Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Jun. 30, 2013 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'CHINA PHARMA HOLDINGS, INC. | ' |
Document Type | '10-K | ' |
Document Period End Date | 31-Dec-13 | ' |
Amendment Flag | 'false | ' |
Entity Central Index Key | '0001106644 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Common Stock, Shares Outstanding | 43,579,557 | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Voluntary Filers | 'No | ' |
Entity Well-known Seasoned Issuer | 'No | ' |
Document Fiscal Year Focus | '2013 | ' |
Document Fiscal Period Focus | 'FY | ' |
Entity Public Float | ' | $0 |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Current Assets: | ' | ' |
Cash and cash equivalents | $5,993,139 | $4,029,708 |
Banker's acceptances | 336,003 | 101,570 |
Trade accounts receivable, less allowance for doubtful accounts of $13,301,622 and $4,429,945, respectively | 45,147,602 | 66,175,570 |
Other receivables, less allowance for doubtful accounts of $43,064 and $49,881, respectively | 175,739 | 80,799 |
Advances to suppliers | 7,626,716 | 4,816,354 |
Inventory, less allowance for obsolescence of $8,027,126 and $1,769,984, respectively | 24,677,120 | 36,359,516 |
Deferred tax assets | 0 | 967,671 |
Total Current Assets | 83,956,319 | 112,531,188 |
Advances for purchases of intangible assets | 41,701,505 | 39,263,977 |
Property and equipment, net of accumulated depreciation of $5,264,350 and $4,273,373, respectively | 30,241,337 | 9,031,894 |
Intangible assets, net of accumulated amortization of $3,812,992 and $2,944,726, respectively | 1,711,793 | 2,412,854 |
TOTAL ASSETS | 157,610,954 | 163,239,913 |
Current Liabilities: | ' | ' |
Trade accounts payable | 1,877,437 | 2,841,862 |
Accrued expenses | 323,651 | 202,185 |
Accrued taxes payable | 0 | 2,426,826 |
Other payables | 1,312,361 | 1,094,886 |
Advances from customers | 2,228,238 | 1,945,984 |
Other payables - related parties | 1,354,567 | 1,354,567 |
Short-term notes payable | 4,909,662 | 4,761,073 |
Total Current Liabilities | 12,005,916 | 14,627,383 |
Non-current Liabilities: | ' | ' |
Construction loan facility | 12,484,183 | 0 |
Long-term deferred tax liability | 176,414 | 95,963 |
Total Liabilities | 24,666,513 | 14,723,346 |
Stockholders' Equity: | ' | ' |
Preferred stock, $0.001 par value; 5,000,000 shares authorized;no shares issued or outstanding | 0 | 0 |
Common stock, $0.001 par value; 95,000,000 shares authorized; 43,579,557 shares and 43,579,557 shares outstanding, respectively | 43,580 | 43,580 |
Additional paid-in capital | 23,590,204 | 23,590,204 |
Retained earnings | 88,896,276 | 108,904,325 |
Accumulated other comprehensive income | 20,414,381 | 15,978,458 |
Total Stockholders' Equity | 132,944,441 | 148,516,567 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $157,610,954 | $163,239,913 |
CONSOLIDATED_BALANCE_SHEETS_PA
CONSOLIDATED BALANCE SHEETS PARENTHETICALS (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Stockholders equity number of shares par value and other disclosures | ' | ' |
Allowance for doubtful accounts on trade accounts receivables | $13,301,622 | $4,429,945 |
Allowance for doubtful accounts on other receivables | 43,064 | 49,881 |
Allowance for obsolescence of inventory | 8,027,126 | 1,769,984 |
Accumulated depreciation on property and equipment | 5,264,350 | 4,273,373 |
Accumulated amortization on intangible assets | $3,812,992 | $2,944,726 |
Preferred Stock, par or stated value | $0.00 | $0.00 |
Preferred Stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred Stock, shares issued | 0 | 0 |
Preferred Stock, shares outstanding | 0 | 0 |
Common Stock, par or stated value | $0.00 | $0.00 |
Common Stock, shares authorized | 95,000,000 | 95,000,000 |
Common Stock, shares issued | 43,579,557 | 43,579,557 |
Common Stock, shares outstanding | 43,579,557 | 43,579,557 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Revenues: | ' | ' |
Revenue | $32,806,678 | $54,507,049 |
Cost of revenue | 23,405,886 | 38,660,814 |
Inventory obsolescence | 9,881,711 | 1,769,984 |
Gross (loss) profit | -480,919 | 14,076,251 |
Operating expenses: | ' | ' |
Selling expenses | 3,284,905 | 3,535,214 |
General and administrative expenses | 2,404,338 | 2,874,644 |
Research and development expenses | 1,683,244 | 438,662 |
Bad debt expense | 10,752,991 | 871,612 |
Impairment of intangible assets | 0 | 593,095 |
Total operating expenses | 18,125,478 | 8,313,227 |
Government subsidy income | 0 | 141,987 |
(Loss) income from operations | -18,606,397 | 5,905,011 |
Other income (expense): | ' | ' |
Interest income | 8,457 | 4,944 |
Interest expense | -348,696 | -308,375 |
Net other expense | -340,239 | -303,431 |
(Loss) income before income taxes | -18,946,636 | 5,601,580 |
Income tax expense | -1,061,413 | -983,921 |
Net (loss) income | -20,008,049 | 4,617,659 |
Other comprehensive income - foreign currency translation adjustment | 4,435,923 | 1,274,091 |
Comprehensive (loss) income | ($15,572,126) | $5,891,750 |
(Loss) earnings per share: | ' | ' |
Basic | ($0.46) | $0.11 |
Diluted | ($0.46) | $0.11 |
CONSOLIDATED_STATEMENTS_OF_STO
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $) | Common Stock Shares | Common Stock Amount | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income | Total Stockholders' Equity |
USD ($) | USD ($) | USD ($) | ||||
Balance, at Dec. 31, 2011 | 43,529,557 | 43,530 | 23,448,534 | 104,286,666 | 14,704,367 | 142,483,097 |
Share-based compensation. | 100,000 | 100 | 141,620 | ' | ' | 141,720 |
Forfeiture of contingently vesting shares | -50,000 | -50 | 50 | ' | ' | ' |
Net income for the year | ' | ' | ' | $4,617,659 | ' | $4,617,659 |
Foreign currency translation adjustment | ' | ' | ' | ' | 1,274,091 | 1,274,091 |
Balance, at Dec. 31, 2012 | 43,579,557 | 43,580 | 23,590,204 | 108,904,325 | 15,978,458 | 148,516,567 |
Net loss for the year | ' | ' | ' | -20,008,049 | ' | -20,008,049 |
Foreign currency translation adjustment. | ' | ' | ' | ' | $4,435,923 | $4,435,923 |
Balance, at Dec. 31, 2013 | 43,579,557 | 43,580 | 23,590,204 | 88,896,276 | 20,414,381 | 132,944,441 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Cash Flows from Operating Activities: | ' | ' |
Net (loss) income for the period | ($20,008,049) | $4,617,659 |
Depreciation and amortization | 1,612,830 | 1,462,771 |
Stock based compensation | 0 | 141,721 |
Bad debt expense. | 10,752,991 | 871,612 |
Deferred income taxes | 1,061,413 | -430,250 |
Inventory obsolescence reserve | 6,121,655 | 1,769,984 |
Impairment of intangible assets. | 0 | 593,095 |
Changes in assets and liabilities: | ' | ' |
Trade accounts and other receivables. | 3,633,180 | -1,098,322 |
Advances to suppliers. | -2,625,629 | 1,014,760 |
Inventory. | 11,155,810 | -4,702,575 |
Trade accounts payable. | -1,183,733 | -306,040 |
Accrued expenses and other liabilities. | 356,640 | 246,817 |
Accrued taxes payable. | -2,499,949 | -683,357 |
Other payables. | 0 | 744 |
Advances from customers. | 218,656 | 145,201 |
Net Cash Provided by Operating Activities | 8,595,815 | 3,643,820 |
Cash Flows from Investing Activities: | ' | ' |
Advances for purchases of intangible assets. | -298,631 | -3,218,035 |
Advances for purchases of property and equipment | 0 | -1,612,670 |
Purchases of property and equipment | -18,794,261 | -156,878 |
Net Cash Used in Investing Activities | -19,092,892 | -4,987,583 |
Cash Flows from Financing Activities: | ' | ' |
Proceeds from construction term loan | 12,322,648 | 0 |
Proceeds from issuance of notes payable | 0 | 793,223 |
Proceeds from related party loan | 0 | 493,004 |
Net Cash Provided by Financing Activity | 12,322,648 | 1,286,227 |
Effect of Exchange Rate Changes on Cash | 137,860 | 36,390 |
Net (Decrease ) Increase in Cash and Cash Equivalents | 1,963,431 | -21,146 |
Cash and Cash Equivalents at Beginning of Period | 4,029,708 | 4,050,854 |
Cash and Cash Equivalents at End of Period | 5,993,139 | 4,029,708 |
Supplemental Cash Flow Information: | ' | ' |
Cash paid for interest | 569,855 | 298,433 |
Cash paid for income taxes | 2,481,164 | 2,138,853 |
Supplemental Noncash Investing and Financing Activities: | ' | ' |
Accounts payable for purchases of property and equipment | 144,243 | 151,731 |
Accounts receivable collected with banker's acceptances | 8,317,045 | 4,354,825 |
Purchases of property and equipment paid with banker's acceptances | 2,564,790 | 1,540,820 |
Advances for purchases of intangibles paid with banker's acceptances | 897,820 | 27,909 |
Inventory purchased with banker's acceptances | $4,626,165 | $2,768,805 |
ORGANIZATION_AND_SIGNIFICANT_A
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||||
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||||
NOTE 1 – ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | |||||||||
Organization and Nature of Operations – China Pharma Holdings, Inc., a Nevada corporation, owns 100% of Onny Investment Limited (Onny), a British Virgin Islands corporation, which owns 100% of Hainan Helpson Medical & Biotechnology Co., Ltd (Helpson), a company organized under the laws of the People's Republic of China (the PRC). China Pharma Holdings, Inc. and its subsidiaries are referred to herein as the Company. | |||||||||
On December 31, 2012, China Pharma Holdings, Inc consummated a reincorporation merger for the purpose of changing its state of incorporation from Delaware to Nevada pursuant to the terms and conditions of an Agreement and Plan of Merger dated December 27, 2012. The reincorporation merger was approved by stockholders holding the majority of the Company’s outstanding shares of common stock on December 21, 2012. | |||||||||
The Foreign Investment Industrial Catalogue (the “Catalogue”) jointly issued by China’s Ministry of Commerce and the National Development and Reform Commission (as the latest version is the year 2012 version, effective January 30, 2012) classified various industries/businesses into three different categories: (i) encouraged for foreign investment; (ii) restricted to foreign investment; and (iii) prohibited from foreign investment. For any industry/business not covered by any of these three categories, they will be deemed industries/businesses permitted for foreign investment. A typical foreign investment ownership restriction in the pharmaceutical industry is that a foreign investment enterprise (the “FIE”) shall not have the whole or majority of its equity interests owned by a foreign owner if the FIE establishes more than 30 branch stores and distributes a variety of brands in those franchise stores, which is not the case for the Company’s business. | |||||||||
Helpson manufactures and markets generic and branded pharmaceutical products as well as biochemical products primarily to hospitals and private retailers located throughout the PRC. The Company believes Helpson’s business is not subject to any ownership restrictions prescribed under the Catalogue. Onny acquired 100% of the ownership in Helpson from Helpson’s three former shareholders on May 25, 2005 by entry into an Equity Transfer Agreement with such three parties on May 25, 2005. The transaction was approved by the Commercial Bureau of Hainan Province on June 12, 2005 and Helpson received the Certificate of Approval for Establishing of Enterprises with Foreign Investment in the PRC on the same day and its business license evidencing its WFOE (Wholly Foreign Owned Enterprise) status on June 21, 2005. | |||||||||
The Company has and continues to acquire well-accepted medical formulas to add to its diverse portfolio of Western and Chinese medicines. | |||||||||
Consolidation and Basis of Presentation – The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and are expressed in United States dollars. The accompanying consolidated financial statements include the accounts and operations of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidation. | |||||||||
Helpson’s functional currency is the Chinese Renminbi. Helpson’s revenue and expenses are translated into United States dollars at the average exchange rate for the period. Assets and liabilities are translated at the exchange rate as of the end of the reporting period. Gains or losses from translating Helpson’s financial statements are included in accumulated other comprehensive income, which is a component of stockholders’ equity. Gains and losses arising from transactions denominated in a currency other than the functional currency of the entity that is party to the transaction are included in the results of operations. | |||||||||
Reclassification - The Company has made certain reclassifications to the consolidated statement of operations for the year ended December 31, 2012 to conform to the presentation for the year ended December 31, 2013. These reclassifications had no effect on the consolidated balance sheets, the results of operations or the consolidated statement of cash flows as of or for the year ended December 31, 2012. | |||||||||
Accounting Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the management of the Company (“Management”) to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. | |||||||||
Cash and Cash Equivalents – Cash and cash equivalents include interest bearing and non-interest bearing bank deposits, money market accounts, and short-term banker’s acceptances purchased with maturities of three months or less. | |||||||||
Trade Accounts Receivable and Allowance for Doubtful Accounts – Trade accounts receivables are carried at original invoiced amounts less an allowance for doubtful accounts. The allowances for doubtful accounts are calculated based on a detailed review of certain individual customer accounts and an estimation of the overall economic conditions affecting the Company's customer base. The Company reviews a customer's credit history before extending credit. If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payments, additions to the allowance would be required. A provision is made against accounts receivable to the extent they are considered unlikely to be collected. It is common practice in the PRC for receivables to extend beyond one year. Customer balances outstanding for more than one year are allowed for at a greater rate when calculating the allowance for doubtful accounts. At December 31, 2013, trade accounts receivables included $23,000,726 from sales that occurred more than one year prior to December 31, 2013, that Management believes are collectable. | |||||||||
During the fourth quarter of 2013, Management negotiated settlement offers with certain customers with approximately $8.0 million in accounts receivable balances that were greater than one (1) year past due. The offers to these customers were comprised of discounts ranging from 15% to 30% of the total past due balance in exchange for payment in full by December 31, 2013. As a result, the Company was able to collect cash of approximately $5.85 million, and recognized additional bad debt expense for the negotiated discounts in the amount of $2,140,838 for the year ended December 31, 2013. | |||||||||
Advances to Suppliers and Advances from Customers – Common practice in the PRC is to make advances to suppliers for materials and to receive advances from customers for finished products. Advances to suppliers are applied to trade accounts payable when the materials are received. Advances received from customers are applied against trade accounts receivable when finished products are sold. | |||||||||
Inventory – Inventory is stated at the lower of cost or net realizable value, computed on an average cost basis. We charge inventory obsolescence expense for inventory allowance to write down our inventory to the lower of cost or estimated market value or to completely write off obsolete or excess inventory. Charges to inventory obsolescence expense totaled $9,881,711 and $1,769,984 for the years ended December 31, 2013 and 2012, respectively. The Company recognized an inventory obsolescence reserve of $6,257,142 and $1,769,984 for the years ended December 31, 2013 and 2012, respectively. | |||||||||
Valuation of Long-Lived Assets – The carrying values of long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying values may not be recoverable. When such an event occurs, the Company projects the undiscounted cash flows to be generated from the use of the asset and its eventual disposition over the remaining life of the asset. If projections indicate that the carrying value of an asset will not be recovered, it is reduced by the estimated excess of the carrying value over the projected discounted cash flows estimated to be generated by the asset. The Company evaluated its long-lived assets at December 31, 2013 and determined that no impairment adjustment was necessary. At December 31, 2012, the value of certain of its intangible assets were impaired and the Company recognized an impairment loss of $593,095 for the year ended December 31, 2012. See Note 5. | |||||||||
Property and Equipment – Property and equipment are stated at cost. Maintenance and repairs are charged to expense as incurred and major improvements are capitalized. Gains or losses on sale, trade-in or retirement are included in operations during the period of disposition. | |||||||||
Revenue Recognition – Revenue is considered earned when the Company has persuasive evidence of an arrangement with the customer, delivery of the products has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. Delivery does not occur until products have been shipped to the customer, risk of loss has transferred to the customer and customer acceptance has been obtained, customer acceptance provisions have lapsed, or the Company has objective evidence that the criteria specified in the customer acceptance provisions have been satisfied. The sales price is not considered to be fixed or determinable until all contingencies related to the sale have been resolved. | |||||||||
Cost of Revenues – Cost of revenues includes wages, materials, handling charges, and other expenses associated with the manufacture and delivery of products. | |||||||||
Research and Development – Research and development expenditures are recorded as expenses in the period in which they occur. Research and development expenses were $1,683,244 and $438,662 for the years ended December 31, 2013 and 2012, respectively. | |||||||||
Retirement Benefit Plans – The Company is required to make monthly contributions at prescribed rates to various employee retirement benefit plans organized by provincial governments. The governments benefit plans assume the retirement benefit obligations of all existing and future retired employees of the Company. The Company contributed $241,384 and $233,846 to retirement benefit plans for the years ended December 31, 2013 and 2012, respectively. Contributions to these plans are charged to expense as incurred. | |||||||||
Advertising Costs – Advertising costs are expensed when incurred. The Company did not incur any advertising costs for the years ended December 31, 2013 and 2012. | |||||||||
Basic and Diluted (Loss) Earnings per Common Share - Basic (loss) earnings per common share is computed by dividing net (loss) income by the weighted-average number of common shares outstanding during the period. Diluted (loss) earnings per share is calculated to give effect to potentially issuable dilutive common shares. | |||||||||
The following table is a presentation of the numerators and denominators used in the calculation of basic and diluted (loss) earnings per share: | |||||||||
For the Years | |||||||||
Ended December 31, | |||||||||
2013 | 2012 | ||||||||
Net (loss) income | $ | (20,008,049 | ) | $ | 4,617,659 | ||||
Basic weighted-average common shares outstanding | 43,579,557 | 43,579,557 | |||||||
Effect of dilutive securities: | |||||||||
Warrants | - | - | |||||||
Options | - | - | |||||||
Diluted weighted-average common shares outstanding | 43,579,557 | 43,579,557 | |||||||
Basic (loss) earnings per share | $ | (0.46 | ) | $ | 0.11 | ||||
Diluted (loss) earnings per share | $ | (0.46 | ) | $ | 0.11 | ||||
The following potential common shares were not included in the computation of diluted earnings per share as their effect would have been anti-dilutive: | |||||||||
For the Years | |||||||||
Ended December 31, | |||||||||
2013 | 2012 | ||||||||
Warrants with exercise prices of $3.00 to $3.80 per share | - | 150,000 | |||||||
Options with an exercise price of $2.54 to $3.47 per share | - | 50,000 | |||||||
Total | - | 200,000 | |||||||
Credit Risk – The carrying amounts of accounts receivable included in the balance sheet represent the Company's exposure to credit risk in relation to its financial assets. No other financial assets carry a significant exposure to credit risk. The Company performs ongoing credit evaluations of each customer's financial condition. The Company maintains allowances for doubtful accounts and such allowances in the aggregate have not exceeded Management's estimates. | |||||||||
The Company has its cash in bank deposits primarily at state owned banks located in the PRC. Historically, deposits in PRC banks have been secure due to the state policy of protecting depositors’ interests. The PRC promulgated a new Bankruptcy Law in August 2006, effective June 1, 2007, which contains provisions for the implementation of measures for the bankruptcy of PRC banks. In the event that bankruptcy laws are enacted for banks in the PRC, the Company’s deposits may be at a higher risk of loss. | |||||||||
Interest Rate Risk – The Company is exposed to the risk arising from changing interest rates, which may affect the ability of repayment of existing debts and viability of securing future debt instruments within the PRC. | |||||||||
Recently Announced Accounting Standards – In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). This update requires companies to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, unless certain conditions exist. ASU 2013-11 became effective for interim and annual periods beginning after December 15, 2013, with early adoption permitted. The Company will adopt ASU 2013-11 when required in the first quarter of 2014. The Company does not believe the impact of ASU 2013-11 will have a material effect on the Company’s consolidated financial statements or on its financial condition. | |||||||||
ASU 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment, permits, but does not require, an entity to conduct an initial qualitative assessment to determine whether it is more likely than not that a non-goodwill indefinite-lived asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test currently required (i.e., comparing the asset's fair value with its carrying amount). This new standard was adopted by the Company on September 30, 2012 and had no significant effect on the accompanying consolidated financial statements. | |||||||||
ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, requires disclosures about assets and liabilities that are offset or have the potential to be offset. This new guidance was effective for reporting periods beginning January 1, 2013, with retrospective application required. The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. | |||||||||
PRODUCT_RECALL
PRODUCT RECALL | 12 Months Ended |
Dec. 31, 2013 | |
PRODUCT RECALL | ' |
PRODUCT RECALL | ' |
NOTE 2 – PRODUCT RECALL | |
In March 2013, the China Food and Drug Administration (“CFDA”) issued a nationwide notice (the “CFDA Notice”) for the cessation of the production, sale and use of Buflomedil effective immediately. The CFDA Notice was a result of the reevaluation done by the CFDA based on the indications from the recent China and international research materials, which found that the risks of side effects to the nervous system and the cardiovascular system from Buflomedil have surpassed its clinical treatment benefits. The CFDA Notice was applicable to all the manufacturers and distributers in China who are in the business of the production and sale of Buflomedil-related products. | |
Pursuant to the CFDA Notice, the Company ceased the production and sale of Buflomedil-based products and ceased all promotional and marketing activities for Buflomedil-based products. Furthermore, the Company recognized an inventory obsolescence allowance of approximately $3.7 million for Buflomedil-related raw materials and finished goods inventory. This was recorded as inventory obsolescence on the accompanying statement of operations for the year ended December 31, 2013. | |
In addition, the Company recalled Buflomedil-based products from the market. The Company authorized the return of its previously sold Buflomedil-related products through April 30, 2013. The loss from the refunds to customers was $27,507 and was recognized as a reduction of revenues for the year ended December 31, 2013. Under CFDA regulatory provisions, the CFDA notice does not impose legal liability to the manufacturers of Buflomedil as long as they act pursuant to the CFDA Notice to cease the production, sale and use of Buflomedil and destroy such finished goods immediately. | |
Pursuant to the CFDA Notice, the CFDA revoked the production licenses for Buflomedil-based products. The carrying value of the Company’s Buflomedil-related intangible assets was zero; therefore, no impairment of the Company’s intangible assets was necessary. |
INVENTORY
INVENTORY. | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
INVENTORY | ' | ||||||||
INVENTORY | ' | ||||||||
NOTE 3 – INVENTORY | |||||||||
Inventory consisted of the following: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Raw materials | $ | 28,259,707 | $ | 30,198,816 | |||||
Work in process | 853,602 | - | |||||||
Finished goods | 3,590,937 | 7,930,684 | |||||||
32,704,246 | 38,129,500 | ||||||||
Obsolescence reserve | (8,027,126 | ) | (1,769,984 | ) | |||||
Total Inventory | $ | 24,677,120 | $ | 36,359,516 |
PROPERTY_AND_EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
PROPERTY AND EQUIPMENT | ' | ||||||||
PROPERTY AND EQUIPMENT | ' | ||||||||
NOTE 4 - PROPERTY AND EQUIPMENT | |||||||||
Property and equipment consisted of the following: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Permit of land use | $ | 460,964 | $ | 447,013 | |||||
Building | 2,494,623 | 2,419,125 | |||||||
Plant, machinery and equipment | 6,671,620 | 6,381,209 | |||||||
Motor vehicle | 151,670 | 147,080 | |||||||
Office equipment | 229,210 | 222,273 | |||||||
Construction in progress | 25,497,600 | 3,688,567 | |||||||
Total | 35,505,687 | 13,305,267 | |||||||
Less: accumulated depreciation | (5,264,350 | ) | (4,273,373 | ) | |||||
Property and Equipment, net | $ | 30,241,337 | $ | 9,031,894 | |||||
Construction in progress consists primarily of the construction of a new production facility, the acquisition of related equipment and capitalized interest during the construction period. Once the machinery is in production and the facility is in use, construction in progress is moved into plant, machinery and equipment and depreciated. A reconciliation of total interest cost incurred to interest expense as recognized in the consolidated statement of operations is as follows: | |||||||||
For the Years | |||||||||
Ended December 31, | |||||||||
2013 | 2012 | ||||||||
Total interest cost incurred | $ | 583,400 | $ | 308,375 | |||||
Interest cost capitalized | 234,704 | - | |||||||
Interest expense | $ | 348,696 | $ | 308,375 | |||||
Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows: | |||||||||
Asset | Life - years | ||||||||
Permit of land use | 40 - 70 | ||||||||
Building | 20 - 35 | ||||||||
Plant, machinery and equipment | 10 | ||||||||
Motor vehicle | 10-May | ||||||||
Office equipment | 5-Mar | ||||||||
Depreciation relating to office equipment was included in general and administrative expenses, while all other depreciation was included in cost of revenue. For the years ended December 31, 2013 and 2012, depreciation expense was $846,512 and $851,047, respectively. |
INTANGIBLE_ASSETS
INTANGIBLE ASSETS | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
INTANGIBLE ASSETS | ' | ||||||||
INTANGIBLE ASSETS | ' | ||||||||
NOTE 5 - INTANGIBLE ASSETS | |||||||||
Intangible assets represent the cost of medical formulas approved for production by the CFDA. The Company did not obtain CFDA production approval for any medical formula during the year ended December 31, 2013 and no costs were reclassified from advances to intangible assets in 2013. During the year ended December 31, 2012, the Company received production approval from the CFDA for one medical formula and reclassified $507,174 from advances to intangible assets. The new medical formula is being amortized from the date CFDA approval was received over its estimated useful life of thirteen years and is not expected to have a residual value at the end of its useful life. | |||||||||
Approved medical formulas are amortized from the date CFDA approval is obtained over their individually identifiable estimated useful life, which range from ten to thirteen years. It is at least reasonably possible that a change in the estimated useful lives of the medical formulas could occur in the near term due to changes in the demand for the drugs and medicines produced from these medical formulas. Amortization expense relating to intangible assets was $766,318 and $611,724 for the years ended December 31, 2013 and 2012, respectively, and was included in the general and administrative expenses. Medical formulas typically do not have a residual value at the end of their amortization period. | |||||||||
The Company evaluates each approved medical formula for impairment at the date of CFDA approval, when indications of impairment are present and at the date of each financial statement. The Company’s evaluation is based on an estimated undiscounted net cash flow model, considering currently available market data for the related drug and the Company’s estimated market share. If the carrying value of the medical formula exceeds the estimated future net cash flows, an impairment loss is recognized for the excess of the carrying value over the fair value of the medical formula, which is determined by the estimated discounted future net cash flows. As a result of the evaluations, the Company determined that it is not likely that the carrying value of two medical formulas will be realized from future cash flows due to the failure to meet certain enhanced technical criteria for one formula and from pricing pressures on the other one. As a result, impairment losses relating to those intangible assets were $593,095 for the year ended December 31, 2012. No impairment losses were recognized during the year ended December 31, 2013. | |||||||||
Intangible assets consisted solely of CFDA approved medical formulas as follows: | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Gross carrying amount | $ | 5,524,785 | $ | 5,357,580 | |||||
Accumulated amortization | (3,812,992 | ) | (2,944,726 | ) | |||||
Net carrying amount | $ | 1,711,793 | $ | 2,412,854 | |||||
The estimated aggregate annual amortization expense for each of the next five years and thereafter is as follows: | |||||||||
Year | Amount | ||||||||
2014 | $ 515,810 | ||||||||
2015 | 452,229 | ||||||||
2016 | 284,292 | ||||||||
2017 | 152,841 | ||||||||
2018 | 46,390 | ||||||||
Thereafter | 260,231 | ||||||||
Total | $ 1,711,793 |
ADVANCES_FOR_PURCHASES_OF_INTA
ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS. | 12 Months Ended |
Dec. 31, 2013 | |
ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS | ' |
ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS. | ' |
NOTE 6 – ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS | |
In order to expand the number of medicines manufactured and marketed by the Company, it has entered into contracts with independent laboratories and others for the purchase of medical formulas. Although CFDA approval had not been obtained for these medical formulas at the dates of the respective contracts, the objective of the contracts is for the Company to purchase CFDA-approved medical formulas once the CFDA approval process is completed. The Company received the title to two patents that relate to medical formulas currently in the CFDA approval process at December 31, 2013. The related patents have not expired. | |
Prior to entering into the contracts, the laboratories typically have completed all required research and development to determine the medical formula for and the method of production of the generic medicine. The application to the CFDA for production approval must be made by the production facility that will produce the related product. As a result, a contract typically provides that the Company buys the medical formula from the laboratory and the laboratory is required to assist the Company in applying for and obtaining the production approval from the CFDA. | |
A typical CFDA approval process for the production of a generic medical product involves a number of steps that generally require three to five years to complete. If the medical formula is purchased at the point when the generic medical product receives the CFDA’s approval for a clinical study, which is very typical for the Company, the clinical study that follows will usually take from one and a half to three years to complete. After the clinical study is completed, the results are submitted to the CFDA and a production approval application is filed with the CFDA. In most cases, it will take between eight to eighteen months to prepare and submit the production approval application and obtain CFDA approval. Upon approving the generic medical product, the CFDA issues a production certificate and the Company can produce and sell the generic medical product. As a result of this process, CFDA approval is expected to be received in approximately two to five years from the dates of the medical formula contracts. | |
Under the terms of the contracts, the laboratories are required to assist the Company in obtaining production approval for the medical formulas from the CFDA. Management monitors the status of each medical formula on a regular basis in order to assess whether the laboratories are performing adequately under the contracts. If a medical product is not approved by the CFDA, as evidenced by their issuance of a denial letter, or if the laboratory breaches the contract, the laboratory is required under the contract to provide a refund to the Company of the full amount of the payments made to the laboratory for that formula, or the Company can require the application of those payments to another medical formula with the same laboratory. As a result of the refund right, the Company is ultimately purchasing an approved medical product. Accordingly, payments made prior to the issuance of production approval by the CFDA are recorded as advances for purchases of intangible assets. | |
To date, no formula has failed to receive CFDA production approval nor has the Company been informed or become aware of any formula that may fail to receive such approval. However, there is no assurance that the medical products will receive production approval and if the Company does not receive such approval, it will enforce its contractual rights to receive the refund from the laboratory or have the payments applied to another medical formula with the same laboratory. | |
At December 31, 2013, the Company was obligated to pay laboratories and others approximately $5,466,000 upon completion of the various phases of contracts to provide CFDA production approval of medical formulas. | |
RELATED_PARTY_TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2013 | |
RELATED PARTY TRANSACTIONS | ' |
RELATED PARTY TRANSACTIONS | ' |
NOTE 7 – RELATED PARTY TRANSACTIONS | |
During the years ended December 31, 2013 and December 31, 2012, a member of the Company’s board of directors advanced the Company $0 and $493,004, respectively. The advances bear interest at a rate of 1.0% per year. Total interest expense of $13,545 and $9,942 was recognized for the years ended December 31, 2013 and 2012, respectively. Total advances owing to the board member were $1,354,567 as of December 31, 2013 and 2012 and are recorded as other payables – related parties on the accompanying consolidated balance sheets. |
NOTES_PAYABLE
NOTES PAYABLE | 12 Months Ended |
Dec. 31, 2013 | |
NOTES PAYABLES | ' |
NOTES PAYABLES | ' |
NOTE 8 – NOTES PAYABLE | |
During 2012, the Company had a revolving line of credit with a bank in the amount of RMB 25,000,000 (approximately $3.97 million), with the note payable collateralized by certain land use rights and buildings. The note bore interest at a base rate equal to the PRC’s floating six-month to one year rate of 6.56% plus an additional 15% of the base rate, with a resulting rate of 7.54%. On October 18, 2012, the Company fully paid the amount due of RMB 25,000,000 (approximately $3.97 million) under this line of credit and on October 26, 2012, it matured and was not renewed. | |
On October 30, 2012, the Company entered into a revolving line of credit with another bank in the amount of RMB 30,000,000. The related note payable bore interest at an annual rate of 6.90% (based upon 115% of the PRC government’s current short term rate of 6.00%). Advances on the line of credit were due one year from the date of the advance and were collateralized by certain land use rights, buildings and accounts receivable. On November 1, 2013 the Company entered into a new revolving line of credit for the same amount with the same bank. Advances on the line of credit are due one year from the date of the advance and are collateralized by certain land use rights, buildings and accounts receivable and bear interest at an annual rate of 6.6% (based upon 110% of the PRC government’s current short term rate of 6.00%). In addition, the Company’s Chief Executive Officer and Chair of the board of directors personally guaranteed the new line of credit. | |
The outstanding balance due under the revolving line of credit was RMB 30,000,000 as of December 31, 2013 and 2012 ($4,909,662 as of December 31, 2013 and $4,761,073 as of December 31, 2012). The Company has no additional amounts available to it under this line of credit. This amount has been classified as short-term notes payable in the accompanying consolidated balance sheets at December 31, 2013 and 2012. | |
Fair Value of Notes Payable – Based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities, the carrying amounts of notes payable outstanding at December 31, 2013 and 2012 approximated their fair value because of the immediate or short-term maturity of these financial instruments or because the underlying instruments bear interest rates that approximated current market rates. |
CONSTRUCTION_LOAN_FACILITY
CONSTRUCTION LOAN FACILITY. | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
CONSTRUCTION LOAN FACILITY | ' | ||||
CONSTRUCTION LOAN FACILITY | ' | ||||
NOTE 9 – CONSTRUCTION LOAN FACILITY | |||||
The Company drew down an aggregate of $12,484,183 as of December 31, 2013 from a construction loan facility dated June 21, 2013. The loan facility is for an eight-year term, which commenced on July 11, 2013, the initial draw-down date. The total loan facility amount is RMB 80,000,000 (approximately $13 million) and is from the same bank that currently provides the line of credit as discussed in Note 8. The proceeds of the loan were used for and are collateralized by the construction of the Company’s new production facility and the included production line equipments and machinery. The loan currently bears interest at 7.205%, based upon 110% of the PRC government’s eight-year term rate effective on the actual draw-down date, subject to annual adjustments based on 110% of the floating rate for the same type of loan on the anniversary from the draw-down date and its subsequent anniversary dates. The loan requires interest only payments for the first two years. Beginning July 11, 2015, the balance of the principal is due in annual installments over the next six years through July 11, 2021. At December 31, 2013, the total amount available to draw by the Company is approximately $0.6 million. The Company is required to draw down the entire loan amount by December 31, 2014. | |||||
Principal payments required for the next five years as of December 31, 2013 are as follows: | |||||
Year | Amount | ||||
2014 | $ | - | |||
2015 | 1,636,554 | ||||
2016 | 1,636,554 | ||||
2017 | 2,454,831 | ||||
2018 | 2,454,831 | ||||
Thereafter | 4,301,413 | ||||
$ | 12,484,183 | ||||
Fair Value of Construction Loan Facility – Based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities, the carrying amounts of the construction loan facility outstanding as of December 31, 2013 approximated its fair value because the underlying instrument bears an interest rate that approximated current market rates |
INCOME_TAXES
INCOME TAXES | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
INCOME TAXES | ' | ||||||||
INCOME TAXES | ' | ||||||||
NOTE 10 - INCOME TAXES | |||||||||
Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax laws or rates is recognized in income in the period that includes the enactment date. | |||||||||
Undistributed earnings of Helpson, the Company’s foreign subsidiary, since its acquisition, amounted to approximately $94.0 million at December 31, 2013. Those earnings, as well as the investment in Helpson of approximately $23.3 million, are considered to be indefinitely reinvested and, accordingly, no U.S. federal or state income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. federal and state income taxes (net of an adjustment for foreign tax credits) and withholding taxes payable to the PRC. Determination of the amount of unrecognized deferred U.S. income tax liability is not practical because of the complexities associated with its hypothetical calculation; however, unrecognized foreign tax credits may be available to reduce a portion of the U.S. tax liability. | |||||||||
Liabilities are established for uncertain tax positions expected to be taken in income tax return when such positions are judged to meet the “more-likely-than-not” threshold based on the technical merits of the positions. Estimated interest and penalties related to uncertain tax positions are included as a component of other expenses. Through December 31, 2013, the Company has not identified any uncertain tax positions that it has taken. U.S. income tax returns for the years ended December 31, 2010 through December 31, 2013 and the Chinese income tax return for the year ended December 31, 2013 are open for possible examination. | |||||||||
On March 16, 2007, the National People’s Congress of China passed the Enterprise Income Tax Law (EIT Law) and on December 6, 2007, the State Council of China issued the Implementation Regulations for the EIT Law which took effect on January 1, 2008. The EIT Law and Implementation Regulations Rules impose a unified EIT of 25% on all domestic-invested enterprises and Foreign Invested Entities, or FIEs, unless they qualify under certain limited exceptions. | |||||||||
The Company is located in a special region, which had a 15% corporate income tax rate before the new EIT Law. The new EIT Law abolished the preferential corporate income tax rate in the special region. The Company transitioned to the new 25% tax rate over a five year period which began on January 1, 2008. During 2010, the Company applied for and received a favorable tax rate of 15% for fiscal 2011 through 2013 due to its status in the PRC as a high technology enterprise. In 2013, the Company again applied for and received the same favorable tax rate for 2014 to 2016. Under current tax law in the PRC, the Company is and will be subject to the following enterprise income tax rates: | |||||||||
Enterprise Income | |||||||||
Year | Tax Rate | ||||||||
2014 | 15% | ||||||||
2015 | 15% | ||||||||
2016 | 15% | ||||||||
Thereafter | 25% | ||||||||
The provision for income taxes consisted of the following: | |||||||||
Years Ended December 31, | |||||||||
2013 | 2012 | ||||||||
Current | $ | - | $ | 1,414,171 | |||||
Deferred | 1,061,413 | (430,250 | ) | ||||||
Total income tax expense | $ | 1,061,413 | $ | 983,921 | |||||
Following is a reconciliation of income taxes calculated at the federal statutory rates to the provision for income taxes: | |||||||||
Years Ended December 31, | |||||||||
2013 | 2012 | ||||||||
(Benefit) tax at statutory rate of 25% | $ | (4,736,660 | ) | $ | 1,400,395 | ||||
Stock based compensation from current and prior years | 8,534 | 149,644 | |||||||
Effect of tax holiday | 1,834,517 | (655,947 | ) | ||||||
Other, primarily the difference in U.S. tax rates | - | (70,471 | ) | ||||||
Change in valuation allowance | 3,955,022 | 160,300 | |||||||
Income tax expense | $ | 1,061,413 | $ | 983,921 | |||||
The effect of the tax holiday amounted to a change in the tax expense (benefit) of $1,834,517 and ($655,947) for the years ended December 31, 2013 and 2012, which was equivalent to basic and diluted (loss) earnings per share of ($0.04) and $0.02 per share for the years ended December 31, 2013 and 2012, respectively. The temporary differences which give rise to the deferred income tax assets and liability are as follows: | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Deferred income tax assets: | |||||||||
Allowance for doubtful trade receivables | $ | 1,995,243 | $ | 664,492 | |||||
Allowance for doubtful other receivables | 6,460 | 7,482 | |||||||
Inventory obsolescence reserve | 1,501,687 | 265,498 | |||||||
Expenses not deductible in current year | 31,143 | 30,200 | |||||||
Share based compensation | - | 45,777 | |||||||
PRC net operating loss carry forward | 328,643 | - | |||||||
U.S. net operating loss carry forward | 1,052,784 | 905,669 | |||||||
Total deferred income tax assets | 4,915,960 | 1,919,118 | |||||||
Valuation allowance | (4,915,960 | ) | (951,447 | ) | |||||
Net deferred income tax asset | $ | - | $ | 967,671 | |||||
Deferred income tax liability: | |||||||||
Intangible assets | $ | 176,414 | $ | 95,963 | |||||
At December 31, 2013 the Company has net operating loss carryforwards for PRC tax purposes of approximately $6.8 million which are available to offset any future taxable income through 2018. The Company also has net operating losses for United States federal income tax purposes of approximately $3.1 million which are available to offset future taxable income, if any, through 2033. | |||||||||
In assessing the realizability of deferred tax assets, Management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those differences become deductible or tax loss carry forwards are utilized. Management considers projected future taxable income and tax planning strategies in making this assessment. Based upon an assessment of the level of historical taxable income and projections for future taxable income over the periods on which the deferred tax assets are deductible or can be utilized, Management believes it is not likely the Company will realize all of the benefits of the deferred tax assets as of December 31, 2013 and 2012. Therefore, the Company has provided for a valuation allowance against its deferred tax assets of $4,915,960 and $951,447 as of December 31, 2013 and 2012, respectively. | |||||||||
The Company has also incurred various other taxes, comprised primarily of business taxes, value-added taxes, urban construction taxes, education surcharges and others. Any unpaid amounts are reflected on the balance sheets as accrued taxes payable. During 2012, the Company received an incentive payment from the tax authority of the Hainan provincial government in the PRC totaling $141,987, which has been recorded as government subsidy income on the accompanying statements of operations and comprehensive income for the years ended December 31, 2012. | |||||||||
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
FAIR VALUE MEASUREMENTS | ' | ||||||||||||||||
FAIR VALUE MEASUREMENTS | ' | ||||||||||||||||
NOTE 11 – FAIR VALUE MEASUREMENTS | |||||||||||||||||
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, a hierarchy has been established which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data. Level 3 – Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. | |||||||||||||||||
The Company uses fair value to measure the derivative warrant liability on a recurring basis because fair value is the primary measure for accounting. The Company also uses fair value to measure the value of the banker’s acceptance notes it holds. The Company values its derivative warrants using a valuation method explained above. The banker’s acceptance notes are recorded at cost which approximates fair value. The Company held the following assets and liabilities recorded at fair value as of December 31, 2013 and 2012: | |||||||||||||||||
Fair Value Measurements at | |||||||||||||||||
Reporting Date Using | |||||||||||||||||
Description | 31-Dec-13 | Level 1 | Level 2 | Level 3 | |||||||||||||
Banker's acceptance notes | $ | 336,003 | $ | - | $ | 336,003 | $ | - | |||||||||
Total | $ | 336,003 | $ | - | $ | 336,003 | $ | - | |||||||||
Fair Value Measurements at | |||||||||||||||||
Reporting Date Using | |||||||||||||||||
Description | 31-Dec-12 | Level 1 | Level 2 | Level 3 | |||||||||||||
Banker's acceptance notes | $ | 101,570 | $ | - | $ | 101,570 | $ | - | |||||||||
Total | $ | 101,570 | $ | - | $ | 101,570 | $ | - |
STOCKHOLDERS_EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
STOCKHOLDERS' EQUITY | ' | ||||||||||||||||
STOCKHOLDERS' EQUITY | ' | ||||||||||||||||
NOTE 12 - STOCKHOLDERS' EQUITY | |||||||||||||||||
On December 31, 2012, the domicile of China Pharma Holdings, Inc. was changed from the State of Delaware to the State of Nevada through a merger of the Delaware corporation with and into its newly set-up Nevada subsidiary, with the Nevada subsidiary being the surviving corporation. Each share of common stock, warrant and stock option outstanding on the merger date was automatically converted into a share of common stock, warrant or stock option of the Nevada corporation. | |||||||||||||||||
The Company is authorized to issue 95,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares of preferred stock, $0.001 par value. The preferred stock may be issued in series with such designations, preferences, stated values, rights, qualifications or limitations as determined solely by the Company’s board of directors. | |||||||||||||||||
Warrants | |||||||||||||||||
As of December 31, 2012, the Company had warrants outstanding and exercisable to purchase an aggregate of 150,000 shares of Company's common stock at exercise prices ranging from $3.00 to $3.80 per share, which expired on May 16, 2013. At December 31, 2013, the Company had no warrants outstanding. | |||||||||||||||||
Employee Stock Options | |||||||||||||||||
2010 Incentive Plan | |||||||||||||||||
On November 12, 2010, the Company’s Board of Directors adopted, and on December 22, 2010 its stockholders approved the Company’s 2010 Incentive Plan, which gave the Company the ability to grant stock options, restricted stock, stock appreciation rights and performance units to its employees, directors and consultants, or those who will become employees, directors and consultants of the Company and/or its subsidiaries. The 2010 Incentive Plan currently allows for equity awards of up to 4,000,000 shares of common stock. Through December 31, 2013, there were 175,000 shares of restricted stock granted and outstanding under the 2010 Incentive Plan. No options were outstanding as of December 31, 2013 under the 2010 Incentive Plan. | |||||||||||||||||
There were no securities issued from the 2010 Incentive Plan during the year ended December 31, 2013. | |||||||||||||||||
On May 25, 2011 the Company issued two-year options to purchase a total of 100,000 shares of its common stock under the 2010 Incentive Plan to its Chief Executive Officer and its former Chief Financial Officer. The Company’s Chief Executive Officer was granted non-qualified stock options to purchase 50,000 shares of common stock at an exercise price of $2.54 per share, the closing price of the Company’s common stock on the day prior to the day of grant, expiring on May 25, 2013, of which 25,000 shares vested on May 25, 2012 and 25,000 shares were to vest on the three-month anniversary of the achievement of certain performance-based vesting criteria. The vested options expired unexercised. The Company also granted its former Chief Financial Officer non-qualified stock options to purchase 50,000 shares of common stock at an exercise price of $2.54 per share, expiring on April 28, 2013, of which 25,000 shares vested on April 28, 2012 and 25,000 shares were to vest on the three-month anniversary of the achievement of certain performance-based vesting criteria. The performance based vesting criteria were not met and the options issued to the Chief Executive Officer and the former Chief Financial Officer subject to performance-based vesting were forfeited. | |||||||||||||||||
The grant-date fair value of the options of $0.71 per share, or $70,580 in total, was based on the grant-date closing market price of $2.54 per share and on the following weighted-average assumptions: risk free interest rate of 0.54%, expected dividend yield of 0%, expected volatility of 70.4% and an expected life of 1.0 year. The share-based compensation expense relative to the fixed stock options was recognized over the period the options vested. Share-based compensation relative to the performance-based options will be recognized only if the performance criterion is met. | |||||||||||||||||
In addition, on May 25, 2011 the Company granted a total of 125,000 shares of restricted common stock under the 2010 Incentive Plan to its Chief Executive Officer and its former Chief Financial Officer valued at $317,500 based on the closing market price on the date of grant of $2.54 per share. Specifically, the Company granted 75,000 shares of restricted stock to its Chief Executive Officer, of which 50,000 shares vested on May 25, 2012, and 25,000 shares were to vest on the six-month anniversary of the achievement of certain performance-based vesting criteria, and the Company granted 50,000 shares of restricted stock to its former Chief Financial Officer, of which 25,000 shares vested on April 28, 2012 and 25,000 shares were to vest on the six-month anniversary of the achievement of certain performance-based vesting criteria. The performance criterion was not met and the performance-based shares were forfeited during the year ended December 31, 2012. The share-based compensation related to the fixed share awards was recognized over the period the shares vested. | |||||||||||||||||
Effective April 28, 2012, the Company and Frank Waung, its former Chief Financial Officer, entered into an Amendment Agreement to Non-Qualified Stock Option Agreements to amend the terms of the equity awards previously granted to Mr. Waung in conjunction with the termination of his employment agreement with the Company effective April 29, 2012. The effect of the amendment was to terminate a total of 185,000 of Mr. Waung’s vested but unexercised options immediately on April 28, 2012 as opposed to 90 days after his employment termination date. Effective the same date, the Company awarded 100,000 shares of common stock to Mr. Waung under the 2010 Incentive Plan for his previous service to the Company. | |||||||||||||||||
Accordingly, the Company recorded a total of $55,775 of stock compensation expense based upon the excess of the fair value of the common stock issued in exchange for the options that were cancelled, i.e., 185,000 options with a fair value of $225 in exchange for 100,000 shares of common stock with a fair value of $56,000 based on the closing market price of the common stock of $0.56 per share on the date awarded. The fair value of the stock options was computed using the Black-Scholes Option Pricing Model, using the following assumptions: risk free interest rate of 0.14% to 0.19%, expected dividend yield of 0%, expected volatility of 66.7% and an expected life of 0.5 to 1.1 years. | |||||||||||||||||
In addition, on April 28, 2012 a total of 25,000 options to purchase common stock granted under the 2010 Incentive Plan with an exercise price of $2.54 per share and 50,000 options under the prior plan with an exercise price of $2.75 per share were forfeited. On April 28, 2012 and May 25, 2012, a total of 50,000 shares of common stock granted under the 2010 Incentive Plan failed to vest and were forfeited. | |||||||||||||||||
The Company recognized $0 and $141,721 of compensation expense during the years ended December 31, 2013 and 2012, respectively, as general and administrative expenses related to the awards of common shares and grants and modifications of stock options. The total income tax benefit recognized from the related stock-based compensation was $0 and $35,430 for the years ended December 31, 2013 and 2012, respectively. | |||||||||||||||||
The fair value of each option award is estimated on the date of grant using the Black-Scholes Option Pricing Model using the assumptions noted in the preceding paragraphs. Expected volatility is based on the historical volatility of the Company’s common stock prices. The Company uses historical data to estimate employee termination rates. The expected term of options granted is determined by the simplified method, which is one-half of the original contractual term. The simplified method is used due to the lack of historical share option exercise data to provide a reasonable basis upon which to estimate expected term. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. | |||||||||||||||||
A summary of stock option activity as of December 31, 2013, and changes during the year then ended is presented below: | |||||||||||||||||
Weighted- | |||||||||||||||||
Weighted- | Average | ||||||||||||||||
Average | Remaining | Aggregate | |||||||||||||||
Exercise | Contractual | Intrinsic | |||||||||||||||
Shares | Price | Term (Years) | Value | ||||||||||||||
Outstanding at December 31, 2012 | 25,000 | $ | 2.54 | 0.4 | |||||||||||||
Forfeited | (25,000 | ) | 2.54 | ||||||||||||||
Expired | - | - | |||||||||||||||
Outstanding at December 31, 2013 | - | $ | - | - | $ | - | |||||||||||
Exercisable at December 31, 2013 | - | $ | - | - | $ | - | |||||||||||
At December 31, 2013, there was no remaining unrecognized compensation expense related to stock options or restricted stock grants. |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2013 | |
COMMITMENTS AND CONTINGENCIES | ' |
COMMITMENTS AND CONTINGENCIES | ' |
NOTE 13 – COMMITMENTS AND CONTINGENCIES | |
Economic environment - Substantially all of the Company's operations are conducted in the PRC, and therefore the Company is subject to special considerations and significant risks not typically associated with companies operating in the United States of America. These risks include, among others, the political, economic and legal environments and fluctuations in the foreign currency exchange rate. The Company's results from operations may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. The unfavorable changes in global macroeconomic factors may also adversely affect the Company’s operations. | |
In addition, all of the Company's revenue is denominated in the PRC's currency of Renminbi (RMB), which must be converted into other currencies before remittance out of the PRC. Both the conversion of RMB into foreign currencies and the remittance of foreign currencies abroad require approval of the PRC government. | |
Contractual Commitments – The Company entered into purchase and construction agreements during the year ended December 31, 2013 in connection with the construction of a new facility and required manufacturing improvements. Under these agreements, the Company made payments in the amount of $25,474,525 during the year ended December 31, 2013. These payments are classified as construction in progress on the accompanying balance sheet at December 31, 2013. |
CONCENTRATIONS
CONCENTRATIONS | 12 Months Ended |
Dec. 31, 2013 | |
CONCENTRATIONS | ' |
CONCENTRATIONS | ' |
NOTE 14 – CONCENTRATIONS | |
For the year ended December 31, 2013, no customer accounted for more than 10% of sales and one supplier accounted for 18.7% of raw material purchases. At December 31, 2013, two customers accounted for 14.5% and 11.2% of accounts receivable. | |
For the year ended December 31, 2012, no customer accounted for more than 10% of sales or ending accounts receivable. Two suppliers accounted for 12.1% and 10.3% of raw material purchases, respectively. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2013 | |
SUBSEQUENT EVENTS | ' |
SUBSEQUENT EVENTS | ' |
NOTE 15 – SUBSEQUENT EVENTS | |
As of January 1, 2014, the Company suspended production at its old facility of its dry powder injectable and liquid injectable product lines due to the failure to meet the new GMP upgrading deadline for the production of injectable products. In anticipation that this shut-down will affect its sales in 2014, the Company has gradually increased inventory levels of certain products in order to support the sales demand for these products. The Company plans to start upgrading these two production lines at its old production facility once its new GMP facility starts production. |
Accounting_Policies_Policies
Accounting Policies (Policies) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Accounting Policies (Policies) | ' | ||||||||
Organization and Nature of Operations | ' | ||||||||
Organization and Nature of Operations – China Pharma Holdings, Inc., a Nevada corporation, owns 100% of Onny Investment Limited (Onny), a British Virgin Islands corporation, which owns 100% of Hainan Helpson Medical & Biotechnology Co., Ltd (Helpson), a company organized under the laws of the People's Republic of China (the PRC). China Pharma Holdings, Inc. and its subsidiaries are referred to herein as the Company. | |||||||||
On December 31, 2012, China Pharma Holdings, Inc consummated a reincorporation merger for the purpose of changing its state of incorporation from Delaware to Nevada pursuant to the terms and conditions of an Agreement and Plan of Merger dated December 27, 2012. The reincorporation merger was approved by stockholders holding the majority of the Company’s outstanding shares of common stock on December 21, 2012. | |||||||||
The Foreign Investment Industrial Catalogue (the “Catalogue”) jointly issued by China’s Ministry of Commerce and the National Development and Reform Commission (as the latest version is the year 2012 version, effective January 30, 2012) classified various industries/businesses into three different categories: (i) encouraged for foreign investment; (ii) restricted to foreign investment; and (iii) prohibited from foreign investment. For any industry/business not covered by any of these three categories, they will be deemed industries/businesses permitted for foreign investment. A typical foreign investment ownership restriction in the pharmaceutical industry is that a foreign investment enterprise (the “FIE”) shall not have the whole or majority of its equity interests owned by a foreign owner if the FIE establishes more than 30 branch stores and distributes a variety of brands in those franchise stores, which is not the case for the Company’s business. | |||||||||
Helpson manufactures and markets generic and branded pharmaceutical products as well as biochemical products primarily to hospitals and private retailers located throughout the PRC. The Company believes Helpson’s business is not subject to any ownership restrictions prescribed under the Catalogue. Onny acquired 100% of the ownership in Helpson from Helpson’s three former shareholders on May 25, 2005 by entry into an Equity Transfer Agreement with such three parties on May 25, 2005. The transaction was approved by the Commercial Bureau of Hainan Province on June 12, 2005 and Helpson received the Certificate of Approval for Establishing of Enterprises with Foreign Investment in the PRC on the same day and its business license evidencing its WFOE (Wholly Foreign Owned Enterprise) status on June 21, 2005. | |||||||||
The Company has and continues to acquire well-accepted medical formulas to add to its diverse portfolio of Western and Chinese medicines. | |||||||||
Consolidation and Basis of Presentation | ' | ||||||||
Consolidation and Basis of Presentation – The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and are expressed in United States dollars. The accompanying consolidated financial statements include the accounts and operations of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidation. | |||||||||
Helpson’s functional currency is the Chinese Renminbi. Helpson’s revenue and expenses are translated into United States dollars at the average exchange rate for the period. Assets and liabilities are translated at the exchange rate as of the end of the reporting period. Gains or losses from translating Helpson’s financial statements are included in accumulated other comprehensive income, which is a component of stockholders’ equity. Gains and losses arising from transactions denominated in a currency other than the functional currency of the entity that is party to the transaction are included in the results of operations. | |||||||||
Reclassification | ' | ||||||||
Reclassification - The Company has made certain reclassifications to the consolidated statement of operations for the year ended December 31, 2012 to conform to the presentation for the year ended December 31, 2013. These reclassifications had no effect on the consolidated balance sheets, the results of operations or the consolidated statement of cash flows as of or for the year ended December 31, 2012. | |||||||||
Accounting Estimates | ' | ||||||||
Accounting Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the management of the Company (“Management”) to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. | |||||||||
Cash and Cash Equivalents, Policy | ' | ||||||||
Cash and Cash Equivalents – Cash and cash equivalents include interest bearing and non-interest bearing bank deposits, money market accounts, and short-term banker’s acceptances purchased with maturities of three months or less. | |||||||||
Trade Accounts Receivable and Allowance for Doubtful Accounts | ' | ||||||||
Trade Accounts Receivable and Allowance for Doubtful Accounts – Trade accounts receivables are carried at original invoiced amounts less an allowance for doubtful accounts. The allowances for doubtful accounts are calculated based on a detailed review of certain individual customer accounts and an estimation of the overall economic conditions affecting the Company's customer base. The Company reviews a customer's credit history before extending credit. If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payments, additions to the allowance would be required. A provision is made against accounts receivable to the extent they are considered unlikely to be collected. It is common practice in the PRC for receivables to extend beyond one year. Customer balances outstanding for more than one year are allowed for at a greater rate when calculating the allowance for doubtful accounts. At December 31, 2013, trade accounts receivables included $23,000,726 from sales that occurred more than one year prior to December 31, 2013, that Management believes are collectable. | |||||||||
During the fourth quarter of 2013, Management negotiated settlement offers with certain customers with approximately $8.0 million in accounts receivable balances that were greater than one (1) year past due. The offers to these customers were comprised of discounts ranging from 15% to 30% of the total past due balance in exchange for payment in full by December 31, 2013. As a result, the Company was able to collect cash of approximately $5.85 million, and recognized additional bad debt expense for the negotiated discounts in the amount of $2,140,838 for the year ended December 31, 2013. | |||||||||
Advances to Suppliers and Advances from Customers | ' | ||||||||
Advances to Suppliers and Advances from Customers – Common practice in the PRC is to make advances to suppliers for materials and to receive advances from customers for finished products. Advances to suppliers are applied to trade accounts payable when the materials are received. Advances received from customers are applied against trade accounts receivable when finished products are sold. | |||||||||
Inventory, Policy | ' | ||||||||
Inventory – Inventory is stated at the lower of cost or net realizable value, computed on an average cost basis. We charge inventory obsolescence expense for inventory allowance to write down our inventory to the lower of cost or estimated market value or to completely write off obsolete or excess inventory. Charges to inventory obsolescence expense totaled $9,881,711 and $1,769,984 for the years ended December 31, 2013 and 2012, respectively. The Company recognized an inventory obsolescence reserve of $6,257,142 and $1,769,984 for the years ended December 31, 2013 and 2012, respectively. | |||||||||
Valuation of Long-Lived Assets | ' | ||||||||
Valuation of Long-Lived Assets – The carrying values of long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying values may not be recoverable. When such an event occurs, the Company projects the undiscounted cash flows to be generated from the use of the asset and its eventual disposition over the remaining life of the asset. If projections indicate that the carrying value of an asset will not be recovered, it is reduced by the estimated excess of the carrying value over the projected discounted cash flows estimated to be generated by the asset. The Company evaluated its long-lived assets at December 31, 2013 and determined that no impairment adjustment was necessary. At December 31, 2012, the value of certain of its intangible assets were impaired and the Company recognized an impairment loss of $593,095 for the year ended December 31, 2012. See Note 5. | |||||||||
Property, Plant and Equipment, Policy | ' | ||||||||
Property and Equipment – Property and equipment are stated at cost. Maintenance and repairs are charged to expense as incurred and major improvements are capitalized. Gains or losses on sale, trade-in or retirement are included in operations during the period of disposition. | |||||||||
Revenue Recognition, Policy | ' | ||||||||
Revenue Recognition – Revenue is considered earned when the Company has persuasive evidence of an arrangement with the customer, delivery of the products has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. Delivery does not occur until products have been shipped to the customer, risk of loss has transferred to the customer and customer acceptance has been obtained, customer acceptance provisions have lapsed, or the Company has objective evidence that the criteria specified in the customer acceptance provisions have been satisfied. The sales price is not considered to be fixed or determinable until all contingencies related to the sale have been resolved. | |||||||||
Cost of Revenues, Policy | ' | ||||||||
Cost of Revenues – Cost of revenues includes wages, materials, handling charges, and other expenses associated with the manufacture and delivery of products. | |||||||||
Research and Development Expense, Policy | ' | ||||||||
Research and Development – Research and development expenditures are recorded as expenses in the period in which they occur. Research and development expenses were $1,683,244 and $438,662 for the years ended December 31, 2013 and 2012, respectively. | |||||||||
Retirement Benefit Plans | ' | ||||||||
Retirement Benefit Plans – The Company is required to make monthly contributions at prescribed rates to various employee retirement benefit plans organized by provincial governments. The governments benefit plans assume the retirement benefit obligations of all existing and future retired employees of the Company. The Company contributed $241,384 and $233,846 to retirement benefit plans for the years ended December 31, 2013 and 2012, respectively. Contributions to these plans are charged to expense as incurred. | |||||||||
Advertising Costs, Policy | ' | ||||||||
Advertising Costs – Advertising costs are expensed when incurred. The Company did not incur any advertising costs for the years ended December 31, 2013 and 2012. | |||||||||
Basic and Diluted (Loss) Earnings per Common Share | ' | ||||||||
Basic and Diluted (Loss) Earnings per Common Share - Basic (loss) earnings per common share is computed by dividing net (loss) income by the weighted-average number of common shares outstanding during the period. Diluted (loss) earnings per share is calculated to give effect to potentially issuable dilutive common shares. | |||||||||
The following table is a presentation of the numerators and denominators used in the calculation of basic and diluted (loss) earnings per share: | |||||||||
For the Years | |||||||||
Ended December 31, | |||||||||
2013 | 2012 | ||||||||
Net (loss) income | $ | (20,008,049 | ) | $ | 4,617,659 | ||||
Basic weighted-average common shares outstanding | 43,579,557 | 43,579,557 | |||||||
Effect of dilutive securities: | |||||||||
Warrants | - | - | |||||||
Options | - | - | |||||||
Diluted weighted-average common shares outstanding | 43,579,557 | 43,579,557 | |||||||
Basic (loss) earnings per share | $ | (0.46 | ) | $ | 0.11 | ||||
Diluted (loss) earnings per share | $ | (0.46 | ) | $ | 0.11 | ||||
The following potential common shares were not included in the computation of diluted earnings per share as their effect would have been anti-dilutive: | |||||||||
For the Years | |||||||||
Ended December 31, | |||||||||
2013 | 2012 | ||||||||
Warrants with exercise prices of $3.00 to $3.80 per share | - | 150,000 | |||||||
Options with an exercise price of $2.54 to $3.47 per share | - | 50,000 | |||||||
Total | - | 200,000 | |||||||
Credit Risk, Policy | ' | ||||||||
Credit Risk – The carrying amounts of accounts receivable included in the balance sheet represent the Company's exposure to credit risk in relation to its financial assets. No other financial assets carry a significant exposure to credit risk. The Company performs ongoing credit evaluations of each customer's financial condition. The Company maintains allowances for doubtful accounts and such allowances in the aggregate have not exceeded Management's estimates. | |||||||||
The Company has its cash in bank deposits primarily at state owned banks located in the PRC. Historically, deposits in PRC banks have been secure due to the state policy of protecting depositors’ interests. The PRC promulgated a new Bankruptcy Law in August 2006, effective June 1, 2007, which contains provisions for the implementation of measures for the bankruptcy of PRC banks. In the event that bankruptcy laws are enacted for banks in the PRC, the Company’s deposits may be at a higher risk of loss. | |||||||||
Interest Rate Risk | ' | ||||||||
Interest Rate Risk – The Company is exposed to the risk arising from changing interest rates, which may affect the ability of repayment of existing debts and viability of securing future debt instruments within the PRC. | |||||||||
Recently Announced Accounting Standards | ' | ||||||||
Recently Announced Accounting Standards – In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). This update requires companies to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, unless certain conditions exist. ASU 2013-11 became effective for interim and annual periods beginning after December 15, 2013, with early adoption permitted. The Company will adopt ASU 2013-11 when required in the first quarter of 2014. The Company does not believe the impact of ASU 2013-11 will have a material effect on the Company’s consolidated financial statements or on its financial condition. | |||||||||
ASU 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment, permits, but does not require, an entity to conduct an initial qualitative assessment to determine whether it is more likely than not that a non-goodwill indefinite-lived asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test currently required (i.e., comparing the asset's fair value with its carrying amount). This new standard was adopted by the Company on September 30, 2012 and had no significant effect on the accompanying consolidated financial statements. | |||||||||
ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, requires disclosures about assets and liabilities that are offset or have the potential to be offset. This new guidance was effective for reporting periods beginning January 1, 2013, with retrospective application required. The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. |
BASIS_OF_PRESENTATION_Tables
BASIS OF PRESENTATION (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
BASIS OF PRESENTATION (Tables) | ' | ||||||||
Presentation of the numerators and denominators used in the calculation of basic and diluted earnings per share | ' | ||||||||
The following table is a presentation of the numerators and denominators used in the calculation of basic and diluted (loss) earnings per share: | |||||||||
For the Years | |||||||||
Ended December 31, | |||||||||
2013 | 2012 | ||||||||
Net (loss) income | $ | (20,008,049 | ) | $ | 4,617,659 | ||||
Basic weighted-average common shares outstanding | 43,579,557 | 43,579,557 | |||||||
Effect of dilutive securities: | |||||||||
Warrants | - | - | |||||||
Options | - | - | |||||||
Diluted weighted-average common shares outstanding | 43,579,557 | 43,579,557 | |||||||
Basic (loss) earnings per share | $ | (0.46 | ) | $ | 0.11 | ||||
Diluted (loss) earnings per share | $ | (0.46 | ) | $ | 0.11 | ||||
Potential common shares were not included in the computation of diluted earnings per share | ' | ||||||||
The following potential common shares were not included in the computation of diluted earnings per share as their effect would have been anti-dilutive: | |||||||||
For the Years | |||||||||
Ended December 31, | |||||||||
2013 | 2012 | ||||||||
Warrants with exercise prices of $3.00 to $3.80 per share | - | 150,000 | |||||||
Options with an exercise price of $2.54 to $3.47 per share | - | 50,000 | |||||||
Total | - | 200,000 | |||||||
INVENTORYTables
INVENTORY(Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
INVENTORY (Tables) | ' | ||||||||
Inventory consists | ' | ||||||||
Inventory consisted of the following: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Raw materials | $ | 28,259,707 | $ | 30,198,816 | |||||
Work in process | 853,602 | - | |||||||
Finished goods | 3,590,937 | 7,930,684 | |||||||
32,704,246 | 38,129,500 | ||||||||
Obsolescence reserve | (8,027,126 | ) | (1,769,984 | ) | |||||
Total Inventory | $ | 24,677,120 | $ | 36,359,516 |
PROPERTY_AND_EQUIPMENT_Tables
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
PROPERTY AND EQUIPMENT (Tables) | ' | ||||||||
Property and equipment consists | ' | ||||||||
Property and equipment consisted of the following: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Permit of land use | $ | 460,964 | $ | 447,013 | |||||
Building | 2,494,623 | 2,419,125 | |||||||
Plant, machinery and equipment | 6,671,620 | 6,381,209 | |||||||
Motor vehicle | 151,670 | 147,080 | |||||||
Office equipment | 229,210 | 222,273 | |||||||
Construction in progress | 25,497,600 | 3,688,567 | |||||||
Total | 35,505,687 | 13,305,267 | |||||||
Less: accumulated depreciation | (5,264,350 | ) | (4,273,373 | ) | |||||
Property and Equipment, net | $ | 30,241,337 | $ | 9,031,894 | |||||
A reconciliation of total interest cost incurred to interest expense | ' | ||||||||
A reconciliation of total interest cost incurred to interest expense as recognized in the consolidated statement of operations is as follows: | |||||||||
For the Years | |||||||||
Ended December 31, | |||||||||
2013 | 2012 | ||||||||
Total interest cost incurred | $ | 583,400 | $ | 308,375 | |||||
Interest cost capitalized | 234,704 | - | |||||||
Interest expense | $ | 348,696 | $ | 308,375 | |||||
Useful lives of the assets | ' | ||||||||
Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows: | |||||||||
Asset | Life - years | ||||||||
Permit of land use | 40 - 70 | ||||||||
Building | 20 - 35 | ||||||||
Plant, machinery and equipment | 10 | ||||||||
Motor vehicle | 10-May | ||||||||
Office equipment | 5-Mar | ||||||||
INTANGIBLE_ASSETS_Tables
INTANGIBLE ASSETS (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Intangible Assets (Tables) | ' | ||||||||
Intangible Assets Medical Formulas | ' | ||||||||
Intangible assets consisted solely of CFDA approved medical formulas as follows: | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Gross carrying amount | $ | 5,524,785 | $ | 5,357,580 | |||||
Accumulated amortization | (3,812,992 | ) | (2,944,726 | ) | |||||
Net carrying amount | $ | 1,711,793 | $ | 2,412,854 | |||||
Estimated aggregate annual amortization expense | ' | ||||||||
The estimated aggregate annual amortization expense for each of the next five years and thereafter is as follows: | |||||||||
Year | Amount | ||||||||
2014 | $ 515,810 | ||||||||
2015 | 452,229 | ||||||||
2016 | 284,292 | ||||||||
2017 | 152,841 | ||||||||
2018 | 46,390 | ||||||||
Thereafter | 260,231 | ||||||||
Total | $ 1,711,793 |
Schedule_of_Longterm_Debt_Inst
Schedule of Long-term Debt Instruments (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Schedule of Long-term Debt Instruments: | ' | ||||
Schedule of Long-term Debt Instruments | ' | ||||
Principal payments required for the next five years as of December 31, 2013 are as follows: | |||||
Year | Amount | ||||
2014 | $ | - | |||
2015 | 1,636,554 | ||||
2016 | 1,636,554 | ||||
2017 | 2,454,831 | ||||
2018 | 2,454,831 | ||||
Thereafter | 4,301,413 | ||||
$ | 12,484,183 |
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
INCOME TAXES (Tables) | ' | ||||||||
Current Taxes | ' | ||||||||
Under current tax law in the PRC, the Company is and will be subject to the following enterprise income tax rates: | |||||||||
Enterprise Income | |||||||||
Year | Tax Rate | ||||||||
2014 | 15% | ||||||||
2015 | 15% | ||||||||
2016 | 15% | ||||||||
Thereafter | 25% | ||||||||
Provision For Income Taxes | ' | ||||||||
The provision for income taxes consisted of the following: | |||||||||
Years Ended December 31, | |||||||||
2013 | 2012 | ||||||||
Current | $ | - | $ | 1,414,171 | |||||
Deferred | 1,061,413 | (430,250 | ) | ||||||
Total income tax expense | $ | 1,061,413 | $ | 983,921 | |||||
Schedule of Income Tax Rate Reconciliation | ' | ||||||||
Following is a reconciliation of income taxes calculated at the federal statutory rates to the provision for income taxes: | |||||||||
Years Ended December 31, | |||||||||
2013 | 2012 | ||||||||
(Benefit) tax at statutory rate of 25% | $ | (4,736,660 | ) | $ | 1,400,395 | ||||
Stock based compensation from current and prior years | 8,534 | 149,644 | |||||||
Effect of tax holiday | 1,834,517 | (655,947 | ) | ||||||
Other, primarily the difference in U.S. tax rates | - | (70,471 | ) | ||||||
Change in valuation allowance | 3,955,022 | 160,300 | |||||||
Income tax expense | $ | 1,061,413 | $ | 983,921 | |||||
Schedule of Deferred Tax Assets and Liabilities | ' | ||||||||
The temporary differences which give rise to the deferred income tax assets and liability are as follows: | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Deferred income tax assets: | |||||||||
Allowance for doubtful trade receivables | $ | 1,995,243 | $ | 664,492 | |||||
Allowance for doubtful other receivables | 6,460 | 7,482 | |||||||
Inventory obsolescence reserve | 1,501,687 | 265,498 | |||||||
Expenses not deductible in current year | 31,143 | 30,200 | |||||||
Share based compensation | - | 45,777 | |||||||
PRC net operating loss carry forward | 328,643 | - | |||||||
U.S. net operating loss carry forward | 1,052,784 | 905,669 | |||||||
Total deferred income tax assets | 4,915,960 | 1,919,118 | |||||||
Valuation allowance | (4,915,960 | ) | (951,447 | ) | |||||
Net deferred income tax asset | $ | - | $ | 967,671 | |||||
Deferred income tax liability: | |||||||||
Intangible assets | $ | 176,414 | $ | 95,963 | |||||
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
FAIR VALUE MEASUREMENTS (Tables) | ' | ||||||||||||||||
Assets Fair Value | ' | ||||||||||||||||
The Company held the following assets and liabilities recorded at fair value as of December 31, 2013 and 2012: | |||||||||||||||||
Fair Value Measurements at | |||||||||||||||||
Reporting Date Using | |||||||||||||||||
Description | 31-Dec-13 | Level 1 | Level 2 | Level 3 | |||||||||||||
Banker's acceptance notes | $ | 336,003 | $ | - | $ | 336,003 | $ | - | |||||||||
Total | $ | 336,003 | $ | - | $ | 336,003 | $ | - | |||||||||
Fair Value Measurements at | |||||||||||||||||
Reporting Date Using | |||||||||||||||||
Description | 31-Dec-12 | Level 1 | Level 2 | Level 3 | |||||||||||||
Banker's acceptance notes | $ | 101,570 | $ | - | $ | 101,570 | $ | - | |||||||||
Total | $ | 101,570 | $ | - | $ | 101,570 | $ | - |
Schedule_of_stock_option_activ
Schedule of stock option activity (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Schedule of stock option activity | ' | ||||||||||||||||
Schedule of stock option activity | ' | ||||||||||||||||
A summary of stock option activity as of December 31, 2013, and changes during the year then ended is presented below: | |||||||||||||||||
Weighted- | |||||||||||||||||
Weighted- | Average | ||||||||||||||||
Average | Remaining | Aggregate | |||||||||||||||
Exercise | Contractual | Intrinsic | |||||||||||||||
Shares | Price | Term (Years) | Value | ||||||||||||||
Outstanding at December 31, 2012 | 25,000 | $ | 2.54 | 0.4 | |||||||||||||
Forfeited | (25,000 | ) | 2.54 | ||||||||||||||
Expired | - | - | |||||||||||||||
Outstanding at December 31, 2013 | - | $ | - | - | $ | - | |||||||||||
Exercisable at December 31, 2013 | - | $ | - | - | $ | - |
BASIS_OF_PRESENTATION_Details
BASIS OF PRESENTATION (Details) | Dec. 31, 2013 |
Organization and operations | ' |
Percentage of share owned by China Pharma Holdings Inc of Onny Investment Limited | 100.00% |
Percentage of share owned by China Pharma Holdings Inc of Helpson Medical & Biotechnology Co., Ltd. | 100.00% |
Percetage of acquired by Onny in Helpson | 100.00% |
BASIS_OF_PRESENTATION_Basic_an
BASIS OF PRESENTATION Basic and Diluted Earnings per Common Share (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
BASIS OF PRESENTATION Basic and Diluted Earnings per Common Share | ' | ' |
Net (loss) income | ($20,008,049) | $4,617,659 |
Basic weighted-average common shares outstanding | 43,579,557 | 43,579,557 |
Warrants | 0 | ' |
Options | $0 | ' |
Diluted weighted-average common shares outstanding | 43,579,557 | 43,579,557 |
Basic (loss) earnings per share | ($0.46) | $0.11 |
Diluted (loss) earnings per share | ($0.46) | $0.11 |
BASIS_OF_PRESENTATION_POLICIES
BASIS OF PRESENTATION POLICIES (Details) | 12 Months Ended |
Dec. 31, 2012 | |
BASIS OF PRESENTATION POLICIES | ' |
Warrants with exercise prices of $3.00 to $3.80 per share | 150,000 |
Options with an exercise price of $2.54 to $3.47 per share | 50,000 |
Total Warrants And Options | 200,000 |
BASIS_OF_PRESENTATION_POLICIES1
BASIS OF PRESENTATION POLICIES Parentheticals (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Parentheticals - Trade Receivables | ' | ' |
Accounts Receivable from sales | $23,000,726 | ' |
Options with an exercise price of $2.54 to $3.47 per share | 50,000 | ' |
Management negotiated settlement offers with certain customers in accounts receivable balances that were greater than one (1) year past due. | 8,000,000 | ' |
Amount collected in cash | 5,850,000 | ' |
Recognized additional bad debt expense for the negotiated discounts in the amount of | 2,140,838 | ' |
Charges to inventory obsolescence expense totalled to | 9,881,711 | 1,769,984 |
Recognized inventory obsolescence reserve of | 6,257,142 | 1,769,984 |
Recognized impairment loss on intangible assets | ' | 593,095 |
Research and development expenses | 1,683,244 | 438,662 |
Amount contributed to retirement benefit plans for the period | $241,384 | $233,846 |
PRODUCT_RECALL_DETAILS
PRODUCT RECALL (DETAILS) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
PRODUCT RECALL | ' |
Recognized inventory obsolescence allowance of approx. For Buflomedil-related rawmaterials and finished goods inventory | $3,700,000 |
Loss from the refunds to customers | $27,507 |
INVENTORY_Details
INVENTORY. (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
INVENTORY ABSTRACT | ' | ' |
Raw materials | $28,259,707 | $30,198,816 |
Finished goods | 853,602 | 7,930,684 |
Inventory Gross | 32,704,246 | 38,129,500 |
Allowance for obsolescence - raw materials | -8,027,126 | -1,769,984 |
Total Inventory net | $24,677,120 | $36,359,516 |
PROPERTY_AND_EQUIPMENT_Details
PROPERTY AND EQUIPMENT (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
PROPERTY AND EQUIPMENT {2} | ' | ' |
Permit of land use | $460,964 | $447,013 |
Building | 2,494,623 | 2,419,125 |
Plant, machinery and equipment | 6,671,620 | 6,381,209 |
Motor vehicle | 151,670 | 147,080 |
Office equipment | 229,210 | 222,273 |
Construction in progress | 25,497,600 | 3,688,567 |
Total Property and Equipment | 35,505,687 | 13,305,267 |
Less: accumulated depreciation details | -5,264,350 | -4,273,373 |
Property and Equipment, net | $30,241,337 | $9,031,894 |
PROPERTY_AND_EQUIPMENT_Assets_
PROPERTY AND EQUIPMENT Assets Life (Details) | Dec. 31, 2013 |
PROPERTY AND EQUIPMENT Assets Life | ' |
Permit of land use minimum life | 40 |
Permit of land use maximum life | 70 |
Building minimum life | 20 |
Building maximum life | 35 |
Plant, machinery and equipment life | 10 |
Motor vehicle minimum life | 5 |
Motor vehicle maximum life | 10 |
Office equipment minimum life | 3 |
Office equipment maximum life | 5 |
Reconciliation_of_Total_Intere
Reconciliation of Total Interest incurred cost (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Reconcialition of Total interest details | ' | ' |
Total interest cost incurred | $583,400 | $308,375 |
Interest cost capitalized | 234,704 | 0 |
Interest expense, | $348,696 | $308,375 |
ASSETS_Depreciation_Details
ASSETS Depreciation (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Assets Depreciation | ' | ' |
Depreciation Expense property and equipment | $846,512 | $851,047 |
INTANGIBLE_ASSETS_CFDA_Approve
INTANGIBLE ASSETS CFDA Approved Medical Formulas (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
INTANGIBLE ASSETS CFDA Approved Medical Formulas | ' | ' |
Gross carrying amount | $5,524,785 | $5,357,580 |
Accumulated amortization Intangible assets SFDA Approved Medical Formulas | -3,812,992 | -2,944,726 |
Net carrying amount | $1,711,793 | $2,412,854 |
Estimated_Aggregate_Annual_Amo
Estimated Aggregate Annual Amortization expense for next five years and thereafter (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Estimated Aggregate Annual Amortization expense for next five years and thereafter | ' | ' |
Annual amortization 2014 | $515,810 | ' |
Annual amortization 2015 | 452,229 | ' |
Annual amortization 2016 | 284,292 | ' |
Annual amortization 2017 | 152,841 | ' |
Annual amortization 2018 | 46,390 | ' |
Annual amortization Thereafter | 1,711,793 | ' |
Accumulated amortization Intangible assets CFDA Approved Medical Formulas | 507,174 | ' |
Impairment losses relating to those intangible assets | 593,095 | ' |
Amortization expenses relating to intangible asets was | $766,318 | $611,724 |
ADVANCES_FOR_PURCHASES_OF_INTA1
ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS (Details) (USD $) | Dec. 31, 2013 |
Advances for purchase of intangible assets details | ' |
Company was obligated to pay laboratories | $5,466,000 |
RELATED_PARTY_TRANSACTIONS_Mem
RELATED PARTY TRANSACTIONS Member Of BOD (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
RELATED PARTY TRANSACTIONS Member Of BOD | ' | ' |
Total interest expense recognized for the period | $9,942 | $9,942 |
Interest rate on advances from Member of BOD | 1.00% | 1.00% |
A member of the Company's board of directors advanced the Company | $0 | $493,004 |
RELATED_PARTY_TRANSACTIONS_Owi
RELATED PARTY TRANSACTIONS Owings (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
RELATED PARTY TRANSACTIONS Owings | ' | ' |
Adavances owing to board member | $1,354,567 | $1,354,567 |
NOTES_PAYABLES_Details
NOTES PAYABLES. (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
NOTES PAYABLES | ' | ' |
Revolving line of credit with a bank | $30,000,000 | ' |
Annual interest rate | 6.90% | ' |
Outstanding balance due under revolving line of credit (RMB 30,000,000) | $4,909,662 | $4,761,073 |
CONSTRUCTION_LOAN_FACILITY_Det
CONSTRUCTION LOAN FACILITY (Details) (USD $) | Dec. 31, 2013 |
Construction loan facility details | ' |
Construction loan amount available to draw by the company | $6,000,000 |
Total loan facility amount | $80,000,000 |
Loan interest | 7.21% |
Principal_payments_required_fo
Principal payments required for the next five years as of December 31, 2013 are as follows: (Details) (USD $) | Dec. 31, 2013 |
Principal payments required for the next five years as of December 31, 2013 are as follows: | ' |
Principal Payments 2014 | $1,636,554 |
Principal Payments 2015 | 1,636,554 |
Principal Payments 2016 | 2,454,831 |
Principal Payments 2017 | 2,454,831 |
Principal Payments 2018 | 4,301,413 |
Principal Payments Thereafter | $12,484,183 |
INCOME_TAXES_Undistributed_Ear
INCOME TAXES Undistributed Earnings And Income Tax Rates (Details) (USD $) | Dec. 31, 2013 |
INCOME TAXES Undistributed Earnings | ' |
Undistributed earnings of Helpson in millions | 94 |
Investment in Helpson, a foreign subsidiary for the company in millions | 23.3 |
Enterprise Income Tax Rates for the year 2013 | 15.00% |
Enterprise Income Tax Rates for the year 2014 | 15.00% |
Enterprise Income Tax Rates for the year 2015 | 15.00% |
Enterprise Income Tax Rates for the year 2016 | 15.00% |
Enterprise Income Tax Rates for the year 2016 There after | 25.00% |
Net operating loss carryforwards for PRC tax purposes | $6,800,000 |
Net operating loss carryforwards for US Federal income tax purposes | $3,100,000 |
INCOME_TAXES_Provision_Details
INCOME TAXES Provision (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
INCOME TAXES Provision | ' | ' |
Current tax provision. | $0 | $1,414,171 |
Deferred tax provision. | 1,061,413 | -430,250 |
Total income tax expense | 1,061,413 | 983,921 |
Effect of tax holiday amounted to a change in the tax expense (benefit) of | $1,834,517 | ($655,947) |
Equivalent to basic and diluted earnings per share of | ($0.04) | ($0.02) |
Reconciliation_of_income_taxes
Reconciliation of income taxes (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Reconciliation of income taxes | ' | ' |
Tax at statutory rate of 25% | ($4,736,660) | $1,400,395 |
Current and prior years | 8,534 | 149,644 |
Effect of tax holiday | 1,834,517 | -655,947 |
Other, primarily the effect of US tax rates | 0 | -70,471 |
Change in valuation allowance Reconciliation | 3,955,022 | 160,300 |
Income tax expense Reconciliation | $1,061,413 | $983,921 |
Changes_of_deferred_income_tax
Changes of deferred income tax assets and liability (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Changes of deferred income tax assets and liability | ' | ' |
Allowance for doubtful trade receivables deferred tax | $1,995,243 | $664,492 |
Allowance for doubtful other receivables deferred tax | 6,460 | 7,482 |
Inventory obsolescence reserve | 1,501,687 | 265,498 |
Expenses not deductible in current year | 31,143 | 30,200 |
Share based compensation deferred tax | 0 | 45,777 |
PRC Net operating loss carry forward | 328,643 | 0 |
U.S. net operating loss carry forwards | 1,052,784 | 905,669 |
Total deferred income tax assets | 4,915,960 | 1,919,118 |
Valuation allowance, | -4,915,960 | -951,447 |
Net deferred income tax asset. | 0 | 967,671 |
Intangible assets income tax liability | $176,414 | $95,963 |
FAIR_VALUE_MEASUREMENTS_At_Rep
FAIR VALUE MEASUREMENTS At Reporting Date Using (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
FAIR VALUE MEASUREMENTS At Reporting Date Using | ' | ' |
Bankers acceptance notes | $336,003 | $101,570 |
Total | 336,003 | 101,570 |
Bankers acceptance notes Level 1 | 0 | 0 |
Total Level 1 | 0 | 0 |
Bankers acceptance notes Level 2 | 336,003 | 101,570 |
Total Level 2 | 336,003 | 101,570 |
Bankers acceptance notes Level 3 | 0 | 0 |
Total Level 3 | $0 | $0 |
Preferred_Common_Stock_And_War
Preferred Common Stock And Warrants (Details) (USD $) | Dec. 31, 2013 |
Preferred Common Stock And Warrants | ' |
Common shares authorized | 95,000,000 |
Preferred shares authorized | 5,000,000 |
Number of common stock shares to purchase by warrants outstaning and exercisable | 150,000 |
Warrants start range exercise price | $3 |
Warrants end range exercise price | $3.80 |
2010_Stock_Option_Plan_Details
2010 Stock Option Plan (Details) (USD $) | Dec. 31, 2013 | Nov. 12, 2010 |
STOCKHOLDERS EQUITY 2010 Stock Option Plan | ' | ' |
Number of common shares | ' | 4,000,000 |
Number of common shares purchased by options | 125,000 | ' |
Stock options granted | 100,000 | ' |
Exercise price per share expired unexercised. | $2.54 | ' |
shares of restricted stock granted and outstanding under the 2010 Incentive Plan | 175,000 | ' |
Compensation_Expense_Details
Compensation Expense (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Compensation Expense | ' | ' |
Recognized compensation expenses | $141,721 | $141,721 |
Income Tax benefit recognized from stock based compensation | $0 | $35,430 |
Summary_of_stock_option_activi
Summary of stock option activity (Details) | No. Of shares | Weighted-Average exercise price | Weighted-Average Remaining Contractual term (Years) |
Outstanding options at Dec. 31, 2012 | 25,000 | 2.54 | 0.4 |
Forfeited options | -25,000 | 2.54 | ' |
Expired options | 0 | ' | ' |
Exercisable options | 0 | ' | ' |
Outstanding options. at Dec. 31, 2013 | 0 | ' | ' |
2010_Stock_Option_Plan_Frank_W
2010 Stock Option Plan Frank Waung (Details) (USD $) | Apr. 28, 2012 |
2010 Stock Option Plan Frank Waung | ' |
Vested and unexercised options | 185,000 |
Number of days opposed after the employment termination date | 90 |
Common shares granted. | 100,000 |
Recorded compensation expense | $55,775 |
Fair value of 185000 options cancelled | 225 |
Fair value of 100000 common shares exchanged | $56,000 |
Closing market price of common stock | $0.56 |
Starting risk free interest rate | 0.14% |
Closing risk free interest rate | 0.19% |
Expected dividend yield | 0.00% |
Expected volatility | 66.70% |
Minimum expected life | 0.5 |
Maximum expected life | 1.1 |
Number of options to purchase common stock granted | $50,000 |
Options exercise price | $2.54 |
Common stock shares granted | 50,000 |
EXECUTIVE_OFFICERS_2010_Stock_
EXECUTIVE OFFICERS 2010 Stock Option Plan (Details) (USD $) | 25-May-11 |
EXECUTIVE OFFICERS 2010 Stock Option Plan | ' |
Number of common shares issued to two executive officers | 100,000 |
Number of non-qualified stock options to purchase common stock | 50,000 |
Exercise Price | $2.54 |
Options expiring on May 25, 2013 | 25,000 |
Options to vest on three month anniversary performance based vesting criteria | 25,000 |
Qualified stock options granted to former CFO non qualified options to purchase common stock | 50,000 |
Exercise Price. | $2.54 |
Options vested on April 28, 2013 | 25,000 |
Options to vest on three month anniversary performance based vesting criteria. | 25,000 |
Granted date fair value of the options per share | $0.71 |
Granted date fair value of the options total value | $70,580 |
Granted date closing market price | $2.54 |
Risk free interest rate | 0.54% |
Dividend Yield | 0.00% |
Expected volatality | 70.40% |
Expected period of life | 1 |
OFFICERS_2010_Stock_Option_Pla
OFFICERS 2010 Stock Option Plan (Details) (USD $) | 25-May-11 |
OFFICERS 2010 Stock Option Plan | ' |
Number of common shares issued to executive officers | 125,000 |
Value of the options granted | $317,500 |
Exercise Price for options granted | $2.54 |
Restricted stock granted to CEO | 75,000 |
Options to vest on six month anniversary performance based vesting criteria | 25,000 |
Options vested on May 25, 2012 | 50,000 |
Restricted stock options granted to former CFO | 25,000 |
Options vested on April 28, 2012 | 25,000 |
Options to vest on six month anniversary performance based vesting criteria. | 25,000 |
Shares forfeited due to non achievement of performance criteria | 50,000 |
share-based compensation related to the fixed share awards was recognized over the period the shares vested. | 50,000 |
Grantdate_fair_value_of_the_op
Grant-date fair value of the options weighted-average assumptions (Details) | 12 Months Ended |
Dec. 31, 2013 | |
Grant-date fair value of the options weighted-average assumptions | ' |
Risk free interest rate. | 0.54% |
Expected dividend yield. | 0.00% |
Expected volatility. | 70.40% |
Expected life in years. | 1 |
CONCENTRATIONS_Sales_And_Purch
CONCENTRATIONS Sales And Purchases (Details) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
CONCENTRATIONS Sales And Purchases | ' | ' |
Percentage of no customer accounted for more than sales | 10.00% | 0.00% |
Percentage of purchases from two supplier of raw materials | 12.10% | 10.30% |
CONCENTRATIONS_Accounts_Receiv
CONCENTRATIONS Accounts Receivable (Details) | Dec. 31, 2013 | Dec. 31, 2012 |
CONCENTRATIONS Accounts Receivable | ' | ' |
Percentage of accounts receivable by two customer | 14.50% | 11.20% |
No of customers accounted for more than 10.0% of accounts receivable | 0 | 0 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (DETAILS) (USD $) | Dec. 31, 2013 |
Payments for construction of a new facility and required manufacturing improvements. | ' |
Payments made for Construction in Progress | $25,474,525 |