Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Nov. 10, 2014 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'CHINA PHARMA HOLDINGS, INC. | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-14 | ' |
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 | '2014 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Current Assets: | ' | ' |
Cash and cash equivalents | $4,269,037 | $5,993,139 |
Banker's acceptances | 116,047 | 336,003 |
Trade accounts receivable, less allowance for doubtful accounts of $27,912,179 and $13,301,622, respectively | 30,642,878 | 45,147,602 |
Other receivables, less allowance for doubtful accounts of $70,004 and $43,064, respectively | 516,095 | 175,739 |
Advances to suppliers | 9,040,464 | 7,626,716 |
Inventory, less allowance for obsolescence of $4,670,853 and $8,027,126, respectively | 19,014,172 | 24,677,120 |
Total Current Assets | 63,598,693 | 83,956,319 |
Advances for purchases of intangible assets | 41,653,862 | 41,701,505 |
Property and equipment, net of accumulated depreciation of $5,951,165 and $5,264,350, respectively | 33,869,491 | 30,241,337 |
Intangible assets, net of accumulated amortization of $4,075,696 and $3,812,992, respectively | 1,410,482 | 1,711,793 |
TOTAL ASSETS | 140,532,528 | 157,610,954 |
Current Liabilities: | ' | ' |
Trade accounts payable | 3,131,988 | 1,877,437 |
Accrued expenses | 214,740 | 323,651 |
Other payables | 1,293,273 | 1,312,361 |
Advances from customers | 1,773,478 | 2,228,238 |
Other payables - related parties | 1,354,567 | 1,354,567 |
Current portion of construction loan facility. | 1,625,118 | ' |
Short-term notes payable | 4,875,353 | 4,909,662 |
Total Current Liabilities | 14,268,517 | 12,005,916 |
Non-current Liabilities: | ' | ' |
Construction loan facility | 11,375,825 | 12,484,183 |
Long-term deferred tax liability | 232,866 | 176,414 |
Total Liabilities | 25,877,208 | 24,666,513 |
Stockholders' Equity: | ' | ' |
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued or outstanding | ' | 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 | 71,535,109 | 88,896,276 |
Accumulated other comprehensive income | 19,486,427 | 20,414,381 |
Total Stockholders' Equity | 114,655,320 | 132,944,441 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $140,532,528 | $157,610,954 |
Balance_Sheets_Parentheticals
Balance Sheets Parentheticals (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
BALANCE SHEETS PARENTHETICALS | ' | ' |
Allowance for doubtful accounts ,Trade accounts receivables | $27,912,179 | $13,301,622 |
Allowance for doubtful accounts , Other receivables | 70,004 | 43,064 |
Allowance for obsolescence, Inventories | 4,670,853 | 8,027,126 |
Accumulated depreciation of Property and equipment | 5,951,165 | 5,264,350 |
accumulated amortization of Intangible assets | $4,075,696 | $3,812,992 |
Preferred Stock, par value | $0.00 | $0.00 |
Preferred Stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred Stock, shares issued | ' | 0 |
Preferred Stock, shares outstanding | ' | 0 |
Common Stock, par 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 (UNAUDITED) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Revenues: | ' | ' | ' | ' |
Revenue | $5,566,543 | $8,116,599 | $18,802,602 | $24,392,311 |
Cost of revenue | 4,057,480 | 5,863,587 | 12,215,756 | 17,837,989 |
Inventory obsolescence | ' | 15,747 | ' | 3,735,820 |
Gross profit | 1,509,063 | 2,237,265 | 6,586,846 | 2,818,502 |
Operating expenses: | ' | ' | ' | ' |
Selling expenses | 745,976 | 921,851 | 2,193,823 | 2,435,592 |
General and administrative expenses | 422,729 | 372,568 | 1,229,488 | 1,536,831 |
Research and development expenses | 181,796 | 352,599 | 2,528,230 | 1,384,263 |
Bad debt expense | 3,940,144 | 3,277,780 | 15,280,588 | 7,910,583 |
Losses from natural disaster | 2,275,593 | ' | 2,275,593 | ' |
Total operating expenses | 7,566,238 | 4,924,798 | 23,507,722 | 13,267,269 |
Subsidy income | 65,086 | ' | 65,086 | ' |
Loss from operations | -5,992,089 | -2,687,533 | -16,855,790 | -10,448,767 |
Other income (expense): | ' | ' | ' | ' |
Interest income | 8,824 | 2,228 | 47,435 | 4,830 |
Interest expense | -325,244 | -89,238 | -495,054 | -263,732 |
Net other expense | -316,420 | -87,010 | -447,619 | -258,902 |
Loss before income taxes | -6,308,509 | -2,774,543 | -17,303,409 | -10,707,669 |
Income tax benefit (expense) | -19,215 | 472,512 | -57,758 | 1,129,506 |
Net loss | -6,327,724 | -2,302,031 | -17,361,167 | -9,578,163 |
Other comprehensive income - foreign currency translation adjustment | 33,366 | 880,315 | -927,954 | 3,918,978 |
Comprehensive (loss) income | ($6,294,358) | ($1,421,716) | ($18,289,121) | ($5,659,185) |
Loss per share: | ' | ' | ' | ' |
Basic | ($0.15) | ($0.05) | ($0.40) | ($0.22) |
Diluted | ($0.15) | ($0.05) | ($0.40) | ($0.22) |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Cash Flows from Operating Activities: | ' | ' |
Net loss | ($17,361,167) | ($9,578,163) |
Depreciation and amortization | 1,014,221 | 1,039,716 |
Bad debt expense | 15,280,588 | 7,910,583 |
Deferred income taxes | 57,758 | -1,129,506 |
Inventory obsolescence reserve | ' | 3,311,926 |
Changes in assets and liabilities: | ' | ' |
Trade accounts receivable | -3,029,386 | 1,077,182 |
Other receivables | -342,012 | -452,500 |
Advances to suppliers | -1,468,882 | -642,850 |
Inventory | 7,671,072 | 4,138,431 |
Trade accounts payable | 1,338,724 | 376,312 |
Accrued taxes payable | -34,638 | -2,486,073 |
Other payables and accrued expenses | -90,108 | 42,847 |
Advances from customers | -439,740 | 90,159 |
Net Cash Provided by Operating Activities | 2,596,430 | 3,698,064 |
Cash Flows from Investing Activities: | ' | ' |
Advances for purchases of intangible assets | -244,073 | -496,634 |
Purchases of property and equipment and construction in process | -4,638,265 | -9,267,088 |
Net Cash Used in Investing Activities | -4,882,338 | -9,763,722 |
Cash Flows from Financing Activities: | ' | ' |
Proceeds from construction term loan | 604,756 | 6,437,906 |
Net Cash Provided by Financing Activity | 604,756 | 6,437,906 |
Effect of Exchange Rate Changes on Cash | -42,950 | 103,542 |
Net (Decrease) Increase in Cash and Cash Equivalents | -1,724,102 | 475,790 |
Cash and Cash Equivalents at Beginning of Period | 5,993,139 | 4,029,708 |
Cash and Cash Equivalents at End of Period | 4,269,037 | 4,505,498 |
Supplemental Cash Flow Information: | ' | ' |
Cash paid for interest | 943,251 | 324,117 |
Cash paid for income taxes | ' | 2,472,099 |
Supplemental Noncash Investing and Financing Activities: | ' | ' |
Accounts payable for purchases of property and equipment | 69,378 | 136,742 |
Accounts receivable collected with banker's acceptances | 1,955,808 | 6,256,327 |
Inventory purchased with banker's acceptances | 2,173,689 | 2,810,462 |
Advances for purchases of equipment paid with banker's acceptances | ' | 2,555,419 |
Advances for purchases of intangibles paid with banker's acceptances | ' | $715,445 |
BASIS_OF_PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
BASIS OF PRESENTATION: | ' | ||||||||||||||||
BASIS OF PRESENTATION | ' | ||||||||||||||||
NOTE 1 - BASIS OF PRESENTATION | |||||||||||||||||
Organization and Nature of Operations – China Pharma Holdings, Inc., a Nevada corporation, owns 100% of Onny Investment Limited (“Onny”), a British Virgin Islands corporation, that in turn owns 100% of Hainan Helpson Medical & Biotechnology Co., Ltd (“Helpson”), a corporation 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”. | |||||||||||||||||
The Foreign Investment Industrial Catalogue (the “Catalogue”) jointly issued by the 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 of 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 (“U.S. GAAP”) 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 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 a party to the transaction are included in the results of operations. | |||||||||||||||||
Reclassification - The Company has made certain reclassifications to the condensed consolidated statement of operations and cash flows for the three and nine months ended September 30, 2013 to conform to the presentation for the three and nine months ended September 30, 2014. These reclassifications had no effect on the condensed consolidated balance sheets, results of operations or cash flows as of or for the three and nine months ended September 30, 2013. | |||||||||||||||||
Condensed Financial Statements – The accompanying unaudited condensed consolidated financial statements were prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “Commission”). Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Management of the Company (“Management”) believes the following disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Commission on March 20, 2014. | |||||||||||||||||
These unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) that, in the opinion of Management, are necessary to present fairly the consolidated financial position and results of operations of the Company for the periods presented. Operating results for the nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. | |||||||||||||||||
Accounting Estimates - The preparation of financial statements in conformity with U.S. GAAP requires 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. | |||||||||||||||||
Basic and Diluted Loss per Common Share - Basic loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per share is calculated to give effect to any potentially issuable dilutive common shares. There were no potentially dilutive common shares outstanding for all periods presented. | |||||||||||||||||
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 Three Months | For the Nine Months | ||||||||||||||||
Ended September 30, | Ended September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Net loss | $ | (6,327,724 | ) | $ | (2,302,031 | ) | $ | (17,361,167 | ) | $ | (9,578,163 | ) | |||||
Basic weighted-average common shares outstanding | 43,579,557 | 43,579,557 | 43,579,557 | 43,579,557 | |||||||||||||
Effect of dilutive securities: | |||||||||||||||||
Warrants | - | - | - | - | |||||||||||||
Options | - | - | - | - | |||||||||||||
Diluted weighted-average common shares outstanding | 43,579,557 | 43,579,557 | 43,579,557 | 43,579,557 | |||||||||||||
Basic loss per share | $ | (0.15 | ) | $ | (0.05 | ) | $ | (0.40 | ) | $ | (0.22 | ) | |||||
Diluted loss per share | $ | (0.15 | ) | $ | (0.05 | ) | $ | (0.40 | ) | $ | (0.22 | ) | |||||
LOSSES_FROM_NATURAL_DISASTER
LOSSES FROM NATURAL DISASTER | 9 Months Ended |
Sep. 30, 2014 | |
LOSSES FROM NATURAL DISASTER: | ' |
LOSSES FROM NATURAL DISASTER | ' |
NOTE 2 – LOSSES FROM NATURAL DISASTER | |
On July 18, 2014, the Company’s manufacturing facilities and inventory sustained storm damage from a powerful tropical typhoon that hit Haikou on that date. The losses are comprised of $2,015,248 of inventory related costs and $260,345 of facilities damage costs. The Company received minor insurance compensation as only the building of new plant was insured and the damage to it was minor. | |
The Company assessed whether any asset impairment had occurred as a result of the storm. Based on the assessment, no impairment was considered necessary. In addition, the Company assessed whether the damage caused by the tropical typhoon resulted in exposure to environmental remediation liability. Based on the assessment, the Company determined that no such exposure has occurred. |
INVENTORY
INVENTORY. | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
INVENTORY | ' | ||||||||
INVENTORY | ' | ||||||||
NOTE 3 – INVENTORY | |||||||||
Inventory consisted of the following: | |||||||||
September 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
Raw materials | $ | 19,571,419 | $ | 28,259,707 | |||||
Work in process | - | 853,602 | |||||||
Finished goods | 4,113,606 | 3,590,937 | |||||||
23,685,025 | 32,704,246 | ||||||||
Obsolescence reserve | (4,670,853 | ) | (8,027,126 | ) | |||||
Total Inventory | $ | 19,014,172 | $ | 24,677,120 |
PROPERTY_AND_EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
PROPERTY AND EQUIPMENT | ' | ||||||||||||||||
PROPERTY AND EQUIPMENT | ' | ||||||||||||||||
NOTE 4 - PROPERTY AND EQUIPMENT | |||||||||||||||||
Property and equipment consisted of the following: | |||||||||||||||||
September 30, | December 31, | ||||||||||||||||
2014 | 2013 | ||||||||||||||||
Permit of land use | $ | 457,743 | $ | 460,964 | |||||||||||||
Building | 10,033,988 | 2,494,623 | |||||||||||||||
Plant, machinery and equipment | 16,393,856 | 6,671,620 | |||||||||||||||
Motor vehicle | 150,611 | 151,670 | |||||||||||||||
Office equipment | 246,553 | 229,210 | |||||||||||||||
Construction in progress | 12,537,905 | 25,497,600 | |||||||||||||||
Total | 39,820,656 | 35,505,687 | |||||||||||||||
Less: accumulated depreciation | (5,951,165 | ) | (5,264,350 | ) | |||||||||||||
Property and Equipment, net | $ | 33,869,491 | $ | 30,241,337 | |||||||||||||
Construction in progress consists primarily of the construction of a new production facility and the acquisition of related equipment and capitalized interest during the construction period. During the nine months ended September 30, 2014, an aggregate of approximately $17.16 million was reclassified from construction in progress to their respective property and equipment category as the assets were placed in service and depreciation commenced. | |||||||||||||||||
A reconciliation of total interest cost incurred to interest expense as recognized in the consolidated statement of operations is as follows: | |||||||||||||||||
For the Three Months | For the Nine Months | ||||||||||||||||
Ended September 30, | Ended September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Total interest cost incurred | $ | 330,995 | $ | 89,238 | $ | 952,836 | $ | 263,732 | |||||||||
Interest cost capitalized | 5,751 | - | 457,782 | - | |||||||||||||
Interest expense | $ | 325,244 | $ | 89,238 | $ | 495,054 | $ | 263,732 | |||||||||
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 - 49 | ||||||||||||||||
Plant, machinery and equipment | 10 | ||||||||||||||||
Motor vehicle | 10-May | ||||||||||||||||
Office equipment | 5-Mar | ||||||||||||||||
For the three months ended September 30, 2014 and 2013, depreciation expense was $321,020 and $210,182. For the nine months ended September 30, 2014 and 2013, depreciation expense was $724,509 and $640,550. | |||||||||||||||||
INTANGIBLE_ASSETS
INTANGIBLE ASSETS | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
INTANGIBLE ASSETS | ' | ||||||||
INTANGIBLE ASSETS | ' | ||||||||
NOTE 5 - INTANGIBLE ASSETS | |||||||||
Intangible assets represent the cost of medical formulas approved for production by the China Food and Drug Administration (“CFDA”) in China. During the nine months ended September 30, 2014, the Company did not obtain CFDA production approval for any medical formula and therefore there were no costs reclassified from advances to medical formulas. | |||||||||
Approved medical formulas are amortized from the date CFDA approval is obtained over their individually identifiable estimated useful life, which ranges 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. For the three and nine months ended September 30, 2014 and 2013, amortization expense relating to intangible assets was $96,382 and $131,585, $289,712 and $399,166, respectively. 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 discounted estimated future net cash flows. As a result of the evaluation, the Company has determined that each medical formula continues to provide benefits to the Company and no impairment was recognized during the nine months ended September 30, 2014 or 2013. | |||||||||
As of September 30, 2014 and December 31, 2013, intangible assets consisted solely of CFDA approved medical formulas as follows: | |||||||||
September 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
Gross carrying amount | $ | 5,486,178 | $ | 5,524,785 | |||||
Accumulated amortization | (4,075,696 | ) | (3,812,992 | ) | |||||
Net carrying amount | $ | 1,410,482 | $ | 1,711,793 |
ADVANCES_FOR_PURCHASES_OF_INTA
ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS. | 9 Months Ended |
Sep. 30, 2014 | |
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 for the purchase of medical formulas. Although CFDA approval had not been obtained for certain medical formulas as of 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. Some of the medical formulas currently in the CFDA approval process also come with patents. As of September 30, 2014, the Company had received the title to two unexpired patents that relate to medical formulas currently in the CFDA approval process. | |
Prior to entering into the contracts, the laboratories typically have completed all required researches and developments to determine the medical formula for and the method of production of the generic medicines. The application to the CFDA for production approval must be made by the facilities that will manufacture the related products. As a result, a contract typically provides that the Company purchases 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 one and a half to three years to complete. After completing the clinical study, results are submitted to the CFDA and a production approval application would be filed. In most cases, it takes between eight to eighteen months from preparing and submitting the production approval application until obtaining CFDA’s approval. Upon approving, the CFDA would issue a production certificate and the Company can start producing and promoting the generic medical product. Therefore, it is expected to take five years from the dates of the medical formula contracts until acquiring CFDA’s approval. However, the actual time needed could be even longer due to the updated criteria in the drug registration process. | |
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 obliged under the contract to provide a refund of the full payment to the Company. alternatively, 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 September 30, 2014, the Company was obliged to pay laboratories and others approximately $5.19 million upon completion of various phases of contracts to provide CFDA production approval of medical formulas. |
RELATED_PARTY_TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2014 | |
RELATED PARTY TRANSACTIONS | ' |
RELATED PARTY TRANSACTIONS | ' |
NOTE 7 – RELATED PARTY TRANSACTIONS | |
Total advances owing to a board member were $1,354,567 as of September 30, 2014 and December 31, 2013 and are recorded as “other payables – related parties” on the accompanying condensed consolidated balance sheets. The advances bear interest at a rate of 1.0% per year. Total interest expense of $10,159 and $10,159 was recognized for the nine months ended September 30, 2014 and 2013, respectively. |
NOTES_PAYABLE
NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2014 | |
NOTES PAYABLES | ' |
NOTES PAYABLES | ' |
NOTE 8 – NOTES PAYABLE | |
On November 1, 2013 the Company entered into a revolving line of credit with a bank in the amount of RMB 30,000,000. 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%). The Company’s Chief Executive Officer and Chair of the board of directors personally guaranteed the line of credit. The Company is in the process of obtaining an extension of the line of credit with the bank, and anticipates this to be completed during the fourth quarter. | |
The outstanding balance due under the revolving line of credit was RMB 30,000,000 as of September 30, 2014 and December 31, 2013 ($4,875,353 as of September 30, 2014 and $4,909,662 as of December 31, 2013). 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 condensed consolidated balance sheets at September 30, 2014 and December 31, 2013. |
CONSTRUCTION_LOAN_FACILITY
CONSTRUCTION LOAN FACILITY. | 9 Months Ended |
Sep. 30, 2014 | |
CONSTRUCTION LOAN FACILITY | ' |
CONSTRUCTION LOAN FACILITY | ' |
NOTE 9 – CONSTRUCTION LOAN FACILITY | |
The Company obtained a construction loan facility in the amount of RMB 80,000,000 (approximately $13.0 million at September 30, 2014) from a construction loan facility dated June 21, 2013. The loan facility is for an eight-year term, which commenced on the initial draw-down date of July 11, 2013, 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 equipment 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, and is subjected 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 will be due in annual installments over the next six years through July 11, 2021. At September 30, 2014, the Company had no additional amounts available to it under this facility. | |
Fair Value of Notes Payable and 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 notes payable and the construction loan facility outstanding as of September 30, 2014 and December 31, 2013 approximated their fair value because of either the immediate or short-term maturity of these financial instruments or because the underlying instruments bear interest rates that approximated current market rates. |
INCOME_TAXES
INCOME TAXES | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
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 are recognized in operations in the period that includes the enactment date. | |||||||||||||||||
Undistributed earnings of Helpson, the Company’s foreign subsidiary, since its acquisition, amounted to approximately $76.9 million at September 30, 2014. 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 practicable 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. | |||||||||||||||||
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: | |||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Current | $ | - | $ | - | $ | - | $ | - | |||||||||
Deferred | 19,215 | (472,512 | ) | 57,758 | (1,129,506 | ) | |||||||||||
Total income tax expense (benefit) | $ | 19,215 | $ | (472,512 | ) | $ | 57,758 | $ | (1,129,506 | ) | |||||||
The Company has net operating loss carryforwards for PRC tax purposes of approximately $10.16 million at September 30, 2014, of which approximately $6.83 million and $3.33 is available to offset future taxable income through 2018 and 2019, respectively. | |||||||||||||||||
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 September 30, 2014 and December 31, 2013. Therefore, the Company has provided for a valuation allowance against its deferred tax assets of $6,450,846 and $4,915,960 as of September 30, 2014 and December 31, 2013, 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. |
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
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 value of the banker’s acceptance notes it holds. The banker’s acceptance notes are recorded at cost which approximates fair value. The Company held the following assets recorded at fair value as of September 30, 2014 and December 31, 2013: | |||||||||||||||||
Fair Value Measurements at | |||||||||||||||||
Reporting Date Using | |||||||||||||||||
Description | 30-Sep-14 | Level 1 | Level 2 | Level 3 | |||||||||||||
Banker's acceptance notes | $ | 116,047 | $ | - | $ | 116,047 | $ | - | |||||||||
Total | $ | 116,047 | $ | - | $ | 116,047 | $ | - | |||||||||
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 | $ | - |
STOCKHOLDERS_EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2014 | |
STOCKHOLDERS' EQUITY | ' |
STOCKHOLDERS' EQUITY | ' |
NOTE 12 - STOCKHOLDERS' EQUITY | |
Preferred and Common Stock – The total number of authorized shares is 95,000,000 shares of common stock and 5,000,000 shares of preferred stock. 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. | |
Stock and Stock Options – 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 (the “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 Plan currently allows for equity awards of up to 4,000,000 shares of common stock. Through September 30, 2014, there were 175,000 shares of restricted stock granted and outstanding under the Plan. | |
There were no securities issued from the Plan during the nine months ended September 30, 2014 and at September 30, 2014 there was no unrecognized compensation expense related to securities granted under the Plan. |
CONTINGENCIES
CONTINGENCIES | 9 Months Ended |
Sep. 30, 2014 | |
CONTINGENCIES | ' |
CONTINGENCIES | ' |
NOTE 13 – 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. |
CONCENTRATIONS
CONCENTRATIONS | 9 Months Ended |
Sep. 30, 2014 | |
CONCENTRATIONS | ' |
CONCENTRATIONS | ' |
NOTE 14 – CONCENTRATIONS | |
At September 30, 2014, one customer accounted for 16.6% of accounts receivable. At December 31, 2013, two customers accounted for 14.5% and 11.2% of accounts receivable. | |
For the nine months ended September 30, 2014, one customer accounted for 16.7% of sales. For the nine months ended September 30, 2013, no customer accounted for more than 10% of sales. | |
For the nine months ended September 30, 2014 and 2013, purchases from one supplier accounted for 31.8% and 20.6% of raw material purchases, respectively. | |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2014 | |
SUBSEQUENT EVENTS | ' |
SUBSEQUENT EVENTS | ' |
NOTE 15 – SUBSEQUENT EVENTS | |
In November 2014 the Company received the manufacturing certificate from the CFDA relating to the Company’s new manufacturing facility. This certificate enables the Company to commence production in the new facility in accordance with the new Good Manufacturing Practice standards promulgated by the CFDA effective March 1, 2011. | |
Accounting_Policies_Policies
Accounting Policies (Policies) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
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, that in turn owns 100% of Hainan Helpson Medical & Biotechnology Co., Ltd (“Helpson”), a corporation 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”. | |||||||||||||||||
The Foreign Investment Industrial Catalogue (the “Catalogue”) jointly issued by the 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 of 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 (“U.S. GAAP”) 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 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 a party to the transaction are included in the results of operations. | |||||||||||||||||
Reclassification | ' | ||||||||||||||||
Reclassification - The Company has made certain reclassifications to the condensed consolidated statement of operations and cash flows for the three and nine months ended September 30, 2013 to conform to the presentation for the three and nine months ended September 30, 2014. These reclassifications had no effect on the condensed consolidated balance sheets, results of operations or cash flows as of or for the three and nine months ended September 30, 2013. | |||||||||||||||||
Condensed Financial Statements | ' | ||||||||||||||||
Condensed Financial Statements – The accompanying unaudited condensed consolidated financial statements were prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “Commission”). Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Management of the Company (“Management”) believes the following disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Commission on March 20, 2014. | |||||||||||||||||
These unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) that, in the opinion of Management, are necessary to present fairly the consolidated financial position and results of operations of the Company for the periods presented. Operating results for the nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. | |||||||||||||||||
Accounting Estimates | ' | ||||||||||||||||
Accounting Estimates - The preparation of financial statements in conformity with U.S. GAAP requires 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. | |||||||||||||||||
Basic and Diluted (Loss) Earnings per Common Share | ' | ||||||||||||||||
Basic and Diluted Loss per Common Share - Basic loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per share is calculated to give effect to any potentially issuable dilutive common shares. There were no potentially dilutive common shares outstanding for all periods presented. | |||||||||||||||||
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 Three Months | For the Nine Months | ||||||||||||||||
Ended September 30, | Ended September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Net loss | $ | (6,327,724 | ) | $ | (2,302,031 | ) | $ | (17,361,167 | ) | $ | (9,578,163 | ) | |||||
Basic weighted-average common shares outstanding | 43,579,557 | 43,579,557 | 43,579,557 | 43,579,557 | |||||||||||||
Effect of dilutive securities: | |||||||||||||||||
Warrants | - | - | - | - | |||||||||||||
Options | - | - | - | - | |||||||||||||
Diluted weighted-average common shares outstanding | 43,579,557 | 43,579,557 | 43,579,557 | 43,579,557 | |||||||||||||
Basic loss per share | $ | (0.15 | ) | $ | (0.05 | ) | $ | (0.40 | ) | $ | (0.22 | ) | |||||
Diluted loss per share | $ | (0.15 | ) | $ | (0.05 | ) | $ | (0.40 | ) | $ | (0.22 | ) | |||||
BASIS_OF_PRESENTATION_Tables
BASIS OF PRESENTATION (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
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 Three Months | For the Nine Months | ||||||||||||||||
Ended September 30, | Ended September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Net loss | $ | (6,327,724 | ) | $ | (2,302,031 | ) | $ | (17,361,167 | ) | $ | (9,578,163 | ) | |||||
Basic weighted-average common shares outstanding | 43,579,557 | 43,579,557 | 43,579,557 | 43,579,557 | |||||||||||||
Effect of dilutive securities: | |||||||||||||||||
Warrants | - | - | - | - | |||||||||||||
Options | - | - | - | - | |||||||||||||
Diluted weighted-average common shares outstanding | 43,579,557 | 43,579,557 | 43,579,557 | 43,579,557 | |||||||||||||
Basic loss per share | $ | (0.15 | ) | $ | (0.05 | ) | $ | (0.40 | ) | $ | (0.22 | ) | |||||
Diluted loss per share | $ | (0.15 | ) | $ | (0.05 | ) | $ | (0.40 | ) | $ | (0.22 | ) |
INVENTORYTables
INVENTORY(Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
INVENTORY (Tables) | ' | ||||||||
Inventory consists | ' | ||||||||
Inventory consisted of the following: | |||||||||
September 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
Raw materials | $ | 19,571,419 | $ | 28,259,707 | |||||
Work in process | - | 853,602 | |||||||
Finished goods | 4,113,606 | 3,590,937 | |||||||
23,685,025 | 32,704,246 | ||||||||
Obsolescence reserve | (4,670,853 | ) | (8,027,126 | ) | |||||
Total Inventory | $ | 19,014,172 | $ | 24,677,120 |
PROPERTY_AND_EQUIPMENT_Tables
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
PROPERTY AND EQUIPMENT (Tables) | ' | ||||||||||||||||
Property and equipment consists | ' | ||||||||||||||||
Property and equipment consisted of the following: | |||||||||||||||||
September 30, | December 31, | ||||||||||||||||
2014 | 2013 | ||||||||||||||||
Permit of land use | $ | 457,743 | $ | 460,964 | |||||||||||||
Building | 10,033,988 | 2,494,623 | |||||||||||||||
Plant, machinery and equipment | 16,393,856 | 6,671,620 | |||||||||||||||
Motor vehicle | 150,611 | 151,670 | |||||||||||||||
Office equipment | 246,553 | 229,210 | |||||||||||||||
Construction in progress | 12,537,905 | 25,497,600 | |||||||||||||||
Total | 39,820,656 | 35,505,687 | |||||||||||||||
Less: accumulated depreciation | (5,951,165 | ) | (5,264,350 | ) | |||||||||||||
Property and Equipment, net | $ | 33,869,491 | $ | 30,241,337 | |||||||||||||
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 Three Months | For the Nine Months | ||||||||||||||||
Ended September 30, | Ended September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Total interest cost incurred | $ | 330,995 | $ | 89,238 | $ | 952,836 | $ | 263,732 | |||||||||
Interest cost capitalized | 5,751 | - | 457,782 | - | |||||||||||||
Interest expense | $ | 325,244 | $ | 89,238 | $ | 495,054 | $ | 263,732 | |||||||||
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 - 49 | ||||||||||||||||
Plant, machinery and equipment | 10 | ||||||||||||||||
Motor vehicle | 10-May | ||||||||||||||||
Office equipment | 5-Mar | ||||||||||||||||
For the three months ended September 30, 2014 and 2013, depreciation expense was $321,020 and $210,182. For the nine months ended September 30, 2014 and 2013, depreciation expense was $724,509 and $640,550. |
INTANGIBLE_ASSETS_Tables
INTANGIBLE ASSETS (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Intangible Assets (Tables) | ' | ||||||||
Intangible Assets Medical Formulas | ' | ||||||||
As of September 30, 2014 and December 31, 2013, intangible assets consisted solely of CFDA approved medical formulas as follows: | |||||||||
September 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
Gross carrying amount | $ | 5,486,178 | $ | 5,524,785 | |||||
Accumulated amortization | (4,075,696 | ) | (3,812,992 | ) | |||||
Net carrying amount | $ | 1,410,482 | $ | 1,711,793 | |||||
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
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: | |||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Current | $ | - | $ | - | $ | - | $ | - | |||||||||
Deferred | 19,215 | (472,512 | ) | 57,758 | (1,129,506 | ) | |||||||||||
Total income tax expense (benefit) | $ | 19,215 | $ | (472,512 | ) | $ | 57,758 | $ | (1,129,506 | ) |
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
FAIR VALUE MEASUREMENTS (Tables) | ' | ||||||||||||||||
Assets Fair Value | ' | ||||||||||||||||
. The Company held the following assets recorded at fair value as of September 30, 2014 and December 31, 2013: | |||||||||||||||||
Fair Value Measurements at | |||||||||||||||||
Reporting Date Using | |||||||||||||||||
Description | 30-Sep-14 | Level 1 | Level 2 | Level 3 | |||||||||||||
Banker's acceptance notes | $ | 116,047 | $ | - | $ | 116,047 | $ | - | |||||||||
Total | $ | 116,047 | $ | - | $ | 116,047 | $ | - | |||||||||
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 | $ | - |
BASIS_OF_PRESENTATION_Details
BASIS OF PRESENTATION (Details) | Sep. 30, 2014 |
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 $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
BASIS OF PRESENTATION Basic and Diluted Earnings per Common Share | ' | ' | ' | ' |
Basic weighted-average common shares outstanding | 43,579,557 | 43,579,557 | 43,579,557 | 43,579,557 |
Warrants | ' | $0 | ' | ' |
Options | ' | $0 | ' | ' |
Diluted weighted-average common shares outstanding | 43,579,557 | 43,579,557 | 43,579,557 | 43,579,557 |
Basic loss per share | ($0.15) | ($0.06) | ($0.40) | ($0.22) |
Diluted loss per share | ($0.15) | ($0.06) | ($0.40) | ($0.22) |
LOSSES_FROM_NATURAL_DISASTER_D
LOSSES FROM NATURAL DISASTER (DETAILS) (USD $) | Jul. 18, 2014 |
LOSSES FROM NATURAL DISASTER DETAILS | ' |
Losses comprised | $2,015,248 |
Inventory related costs | $260,345 |
Inventory_consisted_of_the_fol
Inventory consisted of the following (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Inventory consisted of the following: | ' | ' |
Raw materials | $19,571,419 | $28,259,707 |
Work in process | ' | 853,602 |
Finished goods | 4,113,606 | 3,590,937 |
Inventory Gross | 23,685,025 | 32,704,246 |
Inventory obsolescence reserve | -4,670,853 | -8,027,126 |
Total Inventory | $19,014,172 | $24,677,120 |
Property_and_equipment_consist
Property and equipment consisted of the following (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Property and equipment consisted of the following: | ' | ' |
Permit of land use | $457,743 | $460,964 |
Building | 10,033,988 | 2,494,623 |
Plant, machinery and equipment | 16,393,856 | 6,671,620 |
Motor vehicle | 150,611 | 151,670 |
Office equipment | 246,553 | 229,210 |
Construction in progress | 12,537,905 | 25,497,600 |
Total Property and Equipment | 39,820,656 | 35,505,687 |
Less: accumulated depreciation details | -5,951,165 | -5,264,350 |
Property and Equipment, net | $33,869,491 | $30,241,337 |
PROPERTY_AND_EQUIPMENT_Assets_
PROPERTY AND EQUIPMENT Assets Life (Details) | 9 Months Ended |
Sep. 30, 2014 | |
PROPERTY AND EQUIPMENT Assets Life | ' |
Permit of land use life | '40 to 70 years |
Building life | '20 to 35 years |
Plant, machinery and equipment life | '10 years |
Motor vehicle life | '5 to 10 years |
Office equipment life | '3 to 5 years |
Reconciliation_of_Total_Intere
Reconciliation of Total Interest incurred cost (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Reconcialition of Total interest details | ' | ' | ' | ' |
Total interest cost incurred | $330,995 | $89,238 | $952,836 | $263,732 |
Interest cost capitalized | $5,751 | ' | $457,782 | ' |
ASSETS_Depreciation_Details
ASSETS Depreciation (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Assets Depreciation | ' | ' | ' | ' |
Depreciation Expense property and equipment | $321,020 | $210,182 | $724,509 | $640,550 |
INTANGIBLE_ASSETS_SFDA_Approve
INTANGIBLE ASSETS SFDA Approved Medical Formulas (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
INTANGIBLE ASSETS SFDA Approved Medical Formulas | ' | ' |
Gross carrying amount | $5,486,178 | $5,524,785 |
Accumulated amortization Intangible assets SFDA Approved Medical Formulas | -4,075,696 | -3,812,992 |
Net carrying amount | $1,410,482 | $1,711,793 |
Amortization_expense_DETAILS
Amortization expense (DETAILS) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Amortization expense (DETAILS) | ' | ' | ' | ' |
Amortization expense relating to intangible assets | $96,382 | $131,585 | $289,712 | $399,166 |
RELATED_PARTY_TRANSACTIONS_Owi
RELATED PARTY TRANSACTIONS Owings (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
RELATED PARTY TRANSACTIONS Owings | ' | ' |
Adavances owing to board member | $1,354,567 | $1,354,567 |
Interest rate on advances from Member of BOD | 1.00% | 1.00% |
Interest amount on advances | $10,159 | $10,159 |
Revolving_line_of_credit_Detai
Revolving line of credit (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Nov. 01, 2013 |
Revolving line of credit | ' | ' | ' |
Revolving line of credit with a bank | ' | ' | $30,000,000 |
Annual interest rate | ' | ' | 6.60% |
Outstanding balance due under revolving line of credit (RMB 30,000,000) | $4,875,353 | $4,909,662 | ' |
CONSTRUCTION_LOAN_FACILITY_Det
CONSTRUCTION LOAN FACILITY (Details) (USD $) | Jun. 21, 2013 |
Construction loan facility details | ' |
Construction loan amount in total | $80,000,000 |
Loan interest rate per annum | 7.21% |
Amount drawn under line of credit | $12,983,008 |
INCOME_TAXES_Undistributed_Ear
INCOME TAXES Undistributed Earnings And Income Tax Rates (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
INCOME TAXES Undistributed Earnings | ' | ' |
Undistributed earnings of Helpson in millions | 76.9 | ' |
Investment in Helpson, a foreign subsidiary for the company in millions | 23.3 | ' |
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 in millions | 10.16 | ' |
Net deferred tax asset, | $6,450,846 | $4,915,960 |
INCOME_TAXES_Provision_Details
INCOME TAXES Provision (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
INCOME TAXES Provision | ' | ' | ' | ' |
Current tax provision. | $0 | $0 | ' | ' |
Deferred tax provision. | 19,215 | -472,512 | 57,758 | -1,129,506 |
Total income tax expense | $19,215 | ($472,512) | $57,758 | ($1,129,506) |
FAIR_VALUE_MEASUREMENTS_At_Rep
FAIR VALUE MEASUREMENTS At Reporting Date Using (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
FAIR VALUE MEASUREMENTS At Reporting Date Using | ' | ' |
Bankers acceptance notes | $116,047 | $336,003 |
Total | 116,047 | 336,003 |
Bankers acceptance notes Level 1 | 0 | 0 |
Total Level 1 | 0 | 0 |
Bankers acceptance notes Level 2 | 116,047 | 336,003 |
Total Level 2 | 116,047 | 336,003 |
Bankers acceptance notes Level 3 | 0 | 0 |
Total Level 3 | $0 | $0 |
Preferred_Common_Stock_And_War
Preferred Common Stock And Warrants (Details) | Sep. 30, 2014 |
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 | 4,000,000 |
Shares of restricted stock granted and outstanding under the Plan | 175,000 |
CONCENTRATIONS_Sales_And_Purch
CONCENTRATIONS Sales And Purchases (Details) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
CONCENTRATIONS Sales And Purchases | ' | ' |
Percentage of no customer accounted for more than sales | 16.70% | 0.00% |
Percentage of purchases from two supplier of raw materials | 31.80% | 20.60% |
Percentage of one customer accounted for more than sales | ' | 10.00% |
CONCENTRATIONS_Accounts_Receiv
CONCENTRATIONS Accounts Receivable (Details) | Sep. 30, 2014 | Dec. 31, 2013 |
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 |