Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2014 | Mar. 19, 2015 | Jun. 30, 2014 | |
Document and Entity Information | |||
Entity Registrant Name | CHINA PHARMA HOLDINGS, INC. | ||
Entity Trading Symbol | CHPI | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2014 | ||
Amendment Flag | true | ||
Entity Central Index Key | 1,106,644 | ||
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 | 2,014 | ||
Document Fiscal Period Focus | FY | ||
Entity Public Float | $ 9,443,423 | ||
Amendment Description | Amendment No. 1 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Current Assets: | ||
Cash and cash equivalents | $ 5,295,790 | $ 5,993,139 |
Banker's acceptances | 458,233 | 336,003 |
Trade accounts receivable, less allowance for doubtful accounts of $44,347,451 and $13,301,622, respectively | 13,853,744 | 45,147,602 |
Other receivables, less allowance for doubtful accounts of $60,325 and $43,064, respectively | 272,199 | 175,739 |
Advances to suppliers | 7,889,009 | 7,626,716 |
Inventory, less allowance for obsolescence of $6,934,044 and $8,027,126, respectively | 15,321,856 | 24,677,120 |
Prepaid expenses | 404,370 | 0 |
Total Current Assets | 43,495,201 | 83,956,319 |
Advances for purchases of intangible assets | 42,390,186 | 41,701,505 |
Property and equipment, net of accumulated depreciation of $6,640,718 and $5,264,350, respectively | 33,881,878 | 30,241,337 |
Intangible assets, net of accumulated amortization of $4,186,273 and $3,812,992, respectively | 1,317,221 | 1,711,793 |
TOTAL ASSETS | 121,084,486 | 157,610,954 |
Current Liabilities: | ||
Trade accounts payable | 2,550,816 | 1,877,437 |
Accrued expenses | 269,870 | 323,651 |
Other payables | 1,401,470 | 1,312,361 |
Advances from customers | 2,078,866 | 2,228,238 |
Other payables - related parties | 1,354,567 | 1,354,567 |
Current portion of construction loan facility | 1,629,062 | 0 |
Short-term notes payable | 4,887,187 | 4,909,662 |
Total Current Liabilities | 14,171,838 | 12,005,916 |
Non-current Liabilities: | ||
Construction loan facility | 11,403,438 | 12,484,183 |
Deferred revenue | 2,516,383 | 0 |
Long-term deferred tax liability | 252,707 | 176,414 |
Total Liabilities | 28,344,366 | 24,666,513 |
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 | 49,345,516 | 88,896,276 |
Accumulated other comprehensive income | 19,760,820 | 20,414,381 |
Total Stockholders' Equity | 92,740,120 | 132,944,441 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 121,084,486 | $ 157,610,954 |
CONSOLIDATED BALANCE SHEETS PAR
CONSOLIDATED BALANCE SHEETS PARENTHETICALS - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
PARENTHETICALS | ||
Allowance for doubtful accounts on trade accounts receivables | $ 44,347,451 | $ 13,301,622 |
Allowance for doubtful accounts on other receivables | 60,325 | 43,064 |
Allowance for obsolescence of inventory | 6,934,044 | 8,027,126 |
Accumulated depreciation on property and equipment | 6,640,718 | 5,264,350 |
Accumulated amortization on intangible assets | $ 4,186,273 | $ 3,812,992 |
Preferred Stock, par or stated value | $ 0.001 | $ 0.001 |
Preferred Stock, shares authorized | 5,000,000 | 5,000,000 |
Common Stock, par or stated value | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 95,000,000 | 95,000,000 |
Common Stock, shares outstanding | 43,579,557 | 43,579,557 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Revenue | ||
Revenue | $ 22,133,866 | $ 32,806,678 |
Cost of revenue | 17,215,576 | 23,405,886 |
Inventory obsolescence | 2,250,130 | 9,881,711 |
Gross profit | 2,668,160 | (480,919) |
Operating expenses: | ||
Selling expenses | 3,346,511 | 3,284,905 |
General and administrative expenses | 1,716,760 | 2,404,338 |
Research and development expenses | 2,798,557 | 1,683,244 |
Bad debt expense | 31,352,579 | 10,752,991 |
Losses from natural disaster | 2,276,519 | 0 |
Total operating expenses | 41,490,926 | 18,125,478 |
Subsidy income | 65,113 | 0 |
Loss from operations | (38,757,653) | (18,606,397) |
Other income (expense): | ||
Interest income | 69,739 | 8,457 |
Interest expense | (785,804) | (348,696) |
Net other expense | (716,065) | (340,239) |
Loss before income taxes | (39,473,718) | (18,946,636) |
Income tax expense | (77,042) | (1,061,413) |
Net loss | (39,550,760) | (20,008,049) |
Other comprehensive income - foreign currency translation adjustment | (653,561) | 4,435,923 |
Comprehensive loss | $ (40,204,321) | $ (15,572,126) |
Loss per share: | ||
Basic | $ (0.91) | $ (0.46) |
Diluted | $ (0.91) | $ (0.46) |
CONSOLIDATED STATEMENTS OF STOC
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 |
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 |
Net loss for the year (Restated) | $ (39,550,760) | $ (39,550,760) | ||||
Foreign currency translation adjustment (Restated) | $ (653,561) | $ (653,561) | ||||
Balance (Restated) at Dec. 31, 2014 | 43,579,557 | 43,580 | 23,590,204 | 49,345,516 | 19,760,820 | 92,740,120 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Cash Flows from Operating Activities: | ||
Net loss | $ (39,550,760) | $ (20,008,049) |
Depreciation and amortization | 1,785,835 | 1,612,830 |
Bad debt expense | 31,352,579 | 10,752,991 |
Deferred income taxes | 77,042 | 1,061,413 |
Inventory obsolescence reserve | (1,055,529) | 6,121,655 |
Deferred revenue | 2,514,457 | 0 |
Changes in assets and liabilities: | ||
Trade accounts and other receivables | (3,163,945) | 3,633,180 |
Advances to suppliers | (296,979) | (2,625,629) |
Inventory | 12,780,457 | 11,155,810 |
Trade accounts payable | 634,673 | (1,183,733) |
Accrued taxes payable | 84 | (2,499,949) |
Other payables and accrued expenses | 37,584 | 356,640 |
Advances from customers | (139,066) | 218,656 |
Prepaid expenses | (404,060) | 0 |
Net Cash Provided by Operating Activities | 4,572,372 | 8,595,815 |
Cash Flows from Investing Activities: | ||
Advances for purchases of intangible assets | (714,697) | (298,631) |
Purchases of property and equipment | (5,128,699) | (18,794,261) |
Net Cash Used in Investing Activities | (5,843,396) | (19,092,892) |
Cash Flows from Financing Activities: | ||
Proceeds from construction term loan | 605,002 | 12,322,648 |
Net Cash Provided by Financing Activity | 605,002 | 12,322,648 |
Effect of Exchange Rate Changes on Cash | (31,327) | 137,860 |
Net (Decrease) Increase in Cash and Cash Equivalents | (697,349) | 1,963,431 |
Cash and Cash Equivalents at Beginning of Period | 5,993,139 | 4,029,708 |
Cash and Cash Equivalents at End of Period | 5,295,790 | 5,993,139 |
Supplemental Cash Flow Information: | ||
Cash paid for interest | 1,230,800 | 569,855 |
Cash paid for income taxes | 0 | 2,481,164 |
Supplemental Noncash Investing and Financing Activities: | ||
Accounts payable for purchases of property and equipment | 46,780 | 144,243 |
Accounts receivable collected with banker's acceptances | 2,777,579 | 8,317,045 |
Inventory purchased with banker's acceptances | 2,489,698 | 4,626,165 |
Advances for purchases of equipment paid with banker's acceptances | 0 | 2,564,790 |
Advances for purchases of intangibles paid with banker's acceptances | $ 164,208 | $ 897,820 |
RESTATEMENT
RESTATEMENT | 12 Months Ended |
Dec. 31, 2014 | |
RESTATEMENT: | |
RESTATEMENT | NOTE 1 RESTATEMENT Restatement of December 31, 2014 Consolidated Financial Statements The Company had not properly evaluated whether collectability of revenue was reasonably assured for sales to customers with significantly aged receivable balances and, therefore, whether the revenue had been appropriately recognized. As a result of the process review of revenue recognition, the Company determined that collectability of revenue was not reasonably assured for certain sales transactions and consequently it deferred the revenue recognition on these transactions. Additionally, the Company previously had not properly evaluated the reasonableness of the allowance for doubtful accounts. As a result of the process review of estimating the allowance for doubtful accounts, the Company has changed its estimate of allowance for doubtful accounts. As a result of revisions to the Companys reporting processes related to the above referenced items, the Company has adjusted its consolidated financial statements as of December 31, 2014 and for the year then ended. The adjustments in connection with the restatement are as follows: As Previously As Balance Sheet Amounts Reported Restatement restated December 31, 2014 Accounts receivable, net of allowance $ 24,851,086 $ (10,997,342 ) $ 13,853,744 Total current assets 54,492,543 (10,997,342 ) 43,495,201 Total assets 132,081,828 (10,997,342 ) 121,084,486 Deferred revenue - 2,516,383 2,516,383 Total liabilities 25,827,983 (2,516,383 ) 28,344,366 Retained earnings 62,848,901 13,503,385 49,345,516 Accumulated other comprehensive income - foreign currency translation adjustment 19,771,160 10,340 19,760,820 Total stockholders' equity 106,253,845 13,513,725 92,740,120 Total liabilities and stockholders' equity $ 132,081,828 $ 10,997,342 $ 121,084,486 Statement of Operations and As Previously As Comprehensive Income Amounts Reported Restatement restated For the year ended December 31, 2014 Revenue $ 24,927,707 $ (2,793,841 ) $ 22,133,866 Gross profit 5,462,001 (2,793,841 ) 2,668,160 Bad debt expense 20,643,045 10,709,534 31,352,579 Total operating expenses 30,781,382 10,709,544 41,490,926 Loss from operations (25,254,268 ) (13,503,385 ) (38,757,653 ) Loss before income taxes (25,970,333 ) (13,503,385 ) (39,473,718 ) Income taxes 77,042 - 77,042 Net loss (26,047,375 ) (13,503,385 ) (39,550,760 ) Other comprehensive income - foreign currency translation adjustment (643,221 ) (10,340 ) (653,561 ) Basic and diluted loss per share $ (0.60 ) $ (0.31 ) $ (0.91 ) As Previously As Statement of Cash Flows Amounts Reported Restatement restated For the year ended December 31, 2014 Net loss $ (26,047,375 ) $ (13,503,385 ) $ (39,550,760 ) Bad debt expense 20,643,035 10,709,544 31,352,579 Deferred revenue - 2,514,457 2,514,457 Trade accounts and other receivables $ (3,443,329 ) $ 279,384 $ (3,163,945 ) |
ORGANIZATION AND SIGNIFICANT AC
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2014 | |
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | |
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 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 Companys outstanding shares of common stock on December 21, 2012. The Foreign Investment Industrial Catalogue 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 Helpsons business is not subject to any ownership restrictions prescribed under the Catalogue. Onny acquired 100% of the ownership in Helpson on May 25, 2005 by entering into an Equity Transfer Agreement with Helpsons three former shareholders. 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 acquired 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. Helpsons functional currency is the Chinese Renminbi. Helpsons 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 Helpsons 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. Accounting Estimates - The methodology used to prepare for the Companys financial statements is in conformity with the accounting principles generally accepted in the United States of America, which 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. Therefore, 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 bankers acceptances purchased with maturities of three months or less. Trade Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivables are carried at the 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 to the customer. 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. As of December 31, 2014, the Company had trade accounts receivable amounting to $48,569,986 from sales that occurred more than one year from that date, which the Company believes are collectable. During 2014, the Company offered two of its largest customers a discount of 30% for payments for accounts receivable that were older than one year. The amount of the outstanding accounts receivable balance the discount was applied to was approximately $1.8 million. As a result, the Company recognized additional bad debt expense of approximately $0.53 million for the year ended December 31, 2014. During 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 expenses for the negotiated discounts of approximately $2.1 million 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 $2,250,130 and $9,881,711 for the years ended December 31, 2014 and 2013, respectively. The Company recognized an inventory obsolescence reserve of ($1,093,082) and $6,257,142 for the years ended December 31, 2014 and 2013, 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. For the years ended December 31, 2014 and 2013, the Company evaluated its long-lived assets and determined that no impairment adjustment was necessary. Property and Equipment Property and equipment are stated at cost. Maintenance and repairs are charged to expenses 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 obtains persuasive evidence of an arrangement with the customer, when delivery of the products has occurred, when the sales price is fixed or determinable, and when collectability is reasonably assured. Delivery does not occur until products have been shipped to the customer, the risk of loss has transferred to the customer and customer acceptance has been obtained, customer acceptance provisions have lapsed, or the Company obtains 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. Revenue is deferred when collectability is not considered to be reasonably assured. 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 $2,798,557 and $1,683,244 for the years ended December 31, 2014 and 2013, respectively. Retirement Benefit Plans The Company is required to make monthly contributions at prescribed rates to various employee retirement benefit plans organized by the provincial governments. The benefit plans of the government assume the retirement benefit obligations of all existing and future retired employees of the Company. The Company contributed $249,921 and $241,384 to retirement benefit plans for the years ended December 31, 2014 and 2013, 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, 2014 and 2013. 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 Year Ended December 31, 2014 2013 (As restated) Net loss $ (39,550,760 ) $ (20,008,049 ) 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 per share $ (0.91 ) $ (0.46 ) Diluted loss per share $ (0.91 ) $ (0.46 ) There were no potential dilutive common shares outstanding during the years ended December 31, 2014 and 2013, respectively. Credit Risk The carrying amount of accounts receivable included in the balance sheet represents the Company's exposure to credit risk in relation to its financial assets. No other financial assets carries 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 secured 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 Companys 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. Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers" In June 2014, the FASB issued ASU 2014-12, Compensation-Stock Compensation (Topic 718) Other accounting standards that have been issued by the FASB or other standards-setting bodies are not expected to have a material effect on the Companys financial position, result of operations or cash flows. |
LOSSES FROM NATURAL DISASTER
LOSSES FROM NATURAL DISASTER | 12 Months Ended |
Dec. 31, 2014 | |
LOSSES FROM NATURAL DISASTER | |
LOSSES FROM NATURAL DISASTER | NOTE 3 LOSSES FROM NATURAL DISASTER On July 18, 2014, the Companys manufacturing facilities and inventory sustained storm damage from a powerful tropical typhoon that hit Haikou on that date. The losses are comprised of $2,016,068 of inventory related costs and $260,451 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 and decided no impairment necessary. In addition, the Company assessed whether the damage caused by the tropical typhoon exposed the Company to environmental remediation liability. Based on the assessment, the Company determined that no such exposure had occurred. |
PRODUCT RECALL
PRODUCT RECALL | 12 Months Ended |
Dec. 31, 2014 | |
PRODUCT RECALL | |
PRODUCT RECALL | NOTE 4 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 its reevaluation on the indications from the recent China and international research materials. The CFDA 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 all production licenses for Buflomedil-based products. The carrying value of the Companys Buflomedil-related intangible assets was zero; therefore, no impairment of the Companys intangible assets was necessary. |
INVENTORY.
INVENTORY. | 12 Months Ended |
Dec. 31, 2014 | |
INVENTORY | |
INVENTORY | NOTE 5 INVENTORY Inventory consisted of the following: December 31, December 31, 2014 2013 Raw materials $ 18,819,570 $ 28,259,707 Work in process - 853,602 Finished goods 3,436,330 3,590,937 22,255,900 32,704,246 Obsolescence reserve (6,934,044 ) (8,027,126 ) Total Inventory $ 15,321,856 $ 24,677,120 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2014 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | NOTE 6 - PROPERTY AND EQUIPMENT Property and equipment consisted of the following: December 31, December 31, 2014 2013 Permit of land use $ 458,853 $ 460,964 Building 11,279,704 2,494,623 Plant, machinery and equipment 28,358,694 6,671,620 Motor vehicle 150,976 151,670 Office equipment 268,521 229,210 Construction in progress 5,848 25,497,600 Total 40,522,596 35,505,687 Less: accumulated depreciation (6,640,718 ) (5,264,350 ) Property and Equipment, net $ 33,881,878 $ 30,241,337 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 building and machinery is in production and the facility is in use, the amount of construction in progress is moved into plant, machinery and equipment and depreciated. During the year ended December 31, 2014, an aggregate of approximately $25.5 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 Year Ended December 31, 2014 2013 Total interest cost incurred $ 1,244,346 $ 583,400 Interest cost capitalized 458,542 234,704 Interest expense $ 785,804 $ 348,696 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 5 - 10 Motor vehicle 5 - 10 Office equipment 3-5 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, 2014 and 2013, depreciation expense was $1,399,396 and $846,512, respectively. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2014 | |
INTANGIBLE ASSETS | |
INTANGIBLE ASSETS | NOTE 7 - 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, 2014 and 2013 and no costs were reclassified from advances to intangible assets in 2014 and 2013, respectively. 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 $386,440 and $766,318 for the years ended December 31, 2014 and 2013, 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 Companys evaluation is based on an estimated undiscounted net cash flow model, considering currently available market data for the related drug and the Companys 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. No impairment losses were recognized during the years ended December 31, 2014 and 2013, respectively. Intangible assets consisted solely of CFDA approved medical formulas as follows: December 31, December 31, 2014 2013 Gross carrying amount $ 5,499,494 $ 5,524,785 Accumulated amortization (4,182,273 ) (3,812,992 ) Net carrying amount $ 1,317,221 $ 1,711,793 The estimated aggregate annual amortization expense for each of the next five years and thereafter is as follows: Year Amount 2015 $ 321,753 2016 300,191 2017 258,094 2018 137,930 2019 64,755 Thereafter 234,498 Total $ 1,317,221 |
ADVANCES FOR PURCHASES OF INTAN
ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS. | 12 Months Ended |
Dec. 31, 2014 | |
ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS | |
ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS. | NOTE 8 ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS In order to expand the number of medicines the Company manufactured and marketed, 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 titles to two patents that relate to medical formulas currently in the CFDA approval process for the year end December 31, 2013. These patents have not expired. Prior to entering into contracts with the Company, laboratories typically are required to complete all research and development to determine the content of the medical formula and the method to produce 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 CFDAs 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 completing the clinical study, 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 commence the production and sales of 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 date the Company signs 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. As of December 31, 2014 and 2013, the Company was obligated to pay laboratories and others approximately $4,551,000 and $5,466,000, respectively, upon the completion of the various phases of contracts to obtain CFDA production approval of medical formulas. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2014 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 9 RELATED PARTY TRANSACTIONS A member of the Companys board of directors had previously advanced the Company an aggregate amount of $1,354,567 as of December 31, 2014 and 2013 which are recorded as other payables related parties on the accompanying consolidated balance sheets. The advances bear interest at a rate of 1.0% per year. Total interest expense of $13,546 was recognized for each of the years ended December 31, 2014 and 2013. |
NOTES PAYABLE
NOTES PAYABLE | 12 Months Ended |
Dec. 31, 2014 | |
NOTES PAYABLES | |
NOTES PAYABLES | NOTE 10 NOTES PAYABLE On October 30, 2012, the Company entered into a revolving line of credit with a 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 governments 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 governments current short term rate of 6.00%). In addition, the Companys Chief Executive Officer and Chair of the board of directors personally guaranteed the new line of credit. In November 2014, the Company entered into a new line of credit with the same bank on identical terms. The amounts advanced under the line of credit are due November 24, 2015. 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 6.16% (based upon 110% of the PRC governments current short term rate of 5.6%). In addition, the Companys 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, 2014 and 2013 ($4,887,187 as of December 31, 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 consolidated balance sheets as of December 31, 2014 and 2013. Fair Value of Notes Payable |
CONSTRUCTION LOAN FACILITY.
CONSTRUCTION LOAN FACILITY. | 12 Months Ended |
Dec. 31, 2014 | |
CONSTRUCTION LOAN FACILITY | |
CONSTRUCTION LOAN FACILITY | NOTE 11 CONSTRUCTION LOAN FACILITY The Company obtained a construction loan facility in the amount of RMB 80,000,000 (approximately $13.0 and $12.5 million as of December 31, 2014 and 2013, respectively) 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 10. The proceeds of the loan were used for and are collateralized by the construction of the Companys 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 governments 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. As of December 31, 2014, the Company had no additional amounts available to it under this loan facility. Principal payments required for the next five years as of December 31, 2014 are as follows: Year Amount 2015 1,629,062 2016 1,629,062 2017 2,443,594 2018 2,443,594 2019 2,443,594 Thereafter 2,443,594 $ 13,032,500 Fair Value of Construction Loan Facility |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2014 | |
INCOME TAXES | |
INCOME TAXES | NOTE 12 - 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 Companys foreign subsidiary, since its acquisition, amounted to approximately $68.3 million as of December 31, 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 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, 2014, the Company has not identified any uncertain tax positions that it has taken. U.S. income tax returns for the years ended December 31, 2011 through December 31, 2014 and the Chinese income tax return for the year ended December 31, 2014 are open for possible examination. On March 16, 2007, the National Peoples 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 the 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 2013 15% 2014 15% 2015 15% 2016 15% 2017 25% Thereafter 25% The provision for income taxes consisted of the following: Year Ended December 31, 2014 2013 (As restated) Current $ - $ - Deferred 77,042 1,061,413 Total income tax expense (benefit) $ 77,042 $ 1,061,413 Following is a reconciliation of income taxes calculated at the federal statutory rates to the provision for income taxes: Years Ended December 31, 2014 2013 (As restated) (Benefit) tax at statutory rate of 25% $ (9,868,430 ) $ (4,736,660 ) Stock based compensation from current and prior years - 8,534 Effect of tax holiday 3,906,336 1,834,517 Other, primarily the difference in U.S. tax rates 7,815 - Change in valuation allowance 6,031,321 3,955,022 Income tax expense $ 77,042 $ 1,061,413 The effect of the tax holiday amounted to a change in the tax expense (benefit) of $3,906,336 and $1,834,517 for the years ended December 31, 2014 and 2013, which was equivalent to basic and diluted earnings per share of ($0.09) and ($0.04) per share for the years ended December 31, 2014 and 2013, respectively. The temporary differences which give rise to the deferred income tax assets and liability are as follows: December 31, 2014 2013 (As restated) Deferred income tax assets: Allowance for doubtful trade receivables $ 6,652,118 $ 1,995,243 Allowance for doubtful other receivables 9,049 6,460 Inventory obsolescence reserve 1,040,107 1,501,687 Expenses not deductible in current year 31,000 31,143 Deferred revenue 377,457 - PRC net operating loss carry forward 1,676,852 328,643 U.S. net operating loss carry forward 1,181,679 1,052,784 Total deferred income tax assets 10,968,262 4,915,960 Valuation allowance (10,968,262 ) (4,915,960 ) Net deferred income tax asset $ - $ - As of December 31, 2014, the Company had net operating loss carryforwards for PRC tax purposes of approximately $11.2 million which are available to offset any future taxable income through 2019. The Company also has net operating losses for United States federal income tax purposes of approximately $3.5 million which are available to offset future taxable income, if any, through 2034. 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 for the Company to realize all benefits of the deferred tax assets as of December 31, 2014 and 2013. Therefore, the Company provided for a valuation allowance against its deferred tax assets of $10,968,262 and $4,915,960 as of December 31, 2014 and 2013, respectively. The Company 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 | 12 Months Ended |
Dec. 31, 2014 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | NOTE 13 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 bankers acceptance notes it holds. The Company values its derivative warrants using a valuation method explained above. The bankers 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, 2014 and 2013: Fair Value Measurements at Reporting Date Using Description December 31, 2014 Level 1 Level 2 Level 3 Banker's acceptance notes $ 458,233 $ - $ 458,233 $ - Total $ 458,233 $ - $ 458,233 $ - Fair Value Measurements at Reporting Date Using Description December 31, 2013 Level 1 Level 2 Level 3 Banker's acceptance notes $ 336,003 $ - $ 336,003 $ - Total $ 336,003 $ - $ 336,003 $ - |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2014 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | NOTE 14 - STOCKHOLDERS' EQUITY 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 Companys 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.As of December 31, 2014 and 2013, the Company had no warrants outstanding. Employee Stock Options 2010 Incentive Plan On November 12, 2010, the Companys Board of Directors adopted the Companys 2010 Incentive Plan (the Plan), which was then approved by stockholders on December 22, 2010. The Plan 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 December 31, 2014, there were 175,000 shares of restricted stock granted and outstanding under the Plan. No options were outstanding as of December 31, 2014 under the Plan. There were no securities issued from the Plan during each of the year ended December 31, 2014 and 2013. Options to purchase 25,000 shares of common stock at an exercise price of $2.54 per share were forfeited during 2013. The Company recognized no compensation expense related to the awards of common shares and the grants and modifications of stock options during each of the years ended December 31, 2014 and 2013. The fair value of each option award is estimated on the date of grant using the Black-Scholes Option Pricing Model. Expected volatility is based on the historical volatility of the Companys 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. As of December 31, 2014, 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, 2014 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 15 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 Companys 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 $4,637,671 and $25,474,525 during the years ended December 31, 2014 and 2013, respectively. These payments are classified as property and equipment as of December 31, 2014 and as construction in progress on the accompanying balance sheet as of December 31, 2013. |
CONCENTRATIONS
CONCENTRATIONS | 12 Months Ended |
Dec. 31, 2014 | |
CONCENTRATIONS | |
CONCENTRATIONS | NOTE 16 CONCENTRATIONS For the year ended December 31, 2014, one customer accounted for 13.0% of sales and one supplier accounted for 26.5% of raw material purchases, one customer accounted for 17.7% of accounts receivable, and three different products accounted for 49%, 12% and 11% of revenue. 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, two customers accounted for 14.5% and 11.2% of accounts receivable, and three different products accounted for 35%, 13% and 10% of revenue. |
Accounting Policies (Policies)
Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 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, 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 Companys outstanding shares of common stock on December 21, 2012. The Foreign Investment Industrial Catalogue 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 Helpsons business is not subject to any ownership restrictions prescribed under the Catalogue. Onny acquired 100% of the ownership in Helpson on May 25, 2005 by entering into an Equity Transfer Agreement with Helpsons three former shareholders. 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 acquired 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. Helpsons functional currency is the Chinese Renminbi. Helpsons 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 Helpsons 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. |
Accounting Estimates | Accounting Estimates - The methodology used to prepare for the Companys financial statements is in conformity with the accounting principles generally accepted in the United States of America, which 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. Therefore, 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 bankers 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 the 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 to the customer. 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. As of December 31, 2014, the Company had trade accounts receivable amounting to $48,569,986 from sales that occurred more than one year from that date, which the Company believes are collectable. During 2014, the Company offered two of its largest customers a discount of 30% for payments for accounts receivable that were older than one year. The amount of the outstanding accounts receivable balance the discount was applied to was approximately $1.8 million. As a result, the Company recognized additional bad debt expense of approximately $0.53 million for the year ended December 31, 2014. During 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 expenses for the negotiated discounts of approximately $2.1 million 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 $2,250,130 and $9,881,711 for the years ended December 31, 2014 and 2013, respectively. The Company recognized an inventory obsolescence reserve of ($1,093,082) and $6,257,142 for the years ended December 31, 2014 and 2013, 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. For the years ended December 31, 2014 and 2013, the Company evaluated its long-lived assets and determined that no impairment adjustment was necessary. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost. Maintenance and repairs are charged to expenses 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 obtains persuasive evidence of an arrangement with the customer, when delivery of the products has occurred, when the sales price is fixed or determinable, and when collectability is reasonably assured. Delivery does not occur until products have been shipped to the customer, the risk of loss has transferred to the customer and customer acceptance has been obtained, customer acceptance provisions have lapsed, or the Company obtains 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. Revenue is deferred when collectability is not considered to be reasonably assured |
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 $2,798,557 and $1,683,244 for the years ended December 31, 2014 and 2013, 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 the provincial governments. The benefit plans of the government assume the retirement benefit obligations of all existing and future retired employees of the Company. The Company contributed $249,921 and $241,384 to retirement benefit plans for the years ended December 31, 2014 and 2013, 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, 2014 and 2013. |
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 Year Ended December 31, 2014 2013 (As restated) Net loss $ (39,550,760 ) $ (20,008,049 ) 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 per share $ (0.91 ) $ (0.46 ) Diluted loss per share $ (0.91 ) $ (0.46 ) There were no potential dilutive common shares outstanding during the years ended December 31, 2014 and 2013, respectively. |
Credit Risk, Policy | Credit Risk The carrying amount of accounts receivable included in the balance sheet represents the Company's exposure to credit risk in relation to its financial assets. No other financial assets carries 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 secured 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 Companys 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 | Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers" In June 2014, the FASB issued ASU 2014-12, Compensation-Stock Compensation (Topic 718) Other accounting standards that have been issued by the FASB or other standards-setting bodies are not expected to have a material effect on the Companys financial position, result of operations or cash flows. |
RESTATEMENT (TABLES)
RESTATEMENT (TABLES) | 12 Months Ended |
Dec. 31, 2014 | |
RESTATEMENT (TABLES): | |
RESTATEMENT (TABLES) | The adjustments in connection with the restatement are as follows: As Previously As Balance Sheet Amounts Reported Restatement restated December 31, 2014 Accounts receivable, net of allowance $ 24,851,086 $ (10,997,342 ) $ 13,853,744 Total current assets 54,492,543 (10,997,342 ) 43,495,201 Total assets 132,081,828 (10,997,342 ) 121,084,486 Deferred revenue - 2,516,383 2,516,383 Total liabilities 25,827,983 (2,516,383 ) 28,344,366 Retained earnings 62,848,901 13,503,385 49,345,516 Accumulated other comprehensive income - foreign currency translation adjustment 19,771,160 10,340 19,760,820 Total stockholders' equity 106,253,845 13,513,725 92,740,120 Total liabilities and stockholders' equity $ 132,081,828 $ 10,997,342 $ 121,084,486 Statement of Operations and As Previously As Comprehensive Income Amounts Reported Restatement restated For the year ended December 31, 2014 Revenue $ 24,927,707 $ (2,793,841 ) $ 22,133,866 Gross profit 5,462,001 (2,793,841 ) 2,668,160 Bad debt expense 20,643,045 10,709,534 31,352,579 Total operating expenses 30,781,382 10,709,544 41,490,926 Loss from operations (25,254,268 ) (13,503,385 ) (38,757,653 ) Loss before income taxes (25,970,333 ) (13,503,385 ) (39,473,718 ) Income taxes 77,042 - 77,042 Net loss (26,047,375 ) (13,503,385 ) (39,550,760 ) Other comprehensive income - foreign currency translation adjustment (643,221 ) (10,340 ) (653,561 ) Basic and diluted loss per share $ (0.60 ) $ (0.31 ) $ (0.91 ) As Previously As Statement of Cash Flows Amounts Reported Restatement restated For the year ended December 31, 2014 Net loss $ (26,047,375 ) $ (13,503,385 ) $ (39,550,760 ) Bad debt expense 20,643,035 10,709,544 31,352,579 Deferred revenue - 2,514,457 2,514,457 Trade accounts and other receivables $ (3,443,329 ) $ 279,384 $ (3,163,945 ) |
BASIS OF PRESENTATION (Tables)
BASIS OF PRESENTATION (Tables) | 12 Months Ended |
Dec. 31, 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 Year Ended December 31, 2014 2013 (As restated) Net loss $ (39,550,760 ) $ (20,008,049 ) 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 per share $ (0.91 ) $ (0.46 ) Diluted loss per share $ (0.91 ) $ (0.46 ) |
INVENTORY(Tables)
INVENTORY(Tables) | 12 Months Ended |
Dec. 31, 2014 | |
INVENTORY (Tables) | |
Inventory consists | Inventory consisted of the following: December 31, December 31, 2014 2013 Raw materials $ 18,819,570 $ 28,259,707 Work in process - 853,602 Finished goods 3,436,330 3,590,937 22,255,900 32,704,246 Obsolescence reserve (6,934,044 ) (8,027,126 ) Total Inventory $ 15,321,856 $ 24,677,120 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
PROPERTY AND EQUIPMENT (Tables) | |
Property and equipment consists | Property and equipment consisted of the following: December 31, December 31, 2014 2013 Permit of land use $ 458,853 $ 460,964 Building 11,279,704 2,494,623 Plant, machinery and equipment 28,358,694 6,671,620 Motor vehicle 150,976 151,670 Office equipment 268,521 229,210 Construction in progress 5,848 25,497,600 Total 40,522,596 35,505,687 Less: accumulated depreciation (6,640,718 ) (5,264,350 ) Property and Equipment, net $ 33,881,878 $ 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 Year Ended December 31, 2014 2013 Total interest cost incurred $ 1,244,346 $ 583,400 Interest cost capitalized 458,542 234,704 Interest expense $ 785,804 $ 348,696 |
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 5 - 10 Motor vehicle 5 - 10 Office equipment 3-5 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Intangible Assets (Tables) | |
Intangible Assets Medical Formulas | Intangible assets consisted solely of CFDA approved medical formulas as follows: December 31, December 31, 2014 2013 Gross carrying amount $ 5,499,494 $ 5,524,785 Accumulated amortization (4,182,273 ) (3,812,992 ) Net carrying amount $ 1,317,221 $ 1,711,793 |
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 2015 $ 321,753 2016 300,191 2017 258,094 2018 137,930 2019 64,755 Thereafter 234,498 Total $ 1,317,221 |
Schedule of Long-term Debt Inst
Schedule of Long-term Debt Instruments (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Schedule of Long-term Debt Instruments: | |
Schedule of Long-term Debt Instruments | Principal payments required for the next five years as of December 31, 2014 are as follows: Year Amount 2015 1,629,062 2016 1,629,062 2017 2,443,594 2018 2,443,594 2019 2,443,594 Thereafter 2,443,594 $ 13,032,500 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
INCOME TAXES (Tables) | |
Current Taxes | Under the 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 2013 15% 2014 15% 2015 15% 2016 15% 2017 25% Thereafter 25% |
Provision For Income Taxes | The provision for income taxes consisted of the following: Year Ended December 31, 2014 2013 (As restated) Current $ - $ - Deferred 77,042 1,061,413 Total income tax expense (benefit) $ 77,042 $ 1,061,413 |
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, 2014 2013 (As restated) (Benefit) tax at statutory rate of 25% $ (9,868,430 ) $ (4,736,660 ) Stock based compensation from current and prior years - 8,534 Effect of tax holiday 3,906,336 1,834,517 Other, primarily the difference in U.S. tax rates 7,815 - Change in valuation allowance 6,031,321 3,955,022 Income tax expense $ 77,042 $ 1,061,413 |
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, 2014 2013 (As restated) Deferred income tax assets: Allowance for doubtful trade receivables $ 6,652,118 $ 1,995,243 Allowance for doubtful other receivables 9,049 6,460 Inventory obsolescence reserve 1,040,107 1,501,687 Expenses not deductible in current year 31,000 31,143 Deferred revenue 377,457 - PRC net operating loss carry forward 1,676,852 328,643 U.S. net operating loss carry forward 1,181,679 1,052,784 Total deferred income tax assets 10,968,262 4,915,960 Valuation allowance (10,968,262 ) (4,915,960 ) Net deferred income tax asset $ - $ - |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
FAIR VALUE MEASUREMENTS (Tables) | |
Assets Fair Value | . The Company held the following assets and liabilities recorded at fair value as of December 31, 2014 and 2013: Fair Value Measurements at Reporting Date Using Description December 31, 2014 Level 1 Level 2 Level 3 Banker's acceptance notes $ 458,233 $ - $ 458,233 $ - Total $ 458,233 $ - $ 458,233 $ - Fair Value Measurements at Reporting Date Using Description December 31, 2013 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) | Dec. 31, 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 and
BASIS OF PRESENTATION Basic and Diluted Earnings per Common Share (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
BASIS OF PRESENTATION Basic and Diluted Earnings per Common Share | ||
Net loss | $ (39,550,760) | $ (20,008,049) |
Basic weighted-average common shares outstanding | 43,579,557 | 43,579,557 |
Effect of dilutive securities: | ||
Warrants | $ 0 | |
Options | $ 0 | |
Diluted weighted-average common shares outstanding | 43,579,557 | 43,579,557 |
Basic loss per share | $ (0.91) | $ (0.46) |
Diluted loss per share | $ (0.91) | $ (0.46) |
BASIS OF PRESENTATION POLICIES
BASIS OF PRESENTATION POLICIES Parentheticals (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Parentheticals - Trade Receivables | ||
Accounts Receivable from sales | $ 48,569,986 | |
Customers a discount for payments for accounts receivable that were older than one year | 30.00% | |
Outstanding accounts receivable balance the discount | $ 1,800,000 | |
Management negotiated settlement offers with certain customers in accounts receivable balances that were greater than one (1) year past due. | 8,000,000 | |
Discounts ranging from 15% to | 30.00% | |
Amount collected in cash | 5,850,000 | |
Recognized additional bad debt expense for the negotiated discounts in the amount of | 530,000 | $ 2,100,000 |
Charges to inventory obsolescence expense totalled to | 2,250,130 | 9,881,711 |
Recognized inventory obsolescence reserve of | 1,093,082 | 6,257,142 |
Research and development expenses | 2,798,557 | 1,683,244 |
Amount contributed to retirement benefit plans for the period | $ 249,921 | $ 241,384 |
Losses from natural disaster (D
Losses from natural disaster (Details) | Jul. 18, 2014USD ($) |
Losses from natural disaster consists of | |
Company's manufacturing facilities and inventory sustained storm damage of inventory related costs | $ 2,016,068 |
Company's manufacturing facilities and inventory sustained storm damage of of facilities damage costs | $ 260,451 |
PRODUCT RECALL (DETAILS)
PRODUCT RECALL (DETAILS) | 12 Months Ended |
Dec. 31, 2014USD ($) | |
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 consisted of the foll
Inventory consisted of the following (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Inventory consisted of the following | ||
Raw materials | $ 18,819,570 | $ 28,259,707 |
Work in process | 853,602 | |
Finished goods | 3,436,330 | 3,590,937 |
Inventory Gross | 22,255,900 | 32,704,246 |
Obsolescence reserve | (6,934,044) | (8,027,126) |
Total Inventory | $ 15,321,856 | $ 24,677,120 |
Property and equipment consiste
Property and equipment consisted of the following (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Property and equipment consisted of the following | ||
Permit of land use | $ 458,853 | $ 460,964 |
Building | 11,279,704 | 2,494,623 |
Plant, machinery and equipment | 28,358,694 | 6,671,620 |
Motor vehicle | 150,976 | 151,670 |
Office equipment | 268,521 | 229,210 |
Construction in progress | 5,848 | 25,497,600 |
Total Property and Equipment | 40,522,596 | 35,505,687 |
Less: accumulated depreciation details | (6,640,718) | (5,264,350) |
Property and Equipment, net; | $ 33,881,878 | $ 30,241,337 |
PROPERTY AND EQUIPMENT Assets L
PROPERTY AND EQUIPMENT Assets Life (Details) | Dec. 31, 2014 |
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 | 49 |
Plant, machinery and equipment minimum life | 5 |
Plant, machinery and equipment maximum 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 Interes
Reconciliation of Total Interest incurred cost (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Reconcialition of Total interest details | ||
Total interest cost incurred | $ 1,244,346 | $ 583,400 |
Interest cost capitalized | 458,542 | 234,704 |
Interest expense, | $ 785,804 | $ 348,696 |
ASSETS Depreciation (Details)
ASSETS Depreciation (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Assets Depreciation | ||
Reclassified from construction in progress | $ 25,500,000 | |
Depreciation Expense property and equipment | $ 1,399,396 | $ 846,512 |
INTANGIBLE ASSETS CFDA Approved
INTANGIBLE ASSETS CFDA Approved Medical Formulas (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
INTANGIBLE ASSETS CFDA Approved Medical Formulas | ||
Gross carrying amount | $ 5,499,494 | $ 5,524,785 |
Accumulated amortization Intangible assets SFDA Approved Medical Formulas | (4,182,273) | (3,812,992) |
Net carrying amount | $ 1,317,221 | $ 1,711,793 |
Estimated Aggregate Annual Amor
Estimated Aggregate Annual Amortization expense for next five years and thereafter (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Estimated Aggregate Annual Amortization expense for next five years and thereafter | ||
Annual amortization 2015 | $ 321,753 | |
Annual amortization 2016 | 300,191 | |
Annual amortization 2017 | 258,094 | |
Annual amortization 2018 | 137,930 | |
Annual amortization 2019 | 64,755 | |
Annual amortization Thereafter | 234,498 | |
Accumulated amortization Intangible assets CFDA Approved Medical Formulas | 1,317,221 | |
Impairment losses relating to those intangible assets | 0 | $ 0 |
Amortization expenses relating to intangible asets was | $ 386,440 | $ 766,318 |
ADVANCES FOR PURCHASES OF INT44
ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Advances for purchase of intangible assets details | ||
Company was obligated to pay laboratories | $ 4,551,000 | $ 5,466,000 |
RELATED PARTY TRANSACTIONS Memb
RELATED PARTY TRANSACTIONS Member Of BOD (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
RELATED PARTY TRANSACTIONS Member Of BOD | ||
Total interest expense recognized for the period | $ 13,546 | $ 13,546 |
Interest rate on advances from Member of BOD | 1.00% | 1.00% |
RELATED PARTY TRANSACTIONS Owin
RELATED PARTY TRANSACTIONS Owings (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
RELATED PARTY TRANSACTIONS Owings | ||
Adavances owing to board member | $ 1,354,567 | $ 1,354,567 |
NOTES PAYABLES. (Details)
NOTES PAYABLES. (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
NOTES PAYABLES | ||
Revolving line of credit with a bank (RMB) | $ 30,000,000 | |
Annual interest rate | 6.90% | |
Outstanding balance due under revolving line of credit (RMB 30,000,000) | $ 4,887,187 | $ 4,909,662 |
CONSTRUCTION LOAN FACILITY (Det
CONSTRUCTION LOAN FACILITY (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Construction loan facility details | ||
Total loan facility amount (RMB 80,000,)000 | $ 13,000,000 | $ 12,500,000 |
Loan interest | 7.205% | 7.205% |
Principal payments required for
Principal payments required for the next five years as of December 31, 2014 are as follows: (Details) | Dec. 31, 2014USD ($) |
Principal payments required for the next five years as of December 31, 2013 are as follows: | |
Principal Payments 2015 | $ 1,629,062 |
Principal Payments 2016 | 1,629,062 |
Principal Payments 2017 | 2,443,594 |
Principal Payments 2018 | 2,443,594 |
Principal Payments 2019 | 2,443,594 |
Principal Payments Thereafter | 2,443,594 |
Total principal payments due | $ 13,032,500 |
INCOME TAXES Undistributed Earn
INCOME TAXES Undistributed Earnings And Income Tax Rates (Details) | Dec. 31, 2014USD ($) |
INCOME TAXES Undistributed Earnings | |
Undistributed earnings of Helpson | $ 68,300,000 |
Investment in Helpson, a foreign subsidiary for the company | $ 23,300,000 |
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 2017 | 25.00% |
Enterprise Income Tax Rates for the year There after | 25.00% |
Net operating loss carryforwards for PRC tax purposes | $ 11,200,000 |
Net operating loss carryforwards for US Federal income tax purposes | $ 3,500,000 |
INCOME TAXES Provision (Details
INCOME TAXES Provision (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
INCOME TAXES Provision | ||
Current tax provision. | $ 0 | $ 0 |
Deferred tax provision. | 77,042 | 1,061,413 |
Total income tax expense | 77,042 | 1,061,413 |
Effect of tax holiday amounted to a change in the tax expense (benefit) of | $ 3,906,336 | $ 1,834,517 |
Equivalent to basic and diluted earnings per share of | $ (0.09) | $ (0.04) |
Reconciliation of income taxes
Reconciliation of income taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Reconciliation of income taxes | ||
(Benefit) tax at statutory rate of 25% | $ (9,868,430) | $ (4,736,660) |
Stock based compensation from current and prior years | 8,534 | |
Effect of tax holiday | 3,906,336 | 1,834,517 |
Other, primarily the difference in U.S. tax rates | 7,815 | |
Change in valuation allowance Reconciliation | 6,031,321 | 3,955,022 |
Income tax expense Reconciliation | $ 77,042 | $ 1,061,413 |
Changes of deferred income tax
Changes of deferred income tax assets and liability (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Deferred income tax assets: | ||
Allowance for doubtful trade receivables deferred tax | $ 6,652,118 | $ 1,995,243 |
Allowance for doubtful other receivables deferred tax | 9,049 | 6,460 |
Inventory obsolescence reserve | 1,040,107 | 1,501,687 |
Expenses not deductible in current year | 31,000 | 31,143 |
Deferred revenue | 377,457 | |
PRC net operating loss carry forward | 1,676,852 | 328,643 |
U.S. net operating loss carry forward | 1,181,679 | 1,052,784 |
Total deferred income tax assets | 10,968,262 | 4,915,960 |
Valuation allowance | (10,968,262) | $ (4,915,960) |
Net deferred income tax asset | $ 0 |
FAIR VALUE MEASUREMENTS At Repo
FAIR VALUE MEASUREMENTS At Reporting Date Using (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
FAIR VALUE MEASUREMENTS At Reporting Date Using | ||
Bankers acceptance notes | $ 458,233 | $ 336,003 |
Total | 458,233 | 336,003 |
Bankers acceptance notes Level 1 | 0 | 0 |
Total Level 1 | 0 | 0 |
Bankers acceptance notes Level 2 | 458,233 | 336,003 |
Total Level 2 | 458,233 | 336,003 |
Bankers acceptance notes Level 3 | 0 | 0 |
Total Level 3 | $ 0 | $ 0 |
Preferred Common Stock And Warr
Preferred Common Stock And Warrants (Details) | Dec. 31, 2014$ / sharesshares |
Preferred Common Stock And Warrants | |
Common shares authorized | shares | 95,000,000 |
Preferred shares authorized | shares | 5,000,000 |
Common shares per share value | $ 0.001 |
Preferred shares per share value | $ 0.001 |
Number of common stock shares to purchase by warrants outstaning and exercisable | shares | 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) - $ / shares | Dec. 31, 2014 | Nov. 12, 2010 |
STOCKHOLDERS EQUITY 2010 Stock Option Plan | ||
Number of common shares | 4,000,000 | |
Number of common shares purchased by options | 25,000 | |
Exercise price per share expired unexercised. | $ 2.54 | |
shares of restricted stock granted and outstanding under the 2010 Incentive Plan | 175,000 |
Contractual Commitments (Detail
Contractual Commitments (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Contractual Commitments Details | ||
Company made payments as per Construction agreement | $ 4,637,671 | $ 25,474,525 |
CONCENTRATIONS (Details)
CONCENTRATIONS (Details) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
CONCENTRATIONS Details | ||
Customer accounted for sales | 13.00% | 10.00% |
Supplier accounted for raw material purchases | 26.50% | 18.70% |
Customer accounted accounts receivable 1st time | 17.70% | 14.50% |
Customer accounted accounts receivable 2nd time | 0.00% | 11.20% |
First product accounted for revenue | 49.00% | 35.00% |
Second product accounted for revenue | 12.00% | 13.00% |
Third Product accounted for revenue | 11.00% | 10.00% |