Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 08, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | CHINA PHARMA HOLDINGS, INC. | |
Entity Trading Symbol | cphi | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
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 | 2,016 | |
Document Fiscal Period Focus | Q3 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Current Assets: | ||
Cash and cash equivalents | $ 3,650,039 | $ 6,248,760 |
Restricted cash | 1,470,014 | 0 |
Banker's acceptances | 21,546 | 0 |
Trade accounts receivable, less allowance for doubtful accounts of $29,380,197 and $28,644,398, respectively | 4,014,862 | 5,882,509 |
Other receivables, less allowance for doubtful accounts of $78,618 and $74,400, respectively | 390,450 | 290,739 |
Advances to suppliers | 2,614,053 | 2,533,354 |
Inventory, less allowance for obsolescence of $6,682,357 and $8,417,095, respectively | 8,569,479 | 9,662,750 |
Prepaid expenses | 259,234 | 339,140 |
Total Current Assets | 20,989,677 | 24,957,252 |
Advances for purchases of intangible assets | 39,457,197 | 42,030,649 |
Property and equipment, net of accumulated depreciation of $11,521,705 and $9,422,912, respectively | 26,339,719 | 29,393,257 |
Intangible assets, net of accumulated amortization of $4,440,106 and $4,360,004, respectively | 621,631 | 841,075 |
TOTAL ASSETS | 87,408,224 | 97,222,233 |
Current Liabilities: | ||
Trade accounts payable | 3,478,404 | 2,824,521 |
Accrued expenses | 91,701 | 143,409 |
Other payables | 1,801,087 | 1,710,283 |
Advances from customers | 1,006,776 | 595,681 |
Other payables - related parties | 1,354,567 | 1,354,567 |
Current portion of construction loan facility | 1,499,390 | 1,540,666 |
Short-term notes payable | 2,249,085 | 4,621,998 |
Banker's acceptance notes payable | 1,470,014 | 0 |
Total Current Liabilities | 12,951,024 | 12,791,125 |
Non-current Liabilities: | ||
Construction loan facility | 8,996,338 | 10,784,661 |
Deferred revenue | 172,357 | 708,408 |
Long-term deferred tax liability | 353,100 | 296,890 |
Total Liabilities | 22,472,819 | 24,581,084 |
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 | 28,183,391 | 33,939,998 |
Accumulated other comprehensive income | 13,118,230 | 15,067,367 |
Total Stockholders' Equity | 64,935,405 | 72,641,149 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 87,408,224 | $ 97,222,233 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS PARENTHETICALS - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Parentheticals | ||
Allowance for doubtful accounts on trade accounts receivable | $ 29,380,197 | $ 28,644,398 |
Allowance for doubtful accounts on other receivables | 78,618 | 74,400 |
Allowance for obsolescence of inventory | 6,682,357 | 8,417,095 |
Accumulated depreciation on Property and equipment | 11,521,705 | 9,422,912 |
Accumulated amortization on Intangible assets | $ 4,440,106 | $ 4,360,004 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
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 STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
REVENUES: | ||||
Revenue | $ 3,125,596 | $ 4,479,113 | $ 10,308,320 | $ 15,848,218 |
Cost of revenue | 2,695,900 | 3,720,447 | 8,635,392 | 12,667,104 |
Inventory obsolescence | 79,728 | 436,666 | 200,044 | 1,855,814 |
Gross (loss) profit | 349,968 | 322,000 | 1,472,884 | 1,325,300 |
Operating expenses: | ||||
Selling expenses | 927,187 | 1,155,137 | 2,753,388 | 3,156,553 |
General and administrative expenses | 294,367 | 384,412 | 1,394,250 | 1,315,867 |
Research and development expenses | 99,095 | 405,438 | 289,189 | 741,116 |
Bad debt expense (benefit) | (69,899) | (3,160,862) | 1,005,949 | 6,045,352 |
Impairment of long term assets | 644,696 | 0 | 1,467,235 | 0 |
Total operating expenses | 1,895,446 | (1,215,875) | 6,910,011 | 11,258,888 |
Subsidy income | (2,325) | 1,655,683 | 346,347 | 1,655,683 |
Income (loss) from operations | (1,547,803) | 3,193,558 | (5,090,780) | (8,277,905) |
Other income (expense): | ||||
Interest income | 32,434 | 36,185 | 99,149 | 93,262 |
Interest expense | (213,740) | (279,113) | (699,932) | (915,310) |
Net other expense | (181,306) | (242,928) | (600,783) | (822,048) |
Income (loss) before income taxes | (1,729,109) | 2,950,630 | (5,691,563) | (9,099,953) |
Income tax expense | (20,800) | (18,906) | (65,044) | (57,618) |
Net income (loss) | (1,749,909) | 2,931,724 | (5,756,607) | (9,157,571) |
Other comprehensive income (loss) - foreign currency translation adjustment | (275,928) | (3,794,761) | (1,949,137) | (2,959,348) |
Comprehensive income (loss) | $ (2,025,837) | $ (863,037) | $ (7,705,744) | $ (12,116,919) |
Income (loss) per share: | ||||
Basic | $ (0.04) | $ 0.07 | $ (0.13) | $ (0.21) |
Diluted | $ (0.04) | $ 0.07 | $ (0.13) | $ (0.21) |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash Flows from Operating Activities: | ||
Net loss | $ (5,756,607) | $ (9,157,571) |
Depreciation and amortization | 2,583,066 | 2,769,761 |
Bad debt expense | 1,005,949 | 6,045,352 |
Deferred income taxes | 65,044 | 677,209 |
Inventory obsolescence reserve | (1,529,912) | 460,537 |
Impairment of long-term assets | 1,467,235 | 0 |
Changes in assets and liabilities: | ||
Trade accounts and other receivables | (709,257) | (2,642,445) |
Advances to suppliers | (150,606) | (1,746,117) |
Inventory | 3,157,553 | 3,314,458 |
Trade accounts payable | 739,551 | 2,061,895 |
Accrued taxes payable | (74,080) | 16,307 |
Other payables and accrued expenses | 119,085 | (18,951) |
Advances from customers | 432,904 | (1,128,459) |
Prepaid expenses | 71,790 | 0 |
Net Cash Provided by Operating Activities | 1,421,715 | 651,976 |
Cash Flows from Investing Activities: | ||
Purchases of property and equipment | (86,350) | (310,247) |
Bankers acceptances redeemed for cash | 0 | 306,904 |
Net Cash Used in Investing Activities | (86,350) | (3,343) |
Cash Flows from Financing Activities: | ||
Payments of construction term loan | (1,519,932) | 0 |
Payments of short term debt | (2,279,899) | 0 |
Net Cash Used by Financing Activity | (3,799,831) | 0 |
Effect of Exchange Rate Changes on Cash | (134,255) | (226,914) |
Net (Decrease) Increase in Cash and Cash Equivalents | (2,598,721) | 421,719 |
Cash and Cash Equivalents at Beginning of Period | 6,248,760 | 5,319,990 |
Cash and Cash Equivalents at End of Period | 3,650,039 | 5,741,709 |
Supplemental Cash Flow Information: | ||
Cash paid for interest | 689,773 | 905,151 |
Supplemental Noncash Investing and Financing Activities: | ||
Accounts payable for purchases of property and equipment | 0 | 137,854 |
Accounts receivable collected with banker's acceptances | 803,655 | 1,968,818 |
Inventory purchased with banker's acceptances | 781,814 | 1,400,447 |
Restricted cash related to letter of credit | 1,490,154 | 0 |
Advances for intangible assets purchased with banker's acceptances | $ 0 | $ 395,445 |
ORGANIZATION AND SIGNIFICANT AC
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2016 | |
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | |
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Operations On December 31, 2012, China Pharma Holdings, Inc. consummated a reincorporation merger for the purpose of changing its state of incorporation from Delaware to Nevada pursuant to the terms and conditions of an Agreement and Plan of Merger dated December 27, 2012. The reincorporation merger was approved by stockholders holding the majority of the Company's outstanding shares of common stock on December 21, 2012. The Foreign Investment Industrial Catalogue 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 on May 25, 2005 by entering into an Equity Transfer Agreement with Helpson's 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 Helpson's functional currency is the Chinese Renminbi. Helpson's revenue and expenses are translated into United States dollars at the average exchange rate for the period. Assets and liabilities are translated at the exchange rate as of the end of the reporting period. Gains or losses from translating Helpson's financial statements are included in accumulated other comprehensive income, which is a component of stockholders' equity. Gains and losses arising from transactions denominated in a currency other than the functional currency of the entity that is party to the transaction are included in the results of operations. Accounting Estimates - Cash and Cash Equivalents Restricted Cash Trade Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivable that have been fully allowed for and determined to be uncollectible are charged against the allowance in the period the determination is made. It is common practice in the pharmaceutical industry 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 September 30, 2016, the Company had trade accounts receivable amounting to $30 million from sales that occurred more than one year from that date, most of which the Company believes are collectable. Advances to Suppliers and Advances from Customers Inventory Valuation of Long-Lived Assets Property and Equipment Revenue Recognition Cost of Revenues Research and Development Basic and Diluted Earnings (Loss) per Common 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, 2016 2015 2016 2015 Net (loss) income $ (1,749,909 ) $ 2,931,724 $ (5,756,607 ) $ (9,157,571 ) 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) earnings per share $ (0.04 ) $ 0.07 $ (0.13 ) $ (0.21 ) Diluted loss per share $ (0.04 ) $ 0.07 $ (0.13 ) $ (0.21 ) Credit Risk 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 Company's deposits may be at a higher risk of loss. Interest Rate Risk Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers" The standard allows for two transition methods - retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial adoption. The Company has not yet determined its method of transition and are evaluating the impact that this guidance will have on its financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments Other accounting standards that have been issued by FASB or other standards-setting bodies are not expected to have a material effect on the Company's financial position, result of operations or cash flows. |
INVENTORY
INVENTORY | 9 Months Ended |
Sep. 30, 2016 | |
INVENTORY | |
INVENTORY | NOTE 2 INVENTORY Inventory consisted of the following: September 30, December 31, 2016 2015 Raw materials $ 12,106,727 $ 14,699,736 Work in process 413,756 - Finished goods 2,731,353 3,380,109 15,251,836 18,079,845 Obsolescence reserve (6,682,357 ) (8,417,095 ) Total Inventory $ 8,569,479 $ 9,662,750 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2016 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | NOTE 3 - PROPERTY AND EQUIPMENT Property and equipment consisted of the following: September 30, December 31, 2016 2015 Permit of land use $ 422,330 $ 433,956 Building 10,274,394 10,557,234 Plant, machinery and equipment 26,651,565 27,325,440 Motor vehicle 259,369 242,860 Office equipment 253,766 256,679 Total 37,861,424 38,816,169 Less: accumulated depreciation (11,521,705 ) (9,422,912 ) Property and Equipment, net $ 26,339,719 $ 29,393,257 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 three months ended September 30, 2016 and 2015, depreciation expense was $789,150 and $911,515, respectively. For the nine months ended September 30, 2016 and 2015, depreciation expense was $2,383,457 and $2,523,752, respectively. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2016 | |
INTANGIBLE ASSETS | |
INTANGIBLE ASSETS | NOTE 4 - INTANGIBLE ASSETS Intangible assets represent the cost of medical formulas approved for production by China Food and Drug Administration ("CFDA"). The Company did not obtain CFDA production approval for any medical formula during the nine months ended September 30, 2016 and 2015 and no costs were reclassified from advances to intangible assets during the nine months ended September 30, 2016 and 2015, respectively. Approved medical formulas are amortized from the date CFDA approval is obtained over their individually identifiable estimated useful lives, 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 $65,643 and $73,498, respectively for the three months ended September 30, 2016 and 2015 and $199,609 and $246,009 for the nine months ended September 30, 2016 and 2015, 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 periods. The Company evaluates each approved medical formula for impairment on the date of CFDA approval is obtained, when indications of impairment are present and on the date each financial statement is issued. The Company's evaluation is based on an estimated undiscounted net cash flow model, considering currently available market data for the related drug and the Company's estimated market share. If the carrying value of the medical formula exceeds the estimated future net cash flows, an impairment loss is recognized for the excess of the carrying value over the fair value of the medical formula, which is determined by the estimated discounted future net cash flows. No impairment loss was recognized during the nine months ended September 30, 2016 and 2015. Intangible assets consisted solely of CFDA approved medical formulas as follows: September 30, December 31, 2016 2015 Gross carrying amount $ 5,061,737 $ 5,201,079 Accumulated amortization (4,440,106 ) (4,360,004 ) Net carrying amount $ 621,631 $ 841,075 |
ADVANCES FOR PURCHASES OF INTAN
ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS. | 9 Months Ended |
Sep. 30, 2016 | |
ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS | |
ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS. | NOTE 5 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 as of September 30, 2016. 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 CFDA's approval for a clinical study, which is very typical for the Company, the clinical study that follows will usually take from one and a half to three years to complete. After 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, if the laboratory is in existence and solvent. 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. Impairment is recorded when an asset's carrying amount is not recoverable based on refund rights or otherwise, which can be caused due to laboratory's insolvency or loss of operating license. 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 September 30, 2016, the Company was obligated to pay laboratories and others approximately $4,400,000 upon the completion of various phases of contracts to obtain CFDA production approval of medical formulas. During the nine months ended September 30, 2016, with CFDA's tightened scrutiny procedure in connection with its review of GMP applications and based on the Company's monitoring and assessment process, the Company determined three advanced payments to three independent laboratories were impaired. As a result, the Company recognized an impairment loss for the advances made to these laboratories in the amount of $1,467,235. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2016 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 6 RELATED PARTY TRANSACTIONS A member of the Company's board of directors had previously advanced the Company an aggregate amount of $1,354,567 as of September 30, 2016 and December 31, 2015 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 for the three months ended September 30, 2016 and 2015 was $3,386 and $3,386. Total interest expense for the nine months ended September 30, 2016 and 2015 was $10,159 and $10,158, respectively. |
NOTES PAYABLE
NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2016 | |
NOTES PAYABLES | |
NOTES PAYABLE | NOTE 7 NOTES PAYABLE Line of Credit In November 2014, the Company entered into a line of credit with a bank in the amount of RMB30,000,000 (approximately $4,498,169). 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 and bear interest at an annual rate of 6.16% (based upon 110% of the PRC government's short term rate of 5.6% in November 2014). In addition, the Company's Chief Executive Officer and Chair of the board of directors ("Board") personally guaranteed the line of credit. In November, 2015 the Company renewed its line of credit in the amount of RMB30,000,000 (approximately $4,498,169 with the same bank. The line of credit is payable in two equal installments of RMB15,000,000 (approximately $2.25 million) payable on September 16, 2016 and October 19, 2016, respectively. The Company made the payment due for RMB15,000,000 according to the terms of the agreement as of September 30, 2016. Advances on the line of credit are collateralized by certain land use rights, buildings and accounts receivable and bear interest at an annual rate of 5.06% (based upon 110% of the PRC government's current short term rate of 4.6%). In addition, the Company's Chief Executive Officer and Chairman of the Board personally guaranteed the line of credit. The outstanding balance due under the revolving line of credit was RMB15,000,000 and RMB30,000,000 as of September 30, 2016 and December 31, 2015, respectively ($2,249,085 as of September 30, 2016 and $4,621,998 as of December 31, 2015). 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 as of September 30, 2016. Subsequent to the nine-month period ended September 30, 2016, the Company made the second installment payment of RMB15,000,000. Fair Value of Notes Payable |
BANKER'S ACCEPTANCE NOTES PAYAB
BANKER'S ACCEPTANCE NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2016 | |
BANKER'S ACCEPTANCE NOTES PAYABLE | |
BANKER'S ACCEPTANCE NOTES PAYABLE | NOTE 8 BANKER'S ACCEPTANCE NOTES PAYABLE In April 2016, the Company entered into a "Banker's Acceptance Note Agreement" with a bank. Pursuant to the terms of the agreement, the Company can issue banker's acceptance notes (the "Banker's Notes") to any third party as payment of amounts owing to that third party. The Company is required to deposit with the bank an amount equal to the amounts represented by the Banker's Notes issued to the third parties. The amount of these deposited balances is shown as "Restricted cash" on the accompanying balance sheets as of September 30, 2016. The maximum amount that the Company can issue under this agreement is limited to the lesser of RMB30,000,000 (approximately $4.5 million) or the amount of cash available to deposit against the Banker's Notes. In addition, the agreement calls for the payment of fees equal to 0.05% of the note amount to the bank. During 2016, the Company issued Banker's Notes in the amount of $1,470,014. |
CONSTRUCTION LOAN FACILITY
CONSTRUCTION LOAN FACILITY | 9 Months Ended |
Sep. 30, 2016 | |
CONSTRUCTION LOAN FACILITY | |
CONSTRUCTION LOAN FACILITY | NOTE 9 CONSTRUCTION LOAN FACILITY The Company obtained a construction loan facility in the amount of RMB80,000,000 (approximately $12.0 million) 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 and is from the same bank that currently provides the line of credit as discussed in Note 7. 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 weighted interest at 5.73%, based upon 110% of the PRC government's eight-year term rate effective on the actual draw-down date, subject to annual adjustments based on 110% of the floating rate for the same type of loan on the anniversary from the draw-down date and its subsequent anniversary dates. On July 10, 2015 the interest rate was adjusted to 5.94% and on July 10, 2016 the interest rate was further adjusted to 5.39%. The loan required interest only payments for the first two years. Beginning July 11, 2015, the balance of the principal is due in at least two (2) annual installments with the first annual payment being due within six month period after July 10, 2015 and the second annual payment being due July 10, 2016 and each following year over the next five years through July 11, 2022 on the identical terms as described above for 2015. In January 2016, the Company made a principal payment in the amount of approximately $309,000 (RMB2,000,000) and on July 13, 2016 the Company made a payment in the amount of approximately $1,196,548 (RMB8,000,000). As of September 30, 2016, the Company had no additional amounts available to it under this facility. Principal payments required for the next five years as of September 30, 2016 are as follows: Twelve Months Ending September 30, Amount 2017 $ 1,499,390 2018 2,249,085 2019 2,249,085 2020 2,249,085 2021 2,249,083 $ 10,495,728 Fair Value of Construction Loan Facility |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2016 | |
INCOME TAXES | |
INCOME TAXES | NOTE 10 - INCOME TAXES Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax laws or rates is recognized in income in the period that includes the enactment date. Undistributed earnings of Helpson, the Company's foreign subsidiary, since its acquisition, amounted to approximately $34.5 million as of September 30, 2016. 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 September 30, 2016, the Company has not identified any uncertain tax positions that it has taken. U.S. income tax returns for the years ended December 31, 2012 through December 31, 2015 and the Chinese income tax return for the year ended December 31, 2015 are open for possible examination. On March 16, 2007, the National People's Congress of China passed the Enterprise Income Tax Law (EIT Law) and on December 6, 2007, the State Council of China issued the Implementation Regulations for the EIT Law which took effect on January 1, 2008. The EIT Law and Implementation Regulations Rules impose a unified EIT of 25% on all domestic-invested enterprises and Foreign Invested Entities, or FIEs, unless they qualify under certain limited exceptions. The Company is located in a special region, which had a 15% corporate income tax rate before the new EIT Law. The new EIT Law abolished the preferential corporate income tax rate in the special region. The Company transitioned to the new 25% tax rate over a five year period which began on January 1, 2008. During 2010, the Company applied for and received a favorable tax rate of 15% for fiscal 2011 through 2013 due to its status in the PRC as a high technology enterprise. In 2013, the Company again applied for and received the same favorable tax rate for 2014 to 2016. Under 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 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, 2016 2015 2016 2015 Current $ - $ - $ - $ - Deferred 20,800 18,906 65,044 57,618 Total income tax expense $ 20,800 $ 18,906 $ 65,044 $ 57,618 As of September 30, 2016, the Company had net operating loss carryforwards for PRC tax purposes of approximately $38.9 million, which are available to offset any future taxable income through 2021. The Company also has net operating losses for United States federal income tax purposes of approximately $4.2 million which are available to offset future taxable income, if any, through 2036. 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 September 30, 2016 and December 31, 2015. Therefore, the Company provided for a valuation allowance against its deferred tax assets of $13,457,238 and $12,798,572 as of September 30, 2016 and December 31, 2015, 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 | 9 Months Ended |
Sep. 30, 2016 | |
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 banker's acceptances are recorded at cost which approximates fair value. The Company held the following assets and liabilities recorded at fair value as of September 30, 2016: Fair Value Measurements at Reporting Date Using Description September 30, 2016 Level 1 Level 2 Level 3 Banker's acceptances $ 21,546 $ - $ 21,546 $ - Total $ 21,546 $ - $ 21,546 $ - |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2016 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | NOTE 12 - 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 Company's Board. Employee Stock Options 2010 Incentive Plan On November 12, 2010, the Company's Board adopted the Company's 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 September 30, 2016, there were 175,000 shares of restricted stock granted and outstanding under the Plan. No options were outstanding as of September 30, 2016 under the Plan. There were no securities issued from the Plan during each of the nine months ended September 30, 2016 and 2015. 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 three and nine months ended September 30, 2016 and 2015. 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 Company's common stock prices. The Company uses historical data to estimate employee termination rates. The expected term of options granted is determined by the simplified method, which is one-half of the original contractual term. The simplified method is used due to the lack of historical share option exercise data to provide a reasonable basis upon which to estimate expected term. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. As of September 30, 2016, there was no remaining unrecognized compensation expense related to stock options or restricted stock grants. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2016 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 13 COMMITMENTS AND CONTINGENCIES Economic environment - 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, 2016 | |
CONCENTRATIONS | |
CONCENTRATIONS | NOTE 14 CONCENTRATIONS For the nine months ended September 30, 2016, no customer accounted for more than 10% of sales and one supplier accounted for 21.7% of raw material purchases. At September 30, 2016, three customers accounted for 28.3%, 11.3% and 11% of accounts receivable, respectively. For the nine months ended September 30, 2015, one customer accounted for 10.0% of sales. For the nine months ended September 30, 2015, purchases from one supplier accounted for 20.5% of raw material purchases. At September 30, 2015, two customers accounted for 17.6% and 10.8% of accounts receivable, respectively. |
ACCOUNTING POLICIES (POLICIES)
ACCOUNTING POLICIES (POLICIES) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies: | |
Organization and Nature of Operations | Organization and Nature of Operations On December 31, 2012, China Pharma Holdings, Inc. consummated a reincorporation merger for the purpose of changing its state of incorporation from Delaware to Nevada pursuant to the terms and conditions of an Agreement and Plan of Merger dated December 27, 2012. The reincorporation merger was approved by stockholders holding the majority of the Company's outstanding shares of common stock on December 21, 2012. The Foreign Investment Industrial Catalogue 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 on May 25, 2005 by entering into an Equity Transfer Agreement with Helpson's 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 Helpson's functional currency is the Chinese Renminbi. Helpson's revenue and expenses are translated into United States dollars at the average exchange rate for the period. Assets and liabilities are translated at the exchange rate as of the end of the reporting period. Gains or losses from translating Helpson's financial statements are included in accumulated other comprehensive income, which is a component of stockholders' equity. Gains and losses arising from transactions denominated in a currency other than the functional currency of the entity that is party to the transaction are included in the results of operations. |
Accounting Estimates | Accounting Estimates - |
Cash and Cash Equivalents, Policy | Cash and Cash Equivalents |
Restricted Cash | Restricted Cash |
Trade Accounts Receivable and Allowance for Doubtful Accounts, Policy | Trade Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivable that have been fully allowed for and determined to be uncollectible are charged against the allowance in the period the determination is made. It is common practice in the pharmaceutical industry 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 September 30, 2016, the Company had trade accounts receivable amounting to $30 million from sales that occurred more than one year from that date, most of which the Company believes are collectable. |
Advances to Suppliers and Advances from Customers | Advances to Suppliers and Advances from Customers |
Inventory | Inventory |
Valuation of Long-Lived Assets | Valuation of Long-Lived Assets |
Property and Equipment, Policy | Property and Equipment |
Revenue Recognition | Revenue Recognition |
Cost of Revenues | Cost of Revenues |
Research and Development | Research and Development |
Basic and Diluted (Loss) Earnings per Common Share | Basic and Diluted Earnings (Loss) per Common 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, 2016 2015 2016 2015 Net (loss) income $ (1,749,909 ) $ 2,931,724 $ (5,756,607 ) $ (9,157,571 ) 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) earnings per share $ (0.04 ) $ 0.07 $ (0.13 ) $ (0.21 ) Diluted loss per share $ (0.04 ) $ 0.07 $ (0.13 ) $ (0.21 ) |
Credit Risk | Credit Risk 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 Company's deposits may be at a higher risk of loss. |
Interest Rate Risk | Interest Rate Risk |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers" The standard allows for two transition methods - retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial adoption. The Company has not yet determined its method of transition and are evaluating the impact that this guidance will have on its financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments Other accounting standards that have been issued by FASB or other standards-setting bodies are not expected to have a material effect on the Company's financial position, result of operations or cash flows. |
BASIC AND DILUTED LOSS PER COMM
BASIC AND DILUTED LOSS PER COMMON SHARE (TABLES) | 9 Months Ended |
Sep. 30, 2016 | |
BASIC AND DILUTED LOSS PER COMMON SHARE (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, 2016 2015 2016 2015 Net (loss) income $ (1,749,909 ) $ 2,931,724 $ (5,756,607 ) $ (9,157,571 ) 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) earnings per share $ (0.04 ) $ 0.07 $ (0.13 ) $ (0.21 ) Diluted loss per share $ (0.04 ) $ 0.07 $ (0.13 ) $ (0.21 ) |
INVENTORY (TABLES)
INVENTORY (TABLES) | 9 Months Ended |
Sep. 30, 2016 | |
INVENTORY (TABLES) | |
Inventory consists | Inventory consisted of the following: September 30, December 31, 2016 2015 Raw materials $ 12,106,727 $ 14,699,736 Work in process 413,756 - Finished goods 2,731,353 3,380,109 15,251,836 18,079,845 Obsolescence reserve (6,682,357 ) (8,417,095 ) Total Inventory $ 8,569,479 $ 9,662,750 |
PROPERTY AND EQUIPMENT (TABLES)
PROPERTY AND EQUIPMENT (TABLES) | 9 Months Ended |
Sep. 30, 2016 | |
PROPERTY AND EQUIPMENT (Tables) | |
Property and equipment consists | Property and equipment consisted of the following: September 30, December 31, 2016 2015 Permit of land use $ 422,330 $ 433,956 Building 10,274,394 10,557,234 Plant, machinery and equipment 26,651,565 27,325,440 Motor vehicle 259,369 242,860 Office equipment 253,766 256,679 Total 37,861,424 38,816,169 Less: accumulated depreciation (11,521,705 ) (9,422,912 ) Property and Equipment, net $ 26,339,719 $ 29,393,257 |
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) | 9 Months Ended |
Sep. 30, 2016 | |
Intangible Assets (Tables) | |
Intangible Assets Medical Formulas | Intangible assets consisted solely of CFDA approved medical formulas as follows: September 30, December 31, 2016 2015 Gross carrying amount $ 5,061,737 $ 5,201,079 Accumulated amortization (4,440,106 ) (4,360,004 ) Net carrying amount $ 621,631 $ 841,075 |
SCHEDULE OF CONSTRUCTION LOAN F
SCHEDULE OF CONSTRUCTION LOAN FACILITY (TABLES) | 9 Months Ended |
Sep. 30, 2016 | |
Schedule of Construction Loan Facility: | |
Schedule of Principal payments required for the next five years as of December 31, 2015 | Principal payments required for the next five years as of September 30, 2016 are as follows: Twelve Months Ending September 30, Amount 2017 $ 1,499,390 2018 2,249,085 2019 2,249,085 2020 2,249,085 2021 2,249,083 $ 10,495,728 |
INCOME TAXES (TABLES)
INCOME TAXES (TABLES) | 9 Months Ended |
Sep. 30, 2016 | |
INCOME TAXES (Tables) | |
Schedule of Enterprise Income Tax Rates | 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 2015 15% 2016 15% Thereafter 25% |
Schedule of Provision for income taxes | The provision for income taxes consisted of the following: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Current $ - $ - $ - $ - Deferred 20,800 18,906 65,044 57,618 Total income tax expense $ 20,800 $ 18,906 $ 65,044 $ 57,618 |
SCHEDULE OF FAIR VALUE MEASUREM
SCHEDULE OF FAIR VALUE MEASUREMENTS (TABLES) | 9 Months Ended |
Sep. 30, 2016 | |
SCHEDULE OF FAIR VALUE MEASUREMENTS: | |
Company held the following assets and liabilities recorded at fair value as of December 31, 2014 | The banker's acceptances are recorded at cost which approximates fair value. The Company held the following assets and liabilities recorded at fair value as of September 30, 2016: Fair Value Measurements at Reporting Date Using Description September 30, 2016 Level 1 Level 2 Level 3 Banker's acceptances $ 21,546 $ - $ 21,546 $ - Total $ 21,546 $ - $ 21,546 $ - |
Organization and Nature of Oper
Organization and Nature of Operations (Details) | Sep. 30, 2016 |
Organization and Nature of Operations Details | |
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% |
Trade Accounts Receivable and A
Trade Accounts Receivable and Allowance for Doubtful Accounts (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Trade Accounts Receivable and Allowance for Doubtful Accounts Details | |||
Bad debt expense | $ 1,005,949 | $ 6,045,352 | |
Company had trade accounts receivable amounting | 30,000,000 | ||
Inventory | |||
Charges to inventory obsolescence expense totaled | 200,044 | 1,855,814 | |
Company recognized an inventory obsolescence reserve | 6,682,357 | $ 8,417,095 | |
Advances for purchases of intangible assets | 1,467,235 | ||
Research and development expenses | $ 289,189 | $ 741,116 |
Numerators and denominators use
Numerators and denominators used in the calculation of basic and diluted loss per share (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Numerators and denominators used in the calculation of basic and diluted loss per share details | ||||
Net loss | $ (1,749,909) | $ 2,931,724 | $ (5,756,607) | $ (9,157,571) |
Basic weighted-average common shares outstanding | 43,579,557 | 43,579,557 | 43,579,557 | 43,579,557 |
Effect of dilutive securities: | ||||
Warrants | $ 0 | $ 0 | $ 0 | $ 0 |
Options | $ 0 | $ 0 | $ 0 | $ 0 |
Diluted weighted-average common shares outstanding | 43,579,557 | 43,579,557 | 43,579,557 | 43,579,557 |
Basic loss per share | $ (0.04) | $ 0.07 | $ (0.13) | $ (0.21) |
Diluted loss per share | $ (0.04) | $ 0.07 | $ (0.13) | $ (0.21) |
INVENTORY (DETAILS)
INVENTORY (DETAILS) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Inventory Details | ||
Raw materials | $ 12,106,727 | $ 14,699,736 |
Work in process | 413,756 | 0 |
Finished goods | 2,731,353 | 3,380,109 |
Inventory gross | 15,251,836 | 18,079,845 |
Obsolescence reserve | (6,682,357) | (8,417,095) |
Total Inventory | $ 8,569,479 | $ 9,662,750 |
PROPERTY AND EQUIPMENT CONSISTE
PROPERTY AND EQUIPMENT CONSISTED OF THE FOLLOWING (DETAILS) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Property and equipment consisted of the following details | ||
Permit of land use | $ 422,330 | $ 433,956 |
Building | 10,274,394 | 10,557,234 |
Plant, machinery and equipment | 26,651,565 | 27,325,440 |
Motor vehicle | 259,369 | 242,860 |
Office equipment | 253,766 | 256,679 |
Property and equipment Gross Total | 37,861,424 | 38,816,169 |
Less: accumulated depreciation | (11,521,705) | (9,422,912) |
Property and Equipment, net | $ 26,339,719 | $ 29,393,257 |
ESTIMATED USEFUL LIVES OF THE A
ESTIMATED USEFUL LIVES OF THE ASSETS AS FOLLOWS (DETAILS) | Sep. 30, 2016 |
Estimated useful lives of the assets as follows: | |
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 |
ASSETS DEPRECIATION (DETAILS)
ASSETS DEPRECIATION (DETAILS) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Assets Depreciation | ||||
Depreciation Expense property and equipment | $ 789,150 | $ 911,515 | $ 2,383,457 | $ 2,523,752 |
Intangible assets amortization
Intangible assets amortization expenses (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Intangible assets amortization expenses | ||||
Amortization expenses relating to intangible assets | $ 65,643 | $ 73,498 | $ 199,609 | $ 246,009 |
INTANGIBLE ASSETS CFDA APPROVED
INTANGIBLE ASSETS CFDA APPROVED MEDICAL FORMULAS (DETAILS) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Intangible assets CFDA approved medical formulas details | ||
Gross carrying amount | $ 5,061,737 | $ 5,201,079 |
Accumulated amortization | (4,440,106) | (4,360,004) |
Net carrying amount | $ 621,631 | $ 841,075 |
ADVANCES FOR PURCHASES OF INT37
ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS (DETAILS) | Sep. 30, 2016USD ($) |
Advances for purchase of intangible assets details | |
Company was obligated to pay laboratories and others | $ 4,400,000 |
Company recognized an impairment loss for the advances made to these laboratories | $ 1,467,235 |
Interest (Details)
Interest (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Interest | ||||
Total interest expense | $ 3,386 | $ 3,386 | $ 10,159 | $ 10,158 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
RELATED PARTY TRANSACTIONS DETAILS | ||
Advances owing to board of directors | $ 1,354,567 | $ 1,354,567 |
Interest rate on advances from Member of BOD | 1.00% | 1.00% |
NOTES PAYABLE (DETAILS)
NOTES PAYABLE (DETAILS) - USD ($) | Oct. 19, 2016 | Sep. 30, 2016 | Sep. 16, 2016 | Dec. 31, 2015 | Nov. 30, 2015 | Nov. 30, 2014 |
NOTES PAYABLE DETAILS | ||||||
Revolving line of credit with a bank (RMB) | $ 30,000,000 | |||||
Revolving line of credit with a bank (Dollars) approx | $ 4,498,169 | |||||
Revolving line of credit renewed with the bank (RMB) | $ 30,000,000 | |||||
Revolving line of credit renewed with the bank (Dollars) approx | $ 4,498,169 | |||||
Annual interest rate based upon 110% of PRC government's current short term rate of 5.6% | 6.16% | 5.60% | ||||
Line of credit is payable in two equal installments of RMB 15,000,000 | $ 2,250,000 | $ 2,250,000 | ||||
Annual interest rate based upon 110% of PRC government's current short term rate of 4.6% | 5.06% | |||||
Outstanding balance due under revolving line of credit (RMB 15,000,000 and RMB 30,000,000) | $ 2,249,085 | $ 4,621,998 |
BANKER'S ACCEPTANCE NOTES PAY41
BANKER'S ACCEPTANCE NOTES PAYABLE (Details) | Sep. 30, 2016USD ($) |
BANKER'S ACCEPTANCE NOTES PAYABLE DETAILS | |
Amount of cash available to deposit against the Banker's Notes | $ 4,500,000 |
Payment of fees equal to percent of the note | 0.05% |
Company issued Banker's Notes in the amount | $ 1,470,014 |
CONSTRUCTION LOAN FACILITY (DET
CONSTRUCTION LOAN FACILITY (DETAILS) | Jul. 13, 2016USD ($) | Jul. 10, 2016 | Jan. 31, 2016USD ($) | Jul. 10, 2015 | Jul. 11, 2013USD ($) |
Construction loan facility details | |||||
Obtained construction loan facility (RMB80,000,000) | $ 12,000,000 | ||||
Term of the loan | 8 | ||||
Loan interest for an eight-year term | 5.73% | ||||
Interest rate was adjusted to | 5.39% | 5.94% | |||
Company principal payment (RMB2,000,000) | $ 309,000 | ||||
Company made a payment in amount (RMB 80,000,000) | $ 1,196,548 |
PRINCIPAL PAYMENTS REQUIRED FOR
PRINCIPAL PAYMENTS REQUIRED FOR THE NEXT FIVE YEARS ARE AS FOLLOWS: (DETAILS) | Sep. 30, 2016USD ($) |
Principal payments required for the next five years are as follows: | |
Principal Payments 2017 | $ 1,499,390 |
Principal Payments 2018 | 2,249,085 |
Principal Payments 2019 | 2,249,085 |
Principal Payments 2020 | 2,249,085 |
Principal Payments 2021 | 2,249,083 |
Total principal payments due | $ 10,495,728 |
SUBSIDY INCOME (Details)
SUBSIDY INCOME (Details) | Sep. 30, 2016USD ($) |
SUBSIDY INCOME DETAILS | |
Company foreign subsidiary, since its acquisition | $ 34,500,000 |
Investment in Helpson | $ 23,300,000 |
ENTERPRISE INCOME TAX RATES (DE
ENTERPRISE INCOME TAX RATES (DETAILS) | Sep. 30, 2016 |
Enterprise income tax rates details | |
Enterprise Income Tax Rate 2015 | 15.00% |
Enterprise Income Tax Rate 2016 | 15.00% |
Enterprise Income Tax Rate Thereafter | 25.00% |
PROVISION FOR INCOME TAXES (DET
PROVISION FOR INCOME TAXES (DETAILS) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Provision for income taxes details | ||||
Current | $ 0 | $ 0 | $ 0 | $ 0 |
Deferred | 20,800 | 18,906 | 65,044 | 57,618 |
Total income tax expense | $ 20,800 | $ 18,906 | $ 65,044 | $ 57,618 |
DEFERRED INCOME TAX ASSETS AND
DEFERRED INCOME TAX ASSETS AND LIABILITY (DETAILS) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Deferred income tax assets: | ||
PRC net operating loss carry forward | $ 38,900,000 | |
U.S. net operating loss carry forward | 4,200,000 | |
Valuation allowance | $ 13,457,238 | $ 12,798,572 |
FAIR VALUE MEASUREMENTS AT REPO
FAIR VALUE MEASUREMENTS AT REPORTING DATE USING (DETAILS) | Sep. 30, 2016USD ($) |
FAIR VALUE MEASUREMENTS AT REPORTING DATE USING | |
Bankers acceptance notes | $ 21,546 |
Total | 21,546 |
Bankers acceptance notes Level 1 | 0 |
Total Level 1 | 0 |
Bankers acceptance notes Level 2 | 21,546 |
Total Level 2 | 21,546 |
Bankers acceptance notes Level 3 | 0 |
Total Level 3 | $ 0 |
CAPITAL STOCK TRANSACTIONS (DET
CAPITAL STOCK TRANSACTIONS (DETAILS) - $ / shares | Sep. 30, 2016 | Nov. 12, 2010 |
Capital stock transactions: | ||
Common stock shares authorized | 95,000,000 | |
Preferred stock shares authorized | 5,000,000 | |
Common stock par value | $ 0.001 | |
Preferred stock par value | $ 0.001 | |
Employee Stock Options 2010 Incentive Plan | ||
Number of common shares | 4,000,000 | |
Shares of restricted stock granted and outstanding under the 2010 Incentive Plan | 175,000 |
CONCENTRATIONS (DETAILS)
CONCENTRATIONS (DETAILS) | Sep. 30, 2016 | Dec. 31, 2015 |
Concentrations Details | ||
No customer accounted for more than percentage of sales | 10.00% | |
One supplier accounted for raw material purchases | 21.70% | 20.50% |
One customers accounted for accounts receivable | 28.30% | 17.60% |
Two customers accounted for accounts receivable | 11.30% | 10.80% |
Three customers accounted for accounts receivable | 11.00% | |
One customer accounted for sales | 10.00% |