Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 10, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | CHINA PHARMA HOLDINGS, INC. | |
Entity Trading Symbol | cphi | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
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 | 2,017 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Current Assets: | ||
Cash and cash equivalents | $ 2,523,541 | $ 2,665,802 |
Restricted cash | 1,718,823 | 1,088,879 |
Banker's acceptances | 14,513 | 0 |
Trade accounts receivable, less allowance for doubtful accounts of $16,161,252 and $15,664,496, respectively | 3,703,593 | 3,999,809 |
Other receivables, less allowance for doubtful accounts of $56,157 and $71,548, respectively | 272,097 | 224,373 |
Advances to suppliers | 2,036,758 | 2,003,792 |
Inventory | 6,985,965 | 7,310,939 |
Prepaid expenses | 205,293 | 226,357 |
Total Current Assets | 17,460,583 | 17,519,951 |
Advances for purchases of intangible assets | 35,771,976 | 35,498,059 |
Property and equipment, net | 24,422,373 | 24,967,448 |
Intangible assets, net | 488,044 | 534,682 |
TOTAL ASSETS | 78,142,976 | 78,520,140 |
Current Liabilities: | ||
Trade accounts payable | 2,877,412 | 3,060,374 |
Accrued expenses | 90,232 | 139,830 |
Other payables | 2,355,365 | 2,502,694 |
Advances from customers | 703,915 | 811,232 |
Other payables - related parties | 1,354,567 | 1,354,567 |
Current portion of construction loan facility | 1,440,154 | 1,440,154 |
Bankers' acceptance notes payable | 1,718,823 | 1,088,879 |
Total Current Liabilities | 10,540,468 | 10,397,730 |
Non-current Liabilities: | ||
Construction loan facility | 8,573,590 | 8,640,927 |
Deferred tax liability | 607,090 | 572,349 |
Total Liabilities | 19,721,148 | 19,611,006 |
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 | 23,790,476 | 24,757,374 |
Accumulated other comprehensive income | 10,997,568 | 10,517,976 |
Total Stockholders' Equity | 58,421,828 | 58,909,134 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 78,142,976 | $ 78,520,140 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS PARENTHETICALS - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Parentheticals | ||
Allowance for doubtful accounts on trade accounts receivable | $ 16,161,252 | $ 15,664,496 |
Allowance for doubtful accounts on other receivables | $ 56,157 | $ 71,548 |
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 | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues {1} | ||
Revenue | $ 3,285,203 | $ 3,640,494 |
Cost of revenue | 2,567,350 | 2,999,675 |
Gross profit | 717,853 | 640,819 |
Operating expenses: | ||
Selling expenses | 717,637 | 968,507 |
General and administrative expenses | 416,726 | 318,930 |
Research and development expenses | 26,060 | 93,433 |
Bad debt expense | 360,063 | 581,300 |
Total operating expenses | 1,520,486 | 1,962,170 |
Loss from operations | (802,633) | (1,321,351) |
Other income (expense): | ||
Interest income | 5,033 | 33,592 |
Interest expense | (138,964) | (242,309) |
Net other expense | (133,931) | (208,717) |
Loss before income taxes | (936,564) | (1,530,068) |
Income tax expense | (30,334) | (22,828) |
Net loss | (966,898) | (1,552,896) |
Other comprehensive income - foreign currency translation adjustment | 0 | 480,430 |
Comprehensive loss | $ (966,898) | $ (1,072,466) |
Loss per share: | ||
Basic and diluted | $ (0.02) | $ (0.04) |
Weighted average shares outstanding | 43,579,557 | 43,579,557 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash Flows from Operating Activities: | ||
Net loss | $ (966,898) | $ (1,552,896) |
Depreciation and amortization | 815,394 | 857,195 |
Bad debt expense | 360,063 | 581,300 |
Deferred income taxes | 30,334 | 22,828 |
Changes in assets and liabilities: | ||
Trade accounts and other receivables | (261,377) | (61,069) |
Advances to suppliers | (17,509) | (92,039) |
Inventory | 549,500 | 215,496 |
Trade accounts payable | (206,599) | 888,212 |
Accrued taxes payable | (71,575) | (53,955) |
Other payables and accrued expenses | (130,772) | 25,514 |
Advances from customers | (113,615) | 328,354 |
Prepaid expenses | 22,818 | 144,262 |
Net Cash Provided by Operating Activities | 9,764 | 1,303,202 |
Cash Flows from Investing Activities: | ||
Purchases of property and equipment | (26,628) | (39,248) |
Net Cash Used in Investing Activities | (26,628) | (39,248) |
Cash Flows from Financing Activities: | ||
Payments of construction term loan | (145,176) | (305,835) |
Net Cash Used in Financing Activity | (145,176) | (305,835) |
Effect of Exchange Rate Changes on Cash | 19,779 | 54,898 |
Net (Decrease) Increase in Cash and Cash Equivalents | (142,261) | 1,013,017 |
Cash and Cash Equivalents at Beginning of Period | 2,665,802 | 6,248,760 |
Cash and Cash Equivalents at End of Period | 2,523,541 | 7,261,777 |
Supplemental Cash Flow Information: | ||
Cash paid for interest | 138,964 | 242,309 |
Supplemental Noncash Investing and Financing Activities: | ||
Issuance of banker's acceptances | 621,753 | 0 |
Accounts receivable collected with banker's acceptances | 182,499 | 517,770 |
Inventory purchased with banker's acceptances | $ 167,981 | $ 403,081 |
ORGANIZATION AND SIGNIFICANT AC
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2017 | |
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | |
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Operations China Pharma Holdings, Inc., a Nevada corporation, owns 100% of Onny Investment Limited (Onny), a British Virgin Islands corporation, which owns 100% of Hainan Helpson Medical & Biotechnology Co., Ltd (Helpson), a company organized under the laws of the People's Republic of China (the PRC). China Pharma Holdings, Inc. and its subsidiaries are referred to herein as the Company. On December 31, 2012, China Pharma Holdings, Inc. consummated a reincorporation merger for the purpose of changing its state of incorporation from Delaware to Nevada pursuant to the terms and conditions of an Agreement and Plan of Merger dated December 27, 2012. The reincorporation merger was approved by stockholders holding the majority of the 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. Restricted Cash 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. Charges to bad debt expense totaled $360,063 and $581,300 for the three months ended March 31, 2017 and 2016, respectively. 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. The Company charged off uncollectable trade accounts receivable balances in the amount of $0 against the allowance for both the three months ended March 31, 2017 and 2016, respectively. 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. Advances to Suppliers and Advances from Customers Common practice in the pharmaceutical industry 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. The Company reviews a supplier's credit history and background information before advancing a payment. If the financial condition of its suppliers were to deteriorate, resulting in an impairment of their ability to deliver goods or provide services, the Company would recognize bad debt expense in the period they are considered unlikely to be collected. The Company recognized no bad debt expense for the three months ended March 31, 2017 and 2016, respectively. Inventories Inventories consist of raw materials, work in process and finished goods and are stated at the lower of cost or market. Cost is determined using a weighted average. For work in process and manufactured inventories, cost consists of raw materials, direct labor and an allocated portion of the Companys production overhead. The Company writes down excess and obsolete inventory to its estimated net realizable value based upon assumptions about future demand and market conditions. For finished goods and work in process, if the estimated net realizable value for an inventory item, which is the estimated selling price in the ordinary course of business, less reasonably predicable costs to completion and disposal, is lower than its cost, the specific inventory item is written down to its estimated net realizable value. Market for raw materials is based on replacement cost. Provisions for inventory write-downs are included in cost of revenues in the consolidated statements of operations. Once written down, inventories are carried at this lower cost basis until sold or scrapped. 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. There was no impairment adjustment required for the three months ended March 31, 2017 and 2016. 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. Depreciation relating to office equipment was included in general and administrative expenses, while all other depreciation was included in cost of revenue. 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, depreciation, 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. Basic and Diluted Loss per Common Share - Basic loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per share is calculated to give effect to potentially issuable dilutive common shares. There were no potential dilutive common shares outstanding during the three months ended March 31, 2017 and 2016, 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 asset 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" 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. We have not yet determined our method of transition and are evaluating the impact that this guidance will have on our financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments Credit Losses (Topic 326) Early application of the guidance will be permitted for all entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact of the pending adoption of the new standard on its consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18) 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. |
INVENTORY
INVENTORY | 3 Months Ended |
Mar. 31, 2017 | |
INVENTORY | |
INVENTORY | NOTE 2 INVENTORY Inventory consisted of the following: March 31, December 31, 2017 2016 Raw materials $ 10,796,239 $ 11,562,388 Work in process 692,827 360,550 Finished goods 1,397,514 1,530,641 12,886,580 13,453,579 Obsolescence reserve (5,900,615 ) (6,142,640 ) Total Inventory $ 6,985,965 $ 7,310,939 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
Mar. 31, 2017 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | NOTE 3 - PROPERTY AND EQUIPMENT Property and equipment consisted of the following: March 31, December 31, 2017 2016 Permit of land use $ 408,775 $ 405,645 Building 9,492,387 9,419,700 Plant, machinery and equipment 26,379,439 26,151,029 Motor vehicle 312,167 309,777 Office equipment 184,128 182,718 Total 36,776,896 36,468,869 Less: accumulated depreciation (12,354,523 ) (11,501,421 ) Property and Equipment, net $ 24,422,373 $ 24,967,448 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 March 31, 2017 and 2016, depreciation expense was $764,614 and $790,254, respectively. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2017 | |
INTANGIBLE ASSETS | |
INTANGIBLE ASSETS | NOTE 4 - INTANGIBLE ASSETS Intangible assets represent the cost of medical formulas approved for production by the China Food and Drug Administration (CFDA). The Company did not obtain CFDA production approval for any medical formula during the three months ended March 31, 2017 and 2016 and no costs were reclassified from advances to intangible assets during the three months ended March 31, 2017 and 2016, 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 $50,780 and $66,941 for the three months ended March 31, 2017 and 2016, 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 loss was recognized during the three months ended March 31, 2017 and 2016. Intangible assets consisted solely of CFDA approved medical formulas as follows: March 31, December 31, 2017 2016 Gross carrying amount $ 4,899,281 $ 4,861,766 Accumulated amortization (4,411,237 ) (4,327,084 ) Net carrying amount $ 488,044 $ 534,682 |
ADVANCES FOR PURCHASES OF INTAN
ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS. | 3 Months Ended |
Mar. 31, 2017 | |
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 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. During the fiscal year of 2016, with CFDA's new regulations on scrutiny procedures in connection with its review of production applications and based on the Company's monitoring and assessment process, the Company determined five advanced payments to five independent laboratories were impaired. As a result, the Company recognized an impairment loss for the advances made to these laboratories in the amount of $3,962,141. As of March 31, 2017, 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. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2017 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 6 RELATED PARTY TRANSACTIONS A member of the Companys board of directors (the Board) had previously advanced the Company an aggregate amount of $1,354,567 as of March 31, 2017 and December 31, 2016 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 $3,386 was recognized for each of the three months ended March 31, 2017 and 2016. |
BANKER'S ACCEPTANCE NOTES PAYAB
BANKER'S ACCEPTANCE NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2017 | |
BANKER'S ACCEPTANCE NOTES PAYABLE | |
BANKER'S ACCEPTANCE NOTES PAYABLE | NOTE 7 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 March 31, 2017 and December 31, 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. At March 31, 2017 and December 31 2016, the Company had outstanding Banker's Acceptance Notes in the amount of $1,718,823 and $1,088,879, respectively. |
CONSTRUCTION LOAN FACILITY
CONSTRUCTION LOAN FACILITY | 3 Months Ended |
Mar. 31, 2017 | |
CONSTRUCTION LOAN FACILITY | |
CONSTRUCTION LOAN FACILITY | NOTE 8 CONSTRUCTION LOAN FACILITY The Company obtained a construction loan facility in the amount of RMB 80,000,000 (approximately $13 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 Companys 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 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. On July 10, 2015 the interest rate was adjusted to 5.94% and on July 10, 2016 the 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 the 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. During the first quarter of 2017, the Company made a principal payment in the amount of approximately $145,000 (RMB1,000,000) with the remaining annual principal payment of approximately $1,306,000 (9,000,000 RMB) being due in July 2017. As of March 31, 2017, the Company had no additional amounts available to it under this facility. Principal payments required for the next five years as of March 31, 2017 are as follows: Year Amount 2017 1,306,140 2018 2,176,901 2019 2,176,901 2020 2,176,901 2021 2,176,901 $10,013,744 Fair Value of Construction Loan Facility Based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities, the carrying amounts of the construction loan facility outstanding as of March 31, 2017 and December 31, 2016 approximated its fair value because the underlying instrument bears an interest rate that approximated current market rates. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2017 | |
INCOME TAXES | |
INCOME TAXES | NOTE 9 - 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 $30.5 million as of March 31, 2017. 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 March 31, 2017, the Company has not identified any uncertain tax positions that it has taken. U.S. income tax returns for the years ended December 31, 2013 through December 31, 2016 and the Chinese income tax return for the year ended December 31, 2016 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. The recent net losses put the Company in an unfavorable position for the potential renewal of "National High-Tech Enterprise" status for 2017. After evaluating the feasibility of the renewal in 2016, the Company has decided not to renew this status. Under the current tax law in the PRC, the Company is and will be subject to the following enterprise income tax rates: Enterprise Income Tax Rate Year 2016 15% 2017 25% Thereafter 25% The provision for income taxes consisted of the following: Three Months Ended March 31, 2017 2016 Current $ $ Deferred 30,334 22,828 Total income tax expense $ 30,334 $ 22,828 As of March 31, 2017, the Company had net operating loss carryforwards for PRC tax purposes of approximately $52.2 million which are available to offset any future taxable income through 2022. These carryforwards begin to expire in 2018. The Company also has net operating losses for United States federal income tax purposes of approximately $4.6 million which are available to offset future taxable income, if any, through 2037. 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 March 31, 2017 and December 31, 2016. Therefore, the Company provided for a valuation allowance against its deferred tax assets of $21,963,335 and $21,452,802 as of March 31, 2017 and December 31, 2016, 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 | 3 Months Ended |
Mar. 31, 2017 | |
FAIR VALUE MEASUREMENTS: | |
FAIR VALUE MEASUREMENTS | NOTE 10 FAIR VALUE MEASUREMENTS Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, a hierarchy has been established which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows: Level 1 Quoted prices in active markets for identical assets or liabilities. Level 2 Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data. Level 3 Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. The Company uses fair value to measure the derivative warrant liability on a recurring basis because fair value is the primary measure for accounting. The Company also uses fair value to measure the value of the banker's acceptance notes it holds. The Company values its derivative warrants using a valuation method explained above. The banker's acceptance notes are recorded at cost which approximates fair value. As of December 31, 2016, the Company had no banker's acceptance notes to be recorded at fair value. The Company held the following assets and liabilities recorded at fair value as of March 31, 2017: Fair Value Measurements at Reporting Date Using Description March 31, 2017 Level 1 Level 2 Level 3 Banker's acceptance notes $ 14,513 $ $ 14,513 $ Total $ 14,513 $ $ 14,513 $ |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2017 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | NOTE 11 - 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. Employee Stock Options 2010 Incentive Plan On November 12, 2010, the Companys Board 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 March 31, 2017, there were 175,000 shares of restricted stock granted and outstanding under the Plan. No options were outstanding as of March 31, 2017 under the Plan. There were no securities issued from the Plan during each of the three months ended March 31, 2017 and 2016. 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 months ended March 31, 2017 and 2016. 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 March 31, 2017, there was no remaining unrecognized compensation expense related to stock options or restricted stock grants. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 12 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. |
CONCENTRATIONS
CONCENTRATIONS | 3 Months Ended |
Mar. 31, 2017 | |
CONCENTRATIONS | |
CONCENTRATIONS | NOTE 13 CONCENTRATIONS For the three months ended March 31, 2017, no customer accounted for more than 10% of sales and two customers accounted for 46.2% and 15% of accounts receivable. Four suppliers accounted for 23.7%, 17.3%, 13.6% and 12.7% of raw material purchases. For the three months ended March 31, 2016, no customer accounted for more than 10% of sales and three customers accounted for 28.5%, 11.4% and 11.0% of accounts receivable, respectively. No supplier accounted for greater than 10% of raw material purchases. |
ACCOUNTING POLICIES (POLICIES)
ACCOUNTING POLICIES (POLICIES) | 3 Months Ended |
Mar. 31, 2017 | |
Accounting 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. |
Restricted Cash | Restricted Cash |
Trade Accounts Receivable and Allowance for Doubtful Accounts, Policy | 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. Charges to bad debt expense totaled $360,063 and $581,300 for the three months ended March 31, 2017 and 2016, respectively. 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. The Company charged off uncollectable trade accounts receivable balances in the amount of $0 against the allowance for both the three months ended March 31, 2017 and 2016, respectively. 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. |
Advances to Suppliers and Advances from Customers | Advances to Suppliers and Advances from Customers Common practice in the pharmaceutical industry 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. The Company reviews a supplier's credit history and background information before advancing a payment. If the financial condition of its suppliers were to deteriorate, resulting in an impairment of their ability to deliver goods or provide services, the Company would recognize bad debt expense in the period they are considered unlikely to be collected. The Company recognized no bad debt expense for the three months ended March 31, 2017 and 2016, respectively. |
Inventories | Inventories Inventories consist of raw materials, work in process and finished goods and are stated at the lower of cost or market. Cost is determined using a weighted average. For work in process and manufactured inventories, cost consists of raw materials, direct labor and an allocated portion of the Companys production overhead. The Company writes down excess and obsolete inventory to its estimated net realizable value based upon assumptions about future demand and market conditions. For finished goods and work in process, if the estimated net realizable value for an inventory item, which is the estimated selling price in the ordinary course of business, less reasonably predicable costs to completion and disposal, is lower than its cost, the specific inventory item is written down to its estimated net realizable value. Market for raw materials is based on replacement cost. Provisions for inventory write-downs are included in cost of revenues in the consolidated statements of operations. Once written down, inventories are carried at this lower cost basis until sold or scrapped. |
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. There was no impairment adjustment required for the three months ended March 31, 2017 and 2016. |
Property and Equipment, Policy | 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. Depreciation relating to office equipment was included in general and administrative expenses, while all other depreciation was included in cost of revenue. |
Revenue Recognition | 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 Cost of revenues includes wages, materials, depreciation, handling charges, and other expenses associated with the manufacture and delivery of products. |
Research and Development | Research and Development Research and development expenditures are recorded as expenses in the period in which they occur. |
Basic and Diluted (Loss) Earnings per Common Share | Basic and Diluted Loss per Common Share - Basic loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per share is calculated to give effect to potentially issuable dilutive common shares. There were no potential dilutive common shares outstanding during the three months ended March 31, 2017 and 2016, respectively. |
Credit Risk | 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 asset 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. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued 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. We have not yet determined our method of transition and are evaluating the impact that this guidance will have on our financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments Credit Losses (Topic 326) Early application of the guidance will be permitted for all entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact of the pending adoption of the new standard on its consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18) 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. |
INVENTORY (TABLES)
INVENTORY (TABLES) | 3 Months Ended |
Mar. 31, 2017 | |
INVENTORY (TABLES) | |
Inventory consists | Inventory consisted of the following: March 31, December 31, 2017 2016 Raw materials $ 10,796,239 $ 11,562,388 Work in process 692,827 360,550 Finished goods 1,397,514 1,530,641 12,886,580 13,453,579 Obsolescence reserve (5,900,615 ) (6,142,640 ) Total Inventory $ 6,985,965 $ 7,310,939 |
PROPERTY AND EQUIPMENT (TABLES)
PROPERTY AND EQUIPMENT (TABLES) | 3 Months Ended |
Mar. 31, 2017 | |
PROPERTY AND EQUIPMENT (Tables) | |
Property and equipment consists | Property and equipment consisted of the following: March 31, December 31, 2017 2016 Permit of land use $ 408,775 $ 405,645 Building 9,492,387 9,419,700 Plant, machinery and equipment 26,379,439 26,151,029 Motor vehicle 312,167 309,777 Office equipment 184,128 182,718 Total 36,776,896 36,468,869 Less: accumulated depreciation (12,354,523 ) (11,501,421 ) Property and Equipment, net $ 24,422,373 $ 24,967,448 |
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) | 3 Months Ended |
Mar. 31, 2017 | |
Intangible Assets (Tables) | |
Intangible Assets Medical Formulas | Intangible assets consisted solely of CFDA approved medical formulas as follows: March 31, December 31, 2017 2016 Gross carrying amount $ 4,899,281 $ 4,861,766 Accumulated amortization (4,411,237 ) (4,327,084 ) Net carrying amount $ 488,044 $ 534,682 |
SCHEDULE OF CONSTRUCTION LOAN F
SCHEDULE OF CONSTRUCTION LOAN FACILITY (TABLES) | 3 Months Ended |
Mar. 31, 2017 | |
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 March 31, 2017 are as follows: Year Amount 2017 1,306,140 2018 2,176,901 2019 2,176,901 2020 2,176,901 2021 2,176,901 $10,013,744 |
INCOME TAXES (TABLES)
INCOME TAXES (TABLES) | 3 Months Ended |
Mar. 31, 2017 | |
INCOME TAXES (Tables) | |
Schedule of Enterprise Income Tax Rates | The Company has decided not to renew this status. Under the current tax law in the PRC, the Company is and will be subject to the following enterprise income tax rates: Enterprise Income Tax Rate Year 2016 15% 2017 25% Thereafter 25% |
Schedule of Provision for income taxes | The provision for income taxes consisted of the following: Three Months Ended March 31, 2017 2016 Current $ $ Deferred 30,334 22,828 Total income tax expense $ 30,334 $ 22,828 |
SCHEDULE OF FAIR VALUE MEASUREM
SCHEDULE OF FAIR VALUE MEASUREMENTS (TABLES) | 3 Months Ended |
Mar. 31, 2017 | |
SCHEDULE OF FAIR VALUE MEASUREMENTS | |
Company held the following assets and liabilities recorded at fair value as of December 31, 2016 | The banker's acceptance notes to be recorded at fair value. The Company held the following assets and liabilities recorded at fair value as of March 31, 2017: Fair Value Measurements at Reporting Date Using Description March 31, 2017 Level 1 Level 2 Level 3 Banker's acceptance notes $ 14,513 $ $ 14,513 $ Total $ 14,513 $ $ 14,513 $ |
ORGANIZATION AND SIGNIFICANT 26
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Details) | Mar. 31, 2017 |
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES 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 ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
TRADE ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS Details | ||
Bad debt expense totaled | $ 360,063 | $ 581,300 |
Trade accounts receivable balances | $ 0 | $ 0 |
INVENTORY CONSISTED OF THE FOLL
INVENTORY CONSISTED OF THE FOLLOWING (DETAILS) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
INVENTORY CONSISTED OF THE FOLLOWING (DETAILS) | ||
Raw materials | $ 10,796,239 | $ 11,562,388 |
Work in process | 692,827 | 360,550 |
Finished goods | 1,397,514 | 1,530,641 |
Inventory Gross | 12,886,580 | 13,453,579 |
Obsolescence reserve | (5,900,615) | (6,142,640) |
Total Inventory | $ 6,985,965 | $ 7,310,939 |
PROPERTY AND EQUIPMENT CONSISTE
PROPERTY AND EQUIPMENT CONSISTED OF THE FOLLOWING (DETAILS) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
PROPERTY AND EQUIPMENT CONSISTED OF THE FOLLOWING (DETAILS) | ||
Permit of land use | $ 408,775 | $ 405,645 |
Building | 9,492,387 | 9,419,700 |
Plant, machinery and equipment | 26,379,439 | 26,151,029 |
Motor vehicle | 312,167 | 309,777 |
Office equipment | 184,128 | 182,718 |
Total | 36,776,896 | 36,468,869 |
Less: accumulated depreciation | (12,354,523) | (11,501,421) |
Property and Equipment, net | $ 24,422,373 | $ 24,967,448 |
PROPERTY AND EQUIPMENT ASSETS L
PROPERTY AND EQUIPMENT ASSETS LIFE (DETAILS) | Mar. 31, 2017 |
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 |
ASSETS DEPRECIATION (DETAILS)
ASSETS DEPRECIATION (DETAILS) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Assets Depreciation Details | ||
Depreciation Expense property and equipment | $ 764,614 | $ 790,254 |
INTANGIBLE ASSETS CFDA APPROVED
INTANGIBLE ASSETS CFDA APPROVED MEDICAL FORMULAS (DETAILS) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
INTANGIBLE ASSETS CFDA APPROVED MEDICAL FORMULAS (DETAILS) | ||
Gross carrying amount | $ 4,899,281 | $ 4,861,766 |
Accumulated amortization | (4,411,237) | (4,327,084) |
Net carrying amount | $ 488,044 | $ 534,682 |
AMORTIZATION EXPENSE (DETAILS)
AMORTIZATION EXPENSE (DETAILS) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
AMORTIZATION EXPENSE | ||
Amortization expenses relating to intangible assets | $ 50,780 | $ 66,941 |
ADVANCES FOR PURCHASES OF INT34
ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS (DETAILS) | Mar. 31, 2017USD ($) |
Advances for purchase of intangible assets details | |
Company was obligated to pay laboratories | $ 4,400,000 |
Company recognized an impairment loss for the advances made to these laboratories | $ 3,962,141 |
RELATED PARTY TRANSACTIONS OWIN
RELATED PARTY TRANSACTIONS OWINGS (DETAILS) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
RELATED PARTY TRANSACTIONS OWINGS | ||
Adavances owing to board | $ 1,354,567 | $ 1,354,567 |
Interest rate on advances from Member of BOD | 1.00% | 1.00% |
RELATED PARTY TRANSACTIONS MEMB
RELATED PARTY TRANSACTIONS MEMBER OF BOD (DETAILS) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
RELATED PARTY TRANSACTIONS Member Of BOD | ||
Total interest expense recognized for the period | $ 3,386 | $ 3,386 |
BANKER'S ACCEPTANCE NOTES PAY37
BANKER'S ACCEPTANCE NOTES PAYABLE (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
BANKER'S ACCEPTANCE NOTES PAYABLE Details | ||
Maximum amount that the Company can issue under this agreement against the Banker's Notes | $ 4,500,000 | $ 4,500,000 |
Agreement calls for the payment of fees equal to the note amount to the bank | 0.05% | 0.05% |
Company had outstanding Banker's Acceptance Notes | $ 1,718,823 | $ 1,088,879 |
CONSTRUCTION LOAN FACILITY (DET
CONSTRUCTION LOAN FACILITY (DETAILS) | Mar. 31, 2017USD ($) |
Construction loan facility details | |
Total Loan facility amount (RMB 80,000,000) | $ 13,000,000 |
Company made a principal payment | 145,000 |
Remaining annual principal payment | $ 1,306,000 |
PRINCIPAL PAYMENTS REQUIRED FOR
PRINCIPAL PAYMENTS REQUIRED FOR THE NEXT FIVE YEARS ARE AS FOLLOWS: (DETAILS) | Mar. 31, 2017USD ($) |
Principal payments required for the next five years are as follows: | |
Principal Payments 2017 | $ 1,306,140 |
Principal Payments 2018 | 2,176,901 |
Principal Payments 2019 | 2,176,901 |
Principal Payments 2020 | 2,176,901 |
Principal Payments 2021 | 2,176,901 |
Total principal payments due | $ 10,013,744 |
INCOME TAXES UNDISTRIBUTED EARN
INCOME TAXES UNDISTRIBUTED EARNINGS AND INCOMR TAX RATES (DETAILS) | Mar. 31, 2017USD ($) |
Income Taxes Undistributed Earnings | |
Undistributed earnings of Helpson | $ 30,500,000 |
Investment in Helpson, a foreign subsidiary for the company | $ 23,300,000 |
Enterprise Income Tax Rates for the year 2016 | 15.00% |
Enterprise Income Tax Rates for the year 2017 | 25.00% |
Enterprise Income Tax Rates There after | 25.00% |
Net operating loss carryforwards for PRC tax purposes | $ 52,200,000 |
Net operating losses for United States federal income tax purposes | $ 4,600,000 |
INCOME TAXES PROVISION (DETAILS
INCOME TAXES PROVISION (DETAILS) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Taxes Provision | ||
Current tax provision | $ 0 | |
Deferred tax provision | 30,334 | $ 22,828 |
Total income tax (benefit) expense | $ 30,334 | $ 22,828 |
DEFERRED INCOME TAX ASSETS AND
DEFERRED INCOME TAX ASSETS AND LIABILITY (DETAILS) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Deferred Income Tax Assets And Liability | ||
Valuation allowance against deferred tax assets | $ 21,963,335 | $ 21,452,802 |
FAIR VALUE MEASUREMENTS AT REPO
FAIR VALUE MEASUREMENTS AT REPORTING DATE USING (DETAILS) | Mar. 31, 2017USD ($) |
FAIR VALUE MEASUREMENTS AT REPORTING DATE USING | |
Bankers acceptance notes | $ 14,513 |
Total | 14,513 |
Bankers acceptance notes Level 1 | 0 |
Total Level 1 | 0 |
Bankers acceptance notes Level 2 | 14,513 |
Total Level 2 | 14,513 |
Bankers acceptance notes Level 3 | 0 |
Total Level 3 | $ 0 |
PREFERRED COMMON STOCK (DETAILS
PREFERRED COMMON STOCK (DETAILS) | Mar. 31, 2017$ / sharesshares |
Preferred Common Stock And Warrants | |
Common shares authorized | 95,000,000 |
Preferred shares authorized | 5,000,000 |
Preferred shares par value | $ / shares | $ 0.001 |
2010 STOCK OPTION PLAN (DETAILS
2010 STOCK OPTION PLAN (DETAILS) - shares | Mar. 31, 2017 | Nov. 12, 2010 |
Stockholders Equity 2010 Stock Option 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) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Concentrations Details | ||
First Customer accounted accounts receivable | 46.20% | 28.50% |
Second Customer accounted accounts receivable | 15.00% | 11.40% |
Third Customer accounted accounts receivable | 11.00% | |
First Supplier accounted for raw material purchases | 23.70% | |
Second Supplier accounted for raw material purchases | 17.30% | |
Third Supplier accounted for raw material purchases | 13.60% | |
Fourth Supplier accounted for raw material purchases | 12.70% |