Nevada
|
73-1564807
|
(State or other jurisdiction of
incorporation or organization)
|
(IRS Employer Identification No.)
|
Title of each class
|
Name of each exchange on which registered
|
|
Common Stock, $0.001 Par Value Per Share
|
NYSE MKT
|
Large accelerated filer
o
|
Accelerated filer
o
|
Non-accelerated filer
o
Do not check if a smaller reporting company
|
Smaller reporting company
x
|
PAGE
|
||||
PART I
|
||||
Item 1.
|
Business.
|
1 | ||
Item 1A.
|
Risk Factors.
|
17 | ||
Item 1B.
|
Unresolved Staff Comments.
|
35 | ||
Item 2.
|
Properties.
|
35 | ||
Item 3.
|
Legal Proceedings.
|
36 | ||
Item 4.
|
Mine Safety Disclosures.
|
36 | ||
PART II
|
||||
Item 5.
|
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
|
36 | ||
Item 6.
|
Selected Financial Data
|
37 | ||
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
37 | ||
Item 7A.
|
Quantitative and Qualitative Disclosures about Market Risk.
|
46 | ||
Item 8.
|
Financial Statements and Supplementary Data.
|
46 | ||
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
|
46 | ||
Item 9A.
|
Controls and Procedures.
|
46 | ||
Item 9B.
|
Other Information.
|
47 | ||
PART III
|
||||
Item 10.
|
Directors, Executive Officers and Corporate Governance.
|
48 | ||
Item 11.
|
Executive Compensation.
|
50 | ||
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.
|
53 | ||
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence.
|
54 | ||
Item 14.
|
Principal Accountant Fees and Services.
|
54 | ||
PART IV
|
||||
Item 15.
|
Exhibits, Financial Statement Schedules.
|
55 | ||
SIGNATURES
|
56 | |||
EXHIBIT INDEX
|
57 | |||
FINANCIAL STATEMENTS
|
F - 1 |
●
|
Basic generic drug, which is a common drug in the PRC marketplace for which there is a very large market;
|
●
|
First-to-market generic drug, which is a generic Western drug that is new to the PRC marketplace; or
|
●
|
Modern Traditional Chinese Medicine, which generally is a non-synthetic, plant-based medicinal compound of the type that has been widely used in the PRC for thousands of years, to which we apply modern production techniques to produce a pharmaceutical product in different formulations, such as tablets, capsules or powders.
|
●
|
Promoting Our Existing Brands to Increase Our National Recognition
. We intend to support and grow the existing recognition and reputation of our brands and to maintain our branded pricing strategy through continued sales and marketing efforts. To achieve this goal, we plan to promote the efficacy and safety profile of our established prescription pharmaceutical products to physicians at hospitals and clinics in all provinces in the PRC through the efforts of our sales force and our independent distributors and through educational physician conferences and seminars.
|
●
|
Developing and Introducing Additional Products to Expand or Strengthen Our Existing Product Portfolio
. We plan to focus our development capabilities towards expanding our existing portfolio of approved products. We have a number of products in various stages of the CFDA approval process. In addition, we intend to conduct clinical trials for new generic or modernized products to expand our current existing products. We plan to introduce new generic or modernized products to leverage our branded market leadership position, particularly in the therapeutic areas in which we already have a strong presence.
|
●
|
Expanding Our Distribution Network For Further Market Penetration
. We intend to expand our reach beyond our current 16 offices in the PRC to drive additional growth of our existing and future products. We currently contract with over 1,000 distributors in the PRC and plan to expand upon these relationships to target new markets. In addition, we plan to continue to broaden our marketing efforts outside of major cities in the PRC and increase our market penetration in cities and rural areas in which we already have a presence. Over the long term, we also intend to expand our presence beyond the PRC to international markets by working with international pharmaceutical companies in cross selling our products.
|
●
|
Acquiring Complementary Products Lines, Technologies, Distribution Networks and Companies
. We intend to selectively pursue strategic acquisition opportunities that we believe will grow our customer base, expand our product lines and distribution network, enhance our manufacturing and technical expertise or otherwise complement our business or further our strategic goals. Pursuing strategic acquisitions is a significant component of our growth strategy.
|
Product
|
Indication
|
Year of
Commercial
Launch
|
||||
Central Nervous System (CNS)
and Cerebral-Cardiovascular
Diseases
|
||||||
Cerebroprotein Hydroloysate
Injection
|
Memory decline and attention deficit disorder caused by the
sequela of craniocerebral trauma and cerebrovascular diseases.
|
1996
|
||||
Gastrodin Injection
|
Tiredness, loss of concentration, poor sleep (the “declined
spirit” syndrome), and for traumatic syndromes of the brain,
including vertigo, neuralgia and headaches.
|
2005
|
||||
Propylgallate for Injection
|
Cerebral thrombosis, coronary heart disease and complication
after surgery-thrombus deep phlebitis.
|
2006
|
||||
Ozagrel Sodium for Injection
|
Cerebral thrombosis, coronary heart disease and complication
after the surgery-thrombus deep phlebitis.
|
2006
|
||||
Alginic Sodium Diester Injection
|
Ischemic heart disease, cerebrovascular diseases (cerebral
thrombosis, cerebral embolism and coronary heart disease)
and high lipoprotein blood disease.
|
2006
|
||||
Bumetanide for Injection
|
Various edema diseases (including those associated with
heart failure, hepatic cirrhosis, nephropathy, and pulmonary
edema), hypertension, acute renal failure, hyperkalemia,
hypercalcemia and for the rescue of acute drug poisoning.
|
2007
|
||||
Candesartan
|
Hypertension
|
2013
|
||||
Anti-infection and
Respiratory Diseases
|
||||||
Roxithromycin Dispersible Tablets
|
Pharyngitis and tonsillitis caused by Streptococcus pyogenes;
sinusitis, tympanitis, acute and chronic bronchitis caused by
acute bacteria, Mycoplasma pneumonia and Chlamydia
pneumoniae; urethritis and cervical infection caused by
chlamydia trachomatis; skin soft tissue infection caused
by sensitive bacteria.
|
1995
|
||||
Cefaclor Dispersible Tablets
|
Tympanitis, lower respiratory tract infection, urinary tract
infections and skin/skin tissue infection.
|
2002
|
Product
|
Indication
|
Year of
Commercial
Launch
|
|
Cefalexin Capsules
|
Acute tonsillitis caused by sensitive fungi, airway infections,
such as pharyngitis, otitis media, nasal sinusitis and
bronchitis; pneumonia, respiratory tract infection, urinary
tract infections and skin soft tissue infections.
|
2002
|
|
Anhydroandrographolide
|
Ischemic heart disease, cerebrovascular diseases (cerebral
thrombosis, cerebral embolism and coronary heart disease)
and high lipoprotein blood disease.
|
2003
|
|
Clarithromycin Granules and
Capsules
|
Nasopharynx infection, lower respiratory tract infection,
skin tissue infection, acute tympanitis and mycoplasma
pneumonia caused by clarithromycin susceptible
organisms; urethritis and cervical infection caused
by chlamydia trachomatis; and the treatment of
legionella infection, mycobacterium avium complex
(MAC) infection and helicobacter pylori infection.
|
2004
|
|
Naproxen Sodium and
Pseudophedrine
Hydrochlorida Sustained
Release Tablets
|
Relieve cold, sinus and flu symptoms, blocked
nose caused by anaphylaxis rhinitis, runny nose,
fever, sore throat, symptoms of myalgia in the
limbs and pain around the joints.
|
2005
|
|
Gull Wood Extract Syrup
|
Detoxicating, anti-inflammatory, quickly reducing
swelling, for the indication of acute tonsillitis, acute
pharyngitis, acute conjunctivitis, and upper
respiratory tract infection.
|
2010
|
|
Digestive Diseases | |||
Hepatocyte
Growth-promoting
Factor for Injection
|
Serious viral hepatitis symptoms caused by various
viral hepatitis types (acute, subnormal temperature,
chronic serious disease early or middle period of hepatitis).
|
2005
|
|
Tiopronin
|
Acute and chronic Hepatitis B, and for the relief of
drug-induced liver injury.
|
2009
|
|
Compound Ammonium
Glycyrrhetate S for Injection
|
Liver dysfunction caused by acute and chronic hepatitis;
supplemental treatment to toxic/trauma hepatitis, liver
cancer; also for the indication of food/drug poisoning,
and drug allergy.
|
2009
|
|
Omeparzole
|
Gastroesophageal reflux disease, and other conditions
caused by excess acidic formulations in the stomach,
including gastric ulcers, recurrent duodenal ulcers and
Zollinger-Ellison Syndrome.
|
2009
|
|
Others | |||
Vitamin B6 for Injection
|
Vitamin supplement.
|
2005
|
|
Granisetron Hydrochloride
Injection
|
Nausea and vomiting caused by radiotherapy and
chemotherapy during the treatment of malignant tumors.
|
2006
|
Product Category
|
Year Ended December 31,
|
Net Change
|
% Change
|
|
2013
|
2012
|
|||
CNS Cerebral & Cardio Vascular
|
$7.2
|
$15.2
|
-$ 8.0
|
-53%
|
Anti-Viro/ Infection & Respiratory
|
$18.2
|
$24.5
|
-$ 6.3
|
-26%
|
Digestive Diseases
|
$2.9
|
$7.0
|
-$ 4.1
|
-58%
|
Other
|
$4.5
|
$7.8
|
-$ 3.3
|
-43%
|
Indication of Product Candidate
|
CFDA Status
|
Anti Infection
|
In Phase II Clinical Study
|
Cholesterol Control Drug
|
Clinical Trial Completed. Waiting for Production Approval
|
Alzheimer's disease drug
|
In CFDA Technical Review
|
Coronary Heart Disease Drug
|
In Phase III Clinical Study
|
New medicine delivery technology
|
In Technical Transfer
|
Hepatitis Drug
|
Received Clinical Approval, Clinical Trials Initiated
|
Central nervous system drug
|
Clinical Trials Completed, at Production Verification Stage
|
Cerebral vascular drug
|
In Technical Transfer
|
Antibiotic for Kids
|
In Production Verification
|
Electrolyte Disequilibrium Adjustment
|
In Process Verification
|
●
|
the number of our competitors increases;
|
●
|
competitors engage in increased price competition; or
|
●
|
competitors develop new products or product substitutes having comparable medicinal applications or therapeutic effects that are more effective, less costly and/or have more perceived benefits than those produced by us.
|
·
|
perceptions by physicians, patients and others in the medical community about the safety and effectiveness of our products;
|
·
|
the prevalence and severity of any side effects;
|
·
|
the pharmacological benefit of our products relative to competing products and products under development;
|
·
|
the efficacy and potential advantages of our products relative to competing products and products under development;
|
·
|
the relative convenience and ease of administration of our products;
|
·
|
the methods by which our pharmaceutical products may be delivered to patients;
|
·
|
the effectiveness of our education, marketing and distribution efforts and those of our distributors;
|
·
|
publicity concerning our products or competing products and treatments; and
|
·
|
the price of our products and competing products.
|
·
|
the inclusion of this medicine on the hospital’s formulary, which establishes the scope of medicines physicians at this hospital may prescribe to their patients, and
|
·
|
the willingness of physicians at a hospital to prescribe this medicine to their patients.
|
·
|
the failure to demonstrate safety and efficacy in preclinical and clinical trials;
|
·
|
the failure to obtain approvals for intended use from relevant regulatory bodies, such as the CFDA;
|
·
|
our inability to manufacture and commercialize sufficient quantities of the product economically; and
|
·
|
proprietary rights, such as patent rights, held by others to our product candidates and their refusal to sell or license such rights to us on reasonable terms, or at all.
|
·
|
sell our products outside their designated territory, possibly in violation of the exclusive distribution rights of other distributors;
|
·
|
fail to adequately promote our products;
|
·
|
promote competing products in lieu of our products; or
|
·
|
violate the anti-corruption laws of China, the United States or other countries.
|
·
|
we determine to devote significant amount of financial resources to the development of products that we believe to have significant commercialization potential;
|
·
|
we determine to acquire or license rights to additional product candidates or new technologies;
|
·
|
some or all of our product candidates fail in clinical trials or pre-clinical studies or prove to be not as commercially promising as we expect and we are forced to develop or acquire additional product candidates;
|
·
|
our product candidates require more extensive clinical or pre-clinical testing or clinical trials of these product candidates take longer to complete than we currently expect; or
|
·
|
we determine or are required to conduct more high-throughput screening than expected against current or additional disease targets to develop additional product candidates.
|
·
|
our future financial condition, results of operations and cash flows;
|
·
|
general market conditions for capital-raising activities by pharmaceutical companies; and
|
·
|
economic, political and other conditions in China and elsewhere.
|
·
|
the degree of government involvement;
|
·
|
the level of development;
|
·
|
the growth rate;
|
·
|
the control of foreign exchange;
|
·
|
access to financing; and
|
·
|
the allocation of resources.
|
·
|
We will be able to capitalize on economic reforms;
|
·
|
The Chinese government will continue its pursuit of economic reform policies;
|
·
|
The economic policies, even if pursued, will be successful;
|
·
|
Economic policies will not be significantly altered from time to time; or
|
·
|
Business operations in China will not become subject to the risk of nationalization.
|
·
|
actual or anticipated fluctuations in our quarterly operating results;
|
·
|
announcements of new products by us or our competitors;
|
·
|
changes in financial estimates by securities analysts;
|
·
|
conditions in the pharmaceutical market;
|
·
|
changes in the economic performance or market valuations of other companies involved in pharmaceutical production;
|
·
|
announcements by our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
|
·
|
economic, regulatory and political developments;
|
·
|
additions or departures of key personnel, or
|
·
|
potential litigation.
|
Loan Amount
|
Lending Institution
|
Contract Period
|
Interest Rate
|
Properties under
Mortgage
|
RMB 30 million
(approximately
$4.91 million)
|
Bank of China
|
October 28, 2013
to October 28, 2014
|
The interest rate is a variable
rate equal to 110% of the
floating base interest for
loans of the same term
promulgated by the PRC’s
central bank.
|
Helpson’s land : 22,936 square
meters (Certificate #: Guo Yong
[2003] No. 005572)
Helpson’s
buildings: 663.94 square meters
(Certificate #: HK008109)
and 6593.2 square meters
(Certificate #: HK122889)
|
High
|
Low
|
|||||||
Fiscal 2013
|
||||||||
First Quarter
|
$
|
0.37
|
$ |
0.21
|
||||
Second Quarter
|
0.29
|
0.19
|
||||||
Third Quarter
|
0.38
|
0.19
|
||||||
Fourth Quarter
|
0.47
|
0.26
|
||||||
Fiscal 2012
|
||||||||
First Quarter
|
$
|
0.87
|
$
|
0.65
|
||||
Second Quarter
|
0.69
|
0.21
|
||||||
Third Quarter
|
0.55
|
0.29
|
||||||
Fourth Quarter
|
0.38
|
0.18
|
Ÿ
|
Antibiotic Combination - We completed the Phase I clinical trials of our novel cephalosporin-based combination antibiotic. We are currently in Phase II of the clinical trial, due to the increased regulatory requests for clinical works.
|
Ÿ
|
Rosuvastatin - Rosuvastatin is a generic form of Crestor, a drug for the treatmentof high blood cholesterol levels. Clinical trials for this generic drug were completed in the fourth quarter of 2010 and we have submitted an application for production approval, and are performing supplemental trials of related materials pursuant to the new criteria requirements.
|
Ÿ
|
Heart Disease Drug - We have an oral solution for the treatment of coronary heart disease in our new product pipeline. This product comes with a patented Traditional Chinese Medicine (TCM) formula and is currently in Phase III clinical trials following the improved regulatory criteria for clinical works.
|
Year Ended December 31,
|
||||||||||||||||
Product Category
|
2013
|
2012
|
Net Change
|
% Change
|
||||||||||||
CNS Cerebral & Cardio Vascular
|
$ | 7.2 | $ | 15.2 | $ | - 8.0 | -53% | |||||||||
Anti-Viro/ Infection & Respiratory
|
$ | 18.2 | $ | 24.5 | $ | - 6.3 | -26% | |||||||||
Digestive Diseases
|
$ | 2.9 | $ | 7.0 | $ | - 4.1 | -58% | |||||||||
Other
|
$ | 4.5 | $ | 7.8 | $ | - 3.3 | -43% |
December 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
1 - 90 Days
|
8.0% | 12.1% | ||||||
90 - 180 Days
|
7.4% | 12.8% | ||||||
180 - 360 Days
|
23.3% | 32.4% | ||||||
>360 Days
|
61.3% | 42.7% | ||||||
Total
|
100.0% | 100.0% |
For the Years Ended
|
||||||||
December 31,
|
||||||||
2013
|
2012
|
|||||||
Balance, Beginning of Year
|
$ | 4,429,945 | $ | 3,536,405 | ||||
Bad debt expense
|
10,752,991 | 871,612 | ||||||
Charged to reserve – collection discount
|
(2,160,527 | ) | - | |||||
Foreign currency translation adjustment
|
279,213 | 21,928 | ||||||
Balance, End of Year
|
$ | 13,301,622 | $ | 4,429,945 |
Name
|
Age
|
Position
|
Zhilin Li
|
60
|
Chairman, President, Chief Executive Officer and interim Chief Financial Officer
|
Heung Mei Tsui
|
56
|
Director
|
Gene Michael Bennett
|
66
|
Independent Director
|
Yingwen Zhang
|
68
|
Independent Director
|
Baowen Dong
|
72
|
Independent Director
|
SUMMARY COMPENSATION TABLE
|
|||||||||
Name and
principal
position
|
Year
Ended
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings ($)
|
All Other
Compensation
($)
|
Total
($)
|
Zhilin Li
Chairman,
Chief
Executive
Officer,
President
and interim
Chief
Financial
Officer
|
2013
2012
|
220,000
220,000
|
-
-
|
-
50,661
(1)
|
-
7,039
(2)
|
-
-
|
-
-
|
16,000
(3)
16,000
(3)
|
236,000
293,700
|
Frank
Waung
Former
Chief
Financial
Officer
|
2012
|
61,857
|
-
|
76,646
(4)
|
7,374
(5)
|
-
|
-
|
-
|
145,877
|
Name and Address of Beneficial Owners
(1)(2)
|
Amount
and Nature
of Beneficial
Ownership
|
Percent of Class
(3)
|
|||||
Directors and Executive Officers
|
|||||||
Zhilin Li
President, Chief Executive Officer,
Interim Chief Financial Officer
and Chairman of the Board
|
10,050,000
|
23.1%
|
|||||
Heung Mei Tsui
Director
|
9,312,651
|
21.4%
|
|||||
Yingwen Zhang
Director
|
0
|
*
|
|||||
Gene Michael Bennett
(4)
Director
|
0
|
*
|
|||||
Baowen Dong
Director
|
0
|
*
|
|||||
All directors and executive officers as a group (5 persons)
|
19,362,651
|
44.5%
|
|||||
Greater than 5% Stockholders
|
|||||||
Pope Asset Management, LLC
5100 Poplar Ave, Ste 805
Memphis, TN 38137
|
2,224,831
(5)
|
5.1%
|
|||||
Jian Yang
|
2,278,815
|
5.2%
|
__________________
|
|||||||
*
|
Represents less than 1%.
|
(1)
|
Pursuant to Rule 13d-3 under the Exchange Act, a person has beneficial ownership of any securities as to which such person, directly or indirectly, through any contract, arrangement, undertaking, relationship or otherwise has or shares voting power and/or investment power or as to which such person has the right to acquire such voting and/or investment power within 60 days.
|
(2)
|
Unless otherwise stated, each beneficial owner has sole power to vote and dispose of the shares and the address of such person is c/o China Pharma Holdings, Inc., 2nd Floor, No. 17 Jinpan Road, Haikou, Hainan Province, People’s Republic of China 570216.
|
(3)
|
In determining the percentage of common stock owned by the beneficial owners, (a) the numerator is the number of shares of common stock beneficially owned by such owner, including shares the owner may acquire, within 60 days of March 19, 2014 upon the exercise of the options or warrants, if any, held by the owner; and (b) the denominator is the sum of (i) the total 43,579,557 shares of common stock outstanding as of March 19, 2014, and (ii) the number of shares underlying any options or warrants, which such owner has the right to acquire upon the exercise of such options or warrants within 60 days of March 19, 2014 (for those who have options or warrants).
|
(4)
|
Pursuant to the terms of his engagement letters, Mr. Bennett is entitled to receive warrants to purchase an aggregate of 10,000 shares of our common stock (5,000 shares in each of the 2012 and 2013 fiscal years). As of the date of this report such warrants have not been issued.
|
(5)
|
Pope Asset Management, LLC (“Pope Management”) is the investment adviser for Pope Investments II LLC (“Pope Investment”). Pope Investments owns 52,823 shares. Pope Management owns 2,172,008 shares on behalf of its clients. Therefore, Pope Management, as investment advisor to Pope Investments could be deemed to be beneficial owners of 2,224,831 shares. Mr. William Wells is the sole manager of Pope Management and has dispositive and voting power over the shares held by Pope Investment. This information is derived from Schedule 13G filed by Pope Management, Pope Investment and Mr. William jointly on February 13, 2013.
|
Date: March 20, 2014
|
CHINA PHARMA HOLDINGS, INC.
|
By:
/s/ Zhilin Li
|
|
Name: Zhilin Li
|
|
Title: Chief Executive Officer
|
|
(principal executive officer)
|
Signature
|
Title
|
Date
|
/
s/ Zhilin Li
Zhilin Li
|
Chairman of the Board, President, Chief Executive Officer
(principal executive officer) and interim Chief Financial Officer
(principal financial officer and principal accounting officer)
|
March 20, 2014
|
/
s/ Heung Mei Tsui
Heung Mei Tsui
|
Director
|
March 20, 2014
|
/
s/ Gene Michael Bennett
Gene Michael Bennett
|
Director
|
March 20, 2014
|
/
s/ Yingwen Zhang
Yingwen Zhang
|
Director
|
March 20, 2014
|
/
s/ Baowen Dong
Baowen Dong
|
Director
|
March 20, 2014
|
Exhibit No.
|
Description
|
||||||||
3.1
|
Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on December 31, 2012).
|
||||||||
3.2
|
Bylaws of the Company (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed on December 31, 2012).
|
||||||||
10.1
|
Engagement Letter dated December 24, 2012 by and between the Company and Ms. Heung Mei Tsui for Ms. Tsui serving as a director of the Company (incorporated by reference to Exhibit 10.1 to our Annual Report on Form 10-K filed on March 14, 2013).
|
||||||||
10.2*
|
Engagement Letter dated December 19, 2013 by and between the Company and Mr. Yingwen Zhang for Mr. Zhang serving as a director of the Company.
|
||||||||
10.3*
|
Engagement Letter dated December 19, 2013 by and between the Company and Mr. Baowen Dong for Mr. Dong serving as a director of the Company.
|
||||||||
10.4*
|
Engagement Letter dated December 19, 2013 by and between the Company and Mr. Gene Michael Bennett for Mr. Bennett serving as a director of the Company.
|
||||||||
10.5
|
Option Grant Agreement dated as of April 28, 2010 between the Company and Frank Waung (incorporated by reference to our Quarterly Report on Form 10-Q filed on August 9, 2010).
|
||||||||
10.6
|
Employment Agreement dated July 1, 2010 between Hainan Helpson Medical & Biotechnology Co., Ltd. and Zhilin Li. (incorporated by reference to our Quarterly Report on Form 10-Q filed on November 10, 2010).
|
||||||||
10.7*
|
Loan Extension Agreement between the Company and Heung Mei Tsui dated December 31, 2013.
|
||||||||
10.8
|
2010 Long-Term Incentive Plan of the Company (incorporated by reference to the Definitive Proxy Statement on Schedule 14A filed on November 12, 2010).
|
||||||||
10.9
|
Employment Agreement dated May 31, 2011 between Hainan Helpson Medical & Biotechnology Co., Ltd. and Frank Waung (incorporated by reference to our Current Report on Form 8-K filed on June 1, 2011).
|
||||||||
10.10
|
Form of Restricted Stock Grant Agreement between the Company and the grantees under 2010 Long-Term Incentive Plan of the Company (incorporated by reference to our Current Report on Form 8-K filed on June 1, 2011).
|
||||||||
10.11
|
Form of Non-Qualified Stock Option Grant Agreement between the Company and the grantees under 2010 Long-Term Incentive Plan of the Company (incorporated by reference to our Current Report on Form 8-K filed on June 1, 2011).
|
||||||||
10.12
|
Amendment Agreement to Non-Qualified Stock Option Agreements dated as of April 28, 2012 by and between the Company and Mr. Waung (incorporated by reference to our Current Report on Form 8-K filed on April 30, 2012).
|
||||||||
14.1
|
Code of Business Conduct and Ethics (incorporated by reference to the Registration Statement on Form S-1 filed on July 11, 2008).
|
21.1
|
Subsidiaries of the Company (incorporated by reference to our Annual Report on Form 10-K filed on March 3, 2011). | |||||||
23.1*
|
Consent of Arshak Davtyan, CPA.
|
|||||||
23.2*
|
Consent of Hansen, Barnett & Maxwell, P.C.
|
31.1*
|
Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a) of the Exchange Act.
|
|
31.2*
|
Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a) of the Exchange Act.
|
|
32.1*
|
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2*
|
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101**
|
Interactive data files pursuant to Rule 405 of Regulation S-T (furnished herewith).
|
Page
|
|
Report of Arshak Davtyan, CPA, Independent Registered Public Accounting Firm
|
F-2
|
Report of Hansen, Barnett & Maxwell, P.C., Independent Registered Public Accounting
Firm
|
F-3
|
Consolidated Balance Sheets as of December 31, 2013 and 2012
|
F-4
|
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2013 and 2012
|
F-5
|
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2012 and 2013
|
F-6
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013 and 2012
|
F-7
|
Notes to Consolidated Financial Statements
|
F-8
|
CHINA PHARMA HOLDINGS, INC.
|
||||||||
CONSOLIDATED BALANCE SHEETS
|
||||||||
December 31,
|
||||||||
2013
|
2012
|
|||||||
ASSETS
|
||||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$ | 5,993,139 | $ | 4,029,708 | ||||
Banker's acceptances
|
336,003 | 101,570 | ||||||
Trade accounts receivable, less allowance for doubtful
|
||||||||
accounts of $13,301,622 and $4,429,945, respectively
|
45,147,602 | 66,175,570 | ||||||
Other receivables, less allowance for doubtful
|
||||||||
accounts of $43,064 and $49,881, respectively
|
175,739 | 80,799 | ||||||
Advances to suppliers
|
7,626,716 | 4,816,354 | ||||||
Inventory, less allowance for obsolescence
|
||||||||
of $8,027,126 and $1,769,984, respectively
|
24,677,120 | 36,359,516 | ||||||
Deferred tax assets
|
- | 967,671 | ||||||
Total Current Assets
|
83,956,319 | 112,531,188 | ||||||
Advances for purchases of intangible assets
|
41,701,505 | 39,263,977 | ||||||
Property and equipment
, net of accumulated depreciation of
|
||||||||
$5,264,350 and $4,273,373, respectively
|
30,241,337 | 9,031,894 | ||||||
Intangible assets
, net of accumulated amortization of
|
||||||||
$3,812,992 and $2,944,726, respectively
|
1,711,793 | 2,412,854 | ||||||
TOTAL ASSETS
|
$ | 157,610,954 | $ | 163,239,913 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current Liabilities:
|
||||||||
Trade accounts payable
|
$ | 1,877,437 | $ | 2,841,862 | ||||
Accrued expenses
|
323,651 | 202,185 | ||||||
Accrued taxes payable
|
- | 2,426,826 | ||||||
Other payables
|
1,312,361 | 1,094,886 | ||||||
Advances from customers
|
2,228,238 | 1,945,984 | ||||||
Other payables - related parties
|
1,354,567 | 1,354,567 | ||||||
Short-term notes payable
|
4,909,662 | 4,761,073 | ||||||
Total Current Liabilities
|
12,005,916 | 14,627,383 | ||||||
Non-current Liabilities:
|
||||||||
Construction loan facility
|
12,484,183 | - | ||||||
Long-term deferred tax liability
|
176,414 | 95,963 | ||||||
Total Liabilities
|
24,666,513 | 14,723,346 | ||||||
Stockholders' Equity:
|
||||||||
Preferred stock, $0.001 par value; 5,000,000 shares authorized;
|
||||||||
no shares issued or outstanding
|
- | - | ||||||
Common stock, $0.001 par value; 95,000,000 shares authorized;
|
||||||||
43,579,557 shares and 43,579,557 shares outstanding, respectively
|
43,580 | 43,580 | ||||||
Additional paid-in capital
|
23,590,204 | 23,590,204 | ||||||
Retained earnings
|
88,896,276 | 108,904,325 | ||||||
Accumulated other comprehensive income
|
20,414,381 | 15,978,458 | ||||||
Total Stockholders' Equity
|
132,944,441 | 148,516,567 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 157,610,954 | $ | 163,239,913 |
CHINA PHARMA HOLDINGS, INC.
|
||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||
AND COMPREHENSIVE INCOME
|
||||||||
For the Years
|
||||||||
Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
Revenue
|
$ | 32,806,678 | $ | 54,507,049 | ||||
Cost of revenue
|
23,405,886 | 38,660,814 | ||||||
Inventory obsolescence
|
9,881,711 | 1,769,984 | ||||||
Gross (loss) profit
|
(480,919 | ) | 14,076,251 | |||||
Operating expenses:
|
||||||||
Selling expenses
|
3,284,905 | 3,535,214 | ||||||
General and administrative expenses
|
2,404,338 | 2,874,644 | ||||||
Research and development expenses
|
1,683,244 | 438,662 | ||||||
Bad debt expense
|
10,752,991 | 871,612 | ||||||
Impairment of intangible assets
|
- | 593,095 | ||||||
Total operating expenses
|
18,125,478 | 8,313,227 | ||||||
Government subsidy income
|
- | 141,987 | ||||||
(Loss) income from operations
|
(18,606,397 | ) | 5,905,011 | |||||
Other income (expense):
|
||||||||
Interest income
|
8,457 | 4,944 | ||||||
Interest expense
|
(348,696 | ) | (308,375 | ) | ||||
Net other expense
|
(340,239 | ) | (303,431 | ) | ||||
(Loss) income before income taxes
|
(18,946,636 | ) | 5,601,580 | |||||
Income tax expense
|
(1,061,413 | ) | (983,921 | ) | ||||
Net (loss) income
|
(20,008,049 | ) | 4,617,659 | |||||
Other comprehensive income - foreign
|
||||||||
currency translation adjustment
|
4,435,923 | 1,274,091 | ||||||
Comprehensive (loss) income
|
$ | (15,572,126 | ) | $ | 5,891,750 | |||
(Loss) earnings per share:
|
||||||||
Basic
|
$ | (0.46 | ) | $ | 0.11 | |||
Diluted
|
$ | (0.46 | ) | $ | 0.11 |
CHINA PHARMA HOLDINGS, INC.
|
||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
|
||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||
Additional
|
Other
|
Total
|
||||||||||||||||||||||
Common Stock
|
Paid-in
|
Retained
|
Comprehensive
|
Stockholders'
|
||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Earnings
|
Income
|
Equity
|
|||||||||||||||||||
Balance, December 31, 2011
|
43,529,557 | $ | 43,530 | $ | 23,448,534 | $ | 104,286,666 | $ | 14,704,367 | $ | 142,483,097 | |||||||||||||
Share-based compensation
|
100,000 | 100 | 141,620 | - | - | 141,720 | ||||||||||||||||||
Forfeiture of contingently vesting shares
|
(50,000 | ) | (50 | ) | 50 | - | - | - | ||||||||||||||||
Net income for the year
|
- | - | - | 4,617,659 | - | 4,617,659 | ||||||||||||||||||
Foreign currency translation adjustment
|
- | - | - | - | 1,274,091 | 1,274,091 | ||||||||||||||||||
Balance, December 31, 2012
|
43,579,557 | 43,580 | 23,590,204 | 108,904,325 | 15,978,458 | 148,516,567 | ||||||||||||||||||
Net loss for the year
|
- | - | - | (20,008,049 | ) | - | (20,008,049 | ) | ||||||||||||||||
Foreign currency translation adjustment
|
- | - | - | - | 4,435,923 | 4,435,923 | ||||||||||||||||||
Balance, December 31, 2013
|
43,579,557 | $ | 43,580 | $ | 23,590,204 | $ | 88,896,276 | $ | 20,414,381 | $ | 132,944,441 |
CHINA PHARMA HOLDINGS, INC.
|
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
For the Years
|
||||||||
Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
Cash Flows from Operating Activities:
|
||||||||
Net (loss) income
|
$ | (20,008,049 | ) | $ | 4,617,659 | |||
Depreciation and amortization
|
1,612,830 | 1,462,771 | ||||||
Stock based compensation
|
- | 141,721 | ||||||
Bad debt expense
|
10,752,991 | 871,612 | ||||||
Deferred income taxes
|
1,061,413 | (430,250 | ) | |||||
Inventory obsolescence reserve
|
6,121,655 | 1,769,984 | ||||||
Impairment of intangible assets
|
- | 593,095 | ||||||
Changes in assets and liabilities:
|
||||||||
Trade accounts and other receivables
|
3,633,180 | (1,098,322 | ) | |||||
Advances to suppliers
|
(2,625,629 | ) | 1,014,760 | |||||
Inventory
|
11,155,810 | (4,702,575 | ) | |||||
Trade accounts payable
|
(1,183,733 | ) | (306,040 | ) | ||||
Accrued expenses and other liabilities
|
356,640 | 246,817 | ||||||
Accrued taxes payable
|
(2,499,949 | ) | (683,357 | ) | ||||
Other payables
|
- | 744 | ||||||
Advances from customers
|
218,656 | 145,201 | ||||||
Net Cash Provided by Operating Activities
|
8,595,815 | 3,643,820 | ||||||
Cash Flows from Investing Activities:
|
||||||||
Advances for purchases of intangible assets
|
(298,631 | ) | (3,218,035 | ) | ||||
Advances for purchases of property and equipment
|
- | (1,612,670 | ) | |||||
Purchases of property and equipment
|
(18,794,261 | ) | (156,878 | ) | ||||
Net Cash Used in Investing Activities
|
(19,092,892 | ) | (4,987,583 | ) | ||||
Cash Flows from Financing Activities:
|
||||||||
Proceeds from construction term loan
|
12,322,648 | - | ||||||
Proceeds from issuance of notes payable
|
- | 793,223 | ||||||
Proceeds from related party loan
|
- | 493,004 | ||||||
Net Cash Provided by Financing Activity
|
12,322,648 | 1,286,227 | ||||||
Effect of Exchange Rate Changes on Cash
|
137,860 | 36,390 | ||||||
Net (Decrease ) Increase in Cash and Cash Equivalents
|
1,963,431 | (21,146 | ) | |||||
Cash and Cash Equivalents at Beginning of Period
|
4,029,708 | 4,050,854 | ||||||
Cash and Cash Equivalents at End of Period
|
$ | 5,993,139 | $ | 4,029,708 | ||||
Supplemental Cash Flow Information:
|
||||||||
Cash paid for interest
|
$ | 569,855 | $ | 298,433 | ||||
Cash paid for income taxes
|
2,481,164 | 2,138,853 | ||||||
Supplemental Noncash Investing and Financing Activities:
|
||||||||
Accounts payable for purchases of property and equipment
|
$ | 144,243 | $ | 151,731 | ||||
Accounts receivable collected with banker's acceptances
|
8,317,045 | 4,354,825 | ||||||
Purchases of property and equipment paid with banker's acceptances
|
2,564,790 | 1,540,820 | ||||||
Advances for purchases of intangibles paid with banker's acceptances
|
897,820 | 27,909 | ||||||
Inventory purchased with banker's acceptances
|
4,626,165 | 2,768,805 |
For the Years
|
||||||||
Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
Net (loss) income
|
$ | (20,008,049 | ) | $ | 4,617,659 | |||
Basic weighted-average common shares outstanding
|
43,579,557 | 43,579,557 | ||||||
Effect of dilutive securities:
|
||||||||
Warrants
|
- | - | ||||||
Options
|
- | - | ||||||
Diluted weighted-average common shares outstanding
|
43,579,557 | 43,579,557 | ||||||
Basic (loss) earnings per share
|
$ | (0.46 | ) | $ | 0.11 | |||
Diluted (loss) earnings per share
|
$ | (0.46 | ) | $ | 0.11 |
For the Years
|
||||||||
Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
Warrants with exercise prices of $3.00 to $3.80 per share
|
- | 150,000 | ||||||
Options with an exercise price of $2.54 to $3.47 per share
|
- | 50,000 | ||||||
Total
|
- | 200,000 |
December 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Raw materials
|
$ | 28,259,707 | $ | 30,198,816 | ||||
Work in process
|
853,602 | - | ||||||
Finished goods
|
3,590,937 | 7,930,684 | ||||||
32,704,246 | 38,129,500 | |||||||
Obsolescence reserve
|
(8,027,126 | ) | (1,769,984 | ) | ||||
Total Inventory
|
$ | 24,677,120 | $ | 36,359,516 |
December 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Permit of land use
|
$ | 460,964 | $ | 447,013 | ||||
Building
|
2,494,623 | 2,419,125 | ||||||
Plant, machinery and equipment
|
6,671,620 | 6,381,209 | ||||||
Motor vehicle
|
151,670 | 147,080 | ||||||
Office equipment
|
229,210 | 222,273 | ||||||
Construction in progress
|
25,497,600 | 3,688,567 | ||||||
Total
|
35,505,687 | 13,305,267 | ||||||
Less: accumulated depreciation
|
(5,264,350 | ) | (4,273,373 | ) | ||||
Property and Equipment, net
|
$ | 30,241,337 | $ | 9,031,894 |
For the Years
|
||||||||
Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
Total interest cost incurred
|
$ | 583,400 | $ | 308,375 | ||||
Interest cost capitalized
|
234,704 | - | ||||||
Interest expense
|
$ | 348,696 | $ | 308,375 |
Asset
|
Life - years
|
|
Permit of land use
|
40 - 70
|
|
Building
|
20 - 35
|
|
Plant, machinery and equipment
|
10
|
|
Motor vehicle
|
5 - 10
|
|
Office equipment
|
3-5
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
Gross carrying amount
|
$ | 5,524,785 | $ | 5,357,580 | ||||
Accumulated amortization
|
(3,812,992 | ) | (2,944,726 | ) | ||||
Net carrying amount
|
$ | 1,711,793 | $ | 2,412,854 |
Year
|
Amount
|
||
2014
|
$ 515,810
|
||
2015
|
452,229
|
||
2016
|
284,292
|
||
2017
|
152,841
|
||
2018
|
46,390
|
||
Thereafter
|
260,231
|
||
Total
|
$ 1,711,793
|
Year
|
Amount
|
|||
2014
|
$ | - | ||
2015
|
1,636,554 | |||
2016
|
1,636,554 | |||
2017
|
2,454,831 | |||
2018
|
2,454,831 | |||
Thereafter
|
4,301,413 | |||
$ | 12,484,183 |
Enterprise Income
|
|||
Year
|
Tax Rate | ||
2014
|
15%
|
||
2015
|
15%
|
||
2016
|
15%
|
||
Thereafter
|
25%
|
Years Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
Current
|
$ | - | $ | 1,414,171 | ||||
Deferred
|
1,061,413 | (430,250 | ) | |||||
Total income tax expense
|
$ | 1,061,413 | $ | 983,921 |
Years Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
(Benefit) tax at statutory rate of 25%
|
$ | (4,736,660 | ) | $ | 1,400,395 | |||
Stock based compensation from current and prior years
|
8,534 | 149,644 | ||||||
Effect of tax holiday
|
1,834,517 | (655,947 | ) | |||||
Other, primarily the difference in U.S. tax rates
|
- | (70,471 | ) | |||||
Change in valuation allowance
|
3,955,022 | 160,300 | ||||||
Income tax expense
|
$ | 1,061,413 | $ | 983,921 |
December 31,
|
||||||||
2013
|
2012
|
|||||||
Deferred income tax assets:
|
||||||||
Allowance for doubtful trade receivables
|
$ | 1,995,243 | $ | 664,492 | ||||
Allowance for doubtful other receivables
|
6,460 | 7,482 | ||||||
Inventory obsolescence reserve
|
1,501,687 | 265,498 | ||||||
Expenses not deductible in current year
|
31,143 | 30,200 | ||||||
Share based compensation
|
- | 45,777 | ||||||
PRC net operating loss carry forward
|
328,643 | - | ||||||
U.S. net operating loss carry forward
|
1,052,784 | 905,669 | ||||||
Total deferred income tax assets
|
4,915,960 | 1,919,118 | ||||||
Valuation allowance
|
(4,915,960 | ) | (951,447 | ) | ||||
Net deferred income tax asset
|
$ | - | $ | 967,671 | ||||
Deferred income tax liability:
|
||||||||
Intangible assets
|
$ | 176,414 | $ | 95,963 |
Fair Value Measurements at
|
||||||||||||||||
Reporting Date Using
|
||||||||||||||||
Description
|
December 31, 2013
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Banker's acceptance notes
|
$ | 336,003 | $ | - | $ | 336,003 | $ | - | ||||||||
Total
|
$ | 336,003 | $ | - | $ | 336,003 | $ | - | ||||||||
Fair Value Measurements at
|
||||||||||||||||
Reporting Date Using
|
||||||||||||||||
Description
|
December 31, 2012
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Banker's acceptance notes
|
$ | 101,570 | $ | - | $ | 101,570 | $ | - | ||||||||
Total
|
$ | 101,570 | $ | - | $ | 101,570 | $ | - |
Weighted-
|
||||||||||||||||
Weighted-
|
Average
|
|||||||||||||||
Average
|
Remaining
|
Aggregate
|
||||||||||||||
Exercise
|
Contractual
|
Intrinsic
|
||||||||||||||
Shares
|
Price
|
Term (Years)
|
Value
|
|||||||||||||
Outstanding at December 31, 2012
|
25,000 | $ | 2.54 | 0.40 | ||||||||||||
Forfeited
|
(25,000 | ) | 2.54 | |||||||||||||
Expired
|
- | - | ||||||||||||||
Outstanding at December 31, 2013
|
- | $ | - | - | $ | - | ||||||||||
Exercisable at December 31, 2013
|
- | $ | - | - | $ | - |
1)
|
A retainer of $16,000 per year, payable quarterly within 5 days of the end of the quarter;
|
2)
|
5,000 warrants of common stocks with an exercise price $0.37 per share which is determined by the average stock price of 15 days before December 19
th
2013. The warrants will be vested on the anniversary date of the board resolution. The warrants issued will be subject to the warrants plan to be adopted by the Company.
|
Creditor
:
Heung Mei Tsui
Debtor
:
China Pharma Holdings, Inc.
December 31, 2013
|
1.
|
I have reviewed this report on Form 10-K of China Pharma Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
|
Exhibit 31.2
|
1.
|
I have reviewed this report on Form 10-K of China Pharma Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
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