Nevada
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73-1564807
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(State or other jurisdiction of
incorporation or organization)
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(IRS Employer Identification No.)
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Title of each class
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Name of each exchange on which registered
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Common Stock, $0.001 Par Value Per Share
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NYSE MKT
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
Do not check if a smaller reporting company
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Smaller reporting company
x
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PAGE
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PART I
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Item 1.
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Business.
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4 |
Item 1A.
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Risk Factors.
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20 |
Item 1B.
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Unresolved Staff Comments.
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41 |
Item 2.
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Properties.
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41 |
Item 3.
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Legal Proceedings.
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42 |
Item 4.
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Mine Safety Disclosures.
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42 |
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PART II
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Item 5.
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Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
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43 |
Item 6.
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Selected Financial Data
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44 |
Item 7.
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Management's Discussion and Analysis of Financial Condition and Results of Operations.
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44 |
Item 7A.
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Quantitative and Qualitative Disclosures about Market Risk.
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54 |
Item 8.
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Financial Statements and Supplementary Data.
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54 |
Item 9.
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
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54 |
Item 9A.
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Controls and Procedures.
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54 |
Item 9B.
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Other Information.
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55 |
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PART III
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Item 10.
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Directors, Executive Officers and Corporate Governance.
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56 |
Item 11.
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Executive Compensation.
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58 |
Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.
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59 |
Item 13.
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Certain Relationships and Related Transactions, and Director Independence.
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60 |
Item 14.
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Principal Accountant Fees and Services.
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61 |
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PART IV
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Item 15.
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Exhibits, Financial Statement Schedules.
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62 |
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SIGNATURES
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|||
EXHIBIT INDEX
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|||
FINANCIAL STATEMENTS
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●
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Basic generic drug, which is a common drug in the PRC for which there is a very large market demand;
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●
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First-to-market generic drug, which is a generic Western drug that is new to the PRC marketplace; or
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●
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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.
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●
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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, and our upgraded new GMP-compliant production lines. 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 of PRC through the efforts of our sales force, independent distributors and educational physician conferences and seminars.
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●
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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.
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●
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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. We will continue our prudent sales strategy to tighten the cooperation with customers with good accounts receivable collection performance. 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.
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●
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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. The Company has not identified any strategic acquisition opportunities as of the date of this report on Form 10-K.
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Cefaclor Dispersible Tablets
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Tympanitis, lower respiratory tract infection, urinary tract infections and skin/skin tissue infection.
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2002
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Anhydroandrographolide
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Ischemic heart disease, cerebrovascular diseases (cerebral thrombosis, cerebral embolism and coronary heart disease) and high lipoprotein blood disease.
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2003
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Clarithromycin Granules and Capsules
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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.
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2004
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Naproxen Sodium and PseudophedrineHydrochlorida Sustained Release Tablets
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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.
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2005
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Gull Wood Extract Syrup
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Detoxicating, anti-inflammatory, quickly reducing swelling, for the indication of acute tonsillitis, acute pharyngitis, acute conjunctivitis, and upper respiratory tract infection.
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2010
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Digestive Diseases
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Hepatocyte Growth-promoting Factor for Injection
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Serious viral hepatitis symptoms caused by various viral hepatitis types (acute, subnormal temperature, chronic serious disease early or middle period of hepatitis).
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2005
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Tiopronin
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Acute and chronic Hepatitis B, and for the relief of drug-induced liver injury.
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2009
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Compound Ammonium Glycyrrhetate S for Injection
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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.
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2009
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Omeparzole
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Gastroesophageal reflux disease, and other conditions caused by excess acidic formulations in the stomach, including gastric ulcers, recurrent duodenal ulcers and Zollinger-Ellison Syndrome.
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2009
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Others
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Vitamin B6 for Injection
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Vitamin supplement.
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2005
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Granisetron Hydrochloride Injection
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Nausea and vomiting caused by radiotherapy and chemotherapy during the treatment of malignant tumors.
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2006
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Product Category
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Twelve Months ending
December 31,
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Net Change
|
% Change
|
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2015
|
2014
|
|||
CNS Cerebral & Cardio Vascular
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3.11
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3.78
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-0.67
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-18%
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Anti-Viro/Injection & Respiratory
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13.51
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14.56
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-1.06
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-7%
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Digestive Diseases
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0.76
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1.25
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-0.49
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-39%
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Other
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2.97
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2.54
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0.43
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17%
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Indication of Product Candidate
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CFDA Status
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Anti Infection
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In Phase II Clinical Study, Supplement Clinical Study Due to Improved Technology Criteria
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Cholesterol Control Drug
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At the latest stage of supplementing Consistency Evaluation per the New Policy
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Alzheimer's disease drug
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At the latest stage of supplementing Consistency Evaluation per the New Policy
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Coronary Heart Disease Drug
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Phase III Clinical Study Completed, Under Clinical Data Collection
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Digestive Diseases Drug #1
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Applied to CFDA for Production Approval, Waiting for CFDA Technical Review
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Digestive Diseases Drug #2
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Applied to CFDA for Production Approval, Waiting for CFDA Technical Review
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Antibiotic for Kids
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At the latest stage of supplementing Consistency Evaluation per the New Policy
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Electrolyte Disequilibrium Adjustment
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Applied to CFDA for Production Approval, Waiting for CFDA Technical Review
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●
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perceptions by physicians, patients and others in the medical community about the safety and effectiveness of our products;
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●
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the prevalence and severity of any side effects;
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●
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the pharmacological benefit of our products relative to competing products and products under development;
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●
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the efficacy and potential advantages of our products relative to competing products and products under development;
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●
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the relative convenience and ease of administration of our products;
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●
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the methods by which our pharmaceutical products may be delivered to patients;
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●
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the effectiveness of our education, marketing and distribution efforts and those of our distributors;
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●
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publicity concerning our products or competing products and treatments; and
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●
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the price of our products and competing products.
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●
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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
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●
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the willingness of physicians at a hospital to prescribe this medicine to their patients.
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●
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the failure to demonstrate safety and efficacy in preclinical and clinical trials;
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●
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the failure to obtain approvals for intended use from relevant regulatory bodies, such as the CFDA;
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●
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our inability to manufacture and commercialize sufficient quantities of the product economically; and
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●
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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.
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●
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sell our products outside their designated territory, possibly in violation of the exclusive distribution rights of other distributors;
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●
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fail to adequately promote our products;
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●
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promote competing products in lieu of our products; or
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●
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violate the anti-corruption laws of China, the United States or other countries.
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●
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we determine to devote significant amount of financial resources to the development of products that we believe to have significant commercialization potential;
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●
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we determine to acquire or license rights to additional product candidates or new technologies;
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●
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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;
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●
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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
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●
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we determine or are required to conduct more high-throughput screening than expected against current or additional disease targets to develop additional product candidates.
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●
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our future financial condition, results of operations and cash flows;
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●
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general market conditions for capital-raising activities by pharmaceutical companies; and
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●
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economic, political and other conditions in China and elsewhere.
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●
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the degree of government involvement;
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●
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the level of development;
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●
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the growth rate;
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●
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the control of foreign exchange;
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●
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access to financing; and
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●
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the allocation of resources.
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●
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We will be able to capitalize on economic reforms;
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●
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The Chinese government will continue its pursuit of economic reform policies;
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●
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The economic policies, even if pursued, will be successful;
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●
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Economic policies will not be significantly altered from time to time; or
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●
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Business operations in China will not become subject to the risk of nationalization.
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●
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actual or anticipated fluctuations in our quarterly operating results;
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●
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announcements of new products by us or our competitors;
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●
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changes in financial estimates by securities analysts;
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●
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conditions in the pharmaceutical market;
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●
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changes in the economic performance or market valuations of other companies involved in pharmaceutical production;
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●
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announcements by our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
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●
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economic, regulatory and political developments;
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●
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additions or departures of key personnel, or
|
●
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potential litigation.
|
Loan Amount
|
Lending Institution
|
Contract Period
|
Interest Rate
|
Properties under
Mortgage
|
RMB 30 million
(approximately
$4.62 million)
|
Bank of China
|
September 23, 2015 to October 20, 2016
|
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)
|
RMB 80 million
(Approximately $12.3million) |
Bank of China
|
July 11, 2013
to July 10, 2021
|
The interest rate is 5.73%, based upon 110% of the PRC government's eight-year term rate effective on the actual draw-down date, subject to annual adjustments based on 110% of the floating rate for the same type of loan on the anniversary from the draw-down date and its subsequent anniversary dates. On July 10, 2015, the interest rate was adjusted to 5.94%.
|
Helpson's new factory: 20,282.42 square meters (Certificate #: HK477872) and the
production line equipment and machinery in the new factory
|
|
High
|
Low
|
||||||
|
||||||||
Fiscal 2015
|
||||||||
|
||||||||
First Quarter
|
$
|
0.56
|
$
|
0.27
|
||||
Second Quarter
|
0.44
|
0.27
|
||||||
Third Quarter
|
0.36
|
0.16
|
||||||
Fourth Quarter
|
0.30
|
0.15
|
Fiscal 2014
|
||||||||
|
||||||||
First Quarter
|
$
|
0.84
|
$
|
0.34
|
||||
Second Quarter
|
0.52
|
0.32
|
||||||
Third Quarter
|
0.39
|
0.22
|
||||||
Fourth Quarter
|
0.53
|
0.21
|
Equity Compensation Plan Information
|
|||
Plan category
|
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
|
Weighted-average
exercise price of
outstanding
options, warrants
and rights
|
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected
in column (a))
|
|
(a)
|
(b)
|
(c)
|
Equity compensation plans not approved by security holders
|
-
|
-
|
-
|
Equity compensation plans approved by security holders
|
-
|
-
|
3,825,000
|
Totals
|
-
|
-
|
3,825,000
|
Ÿ
|
Antibiotic Combination - We are currently in Phase II of the clinical trial,
due to the higher regulatory requests for clinical works
.
|
Ÿ
|
Rosuvastatin - Rosuvastatin is a generic form of Crestor, a drug for the treatment of high blood cholesterol levels. Clinical trials for this generic drug were completed in the fourth quarter of 2010, and are supplementing Consistency Evaluation pursuant to the Opinions.
|
Ÿ
|
Heart Disease Drug - We developed 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. We have completed Phase III clinical trials and are currently collecting and summarizing trial data.
|
Ÿ
|
Alzheimer's disease drug - We developed a drug for the treatment of Alzheimer's disease and are supplementing Consistency Evaluation pursuant to the Opinions
.
|
Ÿ
|
Digestive Diseases drug - We developed two drugs for the treatment of digestive diseases and has applied to CFDA for Production Approval, currently waiting for CFDA Technical Review.
|
Ÿ
|
Antibiotic for Kids - We developed an oral solution antibiotic for the kids and are supplementing Consistency Evaluation pursuant to the Opinions.
|
(a)
|
deepen reform of public hospitals
|
(b)
|
establish and improve the universal health care system
|
(c)
|
encourage social source to develop healthcare business
|
(d)
|
improve the drug supply mechanism
|
(e)
|
improve the diagnosis and treatment hierarchy
|
(f)
|
deepen the comprehensive reform of basic level health care institutions
|
(g)
|
cooperate on all supplemental reform
|
Product Category
|
Twelve Months Ended December 31
|
Net Change
|
% Change
|
|
2015
|
2014
|
|||
CNS Cerebral & Cardio Vascular
|
3.11
|
3.78
|
-0.67
|
-18%
|
Anti-Viro/ Infection & Respiratory
|
13.51
|
14.56
|
-1.06
|
-7%
|
Digestive Diseases
|
0.76
|
1.25
|
-0.49
|
-39%
|
Other
|
2.97
|
2.54
|
0.43
|
17%
|
Product Category
|
Twelve Months December 31
|
|
2015
|
2014
|
|
CNS Cerebral & Cardio Vascular
|
15%
|
17%
|
Anti-Viro/ Infection & Respiratory
|
66%
|
66%
|
Digestive Diseases
|
4%
|
6%
|
Other
|
15%
|
11%
|
|
December 31,
|
December 31,
|
||||
|
2015
|
2014
|
||||
1 - 90 Days
|
|
|
4.0%
|
|
|
5.2%
|
90 - 180 Days
|
|
|
2.2%
|
|
|
4.5%
|
180 - 360 Days
|
|
|
7.9%
|
|
|
6.9%
|
360 - 720 Days
|
|
|
14.6%
|
|
|
29.7%
|
> 720 Days
|
|
|
71.3%
|
|
|
53.7%
|
Total
|
|
|
100.0%
|
|
|
100.0%
|
|
For the Fiscal Years Ended
|
|||||||
|
December 31,
|
|||||||
|
2015
|
2014 | ||||||
Balance, Beginning of Year
|
$
|
44,347,451
|
$
|
13,301,622
|
||||
Bad debt expense
|
7,426,743
|
31,352,579
|
||||||
Charged to reserve
|
-21,307,666
|
-531,598
|
||||||
Foreign currency translation adjustment
|
-1,822,130
|
224,848
|
||||||
Balance, End of Year
|
$
|
28,644,398
|
$
|
44,347,451
|
Name
|
Age
|
Position
|
Zhilin Li
|
62
|
Chairman, President, Chief Executive Officer and interim Chief Financial Officer
|
Heung Mei Tsui
|
58
|
Director
|
Gene Michael Bennett
|
68
|
Independent Director
|
Yingwen Zhang
|
70
|
Independent Director
|
Baowen Dong
|
74
|
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
|
2015
2014
|
225,600
225,600
|
-
|
-
|
-
|
-
|
-
|
16,000
16,000
|
241,600
241,600
|
DIRECTOR COMPENSATION
|
|||||||
Name
|
Fees
Earned
or
Paid in
Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Non-Qualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
Heung Mei Tsui
|
16,000
|
-
|
-
|
-
|
-
|
-
|
16,000
|
Gene Michael Bennett
|
16,000
|
-
|
-
|
-
|
-
|
-
|
16,000
|
Yingwen Zhang
|
6,433
|
-
|
-
|
-
|
-
|
-
|
6,511
|
Baowen Dong
|
6,433
|
-
|
-
|
-
|
-
|
-
|
6,511
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2015 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, 2015, 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, 2015 (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.
|
|
|
Date: March 30, 2016
|
CHINA PHARMA HOLDINGS, INC.
|
|
|
|
|
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By: /s/ Zhilin Li
|
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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 30, 2016
|
|
|
|
/s/ Heung Mei Tsui
Heung Mei Tsui
|
Director
|
March 30, 2016
|
|
|
|
/s/ Gene Michael Bennett
Gene Michael Bennett
|
Director
|
March 30, 2016
|
|
|
|
/s/ Yingwen Zhang
Yingwen Zhang
|
Director
|
March 30, 2016
|
|
|
|
/s/ Baowen Dong
Baowen Dong
|
Director
|
March 30, 2016
|
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).
|
||||||||||||
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|||||
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).
|
||||||||||||
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|
||
10.1*
|
Engagement Letter dated December 9, 2015 by and between the Company and Ms. Heung Mei Tsui for Ms. Tsui serving as a director of the Company.
|
||||||||||||
10.2*
|
Engagement Letter dated December 9, 2015 by and between the Company and Ms. Zhilin Li for Ms. Li serving as a director of the Company.
|
||||||||||||
|
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|
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|
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|
||||
10.3
|
Form of Independent Director Engagement Letter (incorporated by reference to Exhibit 10.2 to our Annual Report on Form 10-K filed on March 30, 2015).
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
||||
10.4*
|
Employment Agreement dated July 1, 2015 between Hainan Helpson Medical & Biotechnology Co., Ltd. and Zhilin Li.
|
||||||||||||
|
|
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|
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|
|
|
|
|
||||
10.5*
|
Loans Extension Confirmation Letter between the Company and Heung Mei Tsui confirming the extension of the loans.
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
||||
10.6
|
2010 Long-Term Incentive Plan of the Company (incorporated by reference to the Definitive Proxy Statement on Schedule 14A filed on November 12, 2010).
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
||||
10.7
|
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).
|
||||||||||||
|
|
|
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|
|
|
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|
|
|
|||
10.8
|
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).
|
||||||||||||
|
|
|
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|
|
|
|
|
|||||
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).
|
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 Chief Executive Officer and 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
|
|
·
|
Exhibits filed herewith.
|
|
|
Page | ||||
Report of Arshak Davtyan, Inc., Independent Registered Public Accounting Firm
|
|
|
F-2
|
|
|
|
|
|
|
Consolidated Balance Sheets - as of December 31, 2015 and 2014
|
|
|
F-3
|
|
|
|
|
|
|
Consolidated Statements of Operations and Comprehensive Loss - for the years ended December 31, 2015 and 2014
|
|
|
F-4
|
|
|
|
|
|
|
Consolidated Statements of Shareholders' Equity - for the years ended December 31, 2015 and 2014
|
|
|
F-5
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows - for the years ended December 31, 2015 and 2014
|
|
|
F-6
|
|
|
|
|
|
|
Notes to Consolidated Financial Statements
|
|
|
F-7
|
|
CHINA PHARMA HOLDINGS, INC.
|
||||||||
CONSOLIDATED BALANCE SHEETS
|
||||||||
December 31,
|
December 31,
|
|||||||
2015
|
2014
|
|||||||
ASSETS
|
||||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$
|
6,248,760
|
$
|
5,295,790
|
||||
Banker's acceptances
|
-
|
458,233
|
||||||
Trade accounts receivable, less allowance for doubtful
|
||||||||
accounts of $28,644,398 and $44,347,451, respectively
|
5,882,509
|
13,853,744
|
||||||
Other receivables, less allowance for doubtful
|
||||||||
accounts of $74,400 and $43,064, respectively
|
290,739
|
272,199
|
||||||
Advances to suppliers
|
2,533,354
|
6,307,190
|
||||||
Inventory, less allowance for obsolescence
|
||||||||
of $8,417,095 and $6,934,044, respectively
|
9,662,750
|
15,321,856
|
||||||
Prepaid expenses
|
339,140
|
404,370
|
||||||
Total Current Assets
|
24,957,252
|
41,913,382
|
||||||
Advances for purchases of intangible assets
|
42,030,649
|
43,972,005
|
||||||
Property and equipment
, net of accumulated depreciation of
|
||||||||
$9,442,912 and $6,640,718, respectively
|
29,393,257
|
33,881,878
|
||||||
Intangible assets
, net of accumulated amortization of
|
||||||||
$4,360,004 and $4,182,273, respectively
|
841,075
|
1,317,221
|
||||||
TOTAL ASSETS
|
$
|
97,222,233
|
$
|
121,084,486
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current Liabilities:
|
||||||||
Trade accounts payable
|
$
|
2,824,521
|
$
|
2,550,816
|
||||
Accrued expenses
|
143,409
|
269,870
|
||||||
Other payables
|
1,710,283
|
1,401,470
|
||||||
Advances from customers
|
595,681
|
2,078,866
|
||||||
Other payables - related parties
|
1,354,567
|
1,354,567
|
||||||
Current portion of construction loan facility
|
1,540,666
|
1,629,062
|
||||||
Short-term notes payable
|
4,621,998
|
4,887,187
|
||||||
Total Current Liabilities
|
12,791,125
|
14,171,838
|
||||||
Non-current Liabilities:
|
||||||||
Construction loan facility
|
10,784,661
|
11,403,438
|
||||||
Deferred revenue
|
708,408
|
2,516,383
|
||||||
Long-term deferred tax liability
|
296,890
|
252,707
|
||||||
Total Liabilities
|
24,581,084
|
28,344,366
|
||||||
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
|
33,939,998
|
49,345,516
|
||||||
Accumulated other comprehensive income
|
15,067,367
|
19,760,820
|
||||||
Total Stockholders' Equity
|
72,641,149
|
92,740,120
|
||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
97,222,233
|
$
|
121,084,486
|
CHINA PHARMA HOLDINGS, INC.
|
||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||
AND COMPREHENSIVE LOSS
|
||||||||
For the Year
|
||||||||
Ended December 31,
|
||||||||
2015
|
2014
|
|||||||
Revenue
|
$
|
20,351,630
|
$
|
22,133,866
|
||||
Cost of revenue
|
15,778,243
|
17,215,576
|
||||||
Inventory obsolescence
|
3,108,826
|
2,250,130
|
||||||
Gross profit
|
1,464,561
|
2,668,160
|
||||||
Operating expenses:
|
||||||||
Selling expenses
|
4,294,639
|
3,346,511
|
||||||
General and administrative expenses
|
1,896,559
|
1,716,760
|
||||||
Research and development expenses
|
961,897
|
2,798,557
|
||||||
Bad debt expense
|
10,147,293
|
31,352,579
|
||||||
Impairment of intangible assets
|
104,544
|
-
|
||||||
Losses from natural disaster
|
-
|
2,276,519
|
||||||
Total operating expenses
|
17,404,932
|
41,490,926
|
||||||
Subsidy income
|
1,640,531
|
65,113
|
||||||
Loss from operations
|
(14,299,840
|
)
|
(38,757,653
|
)
|
||||
Other income (expense):
|
||||||||
Interest income
|
119,925
|
69,739
|
||||||
Interest expense
|
(1,165,164
|
)
|
(785,804
|
)
|
||||
Net other expense
|
(1,045,239
|
)
|
(716,065
|
)
|
||||
Loss before income taxes
|
(15,345,079
|
)
|
(39,473,718
|
)
|
||||
Income tax expense
|
(60,439
|
)
|
(77,042
|
)
|
||||
Net loss
|
(15,405,518
|
)
|
(39,550,760
|
)
|
||||
Other comprehensive loss - foreign currency
|
||||||||
translation adjustment
|
(4,693,453
|
)
|
(653,561
|
)
|
||||
Comprehensive loss
|
$
|
(20,098,971
|
)
|
$
|
(40,204,321
|
)
|
||
Loss per share:
|
||||||||
Basic
|
$
|
(0.35
|
)
|
$
|
(0.91
|
)
|
||
Diluted
|
$
|
(0.35
|
)
|
$
|
(0.91
|
)
|
Accumulated
|
||||||||||||||||||||||||
Additional
|
Other
|
Total
|
||||||||||||||||||||||
Common Stock
|
Paid-in
|
Retained
|
Comprehensive
|
Stockholders'
|
||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Earnings
|
Income
|
Equity
|
|||||||||||||||||||
Balance, December 31, 2013
|
43,579,557
|
43,580
|
23,590,204
|
88,896,276
|
20,414,381
|
132,944,441
|
||||||||||||||||||
Net loss for the year
|
-
|
-
|
-
|
(39,550,760
|
)
|
-
|
(39,550,760
|
)
|
||||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
(653,561
|
)
|
(653,561
|
)
|
||||||||||||||||
Balance, December 31, 2014
|
43,579,557
|
$
|
43,580
|
$
|
23,590,204
|
$
|
49,345,516
|
$
|
19,760,820
|
$
|
92,740,120
|
|||||||||||||
Net loss for the year
|
-
|
-
|
-
|
$
|
(15,405,518
|
)
|
-
|
(15,405,518
|
)
|
|||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
$
|
(4,693,453
|
)
|
(4,693,453
|
)
|
|||||||||||||||
Balance, December 31, 2015
|
43,579,557
|
$
|
43,580
|
$
|
23,590,204
|
$
|
33,939,998
|
$
|
15,067,367
|
$
|
72,641,149
|
CHINA PHARMA HOLDINGS, INC.
|
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
For the Year
|
||||||||
Ended December 31,
|
||||||||
2015
|
2014
|
|||||||
Cash Flows from Operating Activities:
|
||||||||
Net loss
|
$
|
(15,405,518
|
)
|
$
|
(39,550,760
|
)
|
||
Depreciation and amortization
|
3,598,527
|
1,785,835
|
||||||
Bad debt expense
|
10,147,293
|
31,352,579
|
||||||
Deferred income taxes
|
60,439
|
77,042
|
||||||
Inventory obsolescence reserve
|
1,941,007
|
(1,055,529
|
)
|
|||||
Impairment of intangible assets
|
104,544
|
-
|
||||||
Deferred revenue
|
(1,744,873
|
)
|
2,514,457
|
|||||
Changes in assets and liabilities:
|
||||||||
Trade accounts and other receivables
|
(5,067,476
|
)
|
(3,163,945
|
)
|
||||
Advances to suppliers
|
5,144,100
|
1,283,631
|
||||||
Inventory
|
5,157,861
|
12,780,457
|
||||||
Trade accounts payable
|
601,470
|
634,673
|
||||||
Accrued taxes payable
|
34,802
|
84
|
||||||
Other payables and accrued expenses
|
163,289
|
37,584
|
||||||
Advances from customers
|
(1,430,595
|
)
|
(139,066
|
)
|
||||
Prepaid expenses
|
45,190
|
(404,060
|
)
|
|||||
Net Cash Provided by Operating Activities
|
3,350,060
|
6,152,982
|
||||||
Cash Flows from Investing Activities:
|
||||||||
Advances for purchases of intangible assets
|
(1,634,097
|
)
|
(2,295,307
|
)
|
||||
Bankers acceptances redeemed for cash
|
423,693
|
-
|
||||||
Purchases of property and equipment
|
(685,302
|
)
|
(5,128,699
|
)
|
||||
Net Cash Used in Investing Activities
|
(1,895,706
|
)
|
(7,424,006
|
)
|
||||
Cash Flows from Financing Activities:
|
||||||||
Proceeds from construction term loan
|
-
|
605,002
|
||||||
Net Cash Provided by Financing Activity
|
-
|
605,002
|
||||||
Effect of Exchange Rate Changes on Cash
|
(501,384
|
)
|
(31,327
|
)
|
||||
Net (Decrease) Increase in Cash and Cash Equivalents
|
952,970
|
(697,349
|
)
|
|||||
Cash and Cash Equivalents at Beginning of Period
|
5,295,790
|
5,993,139
|
||||||
Cash and Cash Equivalents at End of Period
|
$
|
6,248,760
|
$
|
5,295,790
|
||||
Supplemental Cash Flow Information:
|
||||||||
Cash paid for interest
|
$
|
1,151,613
|
$
|
1,230,800
|
||||
Supplemental Noncash Investing and Financing Activities:
|
||||||||
Accounts payable for purchases of property and equipment
|
$
|
171,245
|
$
|
46,780
|
||||
Accounts receivable collected with banker's acceptances
|
2,422,137
|
2,777,579
|
||||||
Inventory purchased with banker's acceptances
|
2,059,028
|
2,489,698
|
||||||
Advances for purchases of intangibles paid with banker's acceptances
|
391,826
|
164,208
|
For the Year
|
||||||||
Ended December 31,
|
||||||||
2015
|
2014
|
|||||||
Net loss
|
$
|
(15,405,518
|
)
|
$
|
(39,550,760
|
)
|
||
Basic weighted-average common shares outstanding
|
43,579,557
|
43,579,557
|
||||||
Effect of dilutive securities:
|
||||||||
Warrants
|
-
|
-
|
||||||
Options
|
-
|
-
|
||||||
Diluted weighted-average common shares outstanding
|
43,579,557
|
43,579,557
|
||||||
Basic loss per share
|
$
|
(0.35
|
)
|
$
|
(0.91
|
)
|
||
Diluted loss per share
|
$
|
(0.35
|
)
|
$
|
(0.91
|
)
|
December 31,
|
December 31,
|
|||||||
2015
|
2014
|
|||||||
Raw materials
|
$
|
14,699,736
|
$
|
18,819,570
|
||||
Finished goods
|
3,380,109
|
3,436,330
|
||||||
18,079,845
|
22,255,900
|
|||||||
Obsolescence reserve
|
(8,417,095
|
)
|
(6,934,044
|
)
|
||||
Total Inventory
|
$
|
9,662,750
|
$
|
15,321,856
|
December 31,
|
December 31,
|
|||||||
2015
|
2014
|
|||||||
Permit of land use
|
$
|
433,956
|
$
|
458,853
|
||||
Building
|
10,557,234
|
11,279,704
|
||||||
Plant, machinery and equipment
|
27,325,440
|
28,358,694
|
||||||
Motor vehicle
|
242,860
|
150,976
|
||||||
Office equipment
|
256,679
|
268,521
|
||||||
Construction in progress
|
-
|
5,848
|
||||||
Total
|
38,816,169
|
40,522,596
|
||||||
Less: accumulated depreciation
|
(9,422,912
|
)
|
(6,640,718
|
)
|
||||
Property and Equipment, net
|
$
|
29,393,257
|
$
|
33,881,878
|
For the Year
|
||||||||
Ended December 31,
|
||||||||
2015
|
2014
|
|||||||
Total interest cost incurred
|
$
|
1,165,164
|
$
|
1,244,346
|
||||
Interest cost capitalized
|
-
|
458,542
|
||||||
Interest expense
|
$
|
1,165,164
|
$
|
785,804
|
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
|
December 31,
|
December 31,
|
|||||||
2015
|
2014
|
|||||||
Gross carrying amount
|
$
|
5,201,079
|
$
|
5,499,494
|
||||
Accumulated amortization
|
(4,360,004
|
)
|
(4,182,273
|
)
|
||||
Net carrying amount
|
$
|
841,075
|
$
|
1,317,221
|
Year
|
Amount
|
|||
2016
|
$
|
269,077
|
||
2017
|
172,180
|
|||
2018
|
117,541
|
|||
2019
|
61,288
|
|||
2020
|
37,884
|
|||
Thereafter
|
183,105
|
|||
Total
|
$
|
841,075
|
Year
|
Amount
|
|||
2016
|
1,540,666
|
|||
2017
|
1,540,666
|
|||
2018
|
2,310,999
|
|||
2019
|
2,310,999
|
|||
2020
|
2,310,999
|
|||
2021
|
2,310,999
|
|||
$
|
12,325,327
|
Enterprise Income
|
||
Year
|
Tax Rate | |
2014
|
15%
|
|
2015
|
15%
|
|
2016
|
15%
|
|
2017
|
25%
|
|
2018
|
25%
|
|
Thereafter
|
25%
|
Year Ended December 31,
|
||||||||
2015
|
2014
|
|||||||
Current
|
$
|
-
|
$
|
-
|
||||
Deferred
|
60,439
|
77,042
|
||||||
Total income tax expense
|
$
|
60,439
|
$
|
77,042
|
Years Ended December 31,
|
||||||||
2015
|
2014
|
|||||||
(Benefit) tax at statutory rate of 25%
|
$
|
(3,832,536
|
)
|
$
|
(9,868,430
|
)
|
||
Effect of tax holiday
|
1,478,831
|
3,906,336
|
||||||
Other, primarily the difference in U.S. tax rates
|
4,136
|
7,815
|
||||||
Change in valuation allowance
|
2,410,008
|
6,031,321
|
||||||
Income tax expense
|
$
|
60,439
|
$
|
77,042
|
December 31,
|
||||||||
2015
|
2014
|
|||||||
Deferred income tax assets:
|
||||||||
Allowance for doubtful trade receivables
|
$
|
4,296,660
|
$
|
6,652,118
|
||||
Allowance for doubtful other receivables
|
11,160
|
9,049
|
||||||
Inventory obsolescence reserve
|
1,262,564
|
1,040,107
|
||||||
Expenses not deductible in current year
|
647,236
|
31,000
|
||||||
Deferred revenue
|
106,261
|
377,457
|
||||||
PRC net operating loss carry forward
|
5,114,478
|
1,676,852
|
||||||
U.S. net operating loss carry forward
|
1,360,213
|
1,181,679
|
||||||
Total deferred income tax assets
|
12,798,572
|
10,968,262
|
||||||
Valuation allowance
|
(12,798,572
|
)
|
(10,968,262
|
)
|
||||
Net deferred income tax asset
|
$
|
-
|
$
|
-
|
||||
Deferred income tax liability:
|
||||||||
Intangible assets
|
$
|
296,890
|
$
|
252,707
|
Fair Value Measurements at
|
||||||||||||||||
Reporting Date Using
|
||||||||||||||||
Description
|
December 31, 2014
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Banker's acceptance notes
|
$
|
458,233
|
$
|
-
|
$
|
458,233
|
$
|
-
|
||||||||
Total
|
$
|
458,233
|
$
|
-
|
$
|
458.233
|
$
|
-
|
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;
|
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):
|