Business Overview & Recent Developments

China Pharma Holding Inc. (“China Pharma”) is a Nevada holding company, but all of its operations are conducted in China through its wholly-owned subsidiary Hainan Helpson Medical & Biotechnology Co., Ltd (“Helpson”). Helpson is engaged in the development, manufacture, and marketing of pharmaceutical products for human use in China.

Some key points:

• Helpson manufactures a variety of pharmaceutical products including dry powder injectables, liquid injectables, tablets, capsules, and cephalosporin oral solutions.

• China’s consistency evaluation of generic drugs is an ongoing process, and Helpson has made progress with its flagship product Candesartan tablets passing the evaluation in 2023.

• Helpson has taken a cautious approach to initiating consistency evaluation projects due to the changing regulatory environment and impact of centralized drug procurement policies.

• Helpson has expanded into the comprehensive healthcare market, launching products like Noni enzyme supplements and personal protective equipment like masks in response to market needs.

Results of operations for the three months ended September 30, 2024

Revenue:

• Revenue was $1.1 million, down from $1.8 million in the same period in 2023, mainly due to more competitor drugs being included in centralized procurement while Helpson’s products have not passed consistency evaluation.
• The “Anti-Viral/Infection & Respiratory” category saw a 6% increase in revenue, while the “Digestive Diseases” and “Other” categories saw declines of 91% and 73% respectively.

Cost of Revenue and Gross Margin:

• Cost of revenue was $1.6 million, or 147.2% of total revenue, up from 112.9% in 2023 due to increased idle equipment costs and inventory impairments.
• Gross loss was $0.52 million, with a gross loss margin of 47.2% compared to 12.9% in 2023.

Expenses:

• Selling expenses were $0.13 million, or 12.2% of revenue, compared to 11.5% in 2023.
• General and administrative expenses were $0.34 million, or 31.4% of revenue, up from 13.7% in 2023 due to higher amortization of intangible assets.
• R&D expenses were $0.09 million, or 8.0% of revenue, up from 2.5% in 2023 due to increased consistency evaluation efforts.

Net Loss:

• Net loss was $1.1 million, compared to $0.8 million in the same period in 2023.
• Loss per basic and diluted share was $0.06, compared to $0.29 in the same period in 2023.

Results of operations for the nine months ended September 30, 2024

Revenue:

• Revenue was $3.4 million, down from $4.9 million in the same period in 2023.
• The “Digestive Diseases” category saw the largest decline, down 86% to $0.14 million.

Cost of Revenue and Gross Margin:

• Cost of revenue was $5.2 million, or 153.8% of total revenue, up from 104.2% in 2023.
• Gross loss was $1.8 million, with a gross loss margin of 53.8% compared to 4.2% in 2023.

Expenses:

• Selling expenses were $0.35 million, or 10.4% of revenue, down from 10.7% in 2023.
• G&A expenses were $0.93 million, or 27.3% of revenue, up from 16.0% in 2023 due to higher intangible asset amortization.
• R&D expenses were $0.28 million, or 8.2% of revenue, up from 1.8% in 2023 due to increased consistency evaluation costs.

Net Loss:

• Net loss was $3.5 million, compared to $1.8 million in the same period in 2023.
• Loss per basic and diluted share was $0.23, compared to $0.89 in the same period in 2023.

Liquidity and Capital Resources

• The company’s principal sources of liquidity are cash from operations and bank lines of credit.
• As of September 30, 2024, the company had $0.72 million in cash and cash equivalents, down from $1.42 million at the end of 2023.
• The company has obtained various lines of credit and issued a convertible note, but there are concerns about its ability to continue as a going concern.
• Restrictions on dividend distribution and currency conversion from China to the parent company in the US pose challenges.

Overall, China Pharma’s financial performance has declined significantly in 2024 due to lower revenues, higher costs, and increased expenses. The company faces liquidity concerns and regulatory challenges that raise doubts about its ability to continue operations. Addressing the consistency evaluation requirements and centralized procurement policies will be critical for the company’s future.