China Pharma Holdings, Inc. Reports Second Quarter 2019 Financial Results

HAIKOU,China,Aug. 15,2019 -- China Pharma Holdings,Inc. (NYSE American: CPHI) ("China Pharma," the "Company" or "We"),an NYSE American-listed corporation with a fully-integrated specialty pharmaceuticals subsidiary based in China,today announced financial results for the quarter ended June 30,2019.

Second Quarter Highlights

Revenue decreased 19.0% to $2.6 million in the second quarter 2019 from $3.2 million in the same period of 2018;

Gross margin was 6.4% in the second quarter 2019,compared to 18.3% in the same period of 2018;

Loss from operations was $0.8 million in the second quarter 2019 compared to $0.9 million in the same period of 2018,an improvement of $0.1 million;

Net loss was $0.8 million in the second quarter 2019 compared to $1.0 million in the same period of 2018. Loss per common share was both $0.02 per basic and diluted share in the second quarter 2019 and 2018,respectively.

Ms. Zhilin Li,China Pharma's Chairman and CEO,commented,"We experienced negative impacts on our sales from the strict implementation of the government policy of controlling the proportion of the spending on drugs to the patients' total expenditures in hospitals. Management endeavors to vigorously promote sales through active participation in recent provincial market openings to solicit new drug tender offers and allow China Pharma to expand its presence in these markets." Ms. Li continued,"In addition,we are experiencing sustained pressure from the more stringent requirements of drug registration standards,consistency evaluations and challenging environment in our industry in this period. We will continue actively adapting to the state policy guidance and further evaluating market conditions for our current existing products,pipeline products,and competition in the market,in order to optimize our development strategy. Simultaneously,we will also actively implement the launch of our nutrition product."

Second Quarter Results

Revenue decreased by 19.0% to $2.6million for the three months ended June 30,2019,as compared to $3.2million for the three months ended June 30,2018. This decrease was mainly due tothe market reaction caused by the strict implementation of the policy on controlling the percentage of spending on medicines to patients' total expenditure in hospitals.

Gross profit for the three months ended June 30,2019 was $0.2million,as compared to $0.6million during the same period in 2018. Our gross profit margin in the three months ended June 30,2019 was 6.4%ascompared to 18.3% duringthe same period in 2018. The decreasein our gross profit margin was mainly due to thedecrease in revenue and the increased ratio of fixed cost to revenue.

Our selling expenses for the three months ended June 30,2019 and 2018 were$0.5million and $0.7 million,respectively.Selling expenses accounted for19.7% of the total revenue in the three months ended June 30,as compared to 22.6% during the same period in 2018. Because of adjustments in our sales practices,and reform of healthcare policies,we reduced the numberofour personnel and expenses to efficiently support our sales and the collection of accounts receivable.

Our general and administrative expenses for the three months ended June 30,2019 were $0.3 million,ascompared to $0.4 million for the same period in 2018. General and administrative expenses accounted for 13.0% and 11.1% of our total revenues in the three months ended June 30,2019 and 2018,respectively.

Our research and development expenses for the three months ended June 30,2019 were $0.07million,as compared to $0.02million in the same period in 2018. Research and development expenses accounted for 2.6% and 0.7% of our total revenues in the three months ended June 30,respectively.The increase in research and development expenses in this period was mainly due to the spending on the consistency evaluation of our current existing products.

Our bad debt expensesfor the three months ended June 30,2019 were $10,092,as compared to $350,847 forthe same period in 2018.

Net loss for the three months ended June 30,2019was $0.8million,or $0.02 per basic and diluted common share,as compared to a net loss of $1.0 million forthe same period a year ago,or $0.02 per basic and diluted common share. The decrease in net loss was mainly the result of controls on expenditures outweighed the impact of decrease in revenue.

Six Months Results

Revenue decreased by 19.0% to $5.5million for the six months ended June 30,as compared to $6.8million for the six months ended June 30,2018. This decrease was mainly due to the implementation of government policies on "controlling thepercentage of medicine spending on total hospital expenditure" in recent quarters.

Gross profit for the six months ended June 30,2019 was $0.8million,compared to $1.6million in the same period in 2018. Our gross profit margin in the six months ended June 30,2019 was 14.9% compared to 24.1% in the same period in 2018. The decreasein our gross profit margin was mainly due to the decrease in sales in the first half of 2019. Although cost decreased in this period as well,the stable nature of fixed cost deteriorates the gross margin when the decrease in revenue outweighed that of cost.

Net loss for the six months ended both June 30,2019 and 2018was $1.3million,or $0.03 per basic and diluted common share. This reflected the offset of decreasedrevenue to decreased expenses in the six months ended June 30,2019.

Financial Condition

As of June 30,the Company had cash and cash equivalents of $1.7 million compared to $1.2 million as of December 31,2018.

As of June 30,our net accounts receivable was $0.7 million,compared to $0.9 million as of December 31,2018.

For the six months ended June 30,cash flow from operating activities was $0.9 million,as compared to $0.1 million for the same period in 2018.

Conference Call

The Company will hold a conference call at 8:30 am E.T. on August 15,2019 to discuss the results of the second quarter 2019. Listeners may access the call by dialing 1-866-519-4004 or 65-671-350-90 for international callers,Conference ID # 5176357. A replay of the call will be accessible through August 23,2019 by dialing 1-855-452-5696 or 61-281-990-299 for international callers,Conference ID # 5176357.

About China Pharma Holdings,Inc.

China Pharma Holdings,Inc. is a specialty pharmaceutical company that develops,manufactures and markets a diversified portfolio of products,focusing on conditions with high incidence and high mortality rates in China,including cardiovascular,CNS,infectious,and digestive diseases. The Company's cost-effective business model is driven by market demand and supported by new GMP-certified product lines covering the major dosage forms. In addition,the Company has a broad and expanding nationwide distribution network across all major cities and provinces in China. The Company's wholly-owned subsidiary,Hainan Helpson Medical & Biotechnology Co.,Ltd.,is located in Haikou City,Hainan Province. For more information about China Pharma Holdings,Inc.,please visit www.chinapharmaholdings.com. The Company routinely posts important information on its website.

Safe Harbor Statement

Certain statements in this press release constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties may include,but are not limited to: the achievability of financial guidance; success of new product development; unanticipated changes in product demand; increased competition; downturns in the Chinese economy; uncompetitive levels of research and development; and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations,except as required by applicable law or regulation.

- FINANCIAL TABLES FOLLOW -

CHINA PHARMA HOLDINGS,INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

June 30,

December 31,

2019

2018

ASSETS

Current Assets:

Cash and cash equivalents

$ 1,655,892

$ 1,186,587

Restricted cash

503,312

1,273,940

Banker's acceptances

-

20,579

Trade accounts receivable,less allowance for doubtful

accounts of $17,837,014 and $17,815,075,respectively

680,136

916,931

Other receivables,less allowance for doubtful

accounts of $40,555 and $34,884,respectively

290,914

170,098

Advances to suppliers

10,517

47

Inventory

4,392,426

5,054,975

Prepaid expenses

154,672

123,759

Total Current Assets

7,687,869

8,746,916

Advances for purchases of intangible assets

17,073,915

17,069,587

Property,plant and equipment,net

17,857,438

19,294,379

Operating lease right of use asset

184,618

-

Intangible assets,net

226,530

266,443

TOTAL ASSETS

$ 43,030,370

$ 45,377,325

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Trade accounts payable

$ 1,281,712

$ 1,060,934

Accrued expenses

105,490

310,804

Other payables

2,861,123

3,065,508

Advances from customers

556,897

525,647

Other payables - related parties

1,402,567

1,633,263

Operating lease liability,current portion

90,483

-

Current portion of construction loan facility

2,181,913

2,360

Bankers' acceptance notes payable

503,940

Total Current Liabilities

8,983,497

10,051,456

Non-current Liabilities:

Construction loan facility

4,218,366

4,362,720

Operating lease liability,net of current portion

96,297

-

Deferred tax liability

764,568

764,374

Total Liabilities

14,062,728

15,178,550

Commitments and Contingencies (Note 13)

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 shares authorized;

43,579,557 shares and 43,557 shares outstanding,respectively

43,580

43,580

Additional paid-in capital

23,590,204

23,204

Accumulated deficit

(6,526,192)

(5,270,358)

Accumulated other comprehensive income

11,860,050

11,835,349

Total Stockholders' Equity

28,967,642

30,198,775

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$ 43,325

CHINA PHARMA HOLDINGS,INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(Unaudited)

For the Three Months

For the Six Months

Ended June 30,

Ended June 30,

2019

2018

2019

2018

Revenue

$ 2,569,408

$ 3,173,711

$ 5,498,681

$ 6,789,395

Cost of revenue

2,405,860

2,594,230

4,678,603

5,156,214

Gross profit

163,548

579,481

820,078

1,181

Operating expenses:

Selling expenses

505,866

716,220

984,557

1,394,550

General and administrative expenses

334,550

353,143

763,367

845,153

Research and development expenses

66,008

23,674

135,926

45,887

Bad debt expense

10,092

350,847

23,404

352,681

Total operating expenses

916,516

1,443,884

1,907,254

2,638,271

Loss from operations

(752,968)

(864,403)

(1,087,176)

(1,005,090)

Other income (expense):

Interest income

12,119

9,524

15,376

11,818

Interest expense

(97,254)

(130,580)

(184,034)

(259,682)

Net other expense

(85,135)

(121,056)

(168,658)

(247,864)

Loss before income taxes

(838,103)

(985,459)

(1,255,834)

(1,252,954)

Income tax expense

-

(22,590)

-

(48,575)

Net loss

(838,103)

(1,008,049)

(1,301,529)

Other comprehensive income - foreign currency

translation adjustment

(811,164)

(2,418,783)

24,701

(744,707)

Comprehensive loss

$ (1,649,267)

$ (3,426,832)

$ (1,231,133)

$ (2,046,236)

Loss per share:

Basic and diluted

$ (0.02)

$ (0.02)

$ (0.03)

$ (0.03)

Weighted average shares outstanding

43,557

43,557

CHINA PHARMA HOLDINGS,INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the Six Months

Ended June 30,

2019

2018

Cash Flows from Operating Activities:

Net loss

$ (1,834)

$ (1,529)

Depreciation and amortization

1,575,870

1,714,328

Bad debt expense

23,681

Deferred income taxes

-

48,575

Non cash lease expense

2,191

-

Changes in assets and liabilities:

Trade accounts and other receivables

(284,126)

(767,978)

Advances to suppliers

(10,615)

113,520

Inventory

1,072,479

206,415

Trade accounts payable

223,562

35,235

Accrued taxes payable

(43,632)

(94,416)

Other payables and accrued expenses

(371,738)

(157,893)

Advances from customers

31,548

15,639

Prepaid expenses

(31,309)

(40,178)

Net Cash Provided by Operating Activities

931,800

124,399

Cash Flows from Investing Activities:

Purchases of property and equipment

(73,538)

(29,982)

Net Cash Used in Investing Activities

(73,982)

Cash Flows from Financing Activities:

Payments of construction term loan

(147,475)

(157,071)

Payments of related party payables

(231,252)

-

Net Cash Used in Financing Activities

(378,727)

(157,071)

Effect of Exchange Rate Changes on Cash

(10,230)

(32,033)

Net (Decrease) Increase in Cash and Cash Equivalents

469,305

(94,687)

Cash and Cash Equivalents at Beginning of Period

1,587

2,214

Cash and Cash Equivalents at End of Period

$ 1,892

$ 1,935,527

Supplemental Cash Flow Information:

Cash paid for income taxes

$ -

$ -

Cash paid for interest

$ 178,991

$ 259,682

Supplemental Noncash Investing and Financing Activities:

Issuance of banker's acceptances

$ -

$ 965,468

Accounts receivable collected with banker's acceptances

378,585

268,630

Inventory purchased with banker's acceptances

399,455

288,982

Right-of-use assets obtained in exchange for operating lease obligations

233,629

-

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