HAIKOU CITY, China, March 26, 2021 /PRNewswire/ — 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 fiscal year ended December 31, 2020.
Ms. Zhilin Li, China Pharma’s Chairman and CEO, commented, “The outbreak of COVID-19 early in this year has create a substantial, negative impact on sales of pharmaceutical companies, including ours. Many people try to avoid going to hospitals for fear of cross-contamination or potential infection. However, our company has actively responded to the outbreak by the launch of wash-free sanitizer, as well as EU-certified KN95 Particulate Respirator and disposable medical masks. We also completed a one-time COVID-19 tester export in this year.” Ms. Li continued, “In addition, we have a product that passed biological equivalents experiments of consistency evaluation in March 2021. We plan to submit relevant documentation and data to NMPA in the near future. We will continue to work on improving human health. We aim to leverage our expertise in the PRC for the development, manufacture and commercialization of pharmaceutical and comprehensive healthcare products for the benefit of human health.”
Full Year Results
Revenue was both $10.9 million for the years ended December 31, 2020, and 2019, respectively. This was mainly due to a foreign trade of COVID-19 testers we completed in the second quarter of 2020 that offsets the sales decrease of our current existing products in 2020 as compared to 2019. Because of the market demand for COVID-19 related products, we received an export order for diagnostic test, which we purchased from a third party. This one-time business contributed approximately $1.7 million to our revenue in 2020. This is a milestone of our continuous efforts to explore various niche markets, products and regions based on our experiences and abilities. Except for revenue from the export of COVID-19 tester, sales of our existing products decreased in 2020 compared to 2019. The main reason for this decline was that the negative impact on our sales caused by temporarily suspended operations, staff quarantine, and significantly declined outpatient volume at the primary hospitals caused by COVID-19.
For the year ended December 31, 2020, our cost of revenue was $9.0 million, or 82.0% of total revenue, which represented a decrease of $0.4 million from $9.4 million, or 86.4% of total revenue, in 2019. This was mainly due to the impact of the one-time COVID-19 tester transaction and the government relief for employees’ social insurance in 2020.
Gross profit for the year ended December 31, 2020 was $2.0 million, compared to $1.5 million in 2019. Our gross profit margin in 2020 was 18.0% compared to 13.6% in 2019. This increase in our gross profit margin was mainly due to the impact of the one-time COVID-19 tester transaction and the government relief for employees’ social insurance in 2020.
Our selling expenses for the year ended December 31, 2020 were $2.2 million, a decrease of $0.2 million compared to $2.4 million for the year ended December 31, 2019. Selling expenses accounted for 20.4% of the total revenue in 2020 compared to 21.5% in 2019. This decrease was mainly due to emergency quarantine measures caused by the COVID-19 pandemic which reduced business travel and marketing activities.
Our general and administrative expenses for the year ended December 31, 2020 were $1.8 million, as compared to $2.3 million in 2019. General and administrative expenses accounted for 16.8% and 21.0% of our total revenues in 2020 and 2019, respectively. This decrease was mainly due to lower travel and office costs due to the impact of COVID-19, as well as offsets for administrative costs from government subsidies.
Our research and development expenses for the year ended December 31, 2020 was $0.38 million, compared to $0.23 million in 2019. Research and development expenses accounted for 3.5% and 2.1% of our total revenues in 2020 and 2019, respectively. These expenditures were mainly spent on the consistency evaluation of our existing products.
Our bad debt expenses for the year ended December 31, 2020 was $115,186, as compared to $3,153 in 2019. This increase was mainly due to the write-off of accounts receivable from some customers who ceased operations due to the COVID-19 outbreak in 2020.
Net Loss for year ended December 31, 2020 was $2.9 million, or $0.07 each basic and diluted share, compared to net loss of $20.7 million, or $0.48 each basic and diluted share for the year ended December 31, 2019. The decrease in net loss was mainly a result of the decrease in the impairment of long term assets of $17.0 million recognized in fiscal 2019 for which no comparable expense exists for fiscal 2020.
As of December 31, 2020, the Company had cash and cash equivalents of $1.0 million compared to $1.1 million as of December 31, 2019. Working capital deficit increased to $6.1 million as of December 31, 2020 from $4.5 million as of December 31, 2019.
As of December 31, 2020, our net accounts receivable was $0.5 million, compared to $0.6 million as of December 31, 2019.
For the year ended December 31, 2020, net cash flow used by operating activities was $0.04 million, as compared to net cash flow of $0.61 million provide by operating activities in 2019.
Receipt of Audit Opinion with Going Concern Explanatory Paragraph
The audit opinion issued by the Company’s independent registered public accounting firm relating to the Company’s audited consolidated financial statements (the “financial statements”) for the year ended December 31, 2020 included a going concern explanatory paragraph. The financial statements were included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission on March 26, 2021. The explanatory paragraph in the opinion of the Company’s independent registered public accounting firm notes that as discussed in Note 1 to the financial statements, the Company incurred recurring losses from operations, has net current liabilities and an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1 to the financial statements and the financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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.
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.