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What changed in CHINA PHARMA HOLDINGS, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CHINA PHARMA HOLDINGS, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+382 added−318 removedSource: 10-K (2024-04-01) vs 10-K (2023-03-30)

Top changes in CHINA PHARMA HOLDINGS, INC.'s 2023 10-K

382 paragraphs added · 318 removed · 260 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

87 edited+55 added−17 removed60 unchanged
Biggest changeWe implement quality control procedures in this facility in compliance with the PRC’s Good Manufacturing Practices, or GMP standards, and applicable NMPA regulations to ensure consistent quality in our products. 1 The NMPA promulgated Good Manufacturing Practices for Pharmaceutical Products (2010 revised version) on February 12, 2011 (effective as of March 1, 2011) (the “Year 2011 GMP Standards”).
Biggest changeThe NMPA promulgated Good Manufacturing Practices for Pharmaceutical Products (2010 revised version) on February 12, 2011 (effective as of March 1, 2011) (the “Year 2011 GMP Standards”). The Year 2011 GMP Standards outlines the basic principles and standards for the manufacturing of pharmaceutical products and the management of quality controls in the pharmaceutical products manufacturing industry in the PRC.
These include drugs that treat chronic diseases prevalent in China, such as geriatric diseases, cancers, and nutritional products. 5 In addition, as another direction of strategic development, we will actively explore digital interactive healthcare solutions on the Internet. After the advent of the Internet era, marketing is no longer a vertical down logical relationship, but a decentralized form of interconnection.
These include drugs that treat chronic diseases prevalent in China, such as geriatric diseases, cancers, and nutritional products. In addition, as another direction of strategic development, we will actively explore digital interactive healthcare solutions on the Internet. After the advent of the Internet era, marketing is no longer a vertical down logical relationship, but a decentralized form of interconnection.
In selecting generic drugs to develop and manufacture, we consider several factors, including the number of other manufacturers currently producing this particular drug, the size of the market for that drug, the proposed or required method of distribution, the existing and expected pricing for that particular drug in the marketplace, the costs of manufacturing that drug, and the costs of acquiring or developing the formula for that drug.
In selecting generic drugs to develop and manufacture, we consider several factors, including the number of other manufacturers currently producing the particular drug, the size of the market for that drug, the proposed or required method of distribution, the existing and expected pricing for that particular drug in the marketplace, the costs of manufacturing the drug, and the costs of acquiring or developing the formula for the drug.
With the gradual deepening of population aging, the demand continues to be strong, but the ensuing medical insurance pressure has also become the main theme of industrial policy changes in recent years. 2 On one hand, more and more people use medical insurance funds; on the other hand, fewer and fewer people pay premiums.
With the gradual deepening of population aging, the demand continues to be strong, but the ensuing medical insurance pressure has also become the main theme of industrial policy changes in recent years. On one hand, more and more people use medical insurance funds; on the other hand, fewer and fewer people pay premiums.
All of our pharmaceutical products have demonstrated safety and efficacy in clinical trials sufficient to obtain approval by the NMPA and are sold on a prescription basis. The following table summarizes the approved indications for our marketed products and the year in which each of such products was first marketed to our customers.
All of its pharmaceutical products have demonstrated safety and efficacy in clinical trials sufficient to obtain approval by the NMPA and are sold on a prescription basis. The following table summarizes the approved indications for our marketed products and the year in which each of such products was first marketed to our customers.
As a result of these regulations, the holder of a new medicine certificate has the exclusive right to manufacture it during the monitoring period. We currently have the new medicine certificates for our Pusenouke, Cefaclor dispersible tablets and Roxithromycin dispersible tablets and Bumetanide for injection products. National Production Standard and Provisional Standard .
As a result of these regulations, the holder of a new medicine certificate has the exclusive right to manufacture it during the monitoring period. We currently have the new medicine certificates for our Pusenouke, Cefaclor dispersible tablets and Roxithromycin dispersible tablets and Bumetanide for injection products. 13 National Production Standard and Provisional Standard .
All of our existing production lines have met the GMP Standards which became effective as of March 1, 2011. On December 1, 2019, the newly revised Drug Administration Law (the “New Law”) came into effect, which cancelled the GMP certification but impose the pilot inspection mechanism.
All of the existing production lines have met the GMP Standards which became effective as of March 1, 2011. On December 1, 2019, the newly revised Drug Administration Law (the “New Law”) came into effect, which cancelled the GMP certification but impose the pilot inspection mechanism.
Year of Commercial Product Indication Launch Central Nervous System (CNS) and Cerebral-Cardiovascular Diseases CerebroproteinHydroloysate 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, and traumatic syndromes of the brain, including vertigo, neuralgia and headaches. 2005 Propylgallate for Injection Cerebral thrombosis, coronary heart disease and complications after surgery such as thrombus deep phlebitis. 2006 Ozagrel Sodium for Injection Acute thrombotic cerebral infarction and dyskinesia associated with cerebral infarction 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 from 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 bacterial infection, 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 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 Andrographolide Detoxification, antibacterial and anti-inflammatory.
Year of Commercial Product Indication 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, and traumatic syndromes of the brain, including vertigo, neuralgia and headaches. 2005 Propylgallate for Injection Cerebral thrombosis, coronary heart disease and complications after surgery such as thrombus deep phlebitis. 2006 Ozagrel Sodium for Injection Acute thrombotic cerebral infarction and dyskinesia associated with cerebral infarction 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 from acute drug poisoning. 2007 Candesartan Hypertension 2013 8 Anti-infection and Respiratory Diseases Roxithromycin Dispersible Tablets Pharyngitis and tonsillitis caused by Streptococcus pyogenes; sinusitis, tympanitis, acute and chronic bronchitis caused by acute bacterial infection, 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 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 Andrographolide Detoxification, antibacterial and anti-inflammatory.
More than 95% of the chemical drugs approved for marketing are generic drugs, covering nearly 30 treatment fields such as cardio-cerebrovascular system, respiratory system, anti-tumor, anti-infection, etc., which basically satisfy public drug demand.
More than 95% of the drugs approved for marketing are generic drugs, covering nearly 30 treatment fields such as cardio-cerebrovascular system, respiratory system, anti-tumor, anti-infection, etc., which basically satisfy public drug demand.
Accordingly, the manufacturer will continue to have an exclusive production right for the new medicine during this transitional period. 12 Continuing NMPA Regulation Pharmaceutical manufacturers in China are subject to continuing regulation by the NMPA.
Accordingly, the manufacturer will continue to have an exclusive production right for the new medicine during this transitional period. Continuing NMPA Regulation Pharmaceutical manufacturers in China are subject to continuing regulation by the NMPA.
Over the long term, we also intend to expand our presence beyond the PRC to international markets by working with international pharmaceutical companies to cross-sell our products. Explore CDMO services.
Over the long term, we also intend to expand our presence beyond the PRC to international markets by working with international pharmaceutical companies to cross-sell our products. 7 Explore CDMO services.
Notwithstanding such favorable positioning, we are subject to intense competition. There are both local and overseas pharmaceutical enterprises that are engaged in the manufacture and sale of potential substitute or similar pharmaceutical products in the PRC. These competitors may have more capital, better research and development resources, better manufacturing and marketing capability, and more experience than we do.
Notwithstanding such favorable positioning, Helpson is subject to intense competition. There are both local and overseas pharmaceutical enterprises that are engaged in the manufacture and sale of potential substitute or similar pharmaceutical products in the PRC. These competitors may have more capital, better research and development resources, better manufacturing and marketing capability, and more experience than we do.
Our sales system has further developed and expanded with the expansion of Chinese healthcare reform, and our 16 provincial offices deliver our products to basic health care institutions as well as tier two and tier three hospitals through the above mentioned distributors. Our corporate organizational chart is set forth below.
Helpson’s sales system has further developed and expanded with the expansion of Chinese healthcare reform, and its 16 provincial offices deliver the products to basic health care institutions as well as tier two and tier three hospitals through the above mentioned distributors. Our corporate organizational chart is set forth below.
According to the national medical security plan for the 14 th five-year-plan issued by the General Office of the State Council of China on September 29, 2021, personal health expenditure only occupied 27.7% of the total health expenditure in 2020, and it is planned to remain to be at around 27% by 2025.
According to the national medical security plan for the 14 th five-year-plan issued by the General Office of the State Council of China on September 29, 2021, personal health expenditure only occupied 27.7% of the total health expenditure in 2020, and it is expected to remain to be at around 27% by 2025.
The majority of our pharmaceutical products are sold on a prescription basis and all of them have been approved for at least one or more therapeutic indications by the National Medical Products Administration (the “NMPA”, formerly China Food and Drug Administration, CFDA) based upon demonstrated safety and efficacy.
The majority of Helpson’s pharmaceutical products are sold on a prescription basis and all of them have been approved for at least one or more therapeutic indications by the National Medical Products Administration (the “NMPA”, formerly China Food and Drug Administration, CFDA) based upon demonstrated safety and efficacy.
In November 2008, we purchased the patented medical formula and the manufacturing processes for a cerebral/cardio-vascular indication from a third party laboratory. In connection with that acquisition, we obtained the title of the patent. This patent expires in 2025. In 2012, we acquired another patent related to a medical formula for the treatment of cerebral/cardio-vascular diseases.
In November 2008, Helpson purchased the patented medical formula and the manufacturing processes for a cerebral/cardio-vascular indication from a third party laboratory. In connection with that acquisition, we obtained the title of the patent. This patent expires in 2025. 12 In 2012, Helpson acquired another patent related to a medical formula for the treatment of cerebral/cardio-vascular diseases.
The Year 2011 GMP Standards became effective on March 1, 2011, and pharmaceutical manufacturers (except for manufacturers of injectables, blood products or vaccines, which had a three-year grace period) had a five-year grace period to upgrade existing facilities to comply with the revisions. All of our existing production lines have met the Year 2011 GMP Standards.
The Year 2011 GMP Standards became effective on March 1, 2011, and pharmaceutical manufacturers (except for manufacturers of injectables, blood products or vaccines, which had a three-year grace period) had a five-year grace period to upgrade existing facilities to comply with the revisions. All of Helpson’s existing production lines have met the Year 2011 GMP Standards.
This patent expires in 2029. In 2022, we acquired a utility model patent and an invention patent application regarding the creation of an ophthalmic oxygen enriched atomization therapeutic apparatus through Helpson, our wholly owned subsidiary, from Chengdu Bonier Medical Technology Development Co., Ltd. (“Bonier”).
This patent expires in 2029. In 2022, Helpson, our wholly owned subsidiary, acquired a utility model patent and an invention patent application regarding the creation of an ophthalmic oxygen enriched atomization therapeutic apparatus from Chengdu Bonier Medical Technology Development Co., Ltd. (“Bonier”).
As of December 31, 2022, we have 16 sales offices covering all major provinces of China, and over 1,000 sales representatives who assist in managing the delivery of pharmaceutical products, and our promotion and service with hospitals, doctors and local drug distributors.
As of December 31, 2023, we have 16 sales offices covering all major provinces of China, and over 1,000 sales representatives who assist in managing the delivery of pharmaceutical products, and our promotion and service with hospitals, doctors and local drug distributors.
Competition We believe we have established a commercially competitive position in the highly-fragmented pharmaceutical industry in China through our core competitive advantages, as described below: We have a highly-efficient commercialization process for new products, including significant experience with the NMPA registration process.
Competition We believe we have established a commercially competitive position in the highly-fragmented pharmaceutical industry in China through our core competitive advantages, as described below: Helpson has a highly-efficient commercialization process for new products, including significant experience with the NMPA registration process.
We believe that maintaining a variety of delivery systems (e.g. tablets, capsules, injectables and dry powders) for certain of our products targeted at different groups enhances our competitive position in the marketplace.
We believe that maintaining a variety of delivery systems (e.g. tablets, capsules, injectables and dry powders) for certain of its products targeted at different groups enhances its competitive position in the marketplace.
Currently, due to this newly issued NMPA production approved standards and experimental requirements, as with all other Chinese generic pharmaceutical companies, almost all of our pipeline products have undergone major adjustments.
Currently, due to this newly issued NMPA production approved standards and experimental requirements, as with all other Chinese generic pharmaceutical companies, almost all of Helpson’s pipeline products have undergone major adjustments.
As a result, our sales and marketing personnel work closely with management and our research and development personnel to determine which of our products can successfully be marketed for more than one delivery system and which generic drugs in the marketplace may be good candidates for us to manufacture and distribute using different delivery systems.
As a result, its sales and marketing personnel work closely with management and the research and development personnel to determine which of the products can successfully be marketed for more than one delivery system and which generic drugs in the marketplace may be good candidates to manufacture and distribute using different delivery systems.
Our old manufacturing facility, which was built in 2002, is approximately 8,000 square meters (approximately 12.4 million square feet); and our new building, approximately 20,000 square meters (approximately 31 million square feet), was completed in 2013.
The old manufacturing facility, which was built in 2002, is approximately 8,000 square meters (approximately 12.4 million square feet); and the new building, approximately 20,000 square meters (approximately 31 million square feet), was completed in 2013.
Product Development Research & development and innovation represent the core competitive advantage for a company’s sustainable growth. For pharmaceutical companies, products with proprietary intellectual property are not only strategic resources for comprehensive strength, but also important tools to engage in social responsibility. We have been focusing on the research and development of both first generic drugs and innovative drugs.
Product Development Research & development and innovation represent the core competitive advantage for a company’s sustainable growth. For pharmaceutical companies, products with proprietary intellectual property are not only strategic resources for comprehensive strength, but also important tools to engage in social responsibility. Helpson has been focusing on the research and development of both first generic drugs and innovative drugs.
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 on these relationships to target new markets.
We intend to expand Helpson’s reach beyond its current 16 offices in the PRC to drive additional growth of the existing and future products. We currently contract with over 1,000 distributors in the PRC and plan to expand on these relationships to target new markets.
Such failure has not occurred in the past, and we do not anticipate that it will occur in the future, but no assurance can be given in this regard. Regulations Regulations Relating to Pharmaceutical Manufacture Industry . The pharmaceutical manufacture industry in China is highly regulated. The primary regulatory authority is the NMPA, including its provincial and local branches.
Such failure has not occurred in the past, and Helpson does not anticipate that it will occur in the future, but no assurance can be given in this regard. Regulations Regulations Relating to Pharmaceutical Manufacture Industry . The pharmaceutical manufacture industry in China is highly regulated. The primary regulatory authority is the NMPA, including its provincial and local branches.
The Company has not identified any strategic acquisition opportunities as of the date of this report on Form 10-K. 6 Products We currently have a product portfolio of 22 products, including 19 pharmaceutical products that address a wide variety of diseases and medical indications, and the remaining are comprehensive healthcare and protective products.
The Company has not identified any strategic acquisition opportunities as of the date of this report on Form 10-K. Products Helpson currently has a product portfolio of 22 products, including 19 pharmaceutical products that address a wide variety of diseases and medical indications, and the remaining are comprehensive healthcare and protective products.
We believe that generic drugs we have always been selecting to manufacture have large addressable markets and higher profit margins relative to other generic drugs manufactured and distributed in the PRC. In addition, we manufactured comprehensive healthcare products and protective products. We currently own and operate two production facilities in Haikou, Hainan Province, PRC.
We believe that generic drugs we have always been selecting to manufacture have large addressable markets and higher profit margins relative to other generic drugs manufactured and distributed in the PRC. In addition, China Pharma, through Helpson, manufactured comprehensive healthcare products and protective products. China Pharma, through Helpson, currently own and operate two production facilities in Haikou, Hainan Province, PRC.
According to the Bulletin, 1.36 billion people had participated in the national basic medical insurance (hereinafter referred to as the basic medical insurance) by the end of 2021, and the participation rate was stable at more than 95%. China's medical insurance system reform has gone through a long process.
According to the Bulletin, 1.35 billion people had participated in the national basic medical insurance (hereinafter referred to as the basic medical insurance) by the end of 2022, and the participation rate was stable at more than 95%. China’s medical insurance system reform has gone through a long process.
Our product focuses on developing and manufacturing medicines that help large patient groups, such as the infectious disease and cardio vascular disease patient groups.
Helpson’s product focuses on developing and manufacturing medicines that help large patient groups, such as the infectious disease and cardio vascular disease patient groups.
Additionally, we also have actively worked to meet unfulfilled medical needs by sticking to a market-oriented approach and continuously improving the effectiveness and ease of use of our drugs, which are supported by our well-designed system for intellectual property management.
Additionally, Helpson also has actively worked to meet unfulfilled medical needs by sticking to a market-oriented approach and continuously improving the effectiveness and ease of use of our drugs, which are supported by our well-designed system for intellectual property management.
According to the latest Statistical Bulletin on the Development of National Medical Insurance in 2021 issued by NBS, the number of people participating in national basic medical insurance reached 1.36 billion in 2021, and the participation rate remained stable at more than 95%.
According to the latest Statistical Bulletin on the Development of National Medical Insurance in 2022 issued by NBS, the number of people participating in national basic medical insurance reached 1.35 billion in 2022, and the participation rate remained stable at more than 95%.
Based on a foundation established by a number of our widely-recognized prescription products, such as Cefaclor and Roxithromycin, we have launched and will continue to launch a variety of pharmaceuticals. The core criteria for our selection of potential pipeline products is strong market demand, proven efficacy, and safety.
Based on a foundation established by a number of our widely-recognized prescription products, such as Cefaclor and Roxithromycin, Helpson has launched and will continue to launch a variety of pharmaceuticals. The core criteria for Helpson’s selection of potential pipeline products is strong market demand, proven efficacy, and safety.
For sore throat caused by upper respiratory tract infection 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 PseudophedrineHydrochlorida Sustained Release Tablet Relieves 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 7 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 Comprehensive Healthcare and Protective Products Noni Enzyme natural, healthy and nutritionrich a natural, healthy and nutrition-rich food supplement 2018 Sanitizer 75% alcohol wash-free sanitizer 2020 Masks KN95 Particulate Respirator, Disposable Medical Mask, Particle Filtering Mask, N95 Medical Protective Mask 2020 to 2023 8 Set forth below are our revenues by product category in millions (USD) for the years ended December 31, 2022 and 2021: Twelve Months Ended December 31, 2022 2021 Net Change Product Category (in millions) (in millions) (in millions) % Change CNS Cerebral & Cardio Vascular $ 1.70 $ 2.68 -0.98 -37 % Anti-Viral' Infection & Respiratory $ 4.94 $ 5.22 -0.28 -5 % Digestive Diseases $ 0.40 $ 0.37 0.03 11 % Other $ 1.06 $ 1.37 -0.31 -23 % Total $ 8.10 $ 9.64 -1.54 16 % Due to the nature of the pharmaceutical industry, we continually strive to change our product portfolio to respond to changes in market demand.
For sore throat caused by upper respiratory tract infection 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 PseudophedrineHydrochlorida Sustained Release Tablet Relieves 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 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 Comprehensive Healthcare and Protective Products Noni Enzyme natural, healthy and nutritionrich a natural, healthy and nutrition-rich food supplement 2018 Sanitizer 75% alcohol wash-free sanitizer 2020 Masks KN95 Particulate Respirator, Disposable Medical Mask, Particle Filtering Mask, N95 Medical Protective Mask 2020 to 2023 9 Set forth below are our revenues by product category in millions (USD) for the years ended December 31, 2023 and 2022: Twelve Months Ended December 31, Net Product Category 2023 2022 Change % Change CNS Cerebral & Cardio Vascular 1.62 1.70 -0.08 -5 % Anti-Viral/ Infection & Respiratory 3.57 4.94 -1.37 -28 % Digestive Diseases 1.09 0.41 0.68 166 % Other 0.73 1.06 -0.33 -31 % Due to the nature of the pharmaceutical industry, Helpson continually strives to change our product portfolio to respond to changes in market demand.
As of December 31, 2022, we manufactured 19 pharmaceutical products for a wide variety of diseases and medical indications, each of which may be classified into one of three general categories: ● Basic generic drugs, which are common drugs in the PRC for which there is a very large market demand; ● First-to-market generic drugs, which are generic western drugs that are new to the PRC marketplace; or ● Modern Traditional Chinese Medicines, which are generally comprised of non-synthetic, plant-based medicinal compounds that have been widely used in the PRC for thousands of years.
As of December 31, 2023, China Pharma, through Helpson, manufactured 19 pharmaceutical products for a wide variety of diseases and medical indications, each of which may be classified into one of three general categories: ● Basic generic drugs, which are common drugs in the PRC for which there is a very large market demand; ● First-to-market generic drugs, which are generic drugs that are new to the PRC marketplace; or ● Modern Traditional Chinese Medicines (“TCMs”), which are generally comprised of non-synthetic, plant-based medicinal compounds that have been widely used in the PRC for thousands of years.
The Plan clearly points out that the "COVID-19 infection" will be adjusted from " Class B disease and Class A Control " to " Class B disease and Class B Control " from January 8, 2023, which is a major adjustment of China's COVID-19 epidemic prevention and control policy.
The Plan clearly points out that the “COVID-19 infection” will be adjusted from “Class B disease and Class A Control” to “Class B disease and Class B Control” from January 8, 2023, which is a major adjustment of China’s COVID-19 epidemic prevention and control policy.
We have production lines conforming with the 2011 version of GMP certificates for different forms of our products including: tablets, capsules, dry power, liquid injectables, solid oral solution Cephalosporins (specifically designated); other than that, we also have production lines for health care products and various types of masks that meet national standards.
Helpson has production lines conforming with the 2011 version of GMP certificates for different forms of its products including: tablets, capsules, dry power, liquid injectables, solid oral solution Cephalosporins (specifically designated); other than that, it also has production lines for health care products and various types of masks that meet national standards.
ITEM 1. BUSINESS Overview We are principally engaged in the development, manufacture and marketing of pharmaceutical products for human use in connection with a variety of high-incidence and high-mortality diseases and medical conditions prevalent in the People’s Republic of China (the “PRC”). All of our operations are conducted in the PRC, where our manufacturing facilities are located.
We, through Helpson, are principally engaged in the development, manufacture and marketing of pharmaceutical products for human use in connection with a variety of high-incidence and high-mortality diseases and medical conditions prevalent in the People’s Republic of China (the “PRC”). All of the operations are conducted in the PRC, where the manufacturing facilities are located.
We have over 20 years of product-development experience during which time we have implemented processes to efficiently introduce and market new and existing products to the Chinese market. We have a market-oriented product portfolio and product lines.
Helpson has over 20 years of product-development experience during which time it has implemented processes to efficiently introduce and market new and existing products to the Chinese market. Helpson has a market-oriented product portfolio and product lines.
While sales of our pharmaceutical products to hospitals are made through our distributors, we believe we have established long-term cooperation relationships with leading hospitals and healthcare clinics throughout China resulting from our long-term promotional efforts and periodic physician seminars, so that to improve the perception of our products in the marketplace and help us identify and select high-volume drugs to develop into new generic products relatively early in the process.
While sales of the pharmaceutical products to hospitals are made through the distributors, Helpson believes it has established long-term cooperation relationships with leading hospitals and healthcare clinics throughout China resulting from its long-term promotional efforts and periodic physician seminars, so that to improve the perception of the products in the marketplace and help identify and select high-volume drugs to develop into new generic products relatively early in the process.
In an effort to gain an advantage in the marketplace, we often seek to improve the production process of the new generic products we elect to manufacture or to improve the quality of a proposed product to increase its efficacy. We also adjust the delivery systems and marketing for each of our products based on the product’s target patient group.
In an effort to gain an advantage in the marketplace, Helpson often seeks to improve the production process of the new generic products Helpson elects to manufacture or to improve the quality of a proposed product to increase its efficacy. Helpson also adjusts the delivery systems and marketing for each of our products based on the product’s target patient group.
As a developer and producer of medicinal products, we are subject to regulation and oversight by the NMPA and its provincial and local branches.
As a developer and producer of medicinal products, Helpson is subject to regulation and oversight by the NMPA and its provincial and local branches.
Currently, we rely on numerous suppliers in the PRC and overseas to deliver our required raw materials and believe we have at least three principal suppliers for each of our most critical raw materials. Historically, we have not had difficulty obtaining raw materials from suppliers.
Currently, Helpson relies on numerous suppliers in the PRC and overseas to deliver the required raw materials and believe it has at least three principal suppliers for each of our most critical raw materials. Historically, Helpson has not had difficulty obtaining raw materials from suppliers.
Our diversified GMP-certified manufacturing facility includes various production lines targeting a variety of delivery mechanisms, such as tablets, capsules, cephalosprine tablets, cephalosprine capsules, liquid-injectables and dry powder injectables, which enables us to effectively manufacture a broad range of new drugs; other than that, we also have production lines for health care products and various types of masks that meet national standards.
Its diversified GMP-certified manufacturing facility includes various production lines targeting a variety of delivery mechanisms, such as tablets, capsules, cephalosprine tablets, cephalosprine capsules, liquid-injectables and dry powder injectables, which enables it to effectively manufacture a broad range of new drugs; other than that, it also has production lines for health care products and various types of masks that meet national standards. 11 We have product diversification to target specific sub-markets.
We manufacture pharmaceutical products in the form of dry powder injectables, liquid injectables, tablets, capsules, and cephalosporin oral solutions.
Helpson manufactures pharmaceutical products in the form of dry powder injectables, liquid injectables, tablets, capsules, and cephalosporin oral solutions.
Raw Materials We require a supply of a wide variety of raw materials to manufacture our products. We employ purchasing staff with extensive knowledge of our products who work with our product development, and formulations and quality control personnel to source raw materials for our products.
Raw Materials Helpson requires a supply of a wide variety of raw materials to manufacture its products. Helpson employs purchasing staff with extensive knowledge of its products who work with the product development, and formulations and quality control personnel to source raw materials for the products.
Industry Background and Market Opportunities According to the relevant data of the pharmaceutical manufacturing industry released by the National Bureau of Statistics of the People's Republic of China (“NBS”), as of July 2022, the cumulative value of the operating revenue of the pharmaceutical manufacturing industry in China was RMB1,609 billion, down 1.8% from the same period last year; The accumulated value of profit was RMB247 billion, down 30.7% from the same period last year.
Industry Background and Market Opportunities According to the relevant data of the pharmaceutical manufacturing industry released by the National Bureau of Statistics of the People’s Republic of China (“NBS”), as of the first half of 2023, the cumulative value of the operating revenue of the pharmaceutical manufacturing industry in China was RMB1,250 billion, down 2.9% from the same period last year; the accumulated value of profit was RMB179 billion, down 17.1% from the same period last year.
For the year ended December 31, 2022, our purchases of raw material purchases from our three top suppliers accounted for 21.7%, 11.1%, and 8.9%, respectively. For the year ended December 31, 2021 suppliers accounted for 24.8%, 12.7%, and 11.8%, respectively.
For the year ended December 31, 2023, the purchases of raw material purchases from its three top suppliers accounted for 17.7%, 13.8%, and 8.9%, respectively. For the year ended December 31, 2022 suppliers accounted for 21.7%, 9.1%, and 8.9%, respectively.
According to the Program, the trial drugs are selected from the generic drugs that have passed the consistency evaluation, and the state organizes the centralized purchase of drugs to reduce the drug price and reduce the burden of drug expenses on patients. Our company has actively promoted the Evaluation process of several important products in 2022.
According to the Program, the trial drugs are selected from the generic drugs that have passed the consistency evaluation, and the state organizes the centralized purchase of drugs to reduce the drug price and reduce the burden of drug expenses on patients.
We believe we are well-positioned in a comparatively steadily growing industry in one of the fastest-growing economies in the world. With China’s per capita GDP exceeding US$12,000 in 2022, consumption structure upgrade, and the establishment of a high-quality health care system has become one of the most important tasks. We currently manufacture a number of off-patent branded generic drugs.
With China’s per capita GDP exceeding US$12,700 in 2023, consumption structure upgrade, and the establishment of a high-quality health care system has become one of the most important tasks. We currently manufacture a number of off-patent branded generic drugs.
This means a stricter form of supervision is implemented comparing to the prior GMP certificates system 。 Our production lines are subject pilot inspection under the New Law. We believe that GMP inspection only switches to another form, which includes flight inspection, drug production license inspection (for on-site management and quality system), as well as product inspection.
Helpson’s production lines are subject pilot inspection under the New Law. 14 We believe that GMP inspection only switches to another form, which includes flight inspection, drug production license inspection (for on-site management and quality system), as well as product inspection.
A newly revised Drug Administration Law (the “New Law”) came into effect on December 1, 2019. The New Law cancelled the GMP certification but impose the pilot inspection mechanism in the event that if any production line(s) does not satisfy any pilot inspection under the New Law, the production on such production line(s) could be suspended.
The New Law cancelled the GMP certification but impose the pilot inspection mechanism in the event that if any production line(s) does not satisfy any pilot inspection under the New Law, the production on such production line(s) could be suspended.
Our experienced sales team has industry knowledge and know-how to synergistically combine our strong market insight with successful commercialization platforms. 10 We have developed high-quality relationships with leading hospital and clinic administrators and physicians.
Helpson has a national sales network and a highly-trained marketing team. Helpson’s experienced sales team has industry knowledge and know-how to synergistically combine its strong market insight with successful commercialization platforms. Helpson has developed high-quality relationships with leading hospital and clinic administrators and physicians.
If the defect is caused by the producer, the seller shall have the right to recover compensation from the producer.
If the defect is caused by the producer, the seller shall have the right to recover compensation from the producer. If the product is defective due to the fault of the seller, the producer shall have the right to recover from the seller after making compensation.
As of December 31, 2022, we owned 18 registered trademarks, including marks for eight of the 19 pharmaceutical products we manufacture, including the tradenames Fukexing, Beisha, Shiduotai, Xinuo, Pusenlitai, Pusenouke, Shuchang, Shenkaineng, XERONINE, and Aronino, as well as marks for our AFGF logo, our HPS logo, our two HELPSON logos and four other logos.
As of December 31, 2023, Helpson owns 15 registered trademarks, including marks for eight of the 19 pharmaceutical products Helpson manufactures, including the tradenamesFukexing, Beisha, Shiduotai, Xinuo, Pusenlitai, Pusenouke, Shuchang, Shenkaineng, XERONINE, and Aronino, as well as marks for the HPS logo, two HELPSON logos and two other logos.
We are working towards entering into employment contracts with those employees who do not currently have employment contracts with us. The PRC enacted a new Labor Contract Law, which became effective on January 1, 2008. We have updated our employment contracts and employee handbook and are in compliance with such law. 14
As required by applicable Chinese law, we have entered into employment contracts with substantially all of our officers, managers and employees. We are working towards entering into employment contracts with those employees who do not currently have employment contracts with us. The PRC enacted a new Labor Contract Law, which became effective on January 1, 2008.
Instead, it requires that drug manufacturing enterprises and drug trading enterprises establish and improve the quality management systems of manufacture and trade of drugs, and ensure that the process of manufacturing and trading of drugs always meets all legal requirements.
Instead, it requires that drug manufacturing enterprises and drug trading enterprises establish and improve the quality management systems of manufacture and trade of drugs, and ensure that the process of manufacturing and trading of drugs always meets all legal requirements. This means a stricter form of supervision is implemented comparing to the prior GMP certificates system.
According to the published scope of drug filling, there are 41 varieties and 181 specifications of drugs entering this round. We also have observed the continuous improvement in medical demand and consumption level in recent years, and the value of high-quality medicine with innovation and consumption attributes has become prominent.
We also have observed the continuous improvement in medical demand and consumption level in recent years, and the value of high-quality medicine with innovation and consumption attributes has become prominent.
China National Healthcare Security Administration (“NHSA”) has gradually promoted volume-based procurement for the entire national market, therefore, pharmaceutical manufacturers have greatly reduced the price in order to win the bid.
Under such policies, pharmaceutical enterprises have to carry out innovation and transform, and the overall environment of deepening medical reform has greatly reduced the profits of generic pharmaceutical enterprises in China. 2 China National Healthcare Security Administration (“NHSA”) has gradually promoted volume-based procurement for the entire national market, therefore, pharmaceutical manufacturers have greatly reduced the price in order to win the bid.
In the face of increasing medical and health demand and increasing medical insurance pressure, how to efficiently use medical insurance funds has become the focus of the adjustment of the Catalogue in recent years.
In the face of increasing medical and health demand and increasing medical insurance pressure, how to efficiently use medical insurance funds has become the focus of the adjustment of the Catalogue in recent years. On June 29, 2023, the NHSA published the “ 2023 National Basic medical insurance, work-related injury insurance and maternity insurance drug catalogue adjustment work plan” .
We market and sell our products through 16 sales offices covering all major cities and provinces in the PRC. To comply with applicable Chinese laws relating to sales of prescription drugs to certain hospitals and clinics, we also use a distribution system comprised of over 1,000 independent provincial-level, city-level, and county-level distributors.
To comply with applicable Chinese laws relating to sales of prescription drugs to certain hospitals and clinics, Helpson also uses a distribution system comprised of over 1,000 independent provincial-level, city-level, and county-level distributors.
This means that China's prevention and control will focus on "protecting health and preventing severe diseases" to minimize the impact of the epidemic on economic and social development. 3 Consistency Evaluation for Generic Drugs According to the disclosure of the State Drug Administration of China in May 2022: China's modern pharmaceutical industry started relatively late, and drug production is dominated by imitation.
Consistency Evaluation for Generic Drugs According to the disclosure of the State Drug Administration of China in May 2022: China’s modern pharmaceutical industry started relatively late, and drug production is dominated by imitation.
In addition to statutory and regulatory compliance, we actively ensure the environmental sustainability of our operations. Penalties may be levied upon us if we fail to adhere to and maintain certain standards.
Environmental Matters Helpson complies with the Environmental Protection Law of China as well as applicable local regulations. In addition to statutory and regulatory compliance, Helpson actively ensures the environmental sustainability of the operations. Penalties may be levied upon it if we fail to adhere to and maintain certain standards.
On December 26, 2022, the National Health Commission issued the Plan for "Class B disease and Class B Control" of COVID-19 Infection (the “Plan”).
From December 25, 2022, the China’s National Health Commission of China will no longer release daily epidemic information. On December 26, 2022, the National Health Commission issued the Plan for “Class B disease and Class B Control” of COVID-19 Infection (the “Plan”).
If the product is defective due to the fault of the seller, the producer shall have the right to recover from the seller after making compensation. 13 The Product Quality Law of the PRC was enacted in 1993 and amended in 2000 to strengthen the quality control of products and protect consumers’ rights and interests.
The Product Quality Law of the PRC was enacted in 1993 and amended in 2000 to strengthen the quality control of products and protect consumers’ rights and interests.
The Company’s recent research and development work is mainly aimed at promoting the consistency evaluation of several major products already on the market, as well as the continued exploration of comprehensive health product categories. The Company is to release to the market a product for the treatment of dysmenorrhea, which Ms.
Helpson’s recent research and development work is mainly aimed at promoting the consistency evaluation of several major products already on the market, as well as the continued exploration of comprehensive health product categories. Helpson has recently acquired formulas for dry eye syndrome, chronic obstructive pulmonary disease, and a pharmaceutical composition for treatment of psoriasis, etc.
The PRC’s medical insurance system National Healthcare Security Administration (“NHSA”) issued the Statistical Bulletin on the Development of National Medical Security in 2021 (the “Bulletin”) on June 8, 2022. The Bulletin showed the total income of the national basic medical insurance (including maternity insurance) fund was RMB2.87 trillion in 2021, which represented an increase of 15.6% over the previous year.
The Bulletin showed the total income of the national basic medical insurance (including maternity insurance) fund was RMB3.09 trillion in 2022, which represented an increase of 7.6% over the previous year.
Since the State Council of China issued The Pilot Scheme of Drug Marketing License Holder System in 2016, we have been actively exploring the CDMO market, especially in the field of high-end manufacturing. We will focus on developing CDMO of pharmaceutical preparations required in the whole life cycle from preclinical, clinical trials, scale-up manufacturing to drug marketing.
Since the State Council of China issued The Pilot Scheme of Drug Marketing License Holder System in 2016, Helpson has been actively exploring the CDMO market, especially in the field of high-end manufacturing.
The use of adjuvant drugs has gradually fallen out of favor, giving up the share of medical insurance funds for specialized drugs and tumor drugs with more clinical efficacy. Under such policies, pharmaceutical enterprises have to carry out innovation and transform. And the overall environment of deepening medical reform has greatly reduced the profits of generic pharmaceutical enterprises in China.
The use of adjuvant drugs has gradually fallen out of favor, giving up the share of medical insurance funds for specialized drugs and tumor drugs with more clinical efficacy.
At the same time, the Plan points out that quarantine infectious disease management measures will no longer be taken for people and goods entering the country.
At the same time, the Plan points out that quarantine infectious disease management measures will no longer be taken for people and goods entering the country. This means that China’s prevention and control will focus on “protecting health and preventing severe diseases” to minimize the impact of the epidemic on economic and social development.
Additionally, these foreign-invested enterprises are required to set aside certain amounts of their accumulated profits each year, if any, to fund certain reserve funds. These reserves are not distributable as cash dividends. Employees As of December 31, 2022, we had 244 employees, among which 234 employees were full-time employees and 10 employees were temporary employees.
Additionally, these foreign-invested enterprises are required to set aside certain amounts of their accumulated profits each year, if any, to fund certain reserve funds.
Due to the nature of our products and current governmental regulations, all of our customers are located in the PRC. We have established long-standing relationships with most of our key customers through our operating subsidiary, Hainan Helpson Medical & Biotechnology Co., Ltd.
Due to the nature of Helpson’s products and current governmental regulations, all of its customers are located in the PRC. Helpson has established long-standing relationships with key customers. Production Facilities China Pharma, through Helpson, manufacture and package our products at our manufacturing facility in the Haikou Free Trade Zone in Haikou, Hainan Province.
We have product diversification to target specific sub-markets. We attempt to differentiate our products from those of our competitors by changing, and, in many cases, improving certain physical aspects of our products to market under different market segments.
We attempt to differentiate our products from those of our competitors by changing, and, in many cases, improving certain physical aspects of our products to market under different market segments. For example, to make our Cefaclor product more patient friendly to children and patients with swallowing problems, we added an enteric coating to make our tablets easier to swallow.
In this environment, our ordinary production, procurement, sales, and logistics activities were under heavy negative pressure. As the epidemic has entered the era of Omicron mutant, its infectivity has been greatly enhanced, but its pathogenicity has been significantly weakened. In addition, vaccination has been popularized and prevention and control experience has been accumulated.
Impact from the New Coronavirus Global Pandemic (“COVID-19”) As the epidemic has entered the era of JN1 mutant, its infectivity has been further enhanced, but its pathogenicity has been significantly weakened. In addition, vaccination has been popularized and prevention and control experience has been accumulated.
One has a construction area of 663.94 square meters, the other factory has two buildings with production area of 20,282.42 square meters and 6,593.20 square meters.
One has a construction area of 663.94 square meters, the other factory has two buildings with production area of 20,282.42 square meters and 6,593.20 square meters. We implement quality control procedures in this facility in compliance with the PRC’s Good Manufacturing Practices, or GMP standards, and applicable NMPA regulations to ensure consistent quality in our products.
Our Strategy We believe that the pursuit of innovation is imperative for providing the basic medical solutions needed by the majority of patients. We are passionate about protecting human health, and we always adhere to the highest standards of ethics and integrity to fulfill our firm commitment to our customers and patients.
We are passionate about protecting human health, and we always adhere to the highest standards of ethics and integrity to fulfill our firm commitment to our customers and patients. 6 We believe we are well-positioned in a comparatively steadily growing industry in one of the fastest-growing economies in the world.
Li, Chairman and CEO of the Company, is one of the inventors. In addition, the Company has launched N95 Medical Protective masks in early 2023. Since China ended its zero-case policy and no longer requires shutdown or quarantine in December 2022, the market demand for prevention materials, such as masks has surged.
Since China ended its zero-case policy and no longer requires shutdown or quarantine in December 2022, the market demand for prevention materials, such as masks has surged. 10 Distribution and Customers Helpson has a well-established sales network. As its current pharmaceutical product portfolio is comprised mainly of prescription drugs, its major sales targets are hospitals.
The Year 2011 GMP Standards outlines the basic principles and standards for the manufacturing of pharmaceutical products and the management of quality controls in the pharmaceutical products manufacturing industry in the PRC. All of our production lines: tablets, capsules, dry powder, liquid injectables, solid oral solution Cephalosporins (specifically designated), are in full compliance with the Year 2011 GMP Standards.
All of Helpson’s production lines: tablets, capsules, dry powder, liquid injectables, solid oral solution Cephalosporins (specifically designated), are in full compliance with the Year 2011 GMP Standards. A newly revised Drug Administration Law (the “New Law”) came into effect on December 1, 2019.
None of our employees is represented by a labor union and, in general, we consider our relationship with our employees to be good. As required by applicable Chinese law, we have entered into employment contracts with substantially all of our officers, managers and employees.
Employees As of December 31, 2023, we had 239 employees, among which 231 employees were full-time employees and 8 employees were temporary employees. None of our employees is represented by a labor union and, in general, we consider our relationship with our employees to be good.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeProduct recalls could impose significant costs on us and adversely affect our ability to generate revenue; o If we fail to develop new products with high profit margins and our high-profit-margin products are replaced by competitors’ products, then our gross will be adversely affected; o Most of our products are off-patent branded generics that can be manufactured and sold by other pharmaceutical manufacturers in the PRC which may increase the competition we face; o If we are not able to maintain and enhance our brand recognition to maintain our competitive advantage, our reputation, business and operating results may be harmed; o Reimbursement may not be available for our products, which could diminish our sales; o The growth and success of our business depend on our ability to successfully market our principal products to hospitals and their selection for medicine purchases; o Our future research and development projects may not be successful; o We cooperate with research institutions and universities in the PRC for the research and development of certain new products and any failure of such research institutions to meet our timing and quality standards may pose impairment loss on our financial results and our failure to continue such collaborative arrangement could adversely affect our ability to develop new pharmaceuticals and our overall business prospects; o We may not be able to obtain regulatory approval for any of the new products and failure to obtain these approvals could materially harm our business; 15 o New product development in the pharmaceutical industry is time-consuming and costly and has a low rate of successful commercialization; o We may not be able to successfully identify and acquire new products or businesses; o We rely on distributors for all of our revenues and failure to maintain relationships or to otherwise expand our distribution network would materially and adversely affect our business; o We rely on a limited number of distributors for the majority of sales of our products; o Our operations may be affected if we could not pass the Consistency Evaluation requirement issued by the State Council for any of our current existing products; o We face risks related to health pandemics that could impact our sales and operating results; o Our operations may be affected if we could not obtain raw materials from our current key suppliers on acceptable terms; o We may not be able to effectively manage our employees and distribution network, and our reputation, business, prospects and brand may be materially and adversely affected by actions taken by our distributors and third party marketing firms; o We have limited insurance coverage and may incur losses resulting from product liability claims, business interruptions or claims that could be covered by D&O Insurance; o Our future liquidity needs are uncertain and we may need to raise additional funds in the future. ● Risks Related to Doing Business in China o Adverse changes in political and economic policies of the PRC government could have a material and adverse effect on the overall economic growth of China, which could reduce the demand for our services and materially and adversely affect our competitive position; o The PRC legal system has inherent uncertainties that could limit our legal protections available to us; o You may experience difficulties in bringing original actions in the PRC against our company or our management based on U.S. or other foreign laws; o Because we receive substantially all of our revenue in Renminbi, which currently is not a freely convertible currency, we are subject to changes in the PRC’s political and economic decisions; 16 o We cannot be certain that the Chinese regulatory authorities will not impose more stringent restrictions on the convertibility of the Renminbi, especially for foreign exchange transactions; o We are subject to the environmental protection laws of the PRC that may be costly to comply with and may adversely affect our manufacturing operations; o Compliance with China’s new Data Security Law, Measures on Cybersecurity Review, Personal Information Protection Law (second draft for consultation), regulations and guidelines relating to the multi-level protection scheme and any other future laws and regulations may entail significant expenses and could materially affect our business; o We are not required to submit an application to CSRC pursuant to the M&A Rules, nor are we subject to the cybersecurity review.
Biggest changeProduct recalls could impose significant costs on us and adversely affect our ability to generate revenue; o If we fail to develop new products with high profit margins and our high-profit-margin products are replaced by competitors’ products, then our gross will be adversely affected; o Most of our products are off-patent branded generics that can be manufactured and sold by other pharmaceutical manufacturers in the PRC which may increase the competition we face; o If we are not able to maintain and enhance our brand recognition to maintain our competitive advantage, our reputation, business and operating results may be harmed; o Reimbursement may not be available for our products, which could diminish our sales; o The growth and success of our business depend on our ability to successfully market our principal products to hospitals and their selection for medicine purchases; o Our future research and development projects may not be successful; o We cooperate with research institutions and universities in the PRC for the research and development of certain new products and any failure of such research institutions to meet our timing and quality standards may pose impairment loss on our financial results and our failure to continue such collaborative arrangement could adversely affect our ability to develop new pharmaceuticals and our overall business prospects; o We may not be able to obtain regulatory approval for any of the new products and failure to obtain these approvals could materially harm our business; o New product development in the pharmaceutical industry is time-consuming and costly and has a low rate of successful commercialization; o We may not be able to successfully identify and acquire new products or businesses; o We rely on distributors for all of our revenues and failure to maintain relationships or to otherwise expand our distribution network would materially and adversely affect our business; 17 o We rely on a limited number of distributors for the majority of sales of our products; o Our operations may be affected if we could not pass the Consistency Evaluation requirement issued by the State Council for any of our current existing products; o We face risks related to health pandemics that could impact our sales and operating results; o Our operations may be affected if we could not obtain raw materials from our current key suppliers on acceptable terms; o We may not be able to effectively manage our employees and distribution network, and our reputation, business, prospects and brand may be materially and adversely affected by actions taken by our distributors and third party marketing firms; o We have limited insurance coverage and may incur losses resulting from product liability claims, business interruptions or claims that could be covered by D&O Insurance; o Our future liquidity needs are uncertain and we may need to raise additional funds in the future. ● Risks Related to Doing Business in China o Adverse changes in political and economic policies of the PRC government could have a material and adverse effect on the overall economic growth of China, which could reduce the demand for our services and materially and adversely affect our competitive position; o The Chinese government may intervene with or influence our business at any time.
Any disclosure of documents or information located in China by foreign agencies may be subject to jurisdiction constraints and must comply with China’s state secrecy laws, which broadly define the scope of “state secrets” to include matters involving economic interests and technologies.
Any disclosure of documents or information located in China by foreign agencies may be subject to jurisdiction constraints and must comply with China’s state secrecy laws, which broadly define the scope of “state secrets” to include matters involving economic interests and technologies.
Our auditor, BF Borgers CPA PC, the independent registered public accounting firm that issues the audit report included elsewhere in this report, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess our auditor’s compliance with the applicable professional standards.
Our auditor, BF Borgers CPA PC, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess our auditor’s compliance with the applicable professional standards.
In the event we or any of our directors or officers are sued under any proceedings or actions that could be covered by a standard D&O insurance, we may incur substantial costs and expenses to defend such case. Our future liquidity needs are uncertain and we may need to raise additional funds in the future.
In the event we or any of our directors or officers are sued under any proceedings or actions that could be covered by a standard D&O insurance, we may incur substantial costs and expenses to defend such case. 26 Our future liquidity needs are uncertain and we may need to raise additional funds in the future.
Our business’s profitability may be adversely affected if additional or modified environmental control regulations are imposed upon us. 31 Failure to comply with PRC regulations regarding the registration requirements for employee equity incentive plans may subject our PRC citizen employees or us to fines and other legal or administrative sanctions.
Our business’s profitability may be adversely affected if additional or modified environmental control regulations are imposed upon us. Failure to comply with PRC regulations regarding the registration requirements for employee equity incentive plans may subject our PRC citizen employees or us to fines and other legal or administrative sanctions.
Therefore, our gross profit margin and net profit margins could be adversely affected notwithstanding any increase in our revenues. Our products face substantial competition. Other companies may discover, develop, acquire or commercialize products earlier or more successfully than we do. We operate in a highly competitive environment.
Therefore, our gross profit margin and net profit margins could be adversely affected notwithstanding any increase in our revenues. 20 Our products face substantial competition. Other companies may discover, develop, acquire or commercialize products earlier or more successfully than we do. We operate in a highly competitive environment.
Competitive products introduced by these companies can also negatively impact our sales and results of operations. 19 Large Chinese state-owned and privately owned pharmaceutical companies and foreign-invested or foreign pharmaceutical companies may have greater clinical, research, regulatory, manufacturing, marketing, financial and human resources than we do.
Competitive products introduced by these companies can also negatively impact our sales and results of operations. Large Chinese state-owned and privately owned pharmaceutical companies and foreign-invested or foreign pharmaceutical companies may have greater clinical, research, regulatory, manufacturing, marketing, financial and human resources than we do.
Our auditor is headquartered in Colorado, and is subject to inspection by the PCAOB on a regular basis with the last inspection in 2022. On August 26, 2022, the PCAOB announced and signed a Statement of Protocol (the “Protocol”) with the China Securities Regulatory Commission and the Ministry of Finance of the People’s Republic of China (together, the “PRC Authorities”).
Our auditor is headquartered in Colorado, and is subject to inspection by the PCAOB on a regular basis with the last inspection in 2023. On August 26, 2022, the PCAOB announced and signed a Statement of Protocol (the “Protocol”) with the China Securities Regulatory Commission and the Ministry of Finance of the People’s Republic of China (together, the “PRC Authorities”).
RISK FACTORS Risk Factor Summary The following are some material risks, any of which could have an adverse effect on our business financial condition, operating results, or prospects. ● Risks Related to our Business and our Industry o If our products do not attain market acceptance among the medical community, our operations and profitability would be adversely affected; o If we fail to meet standards pursuant to the newly revised Drug Administration Law, certain production lines will be suspended and our profitability would be adversely affected; o We may be subject from time to time to product recalls initiated by us or by the NMPA.
Risk Factor Summary The following are some material risks, any of which could have an adverse effect on our business financial condition, operating results, or prospects. ● Risks Related to our Business and our Industry o If our products do not attain market acceptance among the medical community, our operations and profitability would be adversely affected; o If we fail to meet standards pursuant to the newly revised Drug Administration Law, certain production lines will be suspended and our profitability would be adversely affected; o We may be subject from time to time to product cessations or recalls initiated by us or by the NMPA.
Although we believe we have alternative sources of supply for the raw materials used in our business, termination of our relationships with any of our key suppliers could have a material adverse effect on our business, financial condition or results of operations in the unlikely event that we are unable to obtain adequate raw materials from other sources in a timely manner or at all. 24 We may not be able to effectively manage our employees and distribution network, and our reputation, business, prospects and brand may be materially and adversely affected by actions taken by our distributors and third party marketing firms.
Although we believe we have alternative sources of supply for the raw materials used in our business, termination of our relationships with any of our key suppliers could have a material adverse effect on our business, financial condition or results of operations in the unlikely event that we are unable to obtain adequate raw materials from other sources in a timely manner or at all. 25 We may not be able to effectively manage our employees and distribution network, and our reputation, business, prospects and brand may be materially and adversely affected by actions taken by our distributors and third party marketing firms.
The incurrence of additional indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. 26 The failure to manage growth effectively could have an adverse effect on our business, financial condition and results of our operations.
The incurrence of additional indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. The failure to manage growth effectively could have an adverse effect on our business, financial condition and results of our operations.
The PRC legal system has inherent uncertainties that could limit the legal protections available to us. The PRC legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little precedential value.
The PRC legal system has inherent uncertainties that could limit the legal protections available to us. The PRC legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which legal cases have little precedential value.
If the Company fail to complete such registrations, our ability to use the proceeds of this offering and to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business. 32 On March 30, 2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19, which took effect as of June 1, 2015.
If the Company fail to complete such registrations, our ability to use the proceeds of this offering and to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business. 33 On March 30, 2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19, which took effect as of June 1, 2015.
The NMPA and other regulatory authorities may not approve the products that we develop and even if we do obtain regulatory approvals, such regulatory approvals may be subject to limitations on the indicated uses for which we may market a product, which may limit the size of the market for such product. 22 New product development in the pharmaceutical industry is time-consuming and costly and has a low rate of successful commercialization .
The NMPA and other regulatory authorities may not approve the products that we develop and even if we do obtain regulatory approvals, such regulatory approvals may be subject to limitations on the indicated uses for which we may market a product, which may limit the size of the market for such product. 23 New product development in the pharmaceutical industry is time-consuming and costly and has a low rate of successful commercialization .
The PRC legal infrastructure, however, is significantly different in operation from its United States counterpart, and may present a significant impediment to the operation of a foreign invested enterprise. 29 You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in the PRC against our company or our management based on U.S. or other foreign laws.
The PRC legal infrastructure, however, is significantly different in operation from its United States counterpart, and may present a significant impediment to the operation of a foreign invested enterprise. 30 You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in the PRC against our company or our management based on U.S. or other foreign laws.
There is no guarantee that requests from U.S. federal or state regulators or agencies to investigate or inspect our operations will be honored by us, by entities who provide services to us or with whom we associate, without violating PRC legal requirements, especially as those entities are located in China.
There is no guarantee that requests from U.S. federal or state regulators or agencies to investigate or inspect our operations will be honored, by entities who provide services to us or with whom we associate, without violating PRC legal requirements, especially as those entities are located in China. The SEC, U.S.
Any disruption of our distribution network, including our failure to renew our existing distribution agreements with our desired distributors, could negatively affect our ability to effectively sell our products and would materially and adversely affect our business, financial condition and results of operations. 23 We rely on a limited number of distributors for the majority of sales of our products .
Any disruption of our distribution network, including our failure to renew our existing distribution agreements with our desired distributors, could negatively affect our ability to effectively sell our products and would materially and adversely affect our business, financial condition and results of operations. 24 We rely on a limited number of distributors for the majority of sales of our products .
China is experiencing substantial problems with environmental pollution. Accordingly, it is likely that the national, provincial and local governmental agencies will adopt stricter pollution controls. There is no guarantee that future changes in environmental laws and regulations will not impose costly compliance requirements on us or otherwise subject us to future liabilities.
China is experiencing substantial environmental pollution. Accordingly, it is likely that the national, provincial and local governmental agencies will adopt stricter pollution controls. There is no guarantee that future changes in environmental laws and regulations will not impose costly compliance requirements on us or otherwise subject us to future liabilities.
If we are unable to attract and retain key personnel, it could adversely affect our ability to develop and market our products. We are highly dependent upon the principal members of our management team, especially Ms. Zhilin Li, our Chairman, President and Chief Executive Officer. We cannot not guarantee that Ms.
If we are unable to attract and retain key personnel, it could adversely affect our ability to develop and market our products. We are highly dependent upon the principal members of our management team, especially Ms. Zhilin Li, our Chairperson, President and Chief Executive Officer. We cannot not guarantee that Ms.
SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities) to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future.
SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities) to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 is applicable to our stockholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future.
There is substantial doubt about our ability to continue as a going concern. Our auditors have indicated in their report on our financial statements for the years ended December 31, 2022 and 2021 that conditions exist that raise substantial doubt about our ability to continue as a going concern as discussed in Note 1 to the financial statements.
There is substantial doubt about our ability to continue as a going concern. Our auditors have indicated in their report on our financial statements for the years ended December 31, 2023 and 2022 that conditions exist that raise substantial doubt about our ability to continue as a going concern as discussed in Note 1 to the financial statements.
As such, due to the fact that we had been a shell company prior to October 2005, holders of “restricted securities” within the meaning of Rule 144, when reselling their shares pursuant to Rule 144, shall be subject to the conditions set forth herein. 43
As such, due to the fact that we had been a shell company prior to October 2005, holders of “restricted securities” within the meaning of Rule 144, when reselling their shares pursuant to Rule 144, shall be subject to the conditions set forth herein. 44
First, as a matter of substantive law, the Foreign Invested Enterprise laws provide significant protection from government interference. In addition, these laws guarantee the full benefit of corporate articles and contracts to foreign invested enterprise participants.
First, as a matter of substantive law, the Foreign Invested Enterprise laws provide significant protection to keep the Company from government interference. In addition, these laws guarantee the full benefit of corporate articles and contracts to foreign invested enterprise participants.
As set forth in such report, our management has concluded that our internal controls over financial reporting were not effective as of December 31, 2022, and there existed a material weakness in our internal control over financial reporting as of December 31, 2022. 42 We are taking appropriate actions to internally training related personnel, such as Chief Financial Officer, to remediate such material weakness; however, such measures may not be sufficient to address the material weaknesses identified or ensure that our controls and procedures are effective.
As set forth in such report, our management has concluded that our internal controls over financial reporting were not effective as of December 31, 2023, and there existed a material weakness in our internal control over financial reporting as of December 31, 2023. 43 We are taking appropriate actions to internally training related personnel, such as Chief Financial Officer, to remediate such material weakness; however, such measures may not be sufficient to address the material weaknesses identified or ensure that our controls and procedures are effective.
We rely on distributors for all of our revenues and failure to maintain relationships with our distributors or to otherwise expand our distribution network would materially and adversely affect our business . We sell our products exclusively to pharmaceutical distributors in the PRC and rely on distributors for all of our revenues.
We rely on distributors for all of our revenues and failure to maintain relationships with and collect payment from, our distributors or to otherwise expand our distribution network would materially and adversely affect our business . We sell our products exclusively to pharmaceutical distributors in the PRC and rely on distributors for all of our revenues.
We rely on a limited number of distributors for most of our net revenue. Our top five distributors in aggregate accounted for 20% and 21% of our net revenues in 2022 and 2021, respectively. We expect that a relatively small number of distributors will continue to account for a major portion of our net revenue in the near future.
We rely on a limited number of distributors for most of our net revenue. Our top five distributors in aggregate accounted for 22% and 20% of our net revenues in 2023 and 2022, respectively. We expect that a relatively small number of distributors will continue to account for a major portion of our net revenue in the near future.
The rapid market growth of our pharmaceutical products may pose more requirements or more costs on the employment management for managerial, operational, financial and other purposes. As of December 31, 2022, we had 244 employees.
The rapid market growth of our pharmaceutical products may pose more requirements or more costs on the employment management for managerial, operational, financial and other purposes. As of December 31, 2023, we had 239 employees.
Although no event of default has occurred as of the date herein, pursuant to the terms of the Convertible Note, upon our failure to pay back the Convertible Note upon due, Streeterville can, at its sole discretion, send us a notice which turns this into an Event of Default (“Event of Default”), which would give us 10 days to cure.
Although no event of default has occurred as of the date herein, pursuant to the terms of the Convertible Note and its amendment dated April 13, 2023, upon our failure to pay back the Convertible Note upon due, Streeterville can, at its sole discretion, send us a notice which turns this into an Event of Default (“Event of Default”), which would give us 10 days to cure.
There is no anti-dilution protection or preemptive rights in connection with our common stock. Thus, the percentage ownership of existing holders of common stock may be diluted in their respective percentage ownership in us if we issue additional shares of our capital stock.
We may issue additional shares of our capital stock to raise additional cash for working capital. There is no anti-dilution protection or preemptive rights in connection with our common stock. Thus, the percentage ownership of existing holders of common stock may be diluted in their respective percentage ownership in us if we issue additional shares of our capital stock.
However, a s PRC governmental authorities have significant discretion in interpreting and implementing statutory provisions and there remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations, we cannot guarantee the PRC government will have the same analysis and application of law like us.
However, as PRC governmental authorities have significant discretion in interpreting and implementing statutory provisions and there remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations, we cannot guarantee the PRC government will have the same analysis and application of law as we expect.
The qualified banks will directly examine the applications and accept registrations under the supervision of SAFE. 37 Some of our shareholders that we are aware of are subject to SAFE regulations, and we expect all of these shareholders will have completed all necessary registrations with the local SAFE branch or qualified banks as required by SAFE Circular 37.
Some of our shareholders that we are aware of are subject to SAFE regulations, and we expect all of these shareholders will have completed all necessary registrations with the local SAFE branch or qualified banks as required by SAFE Circular 37.
To keep rapidly increasing trend of the Chinese pharmaceutical industry, it will impose significant responsibilities upon the members of management to identify, recruit, maintain, integrate and motivate new and old employees In addition, we may need to increase the salary, or the equity incentive plan for the employees to keep them in the Company.
To keep up with the rapid development of the Chinese pharmaceutical industry, it will impose significant responsibilities upon the members of management to identify, recruit, maintain, integrate and motivate new and old employees In addition, we may need to increase the salary, or the equity incentive plan for the employees to keep them in the Company.
For the year ended December 31, 2022, three suppliers accounted for 21.7%, 11.1%, and 8.9% of raw material purchases and for the year ended December 31, 2021, three suppliers accounted for 24.8%, 12.7%, and 11.8% of raw material purchases. Historically, we have not had difficulty obtaining raw materials from suppliers.
For the year ended December 31, 2023, three suppliers accounted for 17.7%, 13.8% and 9.1% of raw material purchases and for the year ended December 31, 2022, three suppliers accounted for 21.7%, 11.1% and 8.9% of raw material purchases. Historically, we have not had difficulty obtaining raw materials from suppliers.
On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”), which will take effect on March 31, 2023.
On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”), which became effective on March 31, 2023.
While all of our existing product lines are in full compliance with the GMP standards issued in 2011, in the event we fail to continually meet the requirements of the GMP and receive the deficiency feedback from any pilot inspection under the New Law, the production on such production line(s) could be suspended and our operations and profitability could be adversely affected. 18 We may be subject from time to time to product recalls initiated by us or by the NMPA.
While all of our existing product lines are in full compliance with the GMP standards issued in 2011, in the event we fail to continually meet the requirements of the GMP and receive the deficiency feedback from any pilot inspection under the New Law, the production on such production line(s) could be suspended and our operations and profitability could be adversely affected.
Under SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with qualified banks instead of SAFE.
Under SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with qualified banks instead of SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision of SAFE.
For example, to the extent that we need to convert U.S. dollars we receive from securities offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion.
Significant revaluation of the Renminbi may have a material adverse effect on your investment. For example, to the extent that we need to convert U.S. dollars we receive from securities offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion.
The grading result will determine the set of security protection obligations that entities must comply with. Entities classified as Level 2 or above should report the grade to the relevant government authority for examination and approval. The Company’s management believes that they are currently classified as Level 1.
The grading result will determine the set of security protection obligations that entities must comply with. Entities classified as Level 2 or above should report the grade to the relevant government authority for examination and approval.
Power shortages, natural disasters, terrorist acts or other calamities could disrupt our production and have a material adverse effect on our business, financial position and results of operations. All of our products are produced at our manufacturing facility in Hainan, China.
Power shortages, natural disasters, terrorist acts or other calamities could disrupt our production and have a material adverse effect on our business, financial position and results of operations. All of our products are produced at our manufacturing facility in Hainan, China, which is exposed to certain natural disasters such as typhoons.
Any adverse change in the economic conditions or government policies in China could have a material and adverse effect on overall economic growth and the level of investments in health industries in China, which in turn could lead to a reduction in demand for our products and consequently have a material and adverse effect on our business.
Any adverse change in the economic conditions or government policies in China could have a material and adverse effect on overall economic growth and the level of investments in health industries in China, which in turn could lead to a reduction in demand for our products and consequently have a material and adverse effect on our business. 29 The Chinese government may intervene with or influence our business at any time.
However, based on the recent promulgation of the Trial Measures, which are set to be effective on March 31, 2023, we may be required to complete the filing requirements when we have re-financing or any additional offerings in future; o Although the audit report included in this prospectus was issued by U.S. auditors who are currently inspected by the PCAOB, if it is later determined that the PCAOB is unable to inspect or investigate our auditor completely, investors would be deprived of the benefits of such inspection and our ordinary shares may be delisted or prohibited from trading; ● Risks Related to our Common Stock o We may be held in default on our convertible note, which could trigger penalties that worsen our financial condition and potentially disqualify us from listing on the stock exchange where we are currently listed; o The market price for our common stock may be volatile; o If we issue additional shares of our capital stock, our stockholders will experience dilution in their respective percentage ownership in the company; o A large portion of our common stock is controlled by a small number of stockholders and as a result, these stockholders are able to influence and ultimately control the outcome of stockholder votes on various matters; o We are likely to remain subject to “penny stock” regulations and as a consequence there are additional sales practice requirements and additional warnings issued by the SEC; o There is substantial doubt about our ability to continue as a going concern; o We do not anticipate paying cash dividends on our common stock; o Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies. 17 Risks Related to our Business and our Industry The commercial success of our products depends upon the degree of their market acceptance among the medical community.
However, based on the recent promulgation of the Trial Measures, which became effective on March 31, 2023, we may be required to complete the filing requirements when we have re-financing or any additional offerings in future; o Although the audit report included in this annual report was issued by U.S. auditors who are currently inspected by the PCAOB, if it is later determined that the PCAOB is unable to inspect or investigate our auditor completely, investors would be deprived of the benefits of such inspection and our Common Stock may be delisted or prohibited from trading; 18 ● Risks Related to our Common Stock o We may be held in default on our convertible note, which could trigger penalties that worsen our financial condition and potentially disqualify us from listing on the stock exchange where we are currently listed; o The market price for our common stock may be volatile; o If we issue additional shares of our capital stock, our stockholders will experience dilution in their respective percentage ownership in the company; o We are likely to remain subject to “penny stock” regulations and as a consequence there are additional sales practice requirements and additional warnings issued by the SEC; o There is substantial doubt about our ability to continue as a going concern; o We do not anticipate paying cash dividends on our common stock; o Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies.
We have business relationships with over 1,000 distributors in the PRC. For the year ended December 31, 2022, no customer accounted for more than 10.0% of sales, and three customers accounted for 52.9%, 11.4%, and 10.4% of accounts receivable. In line with industry practices in the PRC, we enter into written sales agreements with our distributors.
We have business relationships with over 1,000 distributors in the PRC. For the year ended December 31, 2023, no customer accounted for more than 10.0% of sales, and three customers accounted for 62.5%, 13.5% and 6.2% of accounts receivable. In line with industry practices in the PRC, we enter into written sales agreements with our distributors.
Furthermore, our sales and results of operations could be adversely affected if the Helpson brand or our reputation is impaired by recalls or negative publicity for one of our branded products, or certain actions taken by our distributors, competitors, third-party marketing firms or relevant regulatory authorities.
Furthermore, our sales and results of operations could be adversely affected if the Helpson brand or our reputation is impaired by recalls or negative publicity for one of our branded products, or certain actions taken by our distributors, competitors, third-party marketing firms or relevant regulatory authorities. 21 Reimbursement may not be available for our products, which could diminish our sales or affect our ability to sell our products profitably.
Recently, the Cyberspace Administration of China has taken action against several Chinese internet companies in connection with their initial public offerings on U.S. securities exchanges, for alleged national security risks and improper collection and use of the personal information of Chinese data subjects.
The Company’s management believes that they are currently classified as Level 1. 34 Recently, the Cyberspace Administration of China has taken action against several Chinese internet companies in connection with their initial public offerings on U.S. securities exchanges, for alleged national security risks and improper collection and use of the personal information of Chinese data subjects.
As a result of such decline, we may become unable to satisfy the continuous listing standards of the stock exchange where we are currently listed, which would further negatively impact the operation of our business and the public trading price of our common stock. 40 The market price for our common stock may be volatile which could result in a complete loss of your investment.
As a result of such decline, we may become unable to satisfy the continuous listing standards of the stock exchange where we are currently listed, which would further negatively impact the operation of our business and the public trading price of our common stock.
The implications of this regulation if the Company were to become subject to it are uncertain. Such uncertainty could cause the market price of our common stock to be materially and adversely affected, and our securities could be delisted or prohibited from being traded on NYSE American earlier than would be required by the HFCAA and AHFCAA.
Such uncertainty could cause the market price of our common stock to be materially and adversely affected, and our securities could be delisted or prohibited from being traded on NYSE American earlier than would be required by the HFCAA and AHFCAA.
We cannot guarantee that our future research and development projects will be successful or completed within their anticipated time frames or budgets, or that we will receive the necessary approvals from the relevant authorities for the production of these products, or that these newly-developed products will achieve commercial success.
We cannot guarantee that our future research and development projects will be successful or completed within their anticipated time frames or budgets, or that we will receive the necessary approvals from the relevant authorities for the production of these products, or that these newly-developed products will achieve commercial success. 22 Our competitors may obtain approval for a competitive product before our product we are developing is approved.
The acceptance and use of our products among the medical community will depend upon a number of factors, including: ● perception of physicians, patients and others in the medical community as to 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 acceptance and use of our products among the medical community will depend upon a number of factors, including: ● perception of physicians, patients and others in the medical community as to 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. 19 If we fail to meet standards pursuant to the newly revised Drug Administration Law, the production at certain of our production lines will be suspended and our operations and profitability would be adversely affected.
If we are required under the new EIT law to withhold PRC income tax on our dividends payable to our foreign stockholders who are “non-resident enterprises”, or if you are required to pay PRC income tax on the transfer of our shares under the circumstances mentioned above, the value of your investment in our shares may be materially and adversely affected. 39 We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
If we are required under the new EIT law to withhold PRC income tax on our dividends payable to our foreign stockholders who are “non-resident enterprises”, or if you are required to pay PRC income tax on the transfer of our shares under the circumstances mentioned above, the value of your investment in our shares may be materially and adversely affected.
On November 17, 2021, we entered into a Securities Purchase Agreement pursuant to which we issued an unsecured convertible promissory note (the “Convertible Note”) to an institutional accredited investor Streeterville Capital, LLC (“Streeterville”). The Convertible Note was due on February 17, 2023. The parties are in negotiation in extending the Convertible Note.
On November 17, 2021, we entered into a Securities Purchase Agreement pursuant to which we issued an unsecured convertible promissory note (the “Convertible Note”) to an institutional accredited investor Streeterville Capital, LLC (“Streeterville”). The Convertible Note, as amended, is due on May 19, 2024. The parties may negotiate in extending the Convertible Note.
Our China-sourced income is subject to PRC withholding tax under the new Enterprise Income Tax Law of the PRC, and we may be subject to PRC enterprise income tax at the rate of 25% when more detailed rules or precedents are promulgated.
This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects. 39 Our China-sourced income is subject to PRC withholding tax under the new Enterprise Income Tax Law of the PRC, and we may be subject to PRC enterprise income tax at the rate of 25% when more detailed rules or precedents are promulgated.
Based on our understanding of the Chinese laws and regulations in effect at the time of this report, we will not be required to submit an application to the CSRC for its approval of an offering in a foreseeable future and the listing and trading of our common stock on NYSE American.
Currently, there is no consensus among leading PRC law firms regarding the scope and applicability of the CSRC approval requirement. 36 Based on our understanding of the Chinese laws and regulations in effect at the time of this annual report, we will not be required to submit an application to the CSRC for its approval of an offering in a foreseeable future and the listing and trading of our common stock on NYSE American.
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies.
According to the 2022 Report, the PRC Authorities had fully assisted and cooperated with the PCAOB in carrying out the inspections and investigations according to the Protocol, and have agreed to continue to assist the PCAOB’s investigations and inspections in the future.
According to the 2022 Report, the PRC Authorities had fully assisted and cooperated with the PCAOB in carrying out the inspections and investigations according to the Protocol, and have agreed to continue to assist the PCAOB’s investigations and inspections in the future. The PCAOB may reassess its determinations and issue new determinations consistent with the HFCAA at any time.
We may issue additional shares of our capital stock to raise additional cash for working capital; if we issue additional shares of our capital stock, our stockholders will experience dilution in their respective percentage ownership in the company. We may issue additional shares of our capital stock to raise additional cash for working capital.
These market fluctuations may also materially and adversely affect the market price of our common stock. 42 We may issue additional shares of our capital stock to raise additional cash for working capital; if we issue additional shares of our capital stock, our stockholders will experience dilution in their respective percentage ownership in the company.
Our future growth and success significantly depend on our ability to successfully market our principal products to hospitals as prescription medicines. Approximately 80% of the end-customers of our products are hospitals. Hospitals may make bulk purchases of a medicine included in the national and provincial medicine catalogs only if that medicine is selected under a government-administered tender process.
Approximately 80% of the end-customers of our products are hospitals. Hospitals may make bulk purchases of a medicine included in the national and provincial medicine catalogs only if that medicine is selected under a government-administered tender process.
Despite of the foregoing, we cannot assure you if we will be able to complete the filing procedure in a timely fashion when we are required to do so for any offerings in the future. 35 The Holding Foreign Companies Accountable Act, or the HFCAA, and the related regulations continue to evolve.
Despite of the foregoing, we cannot assure you if we will be able to complete the filing procedure in a timely fashion when we are required to do so for any offerings in the future.
Future technological improvements and continual product developments in the pharmaceutical market may render our existing products obsolete or affect their viability and competitiveness. Therefore, our future success will largely depend on our development capability, including our ability to improve our existing products, diversify our product range and develop new and competitively-priced products that meet the requirements of the changing market.
Therefore, our future success will largely depend on our development capability, including our ability to improve our existing products, diversify our product range and develop new and competitively-priced products that meet the requirements of the changing market.
However, based on the recent promulgation of the Trial Measures, which are set to be effective on March 31, 2023, we may be required to complete the filing requirements when we have re-financing or any additional offerings in future.
We are not required to submit an application to CSRC pursuant to the M&A Rules, nor are we subject to the cybersecurity review. However, based on the recent promulgation of the Trial Measures, which became effective on March 31, 2023, we may be required to complete the filing requirements when we have re-financing or any additional offerings in future.
Product recalls could impose significant costs on us and adversely affect our ability to generate revenue. In our business, we must comply with a variety of product safety and product testing regulations. In particular, our products are subject to, among other statutes and regulations, those issued by the NMPA.
We may be subject from time to time to product cessations or recalls initiated by us or by the NMPA. Product cessations or recalls could impose significant costs on us and adversely affect our ability to generate revenue. In our business, we must comply with a variety of product safety and product testing regulations.
As a result, we may be required to expend valuable resources to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.
As a result, we may be required to expend valuable resources to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations. 41 Risks Related to our Common Stock We may be held in default on our convertible note, which could trigger penalties that worsen our financial condition and potentially disqualify us from listing on the stock exchange where we are currently listed.
The PRC government may, at its discretion, restrict access in the future to foreign currencies for current account transactions. Any future restrictions on currency exchanges may limit our ability to use revenue generated in Renminbi to fund any future business activities outside China or to make dividend or other payments in U.S. dollars.
Any future restrictions on currency exchanges may limit our ability to use revenue generated in Renminbi to fund any future business activities outside China or to make dividend or other payments in U.S. dollars.
We cannot assure you that relevant PRC governmental agencies, including the CSRC, would reach the same conclusion as we do. 34 Recently, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,” or the Opinions, which was made available to the public on July 6, 2021.
Recently, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,” or the Opinions, which was made available to the public on July 6, 2021.
We also purchased a pharmaceutical compound from a third party that we are seeking to develop into a further product. To date, we have not experienced any infringements of our trademarks for sales of pharmaceutical products or our exclusive patent license, and we are not aware of any infringement of our intellectual property rights.
To date, we have not experienced any infringements of our trademarks for sales of pharmaceutical products or our exclusive patent license, and we are not aware of any infringement of our intellectual property rights.
Furthermore, our brand and reputation, our sales activities or the price of our common stock could be adversely affected if we become the target of any negative publicity as a result of actions taken by our employees, affiliates, distributors or third-party marketing firms. 25 We have limited insurance coverage and may incur losses resulting from product liability claims, business interruptions or claims that could be covered by D&O Insurance.
Furthermore, our brand and reputation, our sales activities or the price of our common stock could be adversely affected if we become the target of any negative publicity as a result of actions taken by our employees, affiliates, distributors or third-party marketing firms.
If our products do not attain market acceptance among the medical community, our operations and profitability would be adversely affected. The commercial success of our products depends upon the degree of market acceptance they achieve within the medical community, particularly among physicians and hospital administrators.
Risks Related to our Business and our Industry The commercial success of our products depends upon the degree of their market acceptance among the medical community. If our products do not attain market acceptance among the medical community, our operations and profitability would be adversely affected.
The nature of our business exposes us to the risk of product liability claims that is inherent in the research and development, manufacturing and marketing of pharmaceutical products. Using product candidates in clinical trials also exposes us to product liability claims. These risks are greater for our products that receive regulatory approval for commercial sale.
Using product candidates in clinical trials also exposes us to product liability claims. These risks are greater for our products that receive regulatory approval for commercial sale.
Dividends payable by us to our foreign investors and gain on the sale of our shares may become subject to taxes under PRC tax laws.
Therefore, the Company does not intend to have any dividend distribution in the future. 40 Dividends payable by us to our foreign investors and gain on the sale of our shares may become subject to taxes under PRC tax laws.
Should we fail to respond to these frequent technological advances by failing to improve our existing products, develop new products in a timely manner, or have these products reach a desirable level of market acceptance, our business and profitability will be materially and adversely affected. 21 We cooperate with research institutions and universities in the PRC for the research and development of certain new products and any failure of such research institutions to meet our timing and quality standards may pose impairment loss on our financial results and our failure to continue such collaborative arrangement or enter into such new arrangements could adversely affect our ability to develop new pharmaceuticals and our overall business prospects .
We cooperate with research institutions and universities in the PRC for the research and development of certain new products and any failure of such research institutions to meet our timing and quality standards may pose impairment loss on our financial results and our failure to continue such collaborative arrangement or enter into such new arrangements could adversely affect our ability to develop new pharmaceuticals and our overall business prospects .
There is significant international pressure on the PRC government to adopt a substantial liberalization of its currency policy, which could result in a further and more significant appreciation in the value of the Renminbi against the U.S. dollar. Significant revaluation of the Renminbi may have a material adverse effect on your investment.
It is difficult to predict how long the current situation may last and when and how it may change again. There is significant international pressure on the PRC government to adopt a substantial liberalization of its currency policy, which could result in a further and more significant appreciation in the value of the Renminbi against the U.S. dollar.
As a result, recognition and enforcement in the PRC of judgments of a court in the United States and any of the other jurisdictions mentioned above in relation to any matter may be difficult or impossible.
Moreover, the PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States, and many other countries. As a result, recognition and enforcement in the PRC of judgments of a court in the United States and any of the other jurisdictions in relation to any matter may be difficult or impossible.
While we attempt to provide competitive compensation packages to attract and retain key personnel, many of our competitors are likely to have greater resources and more experience than we have, making it difficult for us to compete successfully for key personnel.
While we attempt to provide competitive compensation packages to attract and retain key personnel, many of our competitors are likely to have greater resources and more experience than we have, making it difficult for us to compete successfully for key personnel. 27 Certain of our employees and consultants were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors, or at universities or other research institutions.
Risks Related to Doing Business in China Adverse changes in political and economic policies of the PRC government could have a material and adverse effect on the overall economic growth of China, which could reduce the demand for our services and materially and adversely affect our competitive position.
If we are unable to protect our trade names, trade secrets and other propriety information from infringement, our business, financial condition and results of operations may be materially and adversely affected. 28 Risks Related to Doing Business in China Adverse changes in political and economic policies of the PRC government could have a material and adverse effect on the overall economic growth of China, which could reduce the demand for our services and materially and adversely affect our competitive position.
The PCAOB may reassess its determinations and issue new determinations consistent with the HFCAA at any time. 36 While the HFCAA and AHFCAA are not currently applicable to the Company because the Company’s current auditors are subject to PCAOB review, if this changes in the future for any reason, the Company may be subject to the HFCAA and AHFCAA.
While the HFCAA and AHFCAA are not currently applicable to the Company because the Company’s current auditors are subject to PCAOB review, if this changes in the future for any reason, the Company may be subject to the HFCAA and AHFCAA. The implications of this regulation if the Company were to become subject to it are uncertain.
The Enterprise Income Tax Law of the PRC imposes a uniform enterprise income tax rate of 25% on all domestic enterprises, including foreign-invested enterprises unless they qualify for certain exceptions, and terminates most of the tax exemptions, reductions and preferential treatments available under previous tax laws and regulations. 38 Moreover, under the Enterprise Income Tax Law of the PRC, enterprises organized under the laws of jurisdictions outside China with their “de facto management bodies” located within China may be considered PRC resident enterprises and therefore subject to PRC enterprise income tax at the rate of 25% on their worldwide income.
The Enterprise Income Tax Law of the PRC imposes a uniform enterprise income tax rate of 25% on all domestic enterprises, including foreign-invested enterprises unless they qualify for certain exceptions, and terminates most of the tax exemptions, reductions and preferential treatments available under previous tax laws and regulations.
In addition, SAT Bulletin 7 has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market.
SAT Bulletin 7 extends its tax jurisdiction to transactions involving the transfer of taxable assets through offshore transfer of a foreign intermediate holding company. In addition, SAT Bulletin 7 has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market.
There can be no assurances that these negotiations will be successful. The Convertible Note has a principal balance of $3,800,000 at December 31, 2022.
There can be no assurances that these negotiations will proceed or be successful. The Convertible Note has a principal balance of $1,423,474.27 as of December 31, 2023.
The pharmaceutical market in the PRC remains very competitive, and there may be pressure to reduce sale prices of products without a corresponding decrease in the cost of sold products.
We had gross loss margins of -4.0% for the year ended December 31, 2023, compared to gross loss margins of -6.1% for the year ended December 31, 2022. The pharmaceutical market in the PRC remains very competitive, and there may be pressure to reduce sale prices of products without a corresponding decrease in the cost of sold products.
Because we receive substantially all of our revenue in Renminbi, which currently is not a freely convertible currency, and the PRC government controls the currency conversion and the fluctuation of the Renminbi, we are subject to changes in the PRC’s political and economic decisions. We receive substantially all of our revenues in Renminbi, which currently is not a freely-convertible currency.
However, in the event the 2021 Negative List is amended in the future to include any of the business Helpson is operating, our ownership structure could be subject to change to the extent our structure is not given any “grandfather” protection. 31 Because we receive substantially all of our revenue in Renminbi, which currently is not a freely convertible currency, and the PRC government controls the currency conversion and the fluctuation of the Renminbi, we are subject to changes in the PRC’s political and economic decisions.
Physicians may not prescribe or recommend our products to patients and procurement departments of hospitals may not purchase our products if physicians or hospital pharmacists do not find our products attractive.
The commercial success of our products depends upon the degree of market acceptance they achieve within the medical community, particularly among physicians and hospital administrators. Physicians may not prescribe or recommend our products to patients and procurement departments of hospitals may not purchase our products if physicians or hospital pharmacists do not find our products attractive.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOn May 2, 2018, the 2011 Lease was superseded by a new lease, for a term of three years ending June 30, 2021, for office spaces on the second and third floor at a monthly rent of RMB 16,000 (approximately $2,319), and RMB 30,000 (approximately $4,349), respectively.
Biggest changeFor office spaces on the second floor and third floor at a monthly rent of RMB 17,600 (approximately $2,485) and RMB 30,000 (approximately $4,236), respectively, based on the current lease dated June 5, 2023 that is for a two-year term ending June 30, 2025.
The loans referred to above are set forth in the table below: Total Amount of the Line of Credit Lending Institution Contract Period Interest Rate Properties under Mortgage RMB 10 million (Approximately $1.54 million) Bank of China September 30, 2022 to September 28, 2023 3.45 % Helpson’s new factory: 20,282.42 square meters (Certificate #: HK477872) Production line equipment and machinery included in the facility
The loans referred to above are set forth in the table below: Total Amount of the Line of Credit Lending Institution Contract Period Interest Rate Properties under Mortgage RMB 10 million (Approximately $1.41 million) Bank of China September 25, 2023 to September 26, 2024 3.35 % Helpson’s new factory: 20,282.42 square meters (Certificate #: HK477872) Production line equipment and machinery included in the facility
In addition, the Company’s Chief Executive Officer and Chair of the Board personally guaranteed the new line of credit. Total interest paid on this loan was $54,923 and $15,582 for the years ended December 31, 2022 and 2021, respectively.
In addition, the Company’s Chief Executive Officer and Chair of the Board personally guaranteed the new line of credit. Total interest paid on this loan was $11,225 for the years ended December 31, 2023.
We believe that all our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for our business. However, we anticipate a potential need for expansion and additional space as our production increases.
The aggregate area of the office space rented by Helpson is 1,686 square meters (16,812 square feet). We believe that all our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for our business. However, we anticipate a potential need for expansion and additional space as our production increases.
On September 30, 2022 the Company received a new line of credit in the same amount. The loan bears interest at the rate of 3.45% and is due September 28, 2023.The loan is collateralized by the Company’s new production facility and the included production line equipment and machinery.
Mortgaged Property On September 25, 2023 the Company received a line of credit for RMB 10 million (approximately $1.41 million) from Bank of China. The loan bears interest at the rate of 3.35% and is due September 26, 2024. The loan is collateralized by the Company’s new production facility and the production line equipment and machinery contained therein.
In addition, Helpson rents offices located on the second floor of the Jiahai Building owned by Hainan Zhongfu Foreign Export Personnel Service Center (the “Center”) as its principal executive offices. Monthly rent at this facility is RMB 5,580 (approximately $843). The original term of the lease was 3 years, from December 1, 2010 to November 30, 2013.
In addition, Helpson rents offices located on the second floor and third floor of the Jiahai Building owned by Hainan Zhongfu Foreign Export Personnel Service Center (the “Center”) as its principal executive offices.
Removed
On December 31, 2011, this lease was superseded by a new lease, for a term of nine years, for office spaces on the second floor and the entire third floor at a monthly rent of RMB 20,000 (approximately $2,941), with a 5% increase every two years from the fourth year until the end of the term (the “2011 Lease”).
Removed
The aggregate area of the office space rented by Helpson is 1,686 square meters (16,812 square feet). On July 10, 2021, the 2011 Lease was further extended to June 30, 2023 for a term of two years and the monthly rent of RMB 47,600 (approximately $7,461).
Removed
Mortgaged Property On September 18, 2021 the Company obtained a line of credit for RMB 10 million (approximately $1.54 million) with Bank of China. The loan bears interest at the rate of 3.85% per annum. The line of credit was paid in full on the due date of September 18, 2022.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeHowever, we are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 44 PART II
Biggest changeHowever, we are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 46 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 44 PART II 45 Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 45 Item 6. [Reserved] 45 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 46 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 53 Item 8.
Biggest changeItem 4. Mine Safety Disclosures. 46 PART II 47 Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 47 Item 6. [Reserved] 47 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 48 Item 7A. Quantitative and Qualitative Disclosures about Market Risk. 55 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans 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 - - 13,540,000 Totals - - 13,540,000
Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans 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 - - 482,000 Totals - - 482,000 * All shares have been retroactively restated to reflect the effect of the 1-for-5 reverse stock split effective March 6, 2024.
Prior to September 30, 2009, our shares traded on the OTC Bulletin Board under the symbol “CPHI.OB.” Holders As of March 24, 2023 there were approximately 134 stockholders of record of our common stock and an indeterminate number of beneficial holders who held our common stock in street name.
Prior to September 30, 2009, our shares traded on the OTC Bulletin Board under the symbol “CPHI.OB.” Holders As of March 24, 2024, there were approximately 133 stockholders of record of our common stock and an indeterminate number of beneficial holders who held our common stock in street name.
Transfer Agent and Registrar The transfer agent and registrar for our common stock is Equinity Trust Company, with offices located at 3200 Cherry Creek South Drive, Suite 430, Denver, Colorado 80209. Their telephone number is (303) 282-4800 and fax number is (303) 282-5800.
Transfer Agent and Registrar The transfer agent and registrar for our common stock is Equinity Trust Company, with offices located at 1110 Centre Pointe Curve, Suite 101, Mendota Heights, MN 55120. Their telephone number is (651)306-2920.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table illustrates our accounts receivable aging distribution in terms of the percentage of the total accounts receivable as of December 31, 2022 and 2021: December 31, December 31, 2022 2021 1 - 180 Days 2.28 % 3.17 % 180 - 360 Days 0.16 % 0.11 % 360 - 720 Days 0.13 % 0.24 % > 720 Days 97.44 % 96.48 % Total 100.00 % 100.00 % Our bad debt allowance estimate practice is that we consider accounts receivable balances aged within 180 days current, except for any individual uncollectible account assessed by management.
Biggest changeThe following table illustrates our accounts receivable aging distribution in terms of the percentage of the total accounts receivable, respective gross accounts receivables as well as the allocated allowance for doubtful accounts as of December 31, 2023 and 2022: December 31, 2023 2022 1 - 180 Days 3.45 % 2.28 % 180 - 365 Days 0.06 % 0.16 % 365 - 720 Days 0.09 % 0.13 % > 720 Days 96.40 % 97.44 % Total 100.00 % 100.01 % Gross Accounts Receivable Amount Allocated Allowance for Doubtful Accounts December 31, 2023 December 31, 2022 December 31, 2023 December 31, 2022 1-180 Days 495,366.30 391,046.24 - 180-365 Days 8,341.73 26,662.04 834.17 2,666.20 365-720 Days 13,825.83 21,628.33 9,678.08 15,139.83 Over 720 Days 13,845,897.46 16,721,720.98 13,845,897.46 16,721,720.98 Total 14,363,431.33 17,161,057.58 13,856,409.72 16,739,527.01 Our bad debt allowance estimate practice is that we consider accounts receivable balances aged within 180 days current, except for any individual uncollectible account assessed by management.
Due to the restriction on dividend distribution to overseas shareholders, the amount of Helpson’s net assets that was designated for general and statutory capital reserves, and thus could not be transferred to our parent company as cash dividends, was 50% of Helpson’s registered capital, which was both $8,145,000 as of December 31, 2022 and December 31, 2021, respectively.
Due to the restriction on dividend distribution to overseas shareholders, the amount of Helpson’s net assets that was designated for general and statutory capital reserves, and thus could not be transferred to our parent company as cash dividends, was 50% of Helpson’s registered capital, which was both $8,145,000 as of December 31, 2023 and December 31, 2022, respectively.
The currency exchange control procedures imposed by Chinese government authorities may restrict the ability of Helpson, our Chinese subsidiary, to transfer its net assets to our parent company through loans, advances or cash dividends. Off-Balance Sheet Arrangements As of December 31, 2022, we did not have any off-balance sheet arrangements.
The currency exchange control procedures imposed by Chinese government authorities may restrict the ability of Helpson, our Chinese subsidiary, to transfer its net assets to our parent company through loans, advances or cash dividends. Off-Balance Sheet Arrangements As of December 31, 2023, we did not have any off-balance sheet arrangements.
This policy not only transitions our production practices to meet the European and United States standards by separating drug approval and production qualifications, thereby changing the existing model of bundling drug approval numbers to pharmaceutical manufacturers in China, but also serves as a supplement to the ongoing consistency evaluations policy.
This policy not only transitions the production practices to meet the European and United States standards by separating drug approval and production qualifications, thereby changing the existing model of bundling drug approval codes to pharmaceutical manufacturers in China, but also serves as a supplement to the ongoing consistency evaluations policy.
The majority of our pharmaceutical products are sold on a prescription basis and all of them have been approved for at least one or more therapeutic indications by the National Medical Products Administration (the “NMPA”, formerly China Food and Drug Administration, or CFDA) based upon demonstrated safety and efficacy. China's consistency evaluation of generic drugs continues to proceed in 2022.
The majority of its pharmaceutical products are sold on a prescription basis and all of them have been approved for at least one or more therapeutic indications by the National Medical Products Administration (the “NMPA”, formerly China Food and Drug Administration, or CFDA) based upon demonstrated safety and efficacy. China’s consistency evaluation of generic drugs continues to proceed in 2023.
In response to this trend, we launched Noni enzyme, a natural, Xeronine-rich antioxidant food supplement at the end of 2018. We also launched wash-free sanitizers and masks, in 2020, to address the market needs caused by COVID-19 in China.
In response to this trend, Helpson launched Noni enzyme, a natural, Xeronine-rich antioxidant food supplement at the end of 2018. It also launched wash-free sanitizers and masks, in 2020, to address the market needs caused by COVID-19 in China.
Please refer to Note 1 to our consolidated financial statements, “Organization and Significant Accounting Policies” for the discussion of our critical accounting policies. . 52
Please refer to Note 1 to our consolidated financial statements, “Organization and Significant Accounting Policies” for the discussion of our critical accounting policies. 54
In general, demand for pharmaceutical products continues its steady growth in China. We believe the ongoing generic drug consistency evaluations and reform of China’s drug production registration and review policies will have major effects on the future development of our industry and may change its business patterns.
In general, demand for pharmaceutical products continues its steady growth in China. Helpson believes the ongoing generic drug consistency evaluations and reform of China’s drug production registration and review policies will have major effects on the future development of our industry and may change its business patterns.
Comprehensive healthcare is a general concept proposed by the Chinese government according to the development of the times, social needs and changes in disease spectrum. According to the Outline of "Healthy China 2030" issued by Chinese government in October 2016, the total size of China's health service industry will reach RMB 16 trillion (approximately 2.5 trillion) by 2030.
Comprehensive healthcare is a general concept proposed by the Chinese government according to the development of the times, social needs and changes in disease spectrum. According to the Outline of “Healthy China 2030” issued by Chinese government in October 2016, the total size of China’s health service industry is expected to reach RMB 16 trillion (approximately $2.5 trillion) by 2030.
However, for each drug’s consistency evaluation, due to the continuous dynamic changes of the detailed consistency evaluation policies, market trends, expected investments, and expected returns of investment (“ROI”) the whole industry, including us, has been making slow progress in terms of the consistency evaluation.
However, for each drug’s consistency evaluation, due to the continuous dynamic changes of the detailed consistency evaluation policies, market trends, expected investments, and expected returns of investment (“ROI”), the whole industry, including Helpson, has been making slow progresses in terms of the consistency evaluation.
There can be no assurance that any additional financing will be available on acceptable terms, if at all. Operating Activities Net cash used in operating activities was $0.41 million in the year ended December 31, 2022, compared to $0.25 million in 2021.
There can be no assurance that any additional financing will be available on acceptable terms, if at all. 53 Operating Activities Net cash used in operating activities was $0.70 million in the year ended December 31, 2023, compared to $0.41 million in 2022.
The Company issued a convertible note to an institutional accredited investor as disclosed in Note 8 to the condensed consolidated financial statements contained in this report which is incorporated by reference herein.
China Pharma issued a convertible note to an institutional accredited investor as disclosed in Note 8 to the audited condensed consolidated financial statements contained in this report which is incorporated by reference herein.
Allocations to these reserves and funds can only be used for specific purposes and are not transferrable to the parent company in the form of loans, advances or cash dividends. As of December 31, 2022 and December 31, 2021, Helpson’s net assets totaled $(190,000) and $3,447,000, respectively.
Allocations to these reserves and funds can only be used for specific purposes and are not transferrable to the parent company in the form of loans, advances or cash dividends. As of December 31, 2023 and December 31, 2022, Helpson’s net assets totaled $(2,289,000) and $(190,000), respectively.
With Chinese government officially terminated its zero-case policy, now the responsibility to protect people from the impact of COVID-19 falls more to the citizens themselves, and masks and sanitizers have been more and more popular.
As Chinese government officially terminated its zero-case policy, now the responsibility to protect people from the impact of COVID-19 falls more to the citizens themselves, and masks and sanitizers have been more and more popular due to increasing demand.
We do not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required by applicable law or regulation.
We do not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required by applicable law or regulation. Business Overview & Recent Developments China Pharma Holding Inc.
Sales in the “Anti-Viral/Infection & Respiratory” product category represented 61% and 54% of total sales in the years ended December 31, 2022 and 2021, respectively. The “CNS Cerebral & Cardio Vascular” category represented 21% of total revenue in 2022, compared to 28% in 2021. The “Digestive Diseases” category represented 5% and 4% of total revenue in 2022 and 2021, respectively.
Sales in the “Anti-Viral/Infection & Respiratory” product category represented 51% and 61% of total sales in the years ended December 31, 2023 and 2022, respectively. The “CNS Cerebral & Cardio Vascular” category represented 23% of total revenue in 2023, compared to 21% in 2022. The “Digestive Diseases” category represented 16% and 5% of total revenue in 2023 and 2022, respectively.
The “Other” category represented 13% and 14% of revenues in 2022 and 2021, respectively. Cost of Revenue For the year ended December 31, 2022, our cost of revenue was $8.6 million, or 106.1% of total revenue, which represented a decrease of $0.7 million from $9.3 million, or 96.4% of total revenue, in 2021.
The “Other” category represented 10% and 13% of revenues in 2023 and 2022, respectively. 50 Cost of Revenue For the year ended December 31, 2023, our cost of revenue was $7.3 million, or 104.0% of total revenue, which represented a decrease of $1.3 million from $8.6 million, or 106.1% of total revenue, in 2022.
The amount that Helpson must set aside for the statutory surplus fund accounts is (4,279)% and 236% of its total net assets. There were no allocations to the statutory surplus reserve accounts during the twelve months ended December 31, 2022.
The amount that Helpson must set aside for the statutory surplus fund accounts exceeds its total net assets at December 31, 2023 and 2022. There were no allocations to the statutory surplus reserve accounts during the twelve months ended December 31, 2023.
Although the Company obtained the convertible note and additional lines of credit in 2021, there can be no assurance that the Company will be able to achieve its future strategic goal to accelerate the launch of nutrition products. This raises substantial doubt about the Company’s ability to continue as a going concern.
Although the Company obtained additional lines of credit in 2023, there can be no assurance that the Company will be able to achieve its future strategic goals, including the launch of new products. This raises substantial doubt about the Company’s ability to continue as a going concern.
We account for the following respective percentage as bad debt allowance based on age of the accounts receivables: 10% of accounts receivable that are between 180 days and 365 days old, 70% of accounts receivable that are between 365 days and 720 days old, and 100% of accounts receivable that are greater than 720 days old. 50 We recognize bad debt expenses per actual write-offs as well as changes of allowance for doubtful accounts.
We account for the following respective percentage as bad debt allowance based on age of the accounts receivables: 10% of accounts receivable that are between 180 days and 365 days old, 70% of accounts receivable that are between 365 days and 720 days old, and 100% of accounts receivable that are greater than 720 days old.
Year Ended December 31, Product Category 2022 2021 CNS Cerebral & Cardio Vascular 21 % 28 % Anti-Viral/ Infection & Respiratory 61 % 54 % Digestive Diseases 5 % 4 % Other 13 % 14 % For the year ended December 31, 2022, revenue breakdown by product category experienced certain variances compared with that of the prior year.
Twelve Months Ended December 31, Product Category 2023 2022 CNS Cerebral & Cardio Vascular 23 % 21 % Anti-Viral/ Infection & Respiratory 51 % 61 % Digestive Diseases 16 % 5 % Other 10 % 13 % For the year ended December 31, 2023, revenue breakdown by product category experienced certain variances compared with that of the prior year.
The allowance for doubtful account balances were $16.7 million and $18.3 million as of December 31, 2022 and December 31, 2021, respectively.
The allowance for doubtful account balances were $13.8 million and $16.7 million as of December 31, 2023 and December 31, 2022, respectively.
Although our Chairperson and Chief Executive Officer had advanced funds for working capital during the year ended December 31, 2022, there can be no assurances that this will be the case in the future.
Although our Chairperson and Chief Executive Officer had advanced funds for working capital in 2023, there can be no assurances that this will continue in the future.
Liquidity and Capital Resources Our principal source of liquidity is cash generated from operations, bank lines of credit and the Convertible Note Payable. Currently the Company has not witnessed or expected to encounter any difficulties to refinance those lines of credit this year.
Liquidity and Capital Resources Our principal source of liquidity is cash generated from operations, bank lines of credit and the convertible note payable. Currently the Company has not witnessed or expected to encounter any difficulties to refinance those lines of credit this year. As of December 31, 2023, the aggregated advance from our CEO was $1,133,809 for use in operations.
We believe that there is a large number of unmet demands in comprehensive healthcare and internet healthcare sectors. 47 In addition, the Office of the State Council issued “ Pilot Plan for Marketing Authorization Holders ” on May 24, 2016, allowing eligible drug research and development institutions and scientific researchers to become Marketing Authorization Holders (“MAH”) by obtaining drug marketing authorization and drug approval numbers from the State Council.
In addition, the Office of the State Council issued “ Pilot Plan for Marketing Authorization Holders ” on May 24, 2016, allowing eligible drug research and development institutions and scientific researchers to become Marketing Authorization Holders (“MAH”) by obtaining drug marketing authorization and drug approval numbers from the State Council.
This decrease was mainly due to a decrease in sales of our Cefaclor due to market fluctuation, and change in foreign exchange rate. Sales revenue in the “Other” category was $1.06 million in 2022, which represented a decrease of $0.31 million compared to $1.37 million in 2021.
Sales revenue in the “Other” product category was $0.73 million in 2023, compared to $1.06 million in 2022, which represented a decrease of $0.33 million. This decrease was mainly due to a decrease in sales of the Vitamin B6 for Injection due to market fluctuation, and change in foreign exchange rate.
Selling Expenses Our selling expenses for the year ended December 31, 2022 were $1.1 million, a decrease of $0.4 million compared to $1.5 million for the year ended December 31, 2021. Selling expenses accounted for 13.2% of the total revenue in 2022 compared to 15.5% in 2021.
Our gross loss margin in 2023 was 4.0%, compared to 6.1% in 2022. Selling Expenses Our selling expenses for the year ended December 31, 2023 were $0.8 million, a decrease of $0.3 million compared to $1.1 million for the year ended December 31, 2022. Selling expenses accounted for 11.1% of the total revenue in 2023 compared to 13.2% in 2022.
As of December 31, 2022, our net accounts receivable was $0.4 million, a decrease of $0.3 million from $0.7 million as of December 31, 2021. As of December 31, 2022, total inventory was $2.9 million, compared to $3.3 million as of December 31, 2021.
As of December 31, 2023, our net accounts receivable was $0.50 million, an increase of $0.08 million from $0.42 million as of December 31, 2022. As of December 31, 2023, total inventory was $3.7 million, compared to $2.9 million as of December 31, 2022.
Set forth below are our revenues by product category in millions (USD) for the years ended December 31, 2022 and 2021: Year Ended December 31, Net % Product Category 2022 2021 Change Change CNS Cerebral & Cardio Vascular 1.70 2.68 -0.98 -37 % Anti-Viral/ Infection & Respiratory 4.94 5.22 -0.28 -5 % Digestive Diseases 0.40 0.37 0.03 8 % Other 1.06 1.37 -0.31 -23 % The most significant revenue decrease in terms of dollar amount was in our “CNS Cerebral & Cardio Vascular”, which generated $1.70 million in sales revenue in 2022 compared to $2.68 million in 2021, a decrease of $0.98 million.
Set forth below are our revenues by product category in millions (USD) for the years ended December 31, 2023 and 2022: Twelve Months Ended December 31, Product Category 2023 2022 Net Change % Change CNS Cerebral & Cardio Vascular 1.62 1.70 -0.08 -5 % Anti-Viral/ Infection & Respiratory 3.57 4.94 -1.37 -28 % Digestive Diseases 1.09 0.41 0.68 166 % Other 0.73 1.06 -0.33 -31 % The most significant revenue decrease in terms of dollar amount was in the “Anti-Viral/ Infection & Respiratory” product category, it generated $3.57 million in 2023, compared to $4.94 million in 2022, which represented a decrease of $1.37 million.
General and administrative expenses accounted for 23.4% and 17.1% of our total revenues in 2022 and 2021, respectively. Research and Development Expenses Our research and development expenses for the year ended December 31, 2022 was $0.19 million, compared to $0.32 million in 2021.
General and Administrative Expenses Our general and administrative expenses for the year ended December 31, 2023 were $1.2 million, a decrease of $0.7 million compared to $1.9 million for the year ended December 31, 2022. General and administrative expenses accounted for 17.0% and 23.4% of our total revenues in 2023 and 2022, respectively.
Net Loss Net Loss for year ended December 31, 2022 was $4.0 million, compared to net loss of $3.4 million for the year ended December 31, 2021. The increase in net loss was mainly a result of the decrease in revenue.
Net Loss Net loss for the year ended December 31, 2023 was $3.1 million, compared to net loss of $3.9 million for the year ended December 31, 2022. The decrease in net loss was mainly a result of the decline in expenses more than the decline in revenue.
Investing Activities During the year ended December 31, 2022, net cash used in investing activities was $0.40 million, compared to $0.44 million for the year ended December 31, 2021. The payments in 2022 were mainly due to the purchase of equipment.
Investing Activities During the year ended December 31, 2023, net cash used in investing activities was $0.01 million, compared to $0.40 million for the year ended December 31, 2022.
The increase in the proportion of costs to revenue is mainly due to the decline in revenue. Gross Profit (Loss) and Gross (Loss) Margin Gross loss for the year ended December 31, 2022 was $0.5 million, compared to gross profit of $3.0 million in 2021.
The decrease in cost is mainly due to the difference in the proportion of different products to total revenue this year and last year. Gross Loss and Gross Loss Margin Gross loss for the year ended December 31, 2023 was $0.3 million, compared to $0.5 million in 2022.
Although price control leads to a decline in the profitability, the CP’s winning enterprise has a good chance of achieving price-for-volume in order to increase its market share and support its continuous innovation and transformation. On a separate note, rising and advancing consumer demand in China drives the increase of discretionary consumption.
Although price control leads to a decline in the profitability, enterprises who win the CP have a good chance of achieving bulk pricing to increase their market share and support their continuous innovation and transformation. On a separate note, growing and advancing consumer demand in China drives the increase of discretionary consumption.
As a result, we need to balance at least the two factors above (namely, the investment of financial resources and time to obtain the qualification of CP, and the sharp decline in the price of drugs included in CP) before making decisions for any products. In addition, we continue to explore the field of comprehensive healthcare.
As a result, Helpson needs to balance between the market access brought by CP, the investment of financial resources and time to obtain the qualification of CP, and the sharp decline in the price of drugs included in CP before making decisions regarding CP for any products. 48 In addition, Helpson continues to explore the field of comprehensive healthcare.
Our cash and cash equivalents were $2.0 million, representing 11.3% of our total assets, as of December 31, 2022, as compared to $4.9 million, representing 21.5% of our total assets as of December 31, 2021.
Our cash and cash equivalents were $1.42 million, representing 8.6% of our total assets, as of December 31, 2023, as compared to $2.03 million, representing 11.4% of our total assets as of December 31, 2022.
Loss per basic and diluted common share was $0. 76 for the year ended December 31, 2022 and $0.74 for the year ended December 31, 2021, respectively. The number of basic and diluted weighted-average outstanding shares used to calculate loss per share was 5,256,855 for 2022, as compared to 4,612,926 for 2021.
Loss per basic and diluted common share was $0.91 for the year ended December 31, 2023 and $3.78 for the year ended December 31, 2022, respectively. The number of basic and diluted weighted-average outstanding shares used to calculate loss per share was 3,383,573 for 2023, as compared to 1,051,371 for 2022.
The changes in the allowances for doubtful accounts during the years ended December 31, 2022 and 2021 were as follows: For the Fiscal Years Ended December 31, 2022 2021 Balance, Beginning of Period $ 18,312,707 $ 18,150,493 Bad debt expense (93,851 ) (255,215 ) Foreign currency translation adjustment (1,479,329 ) 417,429 Balance, End of Period $ 16,739,527 $ 18,312,707 Loss from Operations Our operating loss for the year ended December 31, 2022 was $3.5 million, compared to an operating loss of $2.9 million in 2021.
The changes in the allowances for doubtful accounts during the years ended December 31, 2023 and 2022 were as follows: For the Fiscal Years Ended December 31, 2023 2022 Balance, Beginning of Period $ 16,739,527 $ 18,312,707 Bad debt benefit (15,757 ) (93,851 ) Bad debt write-offs (2,671,896 ) 0 Foreign currency translation adjustment (265,800 ) (1,479,329 ) Balance, End of Period $ 13,786,074 $ 16,739,527 Our bad debt benefit for the year ended December 31, 2023 was $15,757, as compared to $93,851 in 2022.
Since trial Centralized Procurement (“CP”) activities were initiated in 2018 in 11 cities (including 4 municipalities and 7 other cities), eight rounds of CP activities have been carried out throughout China by the end of 2022, which significantly reduced the price of the drugs that won the bids.
In 2018, relevant Chinese authorities decided to implement trial Centralized Procurement (“CP”) activities in 11 selected pilot cities (including 4 municipalities and 7 other cities), since then, nine rounds of CP activities have been carried out as of November 6, 2023, which significantly reduced the price of the drugs that won the bids.
Because of adjustments in our sales practices and Chinese national centralized drug procurement, we reduced selling expenses to efficiently support our sales and the collection of accounts receivable.
Because of the adjustments in the sales practices and Chinese national CP, we reduced selling expenses to efficiently support the sales and the collection of accounts receivable, especially in the context of the increasing impact of CP, like other players in the industry, we have reduced the promotion expenses.
The increase in Loss from Operations was mainly due to the decrease in revenue in 2022. Net Interest Expense Net interest expense was $0.42 million for the year ended December 31, 2022 and $0.54 million for the year ended December 31, 2021.
Loss from Operations Our operating loss for the year ended December 31, 2023 was $2.8 million, compared to $3.5 million in 2022. Net Interest Expense Net interest expense was $0.33 million for the year ended December 31, 2023 and $0.42 million for the year ended December 31, 2022.
All of the $2.0 million of cash and cash equivalents as of December 31, 2022 are considered to be reinvested indefinitely in the Company’s Chinese subsidiary, Helpson and are not expected to be available for payment of dividends or for other payments to its parent company or to its shareholders. 51 The Company obtained various lines of credit in details described under Note 7 to its condensed consolidated financial statements contained in this report which is incorporated by reference herein.
All of the $1.42 million of cash and cash equivalents as of December 31, 2023 are considered to be reinvested indefinitely in the Company’s Chinese subsidiary, Helpson, and are not expected to be available for payment of dividends or for other payments to its parent company or to its shareholders.
The amount of net accounts receivable that were past due (or the amount of accounts receivable that were more than 180 days old) was $0.03 million and $0.11 million as of December 31, 2022 and 2021, respectively.
In the event the length of collection term is deviated from any of the past pattern of any particular customer, the Company will adjust its credit term. 51 The amount of net accounts receivable that was past due (or the amount of accounts receivable that was more than 180 days old) was $0.01 million and $0.03 million as of December 31, 2023 and 2022, respectively.
We will continue to actively adapt to the national policy guidance and further evaluate market conditions for our existing products then adjust accordingly, and compete in the market in order to optimize our development strategy.
Helpson will continue to actively adapt to the national policy guidance and further evaluate market conditions for the existing products then adjust accordingly, and compete in the market in order to optimize the development strategy. 49 Results of Operations for the Fiscal Year ended December 31, 2023 Revenue Revenue was $7.0 million for the year ended December 31, 2023, which represented a decrease of $1.1 million, as compared to $8.1 million for the year ended December 31, 2022.
Market Trends As a generic drug company, we are presented with a huge domestic market. We believe that through further upgrades and better conformity with Chinese consistency evaluations, which are based on European and American production standards, we will be able to export our products to overseas markets.
Helpson believes that through further upgrades and better conformity with Chinese consistency evaluations, which are based on European and American production standards, it will be able to export the products to overseas markets. In China’s market, Helpson believes that in the future, cost management and control ability will gradually become important factors in determining the competitiveness of generic pharmaceutical enterprises.
The supporting policies from central and provincial governments were constantly issued, including polices regarding consistency evaluation for injectable products. We have always taken the task of promoting the consistency evaluation as a top priority, and worked on them actively.
Helpson has always taken the task of promoting the consistency evaluation as a top priority, and worked on them actively.
Research and development expenses accounted for 2.3% and 3.3% of our total revenues in 2022 and 2021, respectively. These expenditures were mainly spent on the consistency evaluation of our existing products. Bad Debt Benefit Our bad debt benefit for the year ended December 31, 2022 was $93,851, as compared to $255,215 in 2021.
Research and development expenses accounted for 3.4% and 2.3% of our total revenues in 2023 and 2022, respectively. These increased research and development expenditures in 2023 was mainly due to the fact that as the contract progressed, the expenditure for Candesartan consistency evaluation was higher in 2023 as compared to 2022.
We have sufficient production capacity for medical masks, surgical masks, KN95 masks, and N95 masks, which meets the personal needs for protection against the epidemic outbreak.
Helpson has sufficient production capacity for medical masks, surgical masks, KN95 masks, and N95 masks, which meets the personal needs for protection against the epidemic outbreak. Helpson’s N95 medical protective mask has received registration certificate by the end of 2022 and right now has been selling in the mainland China nationwide.
Financing Activities Cash flow used in financing activities was $1.77 million in the year ended December 31, 2022; compared to cash flow generated in financing activities of $4.60 million in the year ended December 31, 2021. This change was mainly because of a convertible debt issued in 2021, and the payback of certain bank loans in 2022.
Financing Activities Cash flow provided by financing activities was $0.07 million in the year ended December 31, 2023; compared to cash flow used in financing activities of $1.77 million in the year ended December 31, 2022.
With the improvement of residents' quality of life, the healthcare demand is also changing.
With the improvement of residents’ quality of life, the healthcare demand is also changing. Helpson believes that there is a large number of unmet demands in comprehensive healthcare and internet healthcare sectors.
Business Overview & Recent Developments We are principally engaged in the development, manufacture and marketing of pharmaceutical products for human use in connection with a variety of high-incidence and high-mortality diseases and medical conditions prevalent in the People’s Republic of China (the “PRC”). All of our operations are conducted in the PRC, where our manufacturing facilities are located.
Helpson is principally engaged in the development, manufacture and marketing of pharmaceutical products for human use in connection with a variety of high-incidence and high-mortality diseases and medical conditions prevalent in the PRC. It manufactures pharmaceutical products in the form of dry powder injectables, liquid injectables, tablets, capsules, and cephalosporin oral solutions.
This decrease was mainly due to the sales decrease of Vitamin B6 in fiscal year 2022, caused by the implementation of centralized procurement policy, a stricter drug centralized procurement policy, as well as market fluctuation. Our “Digestive Diseases” category generated $0.40 million of sales revenue in 2022, which represented an increase of $0.03 million compared to $0.37 million in 2021.
Sales revenues in the “Digestive Diseases” category was $1.09 million of sales revenue in 2023, which represented an increase of $0.68 million compared to $0.41 million in 2022. This increase was mainly due to an increase in sales of the Omeprazole due to market fluctuation.
We had completed the supplementary documents as required by the NMPA in early November 2022We had completed the registration inspection and quality standard review of the Institute for Drug Control on February 2023, and are currently undergoing technical review and waiting for on-site verification. 46 We have taken a more cautious and flexible attitude towards initiating and progressing any project for existing products’ consistency evaluation to cope with the changing macro environment of drug sales in China.
One of the flagship products, Candesartan tablets, a hypertension product, has passed generic-drug-consistency-evaluation in early August 2023. Helpson has taken a more cautious and flexible attitude towards initiating and progressing any project for existing products’ consistency evaluation to cope with the changing macro environment of drug sales in China.
In general, our normal customer credit or payment terms are 90 days. This has not changed in recent years. Due to the peculiar environment affecting the Chinese pharmaceutical market, deferred payments to pharmaceutical companies by state-owned hospitals and local medicine distributors are common.
Such relatively long credit term is due to the peculiar environment affecting the Chinese pharmaceutical market, as deferred payments by state-owned hospitals to local drug distributors are common, and their deferred payments will indirectly delay the payments from our customers to us.
Removed
We manufacture pharmaceutical products in the form of dry powder injectables, liquid injectables, tablets, capsules, and cephalosporin oral solutions.
Added
(“China Pharma”) is not a Chinese operating company but a Nevada holding company. All of our operations are conducted in the PRC through Hainan Helpson Medical & Biotechnology Co., Ltd (“Helpson”), our wholly owned subsidiary incorporated under the laws of the People’s Republic of China (the “PRC”), where the manufacturing facilities are located.
Removed
We have submitted application documents to NMPA at the end of 2021 , and passed the clinical verification of the drug by NMPA in June 2022.
Added
Helpson will continue to optimize its product structure and actively respond to the current health needs of human beings. Market Trends As a generic drug company, Helpson is presented with a huge domestic market.
Removed
Thanks to the green channel provided by Hainan Medical Products Administration, we received the Registration Certificate of N95 medical protective mask at the fastest speed by the end of 2022, when the infection of COVID-19 has surged in China. We will continue to optimize our product structure and actively respond to the current health needs of human beings.
Added
This decline was mainly due to an increasing number of drugs from other medicine providers being included in national CP, while Helpson’s related products have not passed consistency evaluation. As Helpson’s related products are not qualified to participate in CP, the resulting sales has decreased.
Removed
In China’s market, we believe that in the future, cost management and control ability will gradually become important factors in determining the competitiveness of generic pharmaceutical enterprises.
Added
This decrease was mainly due to a decrease in sales of Helpson’s Roxithromycin Dispersible Tablet due to the inclusion of this product in the seventh round of CP, and the Roxithromycin produced by Helpson not passing the consistency evaluation, therefore not eligible to participate in CP.
Removed
Results of Operations for the Fiscal Year ended December 31, 2022 Revenue Revenue was $8.1 million for the year ended December 31, 2022, which represented a decrease of $1.5 million, as compared to $9.6 million for the year ended December 31, 2021.
Added
Sales revenue in the “CNS Cerebral & Cardio Vascular” category was $1.62 million in 2023, which represented a decrease of $0.08 million compared to $1.70 million in 2022. The sales revenue of this category in 2023 is similar to that in 2022, because the increase and decrease in sales of various products due to market fluctuations offset each other.
Removed
This decline was mainly due to exchange rate changes, resurgence of COVID-19 in many cities in China, including Haikou, the city where our operations and manufacturing located, and China's strict epidemic isolation and control, which made offline activities difficult to carry out, and pharmacies and hospitals implementing strict controls.
Added
The decrease in administrative expenses was mainly due to the higher exchange rate of the RMB against the US dollar in 2023 and the higher government subsidies obtained in 2023. Research and Development Expenses Our research and development expenses for the year ended December 31, 2023 was $0.24 million, compared to $0.19 million in 2022.
Removed
This decrease was mainly due to a decrease in sales of our Alginic Sodium Diester due to market fluctuation. 48 Sales revenue of our “Anti-Viral/ Infection & Respiratory” product category was $4.94 million in 2022, compared to $5.22 million in 2021, which represented a decrease of $0.28 million.
Added
Bad Debt Benefit Our bad debt benefit for the year ended December 31, 2023 was $15,757, as compared to $93,851 in 2022. In general, our normal customer credit or payment terms are 90 days. This has not changed in recent years.
Removed
This increase was mainly due to an increase in sales of our Tiopronin due to market fluctuation.
Added
Due to the timeliness requirements of the NMPA for logistics of drug sales, Helpson, like most other pharmaceutical companies in China, sells substantially all the drugs to local drug distributors, certified by GSP (Good Supply Practice), the standard of products supply, which is a standard protocol to control the quality of the products during circulation.
Removed
Our gross loss margin in 2022 was 6.1%, compared to gross profit margin of 3.6% in 2021. The decrease in our profit and our gross margin was mainly due to the decrease in the sales price of main products and the increase in the purchase price of main raw materials.
Added
These GSP certified distributors then sell the drugs to state-owned hospitals. The GSP certified distributors’ payments to us are usually delayed as they will pay us after they receive payment from the state-owned hospitals.
Removed
Especially in the context of the increasing impact of centralized drug procurement, like other players in the industry, we have reduced the promotion expenses. 49 General and Administrative Expenses Our general and administrative expenses for the year ended December 31, 2022 was $1.9 million, compared to $1.7 million for the year ended December 31, 2021.
Added
Therefore, as most of our customers are GSP certified distributors, we adopt a unified policy for bad debt allowance reserves for GMP’s customers who are typically GSP certified distributors.
Removed
In addition to the aggregated advance of $1,425,123 from our CEO as of December 31,2021, we received some temporary advances from and made several repayments to her in the twelve months ended December 31, 2022. As of December 31, 2022, the aggregated advance from our CEO was $1,121,273 for use in operations.
Added
As is typical in the Chinese pharmaceutical market, there are no written contracts between the Company and any of its GSP certified distributors requesting the distributors to pay the Company’s account receivable upon their receipt of funds from the distributors’ customers, or state-owned hospitals.
Added
Nevertheless, the Company’s customers typically process the payment of the account receivable to the Company upon their receipt of payment from their customers, i.e., the state-owned hospitals, as a matter of implied consensus or industry standard.
Added
Our allowance for doubtful accounts as a percentage of accounts receivable was 96.5% and 97.5% as of December 31, 2023 and 2022, respectively. The 1% decrease is due to the write-off of accounts receivable in 2023. We conduct analysis and review on accounts receivables for customers on a specific, per-customer basis in the fourth fiscal quarter of each fiscal year.
Added
For customers (i) whose business license has been cancelled or expired; (ii) whose key business certificates such as GSP (Good Supply Practice) license have been invalid or revoked; (iii) who have no ability to continue operations, or (iv) who are encountering other issues that lead to accounts receivable unrecoverable, the receivable will be written-off as per the resolution of our Board of Directors. 52 We recognize bad debt expenses per actual write-offs as well as changes of allowance for doubtful accounts.
Added
The Company obtained various lines of credit in details described under Note 7 to its audited condensed consolidated financial statements contained in this annual report which is incorporated by reference herein.

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