China Pharma Holdings, Inc.: Form 10-Q for the period ended Mar 31, 2026

The statements contained in this report with respect to our financial condition, results of operations and business that are not historical facts are forward-looking statements. Forward-looking statements can be identified by the use of forward-looking terminology, such as “anticipate,” “believe,” “expect,” “plan,” “intend,” “seek,” “estimate,” “project,” “could,” or the negative thereof or other variations thereon, or by discussions of strategy that involve risks and uncertainties. Management wishes to caution the readers that any such forward-looking statements contained in this report reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors, including, but not limited to, economic, competitive, regulatory, technological, key employees, and general business factors affecting our operations, markets, growth, services, products, licenses and other factors, some of which are described in this report and some of which are discussed in our other filings with the Securities and Exchange Commission (the “SEC”). These forward-looking statements are only estimates or predictions. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of risks facing our company, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events.

These risk factors should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. All written and oral forward-looking statements made in connection with this report that are attributable to our company or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given these uncertainties, we caution investors not to unduly rely on our forward-looking statements. 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. (“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. 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. 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 for the three months ended March 31, 2026. Helpson has always taken the task of promoting consistency evaluation as a top priority and worked on them actively. 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. One of the flagship products, Candesartan tablets, a hypertension product, passed generic-drug-consistency-evaluation in early August 2023.

In response to the evolving macro-environment of pharmaceutical sales in China, Helpson has adopted a more prudent and flexible approach to the initiation and advancement of consistency evaluation projects for its existing products. In 2018, the relevant competent authorities in China decided to launch pilot Centralized Procurement (“CP”) programs in 11 selected pilot cities, including four municipalities directly under the Central Government and seven other cities. As of March 31, 2026, a total of eleven rounds of national-level CP have been implemented. Among them, the first to eighth batches of CP have successfully completed unified renewal procurement cycles, covering 316 commonly used drugs across 26 therapeutic areas. These CP initiatives have significantly reduced the prices of bid-winning drugs and reshaped the competitive landscape of the pharmaceutical market. In addition, consistency evaluation has long been established as a core qualification criterion for enterprises to participate in CP programs. Consequently, before making decisions on whether to participate in CP for any of its products, Helpson evaluates the potential market access opportunities provided by CP against the financial and time investments required to obtain CP qualification, as well as the risk of significant price declines for drugs included in the CP catalog.

In addition, Helpson continues to explore the field of comprehensive healthcare. 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. This industry focuses on people’s daily life, aging and diseases, pays attention to all kinds of risk factors and misunderstandings affecting health, calls for self-health management, and advocates comprehensive care throughout the entire process of life. It covers all kinds of health-related information, products, and services, as well as actions taken by various organizations to meet health needs. Responding to industry development trends, Helpson launched noni enzyme at the end of 2018, a natural antioxidant dietary supplement rich in xeronine. In 2020, the Company introduced no-rinse disinfectant and protective mask products to meet market demand driven by the COVID-19 pandemic in China. At the end of 2022, the Company obtained the medical device registration certificate for its N95 medical protective masks. Accordingly, the Company has sufficient production capacity for medical masks, surgical masks, KN95 masks and N95 masks, which enabled it to support demand for public and personal protective equipment related to respiratory infectious disease prevention.

In April 2024, Helpson began serving as a Contract Manufacturing Organization (CMO) for a project, undertaking R&D and post-market commercial production activities. This initiative generated approximately $50,000 in revenue in 2024. In 2025, the CMO project generated $33,227 in revenue. Under the contract terms, following the launch of the customer’s product, the Company expects to continue providing production services, which may contribute to additional sales revenue and ensure sustained cash inflows. The project completed process validation in January 2025 and is currently undergoing stability testing. The registration application submission to the National Medical Products Administration (NMPA) was finalized in the third quarter of 2025 and is currently under regulatory review. Moving forward, the Company intends to leverage its competitive advantages as a CMO, including its highly skilled technical team, state-of-the-art facilities, multiple production lines, ample capacity, extensive manufacturing expertise, and a robust quality management system.

Results of Operations for the Three Months ended March 31, 2026

Revenue

Revenue was $0.98 million for the three months ended March 31, 2026, representing a decrease of $0.16 million compared to $1.14 million for the three months ended March 31, 2025. This decline was mainly due to an increasing number of drugs from other medicine providers being included in the national CP program, while Helpson’s comparable products had not passed consistency evaluation and were not qualified to participate in CP. As a result, sales of these products decreased.

Set forth below are our revenues by product category in millions (USD) for the three months ended March 31, 2026 and 2025:

The “CNS Cerebral & Cardio Vascular” product category generated $0.51 million in sales revenue for the three months ended March 31, 2026, compared to $0.34 million for the same period in 2025, representing an increase of $0.17 million. This increase was primarily attributable to higher sales of Gastrodin Injection and Candesartan Cilexetil. The increase in Gastrodin Injection sales was supported by its selection in centralized procurement programs across 15 provinces and municipalities, while Candesartan Cilexetil benefited from inclusion in the renewal procurement of the first eight batches of national centralized procurement.

The largest revenue decline in dollar terms were in the “Anti-Viral/ Infection & Respiratory” product category, which generated $0.41 million for the three months ended March 31, 2026, compared to $0.72 million for the three months ended March 31, 2025, representing a decrease of $0.31 million. This decrease was primarily due to lower sales of Roxithromycin Dispersible Tablets and Cefaclor Dispersible Tablets caused by market fluctuations.

The “Digestive” product category generated $0.05 million in sales revenue for the three months ended March 31, 2026, compared to $0.06 million for the same period last year, representing a decrease of $0.01 million. This decrease was primarily due to lower sales of Omeprazole affected by market volatility.

The “Other” product category generated $0.01 million for the three months ended March 31, 2026, compared to $0.02 million for the three months ended March 31, 2025, representing a decrease of $0.01 million. This decrease was primarily due to lower sales of Vitamin B6 for Injection affected by market fluctuations.

In terms of revenue mix, our product revenue structure changed during the three months ended March 31, 2026, compared with the same period in 2025. The revenue proportion of the “CNS Cerebral & Cardio Vascular” product category increased from 29.9% to 52.2%, making it the Company’s largest revenue contributor. The revenue share of “Anti-Viral/ Infection & Respiratory” product category declined from 63.4% to 41.7%, which was primarily due to market conditions, centralized procurement policies and intensified industrial competition. Although this category remains the second-largest business segment, its relative revenue contribution has decreased. Revenue proportions for “Digestive Diseases” and “Other” product categories remained generally stable, with mild year-on-year decreases.

Core cardiovascular and cerebrovascular products achieved higher sales during the period supported by policy benefits such as successful bids in multi-regional centralized procurement programs and renewal of national centralized procurement, which contributed to changes in our product mix. In contrast, the shrinking proportion of respiratory and anti-infection products was primarily attributable to changes in market demand and increased competition. Going forward, we expect to focus on the cardiovascular and cerebrovascular sectors, optimize its product portfolio, and manage weaker product lines, with the objective of steadily enhancing overall profitability and operational resilience.

Cost of Revenue

For the three months ended March 31, 2026, our cost of revenue was $0.70 million, or 71.0% of total revenue, which represented a decrease of $0.57 million from $1.27 million, or 112.0% of total revenue, for the same period in 2025. The decrease was primarily due to lower depreciation expense, as certain property and equipment (“PP&E”) became fully depreciated.

Gross Profit/ (Loss) and Gross Profit/ (Loss) Margin

Gross margin for the three months ended March 31, 2026 was $0.29 million, compared to a gross loss of $0.14 million for the same period of 2025. The gross profit margin was 29.0% for the three months ended March 31, 2026, compared to a gross loss margin of 12.0% for the same period in 2025.

The increase in gross margin was mainly attributable to certain machinery and equipment reaching the end of their estimated useful lives and being fully depreciated, which reduced product costs and contributed to the shift from gross loss to gross profit.

Selling Expenses

Our selling expenses for the three months ended March 31, 2026 were $0.10 million, an increase of $0.01 million compared to $0.09 million for the same period in 2025. Selling expenses accounted for 9.7% of total revenue for the three months ended March 31, 2026, compared to 7.7% for the same period in 2025. The increase in proportion was primarily due to lower sales revenue.

General and Administrative Expenses

Our general and administrative expenses for the three months ended March 31, 2026 were $1.23 million, an increase of $0.72 million compared to $0.51 million for the same period in 2025. General and administrative expenses accounted for 124.7% and 44.6% of our total revenues for the three months ended March 31, 2026 and 2025, respectively. The increase was mainly attributable to the Company’s acquisition of five new patented technologies since August 2025, which resulted in higher amortization expenses for intangible assets..

Research and Development Expenses

Our research and development expenses were $0.08 million for the three months ended March 31, 2026, compared to $0.03 million for the same period in 2025. Research and development expenses accounted for 8.5% and 2.6% of our total revenues for the three months ended March 31, 2026 and 2025, respectively. These expenditures were primarily related to the consistency evaluation of existing products.

Credit Gains

Our credit gains for the three months ended March 31, 2026 were $2,881, compared to $1,323 for the same period in 2025.

In general, our normal customer credit or payment terms are 90 days. This has not changed in recent years. 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. 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. 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. Therefore, as most of our customers are GSP certified distributors, we have adopted a unified policy for bad debt allowance reserves for GMP’s customers who are typically GSP certified distributors. 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. 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. In the event the length of collection term is deviated from any of the past patterns of any particular customer, the Company will adjust its credit term.

The amount of net accounts receivable that was past due (or the amount of accounts receivable that was more than 180 days old) was $0.06 million and $0.06 million as of March 31, 2026 and December 31, 2025, respectively.

The following table illustrates our trade 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 credit losses as of March 31, 2026 and December 31, 2025:

Our allowance for credit losses estimate practice using the current expected credit loss method considers accounts receivable balances aged within 180 days current, except for any individual uncollectible account assessed by management.

Our allowance for credit losses as a percentage of accounts receivable of trade accounts receivable was 4.6% and 5.1% as of March 31, 2026 and December 31, 2025, respectively.

We conduct analysis and review of accounts receivables for customers on a specific, per-customer basis in the fourth fiscal quarter of each fiscal year. 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.

We recognize credit losses per actual write-offs as well as changes of allowance for credit losses. To the extent that our current allowance for credit losses is higher than that of the previous period, we recognize a bad debt expense for the difference during the current period, and when the current allowance is lower than that of the previous period, we recognize a credit gain for the difference. The allowance for credit losses balances was $0.009 million as of March 31, 2026 and $0.01 million as of December 31, 2025, respectively. The changes in the allowances for credit losses of trade accounts receivable during the three months ended March 31, 2026 and 2025 were as follows:

Our credit gains for the three months ended March 31, 2026 were $3,779, compared to $1,323 for the same period in 2025. As we previously disclosed in our annual report for the fiscal year ended December 31, 2025, the write-off of long-outstanding accounts receivable during 2025 reduces both gross accounts receivable and the allowance for doubtful accounts by the same amount.

Loss from Operations

Our operating loss for the three months ended March 31, 2026 was $1.12 million, compared to $0.76 million in the same period in 2025. The increase in operating loss was mainly attributable to higher amortization of intangible assets

Net Interest Expense

Net interest expense was $0.03 million for both the three months ended March 31, 2026 and 2025, remained unchanged year-over-year.

Net Loss

Net loss for the three months ended March 31, 2026 was $1.14 million, compared to $0.79 million for the same period in 2025. The increase in net loss was primarily driven by an increase in amortization of intangible assets.

Loss per basic and diluted common share was $0.04 for the three months ended March 31, 2026 and $0.24 for the three months ended March 31, 2025, respectively. The number of basic and diluted weighted-average outstanding shares used to calculate loss per share was 25,602,002 for the three months ended March 31, 2026, as compared to 3,261,911 for the same period in 2025.

Liquidity and Capital Resources

Our principal source of liquidity is cash generated from operations and bank lines of credit. Currently, we have not encountered or expect to encounter any difficulties in refinancing these lines of credit this year. As of March 31, 2026, we received an aggregate advance of $1.47 million from our CEO for use in operations. Our cash and cash equivalents totaled $0.17 million, representing 0.4% of our total assets, as of March 31, 2026, compared to $0.41 million, or 2.9% of total assets, as of March 31, 2025. All of the $0.17 million of cash and cash equivalents as of March 31, 2026 is considered to be reinvested indefinitely in our Chinese subsidiary, Helpson, and is not expected to be available for payment of dividends or for other payments to us as the parent company or to our shareholders.

We obtained various lines of credit, as described in Note 8 to our unaudited condensed consolidated financial statements included in this Report, which are incorporated by reference herein.

We cannot guarantee the achievement of our future strategic goals, including the launch of new products. This raises substantial doubt about our ability to continue as a going concern. Although our Chairperson and Chief Executive Officer had advanced funds for working capital for the three months ended March 31, 2026, there can be no assurances that this support will continue in the future. We may seek additional debt or equity financing as necessary when market conditions are favorable and/or may need to reduce certain discretionary spending, which could have a material adverse effect on our ability to achieve our business objectives. There can be no assurance that any additional financing will be available on acceptable terms, if at all.

Operating Activities

Net cash used in our operating activities was $0.06 million for the three months ended March 31, 2026, compared to $0.07 million for the same period in 2025.

As of March 31, 2026, our net trade accounts receivable was $0.20 million, a decrease of $0.04 million from $0.24 million as of December 31, 2025.

As of March 31, 2026, our total inventory was $1.50 million, compared to $1.62 million as of December 31, 2025.

Investing Activities

During the three months ended March 31, 2026, net cash used in investing activities totaled $0, while the same period in 2025 saw net cash used in investing activities of $0.06 million.

Financing Activities

Cash flow used by financing activities was $79,325 in the three months ended March 31, 2026, compared to $76,820 provided for the same period for the three months ended March 31, 2025.

According to relevant PRC laws, companies registered in the PRC, including our PRC subsidiary, Helpson, are required to allocate at least ten percent (10%) of their after-tax net income, as determined under the accounting standards and regulations in the PRC, to statutory surplus reserve accounts until the reserve account balances reach fifty percent (50%) of the companies’ registered capital prior to their remittance of funds out of the PRC. 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 March 31, 2026 and December 31, 2025, Helpson’s net assets totaled ($8,884,096) and ($8,251,000), 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 March 31, 2026 and December 31, 2025, respectively. The amount that Helpson must set aside for the statutory surplus fund accounts exceeds its total net assets as of March 31, 2026 and December 31, 2025. There were no allocations to the statutory surplus reserve accounts during the three months ended March 31, 2026.

The Chinese government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of China. Our businesses and assets are primarily denominated in RMB. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires the submission of a payment application form together with certain invoices and executed contracts. The currency exchange control procedures imposed by Chinese government authorities may restrict Helpson, our Chinese subsidiary, from transferring its net assets to our parent company through loans, advances or cash dividends.

Off-Balance Sheet Arrangements

As of March 31, 2026, we did not have any off-balance sheet arrangements.

Critical Accounting Policies

Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. Our financial statements reflect the selection and application of accounting policies which require management to make significant estimates and judgments. The discussion of our critical accounting policies contained in Note 1 to our consolidated financial statements, “Organization and Significant Accounting Policies”, included in the Company’s annual report on Form 10-Q for the three months ended March 31, 2026, which is incorporated herein by reference.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and interim Chief Financial Officer evaluated the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (the “Exchange Act”) Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this quarterly report. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act (a) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (b) is accumulated and communicated to management, including our Chief Executive Officer and interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as described above. Based on this evaluation, our Chief Executive Officer and interim Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2026 to satisfy the objectives for which they are intended. This was due to the material weakness in our internal control over financial reporting, with respect to our lack of accounting financial reporting personnel who were knowledgeable in U.S. GAAP, as disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on April 1, 2026. Notwithstanding the aforementioned material weakness, management has concluded that our condensed consolidated financial statements included in this report are fairly stated in all material respects in accordance with U.S. GAAP for each period presented herein.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.