CPHI 10-K & 10-Q changes, risk factors and insider trading

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. If the NMPA issues any notices to cease the production, sale and use of any of our products, or request Helpson to recall recall any of our products we sold, we must comply with such requirements. As a result, we may incur significant costs in complying with cessation cessation or recall requirements, and our financial results could be materially and adversely affected. Furthermore, concerns about potential liability liability or potential future changes in product safety regulations may lead us to voluntarily recall or otherwise discontinue selling selected selected products, which could materially and adversely affect our results of operations.

We reported negative gross margins of -43.8%-3.2% for the year ended December 31, 2024,2025, a substantial deterioration from negative gross margins of -4.0%-43.8.0% for the year ended December 31, 2024, 2023, indicating significant challenges in our cost structure and pricing environment. The main reasons for the increase in the gross loss rate were: the rise in idle equipment costs, the increase in inventory impairment provisions, and the significant decline in product sales. sales. 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. To the extent that we fail to develop new products with high profit margins and our high-profit-margin products are replaced by our competitors’ products, our gross profit margins and net profit margins will be adversely affected. In addition, three of our products are included in the National Essential Drug List (the “EDL”), which are subject to strict governmental price controls. Therefore, our gross profit margin and net profit margins could be adversely affected notwithstanding any increase in our revenues.

We operate in a highly competitive environment. Our products compete with other products or treatments for diseases that treat similar medical conditions. Many of our products may compete against products that have lower prices, superior performance, greater ease of administration or other advantages. We would face enhanced competition if competitive products arewere added to the National Medical Insurance Program. Our inability to compete effectively could reduce sales or margins, which could have a material adverse effect on ourthe results of our operations.

Some of our competitors are actively engaging in research and development in areas in which we have products or in which we are developing new productproducts or new indications for existing products. In the future, we expect that our products will compete with new drugs currently in development, drugs approved for other indications that may be approved for the same indications as those of our products and drugs approved for other indications that are used off-label. If alternatives to our products are dispensed or prescribed to patients, the volume of our products sold may decline or we may be required to lower the prices of our products to remain competitive, either of which could negatively impact our sales. In addition, an increasing number of foreign pharmaceutical companies have introduced their pharmaceutical products into the Chinese market. Competitive products introduced by these companies can also negatively impact our sales and results of operations.

Most of our products are off-patent branded generic pharmaceuticals and are not protected by intellectual property rights. As a result, other pharmaceutical companies may sell equivalent products at a lower cost, and this might result in a commensurate loss in sales of our branded generic products or require us to lower our prices to compete. If other pharmaceutical companies sell pharmaceutical products that are similar to our unprotected products, we may face additional competitioncompetition, and our business and profitability may be adversely affected.

The successful development of pharmaceutical products can be influenced by many factors. Products that appear to be promising in their early phases of research and development may fail to be commercially viable for various reasons, such as failing to obtain the necessary regulatory approvals. Additionally, the research and development process for new products for which we may obtain an approval certificate is long. The process of conducting basic research and various stages of tests and trials of a new product before obtaining an approval certificate and commercializing the product may require ten years or longer. A few of our product candidates are in the early stages of pre-clinical study and clinical trials and we must conduct a significant number of additional clinical trials before we can seek the regulatory approvals necessary to begin commercial production and sales of these products. 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-developednewly developed products will achieve commercial success.

Our competitors may obtain approval for a competitive product before ourthe product we are developing is approved. If this occurs, we may be precluded from getting approval until the competitor’s monitoring period expires and realize little to no benefit from our research and development investment.

Complying with such standards may be time-consuming and expensive and could result in delays in obtaining NMPA approval for our future product candidates,candidates or possibly preclude us from obtaining NMPA approval altogether. For example, due to the enhanced criteria introduced during the implementation process of the trial of one of our products in the dried powder injectable and granule production lines in our old plant, the clinical trials lasted longer than originally expected. Furthermore, our future products may not be effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude us from obtaining regulatory approval and prevent or limit their commercial use. 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.

We sell our products exclusively to pharmaceutical distributors in the PRC and rely on distributors for all of our revenues. We have business relationships with certified distributors distributors in the PRC. For the year ended December 31, 2024,2025, no customer accounted for more than 10.0% of sales, and three customers accounted for 63.7%, 13.7%39.2%, 14.4% and 6.3%9.2% of accounts receivable. In line with industry practices in the PRC, we enter into written sales agreements with with our distributors. However, such sales agreements are not in substance equivalent to a typical distribution agreement in the United States. States. Each sales agreement is more in the form of a sales order and specifies one or several purchases of one or more products without any any continuing obligation to purchase any additional amount of products. There are no written contracts between the Company and any of its its distributors requesting the distributors to pay the Company’s account receivable upon their receipt of funds from its customers, or state-owned hospitals. Pharmaceutical distributors 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. 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. Any potential default in repaying the accounts receivable without recourse by the Company may materially and negatively affect the Company’s profitability and business. In the event certain distributors choose not to continue their relationship with us after completing their existing sales agreements, they can do so without breaching any contract or agreement, our financial results could be adversely affected if we cannot find the substantially similar distributors in time under such circumstances. In addition, some of our distributors may sell sell products that compete with our products. We compete for desired distributors with other pharmaceutical manufacturers, many of which may may have higher visibility, greater name recognition, financial resources, and broader product selection than we do. Consequently, maintaining relationships with existing distributors and replacing distributors may be difficult and time-consuming. 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.

We have limited ability to manage and control the activities of our independent distributors and third-party marketing firms that we contract to promote our products and brand name,name; therefore, our reputation, business, prospects and brand may be materially and adversely affected by actions taken by them. Our distributors and third-party marketing firms could take one or more of the following actions, any of which could have a material adverse effect on our business, prospects and brand:

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.sales. Even if a product is approved for commercial use by an appropriate governmental agency, there can be no assurance that users will not claim effects other than those intended resultedresulting from the use of our products. While no material claim for personal injury resulting from allegedly defective products has been brought against us to date, a substantial claim or a substantial number of claims, if successful, could have a material adverse impact on our business, financial condition and results of operations. Such lawsuits may divert the attention of our management from our business strategies, may be costly to defend and may negatively impact on our reputation and our Helpson brand’s reputation, and may harm the sales of our other branded products. In addition, addition, product liability insurance for pharmaceutical products is not available in the PRC. In the event of allegations that any of our products are harmful, we may experience reduced consumer demand for our productsproducts, or our products may be recalled from the market. We may also be forced to defend lawsuits and, if unsuccessful, to pay a substantial amount in damages, legal fees, and other related expenses. In addition, business interruption insurance available in the PRC offers limited coverage compared to that offered in many other countries. We do not have any business interruption insurance. Any business disruption or natural disaster could result in substantial costs and diversion diversion of resources. Lastly, we currently do not have directorsdirectors’ and officersofficers’ insurance. 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.

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, 2023,2025, we had 231221 employees. 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 employeesemployees. In addition, we may need to increase the salary, or the equity incentive plan for the employees to keep them in the Company. Aside from the increased difficulties and increased costs in the management of human resources, we may also encounter working capital issues, as we need increased liquidity to finance the purchases of raw materials and supplies, drug formulas for new products, investment in research and development, and acquisition of new businesses and technologies. Our failure to manage any of the above business administration may lead lead to operational and financial inefficiencies that will have a negative effect on our profitability.

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. Although there is currently no claim against us, we may be subject to claims that these employees or consultants have, inadvertently or otherwise, used or disclosed trade secrets or other proprietary information of from their former employers. It may be necessary to for us to litigate and defend against these claims. Even if we successfully defend ourselves against these claims, litigation could result in substantial costs and be a distraction to our management. If we fail to defend such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel.

Second, while the enforcement of substantive rights may be less clear than United States procedures, foreign-invested enterprises and foreign wholly-owned enterprises are PRC registered companies that enjoy the same status as other PRC registered companies in business-to-business dispute resolutions. The PRC legal infrastructure, however, is significantly different in operation from its United States counterpart,counterpart and may present a significant impediment to the operation of a foreign invested enterprise.

Our operating subsidiary, Helpson, is incorporated under the laws of the PRC and substantially all of our assets are located in the PRC. Additionally, substantially all of our directors, executive officers and managers reside within the PRC, and substantially all assets of these persons are located within the PRC. As a result, it may not be possible to effect service of process within the United States or elsewhere outside the PRC upon certain of our directors, executive officers or managers, including with respect to matters arising under U.S. federal securities laws or applicable state securities laws. 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. Furthermore, an original action may be brought in the PRC against us, our directors, executive officers or managers only if the actions are not required to be arbitrated by PRC law under Helpson’s articles of association, and only if the facts alleged in the complaint give rise to athe cause of action under PRC law. In connection with any such original action, a PRC court may impose civil liability, including monetary damages.

The majority of pharmaceutical manufacturing industryindustry, including the segments under which the Company conducts its business is not included in the 2021 Negative List. Helpson manufactures and markets generic and branded pharmaceutical products as well as biochemical products primarily to hospitals and private retailers located throughout the PRC. The Company believes Helpson’s business is not subject to any ownership restrictions prescribed under the Catalogue. Onny acquired 100% of the ownership inof Helpson on May 25, 2005, by entering into an Equity Transfer Agreement with Helpson’s three former shareholders. The transaction was approved by the Commercial Bureau of Hainan Province on June 12, 20052005, and Helpson received the Certificate of Approval for Establishment of Enterprises with Foreign Investment in the PRC on the same day. Helpson received its business license evidencing its WFOE (Wholly Foreign Owned Enterprise) status on June 21, 2005. 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.

Fluctuation in the value of the Renminbi may have a material and adverse effect on your investment. The change in value of the Renminbi against the U.S. dollar is affected by, among other things, changes in PRC’s political and economic conditions. From 1995 until July 2005, the People’s Bank of China intervened in the foreign exchange market to maintain an exchange rate of approximately Renminbi 8.3 per U.S. dollar. On July 21, 2005, the PRC government changed this policy and began allowing modest appreciation of the Renminbi versus the U.S. dollar. Under the new policy, the Renminbi was permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy caused the Renminbi to appreciate approximately 21.5% against the U.S. dollar over the following three years. As a consequence, the Renminbi has fluctuated sharply since July 2008 against other freely traded currencies, in tandem with the U.S. dollar. 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. 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. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our common stock or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us. In August 2015, the PRC Government devalued its currency by approximately 3%, represented representing the largest yuan depreciation for 20 years. Concerns remain that China’s slowing economy, and in particular its exports, will need a stimulus that can only come from further cuts in the exchange rate.

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. Our business’sbusiness’ profitability may be adversely affected if additional or modified environmental control regulations are imposed upon us.

Any funds the Company transfer to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration with relevant governmental authorities in China. According to the relevant PRC regulations on foreign-invested enterprises, or FIEs, in China, capital contributions to our PRC subsidiaries are subject to the approval of or filing with the Ministry of Commerce, or MOFCOM or its local branches and registration with a local bank authorized by the State Administration of Foreign Exchange, or SAFE. In addition, (i) a foreign loan of less one yearone-year duration procured by our PRC subsidiaries is required to be registered with SAFE or its local branches and (ii) a foreign loan of one year duration or more procured by our PRC subsidiaries is required to be applied to the NDRC in advance for undergoing recordation registration formalities. Any medium or long-term loan to be provided by us to our PRC operating subsidiaries, must be registered with the NDRC and the SAFE or its local branches. The Company may not be able to complete such registrations on a timely basis, with respect to future capital contributions or foreign loans by us to our PRC Subsidiary. If the Company failfails 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.

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. SAFE Circular 19 launched a nationwide reform of the administration of the settlement of the foreign exchange capitals of FIEs and allows FIEs to settle their foreign exchange capital at their discretion,discretion but continues to prohibit FIEs from using the Renminbi fund converted from their foreign exchange capital for expenditure beyond their business scopes, providing entrusted loans or repaying loans between nonfinancial enterprises. The SAFE issued the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or SAFE Circular 16, effective in June 2016. Pursuant to SAFE Circular 16, enterprises registered in China may also convert their foreign debts from foreign currency to Renminbi on a self-discretionary basis. SAFE Circular 16 provides an integrated standard for conversion of foreign exchange under capital account items (including but not limited to foreign currency capital and foreign debts) on a self-discretionary basis which applies to all enterprises registered in China. SAFE Circular 16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a company may not be directly or indirectly used for purposes beyond its business scope or prohibited by PRC laws or regulations, while such converted Renminbi shall not be provided as loans to its non-affiliated entities. As this circular is relatively new, there remains uncertainty as to its interpretation and application and any other future foreign exchange related rules. Violations of these Circulars could result in severe monetary or other penalties. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer any foreign currency we hold, including the net proceeds from this offering, to our WFOE, which may adversely affect our liquidity and our ability to fund and expand our business in China.

On June 10, 2021, the Standing Committee of the National People’s Congress of China promulgated the PRC Data Security Law, which became effective in September 2021. The PRC Data Security Law provides for data security and privacy obligations on entities and individuals carrying out data processing activities, introduces a data classification and hierarchical protection system based on the importance of data, and imposes export restrictions on certain data and information.

On February 22, 2023, CAC issued the Measures for the Standard Contract for Cross-Border Transfer of Personal Information. If our PRC operating entities failedfail to comply with such measures, measures, they may face legal liability under the PRC Personal Information Protection Law, including fines of up to RMB50 million or 5% of annual revenues and may be ordered to suspend related activities or have business licenses revoked.

Anti-Monopoly Law of the People’s Republic of China promulgated by the Standing Committee of the National People’s Congress, which became effective in 2008 and amended in 2022 (“Anti-Monopoly Law”), established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such regulation requires, among other things, that State Administration for Market Regulation (“SAMR”) be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisions of the State Council on the Standard for Declaration of Concentration of Business Operators, issued by the State Council in 2008 and amended in 2018, are triggered. Moreover, the Anti-Monopoly Law requires that transactions which involve the national security, the examination on the national security shall also be conducted according to the relevant provisions of the State. In addition, PRC Measures for the Security Review of Foreign Investment which became effective in January 2021 require acquisitions by foreign investors of PRC companies engaged in military-related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition. We may pursue potential strategic acquisitions that are complementary to our business and operations.

The approval, filing or other requirements of the China Securities Regulatory Commission or other PRC regulatory authorities maywill be required under PRC law in connection with any future issuance of securities overseas, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.

On February 17, 2023, the CSRC also issued a Notice and held a press conference clarifying that companies in mainland China listed overseas before March 31, 2023 are not required to file immediately, but should complete filing for future capital raising activities. As an issuer listed before the effective date, we are not required to complete filing for prior offshore offerings. As of this annual report, we and our PRC operating entities have not been required to obtain permission from or complete filing with CSRC. However, our future capital raising activities maywill be subject to the filing requirement.

On May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act (the “HFCAA”) requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the Company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the Company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national securities exchange or in the over the counterover-the-counter trading market in the U.S. On December 18, 2020, the HFCAA was signed into law.

Our auditor, BFEnrome Borgers CPA PC,LLP, the independent registered registered public accounting firm that issues the audit report included elsewhere in this annual report, is headquartered in Colorado, Singapore, and is subject to inspection by the PCAOB on a regular basis with the last inspection in 2023.basis.

As we are a holding company with all of business operations conducted in PRC by Helpson, which is our wholly-owned subsidiary, we depend on its dividend issuance to us to pay the dividends to our investors. According to the PRC Company Law and Foreign Investment Law, our PRC subsidiary, as a foreign-invested enterprise, or FIE, we may only pay dividends out of their accumulated profit, if any, as determined in accordance with PRC accounting standards and regulations. In additionaddition, we are required to draw 10% of its after-tax profits each year, if any, to fund a common reserve, which may stop stop drawing its after-tax profits if the aggregate balance of the common reserve has already accounted for over 50% of its registered capital. capital. The reserve funds are not distributable as cash dividends. A PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Our ability to distribute dividends may be restricted because of the above-mentioned regulations. regulations. We may even cannot distribute dividends if we are suffering loss in certain fiscal year in the future. As of the date of this annual report, Helpson plans to retain all the revenues and re-invest them intoin Helpson’s daily operation. Therefore, the Company does not intend to have any dividend distribution in the future.

We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries and investments. Our company may be subject to filing obligations or taxed if our company is transferor in such transactions,transactions and may be subject to withholding obligations if our company is transferee in such transactions, under SAT Bulletin 7 and/or SAT Bulletin 37. For transfer of shares in our company by investors who are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under SAT Bulletin 7 and/or SAT Bulletin 37. 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.

Our bylaws provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with orour activities on behalf of us. This indemnification policy could result in substantial expenditures, which we may be unable to recoup.

Our auditors have indicated in their report on our financial statements for the years ended December 31, 20242025 and 20232024 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. The Company incurred recurring losses from operations, has net current liabilities and an accumulated deficit that raiseraises substantial doubt about its ability to continue as a going concern.

To alleviate the conditions that raise substantial substantial doubt about the Company’s ability to continue as a going concern, management plans to enhance the sales model of advance payment, and further strengthen its collection of accounts receivable. Further, the Company is currently exploring strategic alternatives to accelerate the launch of comprehensive healthcare products. The freeze-dried bird'sbird’s nest and Buddha'sBuddha’s hand rose products in the company'scompany’s nutrition and health series have obtained food production licenses. They are currently undergoing market operation, operation and are plannedplanning to be launched this year and are expected to generate sales revenue. This will support the company's company’s continuous operation. In addition, management believes that the Company’s existing fixed assets can serve as collateral to support additional bank loans. Furthermore, the company also strengthened the management of accounts receivable by enhancing the credit assessment of customers, promptly collecting debts and shortening the collection period; it has already initiated and is actively expanding the way of OEM (Original Equipment Manufacturer) to increase the utilization rate of equipment by making use of the existing machines and equipment; and it has been actively striving for government support and subsidies. WhileThe Company will implement multiple measures simultaneously across procurement, production, human resources, and marketing to reduce operating costs. In procurement, the currentCompany planswill consolidate purchasing activities where practical to enhance bargaining power with suppliers. In production, operations will be optimized through approaches such as centralized manufacturing cycles and shifting energy-intensive processes to off-peak hours to reduce power costs. Production personnel will be deployed efficiently to minimize labor expenses while maintaining quality standards. In human resources, the Company will optimize staffing levels and implement targeted incentives to improve work efficiency and output quality, thereby controlling labor costs. Marketing expenditures will be focused on high-return channels through data-driven targeting and channel optimization. Additionally, the Company will enhance employee training in production techniques and cost management principles, fostering a culture of cost awareness throughout the organization. Management believes that, if successfully implemented, these measures may improve the Company’s cash position and allow the Company to fund its operations in the next twelve months, however, there can be no assurance that the Company will be able to achieve its future strategic alternatives alternatives, raising substantial doubt about its ability to continue as a going concern.

China’s consistency evaluation of generic drugs continues to proceed for the year ended December 31, 2024.2025. Helpson has always taken the task of promoting the consistency evaluation as a top priority,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, has passed generic-drug-consistency-evaluation in early August 2023.

In April 2024, Helpson began serving as a Contract Manufacturing Organization (CMO) for a project, undertaking its R&D and post-market commercial production. This initiative generated approximately $50,000 in revenue within the year. UnderIn 2025 this (CMO) project generated $33,227 in revenue .Under the contract terms, once the customer’s product is launched, the company will continue providing production services, further boosting sales revenue and ensuring sustained cash inflows. This project successfully completed process verification in January 2025 and is currently undergoing stability testing. Registration with the National Medical Products Administration (NMPA) ishas expectedmade in the third quarter of 2025. Moving forward, we will leverage our competitive advantages as a CMO, including our highly skilled technical team, state-of-the-art facilities, multiple production lines, ample capacity, extensive manufacturing expertise, and a robust quality management system.

The most significant revenue decrease in terms of dollar amount was in the “Anti-Viral/ Infection & Respiratory” product categorycategory. It generated $2.48 million for the year ended December 31, 2025, compared to $2.75 million for the year ended December 31, 2024, compared to $3.57 million for the year ended December 31, 2023, which represented a decrease of $0.82$0.27 million. This decrease was mainly due to the decrease in sales of the Cefaclor Dispersible Tablets due to a decrease in sales of Helpson not passing the consistency evaluation of Roxithromycin and therefore not being able to participate in CP.

OurThe “CNS Cerebral & Cardio Vascular” product category generated $1.35$1.32 million in sales revenue for the year ended December 31, 2024,2025, compared to $1.62$1.35 million for the sameyear ended December period31, last year,2024, which represented a decrease of $0.27$0.03 million. This decrease was mainly due to thea decrease in sales of Ozagrel Sodium for Injection due to market fluctuation.Candesartan.

Notably, during the year ended December 31, 2024,2025, the company generated an OEM income of $53,338,$33,227, accounting for 1% of our total revenue.revenue, which was attributed from the service income from the service Helpson provided to Contract Manufacturing Organization (CMO) for a project, undertaking its R&D and post-market commercial production.

For the year ended December 31, 2024,2025, our cost of revenue was $6.5$4.3 million, or 143.8%103.2% of total revenue, which represented a decrease of $0.78$2.2 million from $7.3 $6.5 million, or 104.0%143.8% of total revenue, in 2023.2024. The decrease in the dollar value of cost of revenues infor the twelvefiscal monthsyear ended December 31, 20242025 was mainlyprimarily driven because thatby thea $1.10 million decrease in revenue;depreciation expense as certain property and theequipment increase(“PP&E”) became fully depreciated in ratiofiscal ofyear costsended toDecember revenue31, was2024, mainlyand duea to$0.10 themillion increasereduction in idle equipment costs due to reduced production, as well as the increased inventory impairments.obsolescence.

Gross loss for the year ended December 31, 2024 2025 was $2.0$0.1 million, compared to $0.3$2.0 million for the year ended December 31, 2023.2024. Our gross loss margin for the year ended December 31, 2024 2025 was 43.8%,3.2%, compared to 4.0% 43.8% for the year ended December 31, 2023.2024. The main reasons for the increasedecrease in the gross loss rate were:was primarily driven by lower depreciation, as certain property and equipment (“PP&E”) became fully depreciated in the risefiscal inyear idleended equipmentDecember costs31, of2024, approximatelyand $0.66a million, the increasereduction in inventory impairment provisions of approximately $0.86 million, and the significant decline in product sales.obsolescence.

Our selling expenses for the year ended December 31, 2025 were $0.38 million, a decrease of $0.15 million compared to $0.53 million for the year ended December 31, 2024 were $0.53 million, a decrease of $0.25 million compared to $0.78 million for the year ended December 31, 2023.2024. Selling expenses accounted for 11.7%9.1% of the total revenue for the year ended December 31, 20242025 compared to 11.1%11.7% for the year ended December 31, 2023. Because2024. As a result of implementation of centralized volume-based procurement programs administered by the National adjustmentsHealthcare inSecurity Administration, the salesCompany practiceshas reduced traditional selling and Chinesepromotional 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.activities.

Our general and administrative expenses for the year ended December 31, 20242025 were $1.78$2.45 million, an increase of $0.32$0.67 million compared to $1.47$1.78 million for the year ended December 31, 2023.2024. General and administrative expenses accounted for 39.4%59.2% and 20.9%39.4% of our total revenues for the years ended December 31, 20242025 and 2023,2024, respectively. Reason for this increase was the increase of amortization expenses related to the purchased patent technology in 2024.2025.

Our allowance for credit losses forFor the year ended December 31, 2024 was2025, $5,702,the asCompany comparedrecorded toa reversal of bad debt expense of $15,757$1,018, compared to bad debt expense of $5,072 for the same period in 2023.2024.

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 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 of our customers are GSP certified distributors, we adopt a unified policy for bad debt allowance reserves for GMP’s customers who who are typically GSP certified distributors. As is typical in the Chinese pharmaceutical market, there are no written contracts between the the Company and any of its GSP certified distributors requesting the distributors to pay the Company’s account receivable upon their their receipt of funds from the distributors’ customers, or state-owned hospitals. Nevertheless, the Company’s customers typically typically process the payment of the account receivable to the Company upon their receipt of payment from their customers, i.e., the state-owned 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 patternpatterns of any particular customer, the Company will adjust its credit term.

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. We account for the following respective percentage as credit loss 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.

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 the previous period, we recognize a bad debt expense for the difference during the current period, and when the current allowance is lower lower than that of the previous period, we recognize a bad debt credit for the difference. The allowance for credit losses balances werewas $0.01 $13.6 million and $13.8$13.6 million as of December 31, 20242025 and December 31, 2023,2024, respectively. The changes in the allowances for credit losses losses of trade accounts receivable during the years ended December 31, 20242025 and 20232024 were as follows:

Our bad debt expense was $(4,029) and $5,702 for the yearyears ended December 31, 20242025 wasand $5,702,2024, as compared to reversal of allowance for credit losses of $15,757 in 2023.respectively.

Net loss for the year ended December 31, 20242025 was $4.74$3.19 million, compared to net loss of $3.08$4.74 million for the year ended December 31, 2023.2024. The increasedecrease in net loss was mainly a result result of the decline in expenses more than the decline in revenue.

The change in weighted-average shares and per-share amounts reflects the impact of twothree reverse stock splits: a 1-for-10 split effective March 6, 2023, and a 1-for-5 split effective March 6, 2024.2024, Theseand a 1-for 10 split effective April 15, 2025.These splits reduced the number of outstanding shares, with all share and per-share amounts retroactively restated for all periods presented in the accompanying consolidated financial statements.

Our principal source of liquidity is cash generated from operations and bank lines of credit. Currently the Company has not witnessed or expected to encounter any difficulties to refinance those lines of credit this year. As of December 31, 2024,2025, the aggregated advance from our CEO was$1,144,985was $1,435,136 for use in operations. Our cash and cash equivalents were $0.63$0.35 million, representing 4.2%1.1% of our total assets, as of December 31, 2024,2025, as compared to $1.42$0.63 million, representing 8.6%4.2% of our total assets as of December 31, 2023.2024. All of the $0.63$0.35 million of cash and cash equivalents as of December 31, 20242025 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.Helpson.

The Company obtained various lines of credit in in detailsdetail described under Note 8 to its audited consolidated financial statementsstatements, containedwhich is included elsewhere in this reportannual which is incorporated by reference herein.report.

As of December 31, 2024,2025, our net trade accounts receivable was $0.23$0.24 million, aan decreaseincrease of $0.27$0.01 million from $0.50$0.23 million as of December 31, 2023.2024.

During the year ended December 31, 2024,2025, net cash cash used in investing activities was $0.29$0.14 million, compared to $0.01$0.29 million for the year ended December 31, 2023.2024. This decease was mainly due to the lower investment in the development of a medicine formula.

Cash used in financing activities was $0.29 million for the year ended December 31, 2025, compared to $0.03 million provided by financing activities in the same period of 2024. The change was mainly attributable to the repayment of certain bank loans, partially offset by proceeds from the new bank loan 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 December 31, 20242025 and December 31, 2023,2024, Helpson’s net assets totaled ($6,197,000$8,251,000) and ($5,273,000$6,197,000), 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 December 31, 2024 2025 and December 31, 2023,2024, respectively. The amount that Helpson must set aside for the statutory surplus fund accounts exceeds its total net assets atas of December 31, 20242025 and December 31, 2023.2024. There were no allocations to the statutory surplus reserve accounts during the twelvefiscal monthsyear ended December 31, 2024.2025.

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”,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 threesix months ended MarchJune 31,30, 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 MarchJune 31,30, 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.

Results of Operations for the Three Monthsmonths ended MarchJune 31,30, 2026

Revenue was $0.98$0.95 million for the three months ended MarchJune 31,30, 2026, representingwhich represented a decrease of $0.16$0.08 millionmillion, as compared to $1.14$1.03 million for the three months ended MarchJune 31,30, 2025. This This decline was mainly due to an increasing number of drugs from other medicine providers being included in the national CP program, while while Helpson’s comparable products had not passed consistency evaluation and were not qualified to participate in CP. As a result, sales sales of these products decreased.

Set forth below are our revenues by product category in millions (USD) for the three months ended MarchJune 31,30, 2026 and 2025:

The “CNS Cerebral & Cardio Vascular” product category generated $0.51$0.50 million in sales revenue for the three months ended MarchJune 31,30, 2026, compared to $0.34$0.42 million for the same period in 2025, representing an increase of $0.17$0.08 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 “Digestive” product category generated $0.05$0.12 million in sales revenue for the three months ended MarchJune 31,30, 2026, compared to $0.06 million for the same period lastin year,2025, representing aan decreaseincrease of $0.01$0.06 million. This decreaseincrease was primarilymainly due to lowerthe increase in sales of OmeprazoleCompound affectedAmmonium byGlycyrrhetate S for Injection due to market volatility.

The largest revenue decline in dollar terms was in the “OtherAnti-Viral/ Infection & Respiratory” product categorycategory, which generated $0.01 $0.32 million for the three months ended MarchJune 31,30, 2026, compared to $0.02$0.53 million for the threesame monthsperiod ended March 31,in 2025, representing a decrease of $0.01$0.21 million. This decrease was primarily due to lower sales of VitaminRoxithromycin B6Dispersible forTablets Injectionand affectedCefaclor Dispersible Tablets caused by market fluctuations.

In terms of revenue mix, ourthe Company’s product revenue structure changed during the three months ended MarchJune 31,30, 2026, compared with the same period in 2025. The revenue proportion of the “CNS Cerebral & Cardio Vascular” product category increased from 29.9%40% to 52.2%,53%, making it the Company’s largest revenue contributor. The revenue share of the “Anti-Viral / Infection & Respiratory” product category declined from 63.4% 52% to 41.7%,33%, whichmainly wasdriven primarily due toby market conditions, centralized procurement policies and intensified industrialindustry competition. Although this category remains the Company’s second-largest business segment, its relative revenue contribution has decreased. RevenueThe proportionsrevenue forproportion of “Digestive Diseases” rose from 6% to 13% due to the resumption of sales of Compound Ammonium Glycyrrhetate S. Revenue from andthe “Other” productcategory categoriesexperienced remaineda generallyslight stable,year-over-year with mild year-on-year decreases.decrease.

For the threesix months ended MarchJune 31,30, 2026, our cost cost of revenue was $0.70$1.56 million, or 71.0%80.9% of total revenue, whichcompared representedto a decrease of $0.57 million from $1.27$2.39 million, or 112.0% 110.3% of total revenue, for the same period in 2025. The decrease in the cost of revenue in this period was primarilymainly due to lowerthe depreciationdecrease expense,in asamortization certainof propertyour PP&E and equipmentthe decrease (“PP&E”)in becamethe fullyallowance depreciated.of inventory obsolescence.

Gross marginprofit for the threesix months ended MarchJune 30, 31, 2026 was $0.29$0.37 million, compared to a gross loss of $0.14$0.22 million for the same period of 2025. The gross profit margin was 29.0%19.1% for the the threesix months ended MarchJune 31,30, 2026, compared to a gross loss margin of 12.0%10.3% for the same period in 2025.

Our selling expenses for the threesix months ended MarchJune 31,30, 2026 and 2025 were $0.10$0.21 million and $0.19 million, anrespectively. increaseSelling expenses accounted for 10.8% of $0.01the milliontotal revenue in the six months ended June 30, 2026 compared to $0.09 million8.7% 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.

Our general and administrative expenses for the threesix months ended MarchJune 31,30, 2026 were $1.23$2.60 million, an increase of $0.72 millionas compared to $0.51$0.95 million forin the same period in 2025. General Our general and administrative expenses accounted for 124.7%134.8% and 44.6%43.8% of our total revenues forin the threesix months ended MarchJune 31,30, 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..assets.