China Pharma (CPHI) - 2023 Q4 - Annual Report

Part I Business. China Pharma Holdings Inc. operates through its PRC subsidiary Helpson, focusing on pharmaceuticals and TCMs, with strategies for brand promotion and market expansion amidst industry pressures - China Pharma Holdings Inc. is a Nevada holding company, with all operations conducted by its wholly-owned subsidiary, Hainan Helpson Medical and Biotechnology Co., Ltd. (Helpson), in the PRC[12] - Helpson manufactures 19 pharmaceutical products across three categories: Basic generic drugs, First-to-market generic drugs, and Modern Traditional Chinese Medicines (TCMs)[13] - The company's strategy includes promoting existing brands, advancing consistency evaluations for major products (e.g., Candesartan passed in August 2023), exploring the consumption healthcare market, expanding distribution, and exploring CDMO services[33][52][53][54][55][56] Product Revenue by Category | Product Category | 2023 Revenue (USD Million) | 2022 Revenue (USD Million) | Net Change (USD Million) | % 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 pharmaceutical manufacturing industry in China saw a 2.9% decrease in operating revenue and a 17.1% decrease in profit in the first half of 2023, driven by medical insurance fee controls and volume-based procurement policies[19][21][23] - The market size of Traditional Chinese Medicine (TCM) reached RMB 697 billion in 2022, an increase of 2.63% year-on-year, indicating a growing market segment[24] Risk Factors. The company faces diverse risks including market acceptance, regulatory compliance, intense competition, operational dependencies, PRC political and economic uncertainties, and significant financial going concern doubts - The company's commercial success depends on market acceptance of its products among the medical community, influenced by safety, effectiveness, side effects, competitive advantages, ease of administration, marketing efforts, and pricing[114] - Failure to meet standards under the newly revised Drug Administration Law could lead to production suspension and adversely affect operations and profitability[116][117][118] - Most products are off-patent branded generics, increasing competition and potentially reducing profitability if other companies sell equivalent products at lower costs[126][127] - The company relies on distributors for all revenues, with the top five distributors accounting for 22% and 20% of net revenues in 2023 and 2022, respectively, posing risks if relationships are not maintained[147][148] - There is substantial doubt about the company's ability to continue as a going concern due to recurring operating losses, net current liabilities, and an accumulated deficit[260][261][440] - The company is subject to various PRC regulations, including those on foreign currency exchange, dividend distribution, data security, and potential intervention or influence from the Chinese government, which could impact operations and stock value[176][177][186][187][201][202][203][204][205][206][207][208][209][210] - The Holding Foreign Companies Accountable Act (HFCAA) and related regulations pose a risk of delisting from U.S. exchanges if the company's auditor is not inspected by the PCAOB for two consecutive years, although the current auditor is subject to PCAOB inspection[220][221][222][223][224][225][226][227] Unresolved Staff Comments. Smaller reporting companies are not required to provide information on unresolved staff comments - Smaller reporting companies are not required to provide the information required by this item[266] Cybersecurity. The company integrates cybersecurity risk assessment into enterprise risk management, employing a comprehensive threat defense system, with Board oversight, and has reported no material incidents to date - The company has implemented cybersecurity risk assessment procedures and integrated them into its overall enterprise risk management system[267] - A cybersecurity threat defense system is in place, encompassing network, host, and application security, with capabilities for threat defense, monitoring, analysis, response, deception, and countermeasures[268] - The Board of Directors is responsible for overseeing cybersecurity risk management and is informed on risks, reviewing and approving disclosures related to cybersecurity[270] - As of the report date, the company has not experienced any material cybersecurity incidents or identified any material cybersecurity threats[269] Properties. Helpson holds land use rights and owns two production facilities in Haikou, PRC, with a new RMB 10 million ($1.41 million) line of credit collateralized by its new factory and equipment - Helpson was granted land use rights for approximately 22,936 square meters in the Haikou Bonded Zone, Hainan Province, PRC, expiring on September 10, 2063[272] - Helpson owns two production facilities in Haikou, Hainan Province, PRC: one with 663.94 square meters and another with two buildings totaling 20,282.42 and 6,593.20 square meters[273] - Helpson rents office spaces totaling 1,686 square meters in the Jiahai Building, with a lease term ending June 30, 2025[274] Mortgaged Property for Line of Credit | Total Amount of Line of Credit | Lending Institution | Contract Period | Interest Rate | Properties under Mortgage | |:-------------------------------|:--------------------|:----------------|:--------------|:--------------------------| | RMB 10 million (Approx. $1.41 million) | Bank of China | Sep 25, 2023 to Sep 26, 2024 | 3.35% | Helpson's new factory (20,282.42 sq meters) and production line equipment | Legal Proceedings. The company is not currently aware of any legal proceedings or claims expected to have a material adverse effect on its business or financial condition - The company is not currently aware of any legal proceedings or claims that are believed to have a material adverse effect on its business, financial condition, or operating results[277] Mine Safety Disclosures. This item is not applicable to the company - This item is not applicable[278] Part II Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The company's common stock trades on NYSE American under 'CPHI', with 14,816,865 shares outstanding as of March 24, 2024, no cash dividends paid, and 482,000 shares available for future issuance under its incentive plan - The company's common stock trades on the NYSE American under the symbol "CPHI" since September 30, 2009[280] - As of March 24, 2024, there were approximately 133 stockholders of record and 14,816,865 shares of common stock outstanding[5][281] - The company has never paid or declared any cash dividends on its common stock and does not anticipate paying any in the foreseeable future, relying on dividends from its PRC subsidiaries, which are subject to PRC government controls[263][283] Equity Compensation Plan Information (as of March 24, 2024) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |:------------------------------------------|:--------------------------------------------------------------------------------|:----------------------------------------------------------------|:--------------------------------------------------------------------------------------------------------------------------------------------------| | Equity compensation plans not approved by security holders | - | - | | | Equity compensation plans approved by security holders | - | - | 482,000 | | Totals | - | - | 482,000 | Reserved This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations. Revenue decreased to $7.0 million in 2023 due to competition, but net loss improved to $3.1 million from $3.9 million in 2022, though liquidity challenges and going concern doubts persist with $1.42 million cash - Revenue decreased by $1.1 million to $7.0 million for the year ended December 31, 2023, compared to $8.1 million in 2022, mainly due to increased competition from drugs included in national Centralized Procurement (CP) activities[297] Revenue by Product Category (USD Million) | 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% | - Net loss for the year ended December 31, 2023, was $3.1 million, an improvement from $3.9 million in 2022, primarily due to a decline in expenses exceeding the decline in revenue[317] Key Financial Performance Indicators | Metric | 2023 (USD) | 2022 (USD) | Change | |:------------------------------------|:-----------|:-----------|:-------| | Revenue | 7,011,299 | 8,104,092 | -13.48% | | Cost of Revenue | 7,292,384 | 8,598,008 | -15.19% | | Gross (Loss) Profit | (281,085) | (493,916) | 43.10% | | Gross Loss Margin | -4.0% | -6.1% | 2.1 ppt | | Selling Expenses | 780,328 | 1,069,785 | -27.06% | | General and Administrative Expenses | 1,466,084 | 1,893,269 | -22.56% | | Research and Development Expenses | 240,080 | 185,858 | 29.17% | | Bad Debt Benefit | (15,757) | (93,851) | 83.21% | | Loss from Operations | (2,751,820) | (3,548,977) | 22.46% | | Net Interest Expense | (326,998) | (423,864) | 22.87% | | Net Loss | (3,078,818) | (3,972,841) | 22.50% | | Loss per Basic and Diluted Share | (0.91) | (3.78) | 75.93% | | Weighted Average Shares Outstanding | 3,383,573 | 1,051,371 | 221.83% | - Cash and cash equivalents were $1.42 million as of December 31, 2023, down from $2.03 million in 2022, representing 8.6% of total assets. These funds are indefinitely reinvested in Helpson and not available for parent company dividends[318] - Net cash used in operating activities was $0.70 million in 2023, compared to $0.41 million in 2022. Net cash provided by financing activities was $0.07 million in 2023, a significant change from $1.77 million used in 2022[322][324] Quantitative and Qualitative Disclosures about Market Risk. Smaller reporting companies are not required to provide quantitative and qualitative disclosures about market risk - Smaller reporting companies are not required to provide the information required by this item[330] Financial Statements and Supplementary Data. This section refers to the consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows for 2023 and 2022, along with related notes and the independent auditor's report - The consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, stockholders' equity, and cash flows for the years ended December 31, 2023 and 2022, are presented in the 'F' pages of this report[331] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. There have been no changes in or disagreements with accountants on accounting and financial disclosure - None[331] Controls and Procedures. Disclosure controls were ineffective as of December 31, 2023, due to a material weakness in internal control over financial reporting from a lack of US GAAP-knowledgeable personnel, with remediation underway - As of December 31, 2023, the company's disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting[333][338] - The material weakness identified is the lack of accounting financial reporting personnel knowledgeable in US GAAP[339] - Remediation steps include obtaining education and training for personnel regarding proper accounting under U.S. GAAP and reviewing processes to correct identified weaknesses[339] - Despite the material weaknesses, management concluded that the consolidated financial statements are fairly stated in all material respects in accordance with U.S. GAAP[339] - There were no changes in internal control over financial reporting during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[341] Other Information. No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended December 31, 2023 - None of the company's directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the fiscal quarter ended December 31, 2023[342] Disclosure Regarding Foreign Jurisdiction that Prevent Inspections. There is no disclosure regarding foreign jurisdictions that prevent inspections - None[342] Part III Directors, Executive Officers and Corporate Governance. The company's leadership includes Zhilin Li as CEO and interim CFO, with three independent directors forming the Audit Committee, and Gene Michael Bennett as the 'audit committee financial expert', operating under a 2008 Code of Business Conduct and Ethics Directors and Executive Officers (as of March 24, 2024) | Name | Age | Position | |:-------------------|:----|:------------------------------------------------------------------------------------| | Zhilin Li | 71 | Chairperson, President, Chief Executive Officer and interim Chief Financial Officer | | Heung Mei Tsui | 67 | Director | | Gene Michael Bennett | 76 | Independent Director | | Yingwen Zhang | 79 | Independent Director | | Baowen Dong | 81 | Independent Director | - There are no family relationships among the directors or executive officers, and none have been involved in certain legal proceedings in the past ten years[352] - The company adopted a Code of Business Conduct and Ethics on July 8, 2008, applicable to all directors and employees[355] - An Audit Committee was established on February 1, 2008, consisting of the three independent directors, with Gene Michael Bennett identified as an "audit committee financial expert"[356] - Section 16(a) reporting compliance issues were noted for Zhilin Li and Tao Liu regarding late Form 4 and Form 3 filings, respectively, which were subsequently filed[354] Executive Compensation Chairperson Zhilin Li received $241,600 in annual cash compensation for 2023 and 2022, with 482,000 shares available under the incentive plan, and independent directors receiving annual compensation Summary Compensation Table (PEO) | Name and Principal Position | Year Ended | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |:--------------------------------------------------------------------|:-----------|:-----------|:----------|:-----------------|:------------------|:-------------------------------------------|:------------------------------------------------|:---------------------------|:----------| | Zhilin Li, Chairperson, Chief Executive Officer, President and interim Chief Financial Officer | 2023 | 225,600 | | | | | | 16,000 | 241,600 | | | 2022 | 225,600 | - | - | - | - | - | 16,000 | 241,600 | - Ms. Zhilin Li's employment agreement with Helpson was renewed until June 30, 2025, with an annual salary of RMB800,000[360] - The 2010 Long-Term Incentive Plan, as amended, allows for equity awards of up to 580,000 shares of common stock, with 482,000 additional units available for issuance as of March 24, 2024[284][364] Director Compensation (2023) | Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Incentive Plan Compensation ($) | Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |:-------------------|:--------------------------------|:-----------------|:------------------|:--------------------------------|:-----------------------------------|:---------------------------|:----------| | Heung Mei Tsui | 16,000 | - | - | - | - | - | 16,000 | | Gene Michael Bennett | 16,000 | - | - | - | - | - | 16,000 | | Yingwen Zhang | 6,202 | - | - | - | - | - | 6,202 | | Baowen Dong | 6,202 | - | - | - | - | - | 6,202 | - Independent directors Mr. Zhang and Mr. Dong receive RMB40,000 (approx. $6,202) annually, and Mr. Bennett receives $16,000 annually, plus a warrant to purchase 5,000 shares of common stock[367] Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters. As of March 24, 2024, Zhilin Li beneficially owned 20.43% of common stock, with all directors and executive officers as a group owning 21.69% of the 14,816,865 total outstanding shares Beneficial Ownership (as of March 24, 2024) | Name and Address of Beneficial Owners | Amount and Nature of Beneficial Ownership | Percent of Class | |:-----------------------------------------------------------------------------------|:------------------------------------------|:-----------------| | Zhilin Li (President, CEO, Interim CFO, Chairperson) | 3,027,613 | 20.43% | | Heung Mei Tsui (Director) | 186,253 | 1.26% | | Yingwen Zhang (Director) | 0 | * | | Gene Michael Bennett (Director) | 0 | * | | Baowen Dong (Director) | 0 | * | | All directors and executive officers as a group (5 persons) | 3,213,866 | 21.69% | | Tao Liu | 3,000,000 | 20.25% | | Lihua Li | 1,000,000 | 6.75% | | Kui Lai | 1,000,000 | 6.75% | | Jianying Cai | 1,000,000 | 6.75% | - As of March 24, 2024, an aggregate of 14,816,865 shares of common stock were outstanding[369] Certain Relationships and Related Transactions, and Director Independence. Related party transactions include a $1,354,567 loan converted to equity and a RMB 4,770,000 ($738,379) loan from Chairperson Li, with three independent directors and no direct link between TSR and executive compensation - A loan of $1,354,567 from director Ms. Tsui was transferred to Chairperson Li and settled by issuing 2,751,412 shares of restricted common stock on September 29, 2023[375][487] - Chairperson Li provided a loan of RMB 4,770,000 ($738,379) to the company, bearing 4.35% interest, with the due date extended to July 9, 2024[376][488] - Gene Michael Bennett, Baowen Dong, and Yingwen Zhang are determined to be independent directors[377] - The Nomination and Compensation Committee does not have a policy directly linking Total Shareholder Return to executive compensation, instead focusing on liquidity management, NYSE American listing, and patent technology acquisition[383] Pay Versus Performance Information | Year | Summary Comp Total for PEO ($) | Comp. Actually Paid to PEO ($) | Average Summary Comp. Non-PEO NEOs Table ($) | Average Comp. Actually Paid to Non-PEO NEOs ($) | Initial Value of Fixed $100 Investment Based on Total Shareholder Return ($) | Net Income ($) | |:-----|:-------------------------------|:-------------------------------|:---------------------------------------------|:------------------------------------------------|:-----------------------------------------------------------------------------|:---------------| | 2021 | 241,600 | 1,179,200 | 0 | 0 | 108.25 | (3,399,476) | | 2022 | 241,600 | 0 | 0 | 0 | 21.51 | (3,972,841) | | 2023 | 236,000 | 0 | 0 | 0 | 2.71 | (3,022,018) | Principal Accountant Fees and Services. B F Borgers CPA PC billed $132,000 for audit services in both 2023 and 2022, with no other fees, and all services are pre-approved by the Audit Committee to ensure independence - The aggregate fees billed by B F Borgers CPA PC for audit services were $132,000 for both the fiscal years ended December 31, 2023, and 2022[385] - No audit-related fees, tax fees, or other fees were incurred during the fiscal years ended December 31, 2023, and 2022[386][387] - All audit and non-audit services performed by the auditors must be pre-approved by the Audit Committee to assure auditor independence[388] Part IV Exhibits, Financial Statement Schedules. This section lists the financial statements and exhibits filed as part of the 10-K report, including consolidated financial statements for 2023 and 2022, and various corporate documents and interactive data files - The financial statements filed as part of this report include Consolidated Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Stockholders' Equity, and Statements of Cash Flows for the years ended December 31, 2023 and 2022, along with related notes[390][391] - The Exhibit Index details various corporate documents such as Articles of Incorporation, Bylaws, Convertible Promissory Note, Offer Letters, Employment Agreements, Incentive Plans, Securities Purchase Agreements, Technology Transfer Contracts, Office Leases, Code of Business Conduct and Ethics, Subsidiaries list, Consent of Independent Accounting Firm, Certifications, Compensation Recovery Policy, and Interactive Data Files[397][398][399][400][401][402][403][404][405][406][407][408][409][410][411][412][413] Financial Statements REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM B F Borgers CPA PC issued an unqualified opinion on the 2023 and 2022 consolidated financial statements, while noting substantial doubt about the company's ability to continue as a going concern - The independent registered public accounting firm, B F Borgers CPA PC, issued an unqualified opinion on the consolidated financial statements for December 31, 2023 and 2022[418] - The report highlights a substantial doubt about the company's ability to continue as a going concern due to significant operating losses, net current liabilities, and an accumulated deficit[419] - The audit was conducted in accordance with PCAOB standards, and no critical audit matters were determined[421][423] Consolidated Balance Sheets As of December 31, 2023, total assets decreased to $16.47 million, total liabilities significantly decreased to $9.01 million, and total stockholders' equity increased to $7.45 million Consolidated Balance Sheet Summary (USD) | Item | December 31, 2023 | December 31, 2022 | |:------------------------------------------|:------------------|:------------------| | Total Current Assets | 5,996,933 | 5,964,546 | | Property, plant and equipment, net | 7,100,425 | 9,973,065 | | Intangible assets, net | 3,255,232 | 1,807,486 | | TOTAL ASSETS | 16,469,200 | 17,784,143 | | Total Current Liabilities | 6,820,664 | 12,739,447 | | Total Liabilities | 9,014,579 | 13,494,145 | | Total Stockholders' Equity | 7,454,621 | 4,289,998 | - Cash and cash equivalents decreased from $2,029,971 in 2022 to $1,423,838 in 2023[426] - Trade accounts receivable, net of allowance, increased from $421,531 in 2022 to $504,448 in 2023[426] - Convertible, redeemable note payable, net of issue discount, significantly decreased from $3,800,000 in 2022 to $940,000 in 2023[426] Consolidated Statements of Operations and Comprehensive Loss Revenue decreased to $7.01 million in 2023, but net loss improved to $3.08 million from $3.97 million in 2022, with loss per share decreasing to $0.91 due to increased shares outstanding Consolidated Statements of Operations and Comprehensive Loss (USD) | Item | 2023 | 2022 | |:----------------------------------------------------------|:-----------|:-----------| | Revenue | 7,011,299 | 8,104,092 | | Cost of revenue | 7,292,384 | 8,598,008 | | Gross (loss) profit | (281,085) | (493,916) | | Total operating expenses | 2,470,735 | 3,055,061 | | Loss from operations | (2,751,820) | (3,548,977) | | Net other expense | (326,998) | (423,864) | | Loss before income taxes | (3,078,818) | (3,972,841) | | Net loss | (3,078,818) | (3,972,841) | | Other comprehensive income (loss) - foreign currency translation adjustment | (121,011) | (990,764) | | Comprehensive loss | (3,199,829) | (4,963,605) | | Loss per share: Basic and diluted | (0.91) | (3.78) | | Weighted average shares outstanding | 3,383,573 | 1,051,371 | - Revenue decreased by $1.09 million (13.48%) from $8.10 million in 2022 to $7.01 million in 2023[429] - Gross loss improved by $0.21 million (43.10%) from $0.49 million in 2022 to $0.28 million in 2023[429] - Net loss decreased by $0.89 million (22.50%) from $3.97 million in 2022 to $3.08 million in 2023[429] - Loss per basic and diluted common share decreased from $3.78 in 2022 to $0.91 in 2023, partly due to a significant increase in weighted average shares outstanding from 1,051,371 to 3,383,573[429] Consolidated Statements of Stockholders' Equity Total stockholders' equity increased from $4.29 million in 2022 to $7.45 million in 2023, primarily due to common stock issuances for intangible assets and debt conversions, despite a $3.08 million net loss Consolidated Statements of Stockholders' Equity Summary (USD) | Item | December 31, 2022 | December 31, 2023 | |:------------------------------------------|:------------------|:------------------| | Common Stock Amount | 1,498 | 10,625 | | Additional Paid-in Capital | 28,926,931 | 35,282,256 | | Retained Deficit | (36,211,496) | (39,290,314) | | Accumulated Other Comprehensive Income | 11,573,065 | 11,452,054 | | Total Stockholders' Equity | 4,289,998 | 7,454,621 | - Issuance of common stock for intangible assets contributed $1,650,000 to additional paid-in capital in 2023[431] - Conversions of note payable to common stock added $2,856,638 to additional paid-in capital in 2023[431] - Conversion of related party note and interest to common stock added $1,851,701 to additional paid-in capital in 2023[431] - Net loss for the year 2023 was $(3,078,818), increasing the retained deficit[431] Consolidated Statements of Cash Flows Net cash used in operating activities increased to $0.70 million in 2023, investing activities decreased to $0.01 million, and financing activities improved to $0.07 million provided from $1.77 million used in 2022 Consolidated Statements of Cash Flows Summary (USD) | Item | 2023 | 2022 | |:------------------------------------------|:-----------|:-----------| | Net Cash Used in Operating Activities | (699,686) | (409,545) | | Net Cash Used in Investing Activities | (11,517) | (401,964) | | Net Cash (Used In) Provided By Financing Activities | 73,145 | (1,770,007) | | Effect of Exchange Rate Changes on Cash | 31,925 | (247,573) | | Net Increase in Cash, Cash Equivalents and Restricted Cash | (606,133) | (2,829,089) | | Cash and Cash Equivalents at Beginning of Period | 2,029,971 | 4,859,060 | | Cash, Cash Equivalents and Restricted Cash at End of Period | 1,423,838 | 2,029,971 | - Net cash used in operating activities increased by $0.29 million (70.6%) from $0.41 million in 2022 to $0.70 million in 2023[435] - Net cash used in investing activities decreased by $0.39 million (97.1%) from $0.40 million in 2022 to $0.01 million in 2023[435] - Net cash provided by financing activities was $0.07 million in 2023, a significant improvement from $1.77 million used in 2022[435] Notes to Consolidated Financial Statements The notes detail the company's going concern uncertainty, asset composition, related party transactions, debt conversions, and subsequent events including a 1-for-5 reverse stock split and further convertible note redemptions - The company's ability to continue as a going concern is in substantial doubt due to recurring operating losses, net current liabilities, and an accumulated deficit, as discussed in Note 1[440][441][442][443] - Inventory consists of raw materials ($1.85 million), work in process ($0.41 million), and finished goods ($1.47 million) as of December 31, 2023, totaling $3.73 million[469] - Intangible assets include NMPA approved medical formulas, technology from Bonier, and an invention patent for chronic obstructive pulmonary disease acquired from Tao Liu for $1.65 million in common stock[473][476][477][478][482] - A $1.85 million debt from a director was transferred to Chairperson Li and converted into 2,751,412 shares of restricted common stock on September 29, 2023[487] - The Convertible Note Payable balance was $940,000 as of December 31, 2023, down from $3,800,000 in 2022, due to multiple redemptions throughout the year[426][495][502][503][504][505][507][508][509][510][511][513][514] - Effective March 6, 2024, the company implemented a 1-for-5 reverse stock split, retroactively restating all share and per share disclosures[445][560] - Subsequent to year-end, the company entered into a Technology Transfer Agreement with Lihua Li for a pharmaceutical composition for psoriasis, valued at $1.365 million, paid via 3,000,000 shares of common stock[558][559]