UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No.1)
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
Of 1934
For the Quarterly Period Ended June 30, 2008
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
Of 1934
For the Transition Period from _________ to _________
Commission file number: 000-29523
China Pharma Holdings, Inc.
(Exact name of registrant as specified on its charter)
Delaware 73-1564807
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
2nd Floor, No. 17, Jinpan Road, Haikou, Hainan Province, China
(Address of principle executive offices)
0086-898-66811730 (China)
(Registrant's telephone number, including area code)
Copies to:
Charles Law
King and Wood LLP
Suite 1175, 125 S Market Street,
San Jose, CA 95113
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act. Yes [ ] No [X]
As of June 30, 2008, 42,278,938 shares of China Pharma Holdings, Inc. common
stock, par value $0.001 per share, were outstanding.
Transitional Small Business disclosure format: Yes [ ] No [X]
EXPLANATORY NOTE
The registrant filed a Form 10-QSB on August 5, 2008. The registrant is
filing this Form 10Q/A as an amendment to Form 10-QSB with the SEC: 1) to add an
Item 3 - Quantitative and Qualitative Disclosures About Market Risks; and 2) to
amend Item 3 of the Form 10QSB (Item 4 of this Form 10Q/A) Controls and
Procedures as it relates to disclosure controls and internal control procedures
of the report.
In addition, we are also including a currently-dated Sarbanes Oxley Act
Section 302 and Section 906 certifications of the Chief Executive Officer and
Chief Financial Officer that are attached to this Amendment as Exhibits 31.1,
31.2, 32.1and 32.2.
Except as set forth below, this Form 10-Q/A does not modify, amend or
update in any way any other items or disclosure in the Form 10-QSB. This Form
10-Q/A continues to speak as of the date of the original Form 10-QSB and other
than as specifically reflected in the Form 10-Q/A does not reflect events
occurring after the filing of the original Form 10-QSB.
PART I FINANCIAL INFORMATION
Item 3 - Quantitative and Qualitative Disclosures About Market Risks
We have exposure to market risk of changes in foreign currency exchange rates.
We neither hold nor issue financial instruments for trading purposes nor do we
make use of derivative instruments to hedge the risks discussed below.
Foreign Currency Exchange Rates
We collect revenue from operations principally in the Chinese Renminbi. All of
our local sales revenue is collected in and substantially all of our expenses
are paid in the Chinese Renminbi. We face foreign currency rate translation risk
when our Chinese subsidaries results are translated to U.S. Dollars and with
respect to financial instruments denominated in foreign currencies. Our results
of operations denominated in foreign currency are translated at the average rate
of exchange during the reporting period. Assets and liabilities denominated in
foreign currencies at the balance sheet date are translated at the market rate
of exchange ruling at that date. The registered equity capital denominated in
the functional currency is translated at the historical rate of exchange at the
time of capital contribution.
The Chinese Renminbi had remained stable against the U.S. Dollar at
approximately 8.28 Renminbi to 1.00 U.S. Dollar for several years and it was not
until July 21, 2005 that the Chinese currency regime was altered, with a 2.1%
revaluation versus the United States Dollar. This move initially valued the
Renminbi at 8.11 Renminbi per United States Dollar. In addition, the Renminbi is
no longer linked to the U.S. currency but rather to a basket of currencies with
a 0.3% margin of fluctuation. However, there remains international pressure on
the Chinese government to adopt an even more flexible currency policy and as of
June 30, 2008 the exchange rate was 6.8591 Renminbi to 1.00 U.S. Dollar. The
exchange rate of Renminbi is subject to changes in the People's Republic of
China's government policies which are, to a large extent, dependent on the
economic and political development both internationally and locally and the
demand and supply of Renminbi in the domestic market. There can be no assurance
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that such exchange rate will continue to remain stable in the future amongst the
volatility of currencies, globalization and the unstable economies in recent
years. Since (i) our income and profit are mainly denominated in Renminbi, and
(ii) the payment of dividends will be in U.S. dollars, if any, any exchange
fluctuation of the Renminbi against other foreign currencies would adversely
affect the value of the shares and dividends payable to shareholders, in foreign
currency terms.
Item 4 - Controls and Procedures
Disclosure controls and procedures are designed to ensure that financial
information is accumulated and communicated to management, including the
Company's CEO and CFO in a timely manner and then processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.
As required by Rule 13a-15 under the Securities Exchange Act of 1934, within the
90 days prior to the filing date of this report, the Company carried out an
evaluation of the effectiveness of the design and operation of the Company's
internal controls over disclosure and reporting procedures. This evaluation was
carried out under the supervision and with the participation of the Company's
management, including the Company's President, CEO and CFO. The Company has
taken steps to improve our internal controls over recording and reporting which
were disclosed as a material weakness in Item 8A "Controls and Procedures" of
our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007
(the "2007 Form 10-KSB").
As part of this correction process, we recruited three independent directors and
formed an Audit Committee in February 2008 to supervise the implementation of an
Internal Audit Department and to oversee the financial reporting of the Company
including direct communication with our independent auditors. The code of
business conduct and ethics was adopted by the board of directors on July 8,
2008. The code was attached to Form S-1 filed on July 11, 2008 as exhibit 14.1.
We trained our accounting personnel in the application of U.S. GAAP commensurate
with our financial reporting requirements. There have been other changes in the
Company's internal controls subsequent to our assessment to improve internal
controls as indicated in the 2007 Form 10-KSB.
However, due to the recent introduction of the Audit Committee and the internal
audit function, we have not adequately documented our evaluation on the
effectiveness of the function of the Audit Committee and the Internal Audit
function. Therefore, we concluded that even though we have taken remedial
measures, the internal control over financial reporting was not effective as of
the June 30, 2008.
PART II. OTHER INFORMATION
Item 6 - Exhibits
(a) Exhibits
31.1 - Certification of Chief Executive Officer pursuant to Rule 13a-14 and
Rule 15d-14(a) of the Exchange Act.
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31.2 - Certification of Chief Financial Officer pursuant to Rule 13a-14 and
Rule 15d-14(a) of the Exchange Act.
32.1 - Certification of the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
32.2 - Certification of the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
China Pharma Holdings, Inc.
Dated: March 11, 2009 By: /s/ Zhilin Li
------------------
Zhilin Li
Chief Executive Officer,
President and Director
Dated: March 11, 2009 By: /s/ Xinhua Wu
------------------
Xinhua Wu
Chief Financial Officer,
and Director