CHINA PHARMA HOLDINGS INC

Previous wording

In addition, Helpson continues to explore the field of comprehensive healthcare. Comprehensive healthcare is a general concept proposed by the Chinese government according to the development of the times, social needs and changes in disease spectrum. According to the Outline of “Healthy China 2030” issued by Chinese government in October 2016, the total size of China’s health service industry is expected to reach RMB 16 trillion (approximately $2.5 trillion) by 2030. This industry focuses on people’s daily life, aging and diseases, pays attention to all kinds of risk factors and misunderstandings affecting health, calls for self-health management, and advocates the comprehensive care throughout the entire process of life. It covers all kinds of health-related information, products, and services, as well as actions taken by various organizations to meet the health needs. In response to this trend, Helpson launched Noni enzyme, a natural, Xeronine-rich antioxidant food supplement at the end of 2018. It also launched wash-free sanitizers and masks, in 2020, to address the market needs caused by COVID-19 in China. As Chinese government officially terminated its zero-case policy, now the responsibility to protect people from the impact of COVID-19 falls more to the citizens themselves, and masks and sanitizers have been popular since COVID-19. Helpson has sufficient production capacity for medical masks, surgical masks, KN95 masks, and N95 masks, which also meets the personal needs for protection against other respiratory infectious disease. Helpson’s N95 medical protective mask has received registration certificate at the end of 2022 and right now has been selling in the mainland China nationwide.

Current wording

In addition, Helpson continues to explore the field of comprehensive healthcare. Comprehensive healthcare is a general concept proposed by the Chinese government according to the development of the times, social needs and changes in disease spectrum. According to the Outline of “Healthy China 2030” issued by Chinese government in October 2016, the total size of China’s health service industry is expected to reach RMB 16 trillion (approximately $2.5 trillion) by 2030. This industry focuses on people’s daily life, aging and diseases, pays attention to all kinds of risk factors and misunderstandings affecting health, calls for self-health management, and advocates the comprehensive care throughout the entire process of life. It covers all kinds of health-related information, products, and services, as well as actions taken by various organizations to meet the health needs. In response to this trend, Helpson launched Noni enzyme, a natural, Xeronine-rich antioxidant food supplement at the end of 2018. It also launched wash-free sanitizers and masks, in 2020, to address the market needs caused by COVID-19 in China. As Chinese government officially terminated its zero-case policy, now the responsibility to protect people from the impact of COVID-19 falls more to the citizens themselves, and masks and sanitizers have been popular since COVID-19. Helpson has sufficient production capacity for medical masks, surgical masks, KN95 masks, and N95 masks, which also meets the personal needs for protection against other respiratory infectious disease. Helpson’s N95 medical protective mask has received registration certificate at the end of 2022 and has been on the market in the mainland China nationwide.

Previous wording

Revenue decreased by 16.4% to $0.9 million for the three months ended June 30, 2024, as compared to $1.1 million for the three months ended June 30, 2023. This decline was mainly due to an increasing number of drugs from other medicine providers being included in national CP, while Helpson’s peer products have not passed consistency evaluation. As a result, they are not qualified to participate in CP, the resulting sales has decreased.

Current wording

Revenue was $1.1 million for the three months ended September 30, 2024, as compared to $1.8 million in the same period 2023. This decline was mainly due to an increasing number of drugs from other medicine providers being included in national CP, while Helpson’s peer products have not passed consistency evaluation. As a result, they are not qualified to participate in CP, the resulting sales has decreased.

Previous wording

Set forth below are our revenues by product category in millions (USD) for the three months ended June 30, 2024 and 2023:

Current wording

Set forth below are our revenues by product category in millions (USD) for the three months ended September 30, 2024 and 2023, respectively:

Previous wording

Sales of our “Digestive Diseases” was $0.08 million in sales revenue in the six months ended June 30, 2024, compared to $0.37 million in the same period a year ago, which represented a decrease of $0.29 million. This decrease was mainly due to sales decrease of Helpson’s Omeprazole products due to ineligibility to participate in CP.

Current wording

Our “CNS Cerebral & Cardio Vascular” product category generated $0.33 million in sales revenue in the three months ended September 30, 2024 compared to $0.37 million for the same period last year, which represented a decrease of $0.04 million. This decrease was mainly due to the decrease in sales of Candesartan due to market fluctuation.

Previous wording

Our “Other” product category sales decreased by $0.08 million to $0.03 million in the three months ended June 30, 2024 from $0.11 million for the same period in 2023, which was mainly due to the decrease in sales of Vitamin B6 for Injection that was caused by the implementation of CP.

Current wording

“Others” product category generated $0.04 million in sales revenue in the three months ended September 30, 2024 compared to $0.15 million for the same period last year, which represented a decrease of $0.11 million. This decrease was mainly due to the decrease in sales of Vitamin B6 for Injection caused by the implementation of centralized procurement policy, a stricter drug centralized procurement policy, as well as market fluctuation.

Previous wording

For the three months ended June 30, 2024, revenue breakdown by product category showed certain changes to that of the same period in 2023. Sales of the “Anti-Viral/Infection & Respiratory” products category represented 52% and 43% of total sales in the three months ended June 30, 2024 and 2023, respectively. The “CNS Cerebral & Cardio Vascular” product category represented 41% and 32% of total revenue in the three months ended June 30, 2024 and 2023, respectively. The “Other” product category represented 3% and 10% of revenues in the three months ended June 30, 2024 and 2023, respectively. The “Digestive Diseases” product category represented 4% and 15% of total revenue in the three months ended June 30, 2024 and 2023, respectively.

Current wording

For the three months ended September 30, 2024, revenue breakdown by product category showed certain changes to that of the same period in 2023. Sales of the “CNS Cerebral & Cardio Vascular” product category represented 30% and 21% of total revenue in the three months ended September 30, 2024 and 2023, respectively. The “Anti-Viral/Infection & Respiratory” products category represented 61% and 35% of total sales in the three months ended September 30, 2024 and 2023, respectively. The “Digestive Diseases” product category represented 5% and 36% of total revenue in the three months ended September 30, 2024 and 2023, respectively. The “Other” product category represented 4% and 8% of revenues in the three months ended September 30, 2024 and 2023, respectively.

Previous wording

For the six months ended June 30, 2024, our cost of revenue was $3.6 million, or 156.9% of total revenue, comparing to $3.0 million, or 99.0% of total revenue, in the same period in 2023. The increase in the proportion of cost to revenue in this quarter was mainly due to the increase in idle equipment costs due to reduced production, as well as the increased inventory impairments.

Current wording

For the three months ended September 30, 2024, our cost of revenue was $1.6 million, or 147.2% of total revenue, comparing to $2.0 million, or 112.9% of total revenue, for the same period in 2023. The decrease in the dollar value of cost of revenues in the three months ended September 30, 2024 was mainly because that the decrease in revenue; and the increase in ratio of costs to revenue was mainly due to the increase in idle equipment costs due to reduced production, as well as the increased inventory impairments.

Previous wording

Gross Loss and Gross Margin

Current wording

Gross loss and Gross Loss Margin

Previous wording

Gross loss for the three months ended June 30, 2024 was $1.01 million, as compared to $0.15 million during the same period in 2023. For the three months ended June 30, 2024, we had a gross loss margin of 109.8% as compared to a gross loss margin of 13.4% during the same period in 2023. The increase in gross loss is triggered by the decrease in the revenue and increase in the cost of revenue as described above.

Current wording

Gross loss for the three months ended September 30, 2024 was $0.52 million, as compared to $0.23 million during the same period in 2023. Our gross loss margin in the three months ended September 30, 2024 was 47.2% as compared to 12.9% during the same period in 2023. The increase in gross loss is triggered by the decrease in the revenue as described above.

Previous wording

Our selling expenses for the three months ended June 30, 2024 and 2023 were $0.11 million and $0.17 million, respectively. Selling expenses accounted for 12.0% of the total revenue for the three months ended June 30, 2024, as compared to 15.5% during the same period in 2023. As a result of the adjustment of many policies of healthcare reformation, we had reduced the number of personnel and expenses to efficiently support our sales and the collection of accounts receivable.

Current wording

Our selling expenses for the three months ended September 30, 2024 and 2023 were $0.13 million and $0.21 million, respectively. Selling expenses accounted for 12.2% of the total revenue in the three months ended September 30, 2024, as compared to 11.5% during the same period in 2023.

Previous wording

Our research and development expenses for the three months ended June 30, 2024 and 2023 were $0.16 and $0.02 million, respectively. Research and development expenses accounted for 17.8% and 2.2% of our total revenues for the three months ended June 30, 2024 and 2023, respectively. The increase in research and development expenses were mainly due to our increased efforts in drug consistency evaluation.

Current wording

Our research and development expenses for the three months ended September 30, 2024 were $0.09 million, as compared to $0.05 million in the same period in 2023. Research and development expenses accounted for 8.0% and 2.5% of our total revenues in the three months ended September 30, 2024 and 2023, respectively. These expenditures were mainly used for our increased efforts in the consistency evaluations of our existing products.

Previous wording

The amount of accounts receivable that was past due (or the amount of accounts receivable that was more than 180 days old) was $0.06 million and $0.02 million as of June 30, 2024 and December 31, 2023, respectively.

Current wording

The amount of net accounts receivable that was past due (or the amount of accounts receivable that was more than 180 days old) was both $0.03 million as of September 30, 2024 and December 31, 2023, respectively.

Previous wording

The following table illustrates our accounts receivable aging distribution in terms of percentage of total accounts receivable, respective gross accounts receivables as well as the allocated allowance for doubtful accounts as of June 30, 2024 and December 31, 2023:

Current wording

The following tables illustrate our accounts receivable aging distribution in terms of percentage of total accounts receivable, respective gross accounts receivables as well as the allocated allowance for doubtful accounts as of September 30, 2024 and December 31, 2023:

Previous wording

Our bad debt allowance estimate practice is that we consider accounts receivable balances aged within 180 days current, except for any individual uncollectible account assessed by management. We account for the following respective percentage as bad debt allowance based on age of the accounts receivables: 10% of accounts receivable that is between 180 days and 365 days old, 70% of accounts receivable that is between 365 days and 720 days old, and 100% of accounts receivable that is greater than 720 days old.

Current wording

Since the fourth quarter of 2018, our bad debt allowance estimate practice has been updated to a policy that we consider 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 bad debt allowance based on age of the accounts receivables: 10% of accounts receivable that is between 180 days and 365 days old, 70% of accounts receivable that is between 365 days and 720 days old, and 100% of accounts receivable that is greater than 720 days old.

Previous wording

Our allowance for doubtful accounts as a percentage of accounts receivable was 98.2% and 96.5% as of June 30, 2024 and December 31, 2023, respectively.

Current wording

Our allowance for doubtful accounts as a percentage of accounts receivable was 97.7% and 97.8% as of September 30, 2024 and 2023, respectively. The decrease of 0.1% is due to a lower percentage of accounts receivable over 720 days old.

Previous wording

We recognize bad debt expenses per actual write-offs as well as changes of allowance for doubtful accounts. To the extent that our current allowance for doubtful accounts is higher than that of the previous period, we recognize a bad debt expense for the difference during the current period, and when the current allowance is lower than that of the previous period, we recognize a bad debt credit for the difference. The allowance for doubtful account balances were $13.7 million and $13.8 million as of June 30, 2024 and December 31, 2023, respectively. The changes in the allowances for doubtful accounts during the three months ended June 30, 2024 and 2023 were as follows:

Current wording

We recognize bad debt expenses per actual write-offs as well as changes of allowance for doubtful accounts. To the extent that our current allowance for doubtful accounts is higher than that of the previous period, we recognize a bad debt expense for the difference during the current period, and when the current allowance is lower than that of the previous period, we recognize a bad debt credit for the difference. The allowance for doubtful account balances were $13.9 million and $13.8 million as of September 30, 2024 and December 31, 2023, respectively. The changes in the allowances for doubtful accounts during the three months ended September 30, 2024 and 2023 were as follows:

Previous wording

Loss per basic and diluted common share were $0.09 for the three months ended June 30, 2024 and $0.35 for the same period in 2023.

Current wording

Loss per basic and diluted common share was $0.06 for the three months ended September 30, 2024, as compared to $0.29 for the three months ended September 30, 2023.

Previous wording

The number of basic and diluted weighted-average outstanding shares used to calculate loss per share was 14,727,410 for the six months ended June 30, 2024, and 1,653,076 for the six months ended June 30, 2023.

Current wording

The number of basic and diluted weighted-average outstanding shares used to calculate loss per share was 17,306,689 for the three months ended September 30, 2024, and 2,643,270 for the three months ended September 30, 2023.

Previous wording

Results of operations for the six months ended June 30, 2024

Current wording

Results of operations for the nine months ended September 30, 2024

Previous wording

Set forth below are our revenues by product category in millions (USD) for the six months ended June 30, 2024 and 2023, respectively:

Current wording

Set forth below are our revenues by product category in millions (USD) for the nine months ended September 30, 2024 and 2023, respectively:

Previous wording

The most significant revenue decrease in terms of dollar amount was in our “Digestive” product category, which generated $0.04 million in sales revenue in the three months ended June 30, 2024 compared to $0.17 million for the same period a year ago, a decrease of $0.13 million. This decrease was mainly due to the decrease in sales of Omeprazole because of the implementation of CP.

Current wording

The most significant revenue decrease in terms of dollar amount was in our “Digestive Diseases” product category, which generated $0.14 million in sales revenue in the nine months ended September 30, 2024 compared to $1.02 million in the same period last year, a decrease of $0.88 million. This decrease was mainly due to sales decrease of Omeprazole, as the market demand returned to normal after the demand spiked in the same period of 2023.

Previous wording

Sales of our “Anti-Viral/ Infection & Respiratory” product category generated $1.40 million in the six months ended June 30, 2024, and $1.47 million in the six months ended June 30, 2023. This change was mainly due to market volatility.

Current wording

Sales in our “Anti-Viral/ Infection & Respiratory” product category generated $2.07 million in the nine months ended September 30, 2024, as compared to $2.11 million in the nine months ended September 30, 2023. This decrease was mainly due to the decrease in sales of Andro-grapholide and Roxithromycin due to market fluctuation.

Previous wording

The most significant revenue decrease in terms of dollar amount was our “Other” product category, which generated $0.11 million in sales revenue in the six months ended June 30, 2024 compared to $0.47 million in the same period a year ago, represented a decrease of $0.36 million that was mainly caused by the decrease in sales of Vitamin B6 for Injection as our such product is not yet eligible to participate in CP.

Current wording

Our “CNS Cerebral & Cardio Vascular” product category generated $1.02 million in sales revenue in the nine months ended September 30, 2024, compared to $1.12 million in the same period last year, which represented a decrease of $0.10 million that was mainly caused by decrease in sales of Candesartan.

Previous wording

For the six months ended June 30, 2024, revenue breakdown by product category remained similar to that of the same period in 2023. The “Anti-Viral/Infection & Respiratory” products category represented 61% and 48% of total revenues in the six months ended June 30, 2024 and 2023. The “CNS Cerebral & Cardio Vascular” category represented 30% and 25% of total revenue in the six months ended June 30, 2024 and 2023, respectively. The “Others” category represented 5% and 15% of revenues in the six months ended June 30, 2024 and 2023, respectively. And the “Digestive Diseases” category represented 4% and 12% of total revenue in the six months ended June 30, 2024 and 2023, respectively.

Current wording

For the nine months ended September 30, 2024, revenue breakdown by product category showed certain changes to that of the same period in 2023. Sales in the “CNS Cerebral & Cardio Vascular” category represented 30% and 23% of total revenue for the nine months ended September 30, 2024 and 2023, respectively. The “Anti-Viral/Infection & Respiratory” products category represented 61% and 43% of total sales for the nine months ended September 30, 2024 and 2023, respectively. The “Digestive Diseases” category represented 4% and 21% of total revenue for the nine months ended September 30, 2024 and 2023. And the “Other” category represented 5% and 13% of revenues for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Gross loss for the six months ended June 30, 2024 was $1.31 million, compared to gross profit of $0.03 million in the same period in 2023. Our gross loss margin in the six months ended June 30, 2024 was 56.9% compared to a gross profit margin of 1.0% in the same period in 2023. The deterioration of gross margin in this period was mainly due to the increased cost.

Current wording

Gross loss for the nine months ended September 30, 2024 was $1.8 million, compared to $0.2 million in the same period in 2023. Our gross loss margin in the nine months ended September 30, 2024 was 53.8% compared to 4.2% in the same period in 2023. The increase in gross loss is triggered by the decrease in the revenue as described above.

Previous wording

Our selling expenses for the six months ended June 30, 2024 and 2023 were $0.22 million and $0.31 million, respectively. Selling expenses accounted for 9.6% of the total revenue in the six months ended June 30, 2024 compared to 10.3% in the same period in 2023.

Current wording

Our selling expenses for the nine months ended September 30, 2024 and 2023 were $0.35 million and $0.52 million, respectively. Selling expenses accounted for 10.4% of the total revenue in the nine months ended September 30, 2024 compared to 10.7% in the same period in 2023.

Previous wording

Our general and administrative expenses for the six months ended June 30, 2024 were $0.58 million, as compared to $0.53 million in the same period in 2023. Our general and administrative expenses accounted for 25.3% and 17.3% of our total revenues in the six months ended June 30, 2024 and 2023, respectively.

Current wording

Our general and administrative expenses were $0.93 million for the nine months ended September 30, 2024, as compared to $0.78 million in the same period in 2023. Our general and administrative expenses accounted for 27.3% and 16.0% of our total revenues in the nine months ended September 30, 2024 and 2023, respectively. The increase in general and administrative expenses for the nine months ended September 30, 2024 was mainly due to the increase in amortization of intangible asset in this period.

Previous wording

Our research and development expenses for the six months ended June 30, 2024 and 2023 were $0.20 million and $0.05 million, respectively. The increase in research and development costs is mainly due to drug consistency evaluation.

Current wording

Our research and development expenses for the nine months ended September 30, 2024 and 2023 were $0.28 million and $0.09 million, respectively, representing an increase of $0.19 million compared to the same period of last year. The increase in research and development expenses for the nine months ended September 30, 2024 was mainly due to the increased cost in drug consistency evaluation.

Previous wording

The changes in the allowances for doubtful accounts during the six months ended June 30, 2024 and 2023 were as follows:

Current wording

The changes in the allowances for doubtful accounts during the nine months ended September 30, 2024 and 2023 were as follows:

Previous wording

Net loss for the six months ended June 30, 2024 was $2.40 million, as compared to net loss of $1.07 million for the six months ended June 30, 2023. The increase of net loss was mainly a result of increased cost and expenses in this period.

Current wording

Net loss for the nine months ended September 30, 2024 was $3.5 million, as compared to $1.8 million for the nine months ended September 30, 2023. The increase in net loss for the nine months ended September 30, 2024 was mainly due to the decrease in revenue and increase in cost and expenses.

Previous wording

For the six months ended June 30, 2024, loss per basic and diluted common share was $0.16, compared to loss per basic and diluted common share of $0.65 for the six months ended June 30, 2023.

Current wording

For the nine months ended September 30, 2024, loss per basic and diluted common share was $0.23, compared to loss per basic and diluted common share of $0.89 for the nine months ended September 30, 2023.

Previous wording

The number of basic and diluted weighted-average outstanding shares used to calculate loss per share were 16,124,241 and 1,689,985 for the three months ended June 30, 2024 and 2023.

Current wording

The number of basic and diluted weighted-average outstanding shares used to calculate loss per share was 15,593,445 for the nine months ended September 30, 2024, and 2,084,519 for the nine months ended September 30, 2023.

Previous wording

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 June 30, 2024, the aggregated advance from our CEO was $1,140,775 for use in operations. Our cash and cash equivalents were $0.74 million, representing 5.2% of our total assets, as of June 30, 2024, as compared to $1.42 million, representing 8.6% of our total assets as of December 31, 2023. All of the $0.74 million of cash and cash equivalents as of June 30, 2024 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.

Current wording

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 September 30, 2024, the aggregated advance from our CEO was $ 1,166,294 for use in operations. Our cash and cash equivalents were $0.72 million, representing 5.3% of our total assets, as of September 30, 2024, as compared to $1.42 million, representing 8.6% of our total assets as of December 31, 2023. All of the $0.72 million of cash and cash equivalents as of September 30, 2024 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.

Previous wording

Although the Company obtained additional lines of credit in three and six months ended June 30, 2023, there can be no assurance that the Company will be able to achieve its future strategic goals, including the launch of new products. This raises substantial doubt about the Company’s ability to continue as a going concern. Although our Chairperson and Chief Executive Officer had advanced funds for working capital in 2023, there can be no assurances that this will continue in the future. We may seek additional debt or equity financing as necessary when we believe the market conditions are the most advantageous to us and/or require us to reduce certain discretionary spending, which could have a material adverse effect on our ability to achieve our business objectives. There can be no assurance that any additional financing will be available on acceptable terms, if at all.

Current wording

Although the Company renewed lines of credit in 2024 there can be no assurance that the Company will be able to achieve its future strategic goals, including the launch of new products. This raises substantial doubt about the Company’s ability to continue as a going concern. Although our Chairperson and Chief Executive Officer had advanced funds for working capital in the third quarter for fiscal year ending December 31, 2024 there can be no assurances that this will continue in the future. We may seek additional debt or equity financing as necessary when we believe the market conditions are the most advantageous to us and/or require us to reduce certain discretionary spending, which could have a material adverse effect on our ability to achieve our business objectives. There can be no assurance that any additional financing will be available on acceptable terms, if at all.

Previous wording

Net cash used by operating activities was $0.66 million for the six months ended June 30, 2024, compared to $1.68 million in the same period in 2023.

Current wording

Net cash used by operating activities was $0.70 million for the nine months ended September 30, 2024, compared to $0.68 million in the same period in 2023.

Previous wording

As of June 30, 2024, our net accounts receivable was $0.25 million, compared to $0.50 million as of December 31, 2023.

Current wording

As of September 30, 2023, our net accounts receivable was $0.33 million, compared to $0.50 million as of December 31, 2023.

Previous wording

Net cash provided by financing activities was $0.01 million in the six months ended June 30, 2024; compared to net cash used in financing activities of $0.52 million for the same period in 2023.

Current wording

Cash flow provided by financing activities was $0.02 million in the nine months ended September 30, 2024; compared to $0.04 million for the same period in 2023.

Previous wording

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 June 30, 2024 and December 31, 2023, Helpson’s net assets totaled $(4,375,345) and $(2,289,000), 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 June 30, 2024 and December 31, 2023, respectively. The amount that Helpson must set aside for the statutory surplus fund accounts exceeds its total net assets at June 30, 2024 and December 31, 2023. There were no allocations to the statutory surplus reserve accounts during the six months ended June 30, 2024.

Current wording

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 September 30, 2024 and December 31, 2023, Helpson’s net assets totaled $5,273,000 and $2,289,000, 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 September 30, 2024 and December 31, 2023, respectively. The amount that Helpson must set aside for the statutory surplus fund accounts exceeds its total net assets at September 30, 2024 and December 31, 2023. There were no allocations to the statutory surplus reserve accounts during the nine months ended September 30, 2024.

Previous wording

Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). Our financial statements reflect the selection and application of accounting policies which require management to make significant estimates and judgments. Please refer to Note 1 to our unaudited condensed consolidated financial statements, “Organization and Significant Accounting Policies” for the discussion of our critical accounting policies.

Current wording

Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. Our financial statements reflect the selection and application of accounting policies which require management to make significant estimates and judgments. The discussion of our critical accounting policies contained in Note 1 to our consolidated financial statements, “Organization and Significant Accounting Policies”, included in the Company’s annual report on Form 10-K for fiscal year ended December 31, 2023, which is incorporated herein by reference.