{"url_path":"/sec/cphi/10-q/2026/item-1","section_key":"item-1","section_title":"Item 1 Financial Statements**","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1106644/0001213900-26-057705-index.html","accession_number":"0001213900-26-057705","cik":"0001106644","ticker":"CPHI","issuer_name":"CHINA PHARMA HOLDINGS, INC.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1106644/0001213900-26-057705-index.html","primary_entity_key":"0001106644","primary_entity_name":"CHINA PHARMA HOLDINGS, INC."},"word_count":7446,"has_tables":true,"body_markdown":"** **\n\n**Item 1. Financial Statements**\n\n** **\n\n**CHINA PHARMA HOLDINGS, INC. AND SUBSIDIARIES**\n\n \n\n**TABLE OF CONTENTS**\n\n \n\n[Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025 (Unaudited)](#f_001)\n2\n\n \n \n\n[Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2026 and 2025 (Unaudited)](#f_002)\n3\n\n \n \n\n[Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2026 and 2025 (Unaudited)](#f_003)\n4\n\n \n \n\n[Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025 (Unaudited)](#f_004)\n5\n\n \n \n\n[Notes to Condensed Consolidated Financial Statements (Unaudited)](#f_005)\n6\n\n \n\n1\n\n \n\n \n\n**CHINA PHARMA HOLDINGS, INC.**\n\n**CONDENSED CONSOLIDATED BALANCE SHEETS**\n\n**AMOUNTS IN U.S. DOLLARS, EXCEPT FOR SHARE DATA**\n\n**(Unaudited)**\n\n \n\n  \nMarch 31,  \nDecember 31, \n\n  \n2026  \n2025 \n\nASSETS \n   \n  \n\nCurrent Assets: \n   \n  \n\nCash and cash equivalents \n$168,474  \n$345,112 \n\nTrade accounts receivable, less allowance for credit losses of $9,434 and $13,023 \n 196,262  \n 241,412 \n\nOther receivables, less allowance for credit losses of $33,563 and $32,153, respectively \n 61,657  \n 49,261 \n\nAdvances to suppliers \n 4,382  \n 6,831 \n\nInventories \n 1,498,501  \n 1,621,423 \n\nPrepaid expenses \n 74,279  \n 82,368 \n\nTotal Current Assets \n 2,003,555  \n 2,346,407 \n\n  \n    \n   \n\nProperty, plant and equipment, net \n 4,303,993  \n 4,391,964 \n\nRight-of-use assets \n 161,875  \n 181,828 \n\nIntangible assets, net \n 38,674,367  \n 24,079,265 \n\nTOTAL ASSETS \n$45,143,790  \n$30,999,464 \n\n  \n    \n   \n\nLIABILITIES AND STOCKHOLDERS’ EQUITY \n    \n   \n\nCurrent Liabilities: \n    \n   \n\nTrade accounts payable \n$837,108  \n$891,083 \n\nAccrued expenses \n 311,336  \n 350,643 \n\nOther payables \n 2,591,141  \n 2,563,067 \n\nContract liabilities \n 61,746  \n 111,580 \n\nBorrowings from related parties \n 1,466,145  \n 1,435,136 \n\nLease liabilities \n 71,386  \n 71,628 \n\nCurrent portion of lines of credit \n 1,928,816  \n 1,977,222 \n\nTotal Current Liabilities \n 7,267,678  \n 7,400,359 \n\nNon-current Liabilities: \n    \n   \n\nLease liabilities, net of current portion \n 92,294  \n 111,548 \n\nDeferred tax liability \n 759,628  \n 747,805 \n\nTotal Liabilities \n 8,119,600  \n 8,259,712 \n\nCommitments and Contingencies (Note 13) \n \n \n  \n \n \n \n\nStockholders’ Equity: \n    \n   \n\nPreferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued or outstanding \n \n-\n  \n \n-\n \n\nCommon stock, $0.001 par value; 500,000,000 shares authorized; 40,522,002 shares and 15,522,002 shares issued and outstanding, respectively \n 40,522  \n 15,522 \n\nAdditional paid-in capital \n 73,504,819  \n 58,535,819 \n\nSecurities purchase agreement receivable \n (180,000) \n (180,000)\n\nAccumulated deficit \n (48,357,383) \n (47,214,235)\n\nAccumulated other comprehensive income \n 12,016,232  \n 11,582,646 \n\nTotal Stockholders’ Equity \n 37,024,190  \n 22,739,752 \n\nTOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY \n$45,143,790  \n$30,999,464 \n\n \n\nThe accompanying notes are an integral part of\nthese unaudited condensed consolidated financial statements.\n\n \n\n2\n\n \n\n \n\n**CHINA PHARMA HOLDINGS, INC.**\n\n**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**\n\n**AND COMPREHENSIVE LOSS**\n\n**AMOUNTS IN U.S. DOLLARS, EXCEPT FOR SHARE DATA**\n\n**(Unaudited)**  \n\n \n\n  \nFor the Three Months \n\n  \nEnded March 31, \n\n  \n2026  \n2025 \n\nRevenue \n$983,536  \n$1,136,287 \n\nCost of revenue \n 698,049  \n 1,272,348 \n\n  \n    \n   \n\nGross profit (loss) \n 285,487  \n (136,061)\n\n  \n    \n   \n\nOperating expenses: \n    \n   \n\nSelling expenses \n 95,598  \n 87,111 \n\nGeneral and administrative expenses \n 1,226,272  \n 507,182 \n\nResearch and development expenses \n 83,762  \n 29,587 \n\nCredit losses \n (2,881) \n (1,323)\n\nTotal operating expenses \n 1,402,751  \n 622,557 \n\n  \n    \n   \n\nLoss from operations \n (1,117,264) \n (758,618)\n\n  \n    \n   \n\nOther income (expense): \n    \n   \n\nInterest income \n 147  \n 1,074 \n\nInterest expense \n (26,031) \n (28,028)\n\nNet other expense \n (25,884) \n (26,954)\n\n  \n    \n   \n\nLoss before income taxes \n (1,143,148) \n (785,572)\n\nIncome tax expense \n \n-\n  \n \n-\n \n\nNet loss \n (1,143,148) \n (785,572)\n\nOther comprehensive income - foreign currency translation adjustment \n 433,586  \n 7,516 \n\nComprehensive loss \n$(709,562) \n$(778,056)\n\nLoss per share: \n    \n   \n\nBasic and diluted \n$(0.04) \n$(0.24)\n\nWeighted average shares outstanding \n 25,602,002  \n 3,261,911 \n\n \n\nThe accompanying notes are an integral part of\nthese unaudited condensed consolidated financial statements.\n\n \n\n3\n\n \n\n \n\n**CHINA PHARMA HOLDINGS, INC.**\n\n**CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY**\n\n**AMOUNTS IN U.S. DOLLARS, EXCEPT FOR SHARE DATA**\n\n**(Unaudited)**\n\n \n\n  \n   \n   \n   \nSecurities  \n   \nAccumulated  \n  \n\n  \n   \n   \nAdditional  \nPurchase  \n   \nOther  \nTotal \n\n  \nCommon Stock  \nPaid-in  \nAgreement  \nAccumulated  \nComprehensive  \nStockholders’ \n\n  \nShares  \nAmount  \nCapital  \nReceivable  \nDeficit  \nIncome  \nEquity \n\nBalance as of December 31, 2024 \n 3,261,911  \n$3,262  \n$40,631,679  \n$(180,000) \n$(44,026,679) \n$11,319,642  \n$7,747,904 \n\nNet loss for the period \n -  \n \n-\n  \n \n-\n  \n \n-\n  \n (785,572) \n \n-\n  \n (785,572)\n\nForeign currency translation adjustment \n -  \n \n-\n  \n \n-\n  \n \n-\n  \n \n-\n  \n 7,516  \n 7,516 \n\nBalance, March 31, 2025 \n 3,261,911  \n$3,262  \n$40,631,679  \n$(180,000) \n$(44,812,251) \n$11,327,158  \n$6,969,848 \n\n \n\n  \n   \n   \n   \nSecurities  \n   \n   \n  \n\n  \n   \n   \nAdditional  \nPurchase  \n   \nOther  \nTotal \n\n  \nCommon Stock  \nPaid-in  \nAgreement  \nAccumulated  \nComprehensive  \nStockholders’ \n\n  \nShares  \nAmount  \nCapital  \nReceivable  \nDeficit  \nIncome  \nEquity \n\nBalance as of December 31, 2025 \n 15,522,002  \n$15,522  \n$58,535,819  \n (180,000) \n$(47,214,235) \n$11,582,646  \n$22,739,752 \n\nIssuance of common stock for intangible assets \n 25,000,000  \n 25,000  \n 14,969,000  \n \n-\n  \n \n-\n  \n \n-\n  \n 14,994,000 \n\nNet loss for the period \n -  \n \n-\n  \n \n-\n  \n \n-\n  \n (1,143,148) \n \n-\n  \n (1,143,148)\n\nForeign currency translation adjustment \n -  \n \n-\n  \n \n-\n  \n \n-\n  \n \n-\n  \n 433,586  \n 433,586 \n\nBalance, March 31, 2026 \n 40,522,002  \n$40,522  \n$73,504,819  \n$(180,000) \n$(48,357,383) \n$12,016,232  \n$37,024,190 \n\n \n\nThe accompanying notes are an integral part of\nthese unaudited condensed consolidated financial statements.\n\n \n\n4\n\n \n\n \n\n**CHINA PHARMA HOLDINGS, INC.**\n\n**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**\n\n**AMOUNTS IN U.S. DOLLARS, EXCEPT FOR SHARE DATA**\n\n**(Unaudited)**  \n\n \n\n  \nFor the Three Months \n\n  \nEnded March 31, \n\n  \n2026  \n2025 \n\nCash Flows from Operating Activities: \n   \n  \n\nNet loss \n$(1,143,148) \n$(785,572)\n\nDepreciation and amortization \n 980,570  \n 329,313 \n\nReversal of credit losses \n (2,881) \n (1,323)\n\nProvision to write down inventories to net realizable value \n    \n 213,379\n\nLoss on disposal of property, plant and equipment \n 1,446  \n \n-\n \n\nChanges in assets and liabilities: \n    \n   \n\nTrade accounts and other receivables \n (14,019) \n (164,670)\n\nAdvances to suppliers \n 2,546  \n 6,130\n\nInventories \n 247,492  \n 156,627 \n\nTrade accounts payable \n (67,771) \n 322,935 \n\nOther payables and accrued expenses \n (14258) \n (78,809)\n\nAdvances from customers \n (51,376) \n (48,019)\n\nPrepaid expenses \n 6,107  \n (23,667)\n\nNet Cash Used in Operating\nActivities \n (55,292) \n (73,676)\n\n  \n    \n    \n \n\nCash Flows from Investing Activities: \n    \n   \n\nPurchases of property and equipment \n \n-\n  \n (58,324)\n\nNet Cash Used in Investing Activities \n    \n (58,324)\n\n  \n    \n    \n \n\nCash Flows from Financing Activities: \n    \n   \n\nPayments of line of credit \n (79,325) \n (76,820)\n\nNet Cash Used In Financing Activities \n (79,325) \n (76,820)\n\n  \n    \n    \n \n\nEffect of Exchange Rate Changes on Cash \n (42,021) \n (5,371)\n\nNet Increase in Cash and Cash Equivalents \n (176,638) \n (214,191)\n\nCash and Cash Equivalents at Beginning of Period \n 345,112  \n 626,879\n\nCash and Cash Equivalents at End of Period \n$168,474  \n$412,688 \n\n  \n    \n   \n\nSupplemental Cash Flow Information: \n    \n   \n\nCash paid for interest \n$15,758  \n$21,241 \n\n  \n    \n   \n\nSupplemental Noncash Investing and Financing Activities: \n    \n   \n\nIssuances of stock for intangible assets \n$14,994,000  \n$\n-\n \n\n \n\nThe accompanying notes are an integral part of\nthese unaudited condensed consolidated financial statements.\n\n \n\n5\n\n \n\n \n\n**CHINA PHARMA HOLDINGS, INC.**\n\n**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**\n\n**THREE MONTHS ENDED MARCH 31, 2026 AND 2025 (UNAUDITED)**\n\n \n\n**NOTE 1 – ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES**\n\n \n\n**Organization and Nature of Operations – **China\nPharma Holdings, Inc., a Nevada corporation (“China Pharma”), owns 100% of Onny Investment Limited (“Onny”), a\nBritish Virgin Islands corporation, which owns 100% of Hainan Helpson Medical & Biotechnology Co., Ltd (“Helpson”), a\ncompany organized under the laws of the People’s Republic of China (the “PRC”). China Pharma Holdings, Inc. and its\nsubsidiaries are referred to herein as the Company.\n\n \n\nOnny acquired 100% of the ownership of Helpson\non May 25, 2005, by entering into an Equity Transfer Agreement with Helpson’s three former shareholders. The transaction was approved\nby the Commercial Bureau of Hainan Province on June 12, 2005, and Helpson received the Certificate of Approval for Establishment of Enterprises\nwith Foreign Investment in the PRC on the same day. Helpson received its business license evidencing its Wholly Foreign Owned Enterprise\n(“WFOE”) status on June 21, 2005. \n\n \n\nHelpson is principally engaged in the development,\nmanufacture and marketing of pharmaceutical products for human use in connection with a variety of high-incidence and high-mortality diseases\nand medical conditions prevalent in the PRC. All of its operations are conducted in the PRC, where its manufacturing facilities are located.\nHelpson manufactures pharmaceutical products in the form of dry powder injectables, liquid injectables, tablets, capsules, and cephalosporin\noral solutions. The majority of its pharmaceutical products are sold on a prescription basis, and all have been approved for at least\none or more therapeutic indications by the National Medical Products Administration (the “NMPA”, formerly China Food and Drug\nAdministration, or “CFDA”) based upon demonstrated safety and efficacy.\n\n \n\n**Liquidity and Going Concern**\n\n \n\nAs of March 31, 2026, the Company had cash and\ncash equivalents of $0.17 million and an accumulated deficit of $48.4 million and the Company’s current liabilities exceeded current\nassets by $5.3 million. In addition, the Company incurred net losses of $1.1 million and had cash outflows from operating activities of\n$0.06 million for the three months ended March 31, 2026. As of March 31, 2026, the Company’s Chairperson, Chief Executive Officer\nand Interim Chief Financial Officer, Ms. Li, has advanced an aggregate of $1,466,145 to provide working capital and enabled the Company\nto make the required payments related to its former construction loan facility and current lines of credit.\n\n \n\nTo alleviate the conditions that raise substantial\ndoubt about the Company’s ability to continue as a going concern, management plans to enhance the sales model of advance payment,\nand further strengthen its collection of accounts receivable. Further, the Company is currently exploring strategic alternatives to accelerate\nthe launch of nutrition products. In addition, management believes that the Company’s existing property can serve as collateral\nto support additional bank loans. The Company will implement multiple measures simultaneously across procurement, production, human resources,\nand marketing to reduce operating costs. In procurement, the Company will consolidate purchasing activities where practical to enhance\nbargaining power with suppliers. In production, operations will be optimized through approaches such as centralized manufacturing cycles\nand shifting energy-intensive processes to off-peak hours to reduce power costs. In human resources, the Company will optimize staffing\nlevels and implement targeted incentives to improve work efficiency and output quality, thereby controlling labor costs. Marketing expenditures\nwill be focused on high-return channels through data-driven targeting and channel optimization. Additionally, the Company will enhance\nemployee training in production techniques and cost management principles, fostering a culture of cost awareness throughout the organization.\nManagement believes that, if successfully implemented, these measures may improve the Company’s cash position and allow the Company\nto fund its operations in the next twelve months, however, there can be no assurance that the Company will be able to fully execute the\nplanned initiatives, achieve its strategic alternatives, and resolve the conditions raising substantial doubt about its ability to continue\nas a going concern. \n\n \n\nPursuant to the requirements of Accounting Standards\nCodification (ASC) 205-40, *Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern* management\nmust evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s\nability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially\ndoes not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of\nthe date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating\neffect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating\neffect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented\nwithin one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will\nmitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern\nwithin one year after the date that the financial statements are issued.\n\n \n\nUnder ASC 205-40, the strategic alternatives being\npursued by the Company cannot be considered probable at this time because none of the Company’s current plans have been finalized\nat the time of the issuance of these financial statements and the implementation of any such plan is not probable of being effectively\nimplemented as none of the plans are entirely within the Company’s control. Accordingly, substantial doubt is deemed to exist about\nthe Company’s ability to continue as a going concern within one year after the date these financial statements are issued.\n\n \n\n6\n\n \n\n \n\n**CHINA PHARMA HOLDINGS, INC.**\n\n**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**\n\n**THREE MONTHS ENDED MARCH 31, 2026 AND 2025 (UNAUDITED)**\n\n \n\nThe accompanying unaudited condensed consolidated\nfinancial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities\nin the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification\nof recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described\nabove.\n\n \n\n**Consolidation and Basis of Presentation **–\nThe accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles\ngenerally accepted in the United States of America (“U.S. GAAP”) and are expressed in United States dollars. The accompanying\nunaudited interim condensed consolidated financial statements include the accounts and operations of the Company and its wholly-owned\nsubsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidation.\n\n \n\nHelpson’s functional currency is the Chinese\nRenminbi. Helpson’s revenue and expenses are translated into United States dollars at the average exchange rate for the period.\nAssets and liabilities are translated at the exchange rate as of the end of the reporting period. Gains or losses from translating Helpson’s\nfinancial statements are included in accumulated other comprehensive income, which is a component of stockholders’ equity. Gains\nand losses arising from transactions denominated in a currency other than the functional currency of the entity that is party to the transaction\nare included in the results of operations.\n\n \n\nIn the opinion of management, the unaudited interim\ncondensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation\nof the results for the interim periods presented. All significant intercompany transactions and balances are eliminated on consolidation.\nHowever, the results of operations included in such financial statements may not necessarily be indicative of annual results. Such financial\nstatements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included\nin the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission\n(the “SEC”) on April 1, 2026 (“2025 Annual Report”).\n\n \n\n**Accounting Estimates - **The\nmethodology used to prepare the Company’s financial statements is in conformity with U.S. GAAP, which requires the management of\nthe Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent\nassets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting\nperiods. Therefore, actual results could differ from those estimates.\n\n \n\nThe Company uses the same accounting policies\nin preparing its quarterly and annual financial statements. Certain information and footnote disclosures normally included in the annual\nconsolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.\n\n \n\n**Loss Per Share\n-**Basic loss per share is calculated by dividing loss available to common stockholders by the weighted-average number of shares of\ncommon stock outstanding, excluding unvested stock. Diluted loss per share is computed similar to basic loss per share except that the\ndenominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential\ncommon shares, including unvested stock, had been issued and if the additional common shares were dilutive.\n\n \n\nThe potentially dilutive\ncommon shares related to the option to purchase 13,300 shares of common stock as of March 31, 2026 and December 31, 2025 are excluded\nfrom the computation of diluted net loss per share for all periods presented because the effect is anti-dilutive due to net losses of\nthe Company.\n\n** **\n\n**Trade Accounts\nReceivable and Allowance for Doubtful Accounts**–Effective January 1, 2026, the Company adopts the Current Expected Credit\nLoss (CECL) model to accrue credit loss allowances on accounts receivable. The Company uses the aging analysis method to evaluate the\nexpected credit losses of accounts receivable. The baseline historical loss rate is calculated based on rolling four-year historical\ncredit loss data, which is updated on a rolling basis in each reporting period.\n\n \n\nIn each reporting period, considering the\ncurrent economic conditions, forward-looking macroeconomic and industry environment, as well as customers’ credit risk profile,\nforward-looking factors are assigned to each customer category. The comprehensive loss rate for each aging bracket and each customer category\nis determined by multiplying the historical loss rate by the forward-looking coefficient.\n\n \n\nAt the end of each period, the allowance for credit losses is determined\nby aggregating the product of the accounts receivable balance of each aging bracket and each customer category and the corresponding comprehensive\nloss rate, so as to fully reflect the full-life-cycle expected credit losses over the entire contractual term of accounts receivable\n\n \n\n7\n\n \n\n \n\n**CHINA PHARMA HOLDINGS, INC.**\n\n**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**\n\n**THREE MONTHS ENDED MARCH 31, 2026 AND 2025 (UNAUDITED)**\n\n \n\n**Recent Accounting Pronouncements**\n\n \n\n**Recently adopted accounting standards**\n\n \n\nOn July 30, 2025, the FASB issued ASU 2025-05, which\namends ASC 326-20 to provide a practical expedient for all entities which elect a practical expedient that assumes that current conditions\nas of the balance sheet date do not change for the remaining life of the asset in developing reasonable and supportable forecasts as part\nof estimating expected credit losses, and an accounting policy election for all entities, other than a public business entity, that elect\nthe practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets\nthat arise from transactions accounted for under ASC 606. Under ASU 2025-05, an entity is required to disclose whether it has elected\nto use the practical expedient and, if so, whether it has also applied the accounting policy election. An entity that makes the accounting\npolicy election is required to disclose the date through which subsequent cash collections are evaluated. ASU 2025-05 is effective for\nannual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with\nearly adoption permitted. Entities should apply the new guidance prospectively.\n\n \n\n**Recently issued but not yet adopted accounting\npronouncements**\n\n \n\nOn December 17, 2025, the FASB issued ASU 2025-12, which\nis to correct, clarify, and otherwise improve U.S. GAAP. ASU 2025-12 includes 33 improvements that span a wide range of topics, including\nClarifying diluted earnings per share (EPS) calculation when a loss from continuing operations exists, Clarifying disclosure requirements\nfor lease receivables from sales-type or direct financing leases, Revising the calculation of the reference amount for beneficial interests\nto prevent double counting credit losses, Clarifying the permissible methods to account for treasury stock retirements, and Clarifying\nthe guidance for transfers of receivables from contracts with customers. The amendments in this Update are effective for all entities\nfor annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early\nadoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available\nfor issuance. If an entity adopts the amendments in this Update in an interim period, it must adopt them as of the beginning of the annual\nreporting period that includes that interim reporting period. An entity may elect to early adopt the amendments on an issue-by-issue basis.\nFor example, an entity may decide to early adopt certain amendments and adopt the remaining amendments at the effective date. An entity\nshould apply the amendments in this Update (except for the amendments to Topic 260, Earnings Per Share, related to Issue 4) using one\nof the following transition methods: (i) Prospectively to all transactions recognized on or after the date that the entity first applies\nthe amendments, or (ii) Retrospectively to the beginning of the earliest comparative period presented. An entity should adjust the opening\nbalance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) as of the\nbeginning of the earliest comparative period presented. The Company is currently evaluating these new disclosure requirements and does\nnot expect the adoption to have a material impact.\n\n \n\nOn December 8, 2025, the FASB issued ASU 2025-11, which\nis intended to improve the navigability of the guidance in ASC 270 and clarify when it applies. Under the amendments, an entity is\nsubject to ASC 270 if it provides “interim financial statements and notes in accordance with GAAP.” The ASU also addresses\nthe form and content of such financial statements, adds lists to ASC 270 of the interim disclosures required by all other Codification\ntopics, and establishes a principle under which an entity must “disclose events since the end of the last annual reporting period\nthat have a material impact on the entity.” For public business entities, the amendments in ASU 2025-11 are effective for interim\nreporting periods within annual reporting periods beginning after December 15, 2027. For all other entities, the amendments in ASU 2025-11\nare effective for interim reporting periods within annual reporting periods beginning after December 15, 2028. Early adoption is permitted\nfor all entities. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material\nimpact.\n\n \n\nIn January 2025, the FASB issued ASU 2025-01,\n“Income Statement – Comprehensive Income – Expense Disaggregation Disclosure (Subtopic 220-40): Clarifying the Effective\nDate.” This pronouncement revises the effective date of ASU 2024-03 and clarifies that all public business entities are required\nto adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods\nbeginning after December 15, 2027. Entities within the ASU’s scope are permitted to early adopt the accounting standard update.\nThe Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.\n\n \n\nFrom time to time, the FASB or other standards\nsetting bodies issue new accounting pronouncements. Updates to the FASB ASC are communicated through issuance of ASUs. Unless otherwise\ndiscussed, the Company believes that the recently issued guidance, whether adopted or to be adopted in the future, is not expected to\nhave a material impact on its consolidated financial statements upon adoption \n\n \n\n8\n\n \n\n \n\n**CHINA PHARMA HOLDINGS, INC.**\n\n**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**\n\n**THREE MONTHS ENDED MARCH 31, 2026 AND 2025 (UNAUDITED)**\n\n \n\n**NOTE 2 – ACCOUNTS RECEIVABLE, NET**\n\n** **\n\nAccounts receivable, net, consist of the following:\n\n** **\n\n  \nMarch 31,  \nDecember 31, \n\n  \n2026  \n2025 \n\nTrade accounts receivable \n 205,696  \n 254,435 \n\nLess: allowance for credit losses \n (9,434) \n (13,023)\n\nTrade accounts receivable, net \n$196,262  \n$241,412 \n\n \n\nThe changes in the allowances for credit losses\nduring the three months ended March 31, 2026 and 2025 were as follows:\n\n \n\n  \nFor the Three Months \n\n  \nEnded March 31, \n\n  \n2026  \n2025 \n\nBalance, Beginning of Period \n$13,023  \n$13,587,182 \n\n(Reversal) Credit losses expense \n (3,779) \n (1,323)\n\nForeign currency translation adjustment \n 190  \n 19,298 \n\nBalance, End of Period \n$9,434  \n$13,605,157 \n\n** **\n\n**NOTE 3 – INVENTORIES**\n\n \n\nInventories consisted of the following:\n\n \n\n  \nMarch 31,  \nDecember 31, \n\n  \n2026  \n2025 \n\nRaw materials \n$750,019  \n$843,603 \n\nWork in process \n 163,486  \n 457,817 \n\nFinished goods \n$1,702,331  \n$1,465,243 \n\nTotal Inventories \n 2,615,836  \n 2,766,663 \n\nLess: Provision for obsolescence \n (1,117,335) \n (1,145,240)\n\n  \n$1,498,501  \n$1,621,423 \n\n \n\nChanges\nto the provision for obsolescence consisted of the following:\n\n** **\n\n  \nFor the Three Months \n\n  \nEnded March 31, \n\n  \n2026  \n2025 \n\nAt the beginning of the period \n 1,145,240  \n 574,071 \n\nCharges to provision \n    \n 213,379 \n\nForeign currency translation adjustment \n (27,905) \n 747 \n\nAt the end of the period \n 1,117,335  \n 788,197 \n\n** **\n\n**NOTE 4 – PROPERTY, PLANT AND EQUIPMENT**\n\n \n\nProperty, plant and equipment consisted of the following:\n\n \n\n  \nMarch 31,  \nDecember 31, \n\n  \n2026  \n2025 \n\nPermit of land use \n$407,069  \n$400,734 \n\nBuilding \n 9,452,781  \n 9,305,653 \n\nPlant, machinery and equipment \n 27,938,179  \n 27,503,334 \n\nMotor vehicle \n 275,568  \n 271,278 \n\nOffice equipment \n 392,773  \n 400,816 \n\nTotal \n 38,466,370  \n 37,881,815 \n\nLess: accumulated depreciation \n (34,162,377) \n (33,489,851)\n\nProperty, plant and equipment, net \n$4,303,993  \n$4,391,964 \n\n \n\n9\n\n \n\n \n\n**CHINA PHARMA HOLDINGS, INC.**\n\n**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**\n\n**THREE MONTHS ENDED MARCH 31, 2026 AND 2025 (UNAUDITED)**\n\n \n\nDepreciation is computed on a straight-line basis over the estimated\nuseful lives of the assets as follows:\n\n \n\nAsset \nLife - years\n\nPermit of land use \n40 - 70\n\nBuilding \n20 - 49\n\nPlant, machinery and equipment \n5 - 10\n\nMotor vehicle \n5 - 10\n\nOffice equipment \n3-5\n\n \n\nDepreciation relating to office equipment was\nincluded in general and administrative expenses, while all other depreciation was included in cost of revenue. Depreciation expense was\n$155,288 and $171,601 for the three months ended March 31, 2026 and 2025, respectively.\n\n \n\n**NOTE 5 - INTANGIBLE ASSETS**\n\n \n\nIntangible assets represent the cost of medical\nformulas approved for production by the NMPA, the intellectual property acquired from Chengdu Bonier Medical Technology Development Co.,\nLtd. through certain Technology Transfer Agreement (“Bonier Agreement”) and the invention patents and intellectual property\nacquired pursuant to Technology Transfer Agreements. No costs were reclassified from advances to intangible assets during the three months\nended March 31, 2026 and 2025, respectively.\n\n \n\nOn February 5, 2026, the Company entered into\na Technology Transfer Agreement (the “Xiaoyun Chen Agreement”) with Xiaoyun\nChen (“Transferor Chen”). Transferor Chen owns an invention patent of a Topiroxostat\nNanoemulsion and Method for Its Preparation. Pursuant to the Xiaoyun Chen Agreement,\nTransferor Chen will transfer the ownership of the patent to Helpson. Transferor Chen or his designated third party shall provide relevant\ntechnical services, including, but not limited to, product research and development, writing of registration materials, registration application\nand other technical services.\n\n \n\nThe aggregate transfer price as contemplated by\nthe Xiaoyun Chen Agreement is $7.812 million which was paid to the Transferor upon the\nissuance of 12,400,000 shares of common stock of the Company at $0.63 per share based on the closing market price of the\nCompany’s common stock as of the closing date.  The Company recorded the amount as intangible assets on the accompanying balance\nsheet as of the closing date. The value of the intangible asset will be amortized over its remaining useful life of approximately 10.4 years.\n\n \n\nOn February 26, 2026, the Company entered into\na Technology Transfer Agreement (the “Xiaoyan Zhang Agreement”) with Xiaoyan\nZhang (“Transferor Zhang”). Transferor Zhang\nowns an invention patent of a Prinsepia Utilis Esterol Sublingual Tablets and Method for Its Preparation. Pursuant to the Xiaoyan\nZhang Agreement, Transferor Zhang will transfer the ownership of the patent to Helpson.\nTransferor Zhang or his designated third party shall provide relevant technical services,\nincluding, but not limited to, product research and development, writing of registration materials, registration application and other\ntechnical services.\n\n \n\nThe aggregate transfer price as contemplated by\nthe Xiaoyan Zhang Agreement is $7.182 million which was paid to the Transferor and his\ntwo designees upon the issuance of 12,600,000 shares of common stock of the Company at $0.57 per share based on the closing\nmarket price of the Company’s common stock as of the closing date.  The Company recorded the amount as intangible assets on\nthe accompanying balance sheet as of the closing date. The value of the intangible asset will be amortized over its remaining useful life\nof approximately 12.0 years.\n\n \n\nThere\nwere no service fees or upfront consideration paid related to the Bonier\nAgreement or the Technology Transfer Agreements for the three months ended March 31, 2026 and 2025, respectively.\n\n \n\n10\n\n \n\n \n\n**CHINA PHARMA HOLDINGS, INC.**\n\n**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**\n\n**THREE MONTHS ENDED MARCH 31, 2026 AND 2025 (UNAUDITED)**\n\n \n\nApproved medical formulas are amortized from the\ndate NMPA approval is obtained over their individually identifiable estimated useful lives, which ranges from ten to thirteen years.  It\nis at least reasonably possible that a change in the estimated useful lives of the medical formulas could occur in the near term due to\nchanges in the demand for the drugs and medicines produced from these medical formulas. Amortization expense relating to intangible assets\nwas $825,282 and $157,712 for the three months ended March 31, 2026 and 2025, respectively which\nwas included in the general and administrative expenses. Medical formulas typically do not have a residual value at the end of their amortization\nperiod.\n\n \n\nIntangible assets consisted of NMPA approved medical\nformulas, a Utility Model Patent and three Invention Patents as follows:\n\n \n\n  \nMarch 31,  \nDecember 31, \n\n  \n2026  \n2025 \n\nNMPA approved medical formulas \n$4,878,840  \n$4,802,903 \n\nTechnology from Bonier \n 1,767,243  \n 1,739,737 \n\nInvention Patents \n 38,858,217  \n 23,447,518 \n\n  \n 45,504,300  \n 29,990,158 \n\nAccumulated amortization \n (7,174,347) \n (6,246,739)\n\nNet carrying amount \n 38,329,953  \n 23,743,419 \n\nIntangible assets in process \n 344,414  \n 335,846 \n\n  \n$38,674,367  \n$24,079,265 \n\n** **\n\n**NOTE 6 – OTHER PAYABLES**\n\n** **\n\nOther Payables consisted of the following:\n\n \n\n  \nMarch 31,  \nDecember 31, \n\n  \n2026  \n2025 \n\nCompensation payable to officer and director (1) \n$1,923,506  \n$1,919,506 \n\nBusiness taxes and other \n 370,174  \n 351,904 \n\nPayable to Helpson’s Labor Union (2) \n 151,747  \n 149,385 \n\nPayable to Chunming Dong (3) \n 145,714  \n 142,272 \n\nTotal Other Payables \n$2,591,141  \n$2,563,067 \n\n** **\n\n(1)Represents $44,000 of compensation\npayable to two members of the Company’s Board of Directors and compensation to Chairperson Li totaling $1,879,506 as of March 31,\n2026 and $1,875,506 compensation to Chairperson Li as of December 31, 2025, respectively.\n\n \n\n(2)Represents borrowings from\nHelpson’s Labor Union, which originated in November 2024 with no required repayment term and no interest.\n\n \n\n(3)Represents an advance made\nto the Company in June 2025 by Chunming Dong, the husband of Chairperson Li. The advance was interest free until December 31, 2025, and\neffective January 1, 2026, it accrues interest at an annual rate of 3.3%.\n\n \n\n11\n\n \n\n \n\n**CHINA PHARMA HOLDINGS, INC.**\n\n**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**\n\n**THREE MONTHS ENDED MARCH 31, 2026 AND 2025 (UNAUDITED)**\n\n \n\n**NOTE 7 – RELATED PARTY TRANSACTIONS**\n\n \n\nThe Company had previously received advances from\nits Chairperson Li. Total amounts owed to her were $1,466,145 and $1,435,136 and are recorded as “Borrowings from related parties”\non the accompanying condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025, respectively. On July 8, 2019, the\nCompany entered into a loan agreement in exchange for cash of RMB 4,770,000 ($738,379) with its Chairperson Li. The loan bears interest\nat a rate of 4.35% and was payable within one year of the loan agreement. The due date of the loan agreement has been extended annually\non identical terms and is currently due July 9, 2026.\n\n \n\nOn June 20, 2025, the Company borrowed RMB 1,750,000\n(US$248,973) from Chairperson Li. No interest was charged if the loan was repaid in full by December 31, 2025. On January 1, 2026, the\nloan began to accrue interest at a rate of 3.30% and is payable within one year of the loan agreement.\n\n \n\nTotal interest expense related to the two loans\nreferenced above for the three months ended March 31, 2026 and 2025 was $9,085 and $6,787, respectively. Compensation payable to the Chairperson\nLi is included in “Other payables” in the accompanying condensed consolidated balance sheet, totaling $1,879,506 and $1,875,506\nas of March 31, 2026 and December 31, 2025, respectively.\n\n \n\nIn June 2025, Chunming Dong, the husband of Chairperson Li, advanced\nRMB 1,000,000 ($142,272) to the Company for working capital. The advance was interest free until December 31, 2025 and, effective January\n1, 2026, bears interest at an annual rate of 3.3%. Interest expense related to this advance for the three months ended March 31, 2026\nand 2025 was $1,187 and $0, respectively.\n\n** **\n\n**NOTE 8 –LINES OF CREDIT**\n\n \n\nOn June 25, 2025, the Company obtained a new line\nof credit facility in the amount of RMB 5,000,000 and received proceeds of RMB 5,000,000 (approximately $0.7 million). The new facility\nhas an interest rate of 3.6%. The loan is due on June 20, 2026. In addition, the Company’s Chief Executive Officer and Chair of\nthe Board personally guaranteed the new line of credit and pledged personal assets as collateral for the loan. Total interest expense\nunder this facility for the three months ended March 31, 2026 and 2025 was $6,476 and $9,919, respectively. \n\n \n\nOn September 25, 2023, the Company entered into\na three-year revolving loan and received proceeds of RMB 10,000,000 (approximately $1.4 million). The interest rate for\nthe loan was 3.35% for the first twelve-months of the loan and adjusted based on the latest one-year loan market quotation rate less\n10 basis points as published by the China National Interbank Funding Center on the working day prior to each twelve-month anniversary\nof the loan. With the reduction of the Loan Prime Rate by the bank on September 20, 2024, the loan interest rate for this transaction\nwas lowered to 3.25% effective September 21, 2024. The loan interest rate for this transaction was lowered to 2.9% effective September\n21, 2025. Additionally, the company repaid RMB 551,250 (approximately $79,000) for the three months ended March 31, 2026. As of March\n31, 2026, the cumulative principal repaid by the Company totals RMB1,653,750 (approximately $238,000). The loan is due on September 20,\n2026. The loan is collateralized by the Company’s production facility, including its production line equipment and machinery.\nAs of March 31, 2026, the net carrying amount of property, plant and equipment pledged as collateral amounted to $3,291,168. In addition,\nthe Company’s Chief Executive Officer and Chair of the Board personally guaranteed the new line of credit. Total interest paid on\nthis loan was $9,283 and $11,323 for the three months ended March 31, 2026 and 2025, respectively. \n\n \n\nPrincipal payments on the above lines of credit\nare all due within one year of the balance sheet date.\n\n \n\n12\n\n \n\n \n\n**CHINA PHARMA HOLDINGS, INC.**\n\n**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**\n\n**THREE MONTHS ENDED MARCH 31, 2026 AND 2025 (UNAUDITED)**\n\n \n\n**Fair Value of Lines of Credit** –\nThe carrying amounts of the Company’s fixed-rate borrowings, which are due within 12 months, approximate their fair values due to\nthe short-term nature of these instruments.\n\n** **\n\n**NOTE 9 - LEASES**\n\n \n\nThe Company has leases for certain office and\nproduction facilities in the PRC which are classified as operating leases. The leases contain payment terms for fixed amounts. Certain\nleases include options to extend the lease term. Renewal options are included in the determination of the lease term when it is reasonably\ncertain that the Company will exercise such options. There are no residual value guarantees, no variable lease payments, and no restrictions\nor covenants imposed by leases.\n\n** **\n\n  \nThree Months ended\n\nMarch 31, \n\n  \n2026  \n2025 \n\nOperating lease cost \n$17,986  \n$19,176 \n\nCash paid for amounts included in the measurement of lease liabilities \n$18,830  \n$19,894 \n\n \n\n  \nMarch 31,  \nDecember 31, \n\n  \n2026  \n2025 \n\nLease liabilities, current portion \n$71,386  \n$71,628 \n\nLease liabilities, non current portion \n 92,294  \n 111,548 \n\n  \n$163,680  \n$183,176 \n\n \n\nMinimum lease payments for the Company’s\noperating lease liabilities were as follows for the twelve-month period ended March 31:\n\n \n\n2026 \n$75,320 \n\n2027 \n 75,320 \n\n2028 \n 18,831 \n\nTotal undiscounted cash flows \n 169,471 \n\nLess: Imputed interest \n (5,791)\n\n  \n 163,680 \n\nLess: Lease liabilities, current portion \n (71,386)\n\nLease liabilities, non current portion \n$92,294 \n\n** **\n\nThe Company has leases with terms of less than one year for certain\nprovincial sales offices that are not material.\n\n** **\n\n**NOTE 10 - INCOME TAXES**\n\n \n\nDeferred income tax assets and liabilities are\nmeasured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered\nor settled. The effect of a change in tax laws or rates on deferred tax assets and liabilities is recognized in income in the period that\nincludes the enactment date.\n\n \n\nLiabilities are established for uncertain tax positions expected to\nbe taken in income tax returns when such positions are judged to meet the “more-likely-than-not” threshold based on the technical\nmerits of the positions. Estimated interest and penalties related to uncertain tax positions are included as a component of other expenses.\nAs of March 31, 2026 and December 31, 2025, the Company did not have any significant unrecognized uncertain tax positions. U.S. income\ntax returns for the years ended December 31, 2021 through December 31, 2025 and the Chinese income tax return for the year ended December\n31, 2025 remain open to examination by the relevant taxing authorities.\n\n \n\n13\n\n \n\n \n\n**CHINA PHARMA HOLDINGS, INC.**\n\n**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**\n\n**THREE MONTHS ENDED MARCH 31, 2026 AND 2025 (UNAUDITED)**\n\n \n\nUnder the current tax law in the PRC, the Company is and will be subject\nto the enterprise income tax rate of 25%.\n\n  \n\nThere was no provision for income taxes for the\nthree months ended March 31, 2026 and 2025, respectively due to continued net losses of the Company.\n\n \n\nAs of March 31, 2026, Helpson had net operating\nloss carryforwards for PRC tax purposes of approximately $31.2 million which are available to offset any future taxable income through\n2030. Approximately $4.1 million of these carryforwards will expire in December 2026. The Company also has net operating losses for United\nStates federal income tax purposes of approximately $11.8 million of which $5.1 million is available to offset future taxable income,\nif any, through 2040, and $6.7 million are available for carryforward indefinitely subject to a limitation of 80% of taxable income for\neach tax year.\n\n \n\nOn July 4, 2025, the One Big Beautiful Bill Act\n(“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring\nprovisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment\nfor certain business provisions. The Company is currently assessing its impact on our condensed consolidated financial statements. U.S.\nfederal tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “U.S. Tax Reform”), was signed into law on\nDecember 22, 2017. The U.S. Tax Reform significantly modified the U.S. Internal Revenue Code by, among other things, reducing the\nstatutory U.S. federal corporate income tax rate from 35% to 21% for taxable years beginning after December 31, 2017; limiting and/or\neliminating many business deductions; migrating the U.S. to a territorial tax system with a one-time transition tax on a mandatory\ndeemed repatriation of previously deferred foreign earnings of certain foreign subsidiaries; subject to certain limitations, generally\neliminating U.S. corporate income tax on dividends from foreign subsidiaries; and providing for new taxes on certain foreign earnings.\n\n \n\nIn\nassessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of\nthe deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation\nof future taxable income during the periods in which those differences become deductible, or tax loss carry forwards are utilized.  Management\nconsiders projected future taxable income and tax planning strategies in making this assessment.  Based upon the level of historical\ntaxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible or can be utilized,\nmanagement concluded that it is more likely than not that some or all of the deferred tax assets will not be realized in the foreseeable\nfuture. Therefore, the Company provided for a valuation allowance against its deferred tax assets of $21.8 million and $21.2 million\nas of March 31, 2026 and December 31, 2025, respectively\n\n \n\nThe Company also incurred various other taxes,\ncomprised primarily of business taxes, value-added taxes, urban construction taxes, education surcharges and others. Any unpaid amounts\nare reflected in the balance sheets as accrued taxes payable.\n\n \n\n**NOTE 11 - STOCKHOLDERS’ EQUITY**\n\n \n\nChina Pharma is authorized to issue 500,000,000\nshares of common stock, $0.001 par value, and 5,000,000 shares of preferred stock, $0.001 par value. The preferred stock may be issued\nin series with such designations, preferences, stated values, rights, qualifications or limitations as determined solely by the Board\nof the Company.\n\n \n\nOn February 5, 2026, the Company issued 12,400,000\nshares of common stock at a price of $0.63 per share based on the closing market price as of that date pursuant to the Xiaoyun\nChen Agreement as discussed in Note 5.\n\n \n\nOn February 26, 2026, the Company issued 12,600,000\nshares of common stock at a price of $0.57 per share based on the closing market price as of that date pursuant to the Xiaoyan\nZhang Agreement as discussed in Note 5.\n\n \n\n14\n\n \n\n \n\n**CHINA PHARMA HOLDINGS, INC.**\n\n**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**\n\n**THREE MONTHS ENDED MARCH 31, 2026 AND 2025 (UNAUDITED)**\n\n \n\nAccording to relevant PRC laws, companies registered\nin the PRC, including China Pharma’s PRC subsidiary, Helpson, are required to allocate at least 10% of their after tax income, as\ndetermined under the accounting standards and regulations in the PRC, to statutory surplus reserve accounts until the reserve account\nbalances reach 50% of the company’s registered capital prior to their remittance of funds out of the PRC. Allocations to these reserves\nand funds can only be used for specific purposes and are not transferrable to the parent company in the form of loans, advances or cash\ndividends. The amount designated for general and statutory capital reserves is $8,145,000 as of both March 31, 2026 and December 31, 2025.\nAs of March 31, 2026 and December 31, 2025, the balance of the required statutory reserves was $nil.\n\n \n\n*2010 Incentive Plan*\n\n \n\nOn November 12, 2010, the Company’s Board adopted the Company’s\n2010 Incentive Plan (the “Plan”), which was then approved by stockholders on December 22, 2010. On October 17, 2019, the\nBoard of Directors approved the First Amendment to the 2010 Incentive Plan (the “Amendment”), pursuant to which the term\nof the 2010 Incentive Plan was extended to December 31, 2029. The Amendment was adopted by the stockholders on December 19, 2019. On\nOctober 25, 2021, the Board of Directors approved, and on December 27, 2021, our stockholders adopted Amendment No.2 to the Plan to increase\nthe number of shares of the Common Stock that are reserved thereunder by 10,000 shares from 8,000 shares to 18,000 shares.\nOn October 27, 2022, the Board of Directors approved and on December 27, 2022, the stockholders adopted the Amended and Restated Long\nTerm 2010 Incentive Plan to increase the number of shares of common stock that are reserved thereunder by an additional 10,000 shares\nfrom 18,000 to 28,000. On December 17, 2023, the stockholders approved Amendment No. 1 to the Amended and Restated Long\nTerm 2010 Incentive Plan to increase the number of shares from 28,000 to 58,000. On December 22, 2024, stockholders approved\nAmendment No. 2 to the Amended and Restated Long Term 2010 Incentive Plan to increase the number of shares from 58,000 to 69,600.\nOn December 30, 2025, the stockholders approved Amendment No. 3 to the Amended and Restated Long Term 2010 Incentive Plan to increase\nthe number of shares from 69,600 to 569,600. The Plan gives the Company the ability to grant stock options, restricted\nstock, stock appreciation rights and performance units to its employees, directors and consultants, or those who will become employees,\ndirectors and consultants of the Company and/or its subsidiaries. The Plan currently allows for equity awards of up to 569,600 shares\nof common stock. Through March 31, 2026, there were 8,470 shares of stock granted under the Plan. A total of 1,330 options\nwere granted as of March 31, 2026 under the Plan. As such, there are 559,800 additional units available for issuance under\nthe Plan.\n\n \n\nThere were no issuances of securities from the\nPlan for the three months ended March 31, 2026 and as such, no compensation expense was recognized for the period.\n\n \n\nAs of March 31, 2026, there was no remaining unrecognized\ncompensation expense related to stock options or restricted stock grants.\n\n** **\n\n**NOTE 12 – LOSS PER SHARE**\n\n** **\n\nThe following table presents the computation of\nbasic and diluted net loss per share for the three months ended March 31, 2026 and 2025: \n\n \n\n  \nFor the Three Months \n\n  \nEnded March 31, \n\nNumerator: \n2026  \n2025 \n\nNet loss \n$(1,143,148) \n$(785,572)\n\nDenominator: \n    \n   \n\nBasic and diluted weighted-average common shares outstanding \n 25,602,002  \n 3,261,911 \n\nBasic and diluted loss per share \n$(0.04) \n$(0.24)\n\n** **\n\n15\n\n \n\n \n\n**CHINA PHARMA HOLDINGS, INC.**\n\n**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**\n\n**THREE MONTHS ENDED MARCH 31, 2026 AND 2025 (UNAUDITED)**\n\n** **\n\n**NOTE 13 – COMMITMENTS AND CONTINGENCIES**\n\n \n\nFrom time to time, the Company and its subsidiaries are parties to\nvarious legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become\nprobable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.\nThe Company did not have other significant commitments, long-term obligations, significant contingencies or guarantees as of March 31,\n2026 and 2025.\n\n \n\n**Current vulnerability due to certain concentrations**\n\n  \n\nFor\nthe three months ended March 31, 2026, two customers accounted for 21.4% and 10.5% of the Company’s sales, respectively. Three customers\naccounted for 30.6%, 18.2% and 13.2% of accounts receivable, respectively. Two suppliers accounted for 37.4% and 34.2%\nof raw material purchases. Four different products accounted for 23.0%, 22.2%, 22.1% 1and 19.0% of revenue.\n\n \n\nFor\nthe three months ended March 31, 2025, no customer accounted for greater than 10.0% of the Company’s sales. Respectively.\nTwo customers accounted for 63.3% and 13.6% of accounts receivable,\nrespectively. Two suppliers accounted for 40.3% and 31.4% of raw material purchases. Two different products accounted\nfor 34.7% and 28.3% of revenue.\n\n** **\n\n**Nature of Operations**\n\n \n\n**Economic environment - **Substantially\nall of the Company’s operations are conducted in the PRC, and therefore the Company is subject to special considerations and significant\nrisks not typically associated with companies operating in the United States of America. These risks include, among others, the political,\neconomic and legal environments and fluctuations in the foreign currency exchange rate. The Company’s results from operations may\nbe adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect\nto laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among\nother things. The unfavorable changes in global macroeconomic factors may also adversely affect the Company’s operations.\n\n \n\nIn addition, all of the Company’s revenue\nis denominated in the PRC’s currency of Renminbi (RMB), which must be converted into other currencies before remittance out of the\nPRC. Both the conversion of RMB into foreign currencies and the remittance of foreign currencies abroad require approval of the PRC government.\n\n \n\n16"}