Zhilin Li
Thank you, Diana, and good morning everyone. I would like to thank each of you for joining us today and for your continued support of China Pharma. Our performance in generating revenue in the third quarter of 2017 was similar to the same period last year and we increased gross margin slightly due to the better cost control. Nevertheless, increasing sales remains our top priority. Management will continue to vigorously promote sales through active participation in recent provincial market openings to receive new drug tender offers and through further research of the basic medical market. The ongoing generic drug consistency evaluations and reform of China's drug production registration and review policies will have a major impact on the future development of our industry and may change its business patterns. We will continue to actively adapt to state policy guidance and further evaluate market conditions for our current existing products, pipeline products, and competition in the market in order to optimize our development strategy." I will now read the rest of Ms. Li's prepared remarks in English. Now I would like to review our third quarter 2017 financial results and our balance sheet information. Revenues were $3.2 million and $3.1 million for the three months ended September 30, 2017 and 2016 respectively. Gross profit was $0.4 million and $0.3 million for the three months ended September 30, 2017 and 2016, respectively. Our gross profit margin in the third quarter of 2017 was 13.3% compared to 11.2% in the same period 2016. Our selling expenses for the three months ended September 30, 2017 were $0.7 million, which accounted for 21.7% of the total revenue in the third quarter of 2017,compared to $1 million for the same period 2016, which accounted for 29.7% of the total revenue in the third quarter of 2016. Due to many adjustments in our selling processes under healthcare reform policies, despite the decrease in sales, we still need to maintain personnel and continue our sales activities to support the sales and collection of accounts receivable, therefore our selling expenses did not decrease proportionally to our sales. Our general and administrative expenses for the three months ended September 30, 2017 and September 30, 2016, were both $0.3 million. General and administrative expenses accounted for 11% and 9.4% of our total revenues in the third quarters of 2017 and 2016, respectively. Our bad debt expense for the three months ended September 30, 2017 was $0.2 million, compared to a bad debt benefit of $0.1 million in the three months ended September 30, 2016. The change was due to the increase of aged accounts receivables. During the third quarter of 2017 the Company reviewed the contracts relating to advances made for purchases of intangible assets with independent laboratories and determined that advances made by the Company for two formulas to two independent laboratories were impaired. As a result, the Company recognized an impairment loss for the advances made to these laboratories in the amount of $1.2 million. In the same period in 2016, the company also recognized $0.6 million impairment loss for the advances made to one laboratory for one formula per the evaluation. Net loss for three months ended September 30, 2017 was $2.2 million, compared to net loss of $1.7 million for the three months ended September 30, 2016. The change in the net result was mainly due to the increase in impairments of long term asset in the third quarter of 2017 as compared to the same period of 2016. Nine months results; for the nine months ended September 30, 2017, our sales revenue was $9.4 million, which represented a decrease of $0.9 million, or 9.2%, from the $10.3 million in the corresponding period of 2016. Gross profit for the nine months ended September 30, 2017 was $1.8 million, compared to $1.5 million in the same period of 2016. Gross profit margin for the nine months ended September 30, 2017 and 2016 were 19% and 14%, respectively. Our selling expenses for the nine months ended September 30, 2017 were $2.2 million, a decrease of $0.5 million, or 20%, compared to $2.8 million for the same period of 2016. Selling expenses accounted for 23.6% and 26.7% of the total revenue in the first nine months of 2017 and 2016 respectively. Our general and administrative expenses for the nine months ended September 30, 2017 and 2016 were both $1.4 million. Our bad debt expenses for the nine months ended September 30, 2017 and 2016 were both $1 million. During the nine months ended September 30, 2017, the Company reviewed the contracts relating to advances made for purchases of intangible assets with independent laboratories and determined that the advances made by the Company for three formulas to two of the independent laboratories were impaired. As a result, the Company recognized an impairment loss for the advances made to those laboratories in the amount of $2.2 million. In the same period in 2016, the company also recognized $1.5 million impairment loss for the advances made to three laboratories for one formula per the evaluation. Our operating loss for the nine months ended September 30, 2017 was approximately $5 million, compared to $5.1 million for the same period of 2016. Net loss was $5.5 million, or $0.13 per basic and diluted share for the nine months ended September 30, 2017, compared to $5.8 million, or $0.13 per basic and diluted share, for the same period a year ago. Turning to the balance sheet, as of March 31, 2017, the Company had cash and cash equivalents of $2.5 million compared to $2.7 million as of December 31, 2016. Working capital decreased to $6.9 million as of March 31, 2017 from $7.1 million as of December 31, 2016. Our accounts receivable balance decreased to $3.7 million as of March 31, 2017 from $4 million as of December 31, 2016. As of September 30, 2017, the Company had cash and cash equivalents of $1.1 million compared to $2.7 million as of December 31, 2016. Working capital decreased to $4.6 million as of September 30, 2017 from $7.1 million as of December 31, 2016. As of September 30, 2017, our net accounts receivable was $2.9 million, compared to $4 million as of December 31, 2016. Overall, we will continue to focusing on our business developments and promote our sales and beliefs that this will support the fair evaluation of our shareholders increase in the future. With that, we will now open the call up to the questions. Operator?
