China Jo-Jo Drugstores Announces Fiscal Year 2015 First Quarter Financial Results

HANGZHOU, China, August 13, 2014 /PRNewswire/ — China Jo-Jo Drugstores, Inc. (NASDAQ CM: CJJD) (the “Company”), a retail and wholesale distributor of pharmaceutical and other healthcare products in the People’s Republic of China, today announced earnings results for the quarter ended June 30, 2014.

FY 2015 First Quarter Highlights:

  • Online sales contributed $2.6 million in revenue, an increase of 103.5% from the comparable quarter of prior year
  • Retail sales, which includes online sales, accounted for approximately 80.0% of total revenue, and increased by $2.3 million, or 20.7% year over year to $13.2 million
  • Wholesale, which accounted for approximately 20.0% of total revenue, decreased to $3.3 million from $4.4 million for the same quarter of last year
  • Gross margin decreased quarter over quarter from 23.5% to 15.3%
  • Net loss was $0.35 million compared to $0.79 million for the comparable quarter of prior year; Diluted EPS loss was $0.02 compared to $0.06 for the comparable quarter of prior year

The Company’s drugstore sales increased in the first quarter of fiscal 2015, primarily due to a 9.8% increase in same-store sales, and revenues from the proliferation of new stores established over the last few years. Retail profit margin decreased to 17.6% from 25.7% in the first quarter of fiscal 2014 due to strong market competition and the implementation of government subsidies to all drugs sold at public hospitals in Zhejiang Province since April 2014. As of June 30, 2014, we have 49 retail drug stores in total with one new store opened in Hangzhou during the quarter.

The Company’s online sales continued to grow dramatically in the first quarter of fiscal 2015, reflecting its efforts in expanding collaboration with large business-to-consumer vendors, better products selection for online consumer, and effective cost control. The Company also plans to implement the O2O (online to offline) drug sales model, which provides deliveries to customers from local stores within a few hours of an online purchase. As online shopping becomes widely used, the Company’s sales and technical team gains more experiences in searching for potential customers and satisfying products. The Company’s management expects an explosive expansion of its online pharmacy sales in the near future.

Mr. Lei Liu, the Company’s Chairman and CEO, stated, “We are glad to see the continued improvement in our retail operation, especially the growth in our same-store sales and online store. Wholesale business declined in the first quarter as we have been undergoing restructure of the division in the past few quarters, including a change in sales and management team of wholesale division.”

“For the remaining of fiscal 2015,” Concluded by Mr. Liu, “we anticipate to grow revenue primarily through our retail operations and online pharmacy while stabilizing our wholesale operations with an eye to achieve bottom line results.”

Forward Looking Statement

Statements in this press release regarding the Company that are not historical facts are forward-looking statements and are subject to risks and uncertainties that could cause actual future events or results to differ materially from such statements. Any such forward-looking statements, including, but not limited to, financial guidance, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “project,” “plan,” “seek,” “intend,” “anticipate,” the negatives thereof, or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding the progress of new product development. It is routine for the Company’s internal projections and expectations to change as the quarter and year progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which the Company bases its expectations may change. Although these expectations may change, the Company is under no obligation to inform you if they do. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of numerous factors, including the risks associated with the effect of changing economic conditions in the People’s Republic of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products. Readers are referred to the reports and documents filed from time to time by the Company with the Securities and Exchange Commission for a discussion of these and other important risk factors that could cause actual results to differ from those discussed in forward-looking statements. The Company also routinely posts important information on its corporate websites, which readers can access at www.jiuzhou-drugstore.com (Chinese) and www.chinajojodrugstores.com (English).

See Accompanying Tables

CHINA JO-JO DRUGSTORES, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

June 30,

March 31,

2014

2014

A S S E T S

CURRENT ASSETS

Cash

$

3,378,916

$

4,445,276

Restricted cash

3,706,658

3,114,543

Trade accounts receivable, net

5,677,129

6,734,536

Inventories

7,223,808

8,419,132

Other receivables, net

425,983

149,546

Advances to suppliers, net

3,184,527

4,577,194

Other current assets

1,726,872

1,663,102

Total current assets

25,323,893

29,103,329

PROPERTY AND EQUIPMENT, net

9,034,288

9,412,688

OTHER ASSETS

Long-term biological assets

1,373,425

Long term deposits

2,764,792

2,786,437

Other noncurrent assets

2,947,235

3,036,930

Intangible assets, net

1,563,347

1,569,443

Total other assets

8,648,799

7,392,810

Total assets

$

43,006,980

$

45,908,827

L I A B I L I T I E S A N D S T O C K H O L D E R S’ E Q U I T Y

CURRENT LIABILITIES

Short-term loan payable

$

$

162,300

Accounts payable, trade

10,218,415

14,554,726

Notes payable

9,065,063

7,820,718

Other payables

1,825,591

1,282,211

Other payables – related parties

2,808,588

2,384,294

Loan from third parties

234,813

294,042

Customer deposits

3,386,007

3,185,885

Taxes payable

349,562

373,501

Accrued liabilities

823,309

1,208,242

Total current liabilities

28,711,348

31,265,919

Purchase option and warrant liability

155,217

278,916

Total liabilities

28,866,565

31,544,835

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY

Preferred stock; $0.001 par value; 10,000,000 shares authorized; nil issued and
outstanding as of March 31, 2014 and June 30, 2014

Common stock; $0.001 par value; 250,000,000 shares authorized; 14,416,022 and 14,416,022 shares issued and outstanding as of June 30, 2014 and March 31, 2014

14,416

14,416

Additional paid-in capital

17,427,911

17,355,555

Statutory reserves

1,309,109

1,309,109

Accumulated deficit

(8,607,504)

(8,260,767)

Accumulated other comprehensive income

3,957,404

3,905,136

Total stockholders’ equity

14,101,336

14,323,449

Noncontrolling interests

39,079

40,543

Total equity

14,140,415

14,363,992

Total liabilities and stockholders’ equity

$

43,006,980

$

45,908,827

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

For the three months ended
June 30,

2014

2013

REVENUES, NET

$

16,459,232

$

15,336,519

COST OF GOODS SOLD

13,948,613

11,735,350

GROSS PROFIT

2,510,619

3,601,169

SELLING EXPENSES

1,768,577

1,680,842

GENERAL AND ADMINISTRATIVE EXPENSES

1,081,201

2,640,818

TOTAL OPERATING EXPENSES

2,849,778

4,321,660

LOSS FROM OPERATIONS

(339,159)

(720,491)

OTHER LOSS, NET

(115,836)

(40,413)

CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITIES

123,699

12,665

LOSS BEFORE INCOME TAXES

(331,296)

(748,239)

PROVISION FOR INCOME TAXES

16,141

39,520

NET LOSS

(347,437)

(787,759)

ADD: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

700

243

NET LOSS ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES, INC.

(346,737)

(787,516)

OTHER COMPREHENSIVE INCOME

Foreign currency translation adjustments

52,268

759,791

COMPREHENSIVE LOSS

$

(294,469)

$

(27,725)

WEIGHTED AVERAGE NUMBER OF SHARES:

Basic

14,416,022

13,609,003

Diluted

14,416,022

13,609,003

LOSSES PER SHARES:

Basic

$

(0.02)

$

(0.06)

Diluted

$

(0.02)

$

(0.06)

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Three months ended
June 30,

2014

2013

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(347,437)

$

(787,759)

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Depreciation and amortization

502,101

588,936

Stock compensation

71,544

27,338

Bad debt provision

(637,819)

1,181,478

Inventory reserve

4,316

Change in fair value of purchase option derivative liability

(123,699)

(12,665)

Change in operating assets:

Accounts receivable, trade

1,187,128

(190,989)

Notes receivable

(290,214)

Inventories and biological assets

(171,784)

(398,271)

Other receivables

(59,183)

(159,171)

Advances to suppliers

1,694,269

(1,111,259)

Other current assets

(61,633)

(782,304)

Long term deposit

25,040

Other noncurrent assets

93,294

49,586

Change in operating liabilities:

Accounts payable, trade

(4,347,548)

1,363,429

Other payables and accrued liabilities

155,208

(570,952)

Customer deposits

195,894

365,295

Taxes payable

(24,361)

(2,212)

Net cash used in operating activities

(1,844,670)

(729,734)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of equipment

(104,682)

(2,934)

Additions to leasehold improvements

(3,958)

Payments on construction-in-progress

(111,152)

Net cash used in investing activities

(104,682)

(118,044)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from short-term bank loan

161,230

Repayment of short-term bank loan

(162,250)

Repayment of third parties loan

(59,500)

Change in restricted cash

(587,371)

(1,336,189)

Proceeds from notes payable

1,918,599

650,108

Repayments of notes payable

(685,791)

(816,304)

Proceeds from other payables-related parties

423,752

194,973

Net cash provided by financing activities

847,439

(1,146,182)

EFFECT OF EXCHANGE RATE ON CASH

35,553

181,265

DECREASE IN CASH

(1,066,360)

(1,812,695)

CASH, beginning of period

4,445,276

4,524,094

CASH, end of period

$

3,378,916

$

2,711,399

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income taxes

$

21,325

$

9,529

Cash paid for interest

$

1,460

$

8,764