China Jo-Jo Drugstores Reports Second Quarter 2020 Financial Results

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Nov 14, 2019, 09:00 ET

HANGZHOU, China, Nov. 14, 2019 /PRNewswire/ -- China Jo-Jo Drugstores, Inc. (NASDAQ: CJJD) ("Jo-Jo Drugstores" or the "Company"), a leading online and offline retailer and wholesale distributor of pharmaceutical and other healthcare products and a provider of healthcare services in China, today announced its financial results for the second fiscal quarter ended September 30, 2019.

Mr. Lei Liu, Chief Executive Officer and Chairman of Jo-Jo Drugstores, commented, "We are pleased to announce our financial results for the second quarter of fiscal year 2020, with revenue increasing by 3.4% compared to the same period last year. We made great strides in boosting our business and optimizing our operation. As a result, our gross profit had a 15.5% increase and gross margin had a 2.4 percent points increase in the second quarter of 2019. We will continue executing our long-term growth strategy, improving our operations to deliver high quality services to our customers in a challenging and competitive environment."

Second Quarter of Fiscal 2020 Financial Highlights

	For the Three Months Ended September 30,
($ millions, except per share data)	2019	2018	% Change
Revenue	28.35	27.41	3.4%
Retail drugstores	18.00	18.14	-0.7%
Online pharmacy	2.35	2.12	10.8%
Wholesale	8.00	7.15	11.9%
Gross profit	6.69	5.80	15.5%
Gross margin	23.6%	21.2%	2.4 pp*
Loss from operations	(1.62)	(1.64)	1.6%
Net loss	(1.35)	(1.60)	16.0%
Loss per share	(0.04)	(0.06)	33.3%

*Notes: pp represents percentage points

Revenue increased by 3.4% to $28.35 million for the three months ended September 30, 2019 from $27.41 million for the same period of last year.
Gross profit increased by 15.5% to $6.69 million for the three months ended September 30, 2019 from $5.80 million for the same period of last year.
Gross margin increased by 2.4 percentage points to 23.6% from 21.2% for the same period of last year.
Net loss was $1.35 million, or $0.04 per basic and diluted share, for the three months ended September 30, 2019, compared to $1.60 million, or $0.06 per basic and diluted share, for the same period of last year.

Second Quarter of Fiscal 2020 Financial Results

Revenue

Revenue for the three months ended September 30, 2019 increased by $0.94 million, or 3.4%, to $28.35 million from $27.41 million for the same period of last year. The increase in revenue was primarily due to the growth in our wholesale business and online pharmacy.

	For the Three Months Ended September 30,
	2019			2018
($ millions)	Revenue	Cost of Goods	Gross Margin	Revenue	Cost of Goods	Gross Margin
Retail drugstores	18.00	12.47	30.7%	18.14	13.28	26.8%
Online pharmacy	2.35	2.03	13.6%	2.12	1.91	10.1%
Wholesale	8.00	7.16	10.6%	7.15	6.42	10.1%
Total	28.35	21.66	23.6%	27.41	21.61	21.2%

Revenue from the retail drugstores business decreased slightly by $0.14 million, or 0.7%, to $18.00 million for the three months ended September 30, 2019 from $18.14 million for the same period of last year, due to the RMB's dramatic depreciation against the USD from the three months ended September 30, 2018.

Revenue from the online pharmacy business increased by $0.23 million, or 10.8%, to $2.35 million for the three months ended September 30, 2019 from $2.12 million for the same period of last year. The increase was primarily attributable to an increase in sales via e-commerce platforms such as Tmall, offset slightly by a decline in sales via the Company's official site. Popular products at reasonable prices are key to success in our online business. In order to promote the Company's sales, the Company focused on selecting medical equipment tailored to the demands of local customers.

Revenue from the wholesale business increased by $0.85 million, or 11.9%, to $8.00 million for the three months ended September 30, 2019 from $7.15 million for the same period of last year. The increase was primarily a result of the Company's ability to resell certain products, which the Company sold in large quantities at its retail stores, to other vendors at competitive prices.

Gross profit and gross margin

Total cost of goods sold increased slightly by $0.05 million, or 0.2%, to $21.66 million for the three months ended September 30, 2019 from $21.61 million for the same period of last year. Gross profit increased by $0.89 million, or 15.5%, to $6.69 million for three months ended September 30, 2019 from $5.80 million for the same period of last year. Overall gross margin increased by 2.4 percentage points to 23.6% for the three months ended September 30, 2019, from 21.2% for the same period of last year.

Gross margins for retail drugstores, online pharmacy and wholesale were 30.7%, 13.6%, and 10.6%, respectively, for the three months ended September 30, 2019. This compared to gross margins for retail drugstores, online pharmacy and wholesale of 26.8%, 10.1%, and 10.1%, respectively, for the same period of last year.

Loss from operations

Selling and marketing expenses increased by $1.27 million, or 24.2%, to $6.49 million for the three months ended September 30, 2019 from $5.22 million for the same period of last year. The increase in selling and marketing expenses was primarily due to increases in labor costs related to the Company's store expansions and rising local cost of living.

General and administrative expenses decreased by $0.40 million, or 17.7%, to $1.82 million for the three months ended September 30, 2019 from $2.22 million for the same period of last year. In the three months ended September 30, 2018, the Company recorded additional bad debt allowance of $0.63 million. In comparison, the Company recorded additional bad debts allowance of $0.01 million in the three months ended September 30, 2019.

Loss from operations was $1.62 million for the three months ended September 30, 2019, compared to $1.64 million for the same period of last year. Operating margin was negative 5.7% for the three months ended September 30, 2019, compared to negative 6.0% for the same period of last year.

Net loss

Net loss was $1.35 million, or $0.04 per basic and diluted share for the three months ended September 30, 2019, compared to net loss of $1.60 million, or $0.06 per basic and diluted share for the same period of last year.

Six Months Ended September 30, 2019 Financial Highlights

	For the Six Months Ended September 30,
($ millions, except per share data)	2019	2018	% Change
Revenue	53.63	50.18	6.9%
Retail drugstores	34.74	34.10	1.9%
Online pharmacy	4.79	4.14	15.7%
Wholesale	14.10	11.93	18.2%
Gross profit	12.75	11.41	11.7%
Gross margin	23.8%	22.7%	1.1 pp*
Loss from operations	(4.38)	(2.21)	-98.3%
Net loss	(3.73)	(2.30)	-62.0%
Loss per share	(0.10)	(0.08)	-25.0%

*Notes: pp represents percentage points

Revenue increased by 6.9% to $53.63 million for the six months ended September 30, 2019 from $50.18 million for the same period of last year.
Gross profit increased by 11.7% to $12.75 million for the six months ended September 30, 2019 from $11.41 million for the same period of last year.
Gross margin increased by 1.1 percentage points to 23.8% from 22.7% for the same period of last year.
Net loss was $3.73 million, or $0.10 per basic and diluted share, for the six months ended September 30, 2019, compared to $2.30 million, or $0.08 per basic and diluted share, for the same period of last year.

Six Months Ended September 30, 2019 Financial Results

Revenue

Revenue for the six months ended September 30, 2019 increased by $3.45 million, or 6.9%, to $53.63 million from $50.18 million for the same period of last year. The increase in revenue was primarily due to the growth in wholesale business and online pharmacy.

	For the Six Months Ended September 30,
	2019			2018
($ millions)	Revenue	Cost of Goods	Gross Margin	Revenue	Cost of Goods	Gross Margin
Retail drugstores	34.74	24.15	30.5%	34.10	24.44	28.3%
Online pharmacy	4.79	4.13	13.9%	4.14	3.65	11.9%
Wholesale	14.10	12.60	10.7%	11.93	10.68	10.5%
Total	53.63	40.88	23.8%	50.18	38.77	22.7%

Revenue from the retail drugstores business increased by $0.64 million, or 1.9%, to $34.74 million for the six months ended September 30, 2019 from $34.10 million for the same period of last year. The increase was primarily due to consumer-facing benefits such as emphasis on onsite medical care, chronic disease management services, incremental Direct-to-Patient ("DTP") business caused by continuous hospital medical reform, and maturing of stores opened a year ago.

Revenue from the online pharmacy business increased by $0.65 million, or 15.7%, to $4.79 million for the six months ended September 30, 2019 from $4.14 million for the same period of last year. The increase was primarily attributable to an increase in sales via e-commerce platforms such as Tmall, offset slightly by the decline in sales via the Company's official site.

Revenue from the wholesale business increased by $2.17 million, or 18.2%, to $14.10 million for the six months ended September 30, 2019 from $11.93 million for the same period of last year. The increase was primarily a result of the Company's ability to resell certain products, which the Company sold in large quantities at its retail stores, to other vendors at competitive prices.

Gross profit and gross margin

Total cost of goods sold increased by $2.11 million, or 5.4%, to $40.88 million for the six months ended September 30, 2019 from $38.77 million for the same period of last year. Gross profit increased by $1.34 million, or 11.7%, to $12.75 million for the six months ended September 30, 2019 from $11.41 million for the same period of last year. Overall gross margin increased by 1.1 percentage points to 23.8% for the six months ended September 30, 2019, from 22.7% for the same period of last year.

Gross margins for retail drugstores, online pharmacy and wholesale were 30.5%, 13.9%, and 10.7%, respectively, for the six months ended September 30, 2019. This compared to gross margins for retail drugstores, online pharmacy and wholesale of 28.3%, 11.9%, and 10.5%, respectively, for the same period of last year.

Loss from operations

Selling and marketing expenses increased by $2.60 million, or 26.4%, to $12.45 million for the six months ended September 30, 2019 from $9.85 million for the same period of last year. The increase in selling and marketing expenses was primarily due to increases in labor costs related to the Company's store expansions and rising local cost of living.

General and administrative expenses increased by $0.91 million, or 24.0%, to $4.68 million for the six months ended September 30, 2019 from $3.77 million for the same period of last year. The bad debt expense related to the Company's accounts receivable decreased by approximately $0.1 million due to certain aged accounts. Additionally, in order to better reflect the attributes of expenses, certain clinic labor expenses, which were originally allocated to G&A expense are now allocated to selling expense in the six months ended September 20, 2019.

Loss from operations was $4.38 million for the six months ended September 30, 2019, compared to $2.21 million for the same period of last year. Operating margin was negative 8.2% for the six months ended September 30, 2019, compared to negative 4.4% for the same period of last year.

Net loss

Net loss was $3.73 million, or $0.10 per basic and diluted share for the six months ended September 30, 2019, compared to net loss of $2.30 million, or $0.08 per basic and diluted share for the same period of last year.

Financial Condition

As of September 30, 2019, the Company had cash of $17.40 million, compared to $9.32 million as of March 31, 2019. Net cash provided by operating activities was $0.97 million for the six months ended September 30, 2019, compared to net cash used in operating activities of $2.92 million for the same period of last year. Net cash used in investing activities was $1.45 million for the six months ended September 30, 2019, compared to $0.39 million for the same period of last year. Net cash provided by financing activities was $6.38 million for the six months ended September 30, 2019, compared to net cash used in financing activities of $2.19 million for the same period of last year.

About China Jo-Jo Drugstores, Inc.

China Jo-Jo Drugstores, Inc. ("Jo-Jo Drugstores" or the "Company"), is a leading online and offline retailer and wholesale distributor of pharmaceutical and other healthcare products and a provider of healthcare services in China. Jo-Jo Drugstores currently operates an online pharmacy and retail drugstores with licensed doctors on site for consultation, examination and treatment of common ailments at scheduled hours. It is also a wholesale distributor of products similar to those carried in its pharmacies. In addition, Jo-Jo Drugstores cultivates herbs used for traditional Chinese medicine. For more information about the Company, please visit http://jiuzhou360.com. The Company routinely posts important information on its website.

Forward-Looking Statements

This press release contains information about the Company's view of its future expectations, plans and prospects that constitute forward-looking statements. Actual results may differ materially from historical results or those indicated by these forward-looking statements as a result of a variety of factors including, but not limited to, risks and uncertainties associated with its ability to raise additional funding, its ability to maintain and grow its business, variability of operating results, its ability to maintain and enhance its brand, its development and introduction of new products and services, the successful integration of acquired companies, technologies and assets into its portfolio of products and services, marketing and other business development initiatives, competition in the industry, general government regulation, economic conditions, dependence on key personnel, the ability to attract, hire and retain personnel who possess the technical skills and experience necessary to meet the requirements of its clients, and its ability to protect its intellectual property. The Company's encourages you to review other factors that may affect its future results in the Company's annual reports and in its other filings with the Securities and Exchange Commission.

For more information, please contact:

Company Contact:

Frank Zhao
Chief Financial Officer
+86-571-88077108
[email protected]

Steve Liu
Investor Relations Director
[email protected]

Investor Relations Contact:

Tina Xiao
Ascent Investor Relations LLC
+1-917-609-0333
[email protected]

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
				September 30,		March 31,
				2019		2019
ASSETS
CURRENT ASSETS
	Cash			$	17,395,116	$	9,322,463
	Restricted cash				11,890,053		15,422,739
	Financial assets available for sale				156,128		180,928
	Notes receivable				76,922		177,278
	Trade accounts receivable				7,243,629		8,692,514
	Inventories				12,177,952		13,955,202
	Other receivables, net				4,861,492		4,438,230
	Advances to suppliers				1,368,114		1,950,252
	Other current assets				1,286,855		2,063,375
		Total current assets			56,456,261		56,202,981

PROPERTY AND EQUIPMENT, net					8,043,511		8,727,358

OTHER ASSETS
	Long-term investment				11,760		24,243
	Farmland assets				722,384		825,259
	Long term deposits				1,367,267		2,157,275
	Other noncurrent assets				1,111,490		1,196,197
	Operating lease right-of-use assets				15,706,120		-
	Intangible assets, net				3,731,008		3,597,323
		Total other assets			22,650,029		7,800,297

			Total assets	$	87,149,801	$	72,730,636

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
	Accounts payable, trade				23,606,067		23,106,230
	Notes payable				21,383,423		25,951,673
	Other payables				2,774,674		3,197,221
	Other payables - related parties				315,034		795,179
	Customer deposits				1,447,720		771,942
	Taxes payable				278,908		125,859
	Accrued liabilities				873,708		1,264,182
	Long-term loan-current potion				233,480		-
	Current portion of operating lease liabilities				2,267,705		-
		Total current liabilities			53,180,719		55,212,286

Long-term loan					428,047		-
Long term operating lease liabilities					11,785,742		-
	Purchase option and warrants liability				54,828		465,248
	Financial liability				77,048		81,935
		Total liabilities			65,526,384		55,759,469

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
		Common stock; $0.001 par value; 250,000,000 shares authorized; 32,936,786 and 28,936,778 shares issued and outstanding as of September 30, 2019 and March 31, 2019			32,937		28,937
		Preferred stock; $0.001 par value; 10,000,000 shares authorized; nil issued and outstanding as of September 30, 2019 and March 31, 2019			-		-
	Additional paid-in capital				54,209,301		44,905,664
	Statutory reserves				1,309,109		1,309,109
	Accumulated deficit				(33,947,382)		(30,587,468)
	Accumulated other comprehensive income				1,567,391		2,508,964
		Total stockholders' equity			23,171,356		18,165,206
		Noncontrolling interests			(1,547,939)		(1,194,039)
		Total equity			21,623,417		16,971,167
			Total liabilities and stockholders' equity	$	87,149,801	$	72,730,636

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
		For the three months ended				For the six months ended
		September 30,				September 30,
		2019		2018		2019		2018

REVENUES, NET		$	28,353,779	$	27,409,046	$	53,634,563	$	50,181,612

COST OF GOODS SOLD			21,660,415		21,611,945		40,879,761		38,767,708

GROSS PROFIT			6,693,364		5,797,101		12,754,802		11,413,904

SELLING EXPENSES			6,485,848		5,223,523		12,454,399		9,850,501
GENERAL AND ADMINISTRATIVE EXPENSES			1,823,935		2,215,484		4,675,547		3,770,012
TOTAL OPERATING EXPENSES			8,309,783		7,439,007		17,129,946		13,620,513

LOSS FROM OPERATIONS			(1,616,419)		(1,641,906)		(4,375,144)		(2,206,609)

INTEREST INCOME			340,514		26,060		388,387		73,232
OTHER INCOME(LOSS), NET			(72,225)		94,582		(134,710)		(20,359)

CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITIES			6,865		(81,866)		410,420		(88,840)

LOSS BEFORE INCOME TAXES			(1,341,265)		(1,603,130)		(3,711,047)		(2,242,576)

PROVISION FOR INCOME TAXES			5,702		(415)		14,090		56,754

NET LOSS			(1,346,967)		(1,602,715)		(3,725,137)		(2,299,330)

	ADD: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST		122,004		15,298		365,223		66,060

	NET (LOSS) ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES, INC.		(1,224,963)		(1,587,417)		(3,359,914)		(2,233,270)

Foreign currency translation adjustments			(536,335)		(1,448,661)		(941,573)		(827,027)

COMPREHENSIVE LOSS		$	(1,883,302)	$	(3,051,376)	$	(4,666,710)	$	(3,126,357)

WEIGHTED AVERAGE NUMBER OF SHARES:
Basic			32,936,786		28,936,778		32,696,348		28,936,778
Diluted			32,936,786		28,936,778		32,696,348		28,936,778

EARNINGS PER SHARES:
Basic		$	(0.04)	$	(0.06)	$	(0.10)	$	(0.08)
Diluted		$	(0.04)	$	(0.06)	$	(0.10)	$	(0.08)

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
			For the six months ended
			September 30,
			2019		2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss			$	(3,725,137)	$	(2,299,330)
Adjustments to reconcile net income to net cash provided by operating activities:
	Bad debt direct write-off and provision			767,250		890,576
	Depreciation and amortization			1,051,907		557,930
	Stock based compensation			34,560		71,427
	Change in fair value of purchase option derivative liability			(410,420)		88,840
	Accounts receivable, trade			555,289		(833,992)
	Notes receivable			92,655		32,528
	Inventories and biological assets			975,170		(1,587,645)
	Other receivables			(206,247)		(800,686)
	Advances to suppliers			(106,790)		(611,849)
	Other current assets			(1,031,185)		469,985
	Long term deposit			682,504		18,851
	Other noncurrent assets			13,791		(139,597)
	Accounts payable, trade			1,938,015		(603,967)
	Other payables and accrued liabilities			(568,457)		1,305,221
	Customer deposits			744,912		773,748
	Taxes payable			165,692		(253,496)
		Net cash (used in) operating activities		973,509		(2,921,456)

CASH FLOWS FROM INVESTING ACTIVITIES:
	Disposal of financial assets available for sale			14,457		88,897
	Purchase of financial assets available for sale					(91,099)
	Acquisition of equipment			(374,992)		(142,681)
	Increase in intangible assets			(462,266)		-
	Investment in a joint venture			-		-
	Additions to leasehold improvements			(622,464)		(244,047)
		Net cash used in investing activities		(1,445,265)		(388,930)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from third parties loan			682,692
	Proceeds from notes payable			21,745,277		16,177,514
	Repayment of notes payable			(24,862,363)		(18,290,325)
	Proceeds from equity financing			9,273,077		7,667
	Repayment of other payables-related parties			(458,002)		(84,543)
		Net cash provided by (used in) financing activities		6,380,681		(2,189,687)

EFFECT OF EXCHANGE RATE ON CASH				(1,368,958)		(2,243,149)

DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH				4,539,967		(7,743,222)

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period				24,745,202		31,452,191

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, end of period			$	29,285,169	$	23,708,969

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Cash paid for income taxes		$	28,777	$	57,460