China Jo-Jo Drugstores Reports First Quarter 2020 Financial Results

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Aug 14, 2019, 09:00 ET

HANGZHOU, China, Aug. 14, 2019 /PRNewswire/ -- China Jo-Jo Drugstores, Inc. (NASDAQ CM: CJJD) ("Jo-Jo Drugstores" or the "Company"), a leading online and offline retailer and wholesale distributor of pharmaceutical and other healthcare products and a healthcare provider in China, today announced its financial results for the first quarter of its fiscal year 2020.

Mr. Lei Liu, Chief Executive Officer and Chairman of Jo-Jo Drugstores, commented, "We are pleased to announce our financial results for the first quarter of fiscal year 2020. Our sales grew 11.0%, with sales growth in our retail drugstores, online pharmacy, and wholesale segments. We will continue adapting to the changing retail drugstore environment and making progress towards our long-term strategic goals. We remain confident of our ability to realize the potential of our business model as we endeavor to provide the best experience to our customers."

First Quarter of Fiscal 2020 Financial Highlights

	For the Three Months Ended June 30,
($ millions, except per share data)	2019	2018	% Change
Revenue	25.28	22.77	11.0%
Retail drugstores	16.74	15.97	4.8%
Online pharmacy	2.44	2.02	20.9%
Wholesale	6.10	4.78	27.6%
Gross profit	6.06	5.62	7.9%
Gross margin	24.0%	24.7%	-0.7 pp*
Loss from operations	(2.76)	(0.56)	-388.5%
Net loss	(2.38)	(0.70)	-241.4%
Loss per share	(0.07)	(0.02)	-250.0%

*Notes: pp represents percentage points

Revenue increased by 11.0% to $25.28 million for the three months ended June 30, 2019 from $22.77 million for the same period of last year.
Gross profit increased by 7.9% to $6.06 million for the three months ended June 30, 2019 from $5.62 million for the same period of last year.
Gross margin decreased by 0.7 percentage points to 24.0% from 24.7% for the same period of last year.
Net loss was $2.38 million, or $0.07 per basic and diluted share, for the three months ended June 30, 2019, compared to $0.70 million, or $0.02 per basic and diluted share, for the same period of last year.

First Quarter of Fiscal 2020 Financial Results

Revenue

Revenue for the three months ended June 30, 2019 increased by $2.51 million, or 11.0%, to $25.28 million from $22.77 million for the same period of last year. The increase in revenue was primarily due to the growth in retail drugstores business, online pharmacy and wholesale business.

	For the Three Months Ended June 30,
	2019			2018
($ millions)	Revenue	Cost of Goods	Gross Margin	Revenue	Cost of Goods	Gross Margin
Retail drugstores	16.74	11.68	30.2%	15.97	11.17	30.1%
Online pharmacy	2.44	2.10	14.2%	2.02	1.74	13.9%
Wholesale	6.10	5.44	10.9%	4.78	4.25	11.1%
Total	25.28	19.22	24.0%	22.77	17.16	24.7%

Revenue from the retail drugstores business increased by $0.77 million, or 4.8%, to $16.74 million for the three months ended June 30, 2019 from $15.97 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 $0.42 million, or 20.9%, to $2.44 million for the three months ended June 30, 2019 from $2.02 million for the same period of last year. The increase was primarily caused by an increase in sales via e-commerce platforms such as Tmall, offset slightly by the decline in sales via the Company's official site. Popular products at reasonable prices are key to success in online business. In order to promote the Company's sales, the Company focused on the selection of medical equipment suitable to local customers. For example, sales of blood glucose meters and contact lens contributed significantly to our revenue in the three months ended June 30, 2019 as compared to the same period a year ago.

Revenue from the wholesale business increased by $1.32 million, or 27.6%, to $6.10 million for the three months ended June 30, 2019 from $4.78 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 quantity at its retail stores, to other vendors at competitive prices.

Gross profit and gross margin

Total cost of goods sold increased by $2.06 million, or 12.0%, to $19.22 million for the three months ended June 30, 2019 from $17.16 million for the same period of last year. Gross profit increased by $0.44 million, or 7.9%, to $6.06 million for three months ended June 30, 2019 from $5.62 million for the same period of last year. Overall gross margin decreased by 0.7 percentage points to 24.0% for the three months ended June 30, 2019, from 24.7% for the same period of last year.

Gross margins for retail drugstores, online pharmacy and wholesale were 30.2%, 14.2%, and 10.9%, respectively, for the three months ended June 30, 2019. For the same period of last year, the gross margins for retail drugstores, online pharmacy and wholesale of were 30.1%, 13.9%, and 11.1%, respectively.

Loss from operations

Selling and marketing expenses increased by $1.34 million, or 29.0%, to $5.97 million for the three months ended June 30, 2019 from $4.63 million for the same period of last year. The increase in selling and marketing expenses was primarily due to the increase in labor and rent related to the Company's store expansions and rising local living costs.

General and administrative expenses increased by $1.30 million, or 83.4%, to $2.85 million for the three months ended June 30, 2019 from $1.55 million for the same period of last year. The Company's retail business incurred additional administrative expenses related to its store expansion. Additionally, Zhejiang Jiuzhou Linjia Medical Investment and Management Co. Ltd, the entity we have 51% that operates two new clinics in Hangzhou, incurred additional administrative labor costs. The bad debt expenses related to the Company's accounts receivable increased by approximately $0.5 million due to certain aged accounts.

Loss from operations was $2.76 million for the three months ended June 30, 2019, compared to $0.56 million for the same period of last year. Operating margin was negative 10.9% for the three months ended June 30, 2019, compared to negative 2.5% for the same period of last year.

Net loss

Net loss was $2.38 million, or $0.07 per basic and diluted share for the three months ended June 30, 2019, compared to net loss of $0.70 million, or $0.02 per basic and diluted share for the same period of last year.

Financial Condition

As of June 30, 2019, the Company had cash of $8.34 million, compared to $9.32 million as of March 31, 2019. Net cash used in operating activities was $8.16 million for the three months ended June 30, 2019, compared to $2.58 million for the same period of last year. Net cash used in investing activities was $0.95 million for the three months ended June 30, 2019, compared to $0.26 million for the same period of last year. Net cash provided by financing activities was $8.02 million for the three months ended June 30, 2019, compared to net cash used in financing activities of $5.21 million for the same period of last year.

About China Jo-Jo Drugstores, Inc.

China Jo-Jo Drugstores, Inc. is a leading online and offline retailer and wholesale distributor of pharmaceutical and other healthcare products in China. Jo-Jo Drugstores currently operates retail drugstores and an online pharmacy. It is also a wholesale distributor of products similar to those carried in its pharmacies and it 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)


			June 30,		March 31,
			2019		2019
ASSETS
CURRENT ASSETS
	Cash		$	8,341,167	$	9,322,463
	Restricted cash			14,808,986		15,422,739
	Financial assets available for sale			162,273		180,928
	Notes receivable			92,480		177,278
	Trade accounts receivable			8,590,075		8,692,514
	Inventories			10,806,698		13,955,202
	Other receivables, net			4,253,802		4,438,230
	Advances to suppliers			1,544,132		1,950,252
	Other current assets			1,557,156		2,063,375
		Total current assets		50,156,769		56,202,981

PROPERTY AND EQUIPMENT, net				8,620,758		8,727,358

OTHER ASSETS
	Long-term investment			16,318		24,243
	Farmland assets			742,974		825,259
	Long term deposits			2,050,219		2,157,275
	Other noncurrent assets			1,177,703		1,196,197
	Operating lease right-of-use assets			13,564,115		-
	Intangible assets, net			3,888,848		3,597,323
		Total other assets		21,440,177		7,800,297

		Total assets	$	80,217,704	$	72,730,636

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
	Accounts payable, trade			13,674,741		23,106,230
	Notes payable			24,574,955		25,951,673
	Other payables			3,267,074		3,197,221
	Other payables - related parties			326,778		795,179
	Customer deposits			870,100		771,942
	Taxes payable			217,704		125,859
	Accrued liabilities			990,032		1,264,182
	Current portion of operating lease liabilities			4,738,632		-
		Total current liabilities		48,660,016		55,212,286

	Long term operating lease liabilities			7,918,900		-
	Purchase option and warrants liability			61,693		465,248
	Financial liability			80,081		81,935
		Total liabilities		56,720,690		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 June 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 June 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			(32,722,416)		(30,587,468)
	Accumulated other comprehensive income			2,103,726		2,508,964
		Total stockholders' equity		24,932,657		18,165,206
		Noncontrolling interests		(1,435,643)		(1,194,039)
		Total equity		23,497,014		16,971,167
		Total liabilities and stockholders' equity	$	80,217,704	$	72,730,636

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

	For the three months ended June 30,
	2019		2018
REVENUES, NET	$	25,280,784	$	22,772,566

COST OF GOODS SOLD		19,219,346		17,155,763

GROSS PROFIT		6,061,438		5,616,803

SELLING EXPENSES		5,968,551		4,626,978
GENERAL AND ADMINISTRATIVE EXPENSES		2,851,612		1,554,528
TOTAL OPERATING EXPENSES		8,820,163		6,181,506

LOSS FROM OPERATIONS		(2,758,725)		(564,703)

INTEREST INCOME		47,873		47,172
OTHER (EXPENSE), NET		(62,485)		(114,941)
CHANGE IN FAIR VALUE OF WARRANTS LIABILITY		403,555		(6,974)

LOSS BEFORE INCOME TAXES		(2,369,782)		(639,446)

PROVISION FOR INCOME TAXES		8,388		57,169

NET LOSS		(2,378,170)		(696,615)

ADD: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST		243,219		50,763

NET LOSS ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES, INC.		(2,134,951)		(645,852)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS		(405,238)		621,634

COMPREHENSIVE LOSS		(2,783,408)		(74,981)

WEIGHTED AVERAGE NUMBER OF SHARES:
Basic		32,453,269		28,936,778
Diluted		32,453,269		28,936,778

LOSS PER SHARES:
Basic	$	(0.07)	$	(0.02)
Diluted	$	(0.07)	$	(0.02)

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

			For the three months ended
			June 30,
			2019		2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss			$	(2,378,170)	$	(696,615)
Adjustments to reconcile net income to net cash provided by operating activities:
	Bad debt direct write-off and provision			758,231		259,279
	Depreciation and amortization			499,175		293,095
	Stock based compensation			34,560		49,140
	Change in fair value of purchase option derivative liability			(403,555)		6,974
	Accounts receivable, trade			(959,680)		1,077,419
	Notes receivable			81,326		(114,944)
	Inventories and biological assets			2,851,652		(458,803)
	Other receivables			371,054		(401,204)
	Advances to suppliers			242,652		(775,014)
	Other current assets			(450,042)		554,048
	Long term deposit			58,630		(5,415)
	Other noncurrent assets			(8,631)		(97,341)
	Accounts payable, trade			(8,968,168)		(2,369,206)
	Other payables and accrued liabilities			(105,522)		357,335
	Customer deposits			116,398		20,290
	Taxes payable			95,326		(281,235)

		Net cash (used in) operating activities		(8,164,764)		(2,582,197)

CASH FLOWS FROM INVESTING ACTIVITIES:
	Disposal of financial assets available for sale			14,658		-
	Acquisition of equipment			(210,356)		(32,753)
	Increase in intangible assets			(433,111)		-
	Investment in a joint venture			-		(109,142)
	Additions to leasehold improvements			(542,734)		(116,002)
		Net cash used in investing activities		(1,171,543)		(257,897)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from notes payable			15,372,260		10,376,504
	Repayment of notes payable			(16,167,012)		(15,512,104)
	Proceeds from equity financing			9,273,077		7,629
	Repayment of other payables-related parties			(460,000)		(84,014)
		Net cash provided by (used in) financing activities		8,018,325		(5,211,985)

EFFECT OF EXCHANGE RATE ON CASH				(277,067)		(457,638)

DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH				(1,595,049)		(8,509,717)

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			$	23,150,153	$	22,942,474

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Cash paid for income taxes		$	29,176	$	27,832