China Jo-Jo Drugstores Reports Fiscal Year 2015 Third Quarter Financial Results

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Feb 17, 2015, 09:00 ET

HANGZHOU, China, Feb. 17, 2015 /PRNewswire/ -- China Jo-Jo Drugstores, Inc. (NASDAQ CM: CJJD) (the "Company" or "China Jo-Jo"), a leading China-based retail and wholesale distributor of pharmaceutical and health care products through its own online and retail pharmacies, today announced earnings results for the quarter ended December 31, 2014.

FY 2015 Third Quarter Highlights:

Retail drugstores sales increased by $2.16 million, or 19.5% year over year, to approximately $13.3 million, largely due to a 24.3% increases in same-store sales;
Online pharmacy sales jumped 110.6% to approximately $4.4 million during the quarter, as compared to $2.1 million during the same period last year;
Gross profit increased by $3,002,949 or 1,676.8% compared to the same period of prior year;
Gross margin increased from 1.0% to 14.9% in the three months ended December 31,2014;
Net income was $127,525 compared to net loss of $8,735,230 for the same period last year; Diluted EPS was $0.01 compared to loss per share of $0.64 for the comparable quarter of prior year.

Retail drugstores sales increased 19.5% primarily due to the 24.3% increase in same-store sales in the third quarter of 2015. Our retail drugstores sale growth rate is more than twice of the industry average. By acquiring Sanhao Pharmacy during the recent quarter, selecting products catering to local community, and continuing to provide quality in-store service such as doctors' in-store clinics service, we expect to further strengthen our competitive advantage in Hangzhou and Zhejiang Province.

The Company's online pharmacy sales increased dramatically for the three months ended December 31, 2014, more than double the sales as compared to that of the three months ended December 31, 2013. We have expanded cooperation with business-to-consumer online vendors, including Taobao, JD.com and Amazon.com. In addition, we have signed a service agreement with Alipay (China) Internet Technology Ltd. ("Alipay") to launch an online payment service ("Alipay Service") for its customers, which gives us a great opportunity to get access to Alipay's over 300 million registered users. We expect online pharmacy sales will continue to grow fast in the future, especially considering the potential authorization of the online sale of prescription drugs in 2015.

Mr. Lei Liu, Chairman and CEO of the Company stated, "We are glad to see that our company delivered a solid performance as we achieved quarterly profitability as compared to last year's large deficits . What's more exciting is the rapid increase in our e-commerce revenue, which greatly contributed to our total revenue. In the next two to three years, the online pharmacy sales would probably exceed our retail drugstore sales and make the Company one of the leading online pharmacy stores in China. Now it's only a turning point. Going forward, we will continue to focus our efforts on developing e-commerce opportunities, and drive our physical stores network and sales growth."

About China Jo-Jo Drugstores, Inc.

China Jo-Jo Drugstores, Inc., through its own retail drugstores, wholesale distributor and online pharmacy, is a leading retailer and wholesale distributor of pharmaceutical and healthcare products in China. As of December 31, 2014, the Company had 60 retail pharmacies in Hangzhou. The Company's wholesale subsidiary not only supplies its retail stores, but also distributes drug and other healthcare products to other drugstores and drug vendors. The Company routinely posts important information on its corporate websites at www.jiuzhou-drugstore.com (Chinese) and www.chinajojodrugstores.com (English).

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.

Contact:

China Jo-Jo Drugstores, Inc.
Ming Zhao, Chief Financial Officer
+1-561-372-5555
[email protected]

See Accompanying Tables

CHINA JO-JO DRUGSTORES, INC., AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

	December 31,		March 31,
	2014		2014

ASSETS

CURRENT ASSETS
Cash	$	1,734,392	$	4,445,276
Restricted cash		9,989,227		3,114,543
Notes receivable		108,329		-
Trade accounts receivable, net		7,111,594		6,734,536
Inventories		9,777,878		7,047,397
Other receivables, net		988,640		149,546
Advances to suppliers, net		3,666,492		4,577,194
Other current assets		1,614,095		1,663,102
Total current assets		34,990,647		27,731,594

PROPERTY AND EQUIPMENT, net		9,378,160		9,412,688

OTHER ASSETS
Farmland assets		1,376,806		1,371,735
Long term deposits, landlord		2,576,118		2,786,437
Other noncurrent assets		2,767,155		3,036,930
Intangible assets, net		3,140,358		1,569,443
Total other assets		9,860,437		8,764,545

Total assets	$	54,229,244	$	45,908,827

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Short-term loan payable	$	32,580	$	162,300
Accounts payable, trade		13,366,998		14,554,726
Notes payable		14,939,135		7,820,718
Other payables		2,862,395		1,282,211
Other payables - related parties		1,972,931		2,384,294
Loan from third parties		215,843		294,042
Customer deposits		3,693,298		3,185,885
Taxes payable		450,340		373,501
Accrued liabilities		678,751		1,208,242
Total current liabilities		38,212,271		31,265,919

Purchase option and warrant liability		329,990		278,916
Total liabilities		38,542,261		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 December 31, 2014 and March 31, 2014		-		-
Common stock; $0.001 par value; 250,000,000 shares authorized; 15,385,504 and 14,416,022 shares issued and outstanding as of December 31, 2014 and March 31, 2014		15,386		14,416
Additional paid-in capital		18,824,368		17,355,555
Statutory reserves		1,309,109		1,309,109
Accumulated deficit		(8,517,159)		(8,260,767)
Accumulated other comprehensive income		4,016,336		3,905,136
Total stockholders' equity		15,648,040		14,323,449

Noncontrolling interests		38,943		40,543
Total equity		15,686,983		14,363,992

Total liabilities and stockholders' equity	$	54,229,244	$	45,908,827

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

	For the three months ended December 31,				For the nine months ended December 31,
	2014		2013		2014		2013
REVENUES, NET	$	21,320,039	$	17,833,072	$	56,223,336	$	50,025,012

COST OF GOODS SOLD		18,138,006		17,653,988		47,765,427		43,296,356

GROSS PROFIT		3,182,033		179,084		8,457,909		6,728,656

SELLING EXPENSES		2,184,184		5,338,404		5,886,541		9,998,377
GENERAL AND ADMINISTRATIVE EXPENSES		622,113		3,700,466		2,449,489		6,833,265
TOTAL OPERATING EXPENSES		2,806,297		9,038,870		8,336,030		16,831,642

INCOME (LOSS) FROM OPERATIONS		375,736		(8,859,786)		121,879		(10,102,986)

OTHER INCOME (LOSS), NET		(106,773)		130,426		(275,301)		127,034
CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITIES		(127,431)		(41,944)		(51,074)		(50,328)

INCOME (LOSS) BEFORE INCOME TAXES		141,532		(8,771,304)		(204,496)		(10,026,280)

PROVISION FOR INCOME TAXES		14,007		(35,887)		52,828		43,222

NET INCOME (LOSS)		127,525		(8,735,417)		(257,324)		(10,069,502)

LESS: NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTEREST		(987)		187		932		694

NET INCOME (LOSS) ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES, INC.		126,538		(8,735,230)		(256,392)		(10,068,808)

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments		52,740		259,814		111,200		1,019,605

COMPREHENSIVE INCOME (LOSS)	$	179,278	$	(8,475,416)	$	(145,192)	$	(9,049,203)

WEIGHTED AVERAGE NUMBER OF SHARES:
Basic		15,199,092		13,959,003		14,867,218		13,730,742
Diluted		15,596,554		13,959,003		14,867,218		13,730,742

LOSS PER SHARES:
Basic	$	0.01	$	(0.64)	$	(0.02)	$	(0.73)
Diluted	$	0.01	$	(0.64)	$	(0.02)	$	(0.73)

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

	Nine months ended December 31,
	2014		2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(257,324)	$	(10,069,502)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization		1,240,323		1,646,066
Stock compensation		527,357		477,284
Bad debt recovery		(3,126,039)		(692,883)
Inventory reserve		277,603		-
Change in fair value of purchase option and warrant liability		51,074		86,379
Change in operating assets:
Accounts receivable, trade		1,566,629		2,278,341
Notes receivable		(108,096)		-
Inventories		(2,976,220)		(9,330,835)
Other receivables		(619,695)		(259,339)
Advances to suppliers		1,916,591		10,706,963
Other current assets		55,012		(1,009,632)
Long term deposit		220,146		-
Other noncurrent assets		280,399		133,648
Change in operating liabilities:
Accounts payable, trade		(1,236,808)		5,099,673
Other payables and accrued liabilities		390,535		1,074,755
Customer deposits		494,570		(909,992)
Taxes payable		75,296		82,942
Net cash used in operating activities		(1,228,647)		(686,132)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment		(898,522)		(457,609)
Increase in long-term deposits for land use right		-		(1,355,290)
Acquisition of business, net		(936,288)		-
Additions to leasehold improvements		(189,143)		(25,112)
Payments on construction-in-progress		(96,636)		-
Net cash used in investing activities		(2,120,589)		(1,838,011)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term bank loan		32,510		162,280
Repayment of short-term bank loan		(162,550)		-
Repayment of third parties loan		(79,116)		-
Change in restricted cash		(6,848,423)		(999,814)
Repayments of notes payable		(14,132,390)		659,246
Issuance of notes payable		21,206,663		-
Change in other payables-related parties		529,115		909,954
Net cash provided by financing activities		545,809		731,666

EFFECT OF EXCHANGE RATE ON CASH		92,543		375,042

DECREASE IN CASH		(2,710,884)		(1,417,435)

CASH, beginning of period		4,445,276		4,524,094

CASH, end of period	$	1,734,392	$	3,106,659

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	4,621	$	-
Cash paid for income taxes	$	59,755	$	9,529
Issuance of common stock in settlement of debts	$	941,613	$	-