China Jo-Jo Drugstores Reports Fiscal Year 2018 Financial Results

HANGZHOU, China, June 30, 2018 /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 healthcare provider in China, today announced its financial results for the fiscal year ended March 31, 2018.

Mr. Lei Liu, Chief Executive Officer and Chairman of Jo-Jo Drugstores, Inc., commented, “Fiscal year 2018 has been an important transition year for China Jo-Jo Drugstores with revenues increased by 17.9% year-over-year to $96.11 million. We expanded our retail business, opening 55 new retail drugstores in key locations, and continued to improve services in our existing stores. While our e-commerce business continued its transition following the suspension of OTC drug sales on e-commerce platforms in fiscal year 2017, in the third and fourth quarters of fiscal 2018, our online pharmacy results began to stabilize as we optimized our product range.”

Mr. Liu continued, “We expect our efforts to focus on product selection and price negotiation with suppliers to increase our sales profit margin. Our e-commerce segment will continue its evolution following our initiatives to cooperate with commercial insurance companies, such as the People’s Insurance Company of China, and other active strategies. We look forward to executing our business objectives and we believe that there is still plenty of room for us to continue to grow at a rapid rate in the foreseeable future.”

Fiscal Year 2018 Financial Highlights

For the Fiscal Year Ended March 31,

($ millions, except per share data)

2018

2017

 Change

Revenues

96.11

81.50

17.9%

      Retail drugstores

61.98

51.79

19.7%

      Online pharmacy

12.13

15.39

(21.2%)

      Wholesale

22.00

14.32

53.6%

Gross profit

20.13

16.63

21.0%

Gross margin

20.9%

20.4%

0.5 pp*

Loss from operations

(18.02)

(6.10)

195.5%

Net loss attributable to Jo-Jo Drugstores

(17.06)

(5.64)

202.3%

Loss per share

(0.68)

(0.28)

141.4%

*Notes: pp represents percentage points

  • Revenues increased by 17.9% to $96.11 million for the fiscal year ended March 31, 2018 from $81.50 million for the last fiscal year, mainly due to the increase in retail drugstores and wholesale business, partially offset by the decrease in online pharmacy business.
  • Gross profit increased by 21.0% to $20.13 million for the fiscal year ended March 31, 2018 from $16.63 million for the last fiscal year. Gross margin increased by 0.5 percentage points to 20.9% from 20.4% for the last fiscal year.

Fiscal Year ended March 31, 2018 Financial Results

Revenue

Revenue for the fiscal year ended March 31, 2018 increased by $14.61 million, or 17.9%, to $96.11 million from $81.50 million for the last fiscal year. The increase in revenue was primarily due to the increase in retail drugstores and wholesale business, partially offset by the decrease in online pharmacy business.

For the Fiscal Year Ended March 31,

2018

2017

($ millions)

Revenues

Cost of
Goods

Gross
Margin

Revenues

Cost of
Goods

Gross
Margin

Retail drugstores

61.98

45.92

25.9%

51.79

38.09

26.5%

Online pharmacy

12.13

10.86

10.5%

15.39

13.83

10.1%

Wholesale

22.00

19.21

12.7%

14.32

12.95

9.6%

Total

96.11

75.99

20.9%

81.50

64.87

20.4%

Revenue from the retail drugstores segment increased by $10.19 million, or 19.7%, to $61.98 million for the fiscal year ended March 31, 2018 from $51.79 million for the last fiscal year. The increase was primarily due to the increased number of stores, close monitoring of health products suitable to communities, brand-name health product sales campaign in cooperation with brand name suppliers, and value-added customer services such as chronic disease monitoring.

Revenue from the online pharmacy segment decreased by $3.26 million, or 21.2%, to $12.13 million for the fiscal year ended March 31, 2018 from $15.39 million for the last fiscal year. The decrease was mainly caused by a decline in our sales via e-commerce platforms. The decline in sales was due to the suspension of OTC drug sales on e-commerce platforms in the second quarter of fiscal year 2017 by the CFDA. The Company is adding more non-medical health products such as nutritional supplements into our sales menu to counteract the decline in sales of OTC drug category via e-commerce platforms.

Revenue from the wholesale segment increased by $7.68 million, or 53.6%, to $22.00 million for the fiscal year ended March 31, 2018 from $14.32 million for the last fiscal year. The increase was primarily a result of the Company’s ability to resell certain products, which our retail stores made large orders on, to other vendors at competitive prices.

Gross profit and gross margin

Total cost of goods sold increased by $11.12 million, or 17.1%, to $75.99 million for the fiscal year ended March 31, 2018 from $64.87 million for the last fiscal year. Gross profit increased by $3.50 million, or 21.0%, to $20.13 million for the fiscal year ended March 31, 2018 from $16.63 million for the last fiscal year. Overall gross margin increased by 0.5 percentage points to 20.9% for the fiscal year ended March 31, 2018, compared to 20.4% for the last fiscal year.

Gross margins for retail drugstores, online pharmacy and wholesale were 25.9%, 10.5%, and 12.7%, respectively, for the fiscal year ended March 31, 2018. This compared to gross margins for retail drugstores, online pharmacy and wholesale of 26.5%, 10.1%, and 9.6%, respectively, for the last fiscal year.

Loss from operations

Sales and marketing expenses increased by $5.82 million, or 45.0%, to $18.74 million for the fiscal year ended March 31, 2018 from $12.92 million for the last fiscal year, primarily due to increase in labor and rent related to our store expansions and rising local living cost.

General and administrative expenses increased by $10.14 million, or 131.9%, to $17.82 million for the fiscal year ended March 31, 2018 from $7.68 million for the last fiscal year. The increase in general and administrative expenses was primarily due to the increased number of administrative staff and their compensation, as well as additional accounts receivable and advances to vendors allowance of $4.7 million in the fiscal year ended March 31, 2018 as compared to an increase of $0.7 million in allowance in the year ended March 31, 2017.

Impairment of long-lived assets was $1.58 million for the fiscal year ended March 31, 2018, compared to $2.12 million for the last fiscal year. Jiuxin Medicine started outsourcing its logistics service to Astro Boy Cloud Pan (Hangzhou) Storage and Logistics Co. Ltd, Jiuxin Medicine’s warehouse lease has been terminated. As a result, approximately unamortized $1,583,186 warehouse improvement is recognized as expense in the year ended March 31, 2018. Such impairment was made after we estimated that the implied fair value of long-lived assets was lower than the carrying value.

Loss from operations increased by $11.92 million, or 195.5%, to $18.02 million for the fiscal year ended March 31, 2018 from $6.10 million for the last fiscal year. Operating margin was negative 18.8% for the fiscal year ended March 31, 2018, compared to negative 7.5% for the last fiscal year.

Net loss

Net loss attributable to common shareholders for the fiscal year ended March 31, 2018 was $17.06 million, or $0.68 per basic and diluted share. This compared to net loss attributable to common shareholders of $5.64 million, $0.28 per basic and diluted share, for the last fiscal year.

Financial Condition

As of March 31, 2018, the Company had cash of $15.13 million, compared to $18.36 million as of March 31, 2017. Net cash used in operating activities was $2.07 million for the fiscal year ended March 31, 2018, compared to net cash provided by operating cash flow of $1.56 million for the last fiscal year. Net cash used in investing activities was $2.98 million for the fiscal year ended March 31, 2018, compared to $0.05 million for the last fiscal year. Net cash used in financing activities was $0.77 million for the fiscal year ended March 31, 2018, compared to net cash provided by financing activities of $10.64 million for the last fiscal 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 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 and sells herbs used for traditional Chinese medicine. For more information about the Company, please visit http://www.chinajojodrugstores.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
frank.zhao@jojodrugstores.com

Steve Liu
Investor Relations Director
steve.liu@jojodrugstores.com

Investor Relations Contact:

Tina Xiao
Ascent Investor Relations LLC
+1-917-609-0333
tina.xiao@ascent-ir.com

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

March 31,

March 31,

2018

2017

ASSETS

CURRENT ASSETS

Cash

$

15,132,640

$

18,364,424

Restricted cash

16,319,551

9,431,386

Financial assets available for sale

175,140

87,068

Notes receivable

279,082

253,394

Trade accounts receivable, net of allowance for doubtful accounts of $4,561,314 and
    $1,415,505, as of March 31, 2018 and 2017 respectively

8,322,393

8,561,596

Inventories

13,429,568

9,923,101

Other receivables, net of allowance for doubtful accounts of $ 184,720 and $26,854,
    as of March 31, 2018 and 2017, respectively

3,098,079

2,269,193

Advances to suppliers, net of allowance for doubtful accounts of $3,058,092 and
    $1,502,255, as of March 31, 2018 and 2017, respectively

3,447,452

5,504,141

Other current assets

2,116,237

1,566,155

Total current assets

62,320,142

55,960,458

PROPERTY AND EQUIPMENT, net

2,843,640

4,263,157

OTHER ASSETS

Long-term investment

40,890

46,152

Farmland assets

796,286

718,787

Long term deposits

2,501,968

2,294,848

Other noncurrent assets

1,253,352

1,177,005

Intangible assets, net

4,056,414

2,712,611

Total other assets

8,648,910

6,949,403

Total assets

$

73,812,692

$

67,173,018

LIABILITIES AND STOCK HOLDERS’ EQUITY

CURRENT LIABILITIES

Short-term loan payable

$

$

Accounts payable, trade

25,259,526

19,441,195

Notes payable

19,180,200

12,691,575

Other payables

4,272,523

2,916,283

Other payables – related parties

850,342

927,052

Customer deposits

4,040,867

2,675,030

Taxes payable

366,040

681,939

Accrued liabilities

841,993

679,350

Total current liabilities

54,811,491

40,012,424

Purchase option and warrants liability

138,796

496,217

Total liabilities

54,950,287

40,508,641

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY

Common stock; $0.001 par value; 250,000,000 shares authorized; 28,936,778 and
    25,214,678 shares issued and outstanding as of March 31, 2018 and March 31,
    2017

28,937

25,215

Preferred stock; $0.001 par value; 10,000,000 shares authorized; nil issued and 
    outstanding as of March 31, 2018 and March 31,2017

Additional paid-in capital

43,599,089

36,581,248

Statutory reserves

1,309,109

1,309,109

Accumulated deficit

(29,661,190)

(12,601,257)

Accumulated other comprehensive income

3,586,460

1,350,062

Total stockholders’ equity

18,862,405

26,664,377

Total liabilities and stockholders’ equity

$

73,812,692

$

67,173,018

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the years ended
March 31,

2018

2017

REVENUES, NET

$

96,112,706

$

81,499,045

COST OF GOODS SOLD

75,987,537

64,872,127

GROSS PROFIT

20,125,169

16,626,918

SELLING EXPENSES

18,739,492

12,923,192

GENERAL AND ADMINISTRATIVE EXPENSES

17,823,661

7,684,862

IMPAIRMENT OF LONG-LIVED ASSETS

1,583,186

2,117,042

TOTAL OPERATING EXPENSES

38,146,339

22,725,096

LOSS FROM OPERATIONS

(18,021,170)

(6,098,178)

INTEREST INCOME

478,976

379,790

INTEREST EXPENSE

(1,349)

OTHER INCOME, NET

201,096

19,888

CHANGE IN FAIR VALUE OF PURCHASE OPTION AND WARRANTS
LIABILITY

357,421

140,032

LOSS BEFORE INCOME TAXES

(16,983,677)

(5,559,817)

PROVISION FOR INCOME TAXES

76,256

84,387

NET LOSS

(17,059,933)

(5,644,204)

OTHER COMPREHENSIVE LOSS

Foreign currency translation adjustments

2,236,398

(1,507,751)

COMPREHENSIVE LOSS

(14,823,535)

(7,151,955)

WEIGHTED AVERAGE NUMBER OF SHARES:

Basic

25,241,748

20,396,217

Diluted

25,241,748

20,396,217

LOSS PER SHARES:

Basic

$

(0.68)

$

(0.28)

Diluted

$

(0.68)

$

(0.28)

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Accumulated

Common Stock

Retained Earnings

other

Non-

Number of

Paid-in

Statutory

comprehensive

controlling

shares

Amount

capital

reserves

Unrestricted

income/(loss)

interest

Total

BALANCE,
March 31,
2016.

17,735,504

$

17,736

22,088,267

1,309,109

(6,957,053)

2,857,813

$

19,315,872

Stock based
    compensation

1,690,174

1,690

2,246,960

2,248,650

Net loss

(5,644,204)

(5,644,204)

Private direct
    offering
    financing

4,840,000

4,840

10,643,160

10,648,000

Issuance of
    common
    stocks in
    exchange
    of debts

949,000

949

1,602,821

1,603,810

Foreign
    currency
    translation
    loss

(1,507,751)

(1,507,751)

BALANCE,
    March 31,
    2017.

25,214,678

$

25,215

36,581,248

1,309,109

(12,601,257)

1,350,062

$

26,664,377

Stock based
    compensation

3,722,100

3,722

7,017,841

7,021,563

Net loss

(17,059,933)

(17,059,933)

Foreign
    currency
    translation
    loss

2,236,398

2,236,398

BALANCE,
    March 31,
    2018.

28,936,778

28,937

43,599,089

1,309,109

(29,661,190)

3,586,460

18,862,405

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended
March 31,

2018

2017

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

(17,059,933)

$

(5,644,204)

Adjustments to reconcile net income to net cash provided by operating activities:

Bad debt direct write-off and provision

4,009,636

679,271

Depreciation and amortization

1,383,810

1,316,747

Impairment of prepayment of lease use right

1,246,788

Farmland assets impairment

761,403

Impairment of land and road improvement

108,851

Impairment of leasehold improvement

1,583,186

Stock based compensation

7,021,563

2,248,650

Change in fair value of purchase option derivative liability

(357,421)

(140,084)

Change in operating assets:

Accounts receivable, trade

(2,072,486)

(717,386)

Notes receivable

(1,005)

(244,713)

Inventories and biological assets

(2,411,209)

191,564

Other receivables

(489,334)

(773,359)

Advances to suppliers

1,121,006

(3,020,156)

Long term deposit

15,103

Other current assets

(377,391)

(148,983)

Other noncurrent assets

36,091

35,509

Change in operating liabilities:

Accounts payable, trade

3,726,625

3,936,178

Other payables and accrued liabilities

1,115,267

1,250,755

Customer deposits

1,048,939

237,891

Taxes payable

(362,513)

234,780

Net cash provided by operating activities

(2,070,066)

1,559,502

CASH FLOWS FROM INVESTING ACTIVITIES:

Disposal of financial assets available for sale

445,968

Purchase of financial assets available for sale

(75,513)

(89,194)

Acquisition of equipment

(414,398)

(140,209)

Increase intangible assets

(1,140,102)

Termination of a joint venture

104,059

Investment in a joint venture

(96,180)

Additions to leasehold improvements

(1,347,489)

(270,990)

Net cash provided by (used in) investing activities

(2,977,502)

(46,546)

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayment of short-term bank loan

(29,731)

Change in restricted cash

(5,664,224)

3,519,030

Proceeds from notes payable

27,461,423

24,577,096

Repayment of notes payable

(22,476,740)

(28,445,215)

Changes in other payables-related parties

375,659

Proceeds from sale of stock and warrants

10,648,000

Repayment of other payables-related parties

(91,395)

Net cash provided by (used in) financing activities

(770,936)

10,644,839

EFFECT OF EXCHANGE RATE ON CASH

2,586,720

(465,244)

(DECREASE) INCREASE IN CASH

(3,231,784)

11,692,551

CASH, beginning of year

18,364,424

6,671,873

CASH, end of year

$

15,132,640

$

18,364,424

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for interest

$

$

1,349

Cash paid for income taxes

$

27,825

$

57,247

Issuance of common stocks in exchange of debts

$

$

1,603,810

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Source: China Jo-Jo Drugstores, Inc.