China Jo-Jo Drugstores Reports Third Quarter 2020 Financial Results

HANGZHOU,China,Feb. 14,2020 -- 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 third fiscal quarter ended December 31,2019.

Mr. Lei Liu,Chairman and CEO of Jo-Jo Drugstores,commented,"We delivered outstanding financial results for the third quarter of 2020,with revenue recording $33.36 million,up 7.9% compared to the same period of last year. Benefiting from the growth in retail drugstores and online pharmacy businesses as well as our strong competitive position in the industry,all of our core businesses performed in line with our expectation. Looking forward,amidst the outbreak of 2019 Novel Coronavirus,we are striving to optimize our inventory and operational execution with effective distribution channels to meet the strong domestic demand of pharmaceutical and other healthcare products as well as healthcare services. We are confident that our professional team is able to deliver compelling value to our customers and the communities we serve. We will continue to focus on successful execution of our long-term growth strategies to unleash the full potential of our consumer-centric healthcare business model and create value for all shareholders."

Third Quarter of Fiscal 2020 Financial Highlights

For the Three Months Ended December 31,

($ millions,except per share data)

2019

2018

% Change

Revenue

33.36

30.92

7.9%

Retail drugstores

21.58

20.87

3.4%

Online pharmacy

3.96

2.49

59.0%

Wholesale

7.82

7.56

3.5%

Gross profit

7.28

7.14

2.1%

Gross margin

21.8%

23.1%

-1.3 pp*

Income (Loss) from operations

0.55

(2.13)

NM

Net income (loss)

0.46

(2.21)

NM

Earnings (loss) per share

0.02

(0.06)

NM

*Notes: pp represents percentage points

Revenue increased by 7.9% to $33.36 million for the three months ended December 31,2019 from $30.92 million for the same period of last year.

Gross profit increased by 2.1% to $7.28 million for the three months ended December 31,2019 from $7.14 million for the same period of last year.

Gross margin decreased by 1.3 percentage points to 21.8% from 23.1% for the same period of last year.

Net income was $0.46 million,or $0.02 per basic and diluted share,for the three months ended December 31,2019,compared to net loss of $2.21 million,or $0.06 per basic and diluted share,for the same period of last year.

Third Quarter of Fiscal 2020 Financial Results

Revenue

Revenue for the three months ended December 31,2019 increased by $2.45 million,or 7.9%,to $33.36 million from $30.92 million for the same period of last year. The increase in revenue was primarily due to the growth in retail drugstores and online pharmacy business.

For the Three Months Ended December 31,

2019

2018

($ millions)

Revenue

Cost of

Goods

Gross

Margin

Revenue

Cost of

Goods

Gross

Margin

Retail drugstores

21.58

15.39

28.7%

20.87

14.90

28.6%

Online pharmacy

3.96

3.64

8.2%

2.49

2.23

10.4%

Wholesale

7.82

7.05

9.9%

7.56

6.65

12.1%

Total

33.36

26.08

21.8%

30.92

23.78

23.1%

Revenue from the retail drugstores business increased by $0.71 million,or 3.4%,to $21.58 million for the three months ended December 31,2019 from $20.87 million for the same period of last year. The increase was primarily attributable to the consumer-facing benefits we provided,such as on-site 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 $1.47 million,or 59.0%,to $3.96million for the three months ended December 31,2019 from $2.49 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. Additionally,as more and more customers switch to online OTC drug shopping,the Company's OTC drug sales grew too.

Revenue from the wholesale business increased by $0.26million,or 3.5%,to $7.82 million for the three months ended December 31,2019 from $7.56 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 $2.30 million,or 9.7%,to $26.08 million for the three months ended December 31,2019 from $23.78 million for the same period of last year. Gross profit increased by $0.14million,or 2.1%,to $7.28 million for three months ended December 31,2019 from $7.14 million for the same period of last year.Overall gross margin decreased by 1.3 percentage points to 21.8% for the three months ended December 31,from 23.1% for the same period of last year.

Gross margins for retail drugstores,online pharmacy and wholesale were 28.7%,8.2%,and 9.9%,respectively,compared to the corresponding gross margins of 28.6%,10.4%,and 12.1% for the same period of last year.

Income (Loss) from operations

Selling and marketing expenses decreased by $1.01 million,or 15.1%,to $5.68 million for the three months ended December 31,2019 from $6.69 million for the same period of last year. The decrease in selling and marketing expenses was primarily because the Company has outsourced logistic service to Astro Boy Cloud Pan (Hangzhou) Storage and Logistic Co. Ltd ("Astro Boy Logistic") since April 2019.

General and administrative expenses decreased by $1.52 million,to $1.05 million for the three months ended December 31,2019 from $2.57 million for the same period of last year. As the medical reform has been moving along in China,the central government of China promulgated a series of policies to significantly push down the prices of certain drugs covered by the National Health Insurance. Local government even deferred payments to certain clinics and drugstores on the drugs which the local government believes were sold above the government's designated price range. The price restriction and potential payment deferral may cut the profit and affect the Company's operating cash flow. To be safe,in the three months ended December 31,the Company actively negotiated with certain customers and made efforts to collect certain aged accounts receivable. As a result,the Company reversed bad debt allowance of $0.79 million. In comparison,the Company recorded additional bad debts allowance of $0.37 million in the three months ended December 31,2018.

Income from operations was $0.55million for the three months ended December 31,compared to loss from operations of $2.13million for the same period of last year. Operating margin was 1.7% for the three months ended December 31,compared to operating loss of 6.9% for the same period of last year.

Net income (loss)

Net income was $0.46 million,or $0.02 per basic and diluted share for the three months ended December 31,or $0.06 per basic and diluted share for the same period of last year.

Nine months ended December 31,2019 Financial Highlights

For the Nine Months Ended December 31,except per share data)

2019

2018

% Change

Revenue

87.00

81.10

7.3%

Retail drugstores

56.31

54.97

2.4%

Online pharmacy

8.76

6.64

32.0%

Wholesale

21.93

19.49

12.5%

Gross profit

20.04

18.55

8.0%

Gross margin

23.0%

22.9%

0.1 pp*

Income (Loss) from operations

(3.82)

(4.33)

11.8%

Net income (loss)

(3.27)

(4.51)

27.5%

Earnings (loss) per share

(0.09)

(0.14)

35.7%

*Notes: pp represents percentage points

Revenue increased by 7.3% to $87.00 million for the nine months ended December 31,2019 from $81.10 million for the same period of last year.

Gross profit increased by 8.0% to $20.04 million for the nine months ended December 31,2019 from $18.55 million for the same period of last year.

Gross margin increased by 0.1 percentage points to 23.0% from 22.9% for the same period of last year.

Net loss was $3.27 million,or $0.09 per basic and diluted share,for the nine months ended December 31,compared to $4.51 million,or $0.14 per basic and diluted share,for the same period of last year.

Nine months ended December 31,2019 Financial Results

Revenue

Revenue for the nine months ended December 31,2019 increased by $5.90 million,or 7.3%,to $87.00 million from $81.10 million for the same period of last year. The increase in revenue was primarily due to the increase in wholesale and online pharmacy business.

For the Nine Months Ended December 31,

2019

2018

($ millions)

Revenue

Cost of

Goods

Gross

Margin

Revenue

Cost of

Goods

Gross

Margin

Retail drugstores

56.31

39.54

29.8%

54.97

39.35

28.4%

Online pharmacy

8.76

7.77

11.3%

6.64

5.88

11.4%

Wholesale

21.93

19.65

10.4%

19.49

17.32

11.1%

Total

87.00

66.96

23.0%

81.10

62.55

22.9%

Revenue from the retail drugstores business increased by $1.34 million,or 2.4%,to $56.31 million for the nine months ended December 31,2019 from $54.97 million for the same period of last year. The increase was primarily attributable to the consumer-facing benefits we provided,such as onsite medical care,incremental DTP business caused by continuous hospital medical reform,and maturing of stores opened a year ago.

Revenue from the online pharmacy business increased by $2.12 million,or 32.0%,to $8.76 million for the nine months ended December 31,2019 from $6.64 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.

Revenue from the wholesale business increased by $2.44 million,or 12.5%,to $21.93 million for the nine months ended December 31,2019 from $19.49 million for the same period of last year. The increase was primarily a result of the Company's ability to resell certain products,to other vendors at competitive prices.

Gross profit and gross margin

Total cost of goods sold increased by $4.41 million,or 7.1%,to $66.96 million for the nine months ended December 31,2019 from $62.55million for the same period of last year. Gross profit increased by $1.49 million,or 8.0%,to $20.04 million for the nine months ended December 31,2019 from $18.55 million for the same period of last year.Overall gross margin increased by 0.1 percentage points to 23.0% for the nine months ended December 31,from 22.9% for the same period of last year.

Gross margins for retail drugstores,online pharmacy and wholesale were 29.8%,11.3%,and 10.4%,compared to the corresponding gross margins of 28.4%,11.4%,and 11.1% for the same period of last year.

Income (Loss) from operations

Selling and marketing expenses increased by $1.59 million,or 9.6%,to $18.13 million for the nine months ended December 31,2019 from $16.54 million for the same period of last year. The increase in selling and marketing expenses was primarily due to increases in labor related to the Company's store expansions and rising local cost of living.

General and administrative expenses decreased by $0.61 million,to $5.73 million for the nine months ended December 31,2019 from $6.34 million for the same period of last year. In the nine months ended December 31,the Company reversed bad debt allowance of $0.2 million. In comparison,the Company recorded additional bad debts allowance of $1.27 million for the nine months ended December 31,2018.

Loss from operations was $3.82million for the nine months ended December 31,compared to $4.33million for the same period of last year. Operating loss was 4.4% for the nine months ended December 31,compared to 5.3% for the same period of last year.

Net income (loss)

Net loss was $3.27 million,or $0.09 per basic and diluted share for the nine months ended December 31,compared to net loss of $4.51 million,or $0.14 per basic and diluted share for the same period of last year.

Financial Condition

As of December 31,the Company had cash of $11.86 million,compared to $9.32 million as of March 31,2019. Net cash used in operating activities was $11.27 million for the nine months ended December 31,compared to $10.32 million for the same period of last year. Net cash used in investing activities was $1.71 million for the nine months ended December 31,compared to $6.85 million for the same period of last year. Net cash provided by financing activities was $12.70 million for the nine months ended December 31,compared to $7.98 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 inChina. 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

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

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

December 31,

March 31,

2019

2019

ASSETS

CURRENT ASSETS

Cash

$

11,858,985

$

9,322,463

Restricted cash

12,035,385

15,422,739

Financial assets available for sale

159,946

180,928

Notes receivable

48,768

177,278

Trade accounts receivable

11,465,402

8,692,514

Inventories

10,962,677

13,955,202

Other receivables,net

5,862,408

4,438,230

Advances to suppliers

1,393,247

1,950,252

Other current assets

1,505,995

2,063,375

Total current assets

55,292,813

56,202,981

PROPERTY AND EQUIPMENT,net

8,097,428

8,727,358

OTHER ASSETS

Long-term investment

9,846

24,243

Farmland assets

747,782

825,259

Long term deposits

1,481,929

2,157,275

Other noncurrent assets

1,134,643

1,196,197

Operating lease right-of-use assets

15,318,428

-

Intangible assets,net

3,715,629

3,597,323

Total other assets

22,408,257

7,800,297

Total assets

$

85,798,498

$

72,730,636

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable,trade

15,870,874

23,106,230

Notes payable

21,758,227

25,951,673

Other payables

2,590,186

3,197,221

Other payables - related parties

375,068

795,179

Customer deposits

1,201,464

771,942

Taxes payable

433,026

125,859

Accrued liabilities

793,942

1,264,182

Long-term loan - current portion

2,302,924

-

Current portion of operating lease liabilities

409,756

-

Total current liabilities

45,735,467

55,212,286

Long-term loan

4,773,114

-

Long term operating leaseliabilities

12,670,694

-

Purchase option and warrants liability

120,000

465,248

Financial liability

71,757

81,935

Total liabilities

63,371,032

55,759,469

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

Common stock; $0.001 par value; 250,000,000 shares authorized; 32,936,786 and

28,778 shares issued and outstanding as of December 31,2019 and March 31,

2019

32,937

28,937

Preferred stock; $0.001 par value; 10,000 shares authorized; nil issued and

outstanding as of December 31,2019

-

-

Additional paid-in capital

54,209,301

44,905,664

Statutory reserves

1,309,109

1,109

Accumulated deficit

(33,415,600)

(30,587,468)

Accumulated other comprehensive income

1,926,259

2,508,964

Total stockholders' equity

24,062,006

18,165,206

Noncontrolling interests

(1,634,540)

(1,194,039)

Total equity

22,427,466

16,971,167

Total liabilities and stockholders' equity

$

85,636

CHINA JO-JO DRUGSTORES,INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(LOSS)

(UNAUDITED)

For the three months ended

December 31,

For the nine months ended

December 31,

2019

2018

2019

2018

REVENUES,NET

$

33,363,282

$

30,916,549

$

86,997,845

$

81,098,161

COST OF GOODS SOLD

26,079,910

23,780,763

66,959,671

62,548,471

GROSS PROFIT

7,283,372

7,135,786

20,038,174

18,549,690

SELLING EXPENSES

5,676,400

6,688,577

18,130,799

16,539,078

GENERAL AND ADMINISTRATIVE EXPENSES

1,054,060

2,572,862

5,729,607

6,342,874

TOTAL OPERATING EXPENSES

6,460

9,261,439

23,860,406

22,881,952

INCOME (LOSS) FROM OPERATIONS

552,912

(2,125,653)

(3,822,232)

(4,332,262)

INTEREST INCOME

272,773

18,964

661,160

92,196

OTHER INCOME (LOSS),NET

(302,408)

32,795

(437,118)

12,436

CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITIES

(65,172)

(85,115)

345,248

(173,955)

INCOME (LOSS) BEFORE INCOME TAXES

458,105

(2,159,009)

(3,252,942)

(4,401,585)

PROVISION FOR INCOME TAXES

2,184

47,958

16,274

104,712

NET INCOME (LOSS)

455,921

(2,206,967)

(3,269,216)

(4,506,297)

ADD: NET LOSS ATTRIBUTABLE TO

NONCONTROLLING INTEREST

75,861

528,736

441,084

594,796

NET INCOME (LOSS) ATTRIBUTABLE TO CHINA JO-

JO DRUGSTORES,INC.

531,782

(1,678,231)

(2,828,132)

(3,911,501)

Foreign currency translation adjustments

358,868

(130,619)

(582,705)

(957,646)

COMPREHENSIVE INCOME (LOSS)

$

814,789

$

(2,337,586)

$

(3,851,921)

$

(5,463,943)

WEIGHTED AVERAGE NUMBER OF SHARES:

Basic

32,786

28,778

32,776,778

Diluted

32,778

EARNINGS PER SHARES:

Basic

$

0.02

$

(0.06)

$

(0.09)

$

(0.14)

Diluted

$

0.02

$

(0.06)

$

(0.09)

$

(0.14)

CHINA JO-JO DRUGSTORES,INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the

nine months ended

December 31,

2019

2018

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(3,216)

$

(4,297)

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

Bad debt direct write-off and provision

(29,038)

1,266,994

Depreciation and amortization

1,925

937,268

Stock based compensation

34,560

121,547

Change in fair value of purchase option derivative liability

(345,248)

173,955

Accounts receivable,trade

(2,581,208)

(4,061,698)

Notes receivable

122,175

(43,024)

Inventories and biological assets

2,484,432

1,232

Other receivables

(1,353,544)

(681,667)

Advances to suppliers

(222,928)

(911,061)

Other current assets

(1,533)

476,909

Long term deposit

597,084

18,548

Other noncurrent assets

17,744

23,206

Accounts payable,trade

(6,397,104)

(3,945,980)

Other payables and accrued liabilities

(917,398)

815,725

Customer deposits

458,415

(2,258,202)

Taxes payable

312,192

422,665

Net cash used in operating activities

(11,274,690)

(10,880)

CASH FLOWS FROM INVESTING ACTIVITIES:

Disposal of financial assets available for sale

14,370

87,471

Purchase of financial assets available for sale

-

(104,577)

Acquisition of equipment

(561,677)

(5,368,240)

Increase in intangible assets

(461,013)

(29,879)

Investment in a joint venture

-

-

Additions to leasehold improvements

(705,856)

(1,432,060)

Net cash used in investing activities

(1,714,176)

(6,847,285)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from third parties loan

7,085,406

-

Proceeds from notes payable

36,537,832

32,903,549

Repayment of notes payable

(39,784,592)

(24,930,903)

Increase in financial liability

(7,185)

82,167

Proceeds from equity financing

9,273,077

7,544

Repayment of other payables-related parties

(406,506)

(82,866)

Net cash provided by financing activities

12,698,032

7,979,491

EFFECT OF EXCHANGE RATE ON CASH

(559,998)

(1,653,988)

DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

(850,832)

(10,844,662)

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

$

23,894,370

$

20,607,529

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income taxes

$

17,215

$

56,539

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