China Jo-Jo Drugstores Reports Fiscal Year 2020 Financial Results

HANGZHOU,China,July 10,2020 -- China Jo-Jo Drugstores,Inc. (NASDAQ: CJJD) ("Jo-Jo Drugstores" or the "Company"),a leading online and offline retailer,wholesale distributor of pharmaceutical and other healthcare products and healthcare provider inChina,today announced its financial results for the fiscal year ended March 31,2020.

Mr. Lei Liu,Chairman and CEO of Jo-Jo Drugstores,commented,"We are pleased to present our financial results for our 2020 fiscal year. Our revenue records $117.33 million for the fiscal year of 2020,up 9.1% compared to $107.55 million for the previous fiscal year. Revenue from retail drugstores,online pharmacy,and wholesale segments increased by 2.4%,54.1% and 12.4% respectively,demonstrating our ability to realize the potential of our business model. When facing the pandemic of COVID-19,we are uniquely positioned to understand consumer and market needs and how to address them. We will continue monitoring the latest developments and taking appropriate measures to combat the COVID-19 pandemic and provide supports to our customers and the society. Looking forward,we are confident that we are on the right track to deliver significant value to all our investors and shareholders as we have a leading consumer brand in China with a diversified portfolio of essential health care businesses and we will continue to endeavor to provide the best experience to our customers."

Fiscal Year 2020 Financial Highlights

For the Year Ended March 31,

($ millions,except per share data)

2020

2019

% Change

Revenue

117.33

107.55

9.1%

Retail drugstores

74.08

72.33

2.4%

Online pharmacy

13.54

8.78

54.1%

Wholesale

29.71

26.43

12.4%

Gross profit

25.53

25.11

1.7%

Gross margin

21.8%

23.3%

-1.5 pp*

Loss from operations

(7.00)

(0.88)

-699.4%

Net loss

(6.46)

(1.32)

-390.0%

Loss per share

(0.18)

(0.03)

-500.0%

*Notes: pp represents percentage points

Revenue increased by 9.1% to $117.33 million for the fiscal year ended March 31,2020 from $107.55 million for the prior fiscal year.

Gross profit increased by 1.7% to $25.53 million for the fiscal year ended March 31,2020 from $25.11 million for the prior fiscal year.

Gross margin decreased by 1.5 percentage points to 21.8% for the fiscal year ended March 31,2020 from 23.3% for the prior fiscal year.

Net loss was $6.46 million,or $0.18 per basic and diluted share,for the fiscal year ended March 31,2020,compared to net loss of $1.32 million,or $0.03 per basic and diluted share,for the prior fiscal year.

Fiscal Year 2020 Financial Results

Revenue

Revenue for the fiscal year ended March 31,2020 increased by $9.78 million,or 9.1%,to $117.33 million from $107.55 million for the prior fiscal year. The increase in revenue was primarily due to the growth in retail drugstores,online pharmacy and wholesale business.

For the Year Ended March 31,

2020

2019

($ millions)

Revenue

Cost of

Goods

Gross

Margin

Revenue

Cost of

Goods

Gross

Margin

Retail drugstores

74.08

53.24

28.1%

72.34

51.24

29.2%

Online pharmacy

13.54

12.11

10.6%

8.78

7.75

11.8%

Wholesale

29.71

26.45

11.0%

26.43

23.45

11.3%

Total

117.33

91.80

21.8%

107.55

82.44

23.3%

Revenue from the retail drugstores business increased by $1.74million,or 2.4%,to $74.08 million for the fiscal year ended March 31,2020 from $72.34million for the prior fiscal year. The increase was primarily attributable to the consumer-facing benefits,such as on-site medical care,chronic disease management services,incremental DTP (Direct-to-Patient) business caused by continuous hospital medical reform,and maturing of stores opened a year ago.

Revenue from the online pharmacy business increased by $4.76 million,or 54.1%,to $13.54 million for the fiscal year ended March 31,2020 from $8.78 million for the prior fiscal year. The increase was caused by an increase in sales via e-commerce platforms such as Tmalland an increase in sales via our 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,we maintained a membership care program targeted at chronic disease customers. We have closely interacted with our members via WeChat by providing healthcare knowledge and reminding our customers to refill medicine. By implementing a personalized customer care program,we were able to promote our sales. As a result,our sales via these e-commerce platforms increased by 58.3% period over period. The sales via our official website were primarily made by certain pharmacy benefit management providers and insurance companies. For example,we have signed a service contract with Yingda Taihe Life Insurance Co. Ltd. ("Yingda"),a national insurance company. State Grid Corporation of China has bought health insurance package for its employees from Yingda. In the year ended March 31,we served a local factory of State Grid and sold healthcare products to its employees who used their insurance cards to make payments. The sales from these customers contributed significantly to our official website sales. Additionally,in the first quarter of calendar 2020,during the outbreak of COVID-19,we sold a large quantity of health protective products such as masks. Our official website sales increased by $847,899 or 40.8% year over year.

Revenue from the wholesale business increased by $3.28million,or 12.4%,to $29.71 million for the fiscal year ended March 31,2020 from $26.43 million for the prior fiscal 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 $9.36 million,or 11.4%,to $91.80 million for the fiscal year ended March 31,2020 from $82.44 million for the prior fiscal year. Gross profit increased by $0.42million,or 1.7%,to $25.53 million for fiscal year ended March 31,2020 from $25.11 million for the prior fiscal year.Overall gross margin decreased by 1.5 percentage points to 21.8% for the fiscal year ended March 31,from 23.3% for the prior fiscal year.

Gross margins for retail drugstores,online pharmacy and wholesale were 28.1%,10.6%,and 11.0%,respectively,compared to the corresponding gross margins of 29.2%,11.8%,and 11.3% for the prior fiscal year.

Loss from operations

Selling and marketing expenses decreased by $0.48million,or 1.9%,to $23.79 million for the fiscal year ended March 31,2020 from $24.27 million for the prior fiscal year,primarily due to decrease in rent. As we closed several stores,rent expense went down. Additionally,we have closely monitored our marketing expense such as small gifts. As a result,our sale and marketing expense declined slightly.

General and administrative expenses increased by $6.39million,or 371.7%,to $8.11million for the fiscal year ended March 31,2020 from $1.72 million for the prior fiscal year. In the year ended March 31,we recorded bad debt expense of $455,159as compared to a reduction in the allowance for bad debts of $3,346,886 in fiscal year 2019. Additionally,we incurred additional labor cost of approximately $1.5 million as we have expanded certain business. For example,we have been operating two Linjia Clinics and hired more doctors. In addition,in order to obtain business from commercial health insurance providers,we formed a marketing team. Although these businesses have not contributed significantly to our revenue,they incurred labor costs.

Impairment of long-lived assets was $0.63 million for the fiscal year endedMarch 31,compared tonilfor the prior fiscal year. In the year ended March 31,we evaluated the licenses of insurance applicable drugstores acquired in the past based on their discounted positive cash value. Due to the stricter government insurance policy in fiscal year 2021,the value of these licenses has declined.

Loss from operations was $7.00million for the fiscal year ended March 31,compared to loss from operations of $0.88million for the prior fiscal year. Operating margin was (6.0)%and (0.8)% for the fiscal year ended March 31,2020 and 2019 respectively.

Net loss

Net loss was $6.46 million,or $0.18 per basic and diluted share for the fiscal year ended March 31,or $0.03 per basic and diluted share for the prior fiscal year.

Financial Condition

As of March 31,the Company had cash of $16.18 million,compared to $9.32 million as of March 31,2019. Net cash used in operating activities was $6.91 million for the fiscal year ended March 31,compared to $5.60 million for the prior fiscal year. Net cash used in investing activities was $4.84 million for the fiscal year ended March 31,compared to $7.33 million for the prior fiscal year. Net cash provided by financing activities was $19.01 million for the fiscal year ended March 31,compared to $8.08 million for the prior fiscal year. On April 15,2019,we closed a registered direct offering of 4,000,008 shares of common stock at $2.50 per share with gross proceeds of $10,020 from our effective shelf registration statement on Form S-3. In addition,on June 3,we closed another registered direct offering of 5,0004 shares of common stock at $2.00 per share with gross proceeds of $10,008 from our effective shelf registration statement on Form S-3.

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

CONSOLIDATED BALANCE SHEETS

March31,

March31,

2020

2019

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

16,176,318

$

9,322,463

Restricted cash

14,806,288

15,422,739

Financial assets available for sale

157,159

180,928

Notes receivable

57,005

177,278

Trade accounts receivable

9,770,656

8,692,514

Inventories

12,247,004

13,955,202

Other receivables,net

5,069,442

4,438,230

Advances to suppliers

1,174,800

1,950,252

Other current assets

1,528,540

2,063,375

Total current assets

60,987,212

56,202,981

PROPERTY AND EQUIPMENT,net

7,633,740

8,727,358

OTHER ASSETS

Long-term investment

2,544,451

24,243

Farmland assets

742,347

825,259

Long term deposits

1,456,384

2,157,275

Other noncurrent assets

1,046,763

1,196,197

Operating lease right-of-use assets

21,711,376

-

Intangible assets,net

3,393,960

3,597,323

Total other assets

30,895,281

7,800,297

Total assets

$

99,516,233

$

72,730,636

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Short-term bank loan

1,410,130

-

Accounts payable,trade

21,559,494

23,106,230

Notes payable

26,605,971

25,951,673

Other payables

2,522,330

3,197,221

Other payables - related parties

490,218

795,179

Customer deposits

708,140

771,942

Taxes payable

119,247

125,859

Accrued liabilities

753,612

1,264,182

Long-term loan payable-current portion

2,287,742

-

Current portion of operating lease liabilities

981,090

-

Total current liabilities

57,437,974

55,212,286

Long-term loan payable

4,115,958

-

Long term operating leaseliabilities

19,049,575

-

Employee Deposits

70,507

81,935

Purchase option and warrants liability

64,090

465,248

Total liabilities

80,738,104

55,759,469

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

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

28,778 shares issued and outstanding as of March31,2020 and March 31,

2019

32,937

28,937

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

outstanding as of March31,2019

-

-

Additional paid-in capital

54,209,301

44,905,664

Statutory reserves

1,309,109

1,109

Accumulated deficit

(36,400,837)

(30,587,468)

Accumulated other comprehensive income

1,440,424

2,508,964

Total stockholders' equity

20,590,934

18,165,206

Noncontrolling interests

(1,812,805)

(1,194,039)

Total equity

18,778,129

16,971,167

Total liabilities and stockholders' equity

$

99,636

CHINA JO-JO DRUGSTORES,INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the years ended

March 31,

2020

2019

REVENUES,NET

$

117,327,689

$

107,551,012

COST OF GOODS SOLD

91,801,259

82,442,969

GROSS PROFIT

25,526,430

25,108,043

SELLING EXPENSES

23,793,603

24,265,184

GENERAL AND ADMINISTRATIVE EXPENSES

8,377

1,718,989

IMPAIRMENT OF LONG-LIVED ASSETS

628,192

-

TOTAL OPERATING EXPENSES

32,530,172

25,984,173

LOSS FROM OPERATIONS

(7,003,742)

(876,130)

OTHER INCOME (EXPENSE):

INTEREST INCOME

1,747

112,887

INTEREST EXPENSE

(698,518)

-

OTHER

(204,064)

(93,311)

CHANGE IN FAIR VALUE OF PURCHASE OPTION AND WARRANTS

LIABILITY

401,158

(326,452)

LOSS BEFORE INCOME TAXES

(6,441,419)

(1,183,006)

PROVISION FOR INCOME TAXES

16,258

134,763

NET LOSS

(6,457,677)

(1,317,769)

ADD: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

(644,308)

(391,491)

NET LOSS ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES,INC.

(5,813,369)

(926,278)

OTHER COMPREHENSIVE LOSS

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS

(1,068,540)

(1,077,496)

COMPREHENSIVE LOSS

(7,217)

(2,395,265)

WEIGHTED AVERAGE NUMBER OF SHARES:

Basic

32,816,567

28,778

Diluted

32,778

LOSS PER SHARES:

Basic

$

(0.18)

$

(0.03)

Diluted

$

(0.18)

$

(0.03)

CHINA JO-JO DRUGSTORES,INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended

March 31,

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

(6,677)

$

(1,769)

Adjustments to reconcile net income to net cash used in operating activities:

Bad debt direct write-off and provision

446,354

(3,357,851)

Depreciation and amortization

2,082,817

1,676,413

Impairment of long lived assets

628,192

-

Stock based compensation

34,560

197,100

Change in fair value of purchase option derivative liability

(401,158)

326,452

Change in operating assets:

Accounts receivable,trade

(1,567,774)

(116,810)

Notes receivable

112,803

83,910

Inventories and biological assets

979,935

(1,390,823)

Other receivables

(1,010,722)

(1,308,437)

Advances to suppliers

148,638

3,612,453

Long term deposit

596,209

183,841

Other current assets

(1,278,833)

(83,372)

Other noncurrent assets

87,065

(23,511)

Change in operating liabilities:

Accounts payable,trade

(317,755)

(528,353)

Other payables and accrued liabilities

(967,751)

(328,473)

Customer deposits

(22,963)

(3,011,194)

Taxes payable

115

(216,792)

Net cash used in operating activities

(6,907,945)

(5,603,216)

CASH FLOWS FROM INVESTING ACTIVITIES:

Disposal of financialassetsavailableforsale

14,356

87,290

Purchase of financialassetsavailableforsale

-

(104,360)

Acquisition of equipmentand building

(656,297)

(5,450,934)

Investment in a joint venture

(2,083)

-

Increase intangible assets

(871,145)

(29,817)

Additions to leasehold improvements

(756,444)

(1,828,360)

Net cash used in investing activities

(4,836,613)

(7,326,181)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from short-term bank loan

1,435,620

-

Proceeds from third parties loan

7,178,100

-

Repayment ofthird parties loan

(658,645)

-

Proceeds from notes payable

48,974,772

42,030,521

Repayment of notes payable

(46,896,917)

(34,018,811)

Increase in financial liability

(7,178)

81,997

Proceeds from sale of stock and warrants

9,273,077

7,529

Repayment of other payables-related parties

(285,123)

(22,655)

Net cash provided by financing activities

19,013,706

8,078,581

EFFECT OF EXCHANGE RATE ON CASH

(1,031,744)

(1,856,174)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND

RESTRICTED CASH

6,237,404

(6,706,989)

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH,beginning of year

24,745,202

31,452,191

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH,end of year

$

30,982,606

$

24,202

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income taxes

$

17,198

$

56,422

Cash paid for interest

108,098

-

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