China Jo-Jo Drugstores Reports Second Quarter 2021 Financial Results

HANGZHOU,China,Nov. 13,2020 -- 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 in China,today announced its financial results for the second fiscal quarter ended September 30,2020.

Mr. Lei Liu,Chairman and CEO of Jo-Jo Drugstores,commented,"We are pleased with our second quarter performance as we delivered another quarter of strong results. Our revenue and gross profit recorded $30.84 million and $7.01 million for the second fiscal quarter of 2021,up 8.8% and 4.8% compared to same period of fiscal year 2020. Revenue year-over-year from online pharmacy increased by 127.4%. We have always been deeply committed to our communities,and we have taken necessary measures to protect the safety and health of our customers and employees during the global COVID-19 pandemic while making solid progress on our transformation strategy of 'Medical Linkage & Technology Empowerment'. The environment surrounding COVID-19 is accelerating our transformation,giving us new opportunities to demonstrate our capabilities and gain retail market share in China. We are building a strong foundation for sustainable growth and setting the platform to engage with consumers,and we are remaining focused on creating value for all our stakeholders."

Second Quarter of Fiscal 2021 Financial Highlights

For the Three Months Ended September 30,

($ millions,except per share data)

2020

2019

% Change

Revenue

30.84

28.35

8.8%

Retail drugstores

17.93

18.00

-0.4%

Online pharmacy

5.35

2.35

127.4%

Wholesale

7.56

8.00

-5.5%

Gross profit

7.01

6.69

4.8%

Gross margin

22.7%

23.6%

-0.9 pp*

Loss from operations

(1.52)

(1.62)

5.7%

Net loss

(1.53)

(1.35)

-13.4%

Loss per share

(0.04)

(0.04)

-%

*Notes: pp represents percentage points

Revenue increased by 8.8% to $30.84 million for the three months ended September 30,2020 from $28.35 million for the same period of last year.

Gross profit increased by 4.8% to $7.01 million for the three months ended September 30,2020 from $6.69 million for the same period of last year.

Gross margin decreased slightly by 0.9 percentage points to 22.7% for the three months ended September 20,2020 from 23.6% for the same period of last year.

Net loss was $1.53 million,or $0.04 per basic and diluted share,for the three months ended September 30,2020,compared to net loss of $1.35 million,for the same period of last year.

Second Quarter of Fiscal 2021 Financial Results

Revenue

Revenue for the three months ended September 30,2020 increased by $2.49 million,or 8.8%,to $30.84 million from $28.35 million for the same period of last year. The increase in revenue was primarily due to the growth in online pharmacy business.

For the Three Months Ended September 30,

2020

2019

($ millions)

Revenue

Cost of

Goods

Gross

Margin

Revenue

Cost of

Goods

Gross

Margin

Retail drugstores

17.93

12.33

31.3%

18.00

12.47

30.7%

Online pharmacy

5.35

4.74

11.3%

2.35

2.03

13.6%

Wholesale

7.56

6.76

10.7%

8.00

7.16

10.6%

Total

30.84

23.83

22.7%

28.35

21.66

23.6%

Revenue from the retail drugstores business decreased slightly by $0.07 million,or 0.4%,to $17.93 million for the three months ended September 30,2020 from $18.00 million for the same period of last year. The slight decrease was primarily due to the Company's strategical abandoning of the sales of certain low-profit margin products reimbursed by National Healthcare Security Administration ("NHSA" hereafter) due to its overall budget,elimination of a variety of drugs off the list of drugs reimbursed by the local NHSA since September 1,and the negative effect on the overall economy from COVID-19.

Revenue from the online pharmacy business increased by $3.00 million,or 127.4%,to $5.35 million for the three months ended September 30,2020 from $2.35 million for the same period of last year. The increase was primarily caused by an increase in sales of prescription drugs via e-commerce platforms such as Tmall. Prescription drugs used to be prohibited from sales online due to safety concern. However,because the nation has lifted the ban order,online prescription drug sales become popular. As a result,the sale of prescription drugs was $1.76 million in the three months ended September 30,2020 as compared to none in the three month ended September 30,2019. Additionally,the Company maintained a membership care program targeted at customers with chronic disease. The Company has closely interacted with its members via WeChat by providing healthcare knowledge and reminding them to refill medicine. By implementing a personalized customer care program,the Company was able to promote its sales.

Revenue from the wholesale business decreased by $0.44 million,or 5.5%,to $7.56million for the three months ended September 30,2020 from $8.00 million for the same period of last year. The decrease was primarily due to the fact that a key salesperson was sick,which slowed certain business with customers.

Gross profit and gross margin

Total cost of goods sold increased by $2.17 million,or 10.0%,to $23.83 million for the three months ended September 30,2020 from $21.66 million for the same period of last year. Gross profit increased by $0.32 million,or 4.8%,to $7.01 million for three months ended September 30,2020 from $6.69 million for the same period of last year.Overall gross margin decreased slightly by 0.9 percentage points to 22.7% for the three months ended September 30,from 23.6% for the same period of last year.

Gross margins for retail drugstores,online pharmacy and wholesale were 31.3%,11.3%,and 10.7%,respectively,compared to gross margins for retail drugstores,online pharmacy and wholesale of 30.7%,13.6%,and 10.6%,for the same period of last year.

Loss from operations

Selling and marketing expenses decreased by $0.01 million,or 0.2%,to $6.48 million for the three months ended September 30,2020 from $6.49 million for the same period of last year. The decrease in selling and marketing expenses was primarily due to the control of in-store advertising expense,offset by the increase in fee charged by various platforms as a result of sale increase in the Company's online pharmacy.

General and administrative expenses increased by $0.24 million,or 13.0%,to $2.06 million for the three months ended September 30,2020 from $1.82 million for the same period of last year. In the three months ended September 30,the Company reversed bad debt allowance of $304,397 as compared to an increase in bad debt allowance of $9,018 in the same period of last year. Excluding such effect,the general and administrative expenses increased by $551,039 period over period,which reflects the increase in staff and administration expense.

Loss from operations was $1.52 million for the three months ended September 30,compared to $1.62 million for the same period of last year. Operating margin was (4.9)% and (5.7)% for the three months ended September 30,2020 and 2019 respectively.

Net loss

Net loss was $1.53 million,or $0.04 per basic and diluted share for the three months ended September 30,or $0.04 per basic and diluted share for the same period of last year.

Six Months Ended September 30,2020 Financial Highlights

For the Six Months Ended September 30,except per share data)

2020

2019

% Change

Revenue

61.90

53.63

15.4%

Retail drugstores

36.74

34.74

5.8%

Online pharmacy

10.26

4.79

114.0%

Wholesale

14.90

14.10

5.6%

Gross profit

14.99

12.75

17.5%

Gross margin

24.2%

23.8%

0.4 pp*

Loss from operations

(1.94)

(4.38)

55.7%

Net loss

(1.92)

(3.73)

48.6%

Loss per share

(0.05)

(0.10)

50.0%

*Notes: pp represents percentage points

Revenue increased by 15.4% to $61.90 million for the six months ended September 30,2020 from $53.63 million for the same period of last year.

Gross profit increased by 17.5% to $14.99 million for the six months ended September 30,2020 from $12.75 million for the same period of last year.

Gross margin increased by 0.4 percentage points to 24.2% for the six months ended September 20,2020 from 23.8% for the same period of last year.

Net loss was $1.92 million,or $0.05 per basic and diluted share,for the six months ended September 30,compared to net loss of $3.73 million,or $0.10 per basic and diluted share,for the same period of last year.

Six Months Ended September 30,2020 Financial Results

Revenue

Revenue for the six months ended September 30,2020 increased by $8.26 million,or 15.4%,to $61.90 million from $53.63 million for the same period of last year. The increase in revenue was primarily due to the increase in retail drugstores,online pharmacy and wholesale business.

For the Six Months Ended September 30,

2020

2019

($ millions)

Revenue

Cost of

Goods

Gross

Margin

Revenue

Cost of

Goods

Gross

Margin

Retail drugstores

36.74

24.73

32.7%

34.74

24.15

30.5%

Online pharmacy

10.26

8.97

12.5%

4.79

4.13

13.9%

Wholesale

14.90

13.20

11.4%

14.10

12.60

10.7%

Total

61.90

46.90

24.2%

53.63

40.88

23.8%

Revenue from the retail drugstores business increased by $2.00 million,or 5.8%,to $36.74 million for the six months ended September 30,2020 from $34.74 million for the same period of last year. The increase was primarily attributable 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,partially offset by the decline in sale reimbursed by NHSA in the second quarter of fiscal 2021,and maturing of stores opened a year ago.

Revenue from the online pharmacy business increased by $5.47million,or 114.0%,to $10.26 million for the six months ended September 30,2020 from $4.79 million for the same period of last year. The increase was primarily caused by an increase in sales of prescription drugs via e-commerce platforms such as Tmall. Due to the same reason discussed above,the sale of prescription drugs was $3.63 million in the six months ended September 30,2020 as compared to none in the six month ended September 30,the Company was able to promote its sales.

Revenue from the wholesale business increased by $0.80million,or 5.6%,to $14.90 million for the six months ended September 30,2020 from $14.10 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 $6.02 million,or 14.7%,to $46.90 million for the six months ended September 30,2020 from $40.88 million for the same period of last year. Gross profit increased by $2.24 million,or 17.5%,to $14.99 million for the six months ended September 30,2020 from $12.75 million for the same period of last year.Overall gross margin increased by 0.4 percentage points to 24.2% for the six months ended September 30,from 23.8% for the same period of last year.

Gross margins for retail drugstores,online pharmacy and wholesale were 32.7%,12.5%,and 11.4%,2020. This compared to gross margins for retail drugstores,online pharmacy and wholesale of 30.5%,13.9%,for the same period of last year.

Loss from operations

Selling and marketing expenses increased by $0.30million,or 2.4%,to $12.75 million for the six months ended September 30,2020 from $12.45 million for the same period of last year. The increase in selling and marketing expenses was primarily due to increase in fee charged by various platforms as a result of sale increase in the Company's online pharmacy.

General and administrative expenses decreased by $0.50million,or 10.6%,to $4.18 million for the six months ended September 30,2020 from $4.68 million for the same period of last year. In the six months ended September 30,the Company reversed bad debt allowance of $286,076 as compared to an increase in bad debt allowance of $767,249 in the same period of last year. Excluding such an effect,the general and administrative expenses increased by $559,503 period over period,which reflects the increases in staff and administration expense as the Company's online business grew.

Loss from operations was $1.94 million for the six months ended September 30,compared to $4.38 million for the same period of last year. Operating margin was (3.1)% and (8.2)% for the six months ended September 30,2020 and 2019 respectively .

Net loss

Net loss was $1.92 million,or $0.05 per basic and diluted share for the six months ended September 30,or $0.10 per basic and diluted share for the same period of last year.

Financial Condition

As of September 30,the Company had cash of $21.65 million,compared to $16.18 million as of March 31,2020. Net cash used in operating activities was $0.35 million for the six months ended September 30,compared to net cash provided by operating activities of $0.97 million for the same period of last year. Net cash used in investing activities was $1.76 million for the six months ended September 30,compared to $1.45 million for the same period of last year. Net cash provided by financing activities was $4.55 million for the six months ended September 30,compared to $6.38 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. 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)

September30,

March31,

2020

2020

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

21,646,487

$

16,176,318

Restricted cash

13,722,479

14,806,288

Financial assets available for sale

163,818

157,159

Notes receivable

73,494

57,005

Trade accounts receivable

9,992,142

9,770,656

Inventories

13,227,559

12,247,004

Other receivables,net

5,225,418

5,069,442

Advances to suppliers

1,929,273

1,174,800

Other current assets

1,833,208

1,528,540

Total current assets

67,813,878

60,987,212

PROPERTY AND EQUIPMENT,net

6,768,478

7,633,740

OTHER ASSETS

Long-term investment

4,115,839

2,544,451

Farmland assets

789,638

742,347

Long term deposits

1,533,640

1,456,384

Other noncurrent assets

1,077,100

1,046,763

Operating lease right-of-use assets

19,946,821

21,711,376

Intangible assets,net

3,440,046

3,393,960

Total other assets

30,903,084

30,895,281

Total assets

$

105,485,440

$

99,516,233

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Short-term bank loan

$

2,204,820

1,410,130

Accounts payable,trade

24,904,087

21,559,494

Notes payable

23,327,972

26,605,971

Other payables

1,888,563

2,522,330

Other payables - related parties

574,103

490,218

Customer deposits

1,262,520

708,140

Taxes payable

245,203

119,247

Accrued liabilities

653,409

753,612

Long-term loan payable-current portion

2,375,729

2,287,742

Current portion of operating lease liabilities

1,056,181

981,090

Total current liabilities

58,492,587

57,437,974

Long-term loan payable

3,089,373

4,958

Long-term operating leaseliabilities

16,500,499

19,049,575

Employee Deposits

14,699

70,507

Purchase option and warrants liability

36,306

64,090

Total liabilities

78,133,464

80,738,104

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

Common stock; $0.001 par value; 250,000,000 shares authorized; 37,961,790 and

32,936,786 shares issued and outstanding as of September30,2020 and March

31,respectively

37,962

32,937

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

outstanding as of September30 and March 31,respectively

-

-

Additional paid-in capital

63,568,876

54,209,301

Statutory reserves

1,309,109

1,109

Accumulated deficit

(38,126,065)

(36,400,837)

Accumulated other comprehensive income

2,565,454

1,424

Total stockholders' equity

29,355,336

20,590,934

Noncontrolling interests

(2,003,360)

(1,812,805)

Total equity

27,351,976

18,778,129

Total liabilities and stockholders' equity

$

105,233

CHINA JO-JO DRUGSTORES,INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

For the three months ended

September 30,

For the six months ended

September 30,

2020

2019

2020

2019

REVENUES,NET

$

30,842,545

$

28,353,779

$

61,896,857

$

53,634,563

COST OF GOODS SOLD

23,829,793

21,660,415

46,886

40,879,761

GROSS PROFIT

7,012,752

6,693,364

14,971

12,754,802

SELLING EXPENSES

6,475,512

6,848

12,747,919

12,454,399

GENERAL AND ADMINISTRATIVE EXPENSES

2,061,559

1,823,935

4,181,725

4,675,547

TOTAL OPERATING EXPENSES

8,537,071

8,783

16,644

17,129,946

LOSS FROM OPERATIONS

(1,524,319)

(1,616,419)

(1,673)

(4,144)

OTHER INCOME (EXPENSE):

INTEREST INCOME

187,667

340,514

351,255

388,387

INTEREST EXPENSE

(117,692)

-

(245,079)

-

OTHER

(124,496)

(72,225)

(74,475)

(134,710)

CHANGE IN FAIR VALUE OF DERIVATIVE

LIABILITIES

32,674

6,865

27,784

410,420

LOSS BEFORE INCOME TAXES

(1,546,166)

(1,341,265)

(1,877,188)

(3,047)

PROVISION FOR INCOME TAXES

(18,975)

5,702

38,595

14,090

NET LOSS

(1,527,191)

(1,346,967)

(1,915,783)

(3,725,137)

LESS: NET LOSS ATTRIBUTABLE TO

NONCONTROLLING INTEREST

(33,472)

(122,004)

(190,555)

(365,223)

NET LOSS ATTRIBUTABLE TO CHINA JO-JO

DRUGSTORES,INC.

(1,493,719)

(1,224,963)

(1,228)

(3,359,914)

Foreign currency translation adjustments

1,031,461

(536,335)

1,125,030

(941,573)

COMPREHENSIVE LOSS

$

(495,730)

$

(1,883,302)

$

(790,753)

$

(4,666,710)

WEIGHTED AVERAGE NUMBER OF SHARES:

Basic

37,790

32,786

36,232,144

32,696,348

Diluted

37,348

EARNINGS PER SHARES:

Basic

$

(0.04)

$

(0.04)

$

(0.05)

$

(0.10)

Diluted

$

(0.04)

$

(0.04)

$

(0.05)

$

(0.10)

CHINA JO-JO DRUGSTORES,INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Forthesixmonthsended

September 30,

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(1,783)

$

(3,137)

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

Bad debt direct write-off and provision

(286,076)

767,250

Depreciation and amortization

1,258,156

1,051,907

Stock based compensation

-

34,560

Change in fair value of purchase option derivative liability

(27,784)

(410,420)

Changes in operating assets and liabilities：

Accounts receivable,trade

41,724

555,289

Notes receivable

(13,675)

92,655

Inventories and biological assets

(448,573)

975,170

Other receivables

279,650

(206,247)

Advances to suppliers

(531,255)

(106,790)

Other current assets

(853,289)

(1,185)

Long term deposit

(15,106)

682,504

Other noncurrent assets

13,619

13,791

Accounts payable,trade

2,362,338

1,938,015

Other payables and accrued liabilities

(845,411)

(568,457)

Customer deposits

509,549

744,912

Taxes payable

123,082

165,692

Net cash used in/provided by operating activities

(348,834)

973,509

CASH FLOWS FROM INVESTING ACTIVITIES:

Disposal of financialassetsavailableforsale

-

14,457

Acquisition of equipment

(33,968)

(374,992)

Purchases of intangible assets

(55,038)

(462,266)

Investment in a joint venture

(1,422,193)

-

Additions to leasehold improvements

(246,846)

(622,464)

Net cash used in investing activities

(1,758,045)

(1,445,265)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from short-term bank loan

714,160

682,692

Repayment ofthird parties' loan

(1,175,725)

-

Proceeds from notes payable

22,668,388

21,745,277

Repayment of notes payable

(26,949,176)

(24,862,363)

Decrease in Employee Deposits

(57,133)

-

Exercise of warrants

77,500

-

Proceeds from equity financing

9,205,173

9,273,077

Repayment of other payables-related parties

68,994

(458,002)

Net cash provided by financing activities

4,552,181

6,380,681

EFFECT OF EXCHANGE RATE ON CASH

1,941,058

(1,368,958)

INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

4,386,360

4,539,967

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH,beginning of period

30,982,606

24,202

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH,end of period

$

35,966

$

29,285,169

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for interest

247,371

-

Cash paid for income taxes

$

3,457

$

28,777

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