China Jo-Jo Drugstores Reports Third Quarter Fiscal 2021 Financial Results

HANGZHOU,China,Feb. 13,2021 -- 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 third fiscal quarter ended December 31,2020.

Mr. Lei Liu,Chairman and CEO of Jo-Jo Drugstores,commented,"We are pleased with our third quarter performance. We delivered another quarter of strong results. Our revenue and gross profit recorded $35.54 million and $8.09 million for the third fiscal quarter of fiscal year 2021,increased6.5% and 11.0% compared to same period of last year. During the COVID-19 pandemic,we made every effort to guarantee sufficient medicine supply,build a pandemic medicine center and provide online pharmacy consultation services. As a result,our revenue year-over-year from online pharmacy increased by 66.4%. Our robust performance is a strong indicator of the successful execution of our multifaceted growth strategy and strategic transformation."

Mr. Liu continued,"The environment surrounding COVID-19 accelerates our transformation. To address the tremendous pharmaceutical retail market in China,we enhanced various information and data systems,continued to develop the management system for patients with chronic diseases,upgraded our "Medical + Medicine" business model,introduced digital services such as Xiaoqiao robots to our customers,developed 24-hour service stores,launched a new OA system,and accelerated comprehensive budget management. Looking ahead,we will keep focusing on narrowing net loss,drive growth,and continue to deliver sustainable and long-term profitability to our shareholders."

Third Quarter of Fiscal 2021 Financial Highlights

For the Three Months Ended December 31,

($ millions,except per share data)

2020

2019

% Change

Revenue

35.54

33.36

6.5%

Retail drugstores

20.07

21.57

-7.0%

Online pharmacy

6.60

3.97

66.4%

Wholesale

8.87

7.82

13.4%

Gross profit

8.09

7.28

11.0%

Gross margin

22.8%

21.8%

1.0 pp*

Income(loss) from operations

(6.37)

0.55

NM

Net income(loss)

(6.29)

0.46

NM

Earnings(Loss) per share

(0.15)

0.02

NM

*Notes: pp represents percentage points

Revenue increased by 6.5% to $35.54 million for the three months ended December 31,2020 from $33.36 million for the same period of last year.

Gross profit increased by 11.0% to $8.09 million for the three months ended December 31,2020 from $7.28 million for the same period of last year.

Gross margin increased slightly by 1.0 percentage points to 22.8% for the three months ended December 31,2020 from 21.8% for the same period of last year.

Net loss was $6.29 million,or $0.15 per basic and diluted share,for the three months ended December 31,2020,compared to net income of $0.46 million,or $0.02 per basic and diluted share,for the same period of last year.

Third Quarter of Fiscal 2021 Financial Results

Revenue

Revenue for the three months ended December 31,2020 increased by $2.18 million,or 6.5%,to $35.54 million from $33.36 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 December 31,

2020

2019

($ millions)

Revenue

Cost of

Goods

Gross Margin

Revenue

Cost of

Goods

Gross Margin

Retail drugstores

20.07

13.52

32.6%

21.57

15.39

28.7%

Online pharmacy

6.60

6.07

8.1%

3.97

3.64

8.2%

Wholesale

8.87

7.86

11.4%

7.82

7.05

9.9%

Total

35.54

27.45

22.8%

33.36

26.08

21.8%

Revenue from the retail drugstores business decreased by $1.50 million,or 7.0%,to $20.07 million for the three months ended December 31,2020 from $21.57 million for the same period of last year. The decrease was primarily due to the negative effect on the overall economy from COVID-19,and also to the Company's strategic decision to cease selling certain low-profit margin products that are eligible for reimbursement by National Healthcare Security Administration ("NHSA" hereafter) since September 1,2020.

Revenue from the online pharmacy business increased by $2.63 million,or 66.4%,to $6.60 million for the three months ended December 31,2020 from $3.97 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. In the past,prescription drugs cannot be sold online due to safety concern. After the nation lifted the ban order,online prescription drug sales became popular. As a result,the sale of prescription drugs was $2.23 million in the three months ended December 31,2020 as compared to none in the three month ended December 31,2019. Additionally,the Company maintained a membership care program targeted at customers with chronic disease. The Company has closely interacted with its members via WeChat to provide healthcare knowledge,and to remind them to refill medicine. By implementing a personalized customer care program,the Company was able to promote its sales.

Revenue from the wholesale business increased by $1.05 million,or 13.4%,to $8.87 million for the three months ended December 31,2020 from $7.82 million for the same period of last year. The increase was primarily accomplished by Company's ability to sell certain products in large quantity at its retail stores,to other vendors at competitive prices.

Gross profit and gross margin

Total cost of goods sold increased by $1.37 million,or 5.3%,to $27.45 million for the three months ended December 31,2020 from $26.08 million for the same period of last year. Gross profit increased by $0.81 million,or 11.0%,to $8.09 million for three months ended December 31,2020 from $7.28 million for the same period of last year.Overall gross margin increased slightly by 1.0 percentage points to 22.8% for the three months ended December 31,from 21.8% for the same period of last year.

Gross margins for retail drugstores,online pharmacy and wholesale were 32.6%,8.1%,and 11.4%,respectively,compared to gross margins for retail drugstores,online pharmacy and wholesale of 28.7%,8.2%,and 9.9%,for the same period of last year.

Income(loss) from operations

Selling and marketing expenses increased by $2.58 million,or 45.6%,to $8.26 million for the three months ended December 31,2020 from $5.68 million for the same period of last year. The increase in selling and marketing expenses was primarily due to increase in annual employee compensation and online sales service fee as a result of the sale increase in the Company's online pharmacy.

General and administrative expenses increased by $5.14 million,or 487.5%,to $6.19 million for the three months ended December 31,2020 from $1.05 million for the same period of last year. On December 21,the Company issued 3,790,000 shares of common stock according to its employee stock reward incentive plan and recorded stock-based compensation of $3.94 million. Additionally,bad debt direct write-off and provision amounted to $0.29 million,an increase of $1.09 million,as compared to reversal of bad debt allowance of $0.80 million for the same period a year ago. Excluding such effect,the general and administrative expenses increased by $0.11 million period over period,which reflects the increase in staff and administration expense.

Loss from operations was $6.37 million for the three months ended December 31,compared to income from operations of $0.55 million for the same period of last year. Operating margin was (17.9)% and 1.7% for the three months ended December 31,2020 and 2019 respectively.

Net income(loss)

Net loss was $6.29 million,or $0.15 per basic and diluted share for the three months ended December 31,or $0.02 per basic and diluted share for the same period of last year.

Nine Months Ended December 31,2020 Financial Highlights

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

2020

2019

% Change

Revenue

97.44

87.00

12.0%

Retail drugstores

56.81

56.31

0.9%

Online pharmacy

16.86

8.76

92.5%

Wholesale

23.77

21.93

8.4%

Gross profit

23.08

20.04

15.2%

Gross margin

23.7%

23.0%

0.7 pp*

Loss from operations

(8.30)

(3.82)

-117.3%

Net loss

(8.21)

(3.27)

-151.1%

Loss per share

(0.20)

(0.09)

-122.2%

*Notes: pp represents percentage points

Revenue increased by 12.0% to $97.44 million for the nine months ended December 31,2020 from $87.00 million for the same period of last year.

Gross profit increased by 15.2% to $23.08 million for the nine months ended December 31,2020 from $20.04 million for the same period of last year.

Gross margin increased slightly by 0.7 percentage pointsto 23.7% for the nine months ended December 31,2020 from 23.0% for the same period of last year.

Net loss was $8.21 million,or $0.20 per basic and diluted share,for the nine months ended December 31,compared to net loss of $3.27 million,or $0.09 per basic and diluted share,for the same period of last year.

Nine Months Ended December 31,2020 Financial Results

Revenue

Revenue for the nine months ended December 31,2020 increased by $10.44 million,or 12.0%,to $97.44 million from $87.00 million for the same period of last year. The increase in revenue was primarily due to the growth in retail drugstores,online pharmacy and wholesale business.

For the Nine Months Ended December 31,

2020

2019

($ millions)

Revenue

Cost of

Goods

Gross Margin

Revenue

Cost of

Goods

Gross Margin

Retail drugstores

56.81

38.25

32.7%

56.31

39.54

29.8%

Online pharmacy

16.86

15.04

10.8%

8.76

7.77

11.3%

Wholesale

23.77

21.06

11.4%

21.93

19.65

10.4%

Total

97.44

74.35

23.7%

87.00

66.96

23.0%

Revenue from the retail drugstores business increased by $0.50 million,or 0.9%,to $56.81 million for the nine months ended December 31,2020 from $56.31 million for the same period of last year. However,after removing the impact of exchange rate fluctuation,the actual retail drugstores sales decreased by 0.8%. The actual decrease in the Company's retail drugstore sales is primarily due to the negative effect on the overall economy from COVID-19,and also to the Company's strategic decision to cease selling certain low-profit margin products that are eligible for reimbursement by NHSA since September 1,2020.

Revenue from the online pharmacy business increased by $8.10 million,or 92.5%,to $16.86 million for the nine months ended December 31,2020 from $8.76 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 $5.86 million in the nine months ended December 31,2020 as compared to none in the nine months ended December 31,the Company maintained a membership care program targeted at customers with chronic disease. The Company has closely interacted with its members via WeChat to provide healthcare knowledge and to remind them to refill medicine. By implementing a personalized customer care program,the Company was able to promote its sales.

Revenue from the wholesale business increased by $1.84million,or 8.4%,to $23.77 million for the nine months ended December 31,2020 from $21.93 million for the same period of last year. The increase was primarily accomplished by the Company's ability to sell certain products 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 $7.40 million,to $74.36 million for the nine months ended December 31,2020 from $66.96 million for the same period of last year. Gross profit increased by 3.04 million,or 15.2%,to $23.08 million for the nine months ended December 31,2020 from $20.04 million for the same period of last year.Overall gross margin increased slightly by 0.7 percentage points to 23.7% for the nine months ended December 31,from 23.0% for the same period of last year.

Gross margins for retail drugstores,online pharmacy and wholesale were 32.7%,10.8%,2020. This compared to gross margins for retail drugstores,online pharmacy and wholesale of 29.8%,11.3%,and 10.4%,for the same period of last year.

Loss from operations

Selling and marketing expenses increased by $2.88 million,or 15.9%,to $21.01 million for the nine months ended December 31,2020 from $18.13 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 the sale increase in the Company's online pharmacy.

General and administrative expenses decreased by $4.64 million,or 81.1%,to $10.37 million for the nine months ended December 31,2020 from $5.73 million for the same period of last year. On December 21,000 shares of common stock according to its employee stock reward incentive plan and recorded stock-based compensation of $3.94 million. Excluding such an effect,the general and administrative expenses increased by $0.70 million period over period,which reflects the increases in staff and administration expense as the Company's online business grows.

Loss from operations was $8.30 million for the nine months ended December 31,compared to $3.82 million for the same period of last year. Operating margin was (8.5)% and (4.4)% for the nine months ended December 31,2020 and 2019 respectively.

Net loss

Net loss was $8.21 million,or $0.20 per basic and diluted share for the nine months ended December 31,or $0.09 per basic and diluted share for the same period of last year.

Financial Condition

As of December 31,the Company had cash of $12.12 million,compared to $16.18 million as of March 31,2020. Net cash used in operating activities was $12.45 million for the nine months ended December 31,compared to $11.27 million for the same period of last year. Net cash used in investing activities was $1.82 million for the nine months ended December 31,compared to $1.71 million for the same period of last year. Net cash provided by financing activities was $5.42million for the nine months ended December 31,compared to $12.70 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)

December31,

March31,

2020

2020

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

12,116,508

$

16,176,318

Restricted cash

12,925,216

14,806,288

Financial assets available for sale

170,604

157,159

Notes receivable

-

57,005

Trade accounts receivable

11,521,988

9,770,656

Inventories

14,933,245

12,247,004

Other receivables,net

5,084,145

5,069,442

Advances to suppliers

4,511,821

1,174,800

Other current assets

1,821,838

1,528,540

Total current assets

63,085,365

60,987,212

PROPERTY AND EQUIPMENT,net

6,727,485

7,633,740

OTHER ASSETS

Long-term investment

4,295,979

2,544,451

Farmland assets

830,595

742,347

Long term deposits

1,551,248

1,456,384

Other noncurrent assets

1,136,261

1,046,763

Operating lease right-of-use assets

21,389,539

21,711,376

Intangible assets,net

3,541,672

3,393,960

Total other assets

32,745,294

30,895,281

Total assets

$

102,558,144

$

99,516,233

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Short-term bank loan

$

2,296,155

1,410,130

Accounts payable,trade

18,064,997

21,559,494

Notes payable

25,736,161

26,605,971

Other payables

2,744,874

2,522,330

Other payables - related parties

689,274

490,218

Customer deposits

841,686

708,140

Taxes payable

690,906

119,247

Accrued liabilities

681,316

753,612

Long-term loan payable-current portion

2,480,264

2,287,742

Current portion of operating lease liabilities

1,650,085

981,090

Total current liabilities

55,875,718

57,437,974

Long-term loan payable

2,589,643

4,115,958

Long-term operating leaseliabilities

17,993,514

19,049,575

Employee Deposits

15,308

70,507

Purchase option and warrants liability

-

64,090

Total liabilities

76,474,183

80,738,104

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

Common stock; $0.001 par value; 250,000,000 shares authorized; 41,751,790 and 32,936,786 shares issued and outstanding as of December 31,2020 and March 31,respectively

41,752

32,937

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

as of December 31 and March 31,respectively

-

-

Additional paid-in capital

67,506,686

54,209,301

Statutory reserves

1,309,109

1,109

Accumulated deficit

(44,382,384)

(36,400,837)

Accumulated other comprehensive income

3,649,357

1,440,424

Total stockholders' equity

28,124,520

20,590,934

Noncontrolling interests

(2,040,559)

(1,812,805)

Total equity

26,083,961

18,778,129

Total liabilities and stockholders' equity

$

102,233

CHINA JO-JO DRUGSTORES,INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVEINCOME

(LOSS)

(UNAUDITED)

For the three months ended

December31,

For the nine months ended

December31,

2020

2019

2020

2019

REVENUES,NET

$

35,538,759

$

33,363,282

$

97,435,616

$

86,997,845

COST OF GOODS SOLD

27,451,509

26,079,910

74,355,395

66,959,671

GROSS PROFIT

8,087,250

7,283,372

23,080,221

20,038,174

SELLING EXPENSES

8,262,590

5,676,400

21,010,509

18,130,799

GENERAL AND ADMINISTRATIVE EXPENSES

6,192,294

1,054,060

10,374,019

5,729,607

TOTAL OPERATING EXPENSES

14,454,884

6,730,460

31,384,528

23,860,406

INCOME(LOSS) FROM OPERATIONS

(6,367,634)

552,912

(8,304,307)

(3,822,232)

OTHER INCOME (EXPENSE):

INTEREST INCOME

193,207

272,773

544,462

661,160

INTEREST EXPENSE

(109,896)

-

(354,975)

-

OTHER

(43,525)

(302,408)

(118,000)

(437,118)

CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITIES

36,306

(65,172)

64,090

345,248

INCOME(LOSS) BEFORE INCOME TAXES

(6,291,542)

458,105

(8,168,730)

(3,252,942)

PROVISION FOR INCOME TAXES

1,976

2,184

40,571

16,274

NET INCOME (LOSS)

(6,293,518)

455,921

(8,301)

(3,269,216)

LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

(37,199)

(75,861)

(227,754)

(441,084)

NETINCOME (LOSS) ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES,INC.

(6,256,319)

531,782

(7,981,547)

(2,828,132)

Foreign currency translation adjustments

1,903

358,868

2,208,933

(582,705)

COMPREHENSIVE GAIN (LOSS)

$

(5,615)

$

814,789

$

(6,368)

$

(3,851,921)

WEIGHTED AVERAGE NUMBER OF SHARES:

Basic

41,339,834

32,786

40,462,971

32,776,786

Diluted

41,786

EARNINGS (LOSS) PER SHARE

Basic

$

(0.15)

$

0.02

$

(0.20)

$

(0.09)

Diluted

$

(0.15)

$

0.02

$

(0.20)

$

(0.09)

CHINA JO-JO DRUGSTORES,INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Fortheninemonthsended

December31,

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(8,301)

$

(3,216)

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

Bad debt direct write-off and provision

7,065

(29,038)

Depreciation and amortization

1,657,001

1,572,925

Stock based compensation

3,941,600

34,560

Change in fair value of purchase option derivative liability

(64,090)

(345,248)

Changes in operating assets and liabilities：

Accounts receivable,trade

(1,203,132)

(2,581,208)

Notes receivable

58,848

122,175

Inventories and biological assets

(1,139)

2,484,432

Other receivables

625,207

(1,353,544)

Advances to suppliers

(3,050,898)

(222,928)

Other current assets

(79,851)

(1,758,533)

Long term deposit

28,275

597,084

Other noncurrent assets

52

17,744

Accounts payable,trade

(5,077,172)

(6,397,104)

Other payables and accrued liabilities

(118,323)

(917,398)

Customer deposits

69,385

458,415

Taxes payable

525,005

312,192

Net cash used in operating activities

(12,448,468)

(11,274,690)

CASH FLOWS FROM INVESTING ACTIVITIES:

Disposal of financialassetsavailableforsale

-

14,370

Acquisition of equipment

(41,565)

(561,677)

Purchases of intangible assets

(62,644)

(461,013)

Investment in a joint venture

(1,458,633)

-

Additions to leasehold improvements

(261,759)

(705,856)

Net cash used in investing activities

(1,824,601)

(1,714,176)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from short-term bank loan

727,855

Proceeds from third parties' loan

-

7,406

Repayment ofthird parties' loan

(1,789,379)

-

Proceeds from notes payable

39,320,707

36,537,832

Repayment of notes payable

(42,312,460)

(39,784,592)

Decrease in Employee Deposits

(58,228)

(7,185)

Exercise of warrants

77,500

-

Net Proceeds from equity financing

9,100

9,273,077

Repayment of other payables-related parties

168,990

(406,506)

Net cash provided by financing activities

5,422,085

12,698,032

EFFECT OF EXCHANGE RATE ON CASH

2,910,102

(559,998)

(DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

(5,940,882)

(850,832)

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

$

25,041,724

$

23,894,370

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for interest

354,975

-

Cash paid for income taxes

$

35,954

$

17,215

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