China Jo-Jo Drugstores Reports First Quarter 2019 Financial Results

HANGZHOU,China,Aug. 14,2018 -- 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 first quarter ended June 30,2018.

Mr. Lei Liu,Chief Executive Officer and Chairman of Jo-Jo Drugstores,Inc.,commented,"We continue to emphasize our retail strategy as we report our first quarter results for fiscal year 2019. Our gross margin for retail drug stores for the first quarter was 30.1%,up from 25.2% from the same period last year,as we emphasized increasing profit margins,introducing new suppliers,and renegotiating prices with our suppliers in our adjustments to corporate operational strategy. This margin expansion was coupled with a healthy 22.6% increase in revenue from retail drugstores year over year as we continue to execute on our strategy to capture the high-income Hangzhou urban center market. We are pleased with these strong results to start the new fiscal year as we continue to improve our business fundamentals and grow our market share in the expanding healthcare market."

First Quarter of Fiscal 2019 Financial Highlights

For the Three Months Ended June 30,

($ millions,except per share data)

2018

2017

% Change

Revenue

22.77

21.67

5.1%

Retail drugstores

15.97

13.02

22.6%

Online pharmacy

2.02

3.14

-35.5%

Wholesale

4.78

5.51

-13.3%

Gross profit

5.62

4.18

34.4%

Gross margin

24.7%

19.3%

5.4 pp*

Loss from operations

-0.56

-1.46

-61.4%

Operating margin

-2.5%

-6.8%

4.3%

Net loss attributable to Jo-Jo Drugstores

(0.65)

(1.42)

-54.5%

Loss per share

(0.02)

(0.06)

-62.8%

*Notes: pp represents percentage points

Revenue increased by 5.1% to $22.77 million for the three months ended June 30,2018 from $21.67 million for the same period of last year.

Gross profit increased by 34.4% to $5.62 million for the three months ended June 30,2018 from $4.18 million for the same period of last year.

Gross margin increased by 5.4 percentage points to 24.7% from 19.3% for the same period of last year.

Net loss attributable to Jo-Jo Drugstores decreased by 54.5% to $0.65 million,or $0.02 per basic and diluted share,for the three months ended June 30,2018 from $1.42 million,or $0.06 per basic and diluted share,for the same period of last year.

First Quarter of Fiscal 2019 Financial Results

Revenue

Revenue for the three months ended June 30,2018 increased by $1.10 million,or 5.1%,to $22.77 million from $21.67 million for the same period of last year. The increase in revenue was primarily due to the increase in retail drugstores business,partially offset by the decrease in online pharmacy business and wholesale business.

For the Three Months Ended June 30,

2018

2017

($ millions)

Revenues

Cost of

Goods

Gross

Margin

Revenues

Cost of

Goods

Gross

Margin

Retail drugstores

15.97

11.16

30.1%

13.02

9.74

25.2%

Online pharmacy

2.02

1.74

13.9%

3.14

2.84

9.3%

Wholesale

4.78

4.25

11.1%

5.51

4.91

10.9%

Total

22.77

17.16

24.7%

21.67

3.14

19.3%

Revenue from the retail drugstores business increased by $2.95 million,or 22.6%,to $15.97 million for the three months ended June 30,2018 from $13.02 million for the same period of last year. The increase was primarily due to new store sales contributions and benefits such as emphasis on onsite medical care,incremental Direct-to-Patient ("DTP") business caused by continuous hospital medical reform,and promotional campaigns.

Revenue from the online pharmacy business decreased by $1.11 million,or 35.5%,to $2.02 million for the three months ended June 30,2018 from $3.14 million for the same period of last year. The decrease was mainly caused by a decline in our sales via e-commerce platforms and the suspension of OTC drug sales on e-commerce platforms,offset by the increase in business referred from Pharmacy Benefit Management ("PBM") providers,and. 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 business decreased by $0.73 million,or 13.3%,to $4.78 million for the three months ended June 30,2018 from $5.51 million for the same period of last year. The decrease was primarily due to the departure of a key salesperson,which caused the Company to suffer loss of certain business.

Gross profit and gross margin

Total cost of goods sold decreased by $0.34 million,or 1.9%,to $17.16 million for the three months ended June 30,2018 from $17.49 million for the same period of last year. Gross profit increased by $1.44 million,or 34.4%,to $5.62 million for three months ended June 30,2018 from $4.18 million for the same period of last year. Overall gross margin increased by 5.4 percentage points to 24.7% for the three months ended June 30,2018,compared to 19.3% for the same period of last year.

Gross margins for retail drugstores,online pharmacy and wholesale were 30.1%,13.9%,and 11.1%,respectively,2018. This compared to gross margins for retail drugstores,online pharmacy and wholesale of 25.2%,9.3%,and 10.9%,for the same period of last year.

Loss from operations

Selling and marketing expenses increased by $0.71 million,or 18.1%,to $4.63 million for the three months ended June 30,2018 from $3.92 million for the same period of last year. The increase in selling and marketing expenses was primarily due to increase in marketing and sales staff expenses related to store expansion,offset by a decline in expense of wholesale business.

General and administrative expenses decreased by $0.17 million,or 9.9%,to $1.55 million for the three months ended June 30,2018 from $1.73 million for the same period of last year. The decrease in general and administrative expenses was caused by a decrease in administrative fees of wholesale business due to logistics outsourcing. Stock compensation has decreased by approximately $0.29 million as certain stock compensation has been fully amortized into the expenses in fiscal year 2018 and no additional expenses were incurred in the three months ended June 30,2018.

Loss from operations decreased by $0.90 million,or 61.4%,to $0.56 million for the three months ended June 30,2018 from $1.46 million for the same period of last year. Operating margin was negative 2.5% for the three months ended June 30,compared to negative 6.8% for the same period of last year.

Net loss

Net loss decreased by $0.72 million,or 50.9%,to $0.70 million for the three months ended June 30,2018 from $1.42 million for the same period of last year. Net loss attributable to common shareholders for the three months ended June 30,2018 was $0.65 million,or $0.02 per basic and diluted share. This compared to net loss attributable to common shareholders of $1.42 million,$0.06 per basic and diluted share,for the same period of last year.

Financial Condition

As of June 30,the Company had cash of $8.91 million,compared to $15.13 million as of March 31,2018. Net cash used in operating activities was $2.58 million for the three months ended June 30,compared to $3.61 million for the same period of last year. Net cash used in investing activities was $0.26 million for the three months ended June 30,compared to $0.51 million for the same period of last year. Net cash used in financing activities was $3.25 million for the three months ended June 30,compared to $0.34 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 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

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30,

March 31,

2018

2018

ASSETS

CURRENT ASSETS

Cash

$

8,905,417

$

15,132,640

Restricted cash

14,037,057

16,319,551

Financial assets available for sale

172,498

175,140

Notes receivable

394,194

279,082

Trade accounts receivable

6,877,684

8,322,393

Inventories

13,703,245

13,429,568

Other receivables,net

3,712,098

3,098,079

Advances to suppliers

3,887,251

3,447,452

Other current assets

1,509,159

2,116,237

Total current assets

53,198,603

62,320,142

PROPERTY AND EQUIPMENT,net

2,708,381

2,843,640

OTHER ASSETS

Long-term investment

153,573

40,890

Farmland assets

791,795

796,286

Long term deposits

2,469,844

2,501,968

Other noncurrent assets

1,335,493

1,253,352

Intangible assets,919,088

4,056,414

Total other assets

8,669,793

8,648,910

Total assets

$

64,576,776

$

73,812,692

LIABILITIES AND STOCK HOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable,trade

22,419,005

25,259,526

Notes payable

13,559,626

19,180,200

Other payables

4,571,800

4,272,523

Other payables - related parties

754,727

850,342

Customer deposits

4,000,968

4,040,867

Taxes payable

68,571

366,040

Accrued liabilities

837,488

841,993

Total current liabilities

46,212,185

54,811,491

Purchase option and warrants liability

145,770

138,796

Total liabilities

46,357,955

54,950,287

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

Common stock; $0.001 par value; 250,000 shares authorized; 25,214,678 and

25,678 shares issued and outstanding as of June 30,2018 and March 31,2018

28,937

28,937

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

outstanding as of June 30,2018

-

-

Additional paid-in capital

43,229

43,599,089

Statutory reserves

1,309,109

1,109

Accumulated deficit

(30,307,042)

(29,661,190)

Accumulated other comprehensive income

4,208,094

3,586,460

Total stockholders' equity

18,327

18,862,405

Noncontrolling interests

(668,506)

-

Total equity

18,218,821

18,405

Total liabilities and stockholders' equity

$

64,692

CHINA JO-JO DRUGSTORES,INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(LOSS)

For the three months

ended

June 30,

2018

2017

REVENUES,NET

$

22,772,566

$

21,670,368

COST OF GOODS SOLD

17,155,763

17,492,707

GROSS PROFIT

5,616,803

4,177,661

SELLING EXPENSES

4,626,978

3,916,859

GENERAL AND ADMINISTRATIVE EXPENSES

1,554,528

1,725,443

TOTAL OPERATING EXPENSES

6,181,506

5,642,302

LOSS FROM OPERATIONS

(564,703)

(1,464,641)

INTEREST INCOME

47,172

44,899

INTEREST EXPENSE

-

-

OTHER (EXPENSE) INCOME,NET

(114,941)

(29,348)

CHANGE IN FAIR VALUE OF PURCHASE OPTION AND WARRANTS

LIABILITY

(6,974)

(50,324)

(LOSS) BEFORE INCOME TAXES

(639,446)

(1,398,766)

PROVISION FOR INCOME TAXES

57,169

20,538

NET (LOSS)

(696,615)

(1,304)

ADD: NET (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTEREST

50,763

-

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

(645,852)

(1,304)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS

621,634

459,069

COMPREHENSIVE (LOSS)

(74,981)

(960,235)

WEIGHTED AVERAGE NUMBER OF SHARES:

Basic

28,936,778

25,678

Diluted

28,678

(LOSS) PER SHARES:

Basic

$

(0.02)

$

(0.06)

Diluted

$

(0.02)

$

(0.06)

CHINA JO-JO DRUGSTORES,INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months

ended

June 30,

2018

2017

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(696,615)

$

(1,304)

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

Bad debt direct write-off and provision

259,279

212,199

Depreciation and amortization

293,095

289,058

Stock based compensation

49,140

343,480

Change in fair value of purchase option derivative liability

6,974

(50,324)

Accounts receivable,trade

1,077,419

(537,768)

Notes receivable

(114,944)

85,434

Inventories and biological assets

(458,803)

(387,176)

Other receivables

(401,205)

365,954

Advances to suppliers

(775,014)

450,107

Other current assets

554,048

(66,556)

Long term deposit

(5,415)

(772,661)

Other noncurrent assets

(97,341)

(162,049)

Accounts payable,trade

(2,369,206)

(1,518,372)

Other payables and accrued liabilities

357,335

(346,903)

Customer deposits

20,290

83,096

Taxes payable

(281,235)

(179,483)

Net cash provided by operating activities

(2,582,197)

(3,611,268)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of financial assets available for sale

-

(72,875)

Acquisition of equipment

(32,753)

(17,340)

Increase in construction-in-progress

-

(336,882)

Increase intangible assets

-

(80,162)

Additions to leasehold improvements

-

-

Investment in a joint venture

(109,142)

-

Additions to leasehold improvements

(116,002)

-

Net cash used in investing activities

(257,897)

(507,259)

CASH FLOWS FROM FINANCING ACTIVITIES:

Change in restricted cash

1,961,576

(531,031)

Proceeds from notes payable

10,376,504

8,684,688

Repayment of notes payable

(15,512,104)

(8,410,741)

Changes in other payables-related parties

-

(87,449)

Proceeds from equity and debt financing

7,629

-

Repayment of other payables-related parties

(84,014)

-

Net cash provided by (used in) financing activities

(3,250,409)

(344,533)

EFFECT OF EXCHANGE RATE ON CASH

(136,720)

458,201

DECREASE IN CASH

(6,227,223)

(4,004,859)

CASH,beginning of year

15,640

18,364,424

CASH,end of year

$

8,417

$

14,359,565

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income taxes

$

27,832

$

26,853

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