China Jo-Jo Drugstores Reports First Quarter 2020 Financial Results

HANGZHOU,China,Aug. 14,2019 -- China Jo-Jo Drugstores,Inc. (NASDAQ CM: 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 of its fiscal year 2020.

Mr. Lei Liu,Chief Executive Officer and Chairman of Jo-Jo Drugstores,commented,"We are pleased to announce our financial results for the first quarter of fiscal year 2020. Our sales grew 11.0%,with sales growth in our retail drugstores,online pharmacy,and wholesale segments. We will continue adapting to the changing retail drugstore environment and making progress towards our long-term strategic goals. We remain confident of our ability to realize the potential of our business model as we endeavor to provide the best experience to our customers."

First Quarter of Fiscal 2020 Financial Highlights

For the Three Months Ended June 30,

($ millions,except per share data)

2019

2018

% Change

Revenue

25.28

22.77

11.0%

Retail drugstores

16.74

15.97

4.8%

Online pharmacy

2.44

2.02

20.9%

Wholesale

6.10

4.78

27.6%

Gross profit

6.06

5.62

7.9%

Gross margin

24.0%

24.7%

-0.7 pp*

Loss from operations

(2.76)

(0.56)

-388.5%

Net loss

(2.38)

(0.70)

-241.4%

Loss per share

(0.07)

(0.02)

-250.0%

*Notes: pp represents percentage points

Revenue increased by 11.0% to $25.28 million for the three months ended June 30,2019 from $22.77 million for the same period of last year.

Gross profit increased by 7.9% to $6.06 million for the three months ended June 30,2019 from $5.62 million for the same period of last year.

Gross margin decreased by 0.7 percentage points to 24.0% from 24.7% for the same period of last year.

Net loss was $2.38 million,or $0.07 per basic and diluted share,for the three months ended June 30,2019,compared to $0.70 million,or $0.02 per basic and diluted share,for the same period of last year.

First Quarter of Fiscal 2020 Financial Results

Revenue

Revenue for the three months ended June 30,2019 increased by $2.51 million,or 11.0%,to $25.28 million from $22.77 million for the same period of last year. The increase in revenue was primarily due to the growth in retail drugstores business,online pharmacy and wholesale business.

For the Three Months Ended June 30,

2019

2018

($ millions)

Revenue

Cost of Goods

Gross Margin

Revenue

Cost of Goods

Gross Margin

Retail drugstores

16.74

11.68

30.2%

15.97

11.17

30.1%

Online pharmacy

2.44

2.10

14.2%

2.02

1.74

13.9%

Wholesale

6.10

5.44

10.9%

4.78

4.25

11.1%

Total

25.28

19.22

24.0%

22.77

17.16

24.7%

Revenue from the retail drugstores business increased by $0.77 million,or 4.8%,to $16.74million for the three months ended June 30,2019 from $15.97 million for the same period of last year. The increase was primarily due 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,and maturing of stores opened a year ago.

Revenue from the online pharmacy business increased by $0.42 million,or 20.9%,to $2.44 million for the three months ended June 30,2019 from $2.02 million for the same period of last year. The increase wasprimarily 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. For example,sales of blood glucose meters and contact lens contributed significantly to our revenue in the three months ended June 30,2019 as compared to the same period a year ago.

Revenue from the wholesale business increased by $1.32 million,or 27.6%,to $6.10 million for the three months ended June 30,2019 from $4.78 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 quantity at its retail stores,to other vendors at competitive prices.

Gross profit and gross margin

Total cost of goods sold increased by $2.06 million,or 12.0%,to $19.22 million for the three months ended June 30,2019 from $17.16 million for the same period of last year. Gross profit increased by $0.44 million,or 7.9%,to $6.06 million for three months ended June 30,2019 from $5.62 million for the same period of last year.Overall gross margin decreased by 0.7 percentage points to 24.0% for the three months ended June 30,from 24.7% for the same period of last year.

Gross margins for retail drugstores,online pharmacy and wholesale were 30.2%,14.2%,and 10.9%,respectively,2019. For the same period of last year,the gross margins for retail drugstores,online pharmacy and wholesale of were 30.1%,13.9%,and 11.1%,respectively.

Loss from operations

Selling and marketing expenses increased by $1.34 million,or 29.0%,to $5.97 million for the three months ended June 30,2019 from $4.63 million for the same period of last year. The increase in selling and marketing expenses was primarily due to the increase in labor and rent related to the Company's store expansions and rising local living costs.

General and administrative expenses increased by $1.30 million,or 83.4%,to $2.85 million for the three months ended June 30,2019 from $1.55 million for the same period of last year. The Company's retail business incurred additional administrative expenses related to its store expansion. Additionally,Zhejiang Jiuzhou Linjia Medical Investment and Management Co. Ltd,the entity we have 51% that operates two new clinics in Hangzhou,incurred additional administrative labor costs. The bad debt expenses related to the Company's accounts receivable increased by approximately $0.5 million due to certain aged accounts.

Loss from operations was $2.76 million for the three months ended June 30,compared to $0.56 million for the same period of last year. Operating margin was negative 10.9% for the three months ended June 30,compared to negative 2.5% for the same period of last year.

Net loss

Net loss was $2.38 million,or $0.07 per basic and diluted share for the three months ended June 30,compared to net loss of $0.70 million,or $0.02 per basic and diluted share for the same period of last year.

Financial Condition

As of June 30,the Company had cash of $8.34 million,compared to $9.32 million as of March 31,2019. Net cash used in operating activities was $8.16 million for the three months ended June 30,compared to $2.58 million for the same period of last year. Net cash used in investing activities was $0.95 million for the three months ended June 30,compared to $0.26 million for the same period of last year. Net cash provided by financing activities was $8.02 million for the three months ended June 30,compared to net cash used in financing activities of $5.21 million for the same period of last year.

About China Jo-Jo Drugstores,Inc.

China Jo-Jo Drugstores,Inc. 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 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)

June 30,

March 31,

2019

2019

ASSETS

CURRENT ASSETS

Cash

$

8,341,167

$

9,322,463

Restricted cash

14,808,986

15,422,739

Financial assets available for sale

162,273

180,928

Notes receivable

92,480

177,278

Trade accounts receivable

8,590,075

8,692,514

Inventories

10,806,698

13,955,202

Other receivables,net

4,253,802

4,438,230

Advances to suppliers

1,544,132

1,950,252

Other current assets

1,557,156

2,063,375

Total current assets

50,156,769

56,202,981

PROPERTY AND EQUIPMENT,net

8,620,758

8,727,358

OTHER ASSETS

Long-term investment

16,318

24,243

Farmland assets

742,974

825,259

Long term deposits

2,050,219

2,157,275

Other noncurrent assets

1,177,703

1,196,197

Operating lease right-of-use assets

13,564,115

-

Intangible assets,net

3,888,848

3,597,323

Total other assets

21,440,177

7,800,297

Total assets

$

80,217,704

$

72,730,636

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable,trade

13,674,741

23,106,230

Notes payable

24,574,955

25,951,673

Other payables

3,267,074

3,197,221

Other payables - related parties

326,778

795,179

Customer deposits

870,100

771,942

Taxes payable

217,704

125,859

Accrued liabilities

990,032

1,264,182

Current portion of operating lease liabilities

4,738,632

-

Total current liabilities

48,660,016

55,212,286

Long term operating leaseliabilities

7,918,900

-

Purchase option and warrants liability

61,693

465,248

Financial liability

80,081

81,935

Total liabilities

56,720,690

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 June 30,2019 and March 31,2019

32,937

28,937

Preferred stock; $0.001 par value; 10,000 shares authorized; nil issued and outstanding as of June 30,2019

-

-

Additional paid-in capital

54,209,301

44,905,664

Statutory reserves

1,309,109

1,109

Accumulated deficit

(32,722,416)

(30,587,468)

Accumulated other comprehensive income

2,103,726

2,508,964

Total stockholders' equity

24,932,657

18,165,206

Noncontrolling interests

(1,435,643)

(1,194,039)

Total equity

23,497,014

16,971,167

Total liabilities and stockholders' equity

$

80,636

CHINA JO-JO DRUGSTORES,INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

Forthethreemonthsended

June 30,

2019

2018

REVENUES,NET

$

25,280,784

$

22,772,566

COST OF GOODS SOLD

19,219,346

17,155,763

GROSS PROFIT

6,061,438

5,616,803

SELLING EXPENSES

5,968,551

4,626,978

GENERAL AND ADMINISTRATIVE EXPENSES

2,851,612

1,554,528

TOTAL OPERATING EXPENSES

8,820,163

6,181,506

LOSS FROM OPERATIONS

(2,758,725)

(564,703)

INTEREST INCOME

47,873

47,172

OTHER (EXPENSE),NET

(62,485)

(114,941)

CHANGE IN FAIR VALUE OF WARRANTS LIABILITY

403,555

(6,974)

LOSS BEFORE INCOME TAXES

(2,369,782)

(639,446)

PROVISION FOR INCOME TAXES

8,388

57,169

NET LOSS

(2,378,170)

(696,615)

ADD: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

243,219

50,763

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

(2,134,951)

(645,852)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS

(405,238)

621,634

COMPREHENSIVE LOSS

(2,783,408)

(74,981)

WEIGHTED AVERAGE NUMBER OF SHARES:

Basic

32,453,269

28,778

Diluted

32,778

LOSS PER SHARES:

Basic

$

(0.07)

$

(0.02)

Diluted

$

(0.07)

$

(0.02)

CHINA JO-JO DRUGSTORES,INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Forthethreemonthsended

June 30,

2019

2018

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(2,170)

$

(696,615)

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

Bad debt direct write-off and provision

758,231

259,279

Depreciation and amortization

499,175

293,095

Stock based compensation

34,560

49,140

Change in fair value of purchase option derivative liability

(403,555)

6,974

Accounts receivable,trade

(959,680)

1,077,419

Notes receivable

81,326

(114,944)

Inventories and biological assets

2,652

(458,803)

Other receivables

371,054

(401,204)

Advances to suppliers

242,652

(775,014)

Other current assets

(450,042)

554,048

Long term deposit

58,630

(5,415)

Other noncurrent assets

(8,631)

(97,341)

Accounts payable,trade

(8,168)

(2,206)

Other payables and accrued liabilities

(105,522)

357,335

Customer deposits

116,398

20,290

Taxes payable

95,326

(281,235)

Net cash (used in) operating activities

(8,164,764)

(2,582,197)

CASH FLOWS FROM INVESTING ACTIVITIES:

Disposal of financialassetsavailableforsale

14,658

-

Acquisition of equipment

(210,356)

(32,753)

Increase in intangible assets

(433,111)

-

Investment in a joint venture

-

(109,142)

Additions to leasehold improvements

(542,734)

(116,002)

Net cash used in investing activities

(1,171,543)

(257,897)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from notes payable

15,372,260

10,376,504

Repayment of notes payable

(16,167,012)

(15,512,104)

Proceeds from equity financing

9,273,077

7,629

Repayment of other payables-related parties

(460,000)

(84,014)

Net cash provided by (used in) financing activities

8,018,325

(5,211,985)

EFFECT OF EXCHANGE RATE ON CASH

(277,067)

(457,638)

DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

(1,595,049)

(8,509,717)

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

$

23,150,153

$

22,942,474

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income taxes

$

29,176

$

27,832

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