China Jo-Jo Drugstores Reports Second Quarter 2020 Financial Results

HANGZHOU,China,Nov. 14,2019 -- 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 provider of healthcare services in China,today announced its financial results for the second fiscal quarter ended September 30,2019.

Mr. Lei Liu,Chief Executive Officer and Chairman of Jo-Jo Drugstores,commented,"We are pleased to announce our financial results for the second quarter of fiscal year 2020,with revenue increasing by 3.4% compared to the same period last year. We made great strides in boosting our business and optimizing our operation. As a result,our gross profit had a 15.5% increase and gross margin had a 2.4 percent points increase in the second quarter of 2019. We will continue executing our long-term growth strategy,improving our operations to deliver high quality services to our customers in a challenging and competitive environment."

Second Quarter of Fiscal 2020 Financial Highlights

For the Three Months Ended September 30,

($ millions,except per share data)

2019

2018

% Change

Revenue

28.35

27.41

3.4%

Retail drugstores

18.00

18.14

-0.7%

Online pharmacy

2.35

2.12

10.8%

Wholesale

8.00

7.15

11.9%

Gross profit

6.69

5.80

15.5%

Gross margin

23.6%

21.2%

2.4 pp*

Loss from operations

(1.62)

(1.64)

1.6%

Net loss

(1.35)

(1.60)

16.0%

Loss per share

(0.04)

(0.06)

33.3%

*Notes: pp represents percentage points

Revenue increased by 3.4% to $28.35 million for the three months ended September 30,2019 from $27.41 million for the same period of last year.

Gross profit increased by 15.5% to $6.69 million for the three months ended September 30,2019 from $5.80 million for the same period of last year.

Gross margin increased by 2.4 percentage points to 23.6% from 21.2% for the same period of last year.

Net loss was $1.35 million,or $0.04 per basic and diluted share,for the three months ended September 30,2019,compared to $1.60 million,or $0.06 per basic and diluted share,for the same period of last year.

Second Quarter of Fiscal 2020 Financial Results

Revenue

Revenue for the three months ended September 30,2019 increased by $0.94 million,or 3.4%,to $28.35 million from $27.41 million for the same period of last year. The increase in revenue was primarily due to the growth in our wholesale business and online pharmacy.

For the Three Months Ended September 30,

2019

2018

($ millions)

Revenue

Cost of

Goods

Gross

Margin

Revenue

Cost of

Goods

Gross

Margin

Retail drugstores

18.00

12.47

30.7%

18.14

13.28

26.8%

Online pharmacy

2.35

2.03

13.6%

2.12

1.91

10.1%

Wholesale

8.00

7.16

10.6%

7.15

6.42

10.1%

Total

28.35

21.66

23.6%

27.41

21.61

21.2%

Revenue from the retail drugstores business decreased slightly by $0.14 million,or 0.7%,to $18.00 million for the three months ended September 30,2019 from $18.14 million for the same period of last year,due to the RMB's dramatic depreciation against the USD from the three months ended September 30,2018.

Revenue from the online pharmacy business increased by $0.23 million,or 10.8%,to $2.35 million for the three months ended September 30,2019 from $2.12 million for the same period of last year. The increase wasprimarily attributable to an increase in sales via e-commerce platforms such as Tmall,offset slightly bya decline in sales via the Company's official site. Popular products at reasonable prices are key to success in our online business. In order to promote the Company's sales,the Company focused on selecting medical equipment tailored to the demands of local customers.

Revenue from the wholesale business increased by $0.85 million,or 11.9%,to $8.00 million for the three months ended September 30,2019 from $7.15 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 slightly by $0.05 million,or 0.2%,to $21.66 million for the three months ended September 30,2019 from $21.61 million for the same period of last year. Gross profit increased by $0.89 million,or 15.5%,to $6.69 million for three months ended September 30,2019 from $5.80 million for the same period of last year.Overall gross margin increased by 2.4 percentage points to 23.6% for the three months ended September 30,from 21.2% for the same period of last year.

Gross margins for retail drugstores,online pharmacy and wholesale were 30.7%,13.6%,and 10.6%,respectively,2019. This compared to gross margins for retail drugstores,online pharmacy and wholesale of 26.8%,10.1%,and 10.1%,for the same period of last year.

Loss from operations

Selling and marketing expenses increased by $1.27 million,or 24.2%,to $6.49 million for the three months ended September 30,2019 from $5.22 million for the same period of last year. The increase in selling and marketing expenses was primarily due to increases in labor costs related to the Company's store expansions and rising local cost of living.

General and administrative expenses decreased by $0.40 million,or 17.7%,to $1.82 million for the three months ended September 30,2019 from $2.22 million for the same period of last year. In the three months ended September 30,2018,the Company recorded additional bad debt allowance of $0.63 million. In comparison,the Company recorded additional bad debts allowance of $0.01 million in the three months ended September 30,2019.

Loss from operations was $1.62 million for the three months ended September 30,compared to $1.64 million for the same period of last year. Operating margin was negative 5.7% for the three months ended September 30,compared to negative 6.0% for the same period of last year.

Net loss

Net loss was $1.35 million,or $0.04 per basic and diluted share for the three months ended September 30,compared to net loss of $1.60 million,or $0.06 per basic and diluted share for the same period of last year.

Six Months Ended September 30,2019 Financial Highlights

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

2019

2018

% Change

Revenue

53.63

50.18

6.9%

Retail drugstores

34.74

34.10

1.9%

Online pharmacy

4.79

4.14

15.7%

Wholesale

14.10

11.93

18.2%

Gross profit

12.75

11.41

11.7%

Gross margin

23.8%

22.7%

1.1 pp*

Loss from operations

(4.38)

(2.21)

-98.3%

Net loss

(3.73)

(2.30)

-62.0%

Loss per share

(0.10)

(0.08)

-25.0%

*Notes: pp represents percentage points

Revenue increased by 6.9% to $53.63 million for the six months ended September 30,2019 from $50.18 million for the same period of last year.

Gross profit increased by 11.7% to $12.75 million for the six months ended September 30,2019 from $11.41 million for the same period of last year.

Gross margin increased by 1.1 percentage points to 23.8% from 22.7% for the same period of last year.

Net loss was $3.73 million,or $0.10 per basic and diluted share,for the six months ended September 30,compared to $2.30 million,or $0.08 per basic and diluted share,for the same period of last year.

Six Months Ended September 30,2019 Financial Results

Revenue

Revenue for the six months ended September 30,2019 increased by $3.45 million,or 6.9%,to $53.63 million from $50.18 million for the same period of last year. The increase in revenue was primarily due to the growth in wholesale business and online pharmacy.

For the Six Months Ended September 30,

2019

2018

($ millions)

Revenue

Cost of

Goods

Gross

Margin

Revenue

Cost of

Goods

Gross

Margin

Retail drugstores

34.74

24.15

30.5%

34.10

24.44

28.3%

Online pharmacy

4.79

4.13

13.9%

4.14

3.65

11.9%

Wholesale

14.10

12.60

10.7%

11.93

10.68

10.5%

Total

53.63

40.88

23.8%

50.18

38.77

22.7%

Revenue from the retail drugstores business increased by $0.64 million,or 1.9%,to $34.74 million for the six months ended September 30,2019 from $34.10 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 $0.65 million,or 15.7%,to $4.79 million for the six months ended September 30,2019 from $4.14 million for the same period of last year. The increase was primarily attributable to an increase in sales via e-commerce platforms such as Tmall,offset slightly by the decline in sales via the Company's official site.

Revenue from the wholesale business increased by $2.17 million,or 18.2%,to $14.10 million for the six months ended September 30,2019 from $11.93 million for the same period of last year. The increase was primarily a result of the Company's ability to resell certain products,to other vendors at competitive prices.

Gross profit and gross margin

Total cost of goods sold increased by $2.11 million,or 5.4%,to $40.88 million for the six months ended September 30,2019 from $38.77 million for the same period of last year. Gross profit increased by $1.34 million,or 11.7%,to $12.75 million for the six months ended September 30,2019 from $11.41 million for the same period of last year.Overall gross margin increased by 1.1 percentage points to 23.8% for the six months ended September 30,from 22.7% for the same period of last year.

Gross margins for retail drugstores,online pharmacy and wholesale were 30.5%,13.9%,and 10.7%,online pharmacy and wholesale of 28.3%,11.9%,and 10.5%,for the same period of last year.

Loss from operations

Selling and marketing expenses increased by $2.60 million,or 26.4%,to $12.45 million for the six months ended September 30,2019 from $9.85 million for the same period of last year. The increase in selling and marketing expenses was primarily due to increases in labor costs related to the Company's store expansions and rising local cost of living.

General and administrative expenses increased by $0.91 million,or 24.0%,to $4.68 million for the six months ended September 30,2019 from $3.77 million for the same period of last year. The bad debt expense related to the Company's accounts receivable decreased by approximately $0.1 million due to certain aged accounts. Additionally,in order to better reflect the attributes of expenses,certain clinic labor expenses,which were originally allocated to G&A expense are now allocated to selling expense in the six months ended September 20,2019.

Loss from operations was $4.38 million for the six months ended September 30,compared to $2.21 million for the same period of last year. Operating margin was negative 8.2% for the six months ended September 30,compared to negative 4.4% for the same period of last year.

Net loss

Net loss was $3.73 million,or $0.10 per basic and diluted share for the six months ended September 30,compared to net loss of $2.30 million,or $0.08 per basic and diluted share for the same period of last year.

Financial Condition

As of September 30,the Company had cash of $17.40 million,compared to $9.32 million as of March 31,2019. Net cash provided by operating activities was $0.97 million for the six months ended September 30,compared to net cash used in operating activities of $2.92 million for the same period of last year. Net cash used in investing activities was $1.45 million for the six months ended September 30,compared to $0.39 million for the same period of last year. Net cash provided by financing activities was $6.38 million for the six months ended September 30,compared to net cash used in financing activities of $2.19 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. 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

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

September30,

March 31,

2019

2019

ASSETS

CURRENT ASSETS

Cash

$

17,395,116

$

9,322,463

Restricted cash

11,890,053

15,422,739

Financial assets available for sale

156,128

180,928

Notes receivable

76,922

177,278

Trade accounts receivable

7,243,629

8,692,514

Inventories

12,177,952

13,955,202

Other receivables,net

4,861,492

4,438,230

Advances to suppliers

1,368,114

1,950,252

Other current assets

1,286,855

2,063,375

Total current assets

56,456,261

56,202,981

PROPERTY AND EQUIPMENT,net

8,043,511

8,727,358

OTHER ASSETS

Long-term investment

11,760

24,243

Farmland assets

722,384

825,259

Long term deposits

1,367,267

2,157,275

Other noncurrent assets

1,111,490

1,196,197

Operating lease right-of-use assets

15,706,120

-

Intangible assets,net

3,731,008

3,597,323

Total other assets

22,650,029

7,800,297

Total assets

$

87,149,801

$

72,730,636

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable,trade

23,606,067

23,106,230

Notes payable

21,383,423

25,951,673

Other payables

2,774,674

3,197,221

Other payables - related parties

315,034

795,179

Customer deposits

1,447,720

771,942

Taxes payable

278,908

125,859

Accrued liabilities

873,708

1,264,182

Long-term loan-current potion

233,480

-

Current portion of operating lease liabilities

2,267,705

-

Total current liabilities

53,180,719

55,212,286

Long-term loan

428,047

-

Long term operating leaseliabilities

11,785,742

-

Purchase option and warrants liability

54,828

465,248

Financial liability

77,048

81,935

Total liabilities

65,526,384

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 September30,2019 and March 31,2019

32,937

28,937

Preferred stock; $0.001 par value; 10,000 shares authorized; nil issued and outstanding as of September30,2019

-

-

Additional paid-in capital

54,209,301

44,905,664

Statutory reserves

1,309,109

1,109

Accumulated deficit

(33,947,382)

(30,587,468)

Accumulated other comprehensive income

1,567,391

2,508,964

Total stockholders' equity

23,171,356

18,165,206

Noncontrolling interests

(1,547,939)

(1,194,039)

Total equity

21,623,417

16,971,167

Total liabilities and stockholders' equity

$

87,636

CHINA JO-JO DRUGSTORES,INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

For the three months ended

For the six months ended

September 30,

September 30,

2019

2018

2019

2018

REVENUES,NET

$

28,353,779

$

27,409,046

$

53,634,563

$

50,181,612

COST OF GOODS SOLD

21,660,415

21,611,945

40,879,761

38,767,708

GROSS PROFIT

6,693,364

5,797,101

12,754,802

11,413,904

SELLING EXPENSES

6,485,848

5,223,523

12,454,399

9,850,501

GENERAL AND ADMINISTRATIVE EXPENSES

1,823,935

2,215,484

4,675,547

3,770,012

TOTAL OPERATING EXPENSES

8,783

7,439,007

17,129,946

13,620,513

LOSS FROM OPERATIONS

(1,616,419)

(1,641,906)

(4,375,144)

(2,206,609)

INTEREST INCOME

340,514

26,060

388,387

73,232

OTHER INCOME(LOSS),NET

(72,225)

94,582

(134,710)

(20,359)

CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITIES

6,865

(81,866)

410,420

(88,840)

LOSS BEFORE INCOME TAXES

(1,341,265)

(1,603,130)

(3,711,047)

(2,242,576)

PROVISION FOR INCOME TAXES

5,702

(415)

14,090

56,754

NET LOSS

(1,346,967)

(1,602,715)

(3,725,137)

(2,299,330)

ADD: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

122,004

15,298

365,223

66,060

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

(1,224,963)

(1,417)

(3,359,914)

(2,233,270)

Foreign currency translation adjustments

(536,335)

(1,448,661)

(941,573)

(827,027)

COMPREHENSIVE LOSS

$

(1,883,302)

$

(3,051,376)

$

(4,666,710)

$

(3,126,357)

WEIGHTED AVERAGE NUMBER OF SHARES:

Basic

32,786

28,778

32,696,348

28,778

Diluted

32,778

EARNINGS PER SHARES:

Basic

$

(0.04)

$

(0.06)

$

(0.10)

$

(0.08)

Diluted

$

(0.04)

$

(0.06)

$

(0.10)

$

(0.08)

CHINA JO-JO DRUGSTORES,INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the six months ended

September 30,

2019

2018

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(3,137)

$

(2,330)

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

Bad debt direct write-off and provision

767,250

890,576

Depreciation and amortization

1,907

557,930

Stock based compensation

34,560

71,427

Change in fair value of purchase option derivative liability

(410,420)

88,840

Accounts receivable,trade

555,289

(833,992)

Notes receivable

92,655

32,528

Inventories and biological assets

975,170

(1,645)

Other receivables

(206,247)

(800,686)

Advances to suppliers

(106,790)

(611,849)

Other current assets

(1,031,185)

469,985

Long term deposit

682,504

18,851

Other noncurrent assets

13,791

(139,597)

Accounts payable,trade

1,938,015

(603,967)

Other payables and accrued liabilities

(568,457)

1,305,221

Customer deposits

744,912

773,748

Taxes payable

165,692

(253,496)

Net cash (used in) operating activities

973,509

(2,921,456)

CASH FLOWS FROM INVESTING ACTIVITIES:

Disposal of financialassetsavailableforsale

14,457

88,897

Purchase of financial assets available for sale

(91,099)

Acquisition of equipment

(374,992)

(142,681)

Increase in intangible assets

(462,266)

-

Investment in a joint venture

-

-

Additions to leasehold improvements

(622,464)

(244,047)

Net cash used in investing activities

(1,445,265)

(388,930)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from third parties loan

682,692

Proceeds from notes payable

21,745,277

16,514

Repayment of notes payable

(24,862,363)

(18,290,325)

Proceeds from equity financing

9,273,077

7,667

Repayment of other payables-related parties

(458,002)

(84,543)

Net cash provided by (used in) financing activities

6,380,681

(2,189,687)

EFFECT OF EXCHANGE RATE ON CASH

(1,958)

(2,149)

DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

4,539,967

(7,743,222)

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH,beginning of period

24,202

31,452,191

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH,end of period

$

29,285,169

$

23,708,969

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income taxes

$

28,777

$

57,460

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