CHINA JO-JO DRUGSTORES, INC.
|
||
(Exact name of registrant as specified in Charter)
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Nevada
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001-34711
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98-0557852
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||
(State or other jurisdiction of
incorporation or organization)
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(Commission File No.)
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(IRS Employer Identification No.)
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Room 507-513, 5th Floor, A Building, Meidu Plaza
Gongshu District, Hangzhou, Zhejiang Province
People’s Republic of China
|
||
(Address of Principal Executive Offices)
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||
+86 (571) 88077078
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||
(Issuer Telephone Number)
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||
N/A
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||
(Former name or former address, if changed since last report)
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Exhibit
Number
|
Description
|
|
99.1
|
Press Release dated August 14, 2012
|
China Jo-Jo Drugstores, Inc.
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||||
Date:
|
August 14, 2012
|
(Registrant)
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||
By:
|
/s/ Ming Zhao
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|||
Ming Zhao
|
||||
Chief Financial Officer
|
·
|
Revenues increased 53.3% to $32.9 million
|
·
|
Gross profit was $5.1 million and gross margin was 15.7%
|
·
|
Online pharmacy sales increased 627.2% period over period
|
·
|
Wholesale business accounted for 65.0% of total revenue
|
·
|
Diluted and basic earnings per share of $0.04
|
·
|
First quarter retail drug store revenue improves 16.0 % from fourth quarter fiscal year 2012
|
Three months ended June 30,
|
||||||||||||||||
2012
|
2011
|
|||||||||||||||
Amount
|
Percentage
of total
revenue
|
Amount
|
Percentage
of total
revenue
|
|||||||||||||
Revenue
|
$
|
32,847,330
|
100.0
|
%
|
$
|
21,427,859
|
100.0
|
%
|
||||||||
Gross profit
|
$
|
5,144,777
|
15.7
|
%
|
$
|
6,869,323
|
32.1
|
%
|
||||||||
Selling expenses
|
$
|
1,858,225
|
5.7
|
%
|
$
|
1,378,300
|
6.4
|
%
|
||||||||
General and administrative expenses
|
$
|
2,846,578
|
8.7
|
%
|
$
|
1,074,783
|
5.0
|
%
|
||||||||
Income from operations
|
$
|
439,974
|
1.3
|
%
|
$
|
4,416,240
|
20.6
|
%
|
||||||||
Other income (expense), net
|
$
|
98,698
|
0.3
|
%
|
$
|
19,420
|
0.1
|
%
|
||||||||
Change in fair value of purchase option derivative liability
|
$
|
(158
|
)
|
(0.0
|
)%
|
$
|
62,632
|
0.3
|
%
|
|||||||
Income tax expense
|
$
|
3,882
|
0.0
|
%
|
$
|
1,255,563
|
5.9
|
%
|
||||||||
Net income attributable to controlling interest
|
$
|
534,887
|
1.6
|
%
|
$
|
3,242,729
|
15.1
|
%
|
||||||||
Net loss attributable to noncontrolling interest
|
$
|
(255
|
)
|
(0.0
|
)%
|
$
|
-
|
0.0
|
%
|
(1)
|
We started our wholesale business after acquiring Jiuxin Medicine in August 2011, through which we have been distributing third-party pharmaceutical and healthcare products to pharmaceutical trading companies and other group customers. Our wholesale business increased rapidly during fiscal 2012 because we introduced very competitive pricing to customers to stimulate sales. Sales from the wholesale business accounted for $21,368,783 or approximately 65.0% of our total revenue for the three months ended June 30, 2012.
|
(2)
|
In the fourth quarter of fiscal 2012, we also began distributing TCM herbs such as Peucedanum that we have been cultivating, to third-party pharmaceutical trading companies. Although we hired several specialists to oversee our farming business, we mainly relied on the local village government to manage the cultivation process. For example, the local government organized local farmers to sow seeds, fertilize and harvest. In turn, we paid for the expenses incurred by the local farmers based on agreements. Sales from the farming business accounted for $2,524,091 or approximately 7.7% of our total revenue for the three months ended June 30, 2012.
|
(3)
|
Our retail sales decreased by $12,473,403 or 58.2% to $8,954,456 for the three months ended June 30, 2012 from $21,427,859 for the three months ended June 30, 2011. Although our retail store count increased to 65 as of June 30, 2012, from 57 stores a year ago, our retail store sales decreased as a result of stricter government policies, a competitive retail market, and a shift of our group sales from our retail stores to our wholesale business. Retail sales accounted for approximately 27.3% of our total revenue for the three months ended June 30, 2012. Same-store sales decreased by approximately $13,421,318 or 62.0%, while our new stores contributed approximately $462,365. We expect same-store sales will continue to decline as the frequency of government-mandated price controls and the number of drugs subject to price controls continue to rise and, to a lesser extent, with the shift of our group sales to our wholesale business.
|
Three months ended June 30,
|
||||||||||||||||||||||||
2012
|
2011
|
|||||||||||||||||||||||
Amount
|
% of total revenue
|
Amount
|
% of total revenue
|
Variance by amount
|
% of change
|
|||||||||||||||||||
Revenue from retail business
|
||||||||||||||||||||||||
Revenue from drugstores
|
$
|
8,393,098
|
25.6
|
%
|
$
|
21,350,669
|
99.6
|
%
|
$
|
(12,957,571
|
)
|
(60.7)
|
%
|
|||||||||||
Revenue from online sales
|
561,358
|
1.7
|
%
|
77,190
|
0.4
|
%
|
484,168
|
627.2
|
%
|
|||||||||||||||
Sub-total of retail revenue
|
8,954,456
|
27.3
|
%
|
21,427,859
|
100
|
%
|
(12,473,403
|
)
|
(58.2)
|
%
|
||||||||||||||
Revenue from wholesale business
|
21,368,783
|
65.0
|
%
|
-
|
0
|
%
|
21,368,783
|
100.0
|
%
|
|||||||||||||||
Revenue from farming business
|
2,524,091
|
7.7
|
%
|
-
|
0
|
%
|
2,524,091
|
100.0
|
%
|
|||||||||||||||
Total revenue
|
$
|
32,847,330
|
100
|
%
|
$
|
21,427,859
|
100
|
%
|
$
|
11,419,471
|
53.3
|
%
|
(1)
|
Revenue from ”Jiuzhou Grand Pharmacy” stores decreased by approximately $13.0 million or 60.7% quarter over quarter, mainly due to two reasons. During the three month ended June 30, 2011, we implemented a variety of promotional activities such as giving out gifts and discounts to our customers. Since the second quarter of fiscal 2012, the Hangzhou government has been gradually restricting retail drugstores within the city from organizing large-scale marketing promotions on the streets in which further rebates or discounts are given to customers making purchases with government-sponsored medical insurance cards. Our promotional activities were curtailed accordingly, which, in turn, impacted our retail sales revenue, especially from sales of certain prescription drugs covered by the medical insurance cards. In addition, the government subjected more drugs to price controls in October 2011, which caused us to reduce prices for some of the affected drugs and stop carrying others at our pharmacies.
|
(2)
|
Another factor for the decreased retail revenue is the shift of group sales from Jiuzhou Pharmacy’s retail business to Jiuxin Medicine’s wholesales business. We originally recorded group sales under Jiuzhou Pharmacy’s retail system in the prior year. But starting in August 2011, such sales have been recorded under Jiuxin Medicine’s wholesale system because we believe group sales are essentially wholesale in nature. Accordingly, $7.4 million in group sales that would have otherwise been recorded under Jiuzhou Pharmacy have now been recorded under Jiuxin Medicine. Such internal re-allocation of sales revenue between our retail and wholesale businesses affected the comparison of our retail sales for the three months ended June 30, 2012 versus the three months ended June 30, 2011, but has no impact on our unaudited condensed consolidated financial statements
|
(3)
|
Our online pharmacy sales increased by $484,168 or 627.2% quarter over quarter. As we started business cooperation with local business-to-consumer online vendors during the second half of 2011, our online pharmacy has become more and more widely exposed to potential customers. As a result, we have seen a steady growth in online sales.
|
|
Three months ended
March 31,
|
|||||||
|
2012
|
2011
|
||||||
Average gross margin for retail business
|
26.0
|
%
|
32.1
|
%
|
||||
Average gross margin for wholesale business
|
2.5
|
%
|
N/A
|
|||||
Average gross margin for farming business
|
90.9
|
%
|
N/A
|
CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
|
||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2011 AND 2010
|
||||||||
(UNAUDITED)
|
||||||||
JUNE 30,
|
MARCH 31,
|
|||||||
2012
|
2012
|
|||||||
A S S E T S
|
||||||||
CURRENT ASSETS
|
||||||||
Cash
|
$
|
3,621,132
|
$
|
3,833,216
|
||||
Restricted cash
|
1,407,870
|
2,818,449
|
||||||
Notes receivable
|
927,947
|
-
|
||||||
Trade accounts receivable, net
|
23,637,397
|
16,516,671
|
||||||
Inventories
|
7,408,490
|
6,875,574
|
||||||
Other receivables
|
685,657
|
603,294
|
||||||
Advances to suppliers, net
|
16,882,711
|
14,347,557
|
||||||
Other current assets
|
2,838,094
|
2,853,301
|
||||||
Total current assets
|
57,409,298
|
47,848,062
|
||||||
PROPERTY AND EQUIPMENT, net
|
15,394,398
|
15,647,120
|
||||||
OTHER ASSETS
|
||||||||
Long term deposits
|
2,518,900
|
2,872,219
|
||||||
Other noncurrent assets
|
5,641,298
|
5,776,667
|
||||||
Intangible assets, net
|
2,780,839
|
2,816,945
|
||||||
Total other assets
|
10,941,037
|
11,465,831
|
||||||
Total assets
|
$
|
83,744,733
|
$
|
74,961,013
|
||||
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
|
||||||||
CURRENT LIABILITIES
|
||||||||
Accounts payable, trade
|
$
|
19,129,388
|
$
|
13,906,383
|
||||
Notes payable
|
5,611,915
|
4,208,928
|
||||||
Other payables
|
1,385,657
|
782,586
|
||||||
Other payables - related parties
|
1,558,519
|
1,458,441
|
||||||
Customer deposit
|
2,029,599
|
1,332,141
|
||||||
Taxes payable
|
537,240
|
469,606
|
||||||
Accrued liabilities
|
467,116
|
417,184
|
||||||
Total current liabilities
|
30,719,434
|
22,575,269
|
||||||
Purchase option derivative liability
|
34,577
|
34,419
|
||||||
Total liabilities
|
30,754,011
|
22,609,688
|
||||||
COMMITMENTS AND CONTINGENCIES
|
||||||||
STOCKHOLDERS' EQUITY
|
||||||||
Preferred stock; $0.001 par value; 10,000,000 shares authorized;
|
||||||||
nil issued and outstanding as of June 30 and March 31, 2012
|
-
|
-
|
||||||
Common stock; $0.001 par value; 250,000,000
|
||||||||
shares authorized; 13,628,658 and 13,589,621 shares issued
|
||||||||
and outstanding as of June 30 and March 31, 2012
|
13,629
|
13,589
|
||||||
Additional paid-in capital
|
16,902,757
|
16,853,039
|
||||||
Statutory reserves
|
1,309,109
|
1,309,109
|
||||||
Retained earnings
|
31,963,987
|
31,429,100
|
||||||
Accumulated other comprehensive income
|
2,802,569
|
2,747,561
|
||||||
Total stockholders' equity
|
52,992,051
|
52,352,398
|
||||||
Noncontrolling interests
|
(1,329
|
)
|
(1,073
|
)
|
||||
Total equity
|
52,990,722
|
52,351,325
|
||||||
Total liabilities and stockholders' equity
|
$
|
83,744,733
|
$
|
74,961,013
|
CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
|
||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
|
||||||||
(UNAUDITED)
|
||||||||
Three months ended June 30,
|
||||||||
2012
|
2011
|
|||||||
REVENUES, NET
|
$
|
32,847,330
|
$
|
21,427,859
|
||||
COST OF GOODS SOLD
|
27,702,553
|
14,558,536
|
||||||
GROSS PROFIT
|
5,144,777
|
6,869,323
|
||||||
SELLING EXPENSES
|
1,858,225
|
1,378,300
|
||||||
GENERAL AND ADMINISTRATIVE EXPENSES
|
2,846,578
|
1,074,783
|
||||||
TOTAL OPERATING EXPENSES
|
4,704,803
|
2,453,083
|
||||||
INCOME FROM OPERATIONS
|
439,974
|
4,416,240
|
||||||
OTHER INCOME (EXPENSE), NET
|
98,698
|
19,420
|
||||||
CHANGE IN FAIR VALUE OF PURCHASE OPTION DERIVATIVE LIABILITY
|
(158
|
)
|
62,632
|
|||||
INCOME BEFORE INCOME TAXES
|
538,514
|
4,498,292
|
||||||
PROVISION FOR INCOME TAXES
|
3,882
|
1,255,563
|
||||||
NET INCOME
|
534,632
|
3,242,729
|
||||||
ADD: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
|
255
|
-
|
||||||
NET INCOME ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES, INC.
|
534,887
|
3,242,729
|
||||||
OTHER COMPREHENSIVE INCOME
|
||||||||
Foreign currency translation adjustments
|
55,270
|
574,565
|
||||||
COMPREHENSIVE INCOME
|
$
|
590,157
|
$
|
3,817,294
|
||||
WEIGHTED AVERAGE NUMBER OF SHARES:
|
||||||||
Basic
|
13,557,496
|
13,532,240
|
||||||
Diluted
|
13,598,686
|
13,532,240
|
||||||
EARNINGS PER SHARES:
|
||||||||
Basic
|
$
|
0.04
|
$
|
0.24
|
||||
Diluted
|
$
|
0.04
|
$
|
0.24
|
CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
|
||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(UNAUDITED)
|
||||||||
Three months ended June 30,
|
||||||||
2012
|
2011
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net income
|
$
|
534,632
|
$
|
3,242,729
|
||||
Adjustments to reconcile net income to net cash
|
||||||||
provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
610,866
|
262,181
|
||||||
Stock-based compensation
|
49,758
|
28,058
|
||||||
Bad debt expense
|
1,114,673
|
54,691
|
||||||
Change in fair value of purchase option derivative liability
|
158
|
(62,632
|
)
|
|||||
Changes in operating assets:
|
||||||||
Accounts receivable, trade
|
(7,712,451
|
)
|
(438,521
|
)
|
||||
Notes receivable
|
(926,315
|
)
|
-
|
|||||
Inventories
|
(526,099
|
)
|
1,000,520
|
|||||
Other receivables
|
(236,873
|
)
|
(132,648
|
)
|
||||
Advances to suppliers
|
(2,859,522
|
)
|
1,947,720
|
|||||
Other current assets
|
17,561
|
3,879,255
|
||||||
Long term deposit
|
355,151
|
(153,900
|
)
|
|||||
Other noncurrent assets
|
140,067
|
84,061
|
||||||
Changes in operating liabilities:
|
||||||||
Accounts payable, trade
|
5,201,905
|
2,093,048
|
||||||
Other payables and accrued liabilities
|
650,956
|
(409,861
|
)
|
|||||
Customer deposit
|
695,089
|
(1,490,217
|
)
|
|||||
Taxes payable
|
67,114
|
7,809
|
||||||
Net cash (used in) provided by operating activities
|
(2,823,330
|
)
|
9,912,293
|
|||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchase of property and equipment
|
(216,454
|
)
|
(37,760
|
)
|
||||
Payments on leasehold improvements and construction-in-progress
|
(90,313
|
)
|
(3,489,692
|
)
|
||||
Deposit made to secure business acquisition
|
-
|
(4,745,968
|
)
|
|||||
Net cash used in investing activities
|
(306,767
|
)
|
(8,273,420
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Change in restricted cash
|
1,410,499
|
248,687
|
||||||
Payments on notes payable
|
-
|
(2,006,702
|
)
|
|||||
Increase in notes payable
|
1,396,914
|
-
|
||||||
Proceeds from other payables-related parties
|
99,996
|
-
|
||||||
Net cash (used in) provided by financing activities
|
2,907,409
|
(1,758,015
|
)
|
|||||
EFFECT OF EXCHANGE RATE ON CASH
|
10,604
|
77,346
|
||||||
DECREASE IN CASH
|
(212,084
|
)
|
(41,796
|
)
|
||||
CASH, beginning of period
|
3,833,216
|
6,489,905
|
||||||
CASH, end of period
|
$
|
3,621,132
|
$
|
6,448,109
|
||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
Cash paid for income taxes
|
$
|
14,713
|
$
|
1,157,526
|
||||
Non-cash investing activities
|
||||||||
Transfer from construction in progress to property and equipment
|
$
|
1,985,391
|
$
|
-
|
||||
Non-cash financing activities
|
||||||||
Notes payable transferred to vendors
|
$
|
-
|
$
|
1,542,619
|