Description of Business and Organization

9 Months Ended

Dec. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

DESCRIPTION OF BUSINESS AND ORGANIZATION

Note 1 – DESCRIPTION OF BUSINESS AND ORGANIZATION

China Jo-Jo Drugstores, Inc. ("Jo-Jo Drugstores" or the "Company"), was incorporated in Nevada on December 19, 2006, originally under the name of "Kerrisdale Mining Corporation". On September 24, 2009, the Company changed its name to "China Jo-Jo Drugstores, Inc." in connection with a share exchange transaction as described below.

On September 17, 2009, the Company completed a share exchange transaction with Renovation Investment (Hong Kong) Co., Ltd. ("Renovation"), whereby 7,900,000 shares of the Company's common stock were issued to the stockholders of Renovation in exchange for 100% of the capital stock of Renovation. The completion of the share exchange transaction resulted in a change of control. The share exchange transaction was accounted for as a reverse acquisition and recapitalization and, as a result, the consolidated financial statements of the Company (the legal acquirer) are, in substance, those of Renovation (the accounting acquirer), with the assets and liabilities, and revenues and expenses, of the Company being included effective from the date of the share exchange transaction. Renovation has no substantive operations of its own except for its holdings of Zhejiang Jiuxin Investment Management Co., Ltd. ("Jiuxin Management"), Zhejiang Shouantang Medical Technology Co., Ltd. ("Shouantang Technology"), Hangzhou Jiutong Medical Technology Co., Ltd ("Jiutong Medical"), and Hangzhou Jiuyi Medical Technology Co. Ltd. ("Jiuyi Technology"), its wholly-owned subsidiaries.

The Company is an online and offline retailer and wholesale distributor of pharmaceutical and other healthcare products in the People's Republic of China ("China" or the "PRC"). The Company's offline retail business is comprised primarily of pharmacies, which are operated by Hangzhou Jiuzhou Grand Pharmacy Chain Co., Ltd. ("Jiuzhou Pharmacy"), a company that the Company controls through contractual arrangements. On March 31, 2017, Jiuxin Management established a subsidiary, Lin'An Jiuzhou Pharmacy Co., Ltd ("Lin'An Jiuzhou") to operates drugstores in Lin'an City.

During the nine months ended December 31, 2019, the Company dissolved eight independent pharmacies. Among the eight dissolved pharmacies, two stores have merged into Jiuzhou Pharmacy and became Jiuzhou Pharmacy stores in Hangzhou. The other six stores' licenses of government medical insurance, which qualify the stores for government reimbursement, were transferred to six Jiuzhou Pharmacy stores in Hangzhou City.

The Company's offline retail business also includes three medical clinics through Hangzhou Jiuzhou Clinic of Integrated Traditional and Western Medicine ("Jiuzhou Clinic") and Hangzhou Jiuzhou Medical and Public Health Service Co., Ltd. ("Jiuzhou Service"), both of which are also controlled by the Company through contractual arrangements. In May 2014, Shouantang Technology established Hangzhou Shouantang Bio-technology Co., Ltd. ("Shouantang Bio"). In May 2016, Shouantang Bio set up and held 49% of Hangzhou Kahamadi Bio-technology Co., Ltd.("Kahamadi Bio"), a joint venture specializing in brand name development for nutritional supplements. In 2018, Jiuzhou Pharmacy invested a total of $741,540 (RMB5,100,000) in and held 51% of Zhejiang Jiuzhou Linjia Medical Investment and Management Co. Ltd ("Linjia Medical"), which operates two new clinics in Hangzhou as of March 31, 2019. On March 29, 2019, Jiuzhou Pharmacy formed and currently holds 51% of the equity of Zhejiang AyiGe Medical Health Management Co., Ltd.("Ayi Health"), which is intended to provide technical support such as IT and customer support to our health management business in the future.

The Company currently conducts its online retail pharmacy business through Jiuzhou Pharmacy, which holds the Company's online pharmacy license. On September 10, 2015, Renovation set up Jiuyi Technology to provide additional technical support such as webpage development to our online pharmacy business. In November 2015, the technical support function was transferred back to Jiuzhou Pharmacy, which hosts our online pharmacy.

The Company's wholesale business is primarily conducted through Zhejiang Jiuxin Medicine Co., Ltd. ("Jiuxin Medicine"), which is licensed to distribute prescription and non-prescription pharmaceutical products throughout China. Jiuzhou Pharmacy acquired Jiuxin Medicine on August 25, 2011. On April 20, 2018, 10% of Jiuxin Medcine shares were sold to Hangzhou Kangzhou Biotech Co. Ltd. for a total proceeds of $79,625 (RMB 507,760).

The Company's herb farming business is conducted by Hangzhou Qianhong Agriculture Development Co., Ltd. ("Qianhong Agriculture"), a wholly-owned subsidiary of Jiuxin Management. Due to the complexity of the cultivation business, Qianhong Agriculture has not grown herbs in the nine months ended December 31, 2019.

The accompanying condensed consolidated financial statements reflect the activities of the Company and each of the following entities:

Entity Name	Background	Ownership
Renovation	● Incorporated in Hong Kong SAR on September 2, 2008	100%
Jiuxin Management	● Established in the PRC on October 14, 2008	100%
	● Deemed a wholly foreign owned enterprise ("WFOE") under PRC law
	● Registered capital of $14.5 million fully paid
Shouantang Technology	● Established in the PRC on July 16, 2010 by Renovation with registered capital of $20 million	100%
	● Registered capital requirement reduced by the SAIC to $11 million in July 2012 and is fully paid
	● Deemed a WFOE under PRC law
	● Invests and finances the working capital of Quannuo Technology
Qianhong Agriculture	● Established in the PRC on August 10, 2010 by Jiuxin Management	100%
	● Registered capital of RMB 10 million fully paid
	● Carries out herb farming business
Jiuzhou Pharmacy (1)	● Established in the PRC on September 9, 2003	VIE by contractual arrangements (2)
	● Registered capital of RMB 5 million fully paid
	● Operates the "Jiuzhou Grand Pharmacy" stores in Hangzhou
Jiuzhou Clinic (1)	● Established in the PRC as a general partnership on October 10, 2003	VIE by contractual arrangements (2)
	● Operates a medical clinic adjacent to one of Jiuzhou Pharmacy's  stores
Jiuzhou Service (1)	● Established in the PRC on November 2, 2005	VIE by contractual arrangements (2)
	● Registered capital of RMB 500,000 fully paid
	● Operates a medical clinic adjacent to one of Jiuzhou Pharmacy's stores
Jiuxin Medicine	● Established in PRC on December 31, 2003 ● Acquired by Jiuzhou Pharmacy in August 2011	VIE by contractual arrangements as a wholly-owned subsidiary of Jiuzhou Pharmacy (2)
	● 10% of shares sold
	● Registered capital of RMB 10 million fully paid
	● Carries out pharmaceutical distribution services
Jiutong Medical	● Established in the PRC on December 20, 2011 by Renovation	100%
	● Registered capital of $2.6 million fully paid
	● Currently has no operation

Entity Name	Background	Ownership
Shouantang Bio	● Established in the PRC in October, 2014 by Shouantang Technology	100%
	● 100% held by Shouantang Technology
	● Registered capital of RMB 1,000,000 fully paid
	● Sells nutritional supplements under its own brand name
Jiuyi Technology	● Established in the PRC on September 10, 2015	100%
	● 100% held by Renovation
	● Technical support to online pharmacy
Kahamadi Bio	● Established in the PRC in May 2016	49%
	● 49% held by Shouantang Bio
	● Registered capital of RMB 10 million
	● Develop brand name for nutritional supplements
Lin'An Jiuzhou	● Established in the PRC in March 31, 2017	100%
	● 100% held by Jiuxin Management
	● Registered capital of RMB 5 million
	● Explore retail pharmacy market in Lin'An City
Linjia Medical	● Established in the PRC in September 27, 2017 ● 51% held by Jiuzhou Pharmacy	VIE by contractual arrangements as a controlled subsidiary of Jiuzhou Pharmacy (2)
	● Registered capital of RMB 20 million
	● Operates local clinics
Ayi Health	● Established in the PRC in March 29, 2019 ● 51% held by Jiuzhou Pharmacy	VIE by contractual arrangements as a controlled subsidiary of Jiuzhou Pharmacy (2)
	● Registered capital of RMB 10 million
	● Provide technical Support for medial service

(1)

Jiuzhou Pharmacy, Jiuzhou Clinic and Jiuzhou Service had been under the common control of Mr. Lei Liu, Mr. Chong'an Jin and Ms. Li Qi, (the three shareholders, collectively, the "Owners") since their respective establishment dates, pursuant to agreements among the Owners to vote their interests in concert as memorialized in a voting rights agreement. Based on such voting agreement, the Company has determined that common control exists among these three companies. The Owners have operated these three companies in conjunction with one another since each company's respective establishment date. Jiuxin Medicine is also deemed under the common control of the Owners as a subsidiary of Jiuzhou Pharmacy.

(2)

To comply with certain foreign ownership restrictions of pharmacy and medical clinic operators, Jiuxin Management entered into a series of contractual arrangements with Jiuzhou Pharmacy, Jiuzhou Clinic and Jiuzhou Service on August 1, 2009. These contractual arrangements are comprised of five agreements: a consulting services agreement, operating agreement, equity pledge agreement, voting rights agreement and option agreement. Because such agreements obligate Jiuxin Management to absorb all of the risks of loss from the activities of Jiuzhou Pharmacy, Jiuzhou Clinic and Jiuzhou Service, and enable the Company (through Jiuxin Management) to receive all of their expected residual returns, the Company accounts for each of the three companies (as well as subsidiaries of Jiuzhou Pharmacy) as a variable interest entity ("VIE") under the accounting standards of the Financial Accounting Standards Board ("FASB"). Accordingly, the financial statements of Jiuzhou Pharmacy, Jiuzhou Clinic and Jiuzhou Service, as well as the subsidiary under the control of Jiuzhou Pharmacy, Jiuxin Medicine and Shouantang Bio are consolidated into the financial statements of the Company.