EX-99.1 2 ea135416ex99-1_chinajojo.htm PRESS RELEASE, DATED FEBRUARY 12, 2021

Exhibit 99.1

 

China Jo-Jo Drugstores Reports Third Quarter Fiscal 2021 Financial Results

 

HANGZHOU, China, February 12, 2021 /PRNewswire/ -- China Jo-Jo Drugstores, Inc. (NASDAQ: CJJD) (“Jo-Jo Drugstores” or the “Company”), a leading online and offline retailer, wholesale distributor of pharmaceutical and other healthcare products, and healthcare provider in China, today announced its financial results for the third fiscal quarter ended December 31, 2020.

 

Mr. Lei Liu, Chairman and CEO of Jo-Jo Drugstores, commented, “We are pleased with our third quarter performance. We delivered another quarter of strong results. Our revenue and gross profit recorded $35.54 million and $8.09 million for the third fiscal quarter of fiscal year 2021, increased 6.5% and 11.0% compared to same period of last year. During the COVID-19 pandemic, we made every effort to guarantee sufficient medicine supply, build a pandemic medicine center and provide online pharmacy consultation services. As a result, our revenue year-over-year from online pharmacy increased by 66.4%. Our robust performance is a strong indicator of the successful execution of our multifaceted growth strategy and strategic transformation.”

 

Mr. Liu continued, “The environment surrounding COVID-19 accelerates our transformation. To address the tremendous pharmaceutical retail market in China, we enhanced various information and data systems, continued to develop the management system for patients with chronic diseases, upgraded our “Medical + Medicine” business model, introduced digital services such as Xiaoqiao robots to our customers, developed 24-hour service stores, launched a new OA system, and accelerated comprehensive budget management. Looking ahead, we will keep focusing on narrowing net loss, drive growth, and continue to deliver sustainable and long-term profitability to our shareholders.”  

 

Third Quarter of Fiscal 2021 Financial Highlights

 

   For the Three Months Ended December 31, 
($ millions, except per share data)  2020   2019   % Change 
Revenue   35.54    33.36    6.5%
Retail drugstores   20.07    21.57    -7.0%
Online pharmacy   6.60    3.97    66.4%
Wholesale   8.87    7.82    13.4%
Gross profit   8.09    7.28    11.0%
Gross margin   22.8%   21.8%   1.0 pp* 
Income(loss) from operations   (6.37)   0.55    NM 
Net income(loss)   (6.29)   0.46    NM 
Earnings(Loss) per share   (0.15)   0.02    NM 

 

*Notes: pp represents percentage points

 

●Revenue increased by 6.5% to $35.54 million for the three months ended December 31, 2020 from $33.36 million for the same period of last year.

 

●Gross profit increased by 11.0% to $8.09 million for the three months ended December 31, 2020 from $7.28 million for the same period of last year.

 

●Gross margin increased slightly by 1.0 percentage points to 22.8% for the three months ended December 31, 2020 from 21.8% for the same period of last year.

 

●Net loss was $6.29 million, or $0.15 per basic and diluted share, for the three months ended December 31, 2020, compared to net income of $0.46 million, or $0.02 per basic and diluted share, for the same period of last year.

 

 

 

Third Quarter of Fiscal 2021 Financial Results

 

Revenue

 

Revenue for the three months ended December 31, 2020 increased by $2.18 million, or 6.5%, to $35.54 million from $33.36 million for the same period of last year. The increase in revenue was primarily due to the growth in online pharmacy business.

 

   For the Three Months Ended December 31, 
   2020   2019 
($ millions)  Revenue   Cost of
Goods		   Gross
Margin		   Revenue   Cost of
Goods		   Gross
Margin		 
Retail drugstores   20.07    13.52    32.6%   21.57    15.39    28.7%
Online pharmacy   6.60    6.07    8.1%   3.97    3.64    8.2%
Wholesale   8.87    7.86    11.4%   7.82    7.05    9.9%
Total   35.54    27.45    22.8%   33.36    26.08    21.8%

 

Revenue from the retail drugstores business decreased by $1.50 million, or 7.0%, to $20.07 million for the three months ended December 31, 2020 from $21.57 million for the same period of last year. The decrease was primarily due to the negative effect on the overall economy from COVID-19, and also to the Company’s strategic decision to cease selling certain low-profit margin products that are eligible for reimbursement by National Healthcare Security Administration (“NHSA” hereafter) since September 1, 2020.

 

Revenue from the online pharmacy business increased by $2.63 million, or 66.4%, to $6.60 million for the three months ended December 31, 2020 from $3.97 million for the same period of last year. The increase was primarily caused by an increase in sales of prescription drugs via e-commerce platforms such as Tmall. In the past, prescription drugs cannot be sold online due to safety concern. After the nation lifted the ban order, online prescription drug sales became popular. As a result, the sale of prescription drugs was $2.23 million in the three months ended December 31, 2020 as compared to none in the three month ended December 31, 2019. Additionally, the Company maintained a membership care program targeted at customers with chronic disease. The Company has closely interacted with its members via WeChat to provide healthcare knowledge, and to remind them to refill medicine. By implementing a personalized customer care program, the Company was able to promote its sales.

 

Revenue from the wholesale business increased by $1.05 million, or 13.4%, to $8.87 million for the three months ended December 31, 2020 from $7.82 million for the same period of last year.

 

The increase was primarily accomplished by Company’s ability to sell certain products in large quantity at its retail stores, to other vendors at competitive prices.

 

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Gross profit and gross margin

 

Total cost of goods sold increased by $1.37 million, or 5.3%, to $27.45 million for the three months ended December 31, 2020 from $26.08 million for the same period of last year. Gross profit increased by $0.81 million, or 11.0%, to $8.09 million for three months ended December 31, 2020 from $7.28 million for the same period of last year. Overall gross margin increased slightly by 1.0 percentage points to 22.8% for the three months ended December 31, 2020, from 21.8% for the same period of last year.

 

Gross margins for retail drugstores, online pharmacy and wholesale were 32.6%, 8.1%, and 11.4%, respectively, for the three months ended December 31, 2020, compared to gross margins for retail drugstores, online pharmacy and wholesale of 28.7%, 8.2%, and 9.9%, respectively, for the same period of last year.

 

Income(loss) from operations

 

Selling and marketing expenses increased by $2.58 million, or 45.6%, to $8.26 million for the three months ended December 31, 2020 from $5.68 million for the same period of last year. The increase in selling and marketing expenses was primarily due to increase in annual employee compensation and online sales service fee as a result of the sale increase in the Company’s online pharmacy.

 

General and administrative expenses increased by $5.14 million, or 487.5%, to $6.19 million for the three months ended December 31, 2020 from $1.05 million for the same period of last year. On December 21, 2020, the Company issued 3,790,000 shares of common stock according to its employee stock reward incentive plan and recorded stock-based compensation of $3.94 million. Additionally, for the three months ended December 31, 2020, bad debt direct write-off and provision amounted to $0.29 million, an increase of $1.09 million, as compared to reversal of bad debt allowance of $0.80 million for the same period a year ago. Excluding such effect, the general and administrative expenses increased by $0.11 million period over period, which reflects the increase in staff and administration expense.

 

Loss from operations was $6.37 million for the three months ended December 31, 2020, compared to income from operations of $0.55 million for the same period of last year. Operating margin was (17.9)% and 1.7% for the three months ended December 31, 2020 and 2019 respectively.

 

Net income(loss)

 

Net loss was $6.29 million, or $0.15 per basic and diluted share for the three months ended December 31, 2020, compared to net income of $0.46 million, or $0.02 per basic and diluted share for the same period of last year.

 

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Nine Months Ended December 31, 2020 Financial Highlights

 

   For the Nine Months Ended December 31, 
($ millions, except per share data)  2020   2019   % Change 
Revenue   97.44    87.00    12.0%
Retail drugstores   56.81    56.31    0.9%
Online pharmacy   16.86    8.76    92.5%
Wholesale   23.77    21.93    8.4%
Gross profit   23.08    20.04    15.2%
Gross margin   23.7%   23.0%   0.7 pp* 
Loss from operations   (8.30)   (3.82)   -117.3%
Net loss   (8.21)   (3.27)   -151.1%
Loss per share   (0.20)   (0.09)   -122.2%

 

*Notes: pp represents percentage points

 

●Revenue increased by 12.0% to $97.44 million for the nine months ended December 31, 2020 from $87.00 million for the same period of last year.

 

●Gross profit increased by 15.2% to $23.08 million for the nine months ended December 31, 2020 from $20.04 million for the same period of last year.

 

●Gross margin increased slightly by 0.7 percentage pointsto 23.7% for the nine months ended December 31, 2020 from 23.0% for the same period of last year.

 

●Net loss was $8.21 million, or $0.20 per basic and diluted share, for the nine months ended December 31, 2020, compared to net loss of $3.27 million, or $0.09 per basic and diluted share, for the same period of last year.

 

Nine Months Ended December 31, 2020 Financial Results

 

Revenue

 

Revenue for the nine months ended December 31, 2020 increased by $10.44 million, or 12.0%, to $97.44 million from $87.00 million for the same period of last year. The increase in revenue was primarily due to the growth in retail drugstores, online pharmacy and wholesale business.

 

   For the Nine Months Ended December 31, 
   2020   2019 
($ millions)  Revenue   Cost of
Goods		   Gross
Margin		   Revenue   Cost of
Goods		   Gross
Margin		 
Retail drugstores   56.81    38.25    32.7%   56.31    39.54    29.8%
Online pharmacy   16.86    15.04    10.8%   8.76    7.77    11.3%
Wholesale   23.77    21.06    11.4%   21.93    19.65    10.4%
Total   97.44    74.35    23.7%   87.00    66.96    23.0%

 

Revenue from the retail drugstores business increased by $0.50 million, or 0.9%, to $56.81 million for the nine months ended December 31, 2020 from $56.31 million for the same period of last year. However, after removing the impact of exchange rate fluctuation, the actual retail drugstores sales decreased by 0.8%. The actual decrease in the Company’s retail drugstore sales is primarily due to the negative effect on the overall economy from COVID-19, and also to the Company’s strategic decision to cease selling certain low-profit margin products that are eligible for reimbursement by NHSA since September 1, 2020.

 

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Revenue from the online pharmacy business increased by $8.10 million, or 92.5%, to $16.86 million for the nine months ended December 31, 2020 from $8.76 million for the same period of last year. The increase was primarily caused by an increase in sales of prescription drugs via e-commerce platforms such as Tmall. Due to the same reason discussed above, the sale of prescription drugs was $5.86 million in the nine months ended December 31, 2020 as compared to none in the nine months ended December 31, 2019. Additionally, the Company maintained a membership care program targeted at customers with chronic disease. The Company has closely interacted with its members via WeChat to provide healthcare knowledge and to remind them to refill medicine. By implementing a personalized customer care program, the Company was able to promote its sales.

 

Revenue from the wholesale business increased by $1.84 million, or 8.4%, to $23.77 million for the nine months ended December 31, 2020 from $21.93 million for the same period of last year. The increase was primarily accomplished by the Company’s ability to sell certain products in large quantities at its retail stores, to other vendors at competitive prices.

 

Gross profit and gross margin

 

Total cost of goods sold increased by $7.40 million, or 11.0%, to $74.36 million for the nine months ended December 31, 2020 from $66.96 million for the same period of last year. Gross profit increased by 3.04 million, or 15.2%, to $23.08 million for the nine months ended December 31, 2020 from $20.04 million for the same period of last year. Overall gross margin increased slightly by 0.7 percentage points to 23.7% for the nine months ended December 31, 2020, from 23.0% for the same period of last year.

 

Gross margins for retail drugstores, online pharmacy and wholesale were 32.7%, 10.8%, and 11.4%, respectively, for the nine months ended December 31, 2020. This compared to gross margins for retail drugstores, online pharmacy and wholesale of 29.8%, 11.3%, and 10.4%, respectively, for the same period of last year.

 

Loss from operations

 

Selling and marketing expenses increased by $2.88 million, or 15.9%, to $21.01 million for the nine months ended December 31, 2020 from $18.13 million for the same period of last year. The increase in selling and marketing expenses was primarily due to increase in fee charged by various platforms as a result of the sale increase in the Company’s online pharmacy.

 

General and administrative expenses decreased by $4.64 million, or 81.1%, to $10.37 million for the nine months ended December 31, 2020 from $5.73 million for the same period of last year. On December 21, 2020, the Company issued 3,790,000 shares of common stock according to its employee stock reward incentive plan and recorded stock-based compensation of $3.94 million. Excluding such an effect, the general and administrative expenses increased by $0.70 million period over period, which reflects the increases in staff and administration expense as the Company’s online business grows. 

 

Loss from operations was $8.30 million for the nine months ended December 31, 2020, compared to $3.82 million for the same period of last year. Operating margin was (8.5)% and (4.4)% for the nine months ended December 31, 2020 and 2019 respectively.

 

Net loss

 

Net loss was $8.21 million, or $0.20 per basic and diluted share for the nine months ended December 31, 2020, compared to net loss of $3.27 million, or $0.09 per basic and diluted share for the same period of last year.

 

Financial Condition

 

As of December 31, 2020, the Company had cash of $12.12 million, compared to $16.18 million as of March 31, 2020. Net cash used in operating activities was $12.45 million for the nine months ended December 31, 2020, compared to $11.27 million for the same period of last year. Net cash used in investing activities was $1.82 million for the nine months ended December 31, 2020, compared to $1.71 million for the same period of last year. Net cash provided by financing activities was $5.42 million for the nine months ended December 31, 2020, compared to $12.70 million for the same period of last year.

 

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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 in China. 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. 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

 

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CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

   December 31,   March 31, 
   2020   2020 
ASSETS        
CURRENT ASSETS        
Cash and cash equivalents  $12,116,508   $16,176,318 
Restricted cash   12,925,216    14,806,288 
Financial assets available for sale   170,604    157,159 
Notes receivable   -    57,005 
Trade accounts receivable   11,521,988    9,770,656 
Inventories   14,933,245    12,247,004 
Other receivables, net   5,084,145    5,069,442 
Advances to suppliers   4,511,821    1,174,800 
Other current assets   1,821,838    1,528,540 
Total current assets   63,085,365    60,987,212 
           
PROPERTY AND EQUIPMENT, net   6,727,485    7,633,740 
           
OTHER ASSETS          
Long-term investment   4,295,979    2,544,451 
Farmland assets   830,595    742,347 
Long term deposits   1,551,248    1,456,384 
Other noncurrent assets   1,136,261    1,046,763 
Operating lease right-of-use assets   21,389,539    21,711,376 
Intangible assets, net   3,541,672    3,393,960 
Total other assets   32,745,294    30,895,281 
           
Total assets  $102,558,144   $99,516,233 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
CURRENT LIABILITIES          
Short-term bank loan  $2,296,155    1,410,130 
Accounts payable, trade   18,064,997    21,559,494 
Notes payable   25,736,161    26,605,971 
Other payables   2,744,874    2,522,330 
Other payables - related parties   689,274    490,218 
Customer deposits   841,686    708,140 
Taxes payable   690,906    119,247 
Accrued liabilities   681,316    753,612 
Long-term loan payable-current portion   2,480,264    2,287,742 
Current portion of operating lease liabilities   1,650,085    981,090 
Total current liabilities   55,875,718    57,437,974 
           
Long-term loan payable   2,589,643    4,115,958 
Long-term operating lease liabilities   17,993,514    19,049,575 
Employee Deposits   15,308    70,507 
Purchase option and warrants liability   -    64,090 
Total liabilities   76,474,183    80,738,104 
           
COMMITMENTS AND CONTINGENCIES          
           
STOCKHOLDERS’ EQUITY          
Common stock; $0.001 par value; 250,000,000 shares authorized; 41,751,790 and 32,936,786 shares issued and outstanding as of December 31, 2020 and March 31, 2020, respectively   41,752    32,937 
Preferred stock; $0.001 par value; 10,000,000 shares authorized; nil issued and outstanding as of December 31 and March 31, 2020, respectively   -    - 
Additional paid-in capital   67,506,686    54,209,301 
Statutory reserves   1,309,109    1,309,109 
Accumulated deficit   (44,382,384)   (36,400,837)
Accumulated other comprehensive income   3,649,357    1,440,424 
Total stockholders’ equity   28,124,520    20,590,934 
Noncontrolling interests   (2,040,559)   (1,812,805)
Total equity   26,083,961    18,778,129 
Total liabilities and stockholders’ equity  $102,558,144   $99,516,233 

 

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CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

 

   For the three months ended
December 31,		   For the nine months ended
December 31,		 
   2020   2019   2020   2019 
                 
REVENUES, NET  $35,538,759   $33,363,282   $97,435,616   $86,997,845 
                     
COST OF GOODS SOLD   27,451,509    26,079,910    74,355,395    66,959,671 
                     
GROSS PROFIT   8,087,250    7,283,372    23,080,221    20,038,174 
                     
SELLING EXPENSES   8,262,590    5,676,400    21,010,509    18,130,799 
GENERAL AND ADMINISTRATIVE EXPENSES   6,192,294    1,054,060    10,374,019    5,729,607 
TOTAL OPERATING EXPENSES   14,454,884    6,730,460    31,384,528    23,860,406 
                     
INCOME (LOSS) FROM OPERATIONS   (6,367,634)   552,912    (8,304,307)   (3,822,232)
                     
OTHER INCOME (EXPENSE):                    
INTEREST INCOME   193,207    272,773    544,462    661,160 
INTEREST EXPENSE   (109,896)   -    (354,975)   - 
OTHER   (43,525)   (302,408)   (118,000)   (437,118)
CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITIES   36,306    (65,172)   64,090    345,248 
                     
INCOME (LOSS) BEFORE INCOME TAXES   (6,291,542)   458,105    (8,168,730)   (3,252,942)
                     
PROVISION FOR INCOME TAXES   1,976    2,184    40,571    16,274 
                     
NET INCOME (LOSS)   (6,293,518)   455,921    (8,209,301)   (3,269,216)
                     
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST   (37,199)   (75,861)   (227,754)   (441,084)
                     
NET INCOME (LOSS) ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES, INC.   (6,256,319)   531,782    (7,981,547)   (2,828,132)
                     
Foreign currency translation adjustments   1,083,903    358,868    2,208,933    (582,705)
                     
COMPREHENSIVE GAIN (LOSS)  $(5,209,615)  $814,789   $(6,000,368)  $(3,851,921)
                     
WEIGHTED AVERAGE NUMBER OF SHARES:                    
Basic   41,339,834    32,936,786    40,462,971    32,776,786 
Diluted   41,339,834    32,936,786    40,462,971    32,776,786 
                     
EARNINGS (LOSS) PER SHARE                    
Basic  $(0.15)  $0.02   $(0.20)  $(0.09)
Diluted  $(0.15)  $0.02   $(0.20)  $(0.09)

 

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CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   For the nine months ended
December 31,		 
   2020   2019 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss  $(8,209,301)  $(3,269,216)
Adjustments to reconcile net income to net cash provided by operating activities:          
Bad debt direct write-off and provision   7,065    (29,038)
Depreciation and amortization   1,657,001    1,572,925 
Stock based compensation   3,941,600    34,560 
Change in fair value of purchase option derivative liability   (64,090)   (345,248)
Changes in operating assets and liabilities：          
Accounts receivable, trade   (1,203,132)   (2,581,208)
Notes receivable   58,848    122,175 
Inventories and biological assets   (1,558,139)   2,484,432 
Other receivables   625,207    (1,353,544)
Advances to suppliers   (3,050,898)   (222,928)
Other current assets   (79,851)   (1,758,533)
Long term deposit   28,275    597,084 
Other noncurrent assets   52    17,744 
Accounts payable, trade   (5,077,172)   (6,397,104)
Other payables and accrued liabilities   (118,323)   (917,398)
Customer deposits   69,385    458,415 
Taxes payable   525,005    312,192 
           
Net cash used in operating activities   (12,448,468)   (11,274,690)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Disposal of financial assets available for sale   -    14,370 
Acquisition of equipment   (41,565)   (561,677)
Purchases of intangible assets   (62,644)   (461,013)
Investment in a joint venture   (1,458,633)   - 
Additions to leasehold improvements   (261,759)   (705,856)
Net cash used in investing activities   (1,824,601)   (1,714,176)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from short-term bank loan   727,855      
Proceeds from third parties’ loan   -    7,085,406 
Repayment of  third parties’ loan   (1,789,379)   - 
Proceeds from notes payable   39,320,707    36,537,832 
Repayment of notes payable   (42,312,460)   (39,784,592)
Decrease in Employee Deposits   (58,228)   (7,185)
Exercise of warrants   77,500    - 
Net Proceeds from equity financing   9,287,100    9,273,077 
Repayment of other payables-related parties   168,990    (406,506)
Net cash provided by financing activities   5,422,085    12,698,032 
           
EFFECT OF EXCHANGE RATE ON CASH   2,910,102    (559,998)
           
(DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH   (5,940,882)   (850,832)
           
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period   30,982,606    24,745,202 
           
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, end of period  $25,041,724   $23,894,370 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
Cash paid for interest   354,975    - 
Cash paid for income taxes  $35,954   $17,215 

 

 

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