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China Jo-Jo Drugstores Reports Fiscal 2017 Third Quarter Results

 

HANGZHOU, China, Feb. 10, 2017 /PRNewswire/ -- China Jo-Jo Drugstores, Inc. (NASDAQ: CJJD) today announced financial results for its third fiscal quarter and nine months ended December 31, 2016.

Third Quarter Highlights:

  • Revenue was $20.6 million compared to $24.7 million a year ago
  • Retail drugstores sales were $14.1 million compared to $12.9 million a year ago
  • Gross margin increased 70 bps year-over-year to 20.3%, retail pharmacy gross margin increased 410 bps to 25.7% from a year ago
  • GAAP net loss was $834,806 or $0.04 per diluted share compared to net loss of $617,529 or $0.04 per diluted share a year ago

Nine Months Highlights:

  • Revenue was $61.7 million compared to $68.6 million a year ago
  • Retail drugstores sales were $39.6 million compared to $38.2 million a year ago
  • Gross margin increased 190 bps year-over-year to 21.1%, retail pharmacy gross margin increased 460 bps to 27.8% from a year ago
  • GAAP net loss was $605,784 or $0.02 per diluted share compared to net loss of $355,743 or $0.02 per diluted share a year ago
  • Adjusted net income was $1,176,409 or $0.06 per diluted share compared to adjusted net loss of $8,300 or $0.00 per diluted share a year ago

China Jo-Jo's Chairman and CEO, Mr. Liu Lei commented, "Our retail drugstores' sales started to recover during the quarter as we grew both retail sales and margins year-over-year. We optimized our drugstores' product mix leading up to the Chinese New Year Holiday and met customer demand for popular nutritional supplements products. We also continue to improve our chronic disease management program, which has attracted many loyal customers who refill their prescriptions and purchase supplemental products at our stores. We look forward to expanding our proven retail pharmacy model in Hangzhou in the New Year and bringing innovative wellness options and expanded access to care to more pharmacy customers."

Net revenues for the third quarter were $20.6 million compared to $24.7 million in the same quarter a year ago, a decrease of $4.1 million, or 16.6%. Lower revenue was mainly due to the decline in online pharmacy business, which was partially offset by increase in retail drugstore business.

Retail drugstore sales were $14.1 million compared to $12.9 million in the same quarter last year and $12.8 million in the second quarter of fiscal 2017. To improve same-store sales, the Company continued to optimize product mix, expand mobile payment, roll out in-pharmacy virtual doctor clinics, and work with reputable vendors to promote the sales of third-party brand products. As a result, same-store sales increased by approximately $728,822, or 6.0% year-over-year, while new stores contributed approximately $572,876 in revenue in the third quarter. The pharmacy store count increased to 65 as of December 31, 2016, compared to 59 stores a year ago.

Online pharmacy sales were $3.4 million compared to $8.6 million in the same quarter a year ago. The decrease was mainly due to lower sales through third party e-commerce websites that resulted from the CFDA (China Food and Drug Administration) suspension of OTC drug sales on third party e-commerce websites and the decline in referrals from Yikatong, the popular pharmacy and health insurance benefit card, to the Company's online pharmacy. To address these challenges, the Company has been redirecting customer traffic from third party e-commerce websites to its own website to promote the purchase of OTC products, while adding more non-medical health products such as nutritional supplements on such third party e-commerce platforms. Meanwhile, the Company has also been working with alternative referral vendors of pharmacy benefit management services.

Gross profit decreased by $663,462 or 13.7% year-over-year to $4.2 million. Gross margin increased from 19.6% to 20.3% due to higher retail profit margins. Retail gross margin increased primarily due to higher vendor rebates attributable to our marketing efforts in promoting brand-name products with large pharmaceutical suppliers, efforts to renegotiate prices with our suppliers periodically, and selection of certain higher profit margin products for retail sale.

Sales and marketing expenses increased by $283,545 or 8.6% year over year, primarily due to support to new local wholesale clients such as other local drugstores.

General and administrative expenses decreased by $416,599 or 22.3% year over year, primarily due to accounts receivable and decrease of $331,180 in advances to vendors allowance in the third quarter as compared to allowance addition of $190,472 in the same quarter last year. The difference was caused by collection on certain remaining aged accounts receivable and advances to suppliers' accounts in the quarter.

Net loss was $834,806 or $0.04 per diluted share compared to last year's third quarter net loss of $617,529 or $0.04 per diluted share.

About China Jo-Jo Drugstores, Inc.

China Jo-Jo Drugstores, Inc., is a leading China-based pharmacy that engages in retail, wholesale and online distribution and sales of pharmaceutical and health care products, including through its online and retail pharmacies. As of December 31, 2016, the Company had 65 retail pharmacies in Zhejiang Province. The Company's wholesale subsidiary supplies its retail stores and distributes drug and healthcare products to other drugstores and drug vendors. For more information, please visit: www.jiuzhou-drugstore.com (Chinese) and www.chinajojodrugstores.com (English).

Forward Looking Statement

Statements in this press release regarding the Company that are not historical facts are forward-looking statements and are subject to risks and uncertainties that could cause actual future events or results to differ materially from such statements. Any such forward-looking statements, including, but not limited to, financial guidance, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "estimate," "may," "will," "should," "project," "plan," "seek," "intend," "anticipate," the negatives thereof, or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding the progress of new product development. It is routine for the Company's internal projections and expectations to change as the quarter and year progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which the Company bases its expectations may change. Although these expectations may change, the Company is under no obligation to inform you if they do. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of numerous factors, including the risks associated with the effect of changing economic conditions in the People's Republic of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products. Readers are referred to the reports and documents filed from time to time by the Company with the Securities and Exchange Commission for a discussion of these and other important risk factors that could cause actual results to differ from those discussed in forward-looking statements. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

 

CHINA JO-JO DRUGSTORES, INC AND SUBSIDIARIES

condensed CONSOLIDATED BALANCE SHEETS

(UNAUDITED)










December 31,



March 31,




2016



2016


ASSETS







CURRENT ASSETS







Cash


$

4,643,349



$

6,671,873


Financial assets available for sale



-




465,165


Restricted cash



8,980,544




13,747,990


Notes receivable



42,740




15,506


Trade accounts receivable, net



9,441,386




8,054,597


Inventories



10,565,855




10,802,691


Other receivables, net



1,440,641




1,376,468


Advances to suppliers, net



3,839,635




4,230,665


Other current assets



1,483,431




1,518,048


Total current assets



40,437,581




46,883,003











PROPERTY AND EQUIPMENT, net



4,607,201




5,543,076











OTHER ASSETS









Long-term investment



40,131




108,539


Farmland assets



1,484,987




1,562,205


Long term deposits



2,277,120




2,452,056


Other noncurrent assets



2,727,401




2,595,129


Intangible assets, net



2,706,919




2,928,779


Total other assets



9,236,558




9,646,708











Total assets


$

54,281,340



$

62,072,787











LIABILITIES AND STOCKHOLDERS' EQUITY









CURRENT LIABILITIES









Short-term loan payable


$

28,799



$

31,011


Accounts payable, trade



14,402,089




16,667,396


Notes payable



12,215,720




17,595,634


Other payable



2,064,231




1,917,821


Other payable - related parties



922,192




2,199,775


Customer deposits



2,485,944




2,610,151


Taxes payable



594,315




483,770


Accrued liabilities



577,418




615,056


Total current liabilities



33,290,708




42,120,614











Warrant liability



510,859




636,301


Total liabilities



33,801,567




42,756,915











STOCKHOLDERS' EQUITY









Preferred stock; $0.001 par value; 10,000,000 shares
  authorized; 0 issued and outstanding as of December 31,
  2016 and March 31, 2016









Common stock; $0.001 par value; 250,000,000 shares
  authorized; 20,374,678 and 17,735,504 shares issued and
  outstanding as of December 31, 2016 and March 31, 2016



20,375




17,736


Additional paid-in capital



25,597,019




22,088,267


Statutory reserves



1,309,109




1,309,109


Accumulated deficit



(7,562,837)




(6,957,053)


Accumulated other comprehensive income



1,116,107




2,857,813


Total stockholders' equity



20,479,773




19,315,872











Total liabilities and stockholders' equity


$

54,281,340



$

62,072,787


 

 

 

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)




For the three months
ended
December 31,



For the nine months
ended
December 31,




2016



2015



2016



2015


REVENUES, NET


$

20,610,024



$

24,708,046



$

61,706,774



$

68,596,964



















COST OF GOODS SOLD



16,426,153




19,860,713




48,688,092




55,396,941



















GROSS PROFIT



4,183,871




4,847,333




13,018,682




13,200,023



















SELLING EXPENSES



3,570,182




3,286,637




9,276,225




9,801,761


GENERAL AND ADMINISTRATIVE EXPENSES



1,451,849




1,868,448




4,752,981




3,628,520


TOTAL OPERATING EXPENSES



5,022,031




5,155,085




14,029,206




13,430,281



















LOSS FROM OPERATIONS



(838,160)




(307,752)




(1,010,524)




(230,258)



















INTEREST INCOME



54,003




62,337




339,460




253,074


INTEREST EXPENSE



(415)




(2,945)




(1,285)




(156,951)


OTHER INCOME (LOSS), NET



(99,485)




(349,514)




5,139




(315,894)



















CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITIES



67,296




15,444




125,389




173,510



















INCOME BEFORE INCOME TAXES



(816,761)




(582,430)




(541,821)




(276,519)



















PROVISION FOR INCOME TAXES



18,045




35,099




63,963




79,224



















NET LOSS



(834,806)




(617,529)




(605,784)




(355,743)



















OTHER COMPREHENSIVE LOSS

















Foreign currency translation adjustments



(1,768,854)




(268,795)




(1,741,706)




(1,043,348)



















COMPREHENSIVE LOSS


$

(2,603,660)



$

(886,324)



$

(2,347,490)



$

(1,399,091)



















WEIGHTED AVERAGE NUMBER OF SHARES:

















Basic



19,941,439




17,180,830




19,188,867




16,459,195


Diluted



19,941,439




17,180,830




19,188,867




16,459,195



















EARNINGS PER SHARES:

















Basic


$

(0.04)



$

(0.04)



$

(0.02)



$

(0.02)


Diluted


$

(0.04)



$

(0.04)



$

(0.02)



$

(0.02)


 

 

 

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)




Nine months ended
December 31,



2016



2015

CASH FLOWS FROM OPERATING ACTIVITIES:






Net income


$

(605,784)




(355,743)

Adjustments to reconcile net (loss) income to net cash provided by (used in)
  operating activities:








Depreciation and amortization



891,542




1,163,994

Stock-based compensation



1,907,582




520,953

Bad debt provision



(505,117)




(1,369,786)

Change in fair value of warrant derivative liability



(125,441)




(173,510)

Change in operating assets:








Accounts receivable, trade



(1,130,490)




243,666

Notes receivable



(29,484)




99,199

Inventories



(555,388)




(413,472)

Other receivables



64,419




(142,734)

Advances to suppliers



(683,980)




(413,238)

Other current assets



(76,656)




678,339

Other noncurrent assets



(330,217)




-

Change in operating liabilities:








Accounts payable, trade



(1,119,770)




(93,695)

Other payables and accrued liabilities



296,298




277,298

Customer deposits



64,508




(1,146,504)

Taxes payable



150,910




205,734

Net cash used in operating activities



(1,787,068)




(919,499)









CASH FLOWS FROM INVESTING ACTIVITIES:








Purchase of equipment



(115,463)




(171,314)

Decrease in Financial assets available for sale



449,403




1,279,200

Investment in a joint venture



(74,900)




(111,930)

Termination of a joint venture



69,802





Additions to leasehold improvements



(200,428)




-

Net cash provided by investing activities



128,414




995,956









CASH FLOWS FROM FINANCING ACTIVITIES:








Proceeds from short-term bank loan



-




23,115

Repayment of short-term bank loan



-




(55,095)

Change in restricted cash



3,939,366




(4,423,287)

Repayments of notes payable



(24,600,434)




(15,415,543)

Proceeds from notes payable



20,309,469




17,711,172

Proceeds from other payables-related parties



375,395




(179,934)

Proceeds from equity financing



-




2,699,500

Net cash provided by financing activities



23,796




359,928









EFFECT OF EXCHANGE RATE ON CASH



(393,666)




(120,694)

INCREASE IN CASH



(2,028,524)




315,691

CASH, beginning of period



6,671,873




4,023,581

CASH, end of period


$

4,643,349



$

4,339,272









SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:








Cash paid for interest


$

1,348



$

151,258

Cash paid for income taxes


$

57,688



$

48424

Non-cash financing activities:








Issuance of common stocks to exchange for the debt to a shareholder



1,603,810




-

Issuance of stock purchase options to an investment bank



-



$

147,728

 

Use of non-GAAP financial measures

To supplement China Jo-Jo's consolidated financial results presented in accordance with GAAP, China Jo-Jo uses the following measures defined as non-GAAP financial measures by the SEC: net income (loss) excluding share-based compensation expenses and change in fair value of derivative liabilities, and diluted net income (loss) per share excluding share-based compensation expenses and change in the fair value of derivatives liabilities. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

China Jo-Jo believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based compensation expenses and change in fair value of derivative liabilities that may not be indicative of its operating performance from a cash perspective. China Jo-Jo believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to China Jo-Jo's historical performance and liquidity. China Jo-Jo computes its non-GAAP financial measures using the same consistent method from quarter to quarter. China Jo-Jo believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making. A limitation of using these non-GAAP measures is that they exclude share-based compensation and change in fair value of derivative liabilities charge that has been and will continue to be for the foreseeable future a significant recurring expense in our business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The table under the heading Reconciliation to non-GAAP Financial Measures in the beginning of the release has more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

Reconciliation to non-GAAP Financial Measures


Three Months Ended

December 31

Nine Months Ended

December 31


2016

2015

2016

2015

Net loss

$(834,806)

$(617,529)

$(605,784)

$(355,743)

Non-GAAP adjustments:





Share based compensation expense

578,008

312,503

1,907,582

520,953

Change in fair value of derivative liabilities

(67,296)

(15,444)

(125,441)

(173,510)

Adjusted net loss

(324,094)

(320,470)

1,176,357

(8,300)

Adjusted net income (loss) per share diluted

(0.02)

(0.02)

0.06

0.00

Investor Relations Contact:
Steve Liu
steve.liu@jojodrugstores.com

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/china-jo-jo-drugstores-reports-fiscal-2017-third-quarter-results-300405547.html

SOURCE China Jo-Jo Drugstores, Inc.

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