HANGZHOU, China, Nov. 14, 2017 /PRNewswire/ -- China Jo-Jo Drugstores, Inc. (NASDAQ: CJJD)
today announced financial results for its fiscal second quarter
ended September 30, 2017.
FY2018 Second Quarter Highlights:
- Revenue increased by 10.0% year-over-year to $23.5 million
- Retail sales increased by 17.0% year-over-year to $15.0 million
- Wholesale revenue increased by 51.0% year-over-year to
$5.3 million
- Gross profit was $5.6 million
with gross margin of 23.7% compared to $4.4
million and 21.6% a year ago
- GAAP net loss was $1.2 million or
$0.05 per diluted share compared to
net income of $97,870 or $0.01 per diluted share a year ago
FY2018 Six-Month Highlights:
- Revenue increased by 10.0% year-over-year to $45.2 million
- Retail sales increased by 10.0% year-over-year to $28.1 million
- Wholesale revenue increased by 62.0% year-over-year to
$10.9 million
- Gross profit was $9.7 million
with gross margin of 21.6% compared to $8.8
million and 21.5% a year ago
- GAAP net loss was $2.6 million or
$0.10 per diluted share compared to
net income of $229,023 or
$0.01 per diluted share a year
ago
China Jo-Jo's Chairman and CEO,
Mr. Liu Lei commented, "We are
pleased to have achieved the milestone of operating more than 100
retail pharmacies in Hangzhou, and
we are further consolidating our competitive position as the
leading pharmacy in one of the highest income urban centers in
China. As we expand our pharmacy
network, our retail sales growth starts to gain traction. We also
believe that the most challenging period is behind us for our
online pharmacy, as our efforts in optimizing our product range has
stabilized results. We look forward to building on improving
business fundamentals to capture further market share in the
growing healthcare markets in the Hangzhou region."
Net revenues for the fiscal second quarter were $23.5 million compared to $20.2 million in the same quarter a year ago, an
increase of $3.3 million or 17.0%.
Retail drugstores sales were $15.0
million and increased 17.0% from the prior year period. The
increase in retail drugstore sales was primarily due to the
Company's expanding retail footprint, improvements in the range of
products offered, purchase price negotiation with suppliers and a
growing demand for healthcare products from local consumers.
Same-store sales increased by $1.3
million, or 11.5%, while new stores contributed the
remainder of the increase. The pharmacy store count increased to 95
as of September 30, 2017, compared to
62 stores as of September 30,
2016.
Since September 30, 2017,
China Jo-Jo opened six additional
retail pharmacies at the following locations: 1) No. 363-4
Zhongshan South Road, Chengnan District; 2) No.79-3 Xiangjisi Road,
Dingqiao District; 3) No.147-1 Gaosha Road, Xiasha District; 4) No.
36 Taipingmenzhi Road, Jianggan District; 5) No. 250 Huancheng East
Road, Xiacheng District; and 6) No.2-2-7 Wenyuan Fengqing
Community, Hangzhou Economic and Technological Development Zone. As
of November 14, 2017, the Company
operated 101 retail pharmacies in Hangzhou.
Online pharmacy sales for the quarter were $3.1 million compared to $3.8 million in the same quarter a year ago, a
decrease of $0.7 million or 19.0%.
The decrease was primarily due to the industry-wide suspension of
OTC drug sales on e-commerce platforms by the China Food and Drug
Administration ("CFDA") in the fiscal second quarter of 2017. The
Company is adding nutritional supplements and other non-medical
health products to address the decline in OTC drug sales, and
expects e-commerce platform sales to pick up in the future.
Wholesale revenue increased by $1.8
million or 51.0%, primarily through the resale of certain
products for which the Company's retail stores had prepared large
orders to other vendors. The Company successfully negotiated bulk
discounts for certain brand-name products, and was able to resell
such products to third-party vendors at competitive prices. These
sales accounted for the growth in the Company's wholesale sales
volumes.
Gross profit increased by $1.2
million or 27.7% year-over-year primarily due to increase in
retail drugstores sale and increase in gross margin of wholesale
business. Gross margin increased to 23.7% from 21.6% a year ago due
to higher retail profit margins.
Sales and marketing expenses increased by $1.3 million, or 43.9% year-over-year, due to
commissions to wholesale salespeople, increases in total rent paid
due to the opening of new retail stores, and the reclassification
of certain staff salaries as selling and marketing expenses in
wholesale business.
General and administrative expenses increased by $1.5 million, or 106.5% year-over-year due to
additional accounts receivable and advances to vendors allowance of
$1.1 million in the fiscal second
quarter of 2018.
Net loss was $1.2 million or
$0.05 per diluted share compared to
last year's fiscal second quarter net income of $97,870 or $0.01
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. As of November 14, 2017,
the Company had 101 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.chinajojodrugstores.com.
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)
|
|
|
|
September 30,
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2017
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
Cash
|
|
$
|
16,837,873
|
|
|
$
|
18,364,424
|
|
Restricted
cash
|
|
|
10,277,758
|
|
|
|
9,431,386
|
|
Financial assets available for sale
|
|
|
165,282
|
|
|
|
87,068
|
|
Notes
receivable
|
|
|
312,570
|
|
|
|
253,394
|
|
Trade accounts
receivable
|
|
|
10,200,542
|
|
|
|
8,561,596
|
|
Inventories
|
|
|
11,077,027
|
|
|
|
9,923,101
|
|
Other receivables,
net
|
|
|
2,624,059
|
|
|
|
2,269,193
|
|
Advances to
suppliers
|
|
|
3,914,099
|
|
|
|
5,504,141
|
|
Other current
assets
|
|
|
1,804,654
|
|
|
|
1,566,155
|
|
Total current
assets
|
|
|
57,213,864
|
|
|
|
55,960,458
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND
EQUIPMENT, net
|
|
|
4,533,390
|
|
|
|
4,263,157
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
Long-term
investment
|
|
|
46,501
|
|
|
|
46,152
|
|
Farmland
assets
|
|
|
744,256
|
|
|
|
718,787
|
|
Long term
deposits
|
|
|
3,202,793
|
|
|
|
2,294,848
|
|
Other noncurrent
assets
|
|
|
1,327,447
|
|
|
|
1,177,005
|
|
Intangible assets,
net
|
|
|
3,097,546
|
|
|
|
2,712,611
|
|
Total other
assets
|
|
|
8,418,543
|
|
|
|
6,949,403
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
70,165,797
|
|
|
$
|
67,173,018
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCK
HOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable,
trade
|
|
|
23,089,541
|
|
|
|
19,441,195
|
|
Notes
payable
|
|
|
12,872,045
|
|
|
|
12,691,575
|
|
Other
payables
|
|
|
2,735,247
|
|
|
|
2,916,283
|
|
Other payables -
related parties
|
|
|
859,191
|
|
|
|
927,052
|
|
Customer
deposits
|
|
|
3,083,129
|
|
|
|
2,675,030
|
|
Taxes
payable
|
|
|
570,631
|
|
|
|
681,939
|
|
Accrued
liabilities
|
|
|
800,558
|
|
|
|
679,350
|
|
Total current
liabilities
|
|
|
44,010,342
|
|
|
|
40,012,424
|
|
|
|
|
|
|
|
|
|
|
Purchase option and
warrants liability
|
|
|
297,466
|
|
|
|
496,217
|
|
Total
liabilities
|
|
|
44,307,808
|
|
|
|
40,508,641
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
Common stock; $0.001
par value; 250,000,000 shares authorized; 25,214,678 and
25,214,678 shares issued and outstanding as of
September 30, 2017 and March
31, 2017
|
|
|
25,215
|
|
|
|
25,215
|
|
Preferred stock;
$0.001 par value; 10,000,000 shares authorized; nil issued and
outstanding as of September 30, 2017 and March 31,
2017
|
|
|
-
|
|
|
|
-
|
|
Additional paid-in
capital
|
|
|
37,270,620
|
|
|
|
36,581,248
|
|
Statutory
reserves
|
|
|
1,309,109
|
|
|
|
1,309,109
|
|
Accumulated
deficit
|
|
|
(15,189,270)
|
|
|
|
(12,601,257)
|
|
Accumulated other
comprehensive income
|
|
|
2,442,315
|
|
|
|
1,350,062
|
|
Total stockholders'
equity
|
|
|
25,857,989
|
|
|
|
26,664,377
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
|
$
|
70,165,797
|
|
|
$
|
67,173,018
|
|
CHINA JO-JO
DRUGSTORES, INC. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
|
(UNAUDITED)
|
|
|
|
For the three
months
ended
September 30,
|
|
|
For the six
months
ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES,
NET
|
|
$
|
23,491,043
|
|
|
$
|
20,160,835
|
|
|
$
|
45,161,411
|
|
|
$
|
41,096,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF GOODS
SOLD
|
|
|
17,933,446
|
|
|
|
15,807,828
|
|
|
|
35,426,153
|
|
|
|
32,261,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
5,557,597
|
|
|
|
4,353,007
|
|
|
|
9,735,258
|
|
|
|
8,834,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELLING
EXPENSES
|
|
|
4,350,772
|
|
|
|
3,023,322
|
|
|
|
8,267,631
|
|
|
|
5,706,043
|
|
GENERAL AND
ADMINISTRATIVE EXPENSES
|
|
|
2,855,555
|
|
|
|
1,382,650
|
|
|
|
4,580,998
|
|
|
|
3,301,132
|
|
TOTAL OPERATING
EXPENSES
|
|
|
7,206,327
|
|
|
|
4,405,972
|
|
|
|
12,848,629
|
|
|
|
9,007,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS) FROM
OPERATIONS
|
|
|
(1,648,730)
|
|
|
|
(52,965)
|
|
|
|
(3,113,371)
|
|
|
|
(172,364)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST
INCOME
|
|
|
358,344
|
|
|
|
61,035
|
|
|
|
403,243
|
|
|
|
285,457
|
|
INTEREST
EXPENSE
|
|
|
-
|
|
|
|
(430)
|
|
|
|
-
|
|
|
|
(869)
|
|
OTHER INCOME(LOSS),
NET
|
|
|
(8,703)
|
|
|
|
17,425
|
|
|
|
(38,051)
|
|
|
|
104,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHANGE IN FAIR VALUE
OF DERIVATIVE
LIABILITIES
|
|
|
148,427
|
|
|
|
90,289
|
|
|
|
198,751
|
|
|
|
58,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS) INCOME BEFORE
INCOME TAXES
|
|
|
(1,150,662)
|
|
|
|
115,354
|
|
|
|
(2,549,428)
|
|
|
|
274,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION FOR INCOME
TAXES
|
|
|
18,047
|
|
|
|
17,484
|
|
|
|
38,585
|
|
|
|
49,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (LOSS)
INCOME
|
|
|
(1,168,709)
|
|
|
|
97,870
|
|
|
|
(2,588,013)
|
|
|
|
229,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE
(LOSS) INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustments
|
|
|
633,184
|
|
|
|
(87,721)
|
|
|
|
1,092,253
|
|
|
|
27,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE (LOSS)
INCOME
|
|
$
|
(535,525)
|
|
|
$
|
10,149
|
|
|
$
|
(1,495,760)
|
|
|
$
|
256,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE
NUMBER OF SHARES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
25,214,678
|
|
|
|
19,375,773
|
|
|
|
25,214,678
|
|
|
|
18,239,065
|
|
Diluted
|
|
|
25,214,678
|
|
|
|
19,375,773
|
|
|
|
25,214,678
|
|
|
|
18,239,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER
SHARES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.05)
|
|
|
$
|
0.01
|
|
|
$
|
(0.10)
|
|
|
$
|
0.01
|
|
Diluted
|
|
$
|
(0.05)
|
|
|
$
|
0.01
|
|
|
$
|
(0.10)
|
|
|
$
|
0.01
|
|
CHINA JO-JO
DRUGSTORES, INC. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(UNAUDITED)
|
|
|
|
Six months ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net income
|
|
$
|
(2,588,013)
|
|
|
|
229,023
|
|
Adjustments to
reconcile net (loss) income to net cash (used in) provided by
operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
590,618
|
|
|
|
466,570
|
|
Stock-based
compensation
|
|
|
689,372
|
|
|
|
1,329,574
|
|
Bad debt
provision
|
|
|
1,241,159
|
|
|
|
(177,274)
|
|
Change in fair value
of purchase option derivative liability
|
|
|
(198,751)
|
|
|
|
(58,145)
|
|
|
|
|
|
|
|
|
|
|
Change in operating
assets:
|
|
|
|
|
|
|
|
|
Accounts receivable,
trade
|
|
|
(2,138,968)
|
|
|
|
(2,190,470)
|
|
Notes
receivable
|
|
|
(49,387)
|
|
|
|
(156,527)
|
|
Inventories
|
|
|
(789,355)
|
|
|
|
(3,358,110)
|
|
Other
receivables
|
|
|
(39,756)
|
|
|
|
(176,334)
|
|
Advances to
suppliers
|
|
|
958,032
|
|
|
|
275,098
|
|
Other current
assets
|
|
|
(180,048)
|
|
|
|
(269,040)
|
|
Other noncurrent
assets
|
|
|
(106,981)
|
|
|
|
(354,594)
|
|
Long term
deposit
|
|
|
(813,282)
|
|
|
|
-
|
|
Change in operating
liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable,
trade
|
|
|
2,911,679
|
|
|
|
5,147,686
|
|
Other payables and
accrued liabilities
|
|
|
(181,932)
|
|
|
|
(102,920)
|
|
Customer
deposits
|
|
|
308,252
|
|
|
|
156,632
|
|
Taxes
payable
|
|
|
(133,285)
|
|
|
|
(306,109)
|
|
Net cash (used in)
provided by operating activities
|
|
|
(520,646)
|
|
|
|
455,060
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of
equipment
|
|
|
(212,358)
|
|
|
|
(49,298)
|
|
Purchase of
financial assets available for sale
|
|
|
(73,915)
|
|
|
|
|
|
Increase in
construction-in-progress
|
|
|
(473,716)
|
|
|
|
|
|
Increase intangible
assets
|
|
|
(298,617)
|
|
|
|
|
|
Decrease in Financial
assets available for sale
|
|
|
-
|
|
|
|
454,608
|
|
Investment in a joint
venture
|
|
|
(9,387)
|
|
|
|
(75,768)
|
|
Additions to leasehold
improvements
|
|
|
(27,986)
|
|
|
|
(26,262)
|
|
Net cash provided by
investing activities
|
|
|
(1,095,979)
|
|
|
|
303,280
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from
short-term bank loan
|
|
|
|
|
|
|
-
|
|
Repayment of
short-term bank loan
|
|
|
|
|
|
|
-
|
|
Change in restricted
cash
|
|
|
(503,908)
|
|
|
|
6,411,257
|
|
Repayments of notes
payable
|
|
|
(12,929,115)
|
|
|
|
(17,196,298)
|
|
Proceeds from notes
payable
|
|
|
12,664,216
|
|
|
|
11,800,003
|
|
Proceeds from other
payables-related parties
|
|
|
|
|
|
|
95,088
|
|
Repayment of other
payables-related parties
|
|
|
(88,698)
|
|
|
|
|
|
Proceeds from equity
financing
|
|
|
|
|
|
|
-
|
|
Net cash provided
by financing activities
|
|
|
(857,505)
|
|
|
|
1,110,050
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE
RATE ON CASH
|
|
|
947,579
|
|
|
|
(188,172)
|
|
INCREASE IN
CASH
|
|
|
(1,526,551)
|
|
|
|
1,680,218
|
|
CASH, beginning of
period
|
|
|
18,364,424
|
|
|
|
6,671,873
|
|
CASH, end of
period
|
|
$
|
16,837,873
|
|
|
$
|
8,352,091
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for
interest
|
|
$
|
-
|
|
|
$
|
869
|
|
Cash paid for income
taxes
|
|
$
|
42,689
|
|
|
$
|
42,437
|
|
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
September
30
|
Six Months
Ended
September
30
|
|
2017
|
2016
|
2017
|
2016
|
Net income
|
$(1,168,709)
|
$97,870
|
$(2,588,013)
|
$229,023
|
Non-GAAP
adjustments:
|
|
|
|
|
Share based
compensation expense
|
345,892
|
738,923
|
689,372
|
1,329,574
|
Change in fair value
of derivative liabilities
|
(148,427)
|
(90,341)
|
(198,751)
|
(58,145)
|
Adjusted net income
(loss)
|
(971,244)
|
746,452
|
(2,097,392)
|
1,500,452
|
Adjusted net income
per share - diluted
|
(0.04)
|
0.04
|
(0.08)
|
0.08
|
View original
content:http://www.prnewswire.com/news-releases/china-jo-jo-drugstores-reports-fiscal-2018-second-quarter-results-300555496.html
SOURCE China Jo-Jo Drugstores,
Inc.