China Jojo Drugstores, Inc. (CJJD) 10-K Annual Report July 2019

HANGZHOU, China, July 1, 2019 /PRNewswire/ -- China Jo-Jo Drugstores, Inc. (NASDAQ: CJJD) (“Jo-Jo Drugstores” or the “Company”), a leading online and offline retailer and wholesale distributor of pharmaceutical and other healthcare products and a healthcare provider in China, today announced its financial results for the fiscal year ended March 31, 2019.

Mr. Lei Liu, Chairman and Chief Executive Officer of China Jo-Jo Drugstores, Inc., commented, “We are pleased to present our financial results for our 2019 fiscal year. We increased our top line revenue to $107.55 million for the 2019 fiscal year as compared to $96.11 million for the previous fiscal year. Over the course of the 2019 fiscal year we made great strides in improving our operations and made a key senior appointment by appointing Mr. Wei Hu to serve as our new Chief Operating Officer, to accelerate the transition and digitalization of our company in the rapidly evolving retail drugstore industry. We look forward to further improving our operations and continuing to provide effective and efficient services to our loyal customer base for the coming years.”

Fiscal Year 2019 Financial Highlights

	For the Year Ended March 31,
($ millions, except per share data)	2019			2018			% Change
Revenue		107.55			96.11			11.9	%
Retail drugstores		72.34			61.98			16.7	%
Online pharmacy		8.78			12.13			(27.6	)%
Wholesale		26.43			22.00			20.1	%
Gross profit		25.11			20.13			24.8	%
Gross margin		23.3	%		20.9	%		2.4	pp*
Loss from operations		(0.88	)		(18.02	)		95.1	%
Net loss		(1.32	)		(17.06	)		92.3	%
Loss per share		(0.03	)		(0.68	)		95.6	%

*Notes: pp represents percentage points

●

Revenues increased by 11.9% to $107.55 million for the fiscal year ended March 31, 2019 from $96.11 million for the prior fiscal year.

●

Gross profit increased by 24.8% to $25.11 million for the fiscal year ended March 31, 2019 from $20.13 million for prior fiscal year.

●

Gross margin increased by 2.4 percentage points to 23.3% for the fiscal year ended March 31, 2019 from 20.9% for the prior fiscal year.

●

Net loss was $1.32 million, or $0.03 per basic and diluted share, for the fiscal year ended March 31, 2019, compared to $17.06 million, or $0.68 per basic and diluted share, for the same period of last year, which is a decrease in loss.

Fiscal Year 2019 Financial Results

Revenue

Revenue for the fiscal year ended March 31, 2019 increased by $11.44 million, or 11.9%, to $107.55 million from $96.11 million for the prior fiscal year. The increase in revenue was primarily due to the revenue increase in retail drugstores and wholesale business, partially offset by the decrease in online sales business.

	For the Year Ended March 31,
	2019							2018
($ millions)	Revenue		Cost of Goods		Gross Margin			Revenue		Cost of Goods		Gross Margin
Retail drugstores		72.34		51.25		29.2	%		61.98		45.92		25.9	%
Online pharmacy		8.78		7.75		11.8	%		12.13		10.86		10.5	%
Wholesale		26.43		23.45		11.3	%		22.00		19.21		12.7	%
Total		107.55		82.44		23.3	%		96.11		75.99		20.9	%

Revenue from the retail drugstores business increased by $10.36 million, or 16.7%, to $72.34 million for the fiscal year ended March 31, 2019 from $61.98 million for the prior fiscal year. The increase was primarily due to consumer-facing benefits such as emphasis on onsite medical care, chronic disease management, incremental DTP (Direct-to-Patient) business caused by continuous hospital medical reform, and the maturation of stores opened a year ago.

Revenue from the online pharmacy business decreased by $3.35 million, or 27.6%, to $8.78 million for the fiscal year ended March 31, 2019 from $12.13 million for the prior fiscal year. The decrease was mainly caused by a decline in sales via e-commerce platforms which suspended OTC drug sales on their sites directly, offset by the increase in business referred from Pharmacy Benefit Management (“PBM”) providers. The Company is adding more non-medical health products such as nutritional supplements into its product offerings to counteract the decline in sale of OTC drugs.

Revenue from the wholesale business increased by $4.43 million, or 20.1%, to $26.43 million for the fiscal year ended March 31, 2019 from $22.00 million for the prior fiscal year. The increase was primarily a result of the Company's ability to resell certain products, which the Company sold in large quantity at its retail stores, to other vendors at competitive prices, as well as sales of certain nutritional supplements to sales agents.

Gross profit and gross margin

Total cost of goods sold increased by $6.45 million, or 8.5%, to $82.44 million for the fiscal year ended March 31, 2019 from $75.99 million for the prior fiscal year. Gross profit increased by $4.99 million, or 24.8%, to $25.11 million for the fiscal year ended March 31, 2019 from $20.13 million for the prior fiscal year. Overall gross margin increased by 2.4 percentage points to 23.3% for the fiscal year ended March 31, 2019, from 20.9% for the prior fiscal year, due to higher retail profit margins.

Gross margin for the Company’s retail drugstores segment increased by 3.3 percentage points to 29.2% for the fiscal year ended March 31, 2019, from 25.9% for the prior fiscal year, primarily because of the introduction of new suppliers, and the continuing renegotiating of prices with the Company’s suppliers.

Gross margin for the online pharmacy segment increased by 1.3 percentage points to 11.8% for the fiscal year ended March 31, 2019, from 10.5% for the prior fiscal year, primarily due to the increase in sales via the Company’s own official website, offset by decrease in sale via third-party platforms, which are usually subject to low profit margin.

Gross margin for the Company’s wholesale segment decreased by 1.4 percentage to 11.3% for the fiscal year ended March 31, 2019, from 12.7% for the prior fiscal year, primarily as a result of variation in the products the Company carries and sells to certain pharmaceutical vendors.

Loss from operations

Selling and marketing expenses increased by $5.53 million, or 29.5%, to $24.27 million for the fiscal year ended March 31, 2019 from $18.74 million for the prior fiscal year, primarily due to increases in labor and rent related to store expansions and increases in the cost of living.

General and administrative expenses decreased by $16.10 million, or 90.4%, to $1.72 million for the fiscal year ended March 31, 2019 from $17.82 million for the prior fiscal year. In fiscal 2019, in order to use cash more efficiently, the Company accelerated the collection of advances to suppliers and accounts receivables. Specifically, we focused on the collection of aged accounts of advances to suppliers and accounts receivable. As the Company has collected these amounts, its allowance on doubtful accounts decreased by approximately $7.7 million. Additionally, the Company’s stock compensation expense decreased by approximately $6.8 million primarily as a result of issuing shares to its key employees in fiscal 2018. Excluding such expenses, general and administrative expenses decreased by approximately $1.6 million or 9%, which reflects control of expense such as overall management cash compensation in fiscal year 2019.

Impairment of long-lived assets was nil for the fiscal year ended March 31, 2019, compared to $1.58 million for the prior fiscal year. On March 31, 2018, Jiuxin Medicine started outsourcing its logistic service to Astro Boy Cloud Pan (Hangzhou) Storage and Logistic Co. Ltd, Jiuxin Medicine’s warehouse lease has been terminated. As a result, approximately $1.58 million in unamortized warehouse improvements were recognized as expenses in the year ended March 31, 2018. Such impairment was made after the Company estimated that the implied fair value of long-lived assets was lower than their carrying value.

Loss from operations was $0.88 million for the fiscal year ended March 31, 2019, compared to $18.02 million for the prior fiscal year. Operating margin was negative 0.8% for the fiscal year ended March 31, 2019, compared to negative 18.8% for the prior fiscal year.

Net loss

Net loss was $1.32 million, or $0.03 per basic and diluted share for the fiscal year ended March 31, 2019, compared to net loss of $17.06 million, or $0.68 per basic and diluted share for the prior fiscal year.

Financial Condition

As of March 31, 2019, the Company had cash of $24.75 million, compared to $31.45 million as of March 31, 2018. Net cash used in operating activities was $5.60 million for the fiscal year ended March 31, 2019, compared to $2.07 million for the prior fiscal year. Net cash used in investing activities was $7.33 million for the fiscal year ended March 31, 2019, compared to $2.98 million for the prior fiscal year. Net cash provided by financing activities was $8.08 million for the fiscal year ended March 31, 2018, compared to net cash used in financing activities of $4.89 million for the prior fiscal year.

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 in China. Jo-Jo Drugstores currently operates retail drugstores and an online pharmacy. It is also a wholesale distributor of products similar to those carried in its pharmacies and it cultivates and sells herbs used for traditional Chinese medicine. 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
+86-571-88219579
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

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31,			March 31,
	2019			2018
ASSETS
CURRENT ASSETS
Cash	$	9,322,463		$	15,132,640
Restricted cash		15,422,739			16,319,551
Financial assets available for sale		180,928			175,140
Notes receivable		177,278			279,082
Trade accounts receivable		8,692,514			8,322,393
Inventories		13,955,202			13,429,568
Other receivables, net		4,438,230			3,098,079
Advances to suppliers		1,950,252			3,447,452
Other current assets		2,063,375			2,116,237
Total current assets		56,202,981			62,320,142

PROPERTY AND EQUIPMENT, net		8,727,358			2,843,640

OTHER ASSETS
Long-term investment		24,243			40,890
Farmland assets		825,259			796,286
Long term deposits		2,157,275			2,501,968
Other noncurrent assets		1,196,197			1,253,352
Intangible assets, net		3,597,323			4,056,414
Total other assets		7,800,297			8,648,910

Total assets	$	72,730,636		$	73,812,692

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable, trade		23,106,230			25,259,526
Notes payable		25,951,673			19,180,200
Other payables		3,197,221			4,272,523
Other payables - related parties		795,179			850,342
Customer deposits		771,942			4,040,867
Taxes payable		125,859			366,040
Accrued liabilities		1,264,182			841,993
Total current liabilities		55,212,286			54,811,491

Financial liability		465,248			-
Purchase option and warrants liability		81,935			138,796
Total liabilities		55,759,469			54,950,287

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY
Common stock; $0.001 par value; 250,000,000 shares authorized; 28,936,778 and 28,936,778 shares issued and outstanding as of March 31, 2019 and March 31, 2018		28,937			28,937
Preferred stock; $0.001 par value; 10,000,000 shares authorized; nil issued and outstanding as of March 31, 2019 and March 31, 2018		-			-
Additional paid-in capital		44,905,664			43,599,089
Statutory reserves		1,309,109			1,309,109
Accumulated deficit		(30,587,468	)		(29,661,190	)
Accumulated other comprehensive income		2,508,964			3,586,460
Total stockholders’ equity		18,165,206			18,862,405
Noncontrolling interests		(1,194,039	)		-
Total equity		16,971,167			18,862,405
Total liabilities and stockholders’ equity	$	72,730,636		$	73,812,692

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)

	For the years ended March 31,
	2019			2018
REVENUES, NET	$	107,551,012		$	96,112,706

COST OF GOODS SOLD		82,442,969			75,987,537

GROSS PROFIT		25,108,043			20,125,169

SELLING EXPENSES		24,265,184			18,739,492
GENERAL AND ADMINISTRATIVE EXPENSES		1,718,989			17,823,661
IMPAIRMENT OF LONG-LIVED ASSETS		-			1,583,186
TOTAL OPERATING EXPENSES		25,984,173			38,146,339

LOSS FROM OPERATIONS		(876,130	)		(18,021,170	)

INTEREST INCOME		112,887			478,976
OTHER INCOME, NET		(93,311	)		201,096
CHANGE IN FAIR VALUE OF PURCHASE OPTION AND WARRANTS LIABILITY		(326,452	)		357,421

LOSS BEFORE INCOME TAXES		(1,183,006	)		(16,983,677	)

PROVISION FOR INCOME TAXES		134,763			76,256

NET LOSS		(1,317,769	)		(17,059,933	)

ADD: NET (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTEREST		391,491			-

NET (LOSS) ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES, INC.		(926,278	)		(17,059,933	)

OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustments		(1,077,496	)		2,236,398

COMPREHENSIVE LOSS		(2,395,265	)		(14,823,535	)

WEIGHTED AVERAGE NUMBER OF SHARES:
Basic		28,936,778			25,241,748
Diluted		28,936,778			25,241,748

LOSS PER SHARES:
Basic	$	(0.03	)	$	(0.68	)
Diluted	$	(0.03	)	$	(0.68	)

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the years ended March 31,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	(1,317,769	)	$	(17,059,933	)
Adjustments to reconcile net income to net cash provided by operating activities:
Bad debt direct write-off and provision		(3,357,851	)		4,009,636
Depreciation and amortization		1,676,413			1,383,810
Impairment of leasehold improvement					1,583,186
Stock based compensation		197,100			7,021,563
Change in fair value of purchase option derivative liability		326,452			(357,421	)
Change in operating assets:
Accounts receivable, trade		(116,810	)		(2,072,486	)
Notes receivable		83,910			(1,005	)
Inventories and biological assets		(1,390,823	)		(2,411,209	)
Other receivables		(1,308,437	)		(489,334	)
Advances to suppliers		3,612,453			1,121,006
Long term deposit		183,841			15,103
Other current assets		(83,372	)		(377,391	)
Other noncurrent assets		(23,511	)		36,091
Change in operating liabilities:
Accounts payable, trade		(528,353	)		3,726,625
Other payables and accrued liabilities		(328,473	)		1,115,267
Customer deposits		(3,011,194	)		1,048,939
Taxes payable		(216,792	)		(362,513	)
Net cash provided by operating activities		(5,603,216	)		(2,070,066	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Disposal of financial assets available for sale		87,290			-
Purchase of financial assets available for sale		(104,360	)		(75,513	)
Acquisition of equipment and building		(5,450,934	)		(414,398	)
Increase intangible assets		(29,817	)		(1,140,102

Additions to leasehold improvements		(1,828,360	)		(1,347,489	)
Net cash provided by (used in) investing activities		(7,326,181	)		(2,977,502	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable		42,030,521			27,461,423
Repayment of notes payable		(34,018,811	)		(22,476,740	)
Increase in financial liability		81,997			-
Proceeds from sale of stock and warrants		7,529			-
Repayment of other payables-related parties		(22,655	)		(91,395	)
Net cash provided by (used in) financing activities		8,078,581			4,893,288

EFFECT OF EXCHANGE RATE ON CASH		(1,856,174	)		3,810,661

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(6,706,989	)		3,656,381

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, beginning of year		31,452,191			27,795,810

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, end of year	$	24,745,202		$	31,452,191

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income taxes	$	56,422		$	27,825

The following information was filed by China Jojo Drugstores, Inc. (CJJD) on Monday, July 1, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Inside China Jojo Drugstores, Inc.'s 10-K Annual Report:

Financial - Earnings Highlight
The average gross margins for each of our four business segments are as follows: Year ended March 31, 2019 2018 Average gross margin for retail drugstores 29.2 25.9 Average gross margin for online sales 11.8 10.5 Average gross margin for wholesale business 11.3 12.7 Average gross margin for farming business N/A N/A Retail gross margins increased primarily because of introducing new suppliers, and renegotiating prices with our suppliers continuously.

Revenue - Product Highlight
The sales on our own official website usually have higher profit margins because customers referred by commercial insurance companies are premium customers who can afford premium products with higher profit margins.
Revenue - Product Highlight
As a result, we were able to keep up with our sales profit margin.
Other - Other Highlight
Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the "Risk Factors," "Cautionary Notice Regarding Forward-Looking Statements" and "Description of Business" sections and elsewhere in this report.
Financial - Expense Highlight
Excluding the above factors, selling and marketing expenses increased by approximately $1.2 million or 6.2%, which reflects increase in other operating cost.
Other - Other
In fiscal 2019, in order...Read more
Financial - Earnings
As a result, we incurred...Read more
Revenue - Product
Wholesale gross margin decreased primarily...Read more
Revenue - Product
In order to achieve lower...Read more
Revenue - Product
Until we are able to...Read more
Financial - Expense
As a result, approximately $1,583,186...Read more
Financial - Earnings
At the same time, gross...Read more
Other - Other
In fiscal 2019, in order...Read more
Other - Other
As we continue to expand...Read more
Revenue - Geography
Subsequent to March 31, 2019...Read more
Revenue - Product
The increase in our retail...Read more
Financial - Expense
As a result, we experienced...Read more
Financial - Earnings
Gross profit increased by $4,982,874...Read more
Revenue - Product
Sales and marketing expenses increased...Read more
Financial - Earnings
DTP drugs are usually low...Read more
Financial - Expense
General and administrative expenses decreased...Read more
Revenue - Product
Same-store sales increased by approximately...Read more
Revenue - Product
Our official website sales increased...Read more
Other - Other
The standard is effective for...Read more
Revenue - Product
Additionally, the guidance requires improved...Read more
Financial - Expense
Excluding such an effect, general...Read more
Financial - Expense
Additionally, our stock compensation expense...Read more
Financial - Earnings
As a result, our gross...Read more
Revenue - Product
As a result, vendors who...Read more
Other - Other
Although we believe the expectations...Read more
Revenue - Product
By setting special counters selling...Read more
Other - Other
Accounts receivables from our online...Read more
Revenue - Product
Excluding the RMB depreciation effect,...Read more
Other - Other
Advances to suppliers are mainly...Read more
Revenue - Product
As these stores gained such...Read more
Financial - Expense
These estimates can be affected...Read more
Revenue - Product
Wholesale revenue increased by $4,429,950...Read more
Revenue - Product
As our retail drugstores achieved...Read more

Financial Statements, Disclosures and Schedules

Inside this 10-K Annual Report

Material Contracts, Statements, Certifications & more

China Jojo Drugstores, Inc. provided additional information to their SEC Filing as exhibits

Exhibit 21.1: List Of Subsidiaries

Exhibit 23.1: Consent Of Independent Registered Public Accounting Firm

Exhibit 31.1: Certification

Exhibit 31.2: Certification

Exhibit 32.1: Certification

Ticker: CJJD
CIK: 1413263
Form Type: 10-K Annual Report
Accession Number: 0001213900-19-011825
Submitted to the SEC: Mon Jul 01 2019 4:47:01 AM EST
Accepted by the SEC: Mon Jul 01 2019
Period: Sunday, March 31, 2019
Industry: Medicinal Chemicals And Botanical Products