China Jo-Jo Drugstores Announces Fiscal 2014 Third Quarter Financial Results and Schedules Conference Call for February 21, 2014 - WCIV-TV | ABC News 4 - Charleston News, Sports, Weather

China Jo-Jo Drugstores Announces Fiscal 2014 Third Quarter Financial Results and Schedules Conference Call for February 21, 2014

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SOURCE China Jo-Jo Drugstores, Inc.

HANGZHOU, China, Feb. 20, 2014 /PRNewswire/ -- China Jo-Jo Drugstores, Inc. (CJJD) (the "Company"), a retail and wholesale distributor of pharmaceutical and other healthcare products in China, today announced earnings results for the three months ended December 31, 2013.

Fiscal Year 2014 Third Quarter Highlights:

  • Online sales contributed $2.7 million in revenue for the quarter, an increase of 199.4% from the same period of FY 2013
  • Retail sales, approximately 74.1% of total revenue for the three months ended December 31, 2013, increased by $2.0 million or 17.7% to $13.2 million from the same period of FY 2013
  • Wholesale, approximately 25.9% of total revenue for the three months ended December 31, 2013, increased to $4.6 million as compared to $4.3 million in Q3 of FY 2013
  • Gross margin decreased quarter over quarter from 19.2% to 1.0%
  • Quarterly net loss was $8.7 million, and diluted EPS losses of $0.64

Mr. Lei Liu, the Company's Chairman and CEO, stated, "Primarily due to increase in same-store sales and revenues from maturing stores that opened in the last couple of years, our drugstore sales increased slightly quarter over quarter. Looking forward, we will continue to focus on our competitive advantages in the retail drugstore segment by hiring additional clinic staff to better advise on drug selection, looking to open additional clinics next to our drugstores, applying for government insurance for all of our stores, and stocking each location to better cater to its neighborhood. Additionally, our online sales have continued to grow quarter over quarter, reflecting our efforts in collaborating with large business-to-consumer vendors, identifying products suitable for online customers and controlling cost of conducting e-commerce business. Nevertheless, retail profit margin decreased from the same period last year as we were promoting sales via activities such as buy-one-get-one-free. In addition, to commemorate our pharmacy's ten-year anniversary, we rewarded our members with coupons and goods. Although doing so added significant marketing expense, we believe it will strengthen our membership loyalty in the long run."

"In the quarter, we experienced significant loss primarily due to several reasons, including non-recurring promotion activities and membership rewards for ten-year anniversary, as well as discounted sale in our wholesale division," commented by Mr. Lei. Additionally, two stores in Shanghai ceased operations while two stores were opened in Hangzhou in January 2014. As of February 19, 2014, the Company operated 51 pharmacies, including three in Shanghai.

Mr. Liu continued, "As we were transitioning into a new sales and management team for our wholesale business, our regular wholesale business declined quarter over quarter. However, as the new team has extensive industry-relevant experience and is actively seeking out potential customers such as hospital and other drugstores, we are optimistic that our wholesale business can pick up in the future. During this quarter, as the prior team gradually withdrew, certain customers and suppliers that worked with that team chose to discontinue their business with us. In response, we settled certain prepayment accounts with those suppliers through either their products or cash. Because some of the products were specifically for the discontinued customers, we decided not to continue putting significant efforts in marketing such products and sold them off at discount. We believe that doing so, while affecting our short-term profitability, may minimize further loss and free up storage space that our new team may require. In addition, the new team will be freed from dealing with prior accounts of the discontinued suppliers, which in turn allows us to better track the new team's performance. As such sales are non-recurring in nature, we expect our gross margin to recover and net loss to decline in the future."

"For the remainder of fiscal 2014, we are looking to stabilize and grow our revenue primarily through our retail operations, and we will continue our wholesale operations with an eye on bottom line results," concluded Mr. Liu.

Balance Sheet Highlights

As of December 31, 2013, the Company had $3.1 million of cash, $67.5 million in total assets and $37.6 million in total liabilities.

Fiscal Year 2014 Third Quarter Results

Comparison of three months ended December 31, 2013 and 2012

The following table summarizes our results of operations for the three months ended December 31, 2013 and 2012:



Three months ended December 31,



2013


2012



Amount


Percentage

of total

revenue


Amount


Percentage

of total

revenue

Revenue


$

17,833,072


100.0%


$

15,596,013


100.0%

Gross profit


$

179,084


1.0%


$

2,990,302


19.2%

Selling expenses


$

5,338,404


29.9%


$

3,179,168


20.4%

General and administrative expenses


$

3,700,466


20.8%


$

3,300,064


21.2%

Loss from operations


$

(8,859,786)


(49.7)%


$

(3,488,930)


(22.4)%

Other income (expense), net


$

130,426


0.7%


$

(25,380)


(0.2)%

Impairment of goodwill


$

-


0.0%


$

-


0.0%

Change in fair value of purchase option derivative

liability


$

(41,944)


(0.2)%


$

(12,095)


(0.1)%

Income tax benefits


$

(35,887)


(0.2)%


$

(39,613)


(0.3)%

Net loss attributable to controlling interest


$

(8,735,230)


(49.0)%


$

(3,486,521)


(22.4)%

Net loss attributable to noncontrolling interest


$

(187)


(0.0)%


$

(271)


(0.0)%

Revenue

Revenue increased by $2,237,059 or 14.3% period over period, primarily due to our retail business:


(1)

Retail sales, which accounted for approximately 74.1% of total revenue for the three months ended December 31, 2013, increased by $2,022,114 or 17.7% to $13,209,729. Same-store sales increased by approximately $140,000 or 1.4%, while online sales contributed approximately $2,670,000 in revenue, an increase of 199.4%. The increase in same-store sales reflects implementation of key drugstore operational strategies such as promoting sale through our doctors and clinics, as well as modest economic improvements in China. Gross profit decreased by $2,811,218 to $179,084 as compared to the same period a year ago. Retail margin fell from 23.3% to 18.5% primarily due to the additional costs incurred to commemorate our pharmacy's ten-year anniversary. Our store count decreased to 51 as of December 31, 2013, from 52 a year ago.





(2)

Wholesale revenue, which represented 25.9% of total revenue for the three months ended December 31, 2013, slightly increased by $254,945 or 5.8%. During the three months ended December 31, 2013, we disposed of certain products at discounted prices. Excluding the impact from such discounted sales, wholesale revenue period-over-period decreased by approximately $0.4 million, which was primarily caused by the turnover of our sales and management team. While the new team members focused on assuming control of all facets of our wholesale operations during the quarter, they were unable to make significant progress business-wise. Additionally, considerable efforts and time were expended to work with the former team on settling certain accounts and inventory. Until the new team can develop and establish a new customer base, we do not expect our wholesale business to expand significantly in the immediate future.

Revenue by Segment

The following table breaks down the revenue for our three business segments:



Three months ended December 31,







2013



2012







Amount


% of total

revenue


Amount


% of total

revenue


Variance by

amount


% of

change

Revenue from retail business













     Revenue from drugstores


$

10,543,897


59.2%


$

10,337,237


66.5%


$

206,660


2.0%

     Revenue from online sales



2,665,832


14.9%



890,378


5.5%



1,775,454


199.4%

          Sub-total of retail

          revenue



13,209,729


74.1%



11,227,615


72.0%



2,022,114


17.7%

















Revenue from wholesale

business



4,623,343


25.9%



4,368,398


28.0%



254,945


5.8%

Revenue from farming

business



-


0.0%



-


0.0%



-


N/A

Total revenue


$

17,833,072


100%


$

15,596,013


100%


$

2,237,059


14.3%

The revenue fluctuation period over period reflected the following combined factors:


(1)

Drugstore revenue increased by $206,660 or 2.0% period over period. Same-store sales increased by approximately $140,000, including modest increase in sales of insurance-covered medications. In addition, sales attributable to our clinics and from two new stores in Hangzhou and Shanghai contributed approximately $175,000 and $168,000 to revenue, respectively. 





(2)

Wholesale revenue increased by $254,945 or 5.8%. During the three months ended December 31, 2013, we discounted sale prices for certain products that the Company's new wholesale team decided not to continue expending significant efforts to sell in the future. Nevertheless, revenue from their sales accounts for approximately $673,000. Excluding these sales, wholesale revenue period-over-period decreased by approximately $418,000. Due to the transitioning of a new sales and management team for our wholesale business since September 2013, we do not expect any rapid growth in the business in the near future.





(3)

Online sales increased by $1,775,454 or 199.4% period over period. We have been working with business-to-consumer online vendors, including Taobao, by posting our products on their online platforms, which direct customers back to our website. Such arrangement has exposed our online presence to a wider consumer base. In addition, since the end of 2012, we have spent considerable efforts in identifying popular products that can drive sales. As a result, we have seen steady growth in online sales.

Gross Profit

Gross profit decreased by $2,270,117 or 75.9% period over period. Gross margin decreased period over period from 12.8% to 4.0%. The average gross margin of our three business segments are as follows:



Three months ended


December 31,



2013


2012

Average gross margin for retail business 


18.5%


23.3%

Average gross margin for wholesale business 


(48.9)%


8.6%

Average gross margin for farming business 


N/A


N/A

Retail gross margin decreased primarily due to our promotional campaign. To reward our members during our ten-year anniversary and to attract more customers in a competitive market, we conducted promotional events such as buy-one-get-one-free. Accordingly, we recorded approximately $487,000 in cost of sales associated with such promotions. Excluding the effect of such customer rewards, gross margin is approximately 22.2%, which is similar to the same period last year.

Wholesale gross margin decreased primarily because we discounted prices for certain products that the Company's new wholesale team decided not to continue expending significant efforts to sell in the future. We have been transitioning in a new sales and management team for Jiuxin Medicine in the quarter ended December 31, 2013. As the prior team gradually withdrew, certain customers and suppliers that worked with that team chose to discontinue their business with us. In response, we settled certain prepayment accounts with the withdrawing suppliers through either their merchandise or cash, and received approximately $6.9 million in products delivered during the quarter. However, because some of the products were specifically for customers that discontinued business with the Company, the new team decided not to continue expending significant efforts to sell them, and began selling them at discount in an effort to reduce inventory from the Company's warehouse. We believe that such sales, while affecting our short-term profitability, may minimize further loss and free up storage space that the new team may require. In addition, such sales free the new team from dealing with prior accounts of the discontinued suppliers, which in turn allows us to better track the performance of the new team. Nevertheless, the recorded cost related to such discounted sales amounted to approximately $2,065,000, while the sales revenue was approximately $673,000. As a result, our gross margin became negative. Because the inventory assessment is ongoing, additional products may be identified and thus requiring further discounted sales. The cost relating to such additional discounted sales is estimated by the new team to be approximately $545,836.

Selling and Marketing Expenses

Sales and marketing expenses increased by $2,159,236 or 67.9% period over period mainly due to promotional activities such as product giveaways to our members. To commemorate our pharmacy's ten-year anniversary and to foster our members' loyalty, we rewarded them with complimentary gifts during the six months ended December 31, 2013, at a cost of approximately $2,960,000. In contrast, promotional cost for the same period in the prior year is only approximately $530,000. Such expenses as a percentage of revenue increased to 29.9% from 20.4% for the same period a year ago.

General and Administrative Expenses

General and administrative expenses increased by $400,402 or 12.1% period over period. However, such expenses as a percentage of revenue decreased to 20.8% from 21.2% for the same period a year ago as a result of increased sales. As discussed earlier, certain wholesale suppliers stopped doing business with us in connection with the transitioning of the sales and management team for our wholesale business. As a result, we have been actively disposing of our remaining inventory of such suppliers' products, including products that we have decided not to sell in the future. As a result, we recorded loss of approximately $998,000.

Our advances to suppliers balance as of December 31, 2013 decreased by $4,401,330 as a result of shipments from vendors received during the quarter. As a result, we reversed approximately $1,167,879 from the allowance for advance to suppliers account. On the other hand, we tightened our allowance policy for accounts receivable by reserving 100% for all receivable accounts over three months old. As a result, we added approximately $1,259,334 of allowance to our accounts receivable.

Loss from Operations

As a result of the above, loss from operations increased by $5,370,856 period over period. Operating margin for the three months ended December 31, 2013 and 2012 was (49.7)% and (22.4)%, respectively.

Income Taxes 

Income tax benefits decreased by $3,726 period over period, as a result of lower taxable income.

Net Loss

As a result of the foregoing, net loss increased by $5,248,625 period over period.

Comparison of nine months ended December 31, 2013 and 2012

The following table summarizes our results of operations for the nine months ended December 31, 2013 and 2012:



Nine months ended December 31,



2013


2012



Amount


Percentage

of total

revenue


Amount


Percentage

of total

revenue

Revenue


$

50,025,012


100.0%


$

75,108,458


100.0%

Gross profit


$

6,728,656


13.5%


$

11,557,276


15.4%

Selling expenses


$

9,998,377


20.0%


$

7,140,013


9.5%

General and administrative expenses


$

6,833,265


13.7%


$

7,456,956


9.9%

Loss from operations


$

(10,102,986)


(20.2)%


$

(3,039,693)


(4.0)%

Other income, net


$

127,034


0.3%


$

22,627


0.0%

Impairment of good will


$

-


-%


$

(1,473,606)


(2.0)%

Change in fair value of purchase option derivative

liability


$

50,328


0.1%


$

13,652


0.0%

Income tax expense


$

43,222


0.0%


$

3,919


0.0%

Net loss attributable to controlling interest


$

(10,068,808)


(20.1)%


$

(4,480,083)


(6.0)%

Net loss attributable to noncontrolling interest


$

(694)


(0.0)%


$

(856)


(0.0)%

Revenue

Revenue decreased by $25,083,446 or 33.4% period over period, primarily due to our wholesale business, offset by our retail business:


(1)

Retail sales, which accounted for approximately 70.3% of total revenue for the nine months ended December 31, 2013, increased by $4,495,041 or 14.7% to $35,175,061. Same-store sales increased by approximately $1,160,000 or 4.3%, while online sales contributed approximately $5,530,000 in revenue, an increase of 143.9%. The increase in same-store sales reflects implementation of key drugstore operational strategies such as promoting sale through our doctors and clinics, as well as modest economic growth in China. Gross profit decreased by $4,828,620 to $6,728,656 in the nine months ended December 31, 2013 as compared to the same period a year ago. Retail margin, however, slightly fell from 25.2% to 22.0% as a result of our promotions in celebration of our pharmacy's ten-year anniversary. Our store count decreased to 51 as of December 31, 2013, from 52 a year ago.





(2)

Wholesale revenue, which represented 29.7% of total revenue for the nine months ended December 31, 2013, decreased by $27,054,396 or 64.6%. Since the third quarter of fiscal 2013, we have been and are focusing on profitability rather than sales volume. Although we have been actively courting wholesale customers, we have yet to make significant progress. Until we can qualify as first-tier distributor status with more vendors, we will continue to have limited access to more lucrative sales channels such as hospitals, and do not expect our wholesale business to expand significantly in the immediate future.

Revenue by Segment

The following table breaks down the revenue for our three business segments:



Nine months ended December 31,






2013


2012







Amount


% of

total

revenue


Amount


% of

total

revenue


Variance

by

amount


% of

change

Revenue from retail business













     Revenue from drugstores


$

29,643,637


59.2%


$

28,411,652


37.9%


$

1,231,985


4.3%

     Revenue from online sales



5,531,424


11.1%



2,268,368


2.9%



3,263,056


143.9%

          Sub-total of retail

          revenue



35,175,061


70.3%



30,680,020


40.8%



4,495,041


14.7%

















Revenue from wholesale

business



14,849,951


29.7%



41,904,347


55.8%



(27,054,396)


(64.6)%

Revenue from farming

business



-


-%



2,524,091


3.4%



(2,524,091)


(100.0)%

Total revenue


$

50,025,012


100%


$

75,108,458


100%


$

(19,271,743)


(27.8)%

The revenue fluctuation period over period reflected the following combined factors:


(1)

Drugstore revenue increased by $1,231,985 or 4.3% period over period. Same-store sales increased by approximately $1,160,000, including modest increase in sales insurance-covered medications. Sales attributable to our clinics and from three new stores in Hangzhou and Shanghai contributed approximately $855,000 and $208,000 to revenue, respectively. On the other hand, we closed 16 stores in the past calendar year. Although these stores were underperforming, they contributed approximately $1,110,000 in revenue prior to their closures.





(2)

Wholesale revenue decreased by $27,054,396 or 64.6% primarily as a result of changing our sales strategy to focus on profitability. In the first and second quarter of fiscal 2013, we achieved sales volume of approximately $37,535,949 rapidly through competitive pricing. However, we incurred loss as result of low profit margin and rising overhead. Since the third quarter of fiscal 2013, we no longer engage in low margin sales and are focusing on profitability rather than sales volume. As a result, sales in the third quarter of fiscal 2013 amounted to approximately $4,368,398. Although this strategy may impact our ability to achieve first-tier distributor status, we believe that focusing on profitability rather than volume is critical for our overall operations going forward. Although we continue to focus on profitability in fiscal 2014, especially in the first two quarters, our gross margin was severely impacted by discounted sales during the third quarter. As discussed earlier, we had approximately $673,000 in discounted sales from disposing of certain inventory from our wholesale business during the quarter ended December 31, 2013.





(3)

Online sales increased by $3,263,056 or 143.9% period over period. We have been working with business-to-consumer online vendors, including Taobao, by posting our products on their online platforms, which direct customers back to our website. Such arrangement has exposed our online presence to a wider consumer base. In addition, since the end of 2012, we have spent considerable efforts in identifying popular products that can drive sales. As a result, we have seen steady growth in online sales.

Gross Profit

Gross profit decreased by $1,784,057 or 20.8% period over period. Gross margin decreased period over period from 15.4% to 14.5%. The average gross margin of our three business segments are as follows:



Nine months ended

December 31,



2013


2012

Average gross margin for retail business 


22.0%


25.2%

Average gross margin for wholesale business 


(6.8)%


3.6%

Average gross margin for farming business 


N/A


90.9%

Retail gross margin decreased primarily due to our promotional campaign. To reward our members during our ten-year anniversary and to attract more customers in a competitive market, we conducted promotional events such as buy-one-get-one-free. Accordingly, we recorded approximately $487,000 in cost of sales associated with such promotions. Excluding the effect of such customer rewards, gross margin is approximately 23.4%, or 1.8% lower than a year ago, which reflects price adjustments that we made. We also made some price adjustments to comply with government price controls, as well as to stay competitive, including with local community hospitals that are able to sell at or near cost as their pharmacies are indirectly subsidized through the government. Accordingly, overall retail gross profit margin decreased.

Wholesale gross margin decreased primarily because we discounted prices for certain products that the new sales and management team decided not to sell in the future. Products identified by the team were sold at discount at recorded cost of approximately $2,065,000, and there may be additional cost of approximately $545,836 as assessment continues.

Selling and Marketing Expenses

Sales and marketing expenses increased by $2,858,364 or 40.0% period over period mainly due to promotional activities such as product giveaways to our members. To commemorate our pharmacy's ten-year anniversary and to foster our members' loyalty, we rewarded them with complimentary gifts during the six months ended December 31, 2013, at a cost approximately $2,960,000. In contrast, promotional cost was only approximately $530,000 for the nine months ended December 31, 2013. Such expenses as a percentage of revenue increased to 20.0% from 9.5% for the same period a year ago.

General and Administrative Expenses

General and administrative expenses decreased by $623,691 or 8.4% period over period. Such expenses as a percentage of revenue decreased to 13.7% from 21.2% for the same period a year ago as a result of decreasing sales. Since shifting our wholesale strategy at the end of 2012, we have reduced both wholesale staff and administrative expense. We also closed 16 stores in the nine months ended December 31, 2013, thereby eliminating their associated management expense. Nevertheless, as discussed earlier, we recorded loss of approximately $998,000.

Our advances to suppliers balance as of December 31, 2013 decreased by $4,401,330 as a result of shipments from vendors received during the quarter. As a result, we reversed approximately $1,192,038 from the allowance for advance to suppliers account. On the other hand, we tightened our allowance policy for accounts receivable by reserving 100% for all receivable accounts over three months old. As a result, we added approximately $1,340,606 of allowance to our accounts receivable. The significant decrease in absolute dollars mainly reflects decrease in allowance for advances to suppliers.

Loss from Operations

As a result of the above, loss from operations increased by $7,063,293 or 232.4% period over period. Operating margin for the nine months ended December 31, 2013 and 2012 was (20.2)% and (4.0)%, respectively.

Income Taxes

Income tax expense increased by $137,108 period over period.

Net Income

As a result of the foregoing, net loss increased by $5,588,563 period over period.

Conference Call Information

The Company will host a conference call to discuss its fiscal year 2014 third quarter results on Friday, February 21, 2014, at 8 a.m. Eastern Time. To participate in the conference call, please dial 1-877-941-1427 from North America. International participants can access the call by dialing 1-480-629-9664. A live audio webcast of this conference call will be available under the Investor Relations section of the Company's website at http://www.chinajojodrugstores.com. A replay of the call will be available beginning the same day at approximately 11 a.m. Eastern Time by dialing 1-877-870-5176 or -1-858-384-5517 with pin #4670729. The replay will also be available on the company website.

About China Jo-Jo Drugstores, Inc.

China Jo-Jo Drugstores, Inc., through its subsidiaries and contractually controlled affiliates, is a retailer and wholesale distributor of pharmaceutical and other healthcare products in the People's Republic of China. As of February 19, 2014, the Company had 51 retail pharmacies in Hangzhou and Shanghai.

Forward Looking Statement

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain of the statements made in the press release constitute forward-looking statements within the meaning 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," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative 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. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of 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, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.

   

CHINA JO-JO DRUGSTORES, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)




December 31,

2013


March 31,

2013






A S S E T S










CURRENT ASSETS





Cash


$

3,106,659


$

4,524,094

Trade accounts receivable, net



10,192,379



12,978,808

Inventories



18,231,126



8,586,999

Other receivables, net



423,715



157,849

Advances to suppliers, net



6,678,349



15,523,034

Restricted cash



3,229,744



2,162,837

Other current assets



2,272,678



1,221,499

Total current assets



44,134,650



45,155,120








PROPERTY AND EQUIPMENT, net



12,597,796



13,288,652








OTHER ASSETS







Long term deposits



2,835,137



2,760,665

Other noncurrent assets



5,443,025



5,431,326

Intangible assets, net



2,477,648



1,202,258

Total other assets



10,755,810



9,394,249








Total assets


$

67,488,256


$

67,838,021








L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y











CURRENT LIABILITIES







Short-term loan payable


$

163,700


$

-

Accounts payable, trade



19,296,244



13,780,211

Notes payable



8,045,331



7,186,453

Other payables



3,211,101



1,327,454

Other payables - related parties



2,134,802



1,224,417

Customer deposits



4,040,587



4,828,293

Taxes payable



465,326



371,633

Accrued liabilities



222,203



956,342

Total current liabilities



37,579,294



29,674,803








Purchase option derivative liability



101,988



15,609

Total liabilities



37,681,282



29,690,412








COMMITMENTS AND CONTINGENCIES














STOCKHOLDERS' EQUITY







Preferred stock; $0.001 par value; 10,000,000 shares authorized; nil issued and

       outstanding as of December 31, 2013 and March 31, 2013



-



-

Common stock; $0.001 par value; 250,000,000 shares authorized; 13,959,002

       shares issued and outstanding as of December 31, 2013 and March 31, 2013



13,959



13,609

Additional paid-in capital



17,077,556



16,609,747

Statutory reserves



1,309,109



1,309,109

Retained earnings



7,026,561



17,095,369

Accumulated other comprehensive income



4,342,311



3,121,654

Total stockholders' equity



29,769,496



38,149,488








Noncontrolling interests



37,478



(1,879)

Total equity



29,806,974



38,147,609








Total liabilities and stockholders' equity


$

67,488,256


$

67,838,021

   

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,



2013


2012


2013


2012

REVENUES, NET


$

17,833,072


$

15,596,013


$

50,025,012


$

75,108,458














COST OF GOODS SOLD



17,653,988



12,605,711



43,296,356



63,551,182














GROSS PROFIT



179,084



2,990,302



6,728,656



11,557,276














SELLING EXPENSES



5,338,404



3,179,168



9,998,377



7,140,013

GENERAL AND ADMINISTRATIVE EXPENSES



3,700,466



3,300,064



6,833,265



7,456,956

TOTAL OPERATING EXPENSES



9,038,870



6,479,232



16,831,642



14,596,969














LOSS FROM OPERATIONS



(8,859,786)



(3,488,930)



(10,102,986)



(3,039,693)














OTHER INCOME (LOSS), NET



130,426



(25,380)



127,034



(75,178)

GOODWILL IMPAIRMENT LOSS



-



-



-



(1,473,606)

CHANGE IN FAIR VALUE OF DERIVATIVE

LIABILITIES



(41,944)



(12,095)



(50,328)



13,652














LOSS BEFORE INCOME TAXES



(8,771,304)



(3,526,405)



(10,026,280)



(4,574,825)














PROVISION FOR INCOME TAXES



(35,887)



(39,613)



43,222



(93,886)














NET LOSS



(8,735,417)



(3,486,792)



(10,069,502)



(4,480,939)














ADD: NET LOSS ATTRIBUTABLE TO

NONCONTROLLING INTEREST



187



271



694



856














NET LOSS ATTRIBUTABLE TO CHINA JO-JO

DRUGSTORES, INC.



(8,735,230)



(3,486,521)



(10,068,808)



(4,480,083)














OTHER COMPREHENSIVE INCOME













Foreign currency translation adjustments



259,814



52,538



1,019,605



107,547














COMPREHENSIVE LOSS


$

(8,475,416)


$

(3,433,983)


$

(9,049,203)


$

(4,372,536)














WEIGHTED AVERAGE NUMBER OF SHARES:













Basic



13,959,003



13,588,569



13,730,742



13,575,550

Diluted



13,959,003



13,588,569



13,730,742



13,575,550














LOSS PER SHARE:













Basic


$

(0.64)


$

(0.26)


$

(0.73)


$

(0.33)

Diluted


$

(0.64)


$

(0.26)


$

(0.73)


$

(0.33)

   

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)




Nine months ended

December 31,



2013


2012

CASH FLOWS FROM OPERATING ACTIVITIES:



Net loss


$

(10,069,502)


$

(4,480,939)

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



Depreciation and amortization



1,646,066



2,118,133

Stock compensation



477,284



135,107

Bad debt direct write-off



252,780



155,797

Allowance for accounts receivables



578,219



1,690,544

Allowance for advances to suppliers



(1,523,882)



319,481

Goodwill Impairment



-



1,482,327

Change in fair value of purchase option derivative liability



86,379



(13,652)

Inventory reserve and write-off



1,539,514



-

Change in operating assets:







Accounts receivable, trade



2,278,341



(5,581,444)

Notes receivable



-



-

Inventories



(10,870,349)



(734,011)

Other receivables



(259,339)



(1,035,445)

Advances to suppliers



10,706,963



(5,404,917)

Other current assets



(1,009,632)



607,793

Long term deposit



-



422,457

Other noncurrent assets



133,648



331,544

Change in operating liabilities:







Accounts payable, trade



5,099,673



6,891,514

Other payables and accrued liabilities



1,074,755



708,621

Customer deposits



(909,992)



755,387

Taxes payable



82,942



(141,984)

Net cash provided by (used in) operating activities



(686,132)



(1,773,687)








CASH FLOWS FROM INVESTING ACTIVITIES:







Purchase of equipment



(457,609)



(252,128)

Purchase of land use right



(1,355,290)



-

Additions to leasehold improvements



(25,112)



(253,515)

Net cash used in investing activities



(1,838,011)



(505,643)








CASH FLOWS FROM FINANCING ACTIVITIES:




Proceeds from short-term bank loan



162,280



-

Change in restricted cash



(999,814)



3,244

Change in notes payable



659,246



2,512,678

Change in other payables-related parties



909,954



(391,664)

Net cash provided by financing activities



731,666



2,124,258








EFFECT OF EXCHANGE RATE ON CASH



375,042



117,484








INCREASE (DECREASE) IN CASH



(1,417,435)



(37,588)








CASH, beginning of period



4,524,094



3,833,216








CASH, end of period


$

3,106,659


$

3,795,628








SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:




Cash paid for income taxes


$

9,529


$

72,024

Charge of property and equipment into disposal loss at store closing


$

-


$

76,368

Transfer from construction-in-progress to leasehold improvement


$

-


$

2,707,183

Good receipts against accounts receivables


$

1,434,043


$

-

 

©2012 PR Newswire. All Rights Reserved.

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