CHINA JO-JO DRUGSTORES, INC. - FORM 8-K - EX-99.1 - PRESS RELEASE - November 14, 2013

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8-K - CURRENT REPORT - CHINA JO-JO DRUGSTORES, INC.f8k111413_chinajojodrug.htm
Exhibit 99.1

China Jo-Jo Drugstores Announces Fiscal 2014 Second Quarter Financial Results

Fiscal Year 2014 Second Quarter Highlights:

 
·
In three months online sales contributed $1.6 million in revenue, an increase of 85.6% from the prior period
 
·
Retail sales, approximately 65.6% of total revenue for the three months ended September 30, 2013, increased by $0.6 million or 5.3% to $11.1 million compared with the same period last year
 
·
Cost of goods sold in the second quarter decreased to $13.9 million, down 40.2% compared with the same period last year
 
·
Gross margin increased quarter over quarter from 12.8% to 17.5%
 
·
Net loss was $0.55 million in the second quarter, losses narrowed 64.3% compared with the same period last year
 
·
Diluted and basic loss per share was $0.04

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 September 30, 2013.  As previously announced, the Company will hold a conference call at 8:00 a.m. Eastern Time on Friday November 15.  Please see below for dial-in information.

Mr. Lei Liu, the Company's Chairman and CEO, stated, “Due to the closure of 16 stores in the past calendar year, our drugstore sales declined slightly quarter over quarter. However, our same-store sales grew. Looking forward, we will continue to focus on our competitive advantages in the retail drugstore segment: hiring additional clinic staff to better advise on drug selection, looking to open additional clinics next to our drugstores, and stocking each store location to better cater to its neighborhood. Additionally, our online pharmacy grew steadily quarter over quarter, reflecting our efforts in collaborating with large B2C vendors, identifying products suitable for online customers, and controlling costs. Nevertheless, retail profit margin decreased slightly from the same period last year as we were forced by government price control to adjust prices.” As of November 14, 2013, the Company operated 51 pharmacies, including five in Shanghai.

Mr. Liu continued, “Since the third quarter of fiscal 2013, we have stopped low margin sales in our wholesale segment and are focusing on profitability over sales volume. As a result, our sales volume declined while gross profit margin increased significantly. Although this strategy may impact our ability to achieve first-tier distributor status, we believe that this approach is critical for our overall operations going forward.”

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

Balance Sheet Highlights

As of September 30, 2013, the Company had $6.3 million of cash, $70.3 million in total assets and $32.4 million in total liabilities.

Fiscal Year 2014 Second Quarter Results

Comparison of three months ended September 30, 2013 and 2012
 
The following table summarizes our results of operations for the three months ended September 30, 2013 and 2012:
 
   
Three months ended September 30,
  
   
2013
    
2012
  
   
Amount
    
Percentage
of total
revenue
    
Amount
    
Percentage
of total
revenue
  
Revenue
  
$
16,855,421
      
100.0
%
  
$
26,665,114
      
100.0
%
Gross profit
  
$
2,948,403
      
 17.5
%
  
$
3,422,197
      
12.8
%
Selling expenses
  
$
2,979,131
      
 17.7
%
  
$
2,102,621
      
7.9
%
General and administrative expenses
  
$
491,981
      
 2.9
%
  
$
1,310,313
      
4.9
%
(Loss) income from operations
  
$
(522,709
) 
    
 (3.1)
%
  
$
9,263
      
0.0
%
Other income (expense), net
  
$
37,021
      
 0.2
%
  
$
(90,332
) 
    
(0.3
)%
Goodwill impairment loss
  
$
-
      
-
%
  
$
(1,473,606)
      
(5.5
)%
Change in fair value of purchase option derivative liability
  
$
(21,049
)
    
 (0.1)
%
  
$
25,905
      
0.1
%
Income tax expense
  
$
39,589
      
 0.2
%
  
$
10
      
0.0
%
Net loss attributable to controlling interest
  
$
(546,590
) 
    
 (3.2)
%
  
$
(1,528,449
) 
    
(5.7
)%
Net loss attributable to noncontrolling interest
  
$
(264
)
    
 (0.0)
%
  
$
(331
) 
    
(0.0
)%
 
 
1
 
 
Revenue

Revenue decreased by $9,809,693  or 36.8% period over period, primarily due to decrease in our wholesale business, offset by slight increase in our retail business:

 
(1)
Wholesale revenue, which represented 34.4% of total revenue for the three months ended September 30, 2013, decreased by $10,364,687 or 64.1%. Such significant contraction resulted from ongoing implementation of our new wholesale strategy to focus on profitability rather than sales volume.  Thus, our wholesale profit margin increased from 2.5% to 18.6%. However, until we can achieve 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.

 
(2)
Retail sales, which accounted for approximately 65.6% of total revenue for the three months ended September 30, 2013, increased by $554,994 or 5.3% to $11,052,942.  Same-store sales increased by approximately $66,080 or 0.7%, while online sales contributed approximately $1,596,950 in revenue, an increase of 85.6%.  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.  Retail margin, however, fell from 26.0% to 22.7% due to price adjustments caused by government drug price control.  Our store count decreased to 51 as of September 30, 2013, from 65 a year ago.
 
Quarterly Revenue by Segment

The following table breaks down the revenue for our three business segments for the three months ended September 30, 2013 and 2012:

   
Three months ended September 30,
              
   
2013
    
2012
              
   
Amount
    
% of total revenue
    
Amount
    
% of total revenue
    
Variance by amount
    
% of change
  
Revenue from retail business
                                    
     Revenue from drugstores
  
$
9,455,992
      
56.1
%
  
$
9,637,418
      
36.2
%
  
$
(181,426)
      
(1.9)
%
     Revenue from online sales
    
1,596,950
      
9.5
%
    
860,530
      
3.2
%
    
736,420
      
85.6
%
          Sub-total of retail revenue
    
11,052,942
      
65.6
%
    
10,497,948
      
39.4
%
    
554,994
      
5.3
%
                                                 
Revenue from wholesale business
    
5,802,479
      
34.4
%
    
16,167,166
      
60.6
%
    
(10,364,687
) 
    
(64.1)
%
Revenue from farming business
    
-
      
-
%
    
-
      
-
%
    
-
      
N/A
  
Total revenue
  
$
16,855,421
      
100
%
  
$
26,665,114
      
100
%
  
$
(9,809,693)
      
(36.8)
%

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

 
(1)
Drugstore revenue decreased by $181,426 or 1.9% primarily from two factors. We closed 16 stores in the past calendar year.  Although these stores were underperforming, they nevertheless contributed approximately $380,000 in revenue.   We also opened two stores in Shanghai during the same period, which contributed approximately $20,000 in revenue.  Sales generated by in-store clinics and same store sales grew (despite budgetary control by government health insurance) by approximately $110,000 and $70,000, respectively,  although they were not sufficient to offset the effect of the store closures.

 
(2)
Wholesale revenue decreased by $10,364,687 or 64.1% as a result of our strategy to focus on profitability. Although we achieved our sales volume in the prior period quickly through competitive pricing, we incurred loss as result of low profit margin and rising overhead. Since the third quarter of fiscal 2013, we have ceased certain low margin sales and are focusing on profitability rather than sales volume.  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.

 
(3)
Online sales increased by $736,420 or 85.6%.  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 expended 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 $473,794 or 13.8% period over period primarily as a result of the contraction in wholesale business.  Gross margin increased period over period from 12.5% to 17.8% as a result of higher wholesale profit margin, offset by a lower retail profit margin.  The average gross margins for our three business segments are as follows:
 
    
  
Three months ended
September 30,
  
    
  
2013
    
2012
  
Average gross margin for retail business 
    
23.0
%
    
26.6
% 
Average gross margin for wholesale business 
    
7.6
%
    
3.9
%
Average gross margin for farming business 
    
N/A
      
N/A
  
 
 
2
 
 
Retail gross margin decreased primarily due to price adjustments that we made. Some adjustments were made to comply with government price controls. Others were made to stay competitive with local community hospitals that are able to sell at or near cost as their pharmacies are indirectly subsidized through the government. We also adjusted prices to match or better other competitors’ prices. Accordingly, overall retail gross profit margin decreased. 
 
Wholesale gross margin increased because we are now focused on profitability for this segment such as by selling high margin products.  By comparison, our drive to generate sales volume by selling very low margin products created the low gross margin a year ago.

Selling and Marketing Expenses

Sales and marketing expenses increased by $876,510 or 41.7% period over period.  The increase in absolute dollars is mainly due to membership rewards to commemorate Jiuzhou Pharmacy’s ten-year anniversary in August and September 2013.  Such expenses as a percentage of revenue increased to 17.7% from 7.9% for the same period a year ago due to significantly lower wholesale revenue.  We expect sales and marketing expenses to be lower after the anniversary commemoration.

General and Administrative Expenses

General and administrative expenses decreased by $818,332 or 62.5% period over period.  Such expenses as a percentage of revenue decreased to 2.9% from 4.9% for the same period a year ago.   The decrease in absolute dollars as well as the percentage of revenue mainly reflects decrease in allowance for advances to suppliers. We expect future general and administrative expenses to be affected by allowance adjustments significantly.

(Loss) Income from Operations
 
As a result of lower revenue and lower gross profit margins, we had loss from operations of $522,709, as compared to income from operations of $9,263 a year ago.  Our operating margin for the three months ended September 30, 2013 and 2012 was (3.3)% and 0.0%, respectively.
 
Income Taxes 

Income tax expense increased by $39,579 period over period, as a result of higher taxable income from Jiuzhou Pharmacy.
 
Net Loss

As a result of the foregoing, net loss decreased by $981,859 period over period.

Comparison of six months ended September 30, 2013 and 2012

The following table summarizes our results of operations for the six months ended September 30, 2013 and 2012:
 
   
Six months ended September 30,
  
   
2013
    
2012
  
   
Amount
    
Percentage
of total
revenue
    
Amount
    
Percentage
of total
revenue
  
Revenue
  
$
32,191,940
      
100.0
%
  
$
59,512,445
      
100.0
%
Gross profit
  
$
6,549,572
      
 20.3
%
  
$
8,566,974
      
14.4
%
Selling expenses
  
$
4,659,973
      
 14.5
%
  
$
3,960,845
      
6.7
%
General and administrative expenses
  
$
3,132,799
      
 9.7
%
  
$
4,156,892
      
7.0
%
(Loss) income from operations
  
$
(1,243,200
) 
    
 (3.9
)%
  
$
449,237
      
0.8
%
Other income (expense), net
  
$
(90,332
) 
    
 (0.3
)%
  
$
8,367
      
0.0
%
Goodwill impairment loss
  
$
-
      
-
%
  
$
(1,473,606
)
    
(2.5
)%
Change in fair value of purchase option derivative liability
  
$
(8,384
)
    
 (0.0
)%
  
$
25,747
      
0.0
%
Income tax expense
  
$
79,109
      
 0.2
%
  
$
3,892
      
0.0
%
Net loss attributable to controlling interest
  
$
(1,333,578
) 
    
 (4.1
)%
  
$
(993,562
) 
    
(1.7
)%
Net loss attributable to noncontrolling interest
  
$
(507
) 
    
 (0.0
)%
  
$
(585
) 
    
(0.0
)%
 
 
3
 
 
Revenue

Revenue decreased by $27,320,505 or 45.9% period over period, primarily due to decrease in our wholesale business, offset by slight increase in our retail business:

 
(1)
Wholesale revenue, which represented 31.8% of total revenue for the six months ended September 30, 2013, decreased by $27,309,341 or 72.8%. Such significant contraction resulted from ongoing implementation of our new wholesale strategy to focus on profitability rather than sales volume.  Thus, our wholesale profit margin increased from 2.5% to 18.6%. However, until we can achieve 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.

 
(2)
Retail sales, which accounted for approximately 68.2% of total revenue for the six months ended September 30, 2013, increased by $2,512,927 or 12.9% to $11,052,942. Same-store sales increased by approximately $1,066,343 or 6.2%, while online sales contributed approximately $2,865,592 in revenue, an increase of 102.1%.   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.  Retail margin, however, fell from 26.3% to 24.1% due to price adjustments caused by government drug price control.  Our store count decreased to 51 as of September 30, 2013, from 65 a year ago.

Six-Month Revenue by Segment

The following table breaks down the revenue for our three business segments for the six months ended September 30, 2013 and 2012:

   
Six months ended September 30,
              
   
2013
    
2012
              
   
Amount
    
% of total revenue
    
Amount
    
% of total revenue
    
Variance by amount
    
% of change
  
Revenue from retail business
                                    
     Revenue from drugstores
  
$
19,099,740
      
59.3
%
  
$
18,034,415
      
30.3
%
  
$
1,065,325
      
 5.9
%
     Revenue from online sales
    
2,865,592
      
8.9
%
    
1,417,990
      
2.4
%
    
1,447,602
      
 102.1
%
          Sub-total of retail revenue
    
21,965,332
      
68.2
%
    
19,452,405
      
32.7
%
    
2,512,927
      
 12.9
%
                                                 
Revenue from wholesale business
    
10,226,608
      
31.8
%
    
37,535,949
      
 63.1
%
    
(27,309,341
) 
    
 (72.8
)%
Revenue from farming business
    
-
      
-
%
    
2,524,091
      
4.2
%
    
(2,524,091
) 
    
 (100.0
)%
Total revenue
  
$
32,191,940
      
100
%
  
$
59,512,445
      
100.0
%
  
$
(27,320,505
) 
    
 (45.9
)%
 
The revenue fluctuation period over period reflected the following combined factors:

 
(1)
Drugstore revenue increased by $1,065,325 or 5.9% period over period, primarily caused by two factors.  First, same stores sales increased by approximately $1,070,000, including modest increase in sales covered by insurance.  Second, sales attributable to our clinics and from two new stores in Shanghai contributed approximately $680,000 and $40,000 to revenue, respectively.  On the other hand, we closed 16 stores in the past calendar year.  Although these stores were underperforming, they nevertheless contributed approximately $720,000 in revenue.

 
(2)
Wholesale revenue decreased by $27,309,341 or 72.8% as a result of our strategy to focus on profitability. Although we achieved our sales volume in the prior period quickly through competitive pricing, we incurred loss as result of low profit margin and rising overhead. Since our third fiscal quarter of fiscal 2013, we have ceased certain low margin sales and are focusing on profitability rather than sales volume.  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.

 
(3)
Online sales increased by $1,447,602 or 102.1% 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 expended considerable efforts in identifying popular products that can drive sales.  As a result, we have seen steady growth in online sales.
 
 
4
 
 
Gross Profit

Gross profit decreased by $2,017,402 or 23.5% period over period primarily as a result of the contraction in wholesale business.  Gross margin increased period over period from 14.4% to 20.3% as a result of higher wholesale profit margin, offset by a lower retail profit margin.  The average gross margins for our three business segments are as follows:
 
    
  
Six months ended
September 30,
  
    
  
2013
    
2012
  
Average gross margin for retail business 
    
24.3
%
    
26.3
% 
Average gross margin for wholesale business 
    
12.4
%
    
3.0
%
Average gross margin for farming business 
    
N/A
      
90.9
%
 
Retail gross margin decreased primarily due to price adjustments that we made. Some adjustments were made to comply with government price controls. Others were made to stay competitive with local community hospitals that are able to sell at or near cost as their pharmacies are indirectly subsidized through the government. We also adjusted prices to match or better other competitors’ prices. Accordingly, overall retail gross profit margin decreased. 
 
Wholesale gross margin increased because we are now focused on profitability for this segment such as by selling high margin products.  By comparison, our drive to generate sales volume by selling very low margin products created the low gross margin a year ago.

Selling and Marketing Expenses

Sales and marketing expenses increased by $699,128 or 17.7% period over period.  The increase in absolute dollars is mainly due to membership rewards to commemorate Jiuzhou Pharmacy’s ten-year anniversary in August and September 2013.  Such expenses as a percentage of revenue increased to 14.5% from 6.7% for the same period a year ago due to significantly lower wholesale revenue.  We expect future sales and marketing expenses to be lower after the anniversary commemoration.
 
General and Administrative Expenses

General and administrative expenses decreased by $1,024,093 or 24.6% period over period.  Such expenses as a percentage of revenue increased to 9.7% from 7.0% for the same period a year ago.   The significant decrease in absolute dollars mainly reflects decrease in allowance for advances to suppliers. The increase in percentage of revenue is mainly a result of a lower overall revenue base for the six months ended September 30, 2013. We expect future general and administrative expenses to be affected by allowance adjustments significantly.

(Loss) Income from Operations
 
As a result of lower revenue and lower gross margins, income from operations decreased by $1,692,437 or 376.7% period over period.  Operating margin for the six months ended September 30, 2013 and 2012 was (3.9)% and 0.8%, respectively.
 
Income Taxes 

Income tax expense increased by $75,217 period over period, as a result of higher taxable income from Jiuzhou Pharmacy.
 
Net Income

As a result of the foregoing, net income decreased by $340,016 period over period.

Conference Call Information

As previously announced, the Company will host a conference call to discuss its fiscal year 2014 first quarter results on Friday November 15, 2013 at 8 a.m. Eastern Time. To participate in the conference call, please dial 1-888-846-5003 from North America. International participants can access the call by dialing 1-480-629-9586. 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 #4651164. 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 September 30, 2013, the Company had 51 retail pharmacies in Hangzhou and Shanghai.
 
 
5
 
 
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.

Contact:

China Jo-Jo Drugstores, Inc.
Ming Zhao, Chief Financial Officer
561-372-5555
frank.zhao@jojodrugstores.com
 
See Accompanying Tables
 
 
6
 

CHINA JO-JO DRUGSTORES, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
   
September 30,
    
March 31,
  
   
2013
    
2013
  
             
A S S E T S
            
             
CURRENT ASSETS
            
Cash
  
$
6,296,715
    
$
4,524,094
  
Trade accounts receivable, net
    
12,691,630
      
12,978,808
  
Inventories
    
12,167,632
      
8,586,999
  
Other receivables, net
    
425,902
      
157,849
  
Advances to suppliers, net
    
11,070,649
      
15,523,034
  
Restricted cash
    
1,964,313
      
2,162,837
  
Other current assets
    
2,140,802
      
1,221,499
  
Total current assets
    
46,757,643
      
45,155,120
  
                 
PROPERTY AND EQUIPMENT, net
    
12,712,963
      
13,288,652
  
                 
OTHER ASSETS
                
Long term deposits
    
4,184,317
      
2,760,665
  
Other noncurrent assets
    
5,460,500
      
5,431,326
  
Intangible assets, net
    
1,149,981
      
1,202,258
  
Total other assets
    
10,794,798
      
9,394,249
  
                 
Total assets
  
$
70,265,404
    
$
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
  
$
163,000
    
$
-
  
Accounts payable, trade
    
19,455,279
      
13,780,211
  
Notes payable
    
6,547,710
      
7,186,453
  
Other payables
    
1,429,961
      
1,327,454
  
Other payables - related parties
    
2,104,735
      
1,224,417
  
Customer deposits
    
1,989,967
      
4,828,293
  
Taxes payable
    
379,981
      
371,633
  
Accrued liabilities
    
242,843
      
956,342
  
Total current liabilities
    
32,313,476
      
29,674,803
  
                 
Purchase option derivative liability
    
60,043
      
15,609
  
Total liabilities
    
32,373,519
      
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 September 30, 2013 and March 31, 2013
    
-
      
-
  
Common stock; $0.001 par value; 250,000,000 shares authorized;  13,609,002 shares issued and outstanding as of September 30, 2013 and March 31, 2013
    
13,609
      
13,609
  
Additional paid-in capital
    
16,668,548
      
16,609,747
  
Statutory reserves
    
1,309,109
      
1,309,109
  
Retained earnings
    
15,761,791
      
17,095,369
  
Accumulated other comprehensive income
    
4,141,259
      
3,121,654
  
Total stockholders' equity
    
37,894,316
      
38,149,488
  
                 
Noncontrolling interests
    
(2,431
)
    
(1,879
)
Total equity
    
37,891,885
      
38,147,609
  
                 
Total liabilities and stockholders' equity
  
$
70,265,404
    
$
67,838,021
  
 
 
7
 
 
CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
 
   
For the three months
ended September 30,
    
For the six months
ended September 30,
  
   
2013
    
2012
    
2013
    
2012
  
REVENUES, NET
  
$
16,855,421
    
$
26,665,114
    
$
32,191,940
    
$
59,512,445
  
                                 
COST OF GOODS SOLD
    
13,907,018
      
23,242,917
      
25,642,368
      
50,945,471
  
                                 
GROSS PROFIT
    
2,948,403
      
3,422,197
      
6,549,572
      
8,566,974
  
                                 
SELLING EXPENSES
    
2,979,131
      
2,102,621
      
4,659,973
      
3,960,845
  
GENERAL AND ADMINISTRATIVE EXPENSES
    
491,981
      
1,310,313
      
3,132,799
      
4,156,892
  
TOTAL OPERATING EXPENSES
    
3,471,112
      
3,412,934
      
7,792,772
      
8,117,737
  
                                 
(LOSS) INCOME FROM OPERATIONS
    
(522,709
)
    
9,263
      
(1,243,200
)
    
449,237
  
                                 
OTHER INCOME (LOSS), NET
    
37,021
      
(90,332
)
    
(3,392
)
    
8,367
  
GOODWILL IMPAIRMENT LOSS
    
-
      
(1,473,606
)
    
-
      
(1,473,606
)
CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITIES
    
(21,049
)
    
25,905
      
(8,384
)
    
25,747
  
                                 
LOSS BEFORE INCOME TAXES
    
(506,737
)
    
(1,528,770
)
    
(1,254,976
)
    
(990,255
)
                                 
PROVISION FOR INCOME TAXES
    
39,589
      
10
      
79,109
      
3,892
  
                                 
NET LOSS
    
(546,326
)
    
(1,528,780
)
    
(1,334,085
)
    
(994,147
)
                                 
ADD: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
    
264
      
331
      
507
      
585
  
                                 
NET LOSS ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES, INC.
    
(546,062
)
    
(1,528,449
)
    
(1,333,578
)
    
(993,562
)
                                 
OTHER COMPREHENSIVE INCOME
                                
Foreign currency translation adjustments
    
259,814
      
52,538
      
1,019,605
      
107,547
  
                                 
COMPREHENSIVE LOSS
  
$
(286,248
)
  
$
(1,475,911
)
  
$
(313,973
)
  
$
(886,015
)
                                 
WEIGHTED AVERAGE NUMBER OF SHARES:
                                
Basic
    
13,609,003
      
13,588,569
      
13,609,003
      
13,575,550
  
Diluted
    
13,609,003
      
13,588,569
      
13,609,003
      
13,575,550
  
                                 
LOSSES PER SHARES:
                                
Basic
  
$
(0.04
)
  
$
(0.11
)
  
$
(0.10
)
  
$
(0.07
)
Diluted
  
$
(0.04
)
  
$
(0.11
)
  
$
(0.10
)
  
$
(0.07
)
 
 
8
 
 
CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
   
Six months ended
September 30,
  
   
2013
    
2012
  
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net loss
  
$
(1,334,085
)
  
$
(994,147
)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
                
  Depreciation and amortization
    
1,140,586
      
1,295,175
  
  Stock compensation
    
58,801
      
97,236
  
  Bad debt write-off and provision
    
(747,930
)
    
834,772
  
  Goodwill Impairment
    
-
      
1,473,606
  
  Change in fair value of purchase option derivative liability
    
 8,384
      
(25,747
)
  Change in operating assets:
                
  Accounts receivable, trade
    
972,975
      
(11,009,813
)
  Notes receivable
    
-
      
(928,801
)
  Inventories
    
(3,361,143
)
    
(1,887,064
)
  Other receivables
    
(262,493
)
    
(761,810
)
  Advances to suppliers
    
5,117,601
      
(2,040,116
)
  Other current assets
    
(849,209
)
    
(779,191
)
  Long term deposit
    
-
      
421,871
  
  Other noncurrent assets
    
92,785
      
251,938
  
  Change in operating liabilities:
                
  Accounts payable, trade
    
5,323,371
      
9,916,586
  
  Other payables and accrued liabilities
    
(654,911
)
    
715,342
  
  Customer deposits
    
(2,925,130
)
    
1,657,754
  
  Taxes payable
    
(45
)
    
(242,908
)
  Net cash provided by (used in) operating activities
    
2,579,557
      
(2,005,317
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
          
  Purchase of equipment
    
(54,413
)
    
(234,151
)
  Increase in long-term deposits for land use right
    
(1,351,030
)
    
-
  
  Additions to leasehold improvements
    
(26,619
)
    
(253,163
)
  Payments on construction-in-progress
    
(111,524
)
    
-
  
    Net cash used in investing activities
    
(1,543,586
)
    
(487,314
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
          
  Proceeds from short-term bank loan
    
161,770
      
-
  
  Change in restricted cash
    
245,504
      
90,544
  
  Change in notes payable
    
(795,002
)
    
2,328,686
  
  Change in other payables-related parties
    
879,958
      
(295,954
)
    Net cash provided by financing activities
    
492,230
      
2,123,276
  
                 
EFFECT OF EXCHANGE RATE ON CASH
    
244,420
      
44,100
  
                 
INCREASE (DECREASE) IN CASH
    
1,772,621
      
(325,255
)
                 
CASH, beginning of period
    
4,524,094
      
3,833,216
  
                 
CASH, end of period
  
$
6,296,715
    
$
3,507,961
  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  
  Cash paid for income taxes
  
$
12,797
    
$
-
  
  Transfer from construction-in-progress to leasehold improvement
    
-
      
2,703,428
  
 
9

CHINA JO-JO DRUGSTORES, INC. Reports