CHINA JO-JO DRUGSTORES, INC. - FORM 8-K - EX-99.1 - PRESS RELEASE - August 12, 2014

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8-K - CURRENT REPORT - CHINA JO-JO DRUGSTORES, INC.f8k081214_chinajojo.htm
Exhibit 99.1
 
China Jo-Jo Drugstores Announces Fiscal Year 2015 First Quarter Financial Results

HANGZHOU, China, August 12, 2014 – China Jo-Jo Drugstores, Inc. (NASDAQ CM: CJJD) (the "Company"), a retail and wholesale distributor of pharmaceutical and other healthcare products in the People’s Republic of China, today announced earnings results for the quarter ended June 30, 2014.

FY 2015 First Quarter Highlights:

·  
Online sales contributed $2.6 million in revenue, an increase of 103.5% from the comparable quarter of prior year
·  
Retail sales, which includes online sales, accounted for approximately 80.0% of total revenue, and increased by $2.3 million, or 20.7% year over year to $13.2 million
·  
Wholesale, which accounted for approximately 20.0% of total revenue, decreased to $3.3 million from $4.4 million for the same quarter of last year
·  
Gross margin decreased quarter over quarter from 23.5% to 15.3%
·  
Net loss was $0.35 million compared to $0.79 million for the comparable quarter of prior year; Diluted EPS loss was $0.02 compared to $0.06 for the comparable quarter of prior year

The Company’s drugstore sales increased in the first quarter of fiscal 2015, primarily due to a 9.8% increase in same-store sales, and revenues from the proliferation of new stores established over the last few years. Retail profit margin decreased to 17.6% from 25.7% in the first quarter of fiscal 2014 due to strong market competition and the implementation of government subsidies to all drugs sold at public hospitals in Zhejiang Province since April 2014. As of June 30, 2014, we have 49 retail drug stores in total with one new store opened in Hangzhou during the quarter.

The Company’s online sales continued to grow dramatically in the first quarter of fiscal 2015, reflecting its efforts in expanding collaboration with large business-to-consumer vendors, better products selection for online consumer, and effective cost control. The Company also plans to implement the O2O (online to offline) drug sales model, which provides deliveries to customers from local stores within a few hours of an online purchase. As online shopping becomes widely used, the Company’s sales and technical team gains more experiences in searching for potential customers and satisfying products. The Company’s management expects an explosive expansion of its online pharmacy sales in the near future.

Mr. Lei Liu, the Company’s Chairman and CEO, stated, "We are glad to see the continued improvement in our retail operation, especially the growth in our same-store sales and online store. Wholesale business declined in the first quarter as we have been undergoing restructure of the division in the past few quarters, including a change in sales and management team of wholesale division.”

“For the remaining of fiscal 2015,” Concluded by Mr. Liu, “we anticipate to grow revenue primarily through our retail operations and online pharmacy while stabilizing our wholesale operations with an eye to achieve bottom line results.”
 
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,""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. The Company also routinely posts important information on its corporate websites, which readers can access at www.jiuzhou-drugstore.com (Chinese) and www.chinajojodrugstores.com (English).

Contact:
China Jo-Jo Drugstores, Inc.
Ming Zhao, Chief Financial Officer
561-372-5555
frank.zhao@jojodrugstores.com

 
 
 

See Accompanying Tables

CHINA JO-JO DRUGSTORES, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) 
   
June 30,
    
March 31,
  
   
2014
    
2014
  
A S S E T S
            
CURRENT ASSETS
            
Cash
  
$
3,378,916
    
$
4,445,276
  
Restricted cash
    
3,706,658
      
3,114,543
  
Trade accounts receivable, net
    
5,677,129
      
6,734,536
  
Inventories
    
7,223,808
      
8,419,132
  
Other receivables, net
    
425,983
      
149,546
  
Advances to suppliers, net
    
3,184,527
      
4,577,194
  
Other current assets
    
1,726,872
      
1,663,102
  
Total current assets
    
25,323,893
      
29,103,329
  
                 
PROPERTY AND EQUIPMENT, net
    
9,034,288
      
9,412,688
  
                 
OTHER ASSETS
                
Long-term biological assets
    
1,373,425
      
-
  
Long term deposits
    
2,764,792
      
2,786,437
  
Other noncurrent assets
    
2,947,235
      
3,036,930
  
Intangible assets, net
    
1,563,347
      
1,569,443
  
Total other assets
    
8,648,799
      
7,392,810
  
                 
Total assets
  
$
43,006,980
    
$
45,908,827
  
                 
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
  
$
-
    
$
162,300
  
Accounts payable, trade
    
10,218,415
      
14,554,726
  
Notes payable
    
9,065,063
      
7,820,718
  
Other payables
    
1,825,591
      
1,282,211
  
Other payables - related parties
    
2,808,588
      
2,384,294
  
Loan from third parties
    
234,813
      
294,042
  
Customer deposits
    
3,386,007
      
3,185,885
  
Taxes payable
    
349,562
      
373,501
  
Accrued liabilities
    
823,309
      
1,208,242
  
Total current liabilities
    
28,711,348
      
31,265,919
  
                 
Purchase option and warrant liability
    
155,217
      
278,916
  
Total liabilities
    
28,866,565
      
31,544,835
  
                 
COMMITMENTS AND CONTINGENCIES
                
                 
STOCKHOLDERS' EQUITY
                
Preferred stock; $0.001 par value; 10,000,000 shares authorized; nil issued and outstanding as of March 31, 2014 and June 30, 2014
    
-
      
-
  
Common stock; $0.001 par value; 250,000,000 shares authorized; 14,416,022 and 14,416,022 shares issued and outstanding as of June 30, 2014 and March 31, 2014
    
14,416
      
14,416
  
Additional paid-in capital
    
17,427,911
      
17,355,555
  
Statutory reserves
    
1,309,109
      
1,309,109
  
Accumulated deficit
    
(8,607,504
)
    
(8,260,767
)
Accumulated other comprehensive income
    
3,957,404
      
3,905,136
  
Total stockholders' equity
    
14,101,336
      
14,323,449
  
                 
Noncontrolling interests
    
39,079
      
40,543
  
Total equity
    
14,140,415
      
14,363,992
  
                 
Total liabilities and stockholders' equity
  
$
43,006,980
    
$
45,908,827
  
 
 
-2-
 
 
CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
 
   
For the three months ended
June 30,
  
   
2014
    
2013
  
REVENUES, NET
  
$
16,459,232
    
$
15,336,519
  
                 
COST OF GOODS SOLD
    
13,948,613
      
11,735,350
  
                 
GROSS PROFIT
    
2,510,619
      
3,601,169
  
                 
SELLING EXPENSES
    
1,768,577
      
1,680,842
  
GENERAL AND ADMINISTRATIVE EXPENSES
    
1,081,201
      
2,640,818
  
TOTAL OPERATING EXPENSES
    
2,849,778
      
4,321,660
  
                 
LOSS FROM OPERATIONS
    
(339,159
)
    
(720,491
)
                 
OTHER LOSS, NET
    
(115,836
)
    
(40,413
)
CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITIES
    
123,699
      
12,665
  
                 
LOSS BEFORE INCOME TAXES
    
(331,296
)
    
(748,239
)
                 
PROVISION FOR INCOME TAXES
    
16,141
      
39,520
  
                 
NET LOSS
    
(347,437
)
    
(787,759
)
                 
ADD: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
    
700
      
243
  
                 
NET LOSS ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES, INC.
    
(346,737
)
    
(787,516
)
                 
OTHER COMPREHENSIVE INCOME
                
Foreign currency translation adjustments
    
52,268
      
759,791
  
                 
COMPREHENSIVE LOSS
  
$
(294,469
)
  
$
(27,725
)
                 
WEIGHTED AVERAGE NUMBER OF SHARES:
                
Basic
    
14,416,022
      
13,609,003
  
Diluted
    
14,416,022
      
13,609,003
  
                 
LOSSES PER SHARES:
                
Basic
  
$
(0.02
)
  
$
(0.06
)
Diluted
  
$
(0.02
)
  
$
(0.06
)

 
-3-
 
 
CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
   
Three months ended
June 30,
  
   
2014
    
2013
  
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net loss
  
$
(347,437
)
  
$
(787,759
)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
                
Depreciation and amortization
    
502,101
      
588,936
  
Stock compensation
    
71,544
      
27,338
  
Bad debt provision
    
(637,819
)
    
1,181,478
  
Inventory reserve
    
4,316
      
-
  
Change in fair value of purchase option derivative liability
    
(123,699
)
    
(12,665
)
Change in operating assets:
                
Accounts receivable, trade
    
1,187,128
      
(190,989
)
Notes receivable
    
-
      
(290,214
)
Inventories and biological assets
    
(171,784
)
    
(398,271
)
Other receivables
    
(59,183
)
    
(159,171
)
Advances to suppliers
    
1,694,269
      
(1,111,259
)
Other current assets
    
(61,633
)
    
(782,304
)
Long term deposit
    
25,040
      
-
  
Other noncurrent assets
    
93,294
      
49,586
  
Change in operating liabilities:
                
Accounts payable, trade
    
(4,347,548
)
    
1,363,429
  
Other payables and accrued liabilities
    
155,208
      
(570,952
)
Customer deposits
    
195,894
      
365,295
  
Taxes payable
    
(24,361
)
    
(2,212
)
Net cash used in operating activities
    
(1,844,670
)
    
(729,734
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Purchase of equipment
    
(104,682
)
    
(2,934
)
Additions to leasehold improvements
    
-
      
(3,958
)
Payments on construction-in-progress
    
-
      
(111,152
)
Net cash used in investing activities
    
(104,682
)
    
(118,044
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Proceeds from short-term bank loan
    
-
      
161,230
  
Repayment of short-term bank loan
    
(162,250
)
    
-
  
Repayment of  third parties loan
    
(59,500
)
    
-
  
Change in restricted cash
    
(587,371
)
    
(1,336,189
)
Proceeds from notes payable
    
1,918,599
      
650,108
  
Repayments of notes payable
    
(685,791
)
    
(816,304
)
Proceeds from other payables-related parties
    
423,752
      
194,973
  
Net cash provided by financing activities
    
847,439
      
(1,146,182
)
                 
EFFECT OF EXCHANGE RATE ON CASH
    
35,553
      
181,265
  
                 
DECREASE IN CASH
    
(1,066,360
)
    
(1,812,695
)
                 
CASH, beginning of period
    
4,445,276
      
4,524,094
  
                 
CASH, end of period
  
$
3,378,916
    
$
2,711,399
  
                 
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
                
Cash paid for income taxes
  
$
21,325
    
$
9,529
  
Cash paid for interest
  
$
1,460
    
$
8,764
  

-4-

CHINA JO-JO DRUGSTORES, INC. Reports