China Jo-Jo Drugstores Inc. Reports Financial Results for Second Quarter Fiscal 2013 and Announces Second Quarter Fiscal 2013
China Jo-Jo Drugstores Inc. Reports Financial Results for Second Quarter
Fiscal 2013 and Announces Second Quarter Fiscal 2013 Conference Call
Business Wire
HANGZHOU, China -- November 14, 2012
China Jo-Jo Drugstores, Inc. (NASDAQ:CJJD), (the "Company"), a retail and
wholesale distributor of pharmaceutical and other healthcare products in
Zhejiang and Shanghai, today reported earnings results for the second quarter
of fiscal 2013 ended September 30, 2012. The Company will hold its second
quarter fiscal 2013 earnings call on Friday, November 16, 2011 at 8:00 a.m.
Eastern Time. Please see below for dial in information.
Second Quarter Highlights:
* Revenue increased 20.0% from a year ago to $26.7 million
* Second quarter retail drugstore sales revenue improved 12.9% from first
quarter fiscal year 2013
* Wholesale business accounted for 60.6% of total revenue
* Gross profit was $3.4 million and gross margin was 12.8%
Dr. Lei Liu, Chairman and CEO, stated, "Given China’s slower economic and
increased regulatory environment towards retail pharmacies, we are pleased
that we continue to make progress to better vertically integrate our
operations. Our wholesale business has continued to grow and will give us the
foothold we need to establish our long-term position."
Since August 2011, stricter government policies towards the marketing
practices of retail drugstores, industry competition and further government
drug price control have impacted sales at our retail drugstores. However, as
more of our drugstores are approved to accept government medical insurance,
the Company's retail drugstores sales revenue improved to $9,637,418 during
the three months ended September 30, 2012 over revenue of $8,393,098 during
the three months ended June 30, 2012.
Dr. Liu further commented, "Looking forward, we anticipate that our revenues
will be primarily from our wholesale operations with additional contributions
from our retail drugstores. We also hope to see continued production from our
Chinese herb farming and growth in our online drugstore business."
Second Quarter Fiscal 2013 Results
Three months ended September 30,
2012 2011
Percentage Percentage
Amount of total Amount of total
revenue revenue
Revenue $ 26,665,114 100.0 % $ 22,224,947 100.0 %
Gross profit $ 3,422,197 12.8 % $ 6,257,896 28.2 %
Selling $ 2,102,621 7.9 % $ 2,711,494 12.2 %
expenses
General and
administrative $ 1,310,313 4.9 % $ 1,320,521 5.9 %
expenses
Income from $ 9,263 0.0 % $ 2,225,881 10.0 %
operations
Other income $ (90,332 ) (0.3 )% $ 187,166 0.8 %
(expense), net
Impairment of $ 1,473,606 5.5 % $ - 0.0 %
goodwill
Change in fair
value of
purchase $ 25,905 0.1 % $ 34,356 0.2 %
option
derivative
liability
Income tax $ 10 0.0 % $ 817,990 3.7 %
expense
Net (loss)
income
attributable $ (1,528,449 ) (5.7 )% $ 1,633,713 7.4 %
to controlling
interest
Net loss
attributable
to $ 331 0.0 % $ 4,300 0.0 %
noncontrolling
interest
Revenue. We had two revenue streams for the three months ended September 30,
2012 and 2011: (i) store and online retail sales of pharmaceutical and other
healthcare products, and (ii) wholesale distribution of pharmaceutical and
other healthcare products, primarily to third-party pharmaceutical trading
companies. Included in our wholesale revenue are wholesales of pharmaceutical
and healthcare products that we purchased from third-party manufacturers or
suppliers. Our revenue increased by $4,440,167 or 20.0% period over period,
primarily due to the expansion of our wholesale business, offset by a decrease
in our retail business:
We started our wholesale business after acquiring Jiuxin Medicine in
August 2011, through which we have been distributing third-party
pharmaceutical and healthcare products to pharmaceutical trading
companies and other group customers. Our wholesale business increased
rapidly during fiscal 2013 because we introduced very competitive
(1) pricing to customers to stimulate sales. Sales from the wholesale
business accounted for $16,167,166 or approximately 60.6% of our total
revenue for the three months ended September 30, 2012. In contrast,
for the three months ended September 2011, sales from the wholesale
business accounted for only $3,941,973 or approximately 17.7% of our
total sales.
Our retail sales decreased by $7,785,026 or 42.6% to $10,497,948 for
the three months ended September 30, 2012 from $18,282,974 for the
three months ended September 30, 2011. Although our retail store count
increased to 65 as of September 30, 2012, from 58 stores a year ago,
our retail store sales decreased primarily as a result of stricter
government policies and a competitive retail market. Retail sales
(2) accounted for approximately 39.4% of our total revenue for the three
months ended September 30, 2012. Same-store sales decreased by
approximately $9,060,348 or 50.0%, while our new stores and online
pharmacy contributed a total of approximately $1,118,454. We expect
same-store sales will continue to decline as the frequency of
government-mandated price controls and the number of drugs subject to
price controls continue to rise.
Quarterly Revenue by Segment. The following table breaks down the revenue for
our three business segments for the three months ended September 30, 2012 and
2011:
Three months ended September 30,
2012 2011
% of % of Variance by % of
Amount total Amount total amount change
revenue revenue
Revenue
from
retail
business
Revenue
from $ 9,637,418 36.2 % $ 18,193,045 81.9 % $ (8,555,627 ) (47.0 )%
drugstores
Revenue
from 860,530 3.2 % 89,929 0.4 % 770,601 856.9 %
online
sales
Sub-total
of retail 10,497,948 39.4 % 18,282,974 82.3 % (7,785,026 ) (42.6 )%
revenue
Revenue
from 16,167,166 60.6 % $ 3,941,973 17.7 % 12,225,193 310.1 %
wholesale
business
Revenue
from - 0.0 % - 0.0 % - 0.0 %
farming
business
Total $ 26,665,114 100 % $ 22,224,947 100 % $ 4,440,167 20.0 %
revenue
The revenue fluctuation period over period reflected the following combined
factors:
Revenue from “Jiuzhou Grand Pharmacy” stores decreased by
approximately $8.6 million or 47.0% quarter over quarter, mainly due
to two reasons. During the three month ended September 30, 2011, we
implemented a variety of promotional activities such as giving out
gifts and discounts to our customers. Since the second quarter of
fiscal 2012, the Hangzhou government has been gradually restricting
retail drugstores within the city from organizing large-scale
(1) marketing promotions on the streets in which further rebates or
discounts are given to customers making purchases with
government-sponsored medical insurance cards. Our promotional
activities were curtailed accordingly, which, in turn, impacted our
retail sales revenue, especially from sales of certain prescription
drugs covered by the medical insurance cards. In addition, the
government subjected more drugs to price controls, which caused us to
reduce prices for some of the affected drugs and stop carrying others
at our pharmacies.
Our wholesale business increased by $12,225,193 or 301.1% quarter over
quarter. It reflects our continuous efforts to expand Jiuxin
Medicine’s business, which was acquired in August, 2011. In order to
(2) promote its sales, Jiuxin Medicine introduced competitive prices,
which resulted in a low profit margin. On the other side, as Jiuxin
Medicine was in its start-up period, the sales in August and September
of 2011 did not typically represent its regular sale volume. As a
result, we do not expect such a significant growth rate in the future.
Our online pharmacy sales increased by $770,601 or 856.9% quarter over
quarter. As we started business cooperation with certain local
(3) business-to-consumer online vendors such as Taobao during the second
half of 2011, our online pharmacy has become more and more widely
exposed to potential customers over time. As a result, we have seen a
steady growth in our online sales.
Gross Profit. Our gross profit decreased by $2,835,699 or 45.3% quarter over
quarter primarily as a result of decreased retail sales. Our gross margin
decreased period over period from 28.2% to 12.8% as a result of decline of our
retail sale profit margin as well as a low profit margin of our wholesale
business, partially caused by our sales promotion activities. The average
gross margin of our retail and wholesale businesses for the three months ended
September 30, 2012 are as follows:
Three months ended
March 31,
2012 2011
Average gross margin for retail business 26.6 % 33.4 %
Average gross margin for wholesale business 3.9 % 4.1 %
Average gross margin for farming business N/A N/A
Our retail gross margin decreased to 26.6% in the three months ended September
30, 2012 from 33.4% in the three months ended September 30, 2011. The Chinese
government has included more and more prescription and OTC drugs in the price
control list. Some of our products’ prices were higher than the prices set by
the Chinese government. Hence, we had to adjust these products’ prices. As a
result, the profit margin for these products declined. In addition, due to the
economic slowdown and stricter government policies such as stricter insurance
reimbursement policy and the expansion of Essential Drug List (EDL), the
retail drugstore market became much more competitive. For example, drugs
listed in the EDL were being sold at a price close to its cost at local
community hospitals which, in turn, receive government subsidies.
Correspondently, we had to either abandon sale of these drugs or sell them at
minimal profit margins. As a result, our overall retail gross profit margin
decreased.
Our wholesale gross margin for the three months ended September 30, 2012 was
3.9% as compared to 4.1% for the three months ended September 30, 2011.
Because we introduced very competitive prices to stimulate sales, our
traditional wholesale business, where we purchase from third-party
manufacturers or suppliers and resell, has a low profit margin.
Selling and Marketing Expenses. Our sales and marketing expenses decreased by
$608,873 or 22.5% period over period mainly due to less promotional
activities because of restrictions by the local government, offset by
increased rent and depreciation and amortization expense. Such expenses as a
percentage of our revenue decreased to 7.9%, from 12.2% for the same period a
year ago as our wholesale business contributed significant sales revenue.
General and Administrative Expenses. Our general and administrative expenses
decreased by $10,208 or 0.8% period over period. Such expenses as a percentage
of our revenue decreased to 4.9% from 5.9% for the same period a year ago. The
decrease in absolute dollars as well as a percentage of revenue related to our
stringent expense budget and control.
Income from Operations. Mainly as a result of lower profit margins, partly
offset by decreases in general and administration expenses and decreases in
selling and marketing expenses, our income from operations decreased by
$2,216,618 or 99.6% period over period. Our operating margin for the three
months ended September 30, 2012 and 2011 was 0.0% and 10.0%, respectively.
Impairment of Goodwill. During the three months ended September 30, 2012, we
recorded a goodwill impairment charge of $1,473,606 that was previously
recognized in the acquisitions of Juixin Medicine and Shanghai Zhongxin. The
impairment to goodwill was made after the Company estimated the fair values of
businesses acquired and determined that the implied fair value of goodwill was
lower than the carrying value of goodwill for the two businesses. Accordingly,
the Company recorded its best impairment estimates of $1,403,933 for Jiuxin
Medicine and $69,673 for Shanghai Zhongxin.
Income Taxes. For the current period, our income tax expense decreased by
$817,980, as a result of a net loss.
Net Income. As a result of the foregoing, our net income decreased by
$3,162,162 period over period.
Comparison of six months ended September 30, 2012 and 2011
The following table summarizes our results of operations for the six months
ended September 30, 2012 and 2011:
Six months ended September 30,
2012 2011
Percentage Percentage
Amount of total Amount of total
revenue revenue
Revenue $ 59,512,445 100.0 % $ 43,652,806 100.0 %
Gross profit $ 8,566,974 14.4 % $ 13,127,219 30.1 %
Selling $ 3,960,845 6.7 % $ 4,089,794 9.4 %
expenses
General and
administrative $ 4,156,892 7.0 % $ 2,395,304 5.5 %
expenses
Income from $ 449,237 0.8 % $ 6,642,121 15.2 %
operations
Other income, $ 8,367 0.0 % $ 206,586 0.5 %
net
Impairment of $ 1,473,606 2.5 % $ - 0.0 %
goodwill
Change in fair
value of
purchase $ 25,747 0.0 % $ 96,988 0.2 %
option
derivative
liability
Income tax $ 3,892 0.0 % $ 2,073,553 4.8 %
expense
Net (loss)
income
attributable $ (993,562 ) (1.7 )% $ 4,876,442 11.2 %
to controlling
interest
Net loss
attributable
to $ 585 0.0 % $ 4,300 0.0 %
noncontrolling
interest
Revenue. We had three revenue streams for the six months ended September 30,
2012: (i) store and online retail sales of pharmaceutical and other healthcare
products, and (ii) wholesale distribution of pharmaceutical and other
healthcare products, and (iii) our self-cultivated TCM herbs, primarily to
third-party pharmaceutical trading companies. In contrast, store retail sales
and wholesale provided almost all of our revenue for the six months ended
September 30, 2011.
Our revenue increased by $15,859,639 or 36.3% period over period, primarily
due to the expansion of our wholesale business and the addition of our farming
business, offset by a decrease in our retail business:
We started our wholesale business after acquiring Jiuxin Medicine in
August 2011, through which we have been distributing third-party
pharmaceutical and healthcare products to pharmaceutical trading
companies and other group customers. Our wholesale business increased
rapidly during fiscal 2012 because we introduced very competitive
(1) pricing to customers to stimulate sales. Sales from the wholesale
business accounted for $37,535,949 or approximately 63.1% of our total
revenue for the six months ended September 30, 2012. In contrast,
sales from the wholesale business accounted for $3,941,973 or
approximately 9.0% of our total revenue for the six months ended
September 30, 2011.
In the fourth quarter of fiscal 2012, we also began distributing the
TCM herbs such as Peucedanum that we have been cultivating, to
third-party pharmaceutical trading companies. Although we have hired
several specialists to oversee our farming business, we are mainly
relying on the local village government to manage the cultivation
(2) process. For example, the local government would organize local
farmers to plant, fertilize and harvest. In turn, we paid for the
expenses incurred by the local farmers based on our agreements with
the local government. Sales from our farming business accounted for
$2,524,092 or approximately 4.2% of our total revenue for the six
months ended September 30, 2012.
Our retail sales decreased by $20,959,786 or 53.8% to $18,034,414 for
the six months ended September 30, 2012 from $38,994,200 for the six
months ended September 30, 2011. Although our retail store count
increased to 65 as of September 30, 2012, from 58 stores a year ago,
our retail store sales decreased primarily as a result of stricter
government policies and a competitive retail market. Retail sales
(3) accounted for approximately 32.7% of our total revenue for the six
months ended September 30, 2012. Same-store sales decreased by
approximately $22,608,343 or 56.7%, while our new stores and online
pharmacy contributed a total of approximately $1,672,725. We expect
same-store sales will continue to decline as the frequency of
government-mandated price controls and the number of drugs subject to
price controls continue to rise.
Six-Month Revenue by Segment. The following table breaks down the revenue for
our three business segments for the six months ended September 30, 2012 and
2011:
Six months ended September 30,
2012 2011
% of % of Variance by % of
Amount total Amount total amount change
revenue revenue
Revenue
from
retail
business
Revenue
from $ 18,034,415 30.3 % $ 39,534,200 90.6 % $ (21,499,785 ) (54.4 )%
drugstores
Revenue
from 1,417,990 2.4 % 176,633 0.4 % 1,241,357 702.8 %
online
sales
Sub-total
of retail 19,452,405 32.7 % 39,710,833 91.0 % (20,258,428 ) (51.0 )%
revenue
Revenue
from 37,535,949 63.1 % 3,941,973 9.0 % 33,593,976 852.2 %
wholesale
business
Revenue
from 2,524,091 4.2 % - 0.0 % 2,524,091 N/A
farming
business
Total $ 59,512,445 100.0 % $ 43,652,806 100.0 % $ 15,859,639 36.3 %
revenue
The revenue fluctuation period over period reflected the following combined
factors:
Revenue from “Jiuzhou Grand Pharmacy” stores decreased by
approximately $21.0 million or 54.4% period over period for the same
reasons that it declined during the quarter. During the six month
ended September 30, 2011, we implemented a variety of promotional
activities such as giving out gifts and discounts to our customers.
Since the second quarter of fiscal 2012, the Hangzhou government has
been gradually restricting retail drugstores within the city from
(1) organizing large-scale marketing promotions on the streets in which
further rebates or discounts are given to customers making purchases
with government-sponsored medical insurance cards. Our promotional
activities were curtailed accordingly, which, in turn, impacted our
retail sales revenue, especially from sales of certain prescription
drugs covered by the medical insurance cards. In addition, the
government subjected more drugs to price controls, which caused us to
reduce prices for some of the affected drugs and stop carrying others
at our pharmacies.
Our wholesale business increased by $33,593,976 or 852.2% period over
period. It reflects our continuous efforts to expand Jiuxin Medicine’s
business, which was acquired in August, 2011. In order to promote its
(2) sales, Jiuxin Medicine introduced competitive prices, which resulted
in a low profit margin. On the other side, as Jiuxin Medicine was in
its start-up period, the sales in August and September of 2011 did not
typically represent its regular sale volume. As a result, we do not
expect such a significant growth rate in the future.
Our online pharmacy sales increased by $1,241,357 or 702.8% period
over period. As we started business cooperation with certain local
(3) business-to-consumer online vendors such as Taobao during the second
half of 2011, our online pharmacy has become more and more widely
exposed to potential customers over time. As a result, we have seen a
steady growth in our online sales.
Gross Profit. Our gross profit decreased by $4,560,245 or 34.7% period over
period primarily as a result of decreased retail sales. Our gross margin
decreased period over period from 30.1% to 14.4% as a result of decline in our
retail sale profit margin as well as low profit margin for our wholesale
business, partially caused by our sales promotion activities. The average
gross margin of our retail and wholesale businesses for the six months ended
September 30, 2012 are as follows:
Six months ended
March 31,
2012 2011
Average gross margin for retail business 26.3 % 32.1 %
Average gross margin for wholesale business 3.0 % 4.1 %
Average gross margin for farming business 90.9 % N/A
Our retail gross margin decreased to 26.3% in the six months ended September
30, 2012 from 32.1% in the six months ended September 30, 2011. The Chinese
government has included more and more prescription and OTC drugs in the price
control list. Some of our products’ prices were higher than the prices set by
the Chinese government. Hence, we had to adjust these products’ prices. As a
result, the profit margin for these products declined. In addition, due to the
economic slowdown and stricter government policies such as stricter insurance
reimbursement policy and the expansion of Essential Drug List (EDL), the
retail drugstore market became much more competitive. For example, drugs
listed in the EDL were being sold at a price close to its cost at local
community hospitals which, in turn, receive government subsidies.
Correspondently, we had to either abandon sale of these drugs or sell them at
minimal profit margins. As a result, our overall retail gross profit margin
decreased.
Our wholesale gross margin for the six months ended September 30, 2012 was
3.0% as compared to 4.1% for the six months ended September 30, 2011. Because
we introduced very competitive prices to stimulate sales, our traditional
wholesale business, where we purchase from third-party manufacturers or
suppliers and resell, has a low profit margin.
Our profit margin for our harvested TCM sold was approximately 90.9% for the
six months ended September 30, 2012. We are able to control quality through
monitoring which, in turn, enable us to command good pricing. In addition, as
we are also a drug distributor, we are able to internalize distribution costs
more efficiently. As a result, we expect the profit margin for our farming
business to remain high.
Selling and Marketing Expenses. Our sales and marketing expenses decreased by
$128,949 or 3.2% period over period due to less promotional activities because
of restrictions by the local government, offset by increased rent and
depreciation and amortization expense. Such expenses as a percentage of our
revenue decreased to 6.7%, from 9.4% for the same period a year ago as our
wholesale business contributed significant sales revenue.
General and Administrative Expenses. Our general and administrative expenses
increased by $1,761,587 or 73.5% period over period. Such expenses as a
percentage of our revenue increased to 7.0% from 5.5% for the same period a
year ago. The increase in absolute dollars as well as a percentage of revenue
related to professional fees incurred as a U.S. publicly traded company, more
reserves for accounts receivables and advances to suppliers, increased
salaries, and administration costs related to our new businesses such as
Jiuxin Medicine. For example, due to the expansion of our wholesale business,
we had significant amount of accounts receivable and advances to customers as
of September 30, 2012. As a result, we incurred approximately $680,000 of
additional bad debts expense, which is included in the general and
administration expense. As we continue to open drugstores, further develop our
infrastructure, and incur expenses related to being a U.S. public company, we
anticipate that our general and administrative expenses will increase in
absolute dollars.
Impairment of Goodwill. During the six months ended September 30, 2012, we
recorded a goodwill impairment charge of $1,473,606 that was previously
recognized in the acquisitions of Jiuxin Medicine and Shanghai Zhongxin. The
impairment to goodwill was made after we estimated the fair values of
businesses acquired and determined that the implied fair value of goodwill was
lower than the carrying value of goodwill for the two businesses. Accordingly,
we recorded our best impairment estimates of $1,403,933 for Jiuxin Medicine
and $69,673 for Shanghai Zhongxin.
Income from Operations. As a result of lower profit margins, decreases in
selling and marketing expenses, and increases in general and administration
expenses, our income from operations decreased by $6,192,884 or 93.2% period
over period. Our operating margin for the six months ended September 30, 2012
and 2011 was 0.8% and 15.2%, respectively.
Income Taxes. Our income tax expense decreased by $2,069,661 period over
period, as a result of lower taxable income and an income tax waiver granted
to Qianhong Agriculture.
Net Income. As a result of the foregoing, our net income decreased by
$5,870,004 period over period.
Balance Sheet Highlights
As of September 30, 2012, the Company had $3.5 million of cash, $64.1 million
in current assets and $36.7 million in total liabilities.
Conference Call Information
The Company will host a conference call to discuss its second quarter fiscal
year 2013 results on Friday, November 16, 2012, 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 Investors 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 11a.m. Eastern Time by dialing
1-877-870-5176 or 1-858-384-5517 with pin # 4576909. The replay will also be
available on the company website.
CHINA JO-JO DRUGSTORES, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, March 31,
2012 2012
ASSETS
CURRENT ASSETS
Cash $ 3,507,961 $ 3,833,216
Restricted cash 2,731,516 2,818,449
Notes receivable 928,330 -
Trade accounts receivable, net 26,980,178 16,516,671
Inventories 8,770,383 6,875,574
Other receivables 1,209,972 603,294
Advances to suppliers, net 16,287,584 14,347,557
Other current assets 3,635,708 2,853,301
Total current assets 64,051,632 47,848,062
PROPERTY AND EQUIPMENT, net 14,936,637 15,647,120
OTHER ASSETS
Long term deposits 2,454,194 2,872,219
Other noncurrent assets 5,532,164 5,776,667
Intangible assets, net 1,270,471 2,816,945
Total other assets 9,256,829 11,465,831
Total assets $ 88,245,098 $ 74,961,013
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, trade $ 23,835,552 $ 13,906,383
Notes payable 6,541,763 4,208,928
Other payables 1,497,812 782,586
Other payables - related parties 1,162,807 1,458,441
Customer deposit 2,990,743 1,332,141
Taxes payable 227,415 469,606
Accrued liabilities 418,374 417,184
Total current liabilities 36,674,466 22,575,269
Purchase option derivative liability 8,672 34,419
Total liabilities 36,683,138 22,609,688
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock; $0.001 par value;
10,000,000 shares authorized; nil issued
and outstanding as of - -
September 30, 2012 and March 30, 2012
Common stock; $0.001 par value; 250,000,000
shares authorized; 13,666,370 and
13,589,621 13,666 13,589
shares issued and outstanding as of
September 30, 2012 and March 31, 2012
Additional paid-in capital 16,950,199 16,853,039
Statutory reserves 1,309,109 1,309,109
Retained earnings 30,435,538 31,429,100
Accumulated other comprehensive income 2,855,108 2,747,561
Total stockholders' equity 51,563,620 52,352,398
Noncontrolling interests (1,660 ) (1,073 )
Total equity 51,561,960 52,351,325
Total liabilities and stockholders' equity $ 88,245,098 $ 74,961,013
CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
For the three months ended For the six months ended
September 30, September 30,
2012 2011 2012 2011
REVENUES, NET $ 26,665,114 $ 22,224,947 $ 59,512,445 $ 43,652,806
COST OF GOODS 23,242,917 15,967,051 50,945,471 30,525,587
SOLD
GROSS PROFIT 3,422,197 6,257,896 8,566,974 13,127,219
SELLING 2,102,621 2,711,494 3,960,845 4,089,794
EXPENSES
GENERAL AND
ADMINISTRATIVE 1,310,313 1,320,521 4,156,892 2,395,304
EXPENSES
TOTAL
OPERATING 3,412,934 4,032,015 8,117,737 6,485,098
EXPENSES
INCOME FROM 9,263 2,225,881 449,237 6,642,121
OPERATIONS
OTHER INCOME (90,332 ) 187,166 8,367 206,586
(EXPENSE), NET
IMPAIRMENT OF (1,473,606 ) - (1,473,606 ) -
GOODWILL
CHANGE IN FAIR
VALUE OF
PURCHASE 25,905 34,356 25,747 96,988
OPTION
DERIVATIVE
LIABILITY
(LOSS) INCOME
BEFORE INCOME (1,528,770 ) 2,447,403 (990,255 ) 6,945,695
TAXES
PROVISION FOR 10 817,990 3,892 2,073,553
INCOME TAXES
NET (LOSS) (1,528,780 ) 1,629,413 (994,147 ) 4,872,142
INCOME
ADD: NET LOSS
ATTRIBUTABLE
TO 331 4,300 585 4,300
NONCONTROLLING
INTEREST
NET (LOSS)
INCOME
ATTRIBUTABLE (1,528,449 ) 1,633,713 (993,562 ) 4,876,442
TO CHINA JO-JO
DRUGSTORES,
INC.
OTHER
COMPREHENSIVE
INCOME
Foreign
currency 52,538 508,923 107,547 1,083,488
translation
adjustments
COMPREHENSIVE $ (1,475,911 ) $ 2,142,636 $ (886,015 ) $ 5,959,930
INCOME (LOSS)
WEIGHTED
AVERAGE NUMBER
OF SHARES:
Basic 13,588,569 13,547,157 13,575,550 13,541,136
Diluted 13,588,569 13,547,157 13,575,550 13,541,136
(LOSS)
EARNINGS PER
SHARE:
Basic $ (0.11 ) $ 0.12 $ (0.07 ) $ 0.36
Diluted $ (0.11 ) $ 0.12 $ (0.07 ) $ 0.36
CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six months ended
September 30,
2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (994,147 ) $ 4,872,142
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,295,175 1,118,932
Stock compensation 97,236 52,133
Bad debt expense 834,772 182,398
Impairment of Goodwill 1,473,606 -
Change in fair value of purchase option (25,747 ) (96,988 )
derivative liability
Change in operating assets:
Accounts receivable, trade (11,009,813 ) (2,435,921 )
Notes receivable (928,801 ) -
Inventories (1,887,064 ) 1,282,841
Other receivables (761,810 ) (523,817 )
Advances to suppliers (2,040,116 ) 2,173,332
Other current assets (779,191 ) 5,610,337
Long term deposit 421,871 (18,485 )
Other noncurrent assets 251,938 106,115
Change in operating liabilities:
Accounts payable, trade 9,916,586 4,279,623
Other payables and accrued liabilities 715,342 (1,046,197 )
Customer deposits 1,657,754 676,373 )
Taxes payable (242,908 ) (495,891 )
Net cash provided by (used in) operating (2,005,317 ) 15,736,927
activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (234,151 ) (2,155,443 )
Advance payments on equipment purchase - (774,500 )
Additions to leasehold improvements (253,163 ) (1,373,605 )
Payments on construction-in-progress - (6,729,437 )
Net payments for business acquisitions - (3,282,727 )
Net cash used in investing activities (487,314 ) (14,315,712 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in restricted cash 90,544 193,300
Payments on notes payable - (3,703,942 )
Proceeds from shareholders - 58,862
Increase in notes payable 2,328,686 -
Decrease in other payables- related (295,954 ) -
parties
Net cash (used in) provided by financing 2,123,276 (3,451,780 )
activities
EFFECT OF EXCHANGE RATE ON CASH 44,100 130,934
DECREASE IN CASH (325,255 ) (1,899,631 )
CASH, beginning of Period 3,833,216 6,489,905
CASH, end of Period $ 3,507,961 $ 4,590,274
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for income taxes $ - $ 2,428,768
Non-cash investing activities
Transfer from construction-in-progress to $ 2,703,428 $ -
leasehold improvement
Non-cash financing activities
Notes payable transferred to vendors $ - $ 3,431,091
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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, 2012, the Company has 65 retail pharmacies
throughout Zhejiang Province and Shanghai.
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
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