China Jo-Jo Drugstores Reports Third Quarter Earnings Results

  China Jo-Jo Drugstores Reports Third Quarter Earnings Results

Business Wire

HANGZHOU, China -- February 15, 2013

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 third quarter
of fiscal 2013 ended December 31, 2012. The Company will hold its earnings
call on Tuesday, February 19, 2013, at 8:00 a.m. Eastern Time. Please see
below for dial in information.

Third Quarter Highlights:

  *Revenue decreased 39.1% from a year ago to $15.6 million
  *Third quarter retail drugstore sales revenue improved 7.3% from the second
    quarter fiscal year 2013
  *Wholesale business accounted for 28.0% of total revenue
  *Gross profit was $3.0 million and gross margin of retail business and
    wholesale business was 23.3% and 8.6%, respectively

Mr. Lei Liu, the Company’s Chairman and CEO, stated, “Despite tighter budget
for government-sponsored insurance and increased regulations of retail
pharmacies, we were able to improve retail sales from a quarter ago. On the
other hand, we are reconsidering our volume-driven strategy for our wholesale
business.”

Dr. Liu continued, “Looking forward, we anticipate a transition in our
wholesale business strategy and a moderate growth in our retail drugstores
sales. We also anticipate to harvest Chinese Herbs in the next twelve months
and growth in our online drugstore business.”

Comparison of three months ended December 31, 2012 and 2011

The following table summarizes our results of operations for the three months
ended December 31, 2012 and 2011:

                  Three months ended December 31,
                     2012                            2011
                                        Percentage                        Percentage
                     Amount           of total       Amount           of total
                                        revenue                           Revenue
Revenue              $ 15,596,013       100.0  %       $ 25,643,949       100.0      %
Gross profit         $ 2,990,302        19.2   %       $ 6,826,869        26.6       %
Selling              $ 3,179,168        20.4   %       $ 2,498,892        9.7        %
expenses
General and
administrative       $ 3,300,064        21.2   %       $ 2,175,615        8.5        %
expenses
Income (loss)
from                 $ (3,488,930 )     (22.4  )%      $ 2,152,362        8.4        %
operations
Other
(expense)            $ (25,380    )     (0.2   )%      $ 16,343           0.1        %
income, net
Impairment of        $ -                0.0    %       $ -                0.0        %
goodwill
Change in fair
value of
purchase             $ (12,095    )     (0.1   )%      $ 19,404           0.1        %
option
derivative
liability
Income tax
(benefits)           $ (39,613    )     (0.3   )%      $ 610,910          2.4        %
expense
Net (loss)
income
attributable         $ (3,486,521 )     (22.4  )%      $ 1,573,982        6.1        %
to controlling
interest
Net (loss)
attributable
to                   $ (271       )     (0.0   )%      $ (3,217     )     (0.0       )%
noncontrolling
interest
                                                                                     

Revenue. We had two revenue streams for the three months ended December 31,
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. We did not have any revenue from our farming business as there was
no harvest during the winter months.

Our revenue decreased by $10,047,936 or 39.2% period over period, primarily
due to decrease in both wholesale and retail businesses as compared to the
same period a year ago:

        Wholesale, which represented approximately 28.0% of total revenue for
        the three months ended December 31, 2012, decreased by $3,041,477 or
        61.5% to $4,368,398, from $7,409,875 primarily due to a shift in our
        wholesale strategy. Since starting the wholesale business in August
(1)   2011, we have been using competitive pricing to stimulate sales and
        ramp up sales volume. The attendant low margins from such practice
        hurt our profitability. Accordingly, we ceased certain low margin
        sales in the quarter ended December 31, 2012 and are reconsidering our
        volume-driven wholesale strategy.
        
        Retail sales, which accounted for approximately 72.0% of our total
        revenue for the three months ended December 31, 2012, decreased by
        $7,006,459 or 38.4% to $11,227,615 from $18,234,074,primarily as a
        result of stricter government policies and an increasingly competitive
        retail market. Our retail store count decreased to 52 as of December
        31, 2012, from 60 stores a year ago. Such closings, however, had
        little or no impact on our operations given the small size of these
        stores and their operations when compared to the whole of our pharmacy
(2)     business. Same-store sales decreased by approximately $7,156,174 or
        41.6%, while new stores and online pharmacy collectively contributed
        approximately $832,878 in revenue. Our pharmacies usually perform
        better in the second half of our fiscal year when more national
        holidays such as the Chinese Spring Festival take place. Partially due
        to such seasonality, our retail sales changed quarter by quarter
        within the fiscal 2013. We do not expect same-store sales will recover
        quickly in the near future 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 December 31, 2012 and
2011:

              Three months ended December 31,                                          
                 2012                       2011
                                % of                       % of        Variance by
                                  total                        total
                 Amount           revenue     Amount           revenue     amount              % of
                                                                                               change
Revenue
from
retail
business
Revenue
from             $ 10,337,237     66.5  %     $ 17,639,448     68.8  %     $ (7,262,211  )     (41.2  )%
drugstores
Revenue
from              850,378        5.5   %      594,626        2.3   %      255,752          43.0   %
online
sales
Sub-total
of retail          11,227,615     72.0  %       18,234,074     71.1  %       (7,006,459  )     (38.4  )%
revenue
                                                                                                      
Revenue
from               4,368,398      28.0  %       7,409,875      28.9  %       (3,041,477  )     (41.0  )%
wholesale
business
Revenue
from               -              0.0   %       -              0.0   %       -                 0.0    %
farming
business
Total            $ 15,596,013     100   %     $ 25,643,949     100   %     $ (10,047,936 )     (39.2  )%
revenue
                                                                                                      

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

        Drugstore revenue decreased by approximately $7.3 million or 41.2%
        quarter over quarter,primarily due to three reasons. First, local
        government has been trying to control the costs of its insurance
        program in the face of budgetary constraints, and is whittling down
        the types and number of subsidized drugs.Second, as the local
(1)   government subjects more drugs to price control, we must in turn
        either reduce our prices for the affected drugs or stop carrying them
        at our pharmacies. Third, the retail drug market in Hangzhou, where
        our stores are still predominantly located, has become very
        competitive with many neighborhood drugstores. As a result, we do not
        expect our retail sales to recover quickly in the near future.
        
        Our online pharmacy sales increased by $255,752 or 43.0% quarter over
        quarter. Since cooperating with business-to-consumer online vendors
(2)     such as Taobao beginning in the second half of calendar 2011, our
        online pharmacy has gained wider recognition and we have seen a steady
        growth in sales.
        

Gross Profit. Our gross profit decreased by $3,836,567 or 56.2% quarter over
quarter due to the significant drop in sales at our retail locations. Our
gross margin also decreased, from 26.6% to 19.2%,as a result of lower retail
and wholesale profit margins. The average gross margin of each of our three
business segments for the three months ended December 31, 2012 are as follows:

                                                      Three months ended
                                                
                                                      March 31,
                                                      2012        2011
Average gross margin for retail business              23.3   %     36.7  %
Average gross margin for wholesale business           8.6    %     1.9   %
Average gross margin for farming business             N/A          N/A
                                                                         

Our retail gross margin decreased to 23.3% in the three months ended December
31, 2012 from 36.7% in the three months ended December 31, 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. Furthermore, in order to keep competitive in the
competitive drug retail market, we had to cut prices of certain drugs. As a
result, our overall retail gross profit margin decreased.

Our wholesale gross margin for the three months ended December 31, 2012 was
8.6% as compared to 1.9% for the three months ended December 31, 2011. We
ceased certain low profit margin wholesale business in the three months ended
December 31, 2012, and are reconsidering our volume-driven sales strategy. In
addition, in our efforts to become a first-tier distributor for certain
medicines, and thus able to purchase them at lower costs, we advanced payments
to certain vendors. Such advances are refundable if we do not purchase an
equal amount of inventory from these vendors later on. As a result, our
overall wholesale business profit margin increased.

Selling and Marketing Expenses.Our sales and marketing expenses increased by
$680,276 or 27.2% period over period primarily due to promotional activities
and advertising, as well as year-end employee bonuses. We spent approximately
$290,000on promotional activities such as leaflets and product give-aways,
and approximately $240,000 on related advertising in newspapers. Given the
increased competition amongst employers for top performing employees, we also
awarded approximately $570,000 in year-end bonuses to our employees. Coupled
with smaller revenue, selling and marketing expenses as a percentage of our
revenue increased to 20.4%, from 9.7% for the same period a year ago.

General and Administrative Expenses. Our general and administrative expenses
increased by $1,124,449 or 51.7% period over period primarily due to
additional bad debt expense of approximately $1,173,959 we accrued for advance
to suppliers during the three months ended December 31, 2012. As a percentage
of our revenue, general and administrative expenses increased to 21.2% from
8.5% for the same period a year ago also due to our smaller revenue.

Income (Loss) from Operations. Mainly as a result of lower profit margins and
higher selling and general and administrative expenses, our income from
operations decreased by $5,641,292 period over period, resulting in an
operating loss of $3,488,930. Our operating margin for the three months ended
December 31, 2012 and 2011 was (22.4)% and 8.4%, respectively.

Income Taxes. For the current period, our income tax expense decreased by
$650,523, primarily as a result of our net loss.

Net Income (Loss). As a result of the foregoing, our net income decreased by
$5,060,503 period over period, to a net loss of $3,486,792.

Comparison of nine months ended December 31, 2012 and 2011

The following table summarizes our results of operations for the nine months
ended December 31, 2012 and 2011:

                   Nine months ended December 31,
                       2012                            2011
                                          Percentage                        Percentage
                       Amount           of total       Amount           of total
                                          revenue                           Revenue
Revenue                $ 75,108,458       100.0  %       $ 69,296,755       100.0      %
Gross profit           $ 11,557,276       15.4   %       $ 19,954,088       28.8       %
Selling                $ 7,140,013        9.5    %       $ 6,588,686        9.5        %
expenses
General and
administrative         $ 7,456,956        9.9    %       $ 4,570,919        6.6        %
expenses
(Loss) income
from                   $ (3,039,693 )     (4.0   )%      $ 8,794,483        12.7       %
operations
Other
(expense)              $ (75,178    )     (0.1   )%      $ 222,929          0.3        %
income, net
Impairment of          $ 1,473,606        (2.0   )%      $ -                0.0        %
goodwill
Change in fair
value of
purchase               $ 13,652           0.0    %       $ 116,392          0.2        %
option
derivative
liability
Income tax
(benefit)              $ (93,886    )     (0.1   )%      $ 2,684,463        3.9        %
expense
Net (loss)
income
attributable           $ (4,480,083 )     (6.0   )%      $ 6,450,424        9.3        %
to controlling
interest
Net (loss)
attributable
to                     $ (856       )     (0.0   )%      $ (1,083     )     (0.0       )%
noncontrolling
interest
                                                                                       

Revenue. We had three revenue streams for the nine months ended December 31,
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) sales of our self-cultivated TCM herbs,
primarily to third-party pharmaceutical trading companies. In contrast, retail
sales and wholesale provided all of our revenue for the nine months ended
December 31, 2011.

Our revenue increased by $5,811,703 or 8.4% 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:

        Since its start, our wholesale business expanded rapidly through
        competitive pricing, from approximately 16.4% of total revenue for the
        2011 period to approximately 55.8% for the 2012 period. However, the
        low margins from such practice hurt our profitability. As a result, in
(1)   the three months ended December 31, 2012, we ceased certain low margin
        sales and are reconsidering our wholesale strategy. Hence, we had
        declined sales as compared with the same period a year ago. In
        addition, until we are able to achieve first-tier distributor status
        for more than one or two vendors, we do not expect our wholesale
        business to grow quickly in the immediate future.
        
        During the three months ended March 31, 2012, we 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
        process. For example, the local government organizes local farmers to
(2)     plant, fertilize and harvest. In turn, we pay for the expenses
        incurred by the local farmers based on our agreements with the local
        government. Sales fromour farming business accounted for $2,524,091
        or approximately 3.4% of our total revenue for the nine months ended
        December 31, 2012. In calendar 2012, we planted certain new herbs and
        continued to cultivate grown herbs. We usually harvest and sell herbs
        when they become mature and market demands are high. We anticipate
        that we will harvest and sell herbs again in approximately six months.
        
        Our retail sales, which accounted for approximately 40.8% of total
        revenue for the nine months ended December 31, 2012, decreased by
        $27,264,887 or 47.1% to $30,680,020, primarily as a result of stricter
        government policies and a competitive retail market. Our retail store
        count decreased to 52 as of December 31, 2012, from 60 stores a year
        ago. Such closings, however, had little or no impact on our operations
(3)     given the small size of these stores and their operations when
        compared to the whole of our pharmacy business. Same-store sales
        decreased by approximately $29,795,922 or 52.2%, while new stores and
        online pharmacy collectively contributed approximately $2,507,927 in
        revenue. We do not expect same-store sales will recover quickly in the
        near future as the frequency of government-mandated price controls and
        the number of drugs subject to price control continue to rise.

Nine-Month Revenue by Segment.The following table breaks down the revenue for
our two business segments for the nine months ended December 31, 2012 and
2011:

               Nine months ended December 31,                                           
                   2012                       2011
                                  % of                       % of        Variance by
                                    total                        total
                   Amount           revenue     Amount           revenue     amount              % of
                                                                                                 change
Revenue
from
retail
business
Revenue
from               $ 28,411,652     37.9  %     $ 57,173,648     82.5  %     $ (28,761,996 )     (50.3  )%
drugstores
Revenue
from                2,268,368      2.9   %      771,259        1.1   %      1,497,109        194.1  %
online
sales
Sub-total
of retail            30,680,020     40.8  %       57,944,907     83.6  %       (27,264,887 )     (47.1  )%
revenue
                                                                                                        
Revenue
from                 41,904,347     55.8  %       11,351,848     16.4  %       30,552,499        72.9   %
wholesale
business
Revenue
from                 2,524,091      3.4   %       -              0.0   %       2,524,091         N/A
farming
business
Total              $ 75,108,458     100.0 %     $ 69,296,755     100.0 %     $ 5,811,703        8.4    %
revenue
                                                                                                        

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

        Drugstore revenue decreased by approximately $28.8 million or 50.3%
        period over period for the same reasons that revenue declined during
(1)   the quarter, as a result: (a) smaller pool of insurance-subsidized
        medicines, (b) government-mandated price control, and (c) increasing
        competition.
        
        The growth of our wholesale business is a reflection of the second
(2)     half of fiscal 2012, and as discussed earlier, we ceased certain low
        margin sales in the three months ended December 31, 2012, and are
        reconsidering our volume-driven wholesale strategy.
        
        Our online pharmacy sales increased by $1,497,109 or 194.1% period
(3)     over period, and we expect the business to grow as we gain wider
        consumer awareness through our continuing cooperation with
        business-to-consumer online vendors such as Taobao.

Gross Profit. Our gross profit decreased by $8,396,812 or 42.1% period over
period from substantial decline in retail sales. Our gross margin also
decreased, from 28.8% to 15.4%,as a result of lower retail and wholesale
profit margins. The average gross margin of our three business segments for
the nine months ended December 31, 2012 are as follows:

                                                      Nine months ended
                                                
                                                      December 31,
                                                      2012       2011
Average gross margin for retail business              25.2  %     33.9  %
Average gross margin for wholesale business           3.6   %     2.7   %
Average gross margin for farming business             90.9  %     N/A
                                                                        

Our retail gross margin decreased to 25.2% in the nine months ended December
31, 2012 from 33.9% in the nine months ended December 31, 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.Furthermore, in order to keep competitive in the
competitive drug retail market, we had to cut prices of certain drugs.As a
result, our overall retail gross profit margin decreased.

Our wholesale gross margin for the nine months ended December 31, 2012 was
3.6% as compared to 2.7% for the nine months ended December 31, 2011. Because
we introduced very competitive prices to stimulate sales when we started our
wholesale business, where we purchase from third-party manufacturers or
suppliers and resell, such business has had a low profit margin. We ceased
certain low profit margin wholesale business in the three months ended
December 31, 2012, and are reconsidering our volume-driven sales strategy. In
addition, in our efforts to become first-tier distributor for certain
medicines, we advanced payments to certain vendors. As a result, our overall
wholesale business profit margin increased.

The gross margin for our farming business is achieved through our ability to
control quality through monitoring which, in turn, enables 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 increased by
$551,327 or 8.4% period over period primarily due to promotional activities
and advertising, as well as year-end employee bonuses. We spent approximately
$290,000on promotion activities and approximately $240,000 on related
advertising costs. We also awarded approximately $570,000 year-end bonuses to
our employees. Such expenses as a percentage of our revenue kept at 9.5% as
the same period a year ago.

General and Administrative Expenses. Our general and administrative expenses
increased by $2,886,037 or 63.1% period over period. Such expenses as a
percentage of our revenue increased to 9.9% from 6.6% for the same period a
year ago. The increase in absolute dollars as well as a percentage of revenue
relates to professional fees incurred as a U.S. publicly traded company,
additional reserves for accounts receivables and advances to suppliers,
increased compensation, and administration costs for new businesses such as
Jiuxin Medicine. Included in general and administrative expenses is
$1,980,318of bad debt expense related to our wholesale operations. As we have
closed store locations and implemented stricter budgets, we anticipate that
general and administrative expenses will not increase significantly in the
future.

Impairment of Goodwill. During the nine months ended December 31, 2012, we
recorded a goodwill impairment charge of $1,473,606 previously recognized in
connection with the acquisitions of Jiuxin Medicine and Shanghai Zhongxing.
The impairment to goodwill was made after we estimated the fair values of
these businesses and determined that the implied fair value of goodwill was
lower than the carrying value of goodwill. Accordingly, we fully impaired
goodwill by writing down goodwill of $1,403,933 for Jiuxin Medicine and
$69,673 for Shanghai Zhongxing.

Income (Loss) from Operations. As a result of lower profit margins, increase
in selling and marketing expenses and in general and administration expenses,
our income from operations decreased by $11,834,176 period over period,
resulting in an operating loss of $3,039,693. Our operating margin for the
nine months ended December 31, 2012 and 2011 was (4.0)% and 12.7%,
respectively.

Income Taxes. Our income tax expense decreased by $2,778,349 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
$10,930,507 period over period, to a net loss of $(4,480,083).

Balance Sheet Highlights

As of December 31, 2012, the Company had $3.8 million of cash, $58.0 million
in current assets and $33.0 million in total liabilities.

Conference Call Information

The Company will host a conference call to discuss its third quarter fiscal
year 2013 results on Tuesday, February 19, 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 # 4601251. The replay will also be
available on the company website.



CHINA JO-JO DRUGSTORES, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
                                                           
                                             December 31,       March 31,
                                             2012               2012
ASSETS
                                                                             
CURRENT ASSETS
Cash                                         $ 3,795,628        $ 3,833,216
Restricted cash                                2,825,899          2,818,449
Trade accounts receivable, net                 20,472,706         16,516,671
Inventories                                    7,636,141          6,875,574
Other receivables                              1,485,760          603,294
Advances to suppliers, net                     19,490,650         14,347,557
Other current assets                          2,255,924        2,853,301
Total current assets                          57,962,708       47,848,062
                                                                             
PROPERTY AND EQUIPMENT, net                   14,132,691       15,647,120
                                                                             
OTHER ASSETS
Long term deposits                             2,460,396          2,872,219
Other noncurrent assets                        5,466,837          5,776,667
Intangible assets, net                        1,228,260        2,816,945
Total other assets                            9,155,493        11,465,831
                                                                             
Total assets                                 $ 81,250,892      $ 74,961,013
                                                                             
LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                             
CURRENT LIABILITIES
Accounts payable, trade                      $ 20,855,018       $ 13,906,383
Notes payable                                  6,739,164          4,208,928
Other payables                                 1,643,921          782,586
Other payables - related parties               1,066,827          1,458,441
Customer deposit                               2,093,059          1,332,141
Taxes payable                                  329,315            469,606
Accrued liabilities                           269,150          417,184
Total current liabilities                     32,996,454       22,575,269
                                                                             
Purchase option derivative liability          20,767           34,419
Total liabilities                             33,017,221       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 December 31, 2012
and March 30, 2012
Common stock; $0.001 par value;
250,000,000 shares authorized;
13,609,002 and 13,589,621 shares issued        13,609             13,589
and outstanding as of December 31, 2012
and March 31, 2012
Additional paid-in capital                     16,988,127         16,853,039
Statutory reserves                             1,309,109          1,309,109
Retained earnings                              26,949,017         31,429,100
Accumulated other comprehensive income        2,975,743        2,747,561
Total stockholders' equity                    48,235,605       52,352,398
                                                                             
Noncontrolling interests                      (1,934     )      (1,073     )
Total equity                                  48,233,671       52,351,325
                                                                             
Total liabilities and stockholders'          $ 81,250,892      $ 74,961,013
equity
                                                                             
                                                                             



CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
                                                                  
                     For the three months ended          For the nine months ended
                     December 31,                        December 31,
                     2012               2011             2012               2011
REVENUES, NET        $ 15,596,013       $ 25,643,949     $ 75,108,458       $ 69,296,755
                                                                              
COST OF GOODS         12,605,711       18,817,080      63,551,182       49,342,667 
SOLD
                                                                              
GROSS PROFIT          2,990,302        6,826,869       11,557,276       19,954,088 
                                                                              
SELLING                3,179,168          2,498,892        7,140,013          6,588,686
EXPENSES
GENERAL AND
ADMINISTRATIVE        3,300,064        2,175,615       7,456,956        4,570,919  
EXPENSES
TOTAL
OPERATING             6,479,232        4,674,507       14,596,969       11,159,605 
EXPENSES
                                                                              
INCOME (LOSS)
FROM                   (3,488,930 )       2,152,362        (3,039,693 )       8,794,483
OPERATIONS
                                                                              
OTHER INCOME           (25,380    )       16,343           (75,178    )       222,929
(EXPENSE), NET
GOODWILL
IMPAIRMENT             -                  -                (1,473,606 )       -
LOSS
CHANGE IN FAIR
VALUE OF
PURCHASE              (12,095    )      19,404          13,652           116,392    
OPTION
DERIVATIVE
LIABILITY
                                                                              
INCOME BEFORE          (3,526,405 )       2,188,109        (4,574,825 )       9,133,804
INCOME TAXES
                                                                              
PROVISION FOR
(BENEFITS             (39,613    )      610,910         (93,886    )      2,684,463  
FROM) INCOME
TAXES
                                                                              
NET (LOSS)             (3,486,792 )       1,577,199        (4,480,939 )       6,449,341
INCOME
                                                                              
LESS: NET
(LOSS) INCOME
ATTRIBUTABLE          (271       )      3,217           (856       )      (1,083     )
TO
NONCONTROLLING
INTEREST
                                                                              
NET (LOSS)
INCOME
ATTRIBUTABLE           (3,486,521 )       1,573,982        (4,480,083 )       6,450,424
TO CHINA JO-JO
DRUGSTORES,
INC.
                                                                              
OTHER
COMPREHENSIVE
INCOME
Foreign
currency              120,634          262,923         228,181          1,346,370  
translation
adjustments
                                                                              
COMPREHENSIVE        $ (3,365,887 )     $ 1,836,905      $ (4,251,902 )     $ 7,796,794  
(LOSS) INCOME
                                                                              
WEIGHTED
AVERAGE NUMBER
OF SHARES:
Basic                 13,584,172       13,557,379      13,571,479       13,546,570 
Diluted               13,584,172       13,557,379      13,571,479       13,546,570 
                                                                              
(LOSS)
EARNINGS PER
SHARES:
Basic                $ (0.26      )     $ 0.12           $ (0.33      )     $ 0.48       
Diluted              $ (0.26      )     $ 0.12           $ (0.33      )     $ 0.48       
                                                                                         
                                                                                         

                                                                             
                                                                             
CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
                                                           
                                              Nine months ended December 31,
                                              2012             2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income                             $ (4,480,939 )   $ 6,449,341
Adjustments to reconcile net income to
net cash
provided by (used in) operating
activities:
Depreciation and amortization                   2,118,133        2,065,451
Stock compensation                              135,107          75,616
Bad debt expense                                2,165,822        543,435
Goodwill Impairment                             1,482,327        -
Change in fair value of purchase option         (13,652    )     (116,392    )
derivative liability
Change in operating assets:
Accounts receivable, trade                      (5,581,444 )     (5,082,547  )
Notes receivable                                -                -
Inventories                                     (734,011   )     1,497,076
Other receivables                               (1,035,445 )     (636,952    )
Advances to suppliers                           (5,404,917 )     3,000,229
Other current assets                            607,793          5,635,292
Long term deposit                               422,457          (17,790     )
Other noncurrent assets                         331,544          153,828
Change in operating liabilities:
Accounts payable, trade                         6,891,514        5,554,243
Other payables and accrued liabilities          708,621          (862,802    )
Customer deposits                               755,387          (213,660    )
Taxes payable                                  (141,984   )    (366,393    )
Net cash (used in) provided by operating       (1,773,687 )    17,677,975
activities
                                                                             
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment                           (252,128   )     (11,727,452 )
Additions to leasehold improvements             (253,515   )     -
Net payments for business acquisitions         -              (3,297,561  )
Net cash used in investing activities          (505,643   )    (15,025,013 )
                                                                             
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in restricted cash                       3,244            (496,520    )
Payments on notes payable                       -                (4,452,229  )
Increase in notes payable                       2,512,678        -
Decrease in other payables- related            (391,664   )    -
parties
Net cash provided by (used in) financing       2,124,258      (4,948,749  )
activities
                                                                             
EFFECT OF EXCHANGE RATE ON CASH                117,484        145,548
                                                                             
DECREASE IN CASH                                (37,588    )     (2,150,239  )
                                                                             
CASH, beginning of Period                      3,833,216      6,489,905
                                                                             
CASH, end of Period                           $ 3,795,628     $ 4,339,666
                                                                             
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for income taxes                    $ 72,024        $ 3,254,843
Non-cash investing activities
Charge of property and equipment into         $ 76,368        $ -
disposal loss at store closing
Transfer from construction-in-progress to     $ 2,707,183     $ -
leasehold improvement
Non-cash financing activities
Notes payable transferred to accounts         $ -             $ 6,480,692
payable vendors
                                                                             
                                                                             

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 December 31, 2012, the Company has 52 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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