China Jo-Jo Drugstores, Inc. Reports Fiscal Year 2013 Earnings Results and Schedules Conference Call for July 5, 2013

  China Jo-Jo Drugstores, Inc. Reports Fiscal Year 2013 Earnings Results and
                  Schedules Conference Call for July 5, 2013

PR Newswire

HANGZHOU, China, July 2, 2013

HANGZHOU, China, July 2, 2013 /PRNewswire/ --

Fiscal Year 2013 Highlights:

  oRevenues from retail sales decreased to $40.7 million, down 38.4% from the
    prior period
  oGross profit was $14.6 million, down 46.9% from the prior year
  oNet loss was $14.3 million
  oDiluted and basic loss per share was $1.06
  oRetooling operations: closed 17 stores in and around Hangzhou and focusing
    on more profitable wholesale customers

China Jo-Jo Drugstores, Inc. (NASDAQ:CJJD) (the "Company"), a retail and
wholesale distributor of pharmaceutical and other healthcare products in
China, today reported earnings results for the fiscal year ended March 31,
2013. The Company will hold a conference call on Friday, July 5, 2013, at
8:00 a.m. Eastern Time. Please see below for dial-in information.

Mr. Lei Liu, the Company's Chairman and CEO, stated, "During fiscal year 2013,
our retail drugstore segment faced increased government price controls on
over-the-counter and prescription drugs and stricter insurance requirements as
well as increased competition from neighborhood drugstores and hospitals that
received government subsidies." As of June 28, 2013, the Company operated 51
pharmacies, including five stores in Shanghai.

Mr. Lei Liu continued, "Our net loss was not only due to the reserves related
to our advances to suppliers and accounts receivable from our wholesale
business, but also goodwill impairments related to two acquisitions and
write-offs related to closing 17 drugstores. These items totaled $12.2 million
and accounted for 85.1% of our total net loss. Consequently, we are retooling
our business strategies going forward: we plan to open more clinics adjacent
to our drugstores to boost sales, we are looking for ways to reduce our
general and administrative expenses, and we are now focusing on more
profitable wholesale customers rather than driving sales volume through low
margin sales as we had previously done."

Mr. Liu continued, "For fiscal year 2013, we continued to harvest and sell
herbs used in traditional Chinese medicine. Sales from our online drugstore
also rose, as we actively promoted our online presence through cooperation
with some of the larger online vendors in China."

"For 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," stated Mr. Liu.

Balance Sheet Highlights

As of March 31, 2012, the Company had $4.5 million of cash, $67.8 million in
total assets and $29.7 million in total liabilities.

Fiscal Year 2013 Full Year Results

Comparison of years ended March 31, 2013 and 2012

The following table summarizes our results of operations for the years ended
March 31, 2013 and 2012:

                          Years Ended March 31,
                          2013                        2012
                                          Percentage                Percentage
                            Amount        of total      Amount      of total
                                          revenue                   revenue
Revenues                  $ 89,495,546    100.0%      $ 94,352,885  100.0%
Gross Profit              $ 14,634,993    16.4%       $ 27,562,801  29.2%
Selling Expenses          $ 12,216,984    13.7%       $ 8,498,240   9.0%
General and               $ 15,000,364    16.8%       $ 8,582,389   9.1%
Administrative Expenses
Goodwill Impairment Loss  $ 1,473,606     1.6%        $ -           -
(Loss) Income from        $ (14,055,961)  (15.7)%     $ 10,482,172  11.1%
Operations
Other Income (Expense)    $ 56,428        0.1%        $ 187,865     0.2%
Changes in Fair Value of
Purchase Option           $ 18,810        0.0%        $ 118,807     0.1%
Derivative Liability
Income Tax Expenses       $ 353,802       0.4%        $ 2,648,365   2.8%
Net (loss) income
attributable to           $ (14,334,525)  (16.0)%     $ 8,141,626   8.6%
controlling interest
Net (loss) attributable
to noncontrolling           (794)         (0.0)%        (1,147)     (0.0)%
interest



Revenue.

Revenue decreased by $4,857,339 or 5.1% year over year, primarily due to a
decrease in our retail business, despite the fast expansion of our wholesale
business and the addition of our herb farming business:

(1) Retail sales, which accounted for approximately 45.5% of total revenue
for the year ended March 31, 2013, decreased by $25,348,268 or 38.4% to
$40,726,080, due to price control on many popular prescription drugs and an
increasingly competitive retail market. Our retail margin also fell from 33.0%
to 24.4%.Same-store sales decreased by approximately $22,489,343 or 36.2%,
while new stores and online sales collectively contributed approximately
$3,165,271 in revenue.Our store count decreased to 51 as of March 31, 2013,
from 61 a year ago. 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 thereto continue to increase.

(2) Since inception, our wholesale business expanded rapidly through
competitive pricing and represented 51.7% of total revenue for the year ended
March 31, 2013, up from 26.0% a year ago. However, our wholesale margin is
significantly lower than our other operating segments, and fell from 7.4% to
5.2%.Since our third fiscal quarter, we have ceased certain low margin sales
and are focusing on profitability rather than sales volume, and our wholesale
margin rose to over 10% in the fourth fiscal quarter. Because we have little
access to lucrative sales channels such as hospitals, we have qualified as a
first-tier distributor with only a limited number of vendors thus far. Until
we are able to achieve first-tier distributor status with more vendors, we do
not expect our wholesale business to significantly expand in the immediate
future.

(3) Sales fromour herb farming business accounted for $2,534,380 or
approximately 2.8% of our total revenue for the year ended March 31, 2013 as
compared to $4,217,574 a year ago. Our margin from this business is
significant: 91.2% for fiscal 2013 and 94.9% for fiscal 2012. In fiscal 2013,
we planted and harvested herbs based on our best estimate as to future market
demands. We anticipate that we will continue doing soin upcoming fiscal year,
but do not expect a significant increase from fiscal 2013 in terms of revenue
or gross profit.

Revenue by Segment.

The following table breaks down the revenue for our three business segments
for the years ended March 31, 2013 and 2012:



                    Years ended December 31,
                    2013                   2012
                                   % of                 % of   
                    Amount        total                  total                     % of
                                  revenue  Amount        revenue  Variance by     change
                                                                  amount
Revenue from retail
business
Revenue from   $ 37,678,835  42.1%    $ 64,981,643  69%      $ (27,302,808)  (42.0)%
drugstores
Revenue from     3,047,245   3.4%       1,092,705   1%         1,954,540     178.9%
online sales
Sub-total   40,726,080  45.5%      66,074,348  70%        (25,348,268)  (38.4)%
of retail revenue
Revenue from          46,235,086  51.7%      24,060,963  26%        22,174,123    92.2%
wholesale business
Revenue fromherb     2,534,380   2.8%       4,217,574   4%         (1,683,194)   (39.9)%
farming business
Total revenue       $ 89,495,546  100%     $ 94,352,885  100.0%   $ (4,857,339)   (5.1)%

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

(1) Drugstore revenue decreased by approximately $27.3 million or 42.0%
year over year,primarily due to three factors. Local government has been
controlling the cost of its insurance programs by reducing the number and
types of subsidized drugs. In addition, as more drugs are subject to price
control, we must either reduce our prices accordingly or stop carrying the
affected drugs. The retail drug market in Hangzhou, where our stores are still
predominantly located, has also become very competitive with many neighborhood
drugstores opening.Accordingly, we do not expect our retail sales to recover
quickly in the near future.

(2) The growth in wholesale revenue is a reflection of our volume-driven
strategy during the first half of fiscal 2013. Sales during that period
amounted to approximately $37,535,949, or 81.2% of total wholesale revenue.
Starting in the third quarter of fiscal 2013, however, we have halted efforts
to achieve sales volume through low margin sales and are focusing on
profitability. Wholesale revenue for fiscal 2012 was also less because we only
had eight months of wholesale operation, as Jiuxin Medicine was acquired in
August 2011.

(3) Online sales increased by $1,954,540 or 178.9% year over year, 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.

Gross profit decreased by $12,927,808 or 46.9% year over year from substantial
decline in retail sales.Gross margin also decreased, from 29.2% to 16.4%,as
a result of lower retail and wholesale profit margins.The average gross
margin for each of our three business segments for the years ended March 31,
2013 and 2012 are as follows:

                        Years ended

                        March 31,
                        2013     2012
Retail business         24.4%    33.0%
Wholesale business      5.2%     7.4%
Herb farming business   91.2%    94.9%

Retail gross margin decreased primarily due to price adjustments we were
forced to make. 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 near cost due to government subsidies. We also adjusted
prices to match or beat other competitors. As a result, our overall retail
gross profit margin decreased.

The first half of fiscal 2013 is responsible for the decrease in wholesale
gross margin. As we were relying on very competitive prices to stimulate sales
during that period, our profit margin from that period is only 3.0%. We ceased
certain low profit margin wholesale business since then, and profit margin
accordingly improved in the second half of fiscal 2013. Profit margin was over
10% in the fourth fiscal quarter.

The gross margin for our herb farming business is achieved through our ability
to control quality through monitoring the cultivation process which, in turn,
has enabled us to command good pricing. Provided that market demands remain
robust, we expect profit margin to remain high even if we continue to sell our
harvests to just the vendor that we have been selling to.

Selling and Marketing Expenses.

Sales and marketing expenses increased by $3,718,744 or 43.8% year over year
primarily due to promotional activities and advertising, as well as $573,461
in year-end employee bonuses to retain talent and address labor cost
inflation. Included in selling and marketing expense is one-time leasehold
improvement impairment of $275,805 and $1,993,483 related to store closings
and the termination of a new store project, respectively, and $384,276 in
amortization of leasehold improvement for Jiuxin Medicine. In fiscal 2013, we
closed 17 stores and charged the residual value of store improvements (such as
immovable store decoration) into expense. We also shut down construction for a
new pharmacy and terminated the project when the scheduled paving for a nearby
thoroughfare to the city center was suspended indefinitely by the Hangzhou
government. As a result, we recorded a direct write-off of a
construction-in-progress. Rental expense in fiscal 2013 was also $273,599 more
than in fiscal 2012 due to the booming Chinese real estate market. We expect
our labor and rental cost will continue to rise in the future.

General and Administrative Expenses.

General and administrative expenses increased by $6,417,975 or 74.8% year over
year. Such expenses as a percentage of our revenue increased to 16.8% from
9.1% for the same period a year ago. The increase in absolute dollars as well
as a percentage of revenue mainly resulted from write-offs and allowances of
bad debt, including $846,094 of direct write-offs from government health
insurance, as well as allowances from our wholesale operations, including
$4,700,924 related to accounts receivable and $2,846,822 related to advances
to suppliers. Because most aged receivables were reserved in fiscal 2013, we
anticipate that general and administrative expenses should decrease in the
future.

Impairment of Goodwill.

During the year ended March 31, 2013, we recorded a goodwill impairment charge
of $1,473,606 previously recognized in connection with the acquisitions of
Jiuxin Medicine and Shanghai Zhongxing. Such impairment was made after we
estimated the fair value of each of these businesses and determined that the
implied fair value was lower than the carrying value.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.

Income from operations decreased by $24,538,133 year over year, resulting in
operating loss of $14,055,961 for the year ended March 31, 2013, as compared
to operating income of $10,482,172 a year ago. Operating margin for the
fiscal years ended March 31, 2013 and 2012 was (25.1)% and 11.1%,
respectively.

Income Taxes.

Income tax expense decreased by $2,294,563 year over year, as a result of our
operating loss and an income tax waiver granted to Qianhong Agriculture.

Net Loss.

For the fiscal year ended March 31, 2013, we recorded net loss of $14,334,525.
Included in net loss are bad debt allowances of $7,615,067, bad debt
write-offs of $846,094, goodwill impairment of $1,473,606, and a charge to
expense of $2,269,288 in leasehold improvement for our closed stores.

Conference Call Information

The Company will host a conference call to discuss its fiscal year 2013
results on Friday, July 5, 2013, at 8 a.m. Eastern Time. To participate in the
conference call (identification number 4628401), please dial 1-877-941-1427
from North America. International participants can access the call by dialing
1-480-629-9664. A live audio webcast of this conference call will be available
under the Investor Relations section of the Company's website at
http://www.chinajojodrugstores.com. A replay of the call will be available
beginning the same day at approximately 11 a.m. Eastern Time by dialing
1-877-870-5176 or 1-858-384-5517 with pin # 4628401. 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 June 28, 2013, the Company had 51 retail pharmacies in Hangzhou
and Shanghai.

Forward Looking Statement

Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995: Certain of the statements made in the press release constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements can be identified by the use
of forward-looking terminology such as "believe," "expect," "may," "will,"
"should," "project," "plan," "seek," "intend," or "anticipate" or the negative
thereof or comparable terminology. Such statements typically involve risks and
uncertainties and may include financial projections or information regarding
the progress of new product development. Actual results could differ
materially from the expectations reflected in such forward-looking statements
as a result of a variety of factors, including the risks associated with the
effect of changing economic conditions in The People's Republic of China,
variations in cash flow, reliance on collaborative retail partners and on new
product development, variations in new product development, risks associated
with rapid technological change, and the potential of introduced or undetected
flaws and defects in products, and other risk factors detailed in reports
filed with the Securities and Exchange Commission from time to time.

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
CONSOLIDATED BALANCE SHEETS
                                                    March 31,     March 31,
                                                    2013          2012
A S S E T S
CURRENT ASSETS
 Cash                                            $ 4,524,094   $ 3,833,216
 Restricted cash                                   2,162,837     2,818,449
 Trade accounts receivables, net                   12,978,808    16,516,671
 Inventories                                       8,586,999     6,875,574
 Other receivables, net                            157,849       603,294
 Advances to suppliers, net                        15,523,034    14,347,557
 Other current assets                              1,221,499     2,853,301
 Total current assets                          45,155,120    47,848,062
PROPERTY AND EQUIPMENT, net                           13,288,652    15,647,120
OTHER ASSETS
 Long term deposits                                2,760,665     2,872,219
 Other noncurrent assets                           5,431,326     5,776,667
 Intangible assets, net                            1,202,258     2,816,945
 Total other assets                            9,394,249     11,465,831
 Total assets                            $ 67,838,021  $ 74,961,013
L I A B I L I T I E SA N DS T O C K H O L D E R
S'E Q U I T Y
CURRENT LIABILITIES
 Accounts payable, trade                         $ 13,780,211  $ 13,906,383
 Notes payable                                     7,186,453     4,208,928
 Other payables                                    1,327,454     782,586
 Other payables - related parties                  1,224,417     1,458,441
 Customer deposits                                 4,828,293     1,332,141
 Taxes payable                                     371,633       469,606
 Accrued liabilities                               956,342       417,184
 Total current liabilities                     29,674,803    22,575,269
 Purchase option derivative liability              15,609        34,419
  Total liabilities                        29,690,412    22,609,688
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock; $0.001 par value;10,000,000
shares authorized; nil issued andoutstanding as of   -             -
March 31, 2013 and 2012
Common stock; $0.001 par value; 250,000,000 shares
authorized;13,609,002 and13,589,621 shares         13,609        13,589
issued and outstanding
 Additional paid-in capital                        16,609,747    16,853,039
 Statutory reserves                                1,309,109     1,309,109
 Retained earnings                                 17,095,369    31,429,100
 Accumulated other comprehensive income            3,121,654     2,747,561
 Total stockholders' equity                    38,149,488    52,352,398
 Noncontrolling interests                          (1,879)       (1,073)
 Total equity                                  38,147,609    52,351,325
 Total liabilities and stockholders'     $ 67,838,021  $ 74,961,013
equity







CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
                                                 For the years ended March 31,
                                                 2013             2012
REVENUES, NET                                    $  89,495,546    $ 94,352,885
COST OF GOODS SOLD                                  74,860,553      66,790,084
GROSS PROFIT                                        14,634,993      27,562,801
SELLING EXPENSES                                    12,216,984      8,498,240
GENERAL AND ADMINISTRATIVE EXPENSES                 15,000,364      8,582,389
GOODWILL IMPAIRMENT LOSS                            1,473,606       -
TOTAL OPERATING EXPENSES                            28,690,954      17,080,629
(LOSS) INCOME FROM OPERATIONS                       (14,055,961)    10,482,172
OTHER INCOME, NET                                   56,428          187,865
CHANGE IN FAIR VALUE OF PURCHASE OPTION             18,810          118,807
DERIVATIVE LIABILITY
(LOSS) INCOME BEFORE INCOME TAXES                   (13,980,723)    10,788,844
PROVISION FOR INCOME TAXES                          353,802         2,648,365
NET (LOSS) INCOME                                   (14,334,525)    8,140,479
ADD: NET LOSS ATTRIBUTABLE TO NONCONTROLLING        794             1,147
INTEREST
NET (LOSS) INCOME ATTRIBUTABLE TO CHINA JO-JO       (14,333,731)    8,141,626
DRUGSTORES, INC.
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustments            374,093         1,627,728
COMPREHENSIVE (LOSS) INCOME                      $  (13,959,638)  $ 9,769,354
WEIGHTED AVERAGE NUMBER OF SHARES:
 Basic                                           13,580,731      13,568,481
 Diluted                                         13,580,731      13,569,995
EARNINGS PER SHARES:
 Basic                                        $  (1.06)        $ 0.60
 Diluted                                      $  (1.06)        $ 0.60





CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                Common Stock                        Retained Earnings            Accumulated
                                                                                 other
                Number of     Amount    Paid-in     Statutory    Unrestricted    comprehensive    Noncontrolling    Total
                shares                  capital     reserves                     income/(loss)    interest
BALANCE, March  13,530,477  $ 13,530  $ 16,333,956  1,309,109  $ 23,287,474    $ 1,119,848      $ -               $ 42,063,917
31, 2011
Cash injection
contributed by  -             -         406,546     -            -               -                -                 406,546
shareholders
Stock based     59,144        59        118,993     -            -               -                -                 119,052
compensation
Closing of
subsidiary      -             -         (6,456)     -            -               -                -                 (6,456)
Kuaileren
Non-controlling
interest in     -             -         -           -            -               -                59                59
acquiree
Net income      -             -         -           -            8,141,626       -                (1,147)           8,140,479
Foreign
currency        -             -         -           -            -               1,627,713        15                1,627,728
translation
gains
BALANCE, March  13,589,621  $ 13,589  $ 16,853,039  1,309,109  $ 31,429,100    $ 2,747,561      $ (1,073)         $ 52,351,325
31, 2012
Closing of VIE
Jiuying         -             -         (406,546)   -            -               -                -                 (406,546)
Pharmacy
Stock based     19,381        20        163,254     -            -               -                -                 163,274
compensation
Net loss        -             -         -           -            (14,333,731)  -                  (794)             (14,334,525)
Foreign
currency        -             -         -           -            -               374,093          (12)              374,081
translation
gain (loss)
BALANCE, March  13,609,002  $ 13,609  $ 16,609,747  1,309,109    17,095,369    $ 3,121,654      $ (1,879)         $ 38,147,609
31, 2013







CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                For the years ended March 31,
                                                2013            2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income                               $ (14,334,525)  $ 8,140,479
Adjustments to reconcile net (loss) income to
net cash (used
in)provided by operating activities:
 Depreciation and amortization                 2,764,144       2,340,865
 Leasehold improvement impairment              2,269,288       -
 Stock compensation                            163,274         119,052
 Bad debt write-off and provision - trade
accounts receivables,                             8,184,909       1,669,864
advance to suppliers and other receivables
 Goodwill Impairment                           1,473,606
 Change in fair value of purchase option       (18,810)        (118,807)
derivative liability
 Change in operating assets:
 Accounts receivable, trade                    (1,045,689)     (14,179,193)
 Inventories                                   (1,646,583)     2,018,848
 Other receivables                             (503,613)       (372,660)
 Advances to suppliers                         (3,584,443)     2,132,100
 Other current assets                          1,646,935       5,860,584
 Long term deposit                             134,493         (238,630)
 Other noncurrent assets                       390,869         350,885
 Change in operating liabilities:
 Accounts payable, trade                       (239,313)       15,792,680
 Other payables and accrued liabilities        665,735         (1,626,827)
 Customer deposits                             3,467,706       (768,651)
 Taxes payable                                 (101,323)       (1,153,346)
 Net cash (used in) provided by            (313,340)       19,967,243
operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of equipment                         (415,152)       (4,915,241)
 Additions to leasehold improvements           (1,989,207)     (6,639,268)
 Net payments for business acquisitions        -               (3,308,158)
 Net cash used in investing activities     (2,404,359)     (14,862,667)
CASH FLOWS FROM FINANCING ACTIVITIES:
 Change in restricted cash                     675,380         (1,840,419)
 Change in notes payable                       2,928,146       (7,077,596)
 Change in other payables-related parties      (234,404)       577,183
 Proceeds from shareholders contribution       -               406,546
 Net cash (used in) provided               3,369,122       (7,934,286)
byfinancing activities
EFFECT OF EXCHANGE RATE ON CASH                   39,455          173,021
(DECREASE)INCREASE IN CASH                       690,878         (2,656,689)
CASH, beginning of year                           3,833,216       6,489,905
CASH, end of year                               $ 4,524,094     $ 3,833,216
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
 Cash paid for income taxes                  $ 70,725        $ 4,113,553
 Transfer from construction-in-progress to   $ 2,707,183     $ 2,890,399
leasehold improvement
 Non-cash financing activities
 Notes payable transferred to accounts   $ -             $ 8,468,458
payable vendors





SOURCE China Jo-Jo Drugstores, Inc.

Website: http://www.chinajojodrugstores.com
 
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