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

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

PR Newswire

BEIJING, Nov. 14, 2013

BEIJING, Nov. 14, 2013 /PRNewswire/ --

Fiscal Year 2014 Second Quarter Highlights:

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

China Jo-Jo Drugstores, Inc. (CJJD) (the "Company"), a retail and wholesale
distributor of pharmaceutical and other healthcare products in China, today
announced earnings results for the three months ended September 30, 2013. As
previously announced, the Company will hold a conference call at 8:00 A.M.
Eastern Time on Friday November 15. Please see below for dial-in information.

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

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

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

Balance Sheet Highlights

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

Fiscal Year 2014 Second Quarter Results

Comparison of three months ended September 30, 2013 and 2012

The following table summarizes our results of operations for the three months
ended September 30, 2013 and 2012:



                        Three months ended September 30,
                        2013                        2012
                                      Percentage                 Percentage

                        Amount        of total    Amount         of total

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

Revenue

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

     Wholesale revenue, which represented 34.4% of total revenue for the three
     months ended September 30, 2013, decreased by $10,364,687 or 64.1%. Such
     significant contraction resulted from ongoing implementation of our new
     wholesale strategy to focus on profitability rather than sales
 (1) volume.Thus, our wholesale profit margin increased from 2.5% to 18.6%.
     However, until we can achieve first-tier distributor status with more
     vendors, we will continue to have limited access to more lucrative sales
     channels such as hospitals, and do not expect our wholesale business to
     expand significantly in the immediate future.

     Retail sales, which accounted for approximately 65.6% of total revenue
     for the three months ended September 30, 2013, increased by $554,994 or
     5.3% to $11,052,942.Same-store sales increased by approximately $66,080
     or 0.7%, while online sales contributed approximately $1,596,950 in
 (2) revenue, an increase of 85.6%.The increase in same-store sales reflects
     implementation of key drugstore operational strategies such as promoting
     sale through our doctors and clinics, as well as modest economic growth
     in China.Retail margin, however, fell from 26.0% to 22.7% due to price
     adjustments caused by government drug price control.Our store count
     decreased to 51 as of September 30, 2013, from 65 a year ago.



Quarterly Revenue by Segment

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

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



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

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

     Wholesale revenue decreased by $10,364,687 or 64.1% as a result of our
     strategy to focus on profitability. Although we achieved our sales volume
     in the prior period quickly through competitive pricing, we incurred loss
     as result of low profit margin and rising overhead. Since the third
 (2) quarter of fiscal 2013, we have ceased certain low margin sales and are
     focusing on profitability rather than sales volume.Although this
     strategy may impact our ability to achieve first-tier distributor status,
     we believe that focusing on profitability rather than volume is critical
     for our overall operations going forward.

     Online sales increased by $736,420 or 85.6%.We have been working with
     business-to-consumer online vendors, including Taobao, by posting our
     products on their online platforms, which direct customers back to our
 (3) website.Such arrangement has exposed our online presence to a wider
     consumer base.In addition, since the end of 2012, we have expended
     considerable efforts in identifying popular products that can drive
     sales.As a result, we have seen steady growth in online sales.



Gross Profit

Gross profit decreased by $473,794 or 13.8% period over period primarily as a
result of the contraction in wholesale business.Gross margin increased
period over period from 12.5% to 17.8%as a result of higher wholesale profit
margin, offset by a lower retail profit margin.The average gross margins for
our three business segments are as follows:

                                              Three months ended

                                              September 30,
                                              2013        2012
Average gross margin for retail business       23.0%      26.6%
Average gross margin for wholesale business    7.6%       3.9%
Average gross margin for farming business      N/A        N/A



Retail gross margin decreased primarily due to price adjustments that we made.
Some adjustments were made to comply with government price controls. Others
were made to stay competitive with local community hospitals that are able to
sell at or near cost as their pharmacies are indirectly subsidized through the
government. We also adjusted prices to match or better other competitors'
prices. Accordingly, overall retail gross profit margin decreased.

Wholesale gross margin increased because we are now focused on profitability
for this segment such as byselling high margin products.By comparison, our
drive to generate sales volume by selling very low margin products created the
low gross margin a year ago.

Selling and Marketing Expenses

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

General and Administrative Expenses

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

(Loss) Income from Operations

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

Income Taxes

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

Net Loss

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

Comparison of six months ended September 30, 2013 and 2012

The following table summarizes our results of operations for the six months
ended September 30, 2013 and 2012:

                       Six months ended September 30,
                       2013                         2012
                                      Percentage                 Percentage

                       Amount         of total    Amount         of total

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



Revenue

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

     Wholesale revenue, which represented 31.8% of total revenue for the six
     months ended September 30, 2013, decreased by $27,309,341 or 72.8%. Such
     significant contraction resulted from ongoing implementation of our new
     wholesale strategy to focus on profitability rather than sales
 (1) volume.Thus, our wholesale profit margin increased from 2.5% to 18.6%.
     However, until we can achieve first-tier distributor status with more
     vendors, we will continue to have limited access to more lucrative sales
     channels such as hospitals, and do not expect our wholesale business to
     expand significantly in the immediate future

     Retail sales, which accounted for approximately 68.2% of total revenue
     for the six months ended September 30, 2013, increased by $2,512,927 or
     12.9% to $11,052,942. Same-store sales increased by approximately
     $1,066,343 or 6.2%, while online sales contributed approximately
     $2,865,592 in revenue, an increase of 102.1%.The increase in
 (2) same-store sales reflects implementation of key drugstore operational
     strategies such as promoting sale through our doctors and clinics, as
     well as modest economic growth in China.Retail margin, however, fell
     from 26.3% to 24.1% due to price adjustments caused by government drug
     price control.Our store count decreased to 51 as of September 30, 2013,
     from 65 a year ago.



Six-Month Revenue by Segment

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

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



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

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

     Wholesale revenue decreased by $27,309,341 or 72.8% as a result of our
     strategy to focus on profitability. Although we achieved our sales volume
     in the prior period quickly through competitive pricing, we incurred loss
     as result of low profit margin and rising overhead. Since our third
 (2) fiscal quarter of fiscal 2013, we have ceased certain low margin sales
     and are focusing on profitability rather than sales volume.Although
     this strategy may impact our ability to achieve first-tier distributor
     status, we believe that focusing on profitability rather than volume is
     critical for our overall operations going forward.

     Online sales increased by $1,447,602 or 102.1% period over period.We
     have been working with business-to-consumer online vendors, including
     Taobao, by posting our products on their online platforms, which direct
 (3) customers back to our website.Such arrangement has exposed our online
     presence to a wider consumer base.In addition, since the end of 2012,
     we have expended considerable efforts in identifying popular products
     that can drive sales.As a result, we have seen steady growth in online
     sales.



Gross Profit

Gross profit decreased by $2,017,402 or 23.5% period over period primarily as
a result of the contraction in wholesale business.Gross margin increased
period over period from 14.4% to20.3% as a result of higher wholesale profit
margin, offset by a lower retail profit margin.The average gross margins for
our three business segments are as follows:

                                              Six months ended

                                              September 30,
                                              2013      2012
Average gross margin for retail business       24.3%    26.3%
Average gross margin for wholesale business    12.4%    3.0%
Average gross margin for farming business      N/A      90.9%



Retail gross margin decreased primarily due to price adjustments that we made.
Some adjustments were made to comply with government price controls. Others
were made to stay competitive with local community hospitals that are able to
sell at or near cost as their pharmacies are indirectly subsidized through the
government. We also adjusted prices to match or better other competitors'
prices. Accordingly, overall retail gross profit margin decreased.

Wholesale gross margin increased because we are now focused on profitability
for this segment such as byselling high margin products.By comparison, our
drive to generate sales volume by selling very low margin products created the
low gross margin a year ago.

Selling and Marketing Expenses

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

General and Administrative Expenses

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

(Loss) Income from Operations

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

Income Taxes

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

Net Income

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

Conference Call Information

As previously announced, the Company will host a conference call to discuss
its fiscal year 2014 first quarter results on Friday November 15, 2013 at 8
a.m. Eastern Time. To participate in the conference call, please dial
1-888-846-5003 from North America. International participants can access the
call by dialing 1-480-629-9586. A live audio webcast of this conference call
will be available under the Investor Relations section of the Company's
website at http://www.chinajojodrugstores.com. A replay of the call will be
available beginning the same day at approximately 11 a.m. Eastern Time by
dialing 1-877-870-5176 or -1-858-384-5517 with pin #4651164. The replay will
also be available on the company website.

About China Jo-Jo Drugstores, Inc.

China Jo-Jo Drugstores, Inc., through its subsidiaries and contractually
controlled affiliates, is a retailer and wholesale distributor of
pharmaceutical and other healthcare products in the People's Republic of
China. As of September 30, 2013, the Company had 51 retail pharmacies in
Hangzhou and Shanghai.

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

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)
                                                  September 30,   March 31,
                                                  2013            2013
A S S E T S
CURRENT ASSETS
Cash                                              $  6,296,715    $ 4,524,094
Trade accounts receivable, net                       12,691,630     12,978,808
Inventories                                          12,167,632     8,586,999
Other receivables, net                               425,902        157,849
Advances to suppliers, net                           11,070,649     15,523,034
Restricted cash                                      1,964,313      2,162,837
Other current assets                                 2,140,802      1,221,499
Total current assets                                 46,757,643     45,155,120
PROPERTY AND EQUIPMENT, net                          12,712,963     13,288,652
OTHER ASSETS
Long term deposits                                   4,184,317      2,760,665
Other noncurrent assets                              5,460,500      5,431,326
Intangible assets, net                               1,149,981      1,202,258
Total other assets                                   10,794,798     9,394,249
Total assets                                      $  70,265,404   $ 67,838,021
L I A B I L I T I E SA N DS T O C K H O
L D E R S'E Q U I T Y
CURRENT LIABILITIES
Short-term loan payable                           $  163,000      $ -
Accounts payable, trade                              19,455,279     13,780,211
Notes payable                                        6,547,710      7,186,453
Other payables                                       1,429,961      1,327,454
Other payables - related parties                     2,104,735      1,224,417
Customer deposits                                    1,989,967      4,828,293
Taxes payable                                        379,981        371,633
Accrued liabilities                                  242,843        956,342
Total current liabilities                            32,313,476     29,674,803
Purchase option derivative liability                 60,043         15,609
Total liabilities                                    32,373,519     29,690,412
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock; $0.001 par value;10,000,000
shares authorized; nil issued                        -              -
 andoutstanding as ofSeptember 30,
2013 and March 31, 2013
Common stock; $0.001 par value; 250,000,000
shares authorized;13,609,002                      13,609         13,609
shares issued and outstanding as of
September 30, 2013 and March 31, 2013
Additional paid-in capital                           16,668,548     16,609,747
Statutory reserves                                   1,309,109      1,309,109
Retained earnings                                    15,761,791     17,095,369
Accumulated other comprehensive income               4,141,259      3,121,654
Total stockholders' equity                           37,894,316     38,149,488
Noncontrolling interests                             (2,431)        (1,879)
Total equity                                         37,891,885     38,147,609
Total liabilities and stockholders' equity        $  70,265,404   $ 67,838,021



CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)
                 For the three months            For the six months

                 ended September 30,             ended September 30,
                 2013            2012            2013            2012
REVENUES, NET     $ 16,855,421   $ 26,665,114    $ 32,191,940    $ 59,512,445
COST OF GOODS       13,907,018     23,242,917      25,642,368      50,945,471
SOLD
GROSS PROFIT        2,948,403      3,422,197       6,549,572       8,566,974
SELLING EXPENSES    2,979,131      2,102,621       4,659,973       3,960,845
GENERAL AND
ADMINISTRATIVE      491,981        1,310,313       3,132,799       4,156,892
EXPENSES
TOTAL OPERATING     3,471,112      3,412,934       7,792,772       8,117,737
EXPENSES
(LOSS) INCOME       (522,709)      9,263           (1,243,200)     449,237
FROM OPERATIONS
OTHER INCOME        37,021         (90,332)        (3,392)         8,367
(LOSS), NET
GOODWILL            -              (1,473,606)     -               (1,473,606)
IMPAIRMENT LOSS
CHANGE IN FAIR
VALUE OF            (21,049)       25,905          (8,384)         25,747
DERIVATIVE
LIABILITIES
LOSS BEFORE         (506,737)      (1,528,770)     (1,254,976)     (990,255)
INCOME TAXES
PROVISION FOR       39,589         10              79,109          3,892
INCOME TAXES
NET LOSS            (546,326)      (1,528,780)     (1,334,085)     (994,147)
ADD: NET LOSS
ATTRIBUTABLE TO     264            331             507             585
NONCONTROLLING
INTEREST
NET LOSS
ATTRIBUTABLE TO     (546,062)      (1,528,449)     (1,333,578)     (993,562)
CHINA JO-JO
DRUGSTORES, INC.
OTHER
COMPREHENSIVE
INCOME
Foreign currency
translation         259,814        52,538          1,019,605       107,547
adjustments
COMPREHENSIVE     $ (286,248)    $ (1,475,911)   $ (313,973)     $ (886,015)
LOSS
WEIGHTED AVERAGE
NUMBER OF
SHARES:
Basic               13,609,003     13,588,569      13,609,003      13,575,550
Diluted             13,609,003     13,588,569      13,609,003      13,575,550
LOSSES PER
SHARES:
Basic             $ (0.04)       $ (0.11)        $ (0.10)        $ (0.07)
Diluted           $ (0.04)       $ (0.11)        $ (0.10)        $ (0.07)









CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)
                                               Six months ended

                                               September 30,
                                               2013            2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                       $ (1,334,085)   $ (994,147)
Adjustments to reconcile net (loss) income to
net cash provided by (used in)

operating activities:
Depreciation and amortization                  1,140,586       1,295,175
Stock compensation                             58,801          97,236
Bad debt write-off and provision               (747,930)       834,772
Goodwill Impairment                            -               1,473,606
Change in fair value of purchase option        8,384           (25,747)
derivative liability
Change in operating assets:
Accounts receivable, trade                     972,975         (11,009,813)
Notes receivable                               -               (928,801)
Inventories                                    (3,361,143)     (1,887,064)
Other receivables                              (262,493)       (761,810)
Advances to suppliers                          5,117,601       (2,040,116)
Other current assets                           (849,209)       (779,191)
Long term deposit                              -               421,871
Other noncurrent assets                        92,785          251,938
Change in operating liabilities:
Accounts payable, trade                        5,323,371       9,916,586
Other payables and accrued liabilities         (654,911)       715,342
Customer deposits                              (2,925,130)     1,657,754
Taxes payable                                  (45)            (242,908)
Net cash provided by (used in) operating      2,579,557       (2,005,317)
activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment                          (54,413)        (234,151)
Increase in long-term depositsfor land use    (1,351,030)     -
right
Additions to leasehold improvements            (26,619)        (253,163)
Payments on construction-in-progress           (111,524)       -
Net cash used in investing activities        (1,543,586)     (487,314)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term bank loan             161,770         -
Change in restricted cash                      245,504         90,544
Change in notes payable                        (795,002)       2,328,686
Change in other payables-related parties       879,958         (295,954)
Net cash provided byfinancing activities    492,230         2,123,276
EFFECT OF EXCHANGE RATE ON CASH                  244,420         44,100
INCREASE (DECREASE) IN CASH                      1,772,621       (325,255)
CASH, beginning of period                        4,524,094       3,833,216
CASH, end of period                            $ 6,296,715     $ 3,507,961
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes                   $ 12,797        $ -
Transfer from construction-in-progress to      -               2,703,428
leasehold improvement

SOURCE China Jo-Jo Drugstores, Inc.
 
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