China Jo-Jo Drugstores Reports Fiscal Year 2020 Financial Results

HANGZHOU, China, July 10, 2020 /PRNewswire/ -- China Jo-Jo Drugstores, Inc. (NASDAQ: CJJD) ("Jo-Jo Drugstores" or the "Company"), a leading online and offline retailer, wholesale distributor of pharmaceutical and other healthcare products and healthcare provider in China, today announced its financial results for the fiscal year ended March 31, 2020.

Mr. Lei Liu, Chairman and CEO of Jo-Jo Drugstores, commented, "We are pleased to present our financial results for our 2020 fiscal year. Our revenue records $117.33 million for the fiscal year of 2020, up 9.1% compared to $107.55 million for the previous fiscal year. Revenue from retail drugstores, online pharmacy, and wholesale segments increased by 2.4%, 54.1% and 12.4% respectively, demonstrating our ability to realize the potential of our business model. When facing the pandemic of COVID-19, we are uniquely positioned to understand consumer and market needs and how to address them. We will continue monitoring the latest developments and taking appropriate measures to combat the COVID-19 pandemic and provide supports to our customers and the society. Looking forward, we are confident that we are on the right track to deliver significant value to all our investors and shareholders as we have a leading consumer brand in China with a diversified portfolio of essential health care businesses and we will continue to endeavor to provide the best experience to our customers."

Fiscal Year 2020 Financial Highlights

• Revenue increased by 9.1% to $117.33 million for the fiscal year ended March 31, 2020 from $107.55 million for the prior fiscal year.
• Gross profit increased by 1.7% to $25.53 million for the fiscal year ended March 31, 2020 from $25.11 million for the prior fiscal year.
• Gross margin decreased by 1.5 percentage points to 21.8% for the fiscal year ended March 31, 2020 from 23.3% for the prior fiscal year.
• Net loss was $6.46 million, or $0.18 per basic and diluted share, for the fiscal year ended March 31, 2020, compared to net loss of $1.32 million, or $0.03 per basic and diluted share, for the prior fiscal year.

Fiscal Year 2020 Financial Results

Revenue

Revenue for the fiscal year ended March 31, 2020 increased by $9.78 million, or 9.1%, to $117.33 million from $107.55 million for the prior fiscal year. The increase in revenue was primarily due to the growth in retail drugstores, online pharmacy and wholesale business.

Revenue from the retail drugstores business increased by $1.74 million, or 2.4%, to $74.08 million for the fiscal year ended March 31, 2020 from $72.34 million for the prior fiscal year. The increase was primarily attributable to the consumer-facing benefits, such as on-site medical care, chronic disease management services, incremental DTP (Direct-to-Patient) business caused by continuous hospital medical reform, and maturing of stores opened a year ago.

Revenue from the online pharmacy business increased by $4.76 million, or 54.1%, to $13.54 million for the fiscal year ended March 31, 2020 from $8.78 million for the prior fiscal year. The increase was caused by an increase in sales via e-commerce platforms such as Tmall and an increase in sales via our official site. Popular products at reasonable prices are key to success in online business. In order to promote the Company's sales, the Company focused on the selection of medical equipment suitable to local customers. Additionally, we maintained a membership care program targeted at chronic disease customers. We have closely interacted with our members via WeChat by providing healthcare knowledge and reminding our customers to refill medicine. By implementing a personalized customer care program, we were able to promote our sales. As a result, our sales via these e-commerce platforms increased by 58.3% period over period. The sales via our official website were primarily made by certain pharmacy benefit management providers and insurance companies. For example, we have signed a service contract with Yingda Taihe Life Insurance Co. Ltd. ("Yingda"), a national insurance company. State Grid Corporation of China has bought health insurance package for its employees from Yingda. In the year ended March 31, 2020, we served a local factory of State Grid and sold healthcare products to its employees who used their insurance cards to make payments. The sales from these customers contributed significantly to our official website sales. Additionally, in the first quarter of calendar 2020, during the outbreak of COVID-19, we sold a large quantity of health protective products such as masks. Our official website sales increased by $847,899 or 40.8% year over year.

Revenue from the wholesale business increased by $3.28 million, or 12.4%, to $29.71 million for the fiscal year ended March 31, 2020 from $26.43 million for the prior fiscal year. The increase was primarily a result of the Company's ability to resell certain products, which the Company sold in large quantities at its retail stores, to other vendors at competitive prices.

Gross profit and gross margin

Total cost of goods sold increased by $9.36 million, or 11.4%, to $91.80 million for the fiscal year ended March 31, 2020 from $82.44 million for the prior fiscal year. Gross profit increased by $0.42 million, or 1.7%, to $25.53 million for fiscal year ended March 31, 2020 from $25.11 million for the prior fiscal year. Overall gross margin decreased by 1.5 percentage points to 21.8% for the fiscal year ended March 31, 2020, from 23.3% for the prior fiscal year.

Gross margins for retail drugstores, online pharmacy and wholesale were 28.1%, 10.6%, and 11.0%, respectively, for the fiscal year ended March 31, 2020, compared to the corresponding gross margins of 29.2%, 11.8%, and 11.3% for the prior fiscal year.

Loss from operations

Selling and marketing expenses decreased by $0.48 million, or 1.9%, to $23.79 million for the fiscal year ended March 31, 2020 from $24.27 million for the prior fiscal year, primarily due to decrease in rent. As we closed several stores, rent expense went down. Additionally, we have closely monitored our marketing expense such as small gifts. As a result, our sale and marketing expense declined slightly.

General and administrative expenses increased by $6.39 million, or 371.7%, to $8.11 million for the fiscal year ended March 31, 2020 from $1.72 million for the prior fiscal year. In the year ended March 31, 2020, we recorded bad debt expense of $455,159 as compared to a reduction in the allowance for bad debts of $3,346,886 in fiscal year 2019. Additionally, we incurred additional labor cost of approximately $1.5 million as we have expanded certain business. For example, we have been operating two Linjia Clinics and hired more doctors. In addition, in order to obtain business from commercial health insurance providers, we formed a marketing team. Although these businesses have not contributed significantly to our revenue, they incurred labor costs.

Impairment of long-lived assets was $0.63 million for the fiscal year ended March 31, 2020, compared to nil for the prior fiscal year. In the year ended March 31, 2020, we evaluated the licenses of insurance applicable drugstores acquired in the past based on their discounted positive cash value. Due to the stricter government insurance policy in fiscal year 2021, the value of these licenses has declined.

Loss from operations was $7.00 million for the fiscal year ended March 31, 2020, compared to loss from operations of $0.88 million for the prior fiscal year. Operating margin was (6.0)% and (0.8)% for the fiscal year ended March 31, 2020 and 2019 respectively.

Net loss

Net loss was $6.46 million, or $0.18 per basic and diluted share for the fiscal year ended March 31, 2020, compared to net loss of $1.32 million, or $0.03 per basic and diluted share for the prior fiscal year.

Financial Condition

As of March 31, 2020, the Company had cash of $16.18 million, compared to $9.32 million as of March 31, 2019. Net cash used in operating activities was $6.91 million for the fiscal year ended March 31, 2020, compared to $5.60 million for the prior fiscal year. Net cash used in investing activities was $4.84 million for the fiscal year ended March 31, 2020, compared to $7.33 million for the prior fiscal year. Net cash provided by financing activities was $19.01 million for the fiscal year ended March 31, 2020, compared to $8.08 million for the prior fiscal year. On April 15, 2019, we closed a registered direct offering of 4,000,008 shares of common stock at $2.50 per share with gross proceeds of $10,000,020 from our effective shelf registration statement on Form S-3. In addition, on June 3, 2020, we closed another registered direct offering of 5,000,0004 shares of common stock at $2.00 per share with gross proceeds of $10,000,008 from our effective shelf registration statement on Form S-3.

About China Jo-Jo Drugstores, Inc.

China Jo-Jo Drugstores, Inc. ("Jo-Jo Drugstores" or the "Company"), is a leading online and offline retailer and wholesale distributor of pharmaceutical and other healthcare products and a provider of healthcare services in China. Jo-Jo Drugstores currently operates an online pharmacy and retail drugstores with licensed doctors on site for consultation, examination and treatment of common ailments at scheduled hours. It is also a wholesale distributor of products similar to those carried in its pharmacies. In addition, Jo-Jo Drugstores cultivates herbs used for traditional Chinese medicine. For more information about the Company, please visit http://jiuzhou360.com. The Company routinely posts important information on its website.

Forward-Looking Statements

This press release contains information about the Company's view of its future expectations, plans and prospects that constitute forward-looking statements. Actual results may differ materially from historical results or those indicated by these forward-looking statements as a result of a variety of factors including, but not limited to, risks and uncertainties associated with its ability to raise additional funding, its ability to maintain and grow its business, variability of operating results, its ability to maintain and enhance its brand, its development and introduction of new products and services, the successful integration of acquired companies, technologies and assets into its portfolio of products and services, marketing and other business development initiatives, competition in the industry, general government regulation, economic conditions, dependence on key personnel, the ability to attract, hire and retain personnel who possess the technical skills and experience necessary to meet the requirements of its clients, and its ability to protect its intellectual property. The Company's encourages you to review other factors that may affect its future results in the Company's annual reports and in its other filings with the Securities and Exchange Commission.

For more information, please contact:

Company Contact: 

Frank Zhao
Chief Financial Officer
+86-571-88077108
frank.zhao@jojodrugstores.com

Steve Liu
Investor Relations Director
steve.liu@jojodrugstores.com

Investor Relations Contact:

Tina Xiao
Ascent Investor Relations LLC
+1-917-609-0333
tina.xiao@ascent-ir.com

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