HANGZHOU, China, November 13, 2014 /PRNewswire/ — China Jo-Jo Drugstores, Inc. (NASDAQ CM: CJJD) (the “Company”), a leading China-based retail and wholesale distributor of pharmaceutical and healthcare products through its own retail and online pharmacies, today announced earnings results for the quarter ended September 30, 2014, the second quarter of the fiscal year 2015.

FY 2015 Second Quarter Highlights:

  • Retail pharmacy sales increased by $3.0 million, or 31.3%, to $12.4 million from the comparable quarter of the prior year, largely due to a 28.79% increase in same-store sales;
  • Online pharmacy revenue surged by 84.2% to nearly $3.0 million, as compared to $1.6 million in the same quarter last year;
  • Wholesale revenue, which accounted for approximately 16.7% of total revenue, decreased to $3.1 million from $5.8 million for the comparable quarter of the prior year;
  • Net loss attributable to the Company narrowed to $36,193 from $546,062 for the comparable quarter of the prior year;
  • As of September 30, 2014, the Company had cash and restricted cash balance of approximately $12.8 million, $49.5 million in total assets and $34.4 million in total liabilities.

“Our online pharmacy sales continued to grow dramatically during the most recent quarter largely thanks to our efforts in expanding collaboration with various large Chinese e-commerce platforms such as Tmall.com under Alibaba group and JD.com,” stated Mr. Lei Liu, the Chairman and CEO of the Company. “Looking ahead to next year, other than OTC drugs, nutritional supplement and medical equipment, Chinese government may begin to allow online sale of prescription drugs. Furthermore, local government is planning to apply government medical insurance to online purchases. In preparation for these coming explosive market opportunities, we plan to further strengthen our workforce so as to expand our online operation.”

“We are also very happy to report that our retail drugstore revenue grew more than 31% primarily due to a 28.79% increase in our same-store sales during this quarter. Since early this year, the management has been focusing more on developing homegrown market in Zhejiang province as part of our turnaround strategy. We hope that, with the robust online sales growth and continuous revenue growth in our retail drugstores, fiscal year 2015 will be a turnaround year for China Jo-Jo Drugstores.”

About China Jo-Jo Drugstores, Inc.

China Jo-Jo Drugstores, Inc., through its own retail drugstores, wholesale distributor and online pharmacy, is a leading retailer and wholesale distributor of pharmaceutical and healthcare products in China. As of September 30, 2014, the Company had 51 retail pharmacies in Hangzhou. The Company’s wholesale subsidiary not only supplies its retail stores, but also distributes drug and other healthcare products to other drugstores and drug vendors. The Company routinely posts important information on its corporate websites at www.jiuzhou-drugstore.com (Chinese) and www.chinajojodrugstores.com (English).

Forward Looking Statement

Statements in this press release regarding the Company that are not historical facts are forward-looking statements and are subject to risks and uncertainties that could cause actual future events or results to differ materially from such statements. Any such forward-looking statements, including, but not limited to, financial guidance, are made pursuant to the safe harbor provisions 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,” “anticipate,” the negatives 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. It is routine for the Company’s internal projections and expectations to change as the quarter and year progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which the Company bases its expectations may change. Although these expectations may change, the Company is under no obligation to inform you if they do. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of numerous 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. Readers are referred to the reports and documents filed from time to time by the Company with the Securities and Exchange Commission for a discussion of these and other important risk factors that could cause actual results to differ from those discussed in forward-looking statements.

See Accompanying Tables

CHINA JO-JO DRUGSTORES, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

September 30,

March 31,

2014

2014

ASSETS

CURRENT ASSETS

Cash

$

7,352,723

$

4,445,276

Restricted cash

5,485,545

3,114,543

Notes receivable

65,000

Trade accounts receivable, net

6,733,217

6,734,536

Inventories

8,421,989

7,047,397

Other receivables, net

792,852

149,546

Advances to suppliers, net

2,082,163

4,577,194

Other current assets

1,472,693

1,663,102

Total current assets

32,406,182

27,731,594

PROPERTY AND EQUIPMENT, net

8,828,548

9,412,688

OTHER ASSETS

Farmland assets

1,373,425

1,371,735

Long term deposits

2,452,191

2,786,437

Other noncurrent assets

2,853,797

3,036,930

Intangible assets, net

1,555,478

1,569,443

Total other assets

8,234,891

8,764,545

Total assets

$

49,469,621

$

45,908,827

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Short-term loan payable

$

32,500

$

162,300

Accounts payable, trade

14,014,983

14,554,726

Notes payable

11,205,188

7,820,718

Other payables

2,056,070

1,282,211

Other payables – related parties

1,906,973

2,384,294

Loan from third parties

234,812

294,042

Customer deposits

3,599,840

3,185,885

Taxes payable

417,768

373,501

Accrued liabilities

689,973

1,208,242

Total current liabilities

34,158,107

31,265,919

Purchase option and warrant liability

202,559

278,916

Total liabilities

34,360,666

31,544,835

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY

Preferred stock; $0.001 par value; 10,000,000 shares authorized; nil issued and
outstanding as of September 30, 2014 and March 31, 2014

Common stock; $0.001 par value; 250,000,000 shares authorized; 15,035,504
and 14,416,022 shares issued and outstanding as of September 30, 2014 and
March 31, 2014

15,036

14,416

Additional paid-in capital

18,427,053

17,355,555

Statutory reserves

1,309,109

1,309,109

Accumulated deficit

(8,643,697)

(8,260,767)

Accumulated other comprehensive income

3,963,596

3,905,136

Total stockholders’ equity

15,071,097

14,323,449

Noncontrolling interests

37,858

40,543

Total equity

15,108,955

14,363,992

Total liabilities and stockholders’ equity

$

49,469,621

$

45,908,827

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

For the three months ended
September 30,

For the six months ended
September 30,

2014

2013

2014

2013

REVENUES, NET

$

18,444,065

$

16,855,421

$

34,903,297

$

32,191,940

COST OF GOODS SOLD

15,678,808

13,907,018

29,627,421

25,642,368

GROSS PROFIT

2,765,257

2,948,403

5,275,876

6,549,572

SELLING EXPENSES

1,933,780

2,979,131

3,702,357

4,659,973

GENERAL AND ADMINISTRATIVE EXPENSES

746,175

491,981

1,827,376

3,132,799

TOTAL OPERATING EXPENSES

2,679,955

3,471,112

5,529,733

7,792,772

INCOME (LOSS) FROM OPERATIONS

85,302

(522,709)

(253,857)

(1,243,200)

OTHER (LOSS) INCOME, NET

(52,692)

37,021

(168,528)

(3,392)

CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITIES

(47,342)

(21,049)

76,357

(8,384)

LOSS BEFORE INCOME TAXES

(14,732)

(506,737)

(346,028)

(1,254,976)

PROVISION FOR INCOME TAXES

22,680

39,589

38,821

79,109

NET LOSS

(37,412)

(546,326)

(384,849)

(1,334,085)

ADD: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

1,219

264

1,919

507

NET LOSS ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES, INC.

(36,193)

(546,062)

(382,930)

(1,333,578)

OTHER COMPREHENSIVE INCOME

Foreign currency translation adjustments

6,192

259,814

58,460

1,019,605

COMPREHENSIVE INCOME (LOSS)

$

(30,001)

$

(286,248)

$

(324,470)

$

(313,973)

WEIGHTED AVERAGE NUMBER OF SHARES:

Basic

14,981,637

13,609,003

14,700,375

13,609,003

Diluted

14,981,637

13,609,003

14,700,375

13,609,003

LOSS PER SHARES:

Basic

$

(0.00)

$

(0.04)

$

(0.03)

$

(0.10)

Diluted

$

(0.00)

$

(0.04)

$

(0.03)

$

(0.10)

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Six months ended
September 30,

2014

2013

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(384,849)

$

(1,334,085)

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Depreciation and amortization

832,570

1,140,586

Stock-based compensation

129,692

58,801

Bad debt provision

(1,611,497)

(747,930)

Inventory reserve

136,575

Change in fair value of purchase option derivative liability

(76,357)

8,384

Change in operating assets:

Accounts receivable, trade

694,722

972,975

Notes receivable

(64,932)

Inventories

(1,501,054)

(3,361,143)

Other receivables

(425,699)

(262,493)

Advances to suppliers

3,207,686

5,117,601

Other current assets

192,254

(849,209)

Long term deposit

337,326

Other noncurrent assets

186,680

92,785

Change in operating liabilities:

Accounts payable, trade

(557,095)

5,323,371

Other payables and accrued liabilities

252,409

(654,911)

Customer deposits

409,600

(2,925,130)

Taxes payable

43,762

(45)

Net cash provided by operating activities

1,801,793

2,579,557

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of equipment

(246,097)

(54,413)

Increase in long-term deposits for land use right

(1,351,030)

Additions to leasehold improvements

(12,485)

(26,619)

Payments on construction-in-progress

(111,524)

Net cash used in investing activities

(258,582)

(1,543,586)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from short-term bank loan

32,466

161,770

Repayment of short-term bank loan

(162,330)

Repayment of third parties loan

(59,529)

Change in restricted cash

(2,364,687)

245,504

Repayments of notes payable

(7,822,163)

(795,002)

Proceeds from notes payable

11,193,465

Proceeds from other payables-related parties

463,848

879,958

Net cash provided by financing activities

1,281,070

492,230

EFFECT OF EXCHANGE RATE ON CASH

83,166

244,420

INCREASE IN CASH

2,907,447

1,772,621

CASH, beginning of period

4,445,276

4,524,094

CASH, end of period

$

7,352,723

$

6,296,715

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for interest

$

1,458

$

Cash paid for income taxes

$

43,788

$

12,797

Issuance of common stocks in exchange of debts

$

941,613

$

Reclassification of leasehold improvement to equipment

$

37,011

$