China Jo-Jo Drugstores Inc. Reports Record Financial Results Second Quarter Fiscal 2012 and Announces Second Quarter Fiscal 2012 Conference Call

HANGZHOU, China--(BUSINESS WIRE)--China Jo-Jo Drugstores, Inc. (NASDAQ:CJJD), a retail pharmacy chain in Zhejiang and Shanghai, today reported record revenue for the second quarter of fiscal year 2012 ended September 30, 2011. The Company will hold its second quarter fiscal 2012 earnings call on Wednesday, November 16, 2011 at 8:00 a.m. Eastern Time.

Second Quarter Highlights:

• Revenue increased 42% from a year ago to a record $22.2 million
• Gross profit increased 42% to $6.26 million; gross profit margin held steady at 28%
• Net income attributable to controlling interest rose to $1.634 million from $1.627 million
• Diluted and basic earnings attributable to controlling interest were $0.12 per share, unchanged from a year ago
• Opened one new store and acquired another one during the quarter, bringing total number of stores to 58 stores as of September 30, 2011, compared with 46 a year earlier
• Same-store sales increased 7.7% during the quarter from a year ago
• Generated $15.7 million cash flow from operations in the six months ended September 30, up from $157,924 a year ago

Dr. Lei Liu, Chairman and Chief Executive Officer, stated, “We are very pleased to present another quarter of record revenue. We expanded our chain to 58 stores from 46 a year ago, and we continued to generate robust cash flow while reinvesting in our business.”

During the fiscal second quarter, the Company prepared for the launch of its largest store, the 3,588-square-meter (38,620 square feet) Jiuyintang Store, in Zhejiang’s capital city of Hangzhou. The store, opened in October, combines western and Chinese traditional medicines, and features an in-store clinic, pharmacy, physicians, in-store health consulting and management. The store is developed towards serving affluent customers.

In August, the Company finished acquisition of Zhejiang Jiuxin Medicine Co., Ltd. Through the acquisition, the Company obtained a valuable license to purchase medicines and drugs directly from manufacturers, making an important step towards vertical integration.

Dr. Liu continued, “The Zhejiang provincial government has ceased to accept applications for such wholesale drug licenses. The acquisition should greatly improve the long-term efficiency of the Company’s supply-chain operation and reduce its supply costs.”

“Looking forward, we will continue our expansion in Zhejiang and Shanghai. We will also continue to expand our online drug store, the only licensed one in Zhejiang, to drive new growth and build long-term shareholder value.”

Second Quarter Results

Revenue increased 42% to $22.2 million for the second quarter, primarily as a result of the same store sale growth, sale from new stores opened within a year and wholesale revenue from Jiuxin Medicine.

Same store sales increased 7.7% during the quarter, mainly due to sales of pharmaceutical products covered by government-sponsored medical insurance programs. Revenue also increased from operating additional stores. As of September 30, 2011, the company operated 58 stores, compared with 46 stores a year earlier.

Gross profit increased 42% to $6.3 million for the second quarter. Gross margin increased slightly from 28.1% to 28.2%, offset by the lower gross margin from Jiuxin Medicine’s wholesale activities.

Selling expenses increased to $2.7 million from $1.2 million, primarily a result of operating 58 store locations, compared with 46 a year earlier.

General and administrative expenses for the quarter increased to $1.3 million from $0.8 million, mainly due to addition of new subsidiaries and expenses of being a U.S. public company.

Net income attributable to controlling interest for the quarter rose to $1.634 million from $1.627 million. Basic and Diluted earnings per share attributable to controlling interest remained constant at $0.12 a share

Six-Month Results

Revenue for the six months ended September 30, 2011 increased 41.3% to $43.7 million compared with $30.9 million in the year ago period.

Same store sales increased 20.6% from a year earlier, mainly due to sales of pharmaceutical products covered by government-sponsored medical insurance programs. Revenue also increased from operating additional stores.

Gross profit for the six-month period increased 45.5% to $13.1 million compared with $9.0 million a year ago. Gross margin improved from 29.2% to 30.1%, offset by Jiuxin Medicine’s wholesale activities.

Selling expense was $4.1 million versus $2.0 million in the year ago period. The increase reflected the additional 12 stores in operation from a year ago.

General and administrative expenses for the six-month period rose to $2.4 million compared with $1.5 million in the year ago period, as a result of establishing new subsidiaries and costs of being a U.S. public company.

Net income attributable to controlling interest for the six-month period was $4.9 million compared with $3.8 million a year ago. Basic and Diluted earnings per share attributable to controlling interest increased from $0.29 to $0.36.

Balance Sheet Highlights

As of September 30, 2011, the Company had $4.59 million of cash, $36.7 million in current assets and $16.4 million in current liabilities.

Conference Call Information

The Company will host a conference call to discuss second quarter results on Wednesday, Nov. 16, 2011, at 8:00 a.m. Eastern Time. To participate in the conference call, please dial 1-877-941-1429 from North America. International participants can access the call by dialing 480-629-9666. 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 on Nov. 16 approximately 11:00 a.m. Eastern Time by dialing 1-877-870-5176 or 1-858-384-5517 (international) with pin #4488487. The replay will also be available on the company website.

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
			SEPTEMBER 30,			MARCH 31,
			2011			2011
ASSETS
CURRENT ASSETS
	Cash	$	4,590,274		$	6,489,905
	Restricted cash		749,015			921,876
	Trade accounts receivable, net		4,705,866			1,484,850
	Inventories		7,529,108			4,617,420
	Other receivables		1,096,201			1,049,564
	Advances to suppliers		15,166,494			16,528,772
	Other current assets		2,862,349			8,364,267
	Total current assets		36,699,307			39,456,654
PROPERTY AND EQUIPMENT, net			15,470,148			5,471,432
OTHER ASSETS
	Long term deposit		2,620,910			2,540,758
	Prepaid – noncurrent		6,830,221			6,075,478
	Intangible assets, net		2,866,539			390,302
	Total other assets		12,317,670			9,006,538
	Total assets	$	64,487,125		$	53,934,624
LIABILITIES AND EQUITY
CURRENT LIABILITIES
	Accounts payable, trade	$	7,275,302		$	3,530,204
	Notes payable		2,494,643			2,704,680
	Other payables		1,299,284			627,734
	Other payables - related parties		939,490			880,058
	Customer deposits		2,770,868			2,038,608
	Taxes payable		1,119,423			1,624,558
	Accrued liabilities		460,152			311,639
	Total current liabilities		16,359,162			11,717,481
Purchase option derivative liability			56,238			153,226
	Total liabilities		16,415,400			11,870,707
COMMITMENTS AND CONTINGENCIES
EQUITY
	Preferred stock; $0.001 par value; 10,000,000 shares authorized; nil issued and outstanding as of September 30, 2011 and March 31, 2011		-			-
	Common stock; $0.001 par value; 250,000,000 shares authorized; 13,548,603 and 13,530,477 shares issued and outstanding as of September 30, 2011 and March 31, 2011, respectively		13,548			13,530
	Additional Paid-in capital		16,386,071			16,333,956
	Statutory reserves		1,309,109			1,309,109
	Retained earnings		28,163,916			23,287,474
	Accumulated other comprehensive income		2,203,336			1,119,848
	Total equity		48,075,980			42,063,917
NONCONTROLLING INTERESTS			(4,255	)		-
	Total liabilities and equity	$	64,487,125		$	53,934,624

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
(UNAUDITED)
	Three months ended September 30,					Six months ended September 30,
	2011		2010			2011		2010
REVENUES, NET	$	22,224,947	$	15,678,170		$	43,652,806	$	30,885,598
COST OF GOODS SOLD		15,967,051		11,270,058			30,525,587		21,863,590
GROSS PROFIT		6,257,896		4,408,112			13,127,219		9,022,008
SELLING EXPENSES		2,711,494		1,179,515			4,089,794		2,002,873
GENERAL & ADMINISTRATIVE EXPENSES		1,320,521		757,372			2,395,304		1,531,134
OPERATING EXPENSES		4,032,015		1,936,887			6,485,098		3,534,007
INCOME FROM OPERATIONS		2,225,881		2,471,225			6,642,121		5,488,001
OTHER INCOME (EXPENSE), NET		187,166		5,781			206,586		(51,751	)
CHANGE IN FAIR VALUE OF PURCHASE OPTION DERIVATIVE LIABILITY		34,356		(85,993	)		96,988		(28,049	)
INCOME BEFORE INCOME TAXES		2,447,403		2,391,013			6,945,695		5,408,201
PROVISION FOR INCOME TAXES		817,990		763,564			2,073,553		1,628,288
NET INCOME		1,629,413		1,627,449			4,872,142		3,779,913
ADD: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST		4,300		-			4,300		-
NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST		1,633,713		1,627,449			4,876,442		3,779,913
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustments		508,923		554,610			1,083,488		654,032
COMPREHENSIVE INCOME	$	2,142,636	$	2,182,059		$	5,959,930	$	4,433,945
WEIGHTED AVERAGE NUMBER OF SHARES
Basic		13,547,157		13,500,002			13,541,136		13,079,237
Diluted		13,547,157		13,504,247			13,541,136		13,086,959
EARNINGS PER SHARES
Basic - attributable to controlling interest	$	0.12	$	0.12		$	0.36	$	0.29
Diluted - attributable to controlling interest	$	0.12	$	0.12		$	0.36	$	0.29

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
					Six months ended
					September 30,
					2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income				$	4,872,142		$	3,779,913
	Adjustments to reconcile net income to net cash
		(used in) provided by operating activities:
			Depreciation and amortization			1,118,932			404,080
			Stock compensation			52,133			58,615
			Bad debt expense			182,398			-
			Change in fair value of purchase option derivative liability			(96,988	)		28,049
	Changes in operating assets:
			Accounts receivable, trade			(2,435,921	)		(353,528	)
			Inventories			1,282,841			(766,479	)
			Other receivables			(523,817	)		(157,814	)
			Advances to suppliers			2,173,332			(3,347,523	)
			Other current assets			5,610,337			(755,209	)
			Long term deposit			(18,485	)		-
			Prepaid - noncurrent			106,115			(418,806	)
	Changes in operating liabilities:
			Accounts payable, trade			4,279,623			2,217,876
			Other payables and accrued liabilities			(1,046,197	)		(336,074	)
			Customer deposit			676,373			-
			Taxes payable			(495,891	)		(195,176	)
				Net cash provided by operating activities		15,736,927			157,924
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchase of equipment					(2,155,443	)		(206,478	)
	Advance payments on equipment purchase					(774,500	)		-
	Additions to leasehold improvements					(1,373,605	)		(503,219	)
	Payments on construction-in-progress					(6,729,437	)		-
	Net payment for business acquisitions					(3,282,727	)		-
				Net cash used in investing activities		(14,315,712	)		(709,697	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Change in restricted cash					193,300			(201,092	)
	Payments on notes payable					(3,703,942	)		(1,470,429	)
	Proceeds from shareholder					58,862			-
	Proceeds from equity financing					-			15,708,608
	Proceeds from short-term loans					-			(883,920	)
	Payments on other payables-related parties					-			(54,942	)
				Net cash (used in) provided by financing activities		(3,451,780	)		13,098,225
EFFECT OF EXCHANGE RATE ON CASH						130,934			196,988
(DECREASE) INCREASE IN CASH						(1,899,631	)		12,743,440
CASH, beginning of period						6,489,905			801,593
CASH, end of period					$	4,590,274		$	13,545,033
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Cash paid for interest				$	-		$	23,587
	Cash paid for income taxes				$	2,428,768		$	1,700,826
	Non-cash financing activities
		Notes payable transferred to accounts payable vendors			$	3,431,091		$	1,892,631

About China Jo-Jo Drugstores, Inc.

China Jo-Jo Drugstores, Inc. primarily operates a retail pharmacy chain in Zhejiang and Shanghai, offering both western and traditional Chinese medicine, including prescription and over-the-counter drugs, sundries, nutritional supplements and medical devices. China Jo-Jo Drugstores also provides on-site physician consulting. As of September 30, 2011, the Company operated 58 stores.

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.