United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): August 14, 2019

 

CHINA JO-JO DRUGSTORES, INC.

(Exact name of Registrant as specified in charter)

 

Nevada   001-34711   98-0557852
(State or other jurisdiction
of Incorporation)
  (Commission File No.)   (IRS Employer
Identification No.)

 

Hai Wai Hai Tongxin Mansion Floor 6 Gong Shu District,

Hangzhou City, Zhejiang Province, People’s Republic of China, 310008

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: +86-571-88219579

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐ Soliciting material pursuant to Rule14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock   CJJD   NASDAQ

 

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

 

 

 

Item 2.02. Results of Operations and Financial Condition.

 

On August 14, 2019, China Jo-Jo Drugstores, Inc. (the “Company”) issued a press release announcing certain financial results for the fiscal quarter ended June 30, 2019. A copy of the press release is attached hereto as Exhibit 99.1.

 

This information under this Item 2.02 and the press release attached to this Form 8-K as Exhibit 99.1 shall be deemed to be “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that section and shall not be deemed incorporated by reference in any filing under the Exchange Act or the Securities Act of 1933, as amended.

  

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

The following is filed as an exhibit to this report:

 

Exhibit No.   Description
     
99.1   Press Release, dated August 14, 2019.

  

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

  

  CHINA JO-JO DRUGSTORES, INC.
     
Date: August 14, 2019 By: /s/ Ming Zhao
  Name:  Ming Zhao
  Title: Chief Financial Officer

  

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Exhibit 99.1

 

China Jo-Jo Drugstores Reports First Quarter 2020 Financial Results

 

HANGZHOU, China, August 14, 2019 /PRNewswire/ -- China Jo-Jo Drugstores, Inc. (NASDAQ CM: CJJD) ("Jo-Jo Drugstores" or the "Company"), a leading online and offline retailer and wholesale distributor of pharmaceutical and other healthcare products and a healthcare provider in China, today announced its financial results for the first quarter of its fiscal year 2020.

 

Mr. Lei Liu, Chief Executive Officer and Chairman of Jo-Jo Drugstores, commented, “We are pleased to announce our financial results for the first quarter of fiscal year 2020. Our sales grew 11.0%, with sales growth in our retail drugstores, online pharmacy, and wholesale segments. We will continue adapting to the changing retail drugstore environment and making progress towards our long-term strategic goals. We remain confident of our ability to realize the potential of our business model as we endeavor to provide the best experience to our customers.”  

 

First Quarter of Fiscal 2020 Financial Highlights

 

   For the Three Months Ended June 30, 
($ millions, except per share data)  2019   2018   % Change 
Revenue   25.28    22.77    11.0%
      Retail drugstores   16.74    15.97    4.8%
      Online pharmacy   2.44    2.02    20.9%
      Wholesale   6.10    4.78    27.6%
Gross profit   6.06    5.62    7.9%
Gross margin   24.0%   24.7%   -0.7 pp*
Loss from operations   (2.76)   (0.56)   -388.5%
Net loss   (2.38)   (0.70)   -241.4%
Loss per share   (0.07)   (0.02)   -250.0%

*Notes: pp represents percentage points

 

·Revenue increased by 11.0% to $25.28 million for the three months ended June 30, 2019 from $22.77 million for the same period of last year.

 

·Gross profit increased by 7.9% to $6.06 million for the three months ended June 30, 2019 from $5.62 million for the same period of last year.

 

·Gross margin decreased by 0.7 percentage points to 24.0% from 24.7% for the same period of last year.

 

·Net loss was $2.38 million, or $0.07 per basic and diluted share, for the three months ended June 30, 2019, compared to $0.70 million, or $0.02 per basic and diluted share, for the same period of last year.

 

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First Quarter of Fiscal 2020 Financial Results

 

Revenue

 

Revenue for the three months ended June 30, 2019 increased by $2.51 million, or 11.0%, to $25.28 million from $22.77 million for the same period of last year. The increase in revenue was primarily due to the growth in retail drugstores business, online pharmacy and wholesale business.

 

   For the Three Months Ended June 30, 
   2019   2018 
($ millions)  Revenue   Cost of Goods   Gross Margin   Revenue   Cost of Goods   Gross Margin 
Retail drugstores   16.74    11.68    30.2%   15.97    11.17    30.1%
Online pharmacy   2.44    2.10    14.2%   2.02    1.74    13.9%
Wholesale   6.10    5.44    10.9%   4.78    4.25    11.1%
Total   25.28    19.22    24.0%   22.77    17.16    24.7%

 

Revenue from the retail drugstores business increased by $0.77 million, or 4.8%, to $16.74 million for the three months ended June 30, 2019 from $15.97 million for the same period of last year. The increase was primarily due to consumer-facing benefits such as emphasis on onsite medical care, chronic disease management services, incremental Direct-to-Patient (“DTP”) business caused by continuous hospital medical reform, and maturing of stores opened a year ago.

 

Revenue from the online pharmacy business increased by $0.42 million, or 20.9%, to $2.44 million for the three months ended June 30, 2019 from $2.02 million for the same period of last year. The increase was primarily caused by an increase in sales via e-commerce platforms such as Tmall, offset slightly by the decline in sales via the Company’s 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. For example, sales of blood glucose meters and contact lens contributed significantly to our revenue in the three months ended June 30, 2019 as compared to the same period a year ago.

 

Revenue from the wholesale business increased by $1.32 million, or 27.6%, to $6.10 million for the three months ended June 30, 2019 from $4.78 million for the same period of last year. The increase was primarily a result of the Company's ability to resell certain products, which the Company sold in large quantity at its retail stores, to other vendors at competitive prices.

 

Gross profit and gross margin

 

Total cost of goods sold increased by $2.06 million, or 12.0%, to $19.22 million for the three months ended June 30, 2019 from $17.16 million for the same period of last year. Gross profit increased by $0.44 million, or 7.9%, to $6.06 million for three months ended June 30, 2019 from $5.62 million for the same period of last year. Overall gross margin decreased by 0.7 percentage points to 24.0% for the three months ended June 30, 2019, from 24.7% for the same period of last year.

 

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Gross margins for retail drugstores, online pharmacy and wholesale were 30.2%, 14.2%, and 10.9%, respectively, for the three months ended June 30, 2019. For the same period of last year, the gross margins for retail drugstores, online pharmacy and wholesale of were 30.1%, 13.9%, and 11.1%, respectively.

 

Loss from operations

 

Selling and marketing expenses increased by $1.34 million, or 29.0%, to $5.97 million for the three months ended June 30, 2019 from $4.63 million for the same period of last year. The increase in selling and marketing expenses was primarily due to the increase in labor and rent related to the Company’s store expansions and rising local living costs.

 

General and administrative expenses increased by $1.30 million, or 83.4%, to $2.85 million for the three months ended June 30, 2019 from $1.55 million for the same period of last year. The Company’s retail business incurred additional administrative expenses related to its store expansion. Additionally, Zhejiang Jiuzhou Linjia Medical Investment and Management Co. Ltd, the entity we have 51% that operates two new clinics in Hangzhou, incurred additional administrative labor costs. The bad debt expenses related to the Company’s accounts receivable increased by approximately $0.5 million due to certain aged accounts. 

 

Loss from operations was $2.76 million for the three months ended June 30, 2019, compared to $0.56 million for the same period of last year. Operating margin was negative 10.9% for the three months ended June 30, 2019, compared to negative 2.5% for the same period of last year.

 

Net loss

 

Net loss was $2.38 million, or $0.07 per basic and diluted share for the three months ended June 30, 2019, compared to net loss of $0.70 million, or $0.02 per basic and diluted share for the same period of last year.

 

Financial Condition

 

As of June 30, 2019, the Company had cash of $8.34 million, compared to $9.32 million as of March 31, 2019. Net cash used in operating activities was $8.16 million for the three months ended June 30, 2019, compared to $2.58 million for the same period of last year. Net cash used in investing activities was $0.95 million for the three months ended June 30, 2019, compared to $0.26 million for the same period of last year. Net cash provided by financing activities was $8.02 million for the three months ended June 30, 2019, compared to net cash used in financing activities of $5.21 million for the same period of last year.

 

About China Jo-Jo Drugstores, Inc.

 

China Jo-Jo Drugstores, Inc. is a leading online and offline retailer and wholesale distributor of pharmaceutical and other healthcare products in China. Jo-Jo Drugstores currently operates retail drugstores and an online pharmacy. It is also a wholesale distributor of products similar to those carried in its pharmacies and it 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.

 

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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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CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

   June 30,   March 31, 
   2019   2019 
ASSETS        
CURRENT ASSETS        
Cash  $8,341,167   $9,322,463 
Restricted cash   14,808,986    15,422,739 
Financial assets available for sale   162,273    180,928 
Notes receivable   92,480    177,278 
Trade accounts receivable   8,590,075    8,692,514 
Inventories   10,806,698    13,955,202 
Other receivables, net   4,253,802    4,438,230 
Advances to suppliers   1,544,132    1,950,252 
Other current assets   1,557,156    2,063,375 
Total current assets   50,156,769    56,202,981 
           
PROPERTY AND EQUIPMENT, net   8,620,758    8,727,358 
           
OTHER ASSETS          
Long-term investment   16,318    24,243 
Farmland assets   742,974    825,259 
Long term deposits   2,050,219    2,157,275 
Other noncurrent assets   1,177,703    1,196,197 
Operating lease right-of-use assets   13,564,115    - 
Intangible assets, net   3,888,848    3,597,323 
Total other assets   21,440,177    7,800,297 
           
Total assets  $80,217,704   $72,730,636 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
CURRENT LIABILITIES          
Accounts payable, trade   13,674,741    23,106,230 
Notes payable   24,574,955    25,951,673 
Other payables   3,267,074    3,197,221 
Other payables - related parties   326,778    795,179 
Customer deposits   870,100    771,942 
Taxes payable   217,704    125,859 
Accrued liabilities   990,032    1,264,182 
Current portion of operating lease liabilities   4,738,632    - 
Total current liabilities   48,660,016    55,212,286 
           
Long term operating lease  liabilities   7,918,900    - 
Purchase option and warrants liability   61,693    465,248 
Financial liability   80,081    81,935 
Total liabilities   56,720,690    55,759,469 
           
COMMITMENTS AND CONTINGENCIES          
           
STOCKHOLDERS’ EQUITY          
Common stock; $0.001 par value; 250,000,000 shares authorized; 32,936,786 and 28,936,778 shares issued and outstanding as of June 30, 2019 and March 31, 2019   32,937    28,937 
Preferred stock; $0.001 par value; 10,000,000 shares authorized; nil issued and outstanding as of June 30, 2019 and March 31, 2019   -    - 
Additional paid-in capital   54,209,301    44,905,664 
Statutory reserves   1,309,109    1,309,109 
Accumulated deficit   (32,722,416)   (30,587,468)
Accumulated other comprehensive income   2,103,726    2,508,964 
Total stockholders’ equity   24,932,657    18,165,206 
Noncontrolling interests   (1,435,643)   (1,194,039)
Total equity   23,497,014    16,971,167 
Total liabilities and stockholders’ equity  $80,217,704   $72,730,636 

 

 

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CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

 

   For the three months ended 
June 30,
 
   2019   2018 
REVENUES, NET  $25,280,784   $22,772,566 
           
COST OF GOODS SOLD   19,219,346    17,155,763 
           
GROSS PROFIT   6,061,438    5,616,803 
           
SELLING EXPENSES   5,968,551    4,626,978 
GENERAL AND ADMINISTRATIVE EXPENSES   2,851,612    1,554,528 
TOTAL OPERATING EXPENSES   8,820,163    6,181,506 
           
LOSS FROM OPERATIONS   (2,758,725)   (564,703)
           
INTEREST INCOME   47,873    47,172 
OTHER (EXPENSE), NET   (62,485)   (114,941)
CHANGE IN FAIR VALUE OF WARRANTS LIABILITY   403,555    (6,974)
           
LOSS BEFORE INCOME TAXES   (2,369,782)   (639,446)
           
PROVISION FOR INCOME TAXES   8,388    57,169 
           
NET LOSS   (2,378,170)   (696,615)
           
ADD: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST   243,219    50,763 
           
NET LOSS ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES, INC.   (2,134,951)   (645,852)
           
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS   (405,238)   621,634 
           
COMPREHENSIVE LOSS   (2,783,408)   (74,981)
           
WEIGHTED AVERAGE NUMBER OF SHARES:          
Basic   32,453,269    28,936,778 
Diluted   32,453,269    28,936,778 
           
LOSS PER SHARES:          
Basic  $(0.07)  $(0.02)
Diluted  $(0.07)  $(0.02)

 

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CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   For the three months ended
June 30,
 
   2019   2018 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss  $(2,378,170)  $(696,615)
Adjustments to reconcile net income to net cash provided by operating activities:          
Bad debt direct write-off and provision   758,231    259,279 
Depreciation and amortization   499,175    293,095 
Stock based compensation   34,560    49,140 
Change in fair value of purchase option derivative liability   (403,555)   6,974 
Accounts receivable, trade   (959,680)   1,077,419 
Notes receivable   81,326    (114,944)
Inventories and biological assets   2,851,652    (458,803)
Other receivables   371,054    (401,204)
Advances to suppliers   242,652    (775,014)
Other current assets   (450,042)   554,048 
Long term deposit   58,630    (5,415)
Other noncurrent assets   (8,631)   (97,341)
Accounts payable, trade   (8,968,168)   (2,369,206)
Other payables and accrued liabilities   (105,522)   357,335 
Customer deposits   116,398    20,290 
Taxes payable   95,326    (281,235)
           
Net cash (used in) operating activities   (8,164,764)   (2,582,197)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Disposal of financial assets available for sale   14,658    - 
Acquisition of equipment   (210,356)   (32,753)
Increase in intangible assets   (433,111)   - 
Investment in a joint venture   -    (109,142)
Additions to leasehold improvements   (542,734)   (116,002)
Net cash used in investing activities   (1,171,543)   (257,897)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from notes payable   15,372,260    10,376,504 
Repayment of notes payable   (16,167,012)   (15,512,104)
Proceeds from equity financing   9,273,077    7,629 
Repayment of other payables-related parties   (460,000)   (84,014)
Net cash provided by (used in) financing activities   8,018,325    (5,211,985)
           
EFFECT OF EXCHANGE RATE ON CASH   (277,067)   (457,638)
           
DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH   (1,595,049)   (8,509,717)
           
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period   24,745,202    31,452,191 
           
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, end of period  $23,150,153   $22,942,474 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
Cash paid for income taxes  $29,176   $27,832 

 

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