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): July 10, 2020

 

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 Capital Market

  

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 July 10, 2020, China Jo-Jo Drugstores, Inc. (the “Company”) issued a press release announcing certain financial results for the fiscal year ended March 31, 2020. 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 July 10, 2020.

  

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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: July 10, 2020 By: /s/ Ming Zhao
  Name:  Ming Zhao
  Title: Chief Financial Officer

  

 

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Exhibit 99.1

 

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

 

   For the Year Ended March 31, 
($ millions, except per share data)  2020   2019   % Change 
Revenue   117.33    107.55    9.1%
Retail drugstores   74.08    72.33    2.4%
Online pharmacy   13.54    8.78    54.1%
Wholesale   29.71    26.43    12.4%
Gross profit   25.53    25.11    1.7%
Gross margin   21.8%   23.3%   -1.5 pp*
Loss from operations   (7.00)   (0.88)   -699.4%
Net loss   (6.46)   (1.32)   -390.0%
Loss per share   (0.18)   (0.03)   -500.0%

 

*Notes: pp represents percentage points

 

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.

 

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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.

 

   For the Year Ended March 31, 
   2020   2019 
($ millions)  Revenue   Cost of Goods   Gross Margin   Revenue   Cost of Goods   Gross Margin 
Retail drugstores   74.08    53.24    28.1%   72.34    51.24    29.2%
Online pharmacy   13.54    12.11    10.6%   8.78    7.75    11.8%
Wholesale   29.71    26.45    11.0%   26.43    23.45    11.3%
Total   117.33    91.80    21.8%   107.55    82.44    23.3%

 

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.

 

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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.

 

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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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CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

   March 31,   March 31, 
   2020   2019 
ASSETS        
CURRENT ASSETS        
Cash and cash equivalents  $16,176,318   $9,322,463 
Restricted cash   14,806,288    15,422,739 
Financial assets available for sale   157,159    180,928 
Notes receivable   57,005    177,278 
Trade accounts receivable   9,770,656    8,692,514 
Inventories   12,247,004    13,955,202 
Other receivables, net   5,069,442    4,438,230 
Advances to suppliers   1,174,800    1,950,252 
Other current assets   1,528,540    2,063,375 
Total current assets   60,987,212    56,202,981 
           
PROPERTY AND EQUIPMENT, net   7,633,740    8,727,358 
           
OTHER ASSETS          
Long-term investment   2,544,451    24,243 
Farmland assets   742,347    825,259 
Long term deposits   1,456,384    2,157,275 
Other noncurrent assets   1,046,763    1,196,197 
Operating lease right-of-use assets   21,711,376    - 
Intangible assets, net   3,393,960    3,597,323 
Total other assets   30,895,281    7,800,297 
           
Total assets  $99,516,233   $72,730,636 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
CURRENT LIABILITIES          
Short-term bank loan   1,410,130    - 
Accounts payable, trade   21,559,494    23,106,230 
Notes payable   26,605,971    25,951,673 
Other payables   2,522,330    3,197,221 
Other payables - related parties   490,218    795,179 
Customer deposits   708,140    771,942 
Taxes payable   119,247    125,859 
Accrued liabilities   753,612    1,264,182 
Long-term loan payable-current portion   2,287,742    - 
Current portion of operating lease liabilities   981,090    - 
Total current liabilities   57,437,974    55,212,286 
           
Long-term loan payable   4,115,958    - 
Long term operating lease  liabilities   19,049,575    - 
Employee Deposits   70,507    81,935 
Purchase option and warrants liability   64,090    465,248 
Total liabilities   80,738,104    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 March 31, 2020 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 March 31, 2020 and March 31, 2019   -    - 
Additional paid-in capital   54,209,301    44,905,664 
Statutory reserves   1,309,109    1,309,109 
Accumulated deficit   (36,400,837)   (30,587,468)
Accumulated other comprehensive income   1,440,424    2,508,964 
Total stockholders’ equity   20,590,934    18,165,206 
Noncontrolling interests   (1,812,805)   (1,194,039)
Total equity   18,778,129    16,971,167 
Total liabilities and stockholders’ equity  $99,516,233   $72,730,636 

 

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CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 

 

   For the years ended
March 31,
 
   2020   2019 
REVENUES, NET  $117,327,689   $107,551,012 
           
COST OF GOODS SOLD   91,801,259    82,442,969 
           
GROSS PROFIT   25,526,430    25,108,043 
           
SELLING EXPENSES   23,793,603    24,265,184 
GENERAL AND ADMINISTRATIVE EXPENSES   8,108,377    1,718,989 
IMPAIRMENT OF LONG-LIVED ASSETS   628,192    - 
TOTAL OPERATING EXPENSES   32,530,172    25,984,173 
           
LOSS FROM OPERATIONS   (7,003,742)   (876,130)
           
OTHER INCOME (EXPENSE):          
INTEREST INCOME   1,063,747    112,887 
INTEREST EXPENSE   (698,518)   - 
OTHER   (204,064)   (93,311)
CHANGE IN FAIR VALUE OF PURCHASE OPTION AND WARRANTS LIABILITY   401,158    (326,452)
           
LOSS BEFORE INCOME TAXES   (6,441,419)   (1,183,006)
           
PROVISION FOR INCOME TAXES   16,258    134,763 
           
NET LOSS   (6,457,677)   (1,317,769)
           
ADD: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST   (644,308)   (391,491)
           
NET LOSS ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES, INC.   (5,813,369)   (926,278)
           
OTHER COMPREHENSIVE LOSS          
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS   (1,068,540)   (1,077,496)
           
COMPREHENSIVE LOSS   (7,526,217)   (2,395,265)
           
WEIGHTED AVERAGE NUMBER OF SHARES:          
Basic   32,816,567    28,936,778 
Diluted   32,816,567    28,936,778 
           
LOSS PER SHARES:          
Basic  $(0.18)  $(0.03)
Diluted  $(0.18)  $(0.03)

 

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CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   For the years ended
March 31,
 
   2020   2019 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income  $(6,457,677)  $(1,317,769)
Adjustments to reconcile net income to net cash used in operating activities:          
Bad debt direct write-off and provision   446,354    (3,357,851)
Depreciation and amortization   2,082,817    1,676,413 
Impairment of long lived assets   628,192    - 
Stock based compensation   34,560    197,100 
Change in fair value of purchase option derivative liability   (401,158)   326,452 
Change in operating assets:          
Accounts receivable, trade   (1,567,774)   (116,810)
Notes receivable   112,803    83,910 
Inventories and biological assets   979,935    (1,390,823)
Other receivables   (1,010,722)   (1,308,437)
Advances to suppliers   148,638    3,612,453 
Long term deposit   596,209    183,841 
Other current assets   (1,278,833)   (83,372)
Other noncurrent assets   87,065    (23,511)
Change in operating liabilities:          
Accounts payable, trade   (317,755)   (528,353)
Other payables and accrued liabilities   (967,751)   (328,473)
Customer deposits   (22,963)   (3,011,194)
Taxes payable   115    (216,792)
Net cash used in operating activities   (6,907,945)   (5,603,216)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Disposal of financial assets available for sale   14,356    87,290 
Purchase of financial assets available for sale   -    (104,360)
Acquisition of equipment and building   (656,297)   (5,450,934)
Investment in a joint venture   (2,567,083)   - 
Increase intangible assets   (871,145)   (29,817)
Additions to leasehold improvements   (756,444)   (1,828,360)
Net cash used in investing activities   (4,836,613)   (7,326,181)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from short-term bank loan   1,435,620    - 
Proceeds from third parties loan   7,178,100    - 
Repayment of  third parties loan   (658,645)   - 
Proceeds from notes payable   48,974,772    42,030,521 
Repayment of notes payable   (46,896,917)   (34,018,811)
Increase in financial liability   (7,178)   81,997 
Proceeds from sale of stock and warrants   9,273,077    7,529 
Repayment of other payables-related parties   (285,123)   (22,655)
Net cash provided by financing activities   19,013,706    8,078,581 
           
EFFECT OF EXCHANGE RATE ON CASH   (1,031,744)   (1,856,174)
           
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH   6,237,404    (6,706,989)
           
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, beginning of year   24,745,202    31,452,191 
           
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, end of year  $30,982,606   $24,745,202 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
Cash paid for income taxes  $17,198   $56,422 
Cash paid for interest   108,098    - 

 

 

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