þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______________________________ to ______________________________ | |||
Commission File |
CHINA JO-JO DRUGSTORES, INC. |
(Exact name of registrant as specified in its charter) |
Nevada | 98-0557852 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
Room 507-513, 5th Floor A Building, Meidu Plaza Gongshu District, Hangzhou, Zhejiang Province People’s Republic of China | ||
(Zip Code) |
+86 (571) 88077078 |
(Registrant’s telephone number, including area code) |
N/A |
(Former name, former address and former fiscal year, if changed since last report) |
Large Accelerated Filer o | Accelerated Filer o |
Non-accelerated filer o | Smaller reporting company þ |
Page | |||
PART I | FINANCIAL INFORMATION | ||
Item 1. | Financial statements | 4 | |
Unaudited condensed consolidated balance sheets as of | 4 | ||
5 | |||
Unaudited condensed consolidated statements of cash flows for the | 6 | ||
Notes to unaudited condensed consolidated financial statements | 7 | ||
Item 2. | Management's discussion and analysis of financial condition and results of operations | ||
Item 3. | Quantitative and qualitative disclosures about market risk | ||
Item 4. | Controls and | ||
PART II | OTHER INFORMATION | ||
Item 1. | Legal proceedings | ||
Item 1A. | Risk factors | ||
Item 2. | Unregistered sales of equity securities and use of proceeds | ||
Item 3. | Defaults upon senior securities | ||
Item 4. | |||
Item 5. | Other information | ||
Item 6. | Exhibits | ||
Signatures | 32 |
ITEM 1. | FINANCIAL STATEMENTS |
CHINA JO-JO DRUGSTORES, INC AND SUBSIDIARIES | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
(UNAUDITED) |
September 30, | March 31, | |||||||
2013 | 2013 | |||||||
A S S E T S | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 6,296,715 | $ | 4,524,094 | ||||
Trade accounts receivable, net | 12,691,630 | 12,978,808 | ||||||
Inventories | 12,167,632 | 8,586,999 | ||||||
Other receivables, net | 425,902 | 157,849 | ||||||
Advances to suppliers, net | 11,070,649 | 15,523,034 | ||||||
Restricted cash | 1,964,313 | 2,162,837 | ||||||
Other current assets | 2,140,802 | 1,221,499 | ||||||
Total current assets | 46,757,643 | 45,155,120 | ||||||
PROPERTY AND EQUIPMENT, net | 12,712,963 | 13,288,652 | ||||||
OTHER ASSETS | ||||||||
Long term deposits | 4,184,317 | 2,760,665 | ||||||
Other noncurrent assets | 5,460,500 | 5,431,326 | ||||||
Intangible assets, net | 1,149,981 | 1,202,258 | ||||||
Total other assets | 10,794,798 | 9,394,249 | ||||||
Total assets | $ | 70,265,404 | $ | 67,838,021 | ||||
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y | ||||||||
CURRENT LIABILITIES | ||||||||
Short-term loan payable | $ | 163,000 | $ | - | ||||
Accounts payable, trade | 19,455,279 | 13,780,211 | ||||||
Notes payable | 6,547,710 | 7,186,453 | ||||||
Other payables | 1,429,961 | 1,327,454 | ||||||
Other payables - related parties | 2,104,735 | 1,224,417 | ||||||
Customer deposits | 1,989,967 | 4,828,293 | ||||||
Taxes payable | 379,981 | 371,633 | ||||||
Accrued liabilities | 242,843 | 956,342 | ||||||
Total current liabilities | 32,313,476 | 29,674,803 | ||||||
Purchase option derivative liability | 60,043 | 15,609 | ||||||
Total liabilities | 32,373,519 | 29,690,412 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
STOCKHOLDERS' EQUITY | ||||||||
Preferred stock; $0.001 par value; 10,000,000 shares authorized; nil issued and outstanding as of September 30, 2013 and March 31, 2013 | - | - | ||||||
Common stock; $0.001 par value; 250,000,000 shares authorized; 13,609,002 shares issued and outstanding as of September 30, 2013 and March 31, 2013 | 13,609 | 13,609 | ||||||
Additional paid-in capital | 16,668,548 | 16,609,747 | ||||||
Statutory reserves | 1,309,109 | 1,309,109 | ||||||
Retained earnings | 15,761,791 | 17,095,369 | ||||||
Accumulated other comprehensive income | 4,141,259 | 3,121,654 | ||||||
Total stockholders' equity | 37,894,316 | 38,149,488 | ||||||
Noncontrolling interests | (2,431 | ) | (1,879 | ) | ||||
Total equity | 37,891,885 | 38,147,609 | ||||||
Total liabilities and stockholders' equity | $ | 70,265,404 | $ | 67,838,021 |
CHINA JO-JO DRUGSTORES, INC AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(UNAUDITED) | ||||||||
June 30, 2013 | March 31, 2013 | |||||||
A S S E T S | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 2,711,399 | $ | 4,524,094 | ||||
Notes receivable | 291,600 | - | ||||||
Trade accounts receivable, net | 11,912,337 | 12,978,808 | ||||||
Inventories | 9,127,235 | 8,586,999 | ||||||
Other receivables, net | 320,355 | 157,849 | ||||||
Advances to suppliers, net | 17,175,750 | 15,523,034 | ||||||
Restricted cash | 3,540,685 | 2,162,837 | ||||||
Other current assets | 2,027,463 | 1,221,499 | ||||||
Total current assets | 47,106,824 | 45,155,120 | ||||||
PROPERTY AND EQUIPMENT, net | 13,071,698 | 13,288,652 | ||||||
OTHER ASSETS | ||||||||
Long term deposits | 2,805,695 | 2,760,665 | ||||||
Other noncurrent assets | 5,470,095 | 5,431,326 | ||||||
Intangible assets, net | 1,182,433 | 1,202,258 | ||||||
Total other assets | 9,458,223 | 9,394,249 | ||||||
Total assets | $ | 69,636,745 | $ | 67,838,021 | ||||
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y | ||||||||
CURRENT LIABILITIES | ||||||||
Short-term loan payable | $ | 162,000 | $ | - | ||||
Accounts payable, trade | 15,374,922 | 13,780,211 | ||||||
Notes payable | 7,136,683 | 7,186,453 | ||||||
Other payables | 1,426,631 | 1,327,454 | ||||||
Other payables - related parties | 1,419,650 | 1,224,417 | ||||||
Customer deposits | 5,274,087 | 4,828,293 | ||||||
Taxes payable | 375,473 | 371,633 | ||||||
Accrued liabilities | 317,407 | 956,342 | ||||||
Total current liabilities | 31,486,853 | 29,674,803 | ||||||
Purchase option derivative liability | 2,944 | 15,609 | ||||||
Total liabilities | 31,489,797 | 29,690,412 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
STOCKHOLDERS' EQUITY | ||||||||
Preferred stock; $0.001 par value; 10,000,000 shares authorized; nil issued and outstanding as of June 30, 2013 and March 31, 2013 | - | - | ||||||
Common stock; $0.001 par value; 250,000,000 shares authorized; 13,609,003 shares issued and outstanding as of June 30, 2013 and March 31, 2013 | 13,609 | 13,609 | ||||||
Additional paid-in capital | 16,637,085 | 16,609,747 | ||||||
Statutory reserves | 1,309,109 | 1,309,109 | ||||||
Retained earnings | 16,307,853 | 17,095,369 | ||||||
Accumulated other comprehensive income | 3,881,445 | 3,121,654 | ||||||
Total stockholders' equity | 38,149,101 | 38,149,488 | ||||||
Noncontrolling interests | (2,153 | ) | (1,879 | ) | ||||
Total equity | 38,146,948 | 38,147,609 | ||||||
Total liabilities and stockholders' equity | $ | 69,636,745 | $ | 67,838,021 |
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, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
REVENUES, NET | $ | 16,855,421 | $ | 26,665,114 | $ | 32,191,940 | $ | 59,512,445 | ||||||||
COST OF GOODS SOLD | 13,907,018 | 23,242,917 | 25,642,368 | 50,945,471 | ||||||||||||
GROSS PROFIT | 2,948,403 | 3,422,197 | 6,549,572 | 8,566,974 | ||||||||||||
SELLING EXPENSES | 2,979,131 | 2,102,621 | 4,659,973 | 3,960,845 | ||||||||||||
GENERAL AND ADMINISTRATIVE EXPENSES | 491,981 | 1,310,313 | 3,132,799 | 4,156,892 | ||||||||||||
TOTAL OPERATING EXPENSES | 3,471,112 | 3,412,934 | 7,792,772 | 8,117,737 | ||||||||||||
(LOSS) INCOME FROM OPERATIONS | (522,709 | ) | 9,263 | (1,243,200 | ) | 449,237 | ||||||||||
OTHER INCOME (LOSS), NET | 37,021 | (90,332 | ) | (3,392 | ) | 8,367 | ||||||||||
GOODWILL IMPAIRMENT LOSS | - | (1,473,606 | ) | - | (1,473,606 | ) | ||||||||||
CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITIES | (21,049 | ) | 25,905 | (8,384 | ) | 25,747 | ||||||||||
LOSS BEFORE INCOME TAXES | (506,737 | ) | (1,528,770 | ) | (1,254,976 | ) | (990,255 | ) | ||||||||
PROVISION FOR INCOME TAXES | 39,589 | 10 | 79,109 | 3,892 | ||||||||||||
NET LOSS | (546,326 | ) | (1,528,780 | ) | (1,334,085 | ) | (994,147 | ) | ||||||||
ADD: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST | 264 | 331 | 507 | 585 | ||||||||||||
NET LOSS ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES, INC. | (546,062 | ) | (1,528,449 | ) | (1,333,578 | ) | (993,562 | ) | ||||||||
OTHER COMPREHENSIVE INCOME | ||||||||||||||||
Foreign currency translation adjustments | 259,814 | 52,538 | 1,019,605 | 107,547 | ||||||||||||
COMPREHENSIVE LOSS | $ | (286,248 | ) | $ | (1,475,911 | ) | $ | (313,973 | ) | $ | (886,015 | ) | ||||
WEIGHTED AVERAGE NUMBER OF SHARES: | ||||||||||||||||
Basic | 13,609,003 | 13,588,569 | 13,609,003 | 13,575,550 | ||||||||||||
Diluted | 13,609,003 | 13,588,569 | 13,609,003 | 13,575,550 | ||||||||||||
LOSSES PER SHARES: | ||||||||||||||||
Basic | $ | (0.04 | ) | $ | (0.11 | ) | $ | (0.10 | ) | $ | (0.07 | ) | ||||
Diluted | $ | (0.04 | ) | $ | (0.11 | ) | $ | (0.10 | ) | $ | (0.07 | ) |
CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(UNAUDITED) |
Six months ended September 30, | ||||||||
2013 | 2012 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (1,334,085 | ) | $ | (994,147 | ) | ||
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 1,140,586 | 1,295,175 | ||||||
Stock compensation | 58,801 | 97,236 | ||||||
Bad debt write-off and provision | (747,930 | ) | 834,772 | |||||
Goodwill Impairment | - | 1,473,606 | ||||||
Change in fair value of purchase option derivative liability | 8,384 | (25,747 | ) | |||||
Change in operating assets: | ||||||||
Accounts receivable, trade | 972,975 | (11,009,813 | ) | |||||
Notes receivable | - | (928,801 | ) | |||||
Inventories | (3,361,143 | ) | (1,887,064 | ) | ||||
Other receivables | (262,493 | ) | (761,810 | ) | ||||
Advances to suppliers | 5,117,601 | (2,040,116 | ) | |||||
Other current assets | (849,209 | ) | (779,191 | ) | ||||
Long term deposit | - | 421,871 | ||||||
Other noncurrent assets | 92,785 | 251,938 | ||||||
Change in operating liabilities: | ||||||||
Accounts payable, trade | 5,323,371 | 9,916,586 | ||||||
Other payables and accrued liabilities | (654,911 | ) | 715,342 | |||||
Customer deposits | (2,925,130 | ) | 1,657,754 | |||||
Taxes payable | (45 | ) | (242,908 | ) | ||||
Net cash provided by (used in) operating activities | 2,579,557 | (2,005,317 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of equipment | (54,413 | ) | (234,151 | ) | ||||
Increase in long-term deposits for land use right | (1,351,030 | ) | - | |||||
Additions to leasehold improvements | (26,619 | ) | (253,163 | ) | ||||
Payments on construction-in-progress | (111,524 | ) | - | |||||
Net cash used in investing activities | (1,543,586 | ) | (487,314 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from short-term bank loan | 161,770 | - | ||||||
Change in restricted cash | 245,504 | 90,544 | ||||||
Change in notes payable | (795,002 | ) | 2,328,686 | |||||
Change in other payables-related parties | 879,958 | (295,954 | ) | |||||
Net cash provided by financing activities | 492,230 | 2,123,276 | ||||||
EFFECT OF EXCHANGE RATE ON CASH | 244,420 | 44,100 | ||||||
INCREASE (DECREASE) IN CASH | 1,772,621 | (325,255 | ) | |||||
CASH, beginning of period | 4,524,094 | 3,833,216 | ||||||
CASH, end of period | $ | 6,296,715 | $ | 3,507,961 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid for income taxes | $ | 12,797 | $ | - | ||||
Transfer from construction-in-progress to leasehold improvement | - | 2,703,428 |
CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME | ||||||||
(UNAUDITED) | ||||||||
For the three months ended June 30, | ||||||||
2013 | 2012 | |||||||
REVENUES, NET | $ | 15,336,519 | $ | 32,847,330 | ||||
COST OF GOODS SOLD | 11,735,350 | 27,702,553 | ||||||
GROSS PROFIT | 3,601,169 | 5,144,777 | ||||||
SELLING EXPENSES | 1,680,842 | 1,858,225 | ||||||
GENERAL AND ADMINISTRATIVE EXPENSES | 2,640,818 | 2,846,578 | ||||||
TOTAL OPERATING EXPENSES | 4,321,660 | 4,704,803 | ||||||
(LOSS) INCOME FROM OPERATIONS | (720,491 | ) | 439,974 | |||||
OTHER (LOSS) INCOME, NET | (40,413 | ) | 98,698 | |||||
CHANGE IN FAIR VALUE OF PURCHASE OPTION DERIVATIVE LIABILITY | 12,665 | (158 | ) | |||||
(LOSS) INCOME BEFORE INCOME TAXES | (748,239 | ) | 538,514 | |||||
PROVISION FOR INCOME TAXES | 39,520 | 3,882 | ||||||
NET (LOSS) INCOME | (787,759 | ) | 534,632 | |||||
ADD: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST | 243 | 255 | ||||||
NET (LOSS) INCOME ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES, INC. | (787,516 | ) | 534,887 | |||||
OTHER COMPREHENSIVE INCOME | ||||||||
Foreign currency translation adjustments | 759,791 | 55,270 | ||||||
COMPREHENSIVE (LOSS) INCOME | $ | (27,725 | ) | $ | 590,157 | |||
WEIGHTED AVERAGE NUMBER OF SHARES: | ||||||||
Basic | 13,609,003 | 13,557,496 | ||||||
Diluted | 13,609,003 | 13,598,686 | ||||||
EARNINGS PER SHARES: | ||||||||
Basic | $ | (0.06 | ) | $ | 0.04 | |||
Diluted | $ | (0.06 | ) | $ | 0.04 |
CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(UNAUDITED) | ||||||||
Three months ended June 30, | ||||||||
2013 | 2012 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net (loss) income | $ | (787,759 | ) | $ | 534,632 | |||
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 588,936 | 610,866 | ||||||
Stock compensation | 27,338 | 49,758 | ||||||
Bad debt write-off and provision | 1,181,478 | 1,114,673 | ||||||
Change in fair value of purchase option derivative liability | (12,665 | ) | 158 | |||||
Change in operating assets: | ||||||||
Accounts receivable, trade | (190,989 | ) | (7,712,451 | ) | ||||
Notes receivable | (290,214 | ) | (926,315 | ) | ||||
Inventories | (398,271 | ) | (526,099 | ) | ||||
Other receivables | (159,171 | ) | (236,873 | ) | ||||
Advances to suppliers | (1,111,259 | ) | (2,859,522 | ) | ||||
Other current assets | (782,304 | ) | 17,561 | |||||
Long term deposit | - | 355,151 | ||||||
Other noncurrent assets | 49,586 | 140,067 | ||||||
Change in operating liabilities: | ||||||||
Accounts payable, trade | 1,363,429 | 5,201,905 | ||||||
Other payables and accrued liabilities | (570,952 | ) | 650,956 | |||||
Customer deposits | 365,295 | 695,089 | ||||||
Taxes payable | (2,212 | ) | 67,114 | |||||
Net cash used in operating activities | (729,734 | ) | (2,823,330 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of equipment | (2,934 | ) | (216,454 | ) | ||||
Additions to leasehold improvements | (3,958 | ) | (90,313 | ) | ||||
Payments on construction-in-progress | (111,152 | ) | - | |||||
Net cash used in investing activities | (118,044 | ) | (306,767 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from short-term bank loan | 161,230 | - | ||||||
Change in restricted cash | (1,336,189 | ) | 1,410,499 | |||||
Change in notes payable | (166,196 | ) | 1,396,914 | |||||
Change in other payables-related parties | 194,973 | 99,996 | ||||||
Net cash (used in) provided by financing activities | (1,146,182 | ) | 2,907,409 | |||||
EFFECT OF EXCHANGE RATE ON CASH | 181,265 | 173,021 | ||||||
DECREASE IN CASH | (1,812,695 | ) | (49,667 | ) | ||||
CASH, beginning of period | 4,524,094 | 3,833,216 | ||||||
CASH, end of period | $ | 2,711,399 | $ | 3,783,549 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid for income taxes | $ | 9,529 | $ | 14,713 | ||||
Transfer from construction-in-progress to leasehold improvement | - | 1,985,391 |
Background | Ownership | |||
Renovation HK | ● Incorporated in Hong Kong SAR on September 2, 2008 | 100% | ||
Jiuxin Management | ● Established in the PRC on October 14, 2008 ● Deemed a wholly foreign owned enterprise (“WFOE”) under PRC law ● Registered capital of $4.5 million fully paid | 100% | ||
Shouantang Technology | ● Established in the PRC on July 16, 2010 by Renovation with registered capital of $20 million ● Registered capital requirement reduced by the SAIC to $11 million in July 2012 and is fully paid ● Deemed a WFOE under PRC law ● Invests and finances the working capital of Quannuo Technology | 100% | ||
Qianhong Agriculture | ● Established in the PRC on August 10, 2010 by Jiuxin Management ● Registered capital of RMB 10 million fully paid ● Carries out herb farming business | 100% |
Quannuo Technology | ● Established in the PRC on July 7, 2009 ● Registered capital of RMB 10 million fully paid ● Acquired by Shouantang Technology in November 2010 ● Operates the Company’s online pharmacy website and provide software and technical support | 100% | ||
Hangzhou Quannuo | ● Established in the PRC on July 8, 2010 by Quannuo Technology ● Registered capital of RMB 800,000 fully paid ● Currently has no operation | 100% | ||
Jiuzhou Pharmacy (1) | ● Established in the PRC on September 9, 2003 ● Registered capital of RMB 5 million fully paid ● Operates the “Jiuzhou Grand Pharmacy” stores in Hangzhou | VIE by contractual arrangements (2) | ||
Jiuzhou Clinic (1) | ● Established in the PRC as a general partnership on October 10, 2003 ● Operates a medical clinic adjacent to one of Jiuzhou Pharmacy’s stores | VIE by contractual arrangements (2) | ||
Jiuzhou Service (1) | ● Established in the PRC on November 2, 2005 ● Registered capital of RMB 500,000 fully paid ● Operates a medical clinic adjacent to one of Jiuzhou Pharmacy’s stores | VIE by contractual arrangements (2) | ||
Shanghai Lydia | ● Established in the PRC on January 31, 2011 by Jiuzhou Pharmacy ● Registered capital of RMB 1 million fully paid ● Operates the “Lydia Grand Pharmacy” and “Chaling Grand Pharmacy” stores in Shanghai | VIE by contractual arrangements as a wholly-owned subsidiary of Jiuzhou Pharmacy (2) | ||
Jiuxin Medicine | ● Established in PRC on December 31, 2003 ● Acquired by Jiuzhou Pharmacy in August 2011 ● Registered capital of RMB 10 million fully paid ● Carries out pharmaceutical distribution services | VIE by contractual arrangements as a wholly-owned subsidiary of Jiuzhou Pharmacy (2) | ||
Shanghai Zhongxing | ● Established in PRC on June 19, 2006 ● Registered capital of RMB 1 million fully paid ● 99% acquired by Shanghai Lydia in July 2011 ● Operates the “Zhongxing Grand Pharmacy” store in Shanghai | VIE by contractual arrangements as a controlled entity of Jiuzhou Pharmacy through Shanghai Lydia (2) | ||
Lydia Trading | ● Established in the PRC on June 20, 2012 with registered capital of RMB 1 million fully paid ● Operates one “Weifang Grand Pharmacy” store in Shanghai | VIE by contractual arrangements as a controlled entity of Jiuzhou Pharmacy through Shanghai Lydia (2) | ||
Shanghai Zhenguang | ● Established in the PRC on October 31, 2012 with registered capital of RMB 500,000 fully paid ● Operates the “Zhenguang Grand Pharmacy” store in Shanghai | VIE by contractual arrangements as a controlled entity of Jiuzhou Pharmacy through Shanghai Lydia (2) | ||
Jiutong Medical | ● Established in the PRC on December 20, 2011 by Renovation with registered capital of $5 million ● ● Currently has no operation | 100% |
(1) | Jiuzhou Pharmacy, Jiuzhou Clinic and Jiuzhou Service have been under the common control of their three cofounders (the “Owners”) since their respective establishment dates, pursuant to agreements amongst the Owners to vote their interests in concert as memorialized in a voting agreement. Based on such voting agreement, the Company has determined that common control exists among these three companies in accordance with generally accepted accounting standards. Operationally, the Owners have operated these three companies in conjunction with one another since each company’s respective establishment date. Shanghai Lydia, Shanghai Zhongxing, Lydia Trading, Shanghai Zhenguang and Jiuxin Medicine are also deemed under the common control of the Owners as they are each a subsidiary of Jiuzhou |
(2) | To comply with certain foreign ownership restrictions of pharmacy and medical clinic operators, Jiuxin Management entered into a series of contractual arrangements with Jiuzhou Pharmacy, Jiuzhou Clinic and Jiuzhou Service on August 1, 2009. These contractual arrangements are comprised of five agreements: consulting services agreement, operating agreement, equity pledge agreement, voting rights agreement and option agreement. As a result of these agreements, which obligate Jiuxin Management to absorb all of the risks of loss from the activities of Jiuzhou Pharmacy, Jiuzhou Clinic and Jiuzhou Service, and enable the Company (through Jiuxin Management) to receive all of their expected residual returns, the Company accounts for all three companies (as well as the two subsidiaries of Jiuzhou Pharmacy) as a variable interest entity (“VIE”) under the accounting standards of the Financial Accounting Standards Board (“FASB”). Accordingly, the financial statements of Jiuzhou Pharmacy, Jiuzhou Clinic and Jiuzhou Service, as well as the subsidiaries and entity under the control of Jiuzhou Pharmacy (Shanghai Lydia, Jiuxin Medicine, Shanghai Zhongxing, |
Estimated Useful Life | |
Leasehold improvements | 3-10 years |
Motor vehicles | 5 years |
Office equipment & furniture | 3-5 years |
Buildings | 10 years |
June 30, 2013 | March 31, 2013 | September 30, 2013 | March 31, 2013 | |||||||||||||
Accounts receivable | $ | 17,873,974 | $ | 18,007,051 | $ | 17,179,460 | $ | 18,007,051 | ||||||||
Less: allowance for doubtful accounts | (5,961,637 | ) | (5,028,243 | ) | (4,487,830 | ) | (5,028,243 | ) | ||||||||
Trade accounts receivable, net | $ | 11,912,337 | $ | 12,978,808 | $ | 12,691,630 | $ | 12,978,808 |
June 30, 2013 | March 31, 2013 | September 30, 2013 | March 31, 2013 | |||||||||||||
Prepaid rental expenses | $ | 1,552,503 | $ | 647,489 | $ | 1,730,847 | $ | 647,489 | ||||||||
Lease rights transfer fees (1) | 143,417 | 247,789 | 72,916 | 247,789 | ||||||||||||
Prepaids and other current assets | 331,543 | 326,221 | 337,039 | 326,221 | ||||||||||||
Total | $ | 2,027,463 | $ | 1,221,499 | $ | 2,140,802 | $ | 1,221,499 |
(1) | Lease rights transfer fees are paid by the Company to secure store rentals in coveted areas. These additional costs of acquiring the right to lease new store locations are capitalized and amortized over the period of the initial lease term. |
June 30, 2013 | March 31, 2013 | September 30, 2013 | March 31, 2013 | |||||||||||||
Building | $ | 1,137,307 | $ | 1,119,053 | $ | 1,144,326 | $ | 1,119,053 | ||||||||
Leasehold improvements | 14,184,253 | 13,956,605 | 14,298,631 | 13,956,605 | ||||||||||||
Office equipment and furniture | 5,357,177 | 5,264,996 | 5,438,104 | 5,264,996 | ||||||||||||
Motor vehicles | 432,512 | 424,958 | 435,182 | 424,958 | ||||||||||||
Total | 21,111,249 | 20,765,612 | 21,316,243 | 20,765,612 | ||||||||||||
Less: Accumulated depreciation | (8,151,232 | ) | (7,476,960 | ) | (8,715,652 | ) | (7,476,960 | ) | ||||||||
Construction-in-progress | 111,681 | - | 112,372 | - | ||||||||||||
Property and equipment, net | $ | 13,071,698 | $ | 13,288,652 | $ | 12,712,963 | $ | 13,288,652 |
June 30, 2013 | March 31, 2013 | September 30, 2013 | March 31, 2013 | |||||||||||||
Advance to suppliers | $ | 20,093,248 | $ | 19,119,231 | $ | 14,394,521 | $ | 19,119,231 | ||||||||
Less: allowance for doubtful accounts | (2,917,498 | ) | (3,596,197 | ) | (3,323,872 | ) | (3,596,197 | ) | ||||||||
Advance to suppliers, net | $ | 17,175,750 | $ | 15,523,034 | $ | 11,070,649 | $ | 15,523,034 |
September 30, 2013 | March 31, 2013 | |||||||
Long term rental deposit (1) | $ | 2,823,014 | $ | 2,760,665 | ||||
Long term deposit for land use right (2) | 1,361,303 | - | ||||||
Total | $ | 4,184,317 | $ | 2,760,665 |
(1) | Money deposited with or advanced to landlords for securing retail store leases for which the Company does not anticipate applying or being returned within the next twelve months. Most of the Company’s landlords require a minimum of nine months’ rent being paid upfront plus additional deposits. |
(2) | Full prepayment for the purchase of land use right to a property planned as a TCM Plant. The Company has received the official land use right certificate on October 10, 2013, although construction has not begun. |
June 30, 2013 | March 31, 2013 | |||||||
Prepayment for lease of land use right – noncurrent (1) | $ | 5,467,500 | $ | 5,419,600 | ||||
Lease rights transfer fees-noncurrent (2) | 2,595 | 11,726 | ||||||
Total | $ | 5,470,095 | $ | 5,431,326 |
September 30, 2013 | March 31, 2013 | |||||||
Prepayment for lease of land use right – noncurrent (1) | $ | 5,460,500 | $ | 5,419,600 | ||||
Lease rights transfer fees-noncurrent (2) | - | 11,726 | ||||||
Total | $ | 5,460,500 | $ | 5,431,326 |
(1) |
(2) | Lease rights transfer fees are paid by the Company to secure store rentals in coveted areas. These additional costs of acquiring the right to lease new store locations are capitalized and amortized over the period of the initial lease term. |
June 30, 2013 | March 31, 2013 | September 30, 2013 | March 31, 2013 | |||||||||||||
Licenses and permits | 1,123,283 | 1,104,801 | 1,130,217 | 1,104,801 | ||||||||||||
Software | 473,212 | 466,071 | 476,133 | 466,071 | ||||||||||||
Total other intangible assets | 1,596,495 | 1,570,872 | 1,606,350 | 1,570,872 | ||||||||||||
Less: accumulated amortization | (414,062 | ) | (368,614 | ) | (456,369 | ) | (368,614 | ) | ||||||||
Intangible assets, net | $ | 1,182,433 | $ | 1,202,258 | $ | 1,149,981 | $ | 1,202,258 |
Entity | Income Tax Jurisdiction | |
Jo-Jo Drugstores | United States | |
Renovation | Hong Kong | |
All other entities | PRC |
For the three months | For the six months | |||||||||||||||||||||||
For the three months ended June 30, | ended September 30, | �� | ended September 30, | |||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||
U.S. Statutory rates | 34.0 | % | 34.0 | % | 34.0 | % | 34.0 | % | 34.0 | % | 34.0 | % | ||||||||||||
Foreign income not recognized in the U.S. | (34.0 | ) | (34.0 | ) | (34.0 | ) | (34.0 | ) | (34.0 | ) | (34.0 | ) | ||||||||||||
China income taxes | 25.0 | 25.0 | 25.0 | 25.0 | 25.0 | 25.0 | ||||||||||||||||||
Exemption rendered by local tax authorities (1) | - | (25.0 | ) | - | (25.0 | ) | - | (25.0 | ) | |||||||||||||||
Change in valuation allowance (2) | (19.7 | ) | - | (32.1 | ) | - | (31.0 | ) | - | |||||||||||||||
Others (3) | - | 0.7 | (0.7 | ) | (0.0 | ) | (0.3 | ) | (0.4 | ) | ||||||||||||||
Effective tax rate | 5.3 | % | 0.7 | % | (7.8 | )% | (0.0 | )% | (6.3 | )% | (0.4 | )% |
(1) |
(2) | Certain subsidiaries incurred operating loss in the three and six months ended |
(3) | Represent expenses incurred by the Company that were not deductible for PRC income tax. |
June 30, 2013 | March 31, 2013 | September 30, 2013 | March 31, 2013 | |||||||||||||
VAT | $ | 310,451 | $ | 334,833 | $ | 314,455 | $ | 334,833 | ||||||||
Income tax | 38,126 | 7,628 | 54,634 | 7,628 | ||||||||||||
Others | 26,896 | 29,172 | 10,892 | 29,172 | ||||||||||||
Total taxes payable | $ | 375,473 | $ | 371,633 | $ | 379,981 | $ | 371,633 |
June 30, 2013 | March 31, 2013 | September 30, 2013 | March 31, 2013 | |||||||||||||
Due to cofounders (1): | $ | 576,818 | $ | 576,818 | $ | 576,818 | $ | 576,818 | ||||||||
Due to director (2): | 842,832 | 647,599 | 1,527,917 | 647,599 | ||||||||||||
Total | $ | 1,419,650 | $ | 1,224,417 | $ | 2,104,735 | $ | 1,224,417 |
(1) | As of |
(2) | Due to foreign exchange restrictions, Mr. Lei Liu personally lent U.S. dollars to the Company to facilitate its payments of expenses in the United States. In addition, Mr. Lei Liu lent about $600,000 to purchase a piece of land use right. |
Underwriter Purchase Option | Underwriter Purchase Option | |||||||
June 30, 2013 (1) | September 30, 2013 (1) | |||||||
Stock price | $ | 0.56 | $ | 0.70 | ||||
Exercise price | $ | 6.25 | $ | 6.25 | ||||
Annual dividend yield | 0 | % | 0 | % | ||||
Expected term (years) | 1.80 | 1.55 | ||||||
Risk-free interest rate | 0.36 | % | 0.33 | % | ||||
Expected volatility | 98.35 | % | 106.98 | % |
(1) | As of |
Common Stock Warrants | ||||
September 30, 2013 (1) | ||||
Stock price | $ | 0.70 | ||
Exercise price | $ | 1.20 | ||
Annual dividend yield | 0 | % | ||
Expected term (years) | 2.99 | |||
Risk-free interest rate | 0.63 | % | ||
Expected volatility | 99.19 | % |
(1) | As of September 30, 2013, the warrants had not been exercised. |
Three months ended | ||||||||
June 30, | ||||||||
2013 | 2012 | |||||||
Net (loss) income attributable to controlling interest | $ | (787,516 | ) | $ | 534,887 | |||
Weighted average shares used in basic computation | 13,609,003 | 13,557,496 | ||||||
Diluted effect of restricted shares | - | 41,190 | ||||||
Weighted average shares used in diluted computation | 13,609,003 | 13,598,686 | ||||||
Earnings per share – Basic: | ||||||||
Net (loss) income before noncontrolling interest | $ | (0.06 | ) | $ | 0.04 | |||
Add: Net loss attributable to noncontrolling interest | $ | 0.00 | $ | 0.00 | ||||
Net (loss) income attributable to controlling interest | $ | (0.06 | ) | $ | 0.04 | |||
Earnings per share – Diluted: | ||||||||
Net (loss) income before noncontrolling interest | $ | (0.06 | ) | $ | 0.04 | |||
Add: Net loss attributable to noncontrolling interest | $ | 0.00 | $ | 0.00 | ||||
Net (loss) income attributable to controlling interest | $ | (0.06 | ) | $ | 0.04 |
Three months ended September 30, | Six months ended September 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net loss attributable to controlling interest | $ | (546,590) | $ | (1,528,449) | $ | (1,333,578) | $ | (993,562) | ||||||||
Weighted average shares used in basic computation | 13,609,003 | 13,588,569 | 13,609,003 | 13,575,550 | ||||||||||||
Diluted effect of purchase options and warrants | - | - | - | - | ||||||||||||
Diluted effect of restricted shares | - | - | - | - | ||||||||||||
Weighted average shares used in diluted computation | 13,609,003 | 13,588,569 | 13,609,003 | 13,575,550 | ||||||||||||
Loss per share – Basic: | ||||||||||||||||
Net loss before noncontrolling interest | $ | (0.04) | $ | (0.11) | $ | (0.10) | $ | (0.07) | ||||||||
Add: Net loss attributable to noncontrolling interest | $ | - | $ | - | $ | - | $ | - | ||||||||
Net loss attributable to controlling interest | $ | (0.04) | $ | (0.11) | $ | (0.10) | $ | (0.07) | ||||||||
Loss per share – Diluted: | ||||||||||||||||
Net loss before noncontrolling interest | $ | (0.04) | $ | (0.11) | $ | (0.10) | $ | (0.07) | ||||||||
Add: Net loss attributable to noncontrolling interest | $ | - | $ | - | $ | - | $ | - | ||||||||
Net loss attributable to controlling interest | $ | (0.04) | $ | (0.11) | $ | (0.10) | $ | (0.07) |
Retail drugstores | Drug wholesale | Herb farming | Total | |||||||||||||
Revenue | $ | 11,052,942 | $ | 5,802,479 | $ | - | $ | 16,855,421 | ||||||||
Cost of goods | 8,544,744 | 5,362,274 | - | 13,907,018 | ||||||||||||
Gross profit | $ | 2,508,198 | $ | 440,205 | $ | - | $ | 2,948,403 | ||||||||
Selling expenses | 1,574,104 | 1,405,027 | - | 2,979,131 | ||||||||||||
General and administrative expenses | 1,264,804 | (818,103) | 45,280 | 491,981 | ||||||||||||
Loss from operations | $ | (330,710 | ) | $ | (146,719 | ) | $ | (45,280) | $ | (522,709) | ||||||
Depreciation and amortization | $ | 410,521 | $ | 140,867 | $ | 262 | $ | 551,650 | ||||||||
Total capital expenditures | $ | 1,386,806 | $ | 16,088 | $ | - | $ | 1,402,894 | ||||||||
Total assets | $ | 34,714,300 | $ | 28,703,706 | $ | 6,847,398 | $ | 70,265,404 |
Retail drugstores | Drug wholesale | Herb farming | Total | Retail drugstores | Drug wholesale | Herb farming | Total | |||||||||||||||||||||||||
Revenue | $ | 10,912,390 | $ | 4,424,129 | $ | - | $ | 15,336,519 | $ | 10,497,948 | $ | 16,167,166 | $ | - | $ | 26,665,114 | ||||||||||||||||
Cost of goods | 8,127,471 | 3,607,879 | - | 11,735,350 | 7,690,140 | 15,552,777 | - | 23,242,917 | ||||||||||||||||||||||||
Gross profit | $ | 2,784,919 | $ | 816,250 | $ | - | $ | 3,601,169 | $ | 2,807,808 | $ | 614,389 | $ | - | $ | 3,422,197 | ||||||||||||||||
Selling expenses | 1,674,247 | 6,595 | 1,680,842 | $ | 2,044,728 | $ | 57,893 | $ | - | $ | 2,102,621 | |||||||||||||||||||||
General and administrative expenses | 1,567,043 | 1,013,667 | 60,108 | 2,640,818 | $ | 1,300,179 | $ | (22,842 | ) | $ | 32,976 | $ | 1,310,313 | |||||||||||||||||||
(Loss) income from operations | $ | (456,371 | ) | $ | (204,012 | ) | $ | (60,108 | ) | $ | (720,491 | ) | $ | (537,099 | ) | $ | 579,338 | $ | ( 32,976 | ) | $ | 9,263 | ||||||||||
Depreciation and amortization | $ | 457,318 | $ | 131,358 | $ | 260 | $ | 588,936 | $ | 568,012 | $ | 116,000 | $ | 297 | $ | 684,309 | ||||||||||||||||
Total capital expenditures | $ | 116,708 | $ | 1,336 | $ | - | $ | 118,044 | $ | 268,772 | $ | 2,088 | $ | - | $ | 270,860 | ||||||||||||||||
Total assets | $ | 30,183,983 | $ | 32,667,474 | $ | 6,785,288 | $ | 69,636,745 | $ | 47,349,821 | $ | 34,269,871 | $ | 6,625,406 | $ | 88,245,098 |
Retail drugstores | Drug wholesale | Herb farming | Total | |||||||||||||
Revenue | $ | 21,965,332 | $ | 10,226,608 | $ | - | $ | 32,191,940 | ||||||||
Cost of goods | 16,672,215 | 8,970,153 | - | 25,642,368 | ||||||||||||
Gross profit | $ | 5,293,117 | $ | 1,256,455 | $ | - | $ | 6,549,572 | ||||||||
Selling expenses | 3,248,351 | 1,411,622 | 4,659,973 | |||||||||||||
General and administrative expenses | 2,831,847 | 195,565 | 105,387 | 3,132,799 | ||||||||||||
Loss from operations | $ | (787,081 | ) | $ | (350,732 | ) | $ | (105,387 | ) | $ | (1,243,200 | ) | ||||
Depreciation and amortization | $ | 867,839 | $ | 272,225 | $ | 522 | $ | 1,140,586 | ||||||||
Total capital expenditures | $ | 1,503,514 | $ | 17,424 | $ | - | $ | 1,520,938 | ||||||||
Total assets | $ | 34,714,300 | $ | 28,703,706 | $ | 6,847,398 | $ | 70,265,404 |
Retail drugstores | Drug wholesale | Herb farming | Total | Retail drugstores | Drug wholesale | Herb farming | Total | |||||||||||||||||||||||||
Revenue | $ | 8,954,456 | $ | 21,368,783 | $ | 2,524,091 | $ | 32,847,330 | $ | 19,452,405 | $ | 37,535,949 | $ | 2,524,091 | $ | 59,512,445 | ||||||||||||||||
Cost of goods | 6,629,003 | 20,843,901 | 229,649 | 27,702,553 | 14,319,144 | 36,396,678 | 229,649 | 50,945,471 | ||||||||||||||||||||||||
Gross profit | $ | 2,325,453 | $ | 524,882 | $ | 2,294,442 | $ | 5,144,777 | $ | 5,133,261 | $ | 1,139,271 | $ | 2,294,442 | $ | 8,566,974 | ||||||||||||||||
Selling expenses | 1,807,611 | 50,614 | - | 1,858,225 | 3,844,400 | $ | 108,507 | $ | - | $ | 3,952,907 | |||||||||||||||||||||
General and administrative expenses | 1,699,042 | 1,134,865 | 12,671 | 2,846,578 | 3,018,426 | $ | 1,104,512 | $ | 41,892 | $ | 4,164,830 | |||||||||||||||||||||
(Loss) income from operations | $ | (1,054,834 | ) | $ | (660,597 | ) | $ | 2,155,405 | $ | 439,974 | $ | (1,729,565 | ) | $ | (73,748 | ) | $ | 2,252,550 | $ | 449,237 | ||||||||||||
Depreciation and amortization | $ | 466,939 | $ | 136,168 | $ | 7,759 | $ | 610,866 | $ | 1,034,951 | $ | 252,168 | $ | 8,056 | $ | 1,295,175 | ||||||||||||||||
Total capital expenditures | $ | 215,910 | $ | 544 | $ | - | $ | 216,454 | $ | 484,682 | $ | 2,632 | $ | - | $ | 487,314 | ||||||||||||||||
Total assets | $ | 45,945,587 | $ | 31,224,760 | $ | 6,574,386 | $ | 83,744,733 | $ | 47,349,821 | $ | 34,269,871 | $ | 6,625,406 | $ | 88,245,098 |
Three months ended June 30, | Three months ended September 30, | Six months ended September 30, | ||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||
Prescription drugs | $ | 5,287,149 | $ | 4,036,867 | $ | 4,637,114 | $ | 4,304,562 | $ | 9,924,263 | $ | 8,334,655 | ||||||||||||
OTC drugs | 3,925,440 | 2,626,267 | ||||||||||||||||||||||
Over-the-counter drugs | 4,089,736 | 3,111,558 | 8,015,176 | 5,737,825 | ||||||||||||||||||||
Nutritional supplements | 559,837 | 829,286 | 647,177 | 1,713,605 | 1,207,014 | 2,542,891 | ||||||||||||||||||
TCM | 521,246 | 866,701 | ||||||||||||||||||||||
Traditional Chinese medicine | 907,267 | 935,439 | 1,428,513 | 1,802,140 | ||||||||||||||||||||
Sundry products | 297,292 | 222,939 | 473,882 | 173,814 | 771,174 | 396,753 | ||||||||||||||||||
Medical devices | 321,426 | 372,396 | 297,766 | 258,970 | 619,192 | 628,141 | ||||||||||||||||||
Total | $ | 10,912,390 | $ | 8,954,456 | $ | 11,052,942 | $ | 10,497,948 | $ | 21,965,332 | $ | 19,452,405 |
Three months ended September 30, | Six months ended September 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Prescription drugs | $ | 4,276,822 | $ | 8,404,741 | $ | 7,649,675 | $ | 21,125,002 | ||||||||
Over-the-counter drugs | 96,125 | 3,318,318 | 875,345 | 7,851,391 | ||||||||||||
Nutritional supplements | 875 | 4,231,039 | 261,130 | 8,339,633 | ||||||||||||
Traditional Chinese medicine | - | 210,921 | 927 | 213,787 | ||||||||||||
Sundry products | 1,428,657 | 901 | 1,432,811 | 1,983 | ||||||||||||
Medical devices | - | 1,246 | 6,720 | |||||||||||||
Total | $ | 5,802,479 | $ | 16,167,166 | $ | 10,226,608 | $ | 37,535,949 |
Three months ended June 30, | ||||||||
2013 | 2012 | |||||||
Prescription drugs | $ | 3,372,853 | $ | 12,720,261 | ||||
OTC Drugs | 779,220 | 4,533,073 | ||||||
Nutritional supplements | 260,259 | 4,108,594 | ||||||
TCM | 923 | 2,866 | ||||||
Sundry products | 4,176 | 1,082 | ||||||
Medical devices | 6,698 | 2,907 | ||||||
Total | $ | 4,424,129 | $ | 21,368,783 |
Three months ended September 30, | Six months ended September 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Prescription drugs | $ | - | $ | - | $ | - | $ | - | ||||||||
Over-the-counter drugs | - | - | - | - | ||||||||||||
Nutritional supplements | - | - | - | - | ||||||||||||
Traditional Chinese medicine | - | - | - | 2,524,091 | ||||||||||||
Sundry products | - | - | - | - | ||||||||||||
Medical devices | - | - | - | - | ||||||||||||
Total | $ | - | $ | - | $ | - | $ | 2,524,091 |
Three months ended June 30, | ||||||||
2013 | 2012 | |||||||
Prescription drugs | $ | - | $ | - | ||||
OTC drugs | - | - | ||||||
Nutritional supplements | - | - | ||||||
TCM | - | 2,524,091 | ||||||
Sundry products | - | - | ||||||
Medical devices | - | - | ||||||
Total | $ | - | $ | 2,524,091 |
Periods ending June 30, | Retail drugstores | Drug wholesale | Herb farming | Total Amount | ||||||||||||||||||||||||||||
Periods ending September 30, | Retail drugstores | Drug wholesale | Herb farming | Total Amount | ||||||||||||||||||||||||||||
2014 | $ | 2,836,808 | $ | 226,610 | $ | - | $ | 3,063,418 | $ | 2,417,962 | $ | 239,143 | $ | - | $ | 2,657,105 | ||||||||||||||||
2015 | 1,011,560 | 256,010 | - | 1,267,570 | 658,704 | 271,580 | - | 930,284 | ||||||||||||||||||||||||
2016 | 292,862 | 282,139 | - | 575,001 | 259,673 | 288,915 | - | 548,588 | ||||||||||||||||||||||||
2017 | 176,782 | 287,897 | - | 464,679 | 132,476 | 288,915 | - | 421,391 | ||||||||||||||||||||||||
2018 | 57,040 | 287,897 | - | 344,937 | 55,693 | 288,915 | - | 344,608 | ||||||||||||||||||||||||
Thereafter | 424,537 | - | 424,537 | 19,203 | 320,695 | - | 339,718 |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
Three months ended June 30, | Three months ended September 30, | |||||||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||||||||||
Amount | Percentage of total revenue | Amount | Percentage of total revenue | Amount | Percentage of total revenue | Amount | Percentage of total revenue | |||||||||||||||||||||||||
Revenue | $ | 15,336,519 | 100.0 | % | $ | 32,847,330 | 100.0 | % | $ | 16,855,421 | 100.0 | % | $ | 26,665,114 | 100.0 | % | ||||||||||||||||
Gross profit | $ | 3,601,169 | 23.5 | % | $ | 5,144,777 | 15.7 | % | $ | 2,948,403 | 17.5 | % | $ | 3,422,197 | 12.8 | % | ||||||||||||||||
Selling expenses | $ | 1,680,842 | 11.0 | % | $ | 1,858,225 | 5.7 | % | $ | 2,979,131 | 17.7 | % | $ | 2,102,621 | 7.9 | % | ||||||||||||||||
General and administrative expenses | $ | 2,640,818 | 17.2 | % | $ | 2,846,578 | 8.7 | % | $ | 491,981 | 2.9 | % | $ | 1,310,313 | 4.9 | % | ||||||||||||||||
(Loss) income from operations | $ | (720,491 | ) | (4.7 | )% | $ | 439,974 | 1.3 | % | $ | (522,709 | ) | (3.1) | % | $ | 9,263 | 0.0 | % | ||||||||||||||
Other (expense) income, net | $ | (40,413 | ) | (0.3 | )% | $ | 98,698 | 0.3 | % | |||||||||||||||||||||||
Other income (expense), net | $ | 37,021 | 0.2 | % | $ | (90,332 | ) | (0.3 | )% | |||||||||||||||||||||||
Goodwill impairment loss | $ | - | - | % | $ | (1,473,606) | (5.5 | )% | ||||||||||||||||||||||||
Change in fair value of purchase option derivative liability | $ | 12,665 | 0.1 | % | $ | (158 | ) | (0.0 | )% | $ | (21,049 | ) | (0.1) | % | $ | 25,905 | 0.1 | % | ||||||||||||||
Income tax expense | $ | 39,520 | 0.3 | % | $ | 3,882 | 0.0 | % | $ | 39,589 | 0.2 | % | $ | 10 | 0.0 | % | ||||||||||||||||
Net income attributable to controlling interest | $ | (787,516 | ) | (5.1 | )% | $ | 534,887 | 1.6 | % | |||||||||||||||||||||||
Net loss attributable to controlling interest | $ | (546,590 | ) | (3.2) | % | $ | (1,528,449 | ) | (5.7 | )% | ||||||||||||||||||||||
Net loss attributable to noncontrolling interest | $ | (243 | ) | (0.0 | )% | $ | (255 | ) | (0.0 | )% | $ | (264 | ) | (0.0) | % | $ | (331 | ) | (0.0 | )% |
Wholesale revenue, which |
(2) |
Three months ended June 30, | Three months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||
Amount | % of total revenue | Amount | % of total revenue | Variance by amount | % of change | Amount | % of total revenue | Amount | % of total revenue | Variance by amount | % of change | |||||||||||||||||||||||||||||||||||||
Revenue from retail business | ||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from drugstores | $ | 9,648,218 | 62.9 | % | $ | 8,393,098 | 25.6 | % | $ | 1,255,120 | 15.0 | % | $ | 9,455,992 | 56.1 | % | $ | 9,637,418 | 36.2 | % | $ | (181,426) | (1.9) | % | ||||||||||||||||||||||||
Revenue from online sales | 1,264,172 | 8.2 | % | 561,358 | 1.7 | % | 702,814 | 125.2 | % | 1,596,950 | 9.5 | % | 860,530 | 3.2 | % | 736,420 | 85.6 | % | ||||||||||||||||||||||||||||||
Sub-total of retail revenue | 10,912,390 | 71.1 | % | 8,954,456 | 27.3 | % | 1,957,934 | 21.9 | % | 11,052,942 | 65.6 | % | 10,497,948 | 39.4 | % | 554,994 | 5.3 | % | ||||||||||||||||||||||||||||||
Revenue from wholesale business | 4,424,129 | 28.8 | % | 21,368,783 | 65.0 | % | (16,944,654 | ) | (79.3) | % | 5,802,479 | 34.4 | % | 16,167,166 | 60.6 | % | (10,364,687 | ) | (64.1) | % | ||||||||||||||||||||||||||||
Revenue from farming business | - | - | % | 2,524,091 | 7.7 | % | (2,524,091 | ) | (100.0) | % | - | - | % | - | - | % | - | N/A | ||||||||||||||||||||||||||||||
Total revenue | $ | 15,336,519 | 100 | % | $ | 32,847,330 | 100 | % | $ | (17,510,811 | ) | (53.3) | % | $ | 16,855,421 | 100.0 | % | $ | 26,665,114 | 100 | % | $ | (9,809,693) | (36.8) | % |
(1) | Drugstore revenue |
(2) | Wholesale revenue decreased by |
(3) | Online sales increased by $736,420 or 85.6%. We have been working with business-to-consumer online vendors, including Taobao, by posting our products on their online platforms, which direct customers back to our website. Such arrangement has exposed our online presence to a wider consumer base. In addition, since the end of 2012, we have expended considerable efforts in identifying popular products that can drive sales. As a result, we have seen steady growth in online sales. |
Three months ended September 30, | ||||||||
2013 | 2012 | |||||||
Average gross margin for retail business | 23.0 | % | 26.6 | % | ||||
Average gross margin for wholesale business | 7.6 | % | 3.9 | % | ||||
Average gross margin for farming business | N/A | N/A |
Six months ended September 30, | ||||||||||||||||
2013 | 2012 | |||||||||||||||
Amount | Percentage of total revenue | Amount | Percentage of total revenue | |||||||||||||
Revenue | $ | 32,191,940 | 100.0 | % | $ | 59,512,445 | 100.0 | % | ||||||||
Gross profit | $ | 6,549,572 | 20.3 | % | $ | 8,566,974 | 14.4 | % | ||||||||
Selling expenses | $ | 4,659,973 | 14.5 | % | $ | 3,960,845 | 6.7 | % | ||||||||
General and administrative expenses | $ | 3,132,799 | 9.7 | % | $ | 4,156,892 | 7.0 | % | ||||||||
(Loss) income from operations | $ | (1,243,200 | ) | (3.9 | )% | $ | 449,237 | 0.8 | % | |||||||
Other income (expense), net | $ | (90,332 | ) | (0.3 | )% | $ | 8,367 | 0.0 | % | |||||||
Goodwill impairment loss | $ | - | - | % | $ | (1,473,606 | ) | (2.5 | )% | |||||||
Change in fair value of purchase option derivative liability | $ | (8,384 | ) | (0.0 | )% | $ | 25,747 | 0.0 | % | |||||||
Income tax expense | $ | 79,109 | 0.2 | % | $ | 3,892 | 0.0 | % | ||||||||
Net loss attributable to controlling interest | $ | (1,333,578 | ) | (4.1 | )% | $ | (993,562 | ) | (1.7 | )% | ||||||
Net loss attributable to noncontrolling interest | $ | (507 | ) | (0.0 | )% | $ | (585 | ) | (0.0 | )% |
(1) | Wholesale revenue, which represented 31.8% of total revenue for the six months ended September 30, 2013, decreased by $27,309,341 or 72.8%. Such significant contraction resulted from ongoing implementation of our new wholesale strategy to focus on profitability rather than sales volume. Thus, our wholesale profit margin increased from 2.5% to 18.6%. However, until we can achieve first-tier distributor status with more vendors, we will continue to have limited access to more lucrative sales channels such as hospitals, and do not expect our wholesale business to expand significantly in the immediate future |
(2) | Retail sales, which accounted for approximately 68.2% of total revenue for the six months ended September 30, 2013, increased by $2,512,927 or 12.9% to $11,052,942. Same-store sales increased by approximately $1,066,343 or 6.2%, while online sales contributed approximately $2,865,592 in revenue, an increase of 102.1%. The increase in same-store sales reflects implementation of key drugstore operational strategies such as promoting sale through our doctors and clinics, as well as modest economic growth in China. Retail margin, however, fell from 26.3% to 24.1% due to price adjustments caused by government drug price control. Our store count decreased to 51 as of September 30, 2013, from 65 a year ago. |
Six months ended September 30, | ||||||||||||||||||||||||
2013 | 2012 | |||||||||||||||||||||||
Amount | % of total revenue | Amount | % of total revenue | Variance by amount | % of change | |||||||||||||||||||
Revenue from retail business | ||||||||||||||||||||||||
Revenue from drugstores | $ | 19,099,740 | 59.3 | % | $ | 18,034,415 | 30.3 | % | $ | 1,065,325 | 5.9 | % | ||||||||||||
Revenue from online sales | 2,865,592 | 8.9 | % | 1,417,990 | 2.4 | % | 1,447,602 | 102.1 | % | |||||||||||||||
Sub-total of retail revenue | 21,965,332 | 68.2 | % | 19,452,405 | 32.7 | % | 2,512,927 | 12.9 | % | |||||||||||||||
Revenue from wholesale business | 10,226,608 | 31.8 | % | 37,535,949 | 63.1 | % | (27,309,341 | ) | (72.8 | )% | ||||||||||||||
Revenue from farming business | - | - | % | 2,524,091 | 4.2 | % | (2,524,091 | ) | (100.0 | )% | ||||||||||||||
Total revenue | $ | 32,191,940 | 100.0 | % | $ | 59,512,445 | 100.0 | % | $ | (27,320,505 | ) | (45.9 | )% |
(1) | Drugstore revenue increased by $1,065,325 or 5.9% period over |
(2) | Wholesale revenue decreased by $27,309,341 or 72.8% as a |
(3) | Online sales increased by |
Three months ended June 30, | Six months ended September 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Average gross margin for retail business | 25.7 | % | 26.0 | % | 24.3 | % | 26.3 | % | ||||||||
Average gross margin for wholesale business | 18.6 | % | 2.5 | % | 12.4 | % | 3.0 | % | ||||||||
Average gross margin for farming business | N/A | 90.9 | % | N/A | 90.9 | % |
Three months ended June 30 | ||||||||
2013 | 2012 | |||||||
Net cash (used in) provided by operating activities | $ | (729,734 | ) | $ | (2,823,330 | ) | ||
Net cash (used in) investing activities | $ | (118,044 | ) | $ | (306,767 | ) | ||
Net cash (used in) provided by financing activities | $ | (1,146,182 | ) | $ | 2,907,409 |
Six months ended September 30 | ||||||||
2013 | 2012 | |||||||
Net cash provided by (used in) operating activities | $ | 2,579,557 | $ | (2,005,317 | ) | |||
Net cash (used in) investing activities | $ | (1,543,586 | ) | $ | (487,314 | ) | ||
Net cash provided by financing activities | $ | 492,230 | $ | 2,123,276 |
Periods ending June 30, | Retail drugstores | Drug wholesale | Herb farming | Total amount | ||||||||||||||||||||||||||||
Periods ending September 30, | Retail drugstores | Drug wholesale | Herb farming | Total amount | ||||||||||||||||||||||||||||
2014 | $ | 2,836,808 | $ | 226,610 | $ | - | $ | 3,063,418 | $ | 2,417,962 | $ | 239,143 | $ | - | $ | 2,657,105 | ||||||||||||||||
2015 | 1,011,560 | 256,010 | - | 1,267,570 | 658,704 | 271,580 | - | 930,284 | ||||||||||||||||||||||||
2016 | 292,862 | 282,139 | - | 575,001 | 259,673 | 288,915 | - | 548,588 | ||||||||||||||||||||||||
2017 | 176,782 | 287,897 | - | 464,679 | 132,476 | 288,915 | - | 421,391 | ||||||||||||||||||||||||
2018 | 57,040 | 287,897 | - | 344,937 | 55,693 | 288,915 | - | 344,608 | ||||||||||||||||||||||||
Thereafter | - | 424,537 | - | 424,537 | 19,203 | 320,695 | - | 339,718 |
March 31, 2013 | ||||||
Balance sheet items, except for the registered and paid-up capital, as of end of period/year | USD1: RMB | USD1: RMB 0.1594 | USD1: RMB | |||
Amounts included in the statement of Operations and statement of cash flows for the period/ year ended | USD1: RMB | USD1: RMB 0.1586 | USD1: RMB |
· | 350,000 restricted shares of our common stock, and |
· | Option to purchase up to 150,000 shares of our common stock at $1.20 per share, exercisable from September 26, 2013 through September 25, 2016. |
ITEM 4. | MINE SAFETY DISCLOSURES. |
Description | ||
3.1 | Articles of Incorporation of Kerrisdale (1) | |
3.2 | Certificate of Amendment to Articles of Incorporation of Kerrisdale filed with the Nevada Secretary of State on July 14, 2008 (2) | |
3.3 | Articles of Merger between Kerrisdale Mining and China Jo-Jo Drugstores, Inc. filed with the Nevada Secretary of State on September 22, 2009 (3) | |
3.4 | Bylaws (1) | |
3.5 | Text of Amendments to the Bylaws (2) | |
3.6 | Certificate of Change Pursuant to NRS 78.209 with an effective date of April 9, 2010 (4) | |
31.1 | Section 302 Certification by the Corporation’s Chief Executive Officer * | |
31.2 | Section 302 Certification by the Corporation’s Chief Financial Officer * | |
32.1 | Section 906 Certification by the Corporation’s Chief Executive Officer * | |
32.2 | Section 906 Certification by the Corporation’s Chief Financial Officer * | |
101.INS | XBRL Instance Document* ** | |
101.SCH | XBRL Taxonomy Extension Schema Document* ** | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document* ** | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document* ** | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document* ** | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document* ** |
* | Filed herewith. |
** | Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections. |
(1) | Incorporated by reference from the registrant’s Registration Statement on Form SB-2 filed on November 28, 2007 |
(2) | Incorporated by reference from the registrant’s Current Report on Form 8-K filed on July 15, 2008 |
(3) | Incorporated by reference from the registrant’s Current Report on Form 8-K filed on September 24, 2009 |
(4) | Incorporated by reference from the registrant’s Current Report on Form 8-K filed on October 30, 2009 |
CHINA JO-JO DRUGSTORES, INC. | ||||
(Registrant) | ||||
Date: | By: | /s/ Lei Liu | ||
Lei Liu | ||||
Chief Executive Officer | ||||
Date: | By: | /s/ Ming Zhao | |
Ming Zhao | |||
Chief Financial Officer |