China Jo-Jo Drugstores Announces First Quarter Financial Results

China Jo-Jo Drugstores, Inc. (NASDAQ: CJJD) ("Jo-Jo Drugstores" or the "Company"), which operates a retail pharmacy chain in the People’s Republic of China (the “PRC”), today reported its financial results for the fiscal quarter ended June 30, 2010.

Fiscal First Quarter ended June 30, 2010 Highlights

• Revenues increased by 30.2% period over period to $15.2 million
• Gross Profit increased by 52.6% period over period to $4.6 million
• Operating income increased by 38.3% period over period to $3.0 million

“Our first quarter for our fiscal year ending March 31, 2011 was significant for us,” stated Dr. Lei Liu, the Company’s Chairman and CEO, “We completed a $17.5 million financing during the quarter and achieved our highest first quarter revenues, gross profit and operating income to date. We now operate 42 retail drugstores in Zhejiang Province and are closer to our goal of having 60 drugstores in Zhejiang Province by March 31, 2011.”

Dr. Liu further commented, “Another milestone for us was that we are the first non-state-owned enterprise in Zhejiang Province to be able to sell pharmaceutical products online. The online drugstore will not be an immediate revenue generator for us, but over the long term we will use this to further establish our presence throughout Zhejiang Province.”

For the Three Months Ended June 30, 2010 and 2009

Revenue.  Our revenue increased by $3,525,964 or 30.2% to $15,207,428 for the three months ended June 30, 2010 from $11,681,464 for the three months ended June 30, 2009 due to operating additional store locations. We operated 31 stores as of June 30, 2010, as compared to 19 stores as of June 30, 2009. We anticipate that our overall revenue will continue to increase as we open additional stores.

Gross Profit.  Our gross profit increased by $1,590,000 or 52.6% to $4,613,896 for the three months ended June 30, 2010 from $3,023,896 for the three months ended June 30, 2009. Our gross margin increased from 30.3% for the three months ended June 30, 2009 to 25.9% for the three months ended June 30, 2010 as a result of selling more nutritional supplements which have higher profit margins and over-the-counter drugs. We anticipate that our overall gross profit will continue to increase as our sales increase. Additionally, we anticipate that our gross margin will increase as we will be able to obtain better pricing from our suppliers and achieve further economies of scale as a result of purchasing larger quantities of products. We may lower our prices in order to increase sales volume which may have an adverse effect on our gross margins. We presently do not privately label any of our products and are constantly adjusting our product mix to meet customer demand and to maximize our gross margin.

Selling Expenses. Our selling expenses increased by $345,581 or 72.3% to $823,358 for the three months ended June 30, 2010 from $477,777 for the three months ended June 30, 2009. The increase is attributable to operating more store locations in Zhejiang Province. As a percentage of revenue, our selling expenses increased from 4.1% for the three months ended June 30, 2009 to 5.4% for the three months ended June 30, 2010. During the next twelve months, we expect our selling expenses to increase in absolute dollars as a percentage of revenue as we continue to add more store locations in Zhejiang Province.

General and Administrative Expenses. Our general and administrative expenses increased by $408,552 or 111.9% to $773,762 for the three months ended June 30, 2010 from $365,210 for the three months ended June 30, 2009. The increase is attributable to expenses operating as a publicly traded company. As a percentage of revenue our general and administrative expenses increased from 3.1% for the three months ended June 30, 2009 to 5.1% for the three months ended June 30, 2010. During the next twelve months, we expect our general and administrative expenses to increase in absolute dollars and as a percentage of revenue as we continue to establish our brand in Zhejiang Province and operate as a publicly traded company.

Income from Operations.  As a result of our increased gross margin offset by increased operating expenses, our income from operations increased by $835,867 or 38.3% to $3,016,776 for the three months ended June 30, 2010 from $2,180,909 for the three months ended June 30, 2009. Our operating margin for the three months ended June 30, 2010 and 2009 was 19.8% and 18.7%, respectively.

As of August 13, 2010 the Company had $13,915,167 in cash and operated 42 stores in Zhejiang Province.

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