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.

Conference Call Information

The Company will host a conference call to discuss these results on Wednesday, August 18, 2010 8:00 a.m. Eastern time. To participate in the conference call, please dial 877-485-3104 from North America. International participants can access the call by dialing 201-689-8579. Investors may also access a live audio webcast of this conference call under the Investors Relations section of the Company's website at http://www.chinajojodrugstores.com.

A replay of the webcast will be available approximately two hours after the conclusion of the call. The webcast replay will remain available for three months. An audio replay will be made available until August 19, 2010. The audio replay can be accessed by dialing 1-877-660-6853 or 1-201-612-7415 and entering pass-code 355624.

About China Jo-Jo Drugstores, Inc.

China Jo-Jo Drugstores, Inc., through its contractually controlled affiliates Hangzhou Jiuzhou Grand Pharmacy Chain Co., Ltd., Hangzhou Jiuzhou Clinic of Integrated Traditional and Western Medicine General Partnership, and Hangzhou Jiuzhou Medical & Public Health Service Co., Ltd., operates a retail pharmacy chain in China offering both western and traditional Chinese medicine. The chain currently has 42 stores in Zhejiang Province.

Forward-looking Statements

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain of the statements made in the press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding the progress of new product development. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the risks associated with the effect of changing economic conditions in The People's Republic of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.
CHINA JO-JO DRUGSTORES, INC AND SUBSIDIARIES
(FORMERLY KNOWN AS KERRISDALE MINING CORPORATION)
CONSOLIDATED BALANCE SHEETS
     
JUNE 30, MARCH 31,
2010 2010
(Unaudited)
 

ASSETS
 
CURRENT ASSETS
Cash $ 15,774,697 $ 801,593
Restricted cash 807,941 746,703
Accounts receivable, trade 1,446,093 1,228,294
Inventories 3,963,780 3,770,411
Other receivables 246,484 282,073
Other receivables - related parties - -
Advances to suppliers 10,179,812 6,850,240
Advances to supplier - related party - -
Other current assets 1,630,603   1,331,167  
Total current assets 34,049,410   15,010,481  
 
PROPERTY AND EQUIPMENT, net 1,326,425   1,186,292  
 
OTHER ASSETS:
Long term deposit 2,321,115 2,311,661
Prepaid - noncurrent 5,671,660   5,508,963  
Total other assets 7,992,775   7,820,624  
 
Total assets $ 43,368,610   $ 24,017,397  
 

LIABILITIES AND SHAREHOLDERS' EQUITY
 
CURRENT LIABILITIES
Short term loans $ 1,473,000 $ 880,200
Notes payable 1,587,026 1,464,241
Accounts payable, trade 3,348,229 2,330,317
Other payables 166,488 225,716
Other payables - related parties 880,107 935,000
Taxes payable 1,140,709 1,235,083
Accrued liabilities 439,804   257,091  
Total current liabilities 9,035,363   7,327,648  
 
Purchase option derivative liability 344,507   -  
Total liabilities 9,379,870   7,327,648  
 
COMMITMENTS AND CONTINGENCIES
 
SHAREHOLDERS' EQUITY

Common stock; $0.001 par value; 500,000,000 and 250,000,000 shares authorized; 13,500,002 and 10,000,000 shares issued and outstanding as of June 30, 2010 and March 31, 2010, respectively
13,500 10,000
Paid-in capital 15,921,489 877,884
Statutory reserves 1,309,109 1,309,109
Retained earnings 17,007,480 14,855,016
Accumulated other comprehensive loss (262,838 ) (362,260 )
Total shareholders' equity 33,988,740   16,689,749  
 
Total liabilities and shareholders' equity $ 43,368,610   $ 24,017,397  
 

CHINA JO-JO DRUGSTORES, INC AND SUBSIDIARIES
(FORMERLY KNOWN AS KERRISDALE MINING CORPORATION)
 
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
(UNAUDITED)
Three months ended June 30,
2010     2009  
REVENUES $ 15,207,428 $ 11,681,464
 
COST OF GOODS SOLD 10,593,532   8,657,568  
 
GROSS PROFIT 4,613,896   3,023,896  
 
SELLING EXPENSES 823,358 477,777
GENERAL & ADMINISTRATIVE EXPENSES 773,762   365,210  
OPERATING EXPENSES 1,597,120   842,987  
 
INCOME FROM OPERATIONS 3,016,776 2,180,909
 
OTHER INCOME (EXPENSE), NET (57,532 ) 6,635
CHANGE IN FAIR VALUE OF PURCHASE OPTION DERIVATIVE LIABILITY 57,944   -  
 
INCOME BEFORE INCOME TAXES 3,017,188 2,187,544
 
PROVISION FOR INCOME TAXES 864,724   588,383  
 
NET INCOME 2,152,464 1,599,161
 
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustments 99,422   (1,420 )
 
COMPREHENSIVE INCOME $ 2,251,886   $ 1,597,741  
 
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES 12,653,848   7,900,000  
 
BASIC AND DILUTED EARNING PER SHARE $ 0.17   $ 0.20  
 

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