China Jo-Jo second quarter revenue increases 27.9% to $15.7 million

Second Quarter Highlights:

• Revenues increased 27.9% to $15.7 million
• Comparable store sales increased 15.8%
• Gross profit rose 26.0% to $4.4 million
• 7 new stores opened bringing year-to-date total to 24 new locations

Second Quarter Results

Second quarter revenue increased 27.9% to $15.7 million compared to $12.3 million in the second quarter of fiscal 2010. Comparable store sales, which the Company defines as sales at stores open for 15 months or more, increased 15.8% for the three months ended September 30, 2010.

Gross profit for the second quarter of fiscal 2011 increased 26.0% to $4.4 million compared to $3.5 million a year ago. Gross margin was 28.1% versus 28.5% in the 2010 period.

Selling expense was $1.2 million in the second quarter of fiscal 2011 versus $0.6 million in the same period of fiscal 2010. The year-over-year increase reflects an additional 24 stores in operation during the quarter, as well as the Company's ongoing efforts to build increased awareness of the China Jo-Jo Drugstores brand.

Second quarter general and administrative expenses were $0.8 million compared to $0.6 million in the year ago period, reflecting additional costs associated with being a U.S.-listed public company and operating additional store locations.

Income from operations in the second quarter of fiscal 2011 totaled $2.4 million versus $2.3 million in the second quarter of fiscal 2010, while operating margin was 15.8% compared to 19.1%, respectively.

Net income for the period was $1.6 million compared to $1.7 million a year ago. Diluted earnings per share were $0.12 compared to $0.21. The decline is primarily attributable to an additional 5.3 million diluted shares outstanding, as well as higher operating expenses, on a year-over-year basis. The increase in diluted share count from 8.2 million in the fiscal 2010 period to 13.5 million in the fiscal 2011 period reflects the issuance of common shares in connection with the Company's April 2010 stock offering.

As of November 10, 2010, the Company had $12.4 million of cash. As of September 30, 2010, the Company had $33.7 million in current assets and total liabilities of $6.8 million that excludes $0.4 million in derivative liabilities.

Dr. Lei Liu, Chairman and CEO, stated, "We are pleased to report continued top line momentum, which reflects strong consumer demand for the China Jo-Jo concept, as well as the ongoing execution of our new store opening strategy, which calls for a total of 60 locations in operation by March 2011."

Dr. Liu continued, "We believe there is a substantial opportunity to utilize our operating expertise and leverage our strong brand recognition in Zhejiang province to expand the China Jo-Jo Drugstores concept and further extend our geographic reach. We are taking a prudent approach to expansion, investing only in real estate opportunities that meet our strict demographic and ROI criteria. Looking further ahead, we plan to continue our aggressive store opening pace, utilizing the proceeds from our recent public offering and cash flow from operations to fund our anticipated growth."

"As we approach the balance of the year - seasonally our strongest period - we believe the Company is well-positioned to meet the needs of our customers. We're providing a compelling mix of prescription and over-the-counter drugs, traditional Chinese medicine, sundries, nutritional supplements and medical devices. Additionally, China Jo-Jo Drugstores provides access to physicians on-site at all of our locations to enhance the customer experience. We believe the breadth and quality of our product offerings, combined with the personalized customer service we provide, is unmatched in the industry."

New Store Openings

During the second quarter of 2010, the Company opened 7 new stores, bringing the year-to-date total to 24 new locations. As of November 12, 2010, China Jo-Jo Drugstores had 49 stores in operation. The Company remains on track with its plan to have 60 locations open by the close of its 2011 fiscal year ending March 31, 2011.

Six Month Results

Revenue for the six months ended September 30, 2010 increased 29.0% to $30.9 million compared to $23.9 million in the year ago period. Comparable store sales, which the Company defines as sales at stores open for 15 months or more, increased 15.3% for the six months ended September 30, 2010.

Gross profit for the six month period increased 38.3% to $9.0 million compared to $6.5 million a year ago. Gross margin improved 200 basis points to 29.2% versus 27.2% in the fiscal 2010 period.

Selling expense was $2.0 million for the six months ended September 30, 2010 versus $1.1 million in the year ago period. The increase reflects an additional 24 stores in operation during the quarter, as well as our ongoing efforts to build increased awareness of the China Jo-Jo Drugstores brand.

General and administrative expenses for the six month period were $1.5 million compared to $0.9 million in first six months of fiscal 2010, as a result of costs associated with being a U.S.-listed public company and operating additional store locations.

Income from operations in the fiscal 2011 period totaled $5.4 million versus $4.5 million in the first six months of fiscal 2010, while operating margin was 17.8% compared to 18.9%, respectively.

Net income for the fiscal 2011 six month period was $3.8 million compared to $3.3 million a year ago. Diluted earnings per share were $0.29 compared to $0.41. The decline is primarily attributable to an additional 5.0 million diluted shares outstanding, as well as higher operating expenses on a year-over-year basis. The increase in diluted share count from 8.1 million in the fiscal 2010 period to 13.1 million in the fiscal 2011 period reflects the issuance of common shares in connection with the Company's April 2010 stock offering.