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HANGZHOU, China - China Jo-Jo Drugstores, Inc. (NASDAQ:CJJD), a prominent retailer and distributor of pharmaceutical and healthcare products, today announced a strategic shift toward an asset-light, wholesale-centric business model. This move is intended to streamline operations and improve profitability amid challenging conditions. According to InvestingPro data, the company currently operates with a significant debt burden of $42.17 million and has struggled with profitability, posting negative EBITDA of $5.06 million in the last twelve months.
The restructuring consists of two primary transactions. Firstly, the company will acquire Allright (Hangzhou) Internet Technology Co. Ltd., a rapidly expanding firm in the pharmaceutical wholesale sector, through an equity exchange that will issue 2,225,000 ordinary shares. This deal will give Allright a 38% stake in the post-transaction company. Secondly, Jo-Jo Drugstores will divest its retail drug business to current CEO Lei Liu and director Li Qi. In return, Liu and Qi will forfeit their combined 41% ownership in the company by surrendering 2,548,353 ordinary shares.
These transactions are scheduled to conclude in the first quarter of 2025, pending customary closing conditions and shareholder approval. Upon completion, Liu and Qi are expected to resign from the Board and their executive roles, while Allright’s principal shareholder, Lingtao Kong, will join the Board. Frank Zhao, the current CFO, will step in as interim CEO to oversee business continuity and the incorporation of Allright’s operations. InvestingPro analysis reveals the company’s challenging position, with a weak financial health score of 1.5 and a market capitalization of just $9.82 million. Get access to 13 additional ProTips and comprehensive financial metrics with InvestingPro.
Lei Liu believes the transformation will lead to increased operational efficiency and shareholder value, expressing confidence in the company’s wholesale business prospering under the new leadership. Lingtao Kong echoed this sentiment, looking forward to capitalizing on synergies between Allright’s growth and Jo-Jo Drugstores’ strategic plans. Frank Zhao, accepting the interim CEO position, thanked Liu for his contributions and emphasized the company’s commitment to fortifying its wholesale division and driving long-term success.
This press release, containing forward-looking statements, outlines the company’s expectations for the restructuring’s benefits and the anticipated timing of the transactions’ completion. However, actual results may differ due to various factors, including the company’s ability to finalize the transactions and integrate the businesses effectively. InvestingPro’s Fair Value analysis indicates that CJJD is currently undervalued, though investors should note the stock’s significant volatility and -55.81% return over the past year.
The information in this article is based on a press release statement and does not constitute an endorsement of the company’s claims.
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