UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~ September 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to ___________________

Commission File Number: 001-34711

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.)

Hai Wai Hai Tongxin Mansion Floor 6 Gong Shu District, Hangzhou City Zhejiang Province P. R. China		310008
(Address of principal executive offices)		(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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, $0.001 par value		CJJD		NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-accelerated filer	þ	Smaller reporting company	þ
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No þ

As of ~~August~~November 1312, 2020, the registrant ~~had~~ had 37,961,790 shares of common stock outstanding.

TABLE OF CONTENTS

TO QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED ~~JUNE~~ September 30, 2020

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Unaudited condensed consolidated balance sheets as of June 30, 2020 and March 31, 2020	1
	Unaudited condensed consolidated balance sheets as of September 30, 2020 and March 31, 2020	1
	Unaudited condensed consolidated statements of operations and comprehensive income (loss) for the three months ended June 30, 2020 and 2019	2
	Unaudited condensed consolidated statements of operations and comprehensive income (loss) for the three and six months ended September 30, 2020 and 2019	2
	Unaudited condensed consolidated statements of changes in stockholders’ equity for the three months ended June 30, 2020 and 2019	3
	Unaudited condensed consolidated statements of changes in stockholders’ equity for the three and six months ended September 30, 2020 and 2019	3
	Unaudited condensed consolidated statements of cash flows for the three months ended June 30, 2020 and 2019	4
	Unaudited condensed consolidated statements of cash flows for the six months ended September 30, 2020 and 2019	4
	Notes to unaudited condensed consolidated financial statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3843
Item 4.	Controls and Procedures	4144
PART II	OTHER INFORMATION
Item 6.	Exhibits	4245
Signatures		4346

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

All statements contained in this Quarterly Report on Form 10-Q (“Form 10-Q”) for the registrant, other than statements of historical facts, that address future activities, events or developments are forward-looking statements, including, but not limited to, statements containing the words “believe,” “anticipate,” “expect” and words of similar import. These statements are based on certain assumptions and analyses made by us in light of our experience and our assessment of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. However, whether actual results will conform to the expectations and predictions of management is subject to a number of risks and uncertainties that may cause actual results to differ materially.

Such risks include, among others, the following: national and local general economic and market conditions: our ability to sustain, manage or forecast our growth; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other factors referenced in this and previous filings.

Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by management will be realized or, even if substantially realized, that they will have the expected consequences to or effects on our business operations.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	June 30,			March 31,
	September 30,			March 31,
	2020			2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1821,~~477~~646,~~212~~487		$	16,176,318
Restricted cash		1513,~~095~~722,~~116~~479			14,806,288
Financial assets available for sale		~~157~~163,~~644~~818			157,159
Notes receivable		2873,~~290~~494			57,005
Trade accounts receivable		89,~~984~~992,~~595~~142			9,770,656
Inventories		1113,~~141~~227,~~411~~559			12,247,004
Other receivables, net		5,~~599~~225,~~565~~418			5,069,442
Advances to suppliers		21,~~237~~929,~~720~~273			1,174,800
Other current assets		1,~~835~~833,~~927~~208			1,528,540
Total current assets		6367,~~557~~813,~~480~~878			60,987,212
PROPERTY AND EQUIPMENT, net		76,~~095~~768,~~690~~478			7,633,740
OTHER ASSETS
Long-term investment		34,~~963~~115,~~758~~839			2,544,451
Farmland assets		~~752~~789,~~257~~638			742,347
Long term deposits		1,~~447~~533,~~547~~640			1,456,384
Other noncurrent assets		1,~~049~~077,~~184~~100			1,046,763
Operating lease right-of-use assets		19,~~351~~946,~~247~~821			21,711,376
Intangible assets, net		3,~~358~~440,~~407~~046			3,393,960
Total other assets		2930,~~922~~903,~~400~~084			30,895,281
Total assets	$	~~100~~105,~~575~~485,~~570~~440		$	99,516,233
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Short-term bank loan	$	2,~~121~~204,~~720~~820			1,410,130
Accounts payable, trade		1624,~~107~~904,~~594~~087			21,559,494
Notes payable		2623,~~715~~327,~~374~~972			26,605,971
Other payables		21,~~176~~888,~~992~~563			2,522,330
Other payables - related parties		~~491~~574,~~300~~103			490,218
Customer deposits		~~795~~1,~~903~~262,520			708,140
Taxes payable		~~328~~245,~~237~~203			119,247
Accrued liabilities		~~672~~653,~~469~~409			753,612
Long-term loan payable-current portion		2,~~300~~375,~~271~~729			2,287,742
Current portion of operating lease liabilities		~~466~~1,~~213~~056,181			981,090
Total current liabilities		5258,~~176~~492,~~073~~587			57,437,974
Long-term loan payable		3,~~551~~089,~~507~~373			4,115,958
Long-term operating lease liabilities		16,~~917~~500,~~159~~499			19,049,575
Employee Deposits		14,~~145~~699			70,507
Purchase option and warrants liability		6836,~~980~~306			64,090
Total liabilities		7278,~~727~~133,~~864~~464			80,738,104
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Common stock; $0.001 par value; 250,000,000 shares authorized; 37,961,790 and 32,936,786 shares issued and outstanding as of June 30, 2020 and March 31, 2020		37,962			32,937
Common stock; $0.001 par value; 250,000,000 shares authorized; 37,961,790 and 32,936,786 shares issued and outstanding as of September 30, 2020 and March 31, 2020, respectively		37,962			32,937
Preferred stock; $0.001 par value; 10,000,000 shares authorized; nil issued and outstanding as of June 30 and March 31, 2020		-			-
Preferred stock; $0.001 par value; 10,000,000 shares authorized; nil issued and outstanding as of September 30 and March 31, 2020, respectively		-			-
Additional paid-in capital		63,568,876			54,209,301
Statutory reserves		1,309,109			1,309,109
Accumulated deficit		(3638,~~632~~126,~~346~~065	)		(36,400,837	)
Accumulated other comprehensive income		12,~~533~~565,~~993~~454			1,440,424
Total stockholders’ equity		29,~~817~~355,~~594~~336			20,590,934
Noncontrolling interests		(12,~~969~~003,~~888~~360	)		(1,812,805	)
Total equity		27,~~847~~351,~~706~~976			18,778,129
Total liabilities and stockholders’ equity	$	~~100~~105,~~575~~485,~~570~~440		$	99,516,233

The accompanying notes are an integral part of these condensed consolidated financial statements.

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

	For the three months ended June 30,
	For the three months ended September 30,						For the six months ended September 30,
	2020			2019			2020			2019
REVENUES, NET	$	3130,~~054~~842,~~312~~545		$	2528,~~280~~353,~~784~~779		$	61,896,857		$	53,634,563
COST OF GOODS SOLD		23,~~074~~829,~~093~~793			1921,~~219~~660,~~346~~415			46,903,886			40,879,761
GROSS PROFIT		7,~~980~~012,~~219~~752			6,~~061~~693,~~438~~364			14,992,971			12,754,802
SELLING EXPENSES		6,~~272~~475,~~407~~512			56,~~968~~485,~~551~~848			12,747,919			12,454,399
GENERAL AND ADMINISTRATIVE EXPENSES		2,~~120~~061,~~166~~559			21,~~851~~823,~~612~~935			4,181,725			4,675,547
TOTAL OPERATING EXPENSES		8,~~392~~537,~~573~~071			8,~~820~~309,~~163~~783			16,929,644			17,129,946
LOSS FROM OPERATIONS		(~~412~~1,~~354~~524,319	)		(21,~~758~~616,~~725~~419	)		(1,936,673	)		(4,375,144	)
OTHER INCOME (EXPENSE):
INTEREST INCOME		~~163~~187,~~588~~667			47340,~~873~~514			351,255			388,387
INTEREST EXPENSE		(~~127~~117,~~387~~692	)		-			(245,079	)		-
OTHER		50(124,~~021~~496	)		(6272,~~485~~225	)		(74,475	)		(134,710	)
CHANGE IN FAIR VALUE OF PURCHASE OPTION AND WARRANTS LIABILITY		(4,890	)		403,555
CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITIES		32,674			6,865			27,784			410,420
LOSS BEFORE INCOME TAXES		(~~331~~1,~~022~~546,166	)		(21,~~369~~341,~~782~~265	)		(1,877,188	)		(3,711,047	)
PROVISION FOR INCOME TAXES		57(18,~~570~~975	)		85,~~388~~702			38,595			14,090
NET LOSS		(~~388~~1,~~592~~527,191	)		(21,~~378~~346,~~170~~967	)		(1,915,783	)		(3,725,137	)
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST		(~~157~~33,~~083~~472	)		(~~243~~122,~~219~~004	)		(190,555	)		(365,223	)
NET LOSS ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES, INC.		(~~231~~1,~~509~~493,719	)		(21,~~134~~224,~~951~~963	)		(1,725,228	)		(3,359,914	)
OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustments		1,031,461			(536,335	)		1,125,030			(941,573	)
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS		93,569			(405,238	)
COMPREHENSIVE LOSS	$	(495,730	)	$	(1,883,302	)	$	(790,753	)	$	(4,666,710	)
COMPREHENSIVE LOSS		(295,023	)		(2,783,408	)
WEIGHTED AVERAGE NUMBER OF SHARES:
WEIGHTED AVERAGE NUMBER OF SHARES:
Basic		37,961,790			32,936,786			36,232,144			32,696,348
Basic		34,428,271			32,453,269
Diluted		37,961,790			32,936,786			36,232,144			32,696,348
Diluted		34,428,271			32,453,269
EARNINGS PER SHARES:
LOSS PER SHARES:
Basic	$	(0.04	)	$	(0.04	)	$	(0.05	)	$	(0.10	)
Basic	$	(0.01	)	$	(0.07	)
Diluted	$	(0.04	)	$	(0.04	)	$	(0.05	)	$	(0.10	)
Diluted	$	(0.01	)	$	(0.07	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

												Accumulated
	Common Stock				Additional		Retained Earnings					other			Non-
	Number of				Paid-in		Statutory		Accumulated			comprehensive			controlling
	shares		Amount		capital		reserves		deficit			income/(loss)			interest			Total
BALANCE, March 31, 2019.		28,936,778		28,937		44,905,664		1,309,109		(30,587,468	)		2,508,964			(1,194,039	)		16,971,167
Stock based compensation		-		-		34,560		-		-			-			-			34,560
Sale of stock and warrants		4,000,008		4,000		9,269,077		-		-			-			-			9,273,077
Net loss		-		-		-		-		(2,134,951	)		-			(243,219	)		(2,378,170	)
Foreign currency translation loss		-		-		-		-		-			(403,620	)					(403,620	)
BALANCE, June 30, 2019.		32,936,786		32,937		54,209,301		1,309,109		(32,722,419	)		2,105,344			(1,437,258	)		23,497,014
Net loss		-		-		-		-		(1,224,963	)		-			(122,004	)		(1,346,967	)
Foreign currency translation loss		-		-		-		-		-			(526,630	)		-			(526,630	)
BALANCE, September 30, 2019.		32,936,786		32,937		54,209,301		1,309,109		(33,947,382	)		1,578,714			(1,559,262	)		21,623,417
BALANCE, March 31, 2020.		32,936,786		32,937		54,209,301		1,309,109		(36,400,837	)		1,440,424			(1,812,805	)		18,778,129
Exercise of warrants		25,000		25		77,475		-		-			-			-			77,500
Sale of stock and warrants		5,000,004		5,000		9,282,100		-		-			-			-			9,287,100
Net loss		-		-		-		-		(231,509	)		-			(157,083	)		(388,592	)
Foreign currency translation loss		-		-		-		-		-			93,569						93,569
BALANCE, June 30, 2020.		37,961,790		37,962		63,568,876		1,309,109		(36,632,346	)		1,533,993			(1,969,888	)		27,847,706
Net loss		-		-		-		-		(1,493,719	)		-			(33,472	)		(1,527,191	)
Foreign currency translation loss		-		-		-		-		-			1,031,461			-			1,031,461
BALANCE, September 30, 2020.		37,961,790		37,962		63,568,876		1,309,109		(38,126,065	)		2,565,454			(2,003,360	)		27,351,976

The accompanying notes are an integral part of these condensed consolidated financial statements.

CHINA JO-JO DRUGSTORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the three months ended June 30,
	For the six months ended September 30,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(~~388~~1,~~592~~915,783	)	$	(23,~~378~~725,~~170~~137	)
Adjustments to reconcile net income to net cash provided by operating activities:
Bad debt direct write-off and provision		18(286,~~320~~076	)		~~758~~767,~~231~~250
Depreciation and amortization		~~760~~1,~~540~~258,156			~~499~~1,~~175~~051,907
Stock based compensation		-			34,560
Change in fair value of purchase option derivative liability		4(27,~~890~~784	)		(~~403~~410,~~555~~420	)
Accounts receivable, trade		444,672			(959,680	)
Changes in operating assets and liabilities：
Notes receivable		28,824			81,326
Accounts receivable, trade		41,724			555,289
Inventories and biological assets		1,140,697			2,851,652
Notes receivable		(13,675	)		92,655
Other receivables		(293,466	)		371,054
Inventories and biological assets		(448,573	)		975,170
Advances to suppliers		(952,166	)		242,652
Other receivables		279,650			(206,247	)
Other current assets		(583,285	)		(450,042	)
Advances to suppliers		(531,255	)		(106,790	)
Long term deposit		13,299			58,630
Other current assets		(853,289	)		(1,031,185	)
Other noncurrent assets		806			(8,631	)
Long term deposit		(15,106	)		682,504
Accounts payable, trade		(5,505,493	)		(8,968,168	)
Other noncurrent assets		13,619			13,791
Other payables and accrued liabilities		(435,365	)		(105,522	)
Accounts payable, trade		2,362,338			1,938,015
Customer deposits		85,379			116,398
Other payables and accrued liabilities		(845,411	)		(568,457	)
Taxes payable		182,583			95,326
Customer deposits		509,549			744,912
Net cash used in operating activities		(5,478,357	)		(8,164,764	)
Taxes payable		123,082			165,692
Net cash used in/provided by operating activities		(348,834	)		973,509
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposal of financial assets available for sale		-			14,~~658~~457
Acquisition of equipment		(1033,~~536~~968	)		(~~210~~374,~~356~~992	)
Increase in intangible assets		(19,474	)		(433,111	)
Purchases of intangible assets		(55,038	)		(462,266	)
Investment in a joint venture		(1,~~408~~422,~~155~~193	)		-
Additions to leasehold improvements		(~~159~~246,~~272~~846	)		(~~542~~622,~~734~~464	)
Net cash used in investing activities		(1,~~597~~758,~~437~~045	)		(1,~~171~~445,~~543~~265	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term bank loan		~~705~~714,~~585~~160			-682,692
Repayment of third parties loan		(570,338	)		-
Repayment of third parties’ loan		(1,175,725	)		-
Proceeds from notes payable		1422,~~392~~668,~~242~~388			1521,~~372~~745,~~260~~277
Repayment of notes payable		(1426,~~364~~949,~~978~~176	)		(1624,~~167~~862,~~012~~363	)
Decrease in Employee Deposits		(5657,~~447~~133	)		-
Exercise of warrants		77,500			-
Proceeds from equity financing		9,~~287~~205,~~100~~173			9,273,077
Repayment of other payables-related parties		-68,994			(~~460~~458,~~000~~002	)
Net cash provided by financing activities		94,~~470~~552,~~664~~181			86,~~018~~380,~~325~~681
EFFECT OF EXCHANGE RATE ON CASH		~~194~~1,~~852~~941,058			(~~277~~1,~~067~~368,958	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		2,589,722			(1,595,049	)
INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		4,386,360			4,539,967
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period		30,982,606			24,745,202
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, end of period	$	3335,~~572~~368,~~328~~966		$	2329,~~150~~285,~~153~~169
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest		~~127~~247,~~387~~371			-
Cash paid for income taxes	$	-3,457		$	2928,~~176~~777

The accompanying notes are an integral part of these condensed consolidated financial statements.

Note 1 – DESCRIPTION OF BUSINESS AND ORGANIZATION

China Jo-Jo Drugstores, Inc. (“Jo-Jo Drugstores” or the “Company”), was incorporated in Nevada on December 19, 2006, originally under the name “Kerrisdale Mining Corporation”. On September 24, 2009, the Company changed its name to “China Jo-Jo Drugstores, Inc.” in connection with a share exchange transaction as described below.

On September 17, 2009, the Company completed a share exchange transaction with Renovation Investment (Hong Kong) Co., Ltd. (“Renovation”), whereby 7,900,000 shares of common stock were issued to the stockholders of Renovation in exchange for 100% of the capital stock of Renovation. The completion of the share exchange transaction resulted in a change of control. The share exchange transaction was accounted for as a reverse acquisition and recapitalization and, as a result, the consolidated financial statements of the Company (the legal acquirer) are, in substance, those of Renovation (the accounting acquirer), with the assets and liabilities, and revenues and expenses, of the Company being included effective from the date of the share exchange transaction. Renovation has no substantive operations of its own except for its holdings of Zhejiang Jiuxin Investment Management Co., Ltd. (“Jiuxin Management”), Zhejiang Shouantang Medical Technology Co., Ltd. (“Shouantang Technology”) and Hangzhou Jiutong Medical Technology Co., Ltd (“Jiutong Medical”), Hangzhou Jiuyi Medical Technology Co. Ltd. (“Jiuyi Technology”), its wholly-owned subsidiaries.

The Company is an online and offline retailer and wholesale distributor of pharmaceutical and other healthcare products in the People’s Republic of China (“China” or the “PRC”). The Company’s offline retail business is comprised primarily of pharmacies, which are operated by Hangzhou Jiuzhou Grand Pharmacy Chain Co., Ltd. (“Jiuzhou Pharmacy”), a company that the Company controls through contractual arrangements. On March 31, 2017, Jiuxin Management established a subsidiary, Lin’An Jiuzhou Pharmacy Co., Ltd (“Lin’An Jiuzhou”) to ~~operates~~operate drugstores in Lin’an City.

On January 9, 2020, in order to ~~continue~~ continue expanding and strengthening its local drugstore network, the Company acquired a local drugstores chain with ten stores at a price of $0.14 (RMB 1). The acquired chain agreed to cease their stores’ business and liquidate all of the stores ‘accounts after Jiuzhou Pharmacy acquired them. In March 2020, the chain was dissolved and its government insurance reimbursement certificates have been transferred to Jiuzhou Pharmacy.

The Company’s offline retail business also includes four medical clinics through Hangzhou Jiuzhou Clinic of Integrated Traditional and Western Medicine (“Jiuzhou Clinic”) and Hangzhou Jiuzhou Medical and Public Health Service Co., Ltd. (“Jiuzhou Service”), both of which are also controlled by the Company through contractual arrangements. In May 2014, Shouantang Technology established Hangzhou Shouantang Bio-technology Co., Ltd. (“Shouantang Bio”). In May 2016, Shouantang Bio set up and held 49% of Hangzhou Kahamadi Bio-technology Co., Ltd.(“Kahamadi Bio”), a joint venture specializing in brand name development for nutritional supplements. In 2018, Jiuzhou Pharmacy invested a total of $741,540 (RMB5,100,000) in and held 51% of Zhejiang Jiuzhou Linjia Medical Investment and Management Co. Ltd (“Linjia Medical”), which operates two new clinics in Hangzhou as of March 31, 2020. On March 29, 2019, Jiuzhou Pharmacy formed and currently holds 51% of the equity of Zhejiang AyiGe Medical Health Management Co., Ltd. (“Ayi Health”), which is intended to provide technical support such as IT and customer support to our health management business in the future.

The Company currently conducts its online retail pharmacy business through Jiuzhou Pharmacy, which holds the Company’s online pharmacy license. On September 10, 2015, Renovation set up Jiuyi Technology to provide additional technical support such as webpage development to our online pharmacy business. In November 2015, the technical support function was transferred back to Jiuzhou Pharmacy, which hosts our online pharmacy.

The Company’s wholesale business is primarily conducted through Zhejiang Jiuxin Medicine Co., Ltd. (“Jiuxin Medicine”), which is licensed to distribute prescription and non-prescription pharmaceutical products throughout China. Jiuzhou Pharmacy acquired Jiuxin Medicine on August 25, 2011. On April 20, 2018, 10% of Jiuxin Medicine shares were sold to Hangzhou Kangzhou Biotech Co. Ltd. for a total proceeds of of $79,625 (RMB 507,760).

The Company’s herb farming business is conducted by Hangzhou Qianhong Agriculture Development Co., Ltd. (“Qianhong Agriculture”), a wholly-owned subsidiary of Jiuxin Management. Due to the complexity of the cultivation business, Qianhong Agriculture has not grown herbs in the ~~three months~~six months ended ~~June~~September 30, 2020.

The accompanying ~~consolidated~~condensed ~~financial~~consolidated financial statements reflect the activities of the Company and each of the following entities:

Entity Name	Background	Ownership
Renovation	● 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 $1423.5 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%
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)
Jiuxin Medicine	● Established in PRC on December 31, 2003 ● Acquired by Jiuzhou Pharmacy in August 2011 ● 10% of shares sold On April 20, 2018 ● 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)
Jiutong Medical	● Established in the PRC on December 20, 2011 by Renovation ● Registered capital of $2.6 million fully paid ● Currently has no operation	100%

Entity Name	Background	Ownership
Shouantang Bio	● Established in the PRC in October, 2014 by Shouantang Technology ● 100% held by Shouantang Technology ● Registered capital of RMB 1,000,000 fully paid ● Sells nutritional supplements under its own brand name	100%
Jiuyi Technology	● Established in the PRC on September 10, 2015 ● 100% held by Renovation ● Technical support to online pharmacy	100%
Kahamadi Bio	● Established in the PRC in May 2016 ● 49% held by Shouantang Bio ● Registered capital of RMB 10 million ● Develop brand name for nutritional supplements	49%
Lin’An Jiuzhou	● Established in the PRC in March 31, 2017 ● 100% held by Jiuxin Management ● Registered capital of RMB 5 million ● Explore retail pharmacy market in Lin’An City	100%
Linjia Medical	● Established in the PRC in September27, 2017 ● 51% held by Jiuzhou Pharmacy ● Registered capital of RMB 20 million ● Operates local clinics	VIE by contractual arrangements as a controlled subsidiary of Jiuzhou Pharmacy (2)
Ayi Health	● Established in the PRC in March 29, 2019 ● 51% held by Jiuzhou Pharmacy ● Registered capital of RMB 10 million ● Provide technical Support for medial service	VIE by contractual arrangements as a controlled subsidiary of Jiuzhou Pharmacy (2)

(1)

Jiuzhou Pharmacy, Jiuzhou Clinic and Jiuzhou Service had been under the common control of Mr. Lei Liu and Ms. Li Qi, the three shareholders (the “Owners”) since their respective establishment dates, pursuant to agreements among the Owners to vote their interests in concert as memorialized in a voting rights agreement. Based on such voting agreement, the Company has determined that common control exists among these three companies. The Owners have operated these three companies in conjunction with one another since each company’s respective establishment date. Jiuxin Medicine is also deemed under the common control of the Owners as a subsidiary of Jiuzhou Pharmacy.

(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: a consulting services agreement, operating agreement, equity pledge agreement, voting rights agreement and option agreement. Because such agreements 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 each of the three companies (as well as 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 under the control of Jiuzhou Pharmacy, Jiuxin Medicine and Shouantang Bio are consolidated into the financial statements of the Company.

Note 2 – LIQUIDITY

The Company’s accounts have been prepared in accordance with the accounting principles generally accepted in the United States of America (“US GAAP”) on a going concern basis. The going concern basis assumes that assets are realized and liabilities are extinguished in the ordinary course of business at amounts disclosed in the financial statements. The Company’s ability to continue as a going concern depends upon aligning its sources of funding (debt and equity) with its expenditure requirements and repayment of the short-term debts as and when they become due.

The drug retail business is a highly competitive industry in the PRC. Several large drugstore chains and a variety of single stores operate in Hangzhou City and Zhejiang Province. In order to increase the Company’s competitive advantages and gain more local retail pharmacy market share, from fiscal year 2018, we opened fifty-nine new stores in Hangzhou. As a result, the Company incurred significant incremental expense related to rental, labor hiring and training, and marketing activities. As the retail pharmaceutical market becomes more competitive in recent years, a new store usually cannot make profit in its operation until a year later. In fact, the Company incurred significant expenses with limited incremental revenue in the period it opened new stores. At their openings, except for four stores, almost all of the new stores were without government insurance reimbursement certificates. In fact, it usually takes more than one year for a new store to apply for and obtain the local government insurance reimbursement certificate. As of ~~June~~September 30, 2020, the Company had ~~obtained~~ obtained forty-seven reimbursement certificates for stores opened in fiscal 2018 and thereafter. Historically in a mature store, more than half of the total revenue were collected from the individual customers’ government insurance program. The Company is in the process of actively applying certificates for all of its new stores. In the future, as more and more stores obtain certificates, the Company expect its new store revenue to increase and eventually contribute positive operating cash flow.

The Company’s principal sources of liquidity consist of existing cash, equity financing, and bank facilities from local banks as well as personal loans from its principal shareholders if necessary. On April 15, 2019, the Company closed a registered direct offering of 4,000,008 shares of common stock at $2.50 per share with gross proceeds of $10,000,020 from its effective shelf registration statement on Form S-3 pursuant to a Securities Purchase Agreement dated April 11, 2019 (the “2019 Securities Purchase Agreement”), by and among the Company and the investors named therein. On June 3, 2020, the Company closed a registered direct offering of 5,000,004 shares of common stock at $2.00 per share with gross proceeds of $10,000,008 from its effective shelf registration statement on Form S-3 pursuant to a Securities Purchase Agreement dated June 1, 2020 (the “2020 Securities Purchase Agreement”), by and among the Company and the investors named therein.

The Company has a credit line agreement from a local bank as displayed in detail in Note 16. As of ~~June~~September 30, 2020, approximately $03.7411 million of the aforementioned ~~bank~~ bank credit line was available for further borrowing. Additionally, Jiuzhou Pharmacy obtained a credit line of approximately $7,175,000 (RMB50,000,000) from Haihui Commercial Factoring (Tianjin) Co. Ltd. (“Haihui Commercial”) for three years beginning July 26, 2019. As of ~~June~~September 30, 2020, the full amount has been borrowed from Haihui Commercial. Any borrowing thereunder is ~~guaranteed~~ guaranteed by a third-party guarantor company, and secured by the Company’s assets pursuant to a collateral agreement, as well as personal guarantees of some of its principal shareholders.

The Company has also obtained additional government insurance reimbursement certificates for its stores opened in the last two years. As the sales reimbursed from the government account for more than half of sales in a mature store, the certificates may significantly increase the sales of these stores in the next 12 months. Additionally, with the proceeds from the registered direct financing closed on April 15, 2019 and June 3, 2020, and increased credit line, the Company believes it can support its operations for at least the next 12 months.

Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and consolidation

The accompanying condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The consolidated financial statements include the financial statements of the Company, its wholly-owned subsidiaries and VIEs. All significant inter-company transactions and balances between the Company, its subsidiaries and VIEs are eliminated upon consolidation.

Consolidation of variable interest entities

In accordance with accounting standards regarding consolidation of variable interest entities, VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. All VIEs with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.

The Company has concluded, based on the contractual arrangements, that Jiuzhou Pharmacy (including its subsidiaries and controlled entities), Jiuzhou Clinic and Jiuzhou Service are each a VIE and that the Company’s wholly-owned subsidiary, Jiuxin Management, absorbs a majority of the risk of loss from the activities of these companies, thereby enabling the Company, through Jiuxin Management, to receive a majority of their respective expected residual returns.

Control and common control are defined under the accounting standards as “an individual, enterprise, or immediate family members who hold more than 50 percent of the voting ownership interest of each entity.” Because the Owners collectively own 100% of Jiuzhou Pharmacy, Jiuzhou Clinic and Jiuzhou Service, and have agreed to vote their interests in concert since the establishment of each of these three companies as memorialized in the voting rights agreement, the Company believes that the Owners collectively have control and common control of the three companies. Accordingly, the Company believes that Jiuzhou Pharmacy, Jiuzhou Clinic and Jiuzhou Service were constructively held under common control by Jiuxin Management as of the time the Contractual Agreements were entered into, establishing Jiuxin Management as their primary beneficiary. Jiuxin Management, in turn, is owned by Renovation, which is owned by the Company.

Risks and Uncertainties

The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed in Note 1, this may not be indicative of future results.

The Company has significant cash deposits with suppliers in order to obtain and maintain inventory. The Company’s ability to obtain products and maintain inventory at existing and new locations is dependent upon its ability to post and maintain significant cash deposits with its suppliers. In the PRC, many vendors are unwilling to extend credit terms for product sales that require cash deposits to be made. The Company does not generally receive interest on any of its supplier deposits, and such deposits are subject to loss as a result of the creditworthiness or bankruptcy of the party who holds such funds, as well as the risk from illegal acts such as conversion, fraud, theft or dishonesty associated with the third party. If these circumstances were to arise, the Company would find it difficult or impossible, due to the unpredictability of legal proceedings in China, to recover all or a portion of the amount on deposit with its suppliers.

Members of the current management ~~team~~ team own controlling interests in the Company and are also the Owners of the VIEs in the PRC. The Company only controls the VIEs through contractual arrangements which obligate it to absorb the risk of loss and to receive the residual expected returns. As such, the controlling shareholders of the Company and the VIEs could cancel these agreements or permit them to expire at the end of the agreement terms, as a result of which the Company would not retain control of the VIEs.

Use of estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The significant estimates made in the preparation of the accompanying consolidated financial statements relate to the assessment of the carrying values of accounts receivable, advances to suppliers and related allowance for doubtful accounts, useful lives of property and equipment, inventory reserve and fair value of its purchase option derivative liability. Because of the use of estimates inherent in the financial reporting process, actual results could materially differ from those estimates.

Fair value measurements

The Company establishes a three-level valuation hierarchy of valuation techniques based on observable and unobservable inputs, which may be used to measure fair value and include the following:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement.

The Company’s financial assets ~~and~~ and liabilities, which include financial instruments as defined by FASB ASC 820, include cash, ~~and~~ cash equivalents, and restricted cash, financial assets available for sales, trade accounts receivable, notes receivables, other receivable, accounts payable, ~~notes~~other payable, ~~other~~ notes payable, long-term ~~debt~~loan payable, employee deposits and ~~derivatives~~warrants liability. The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, notes receivables, and accounts payable are a reasonable approximation of fair value due to the short maturities of these instruments (Level 1). The carrying amount of notes payable approximates fair value based on borrowing rates of similar bank loan currently available to the Company (Level 2) (See Note 16). The carrying amount of Long-term loan payable approximates fair value based on borrowing rates of similar bank loan currently available to the Company (Level 2) (See Note 17). The carrying amount of the Company’s ~~derivative~~ derivative instruments is recorded at fair value and is determined based on observable inputs that are corroborated by market data (Level 2) (See Note 21). The carrying amount of the financial assets available for sale is recorded at fair value and is ~~determined~~ determined based on unobservable inputs (Level 3) (See Note 4). The carrying amount of the employee deposits is recorded at fair value and is determined based on unobservable inputs (Level 3) (See Note 22).

	Active Market for Identical Assets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)		Total Carrying Value
(amount in absolute value)	Active Market for Identical Assets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)		Total Carrying Value
Cash, cash equivalents and restricted cash	$	3335,~~572~~368,~~328~~966		-		-	$	3335,~~572~~368,~~328~~966
Financial assets available for sale		-		-		~~157~~163,~~644~~818		~~157~~163,~~644~~818
Account receivable		8,984,595		-		-		8,984,595
Trade accounts receivable		9,992,142		-		-		9,992,142
Notes receivable		2873,~~290~~494		-		-		2873,~~290~~494
Other receivable		5,~~599~~225,~~565~~418		-		-		5,~~599~~225,~~565~~418
Accounts payable		1624,~~107~~904,~~594~~087		-		-		1624,~~107~~904,~~594~~087
Notes payable		-		2623,~~715~~327,~~374~~972		-		2623,~~715~~327,~~374~~972
Other payable		21,~~176~~888,~~992~~563		-		-		21,~~176~~888,~~992~~563
Long-term loan payable		-		53,~~851~~089,~~778~~373		-		53,~~851~~089,~~778~~373
Employee Deposits		-		-		14,~~145~~699		14,~~145~~699
Warrants liability		-		6836,~~980~~306		-		6836,~~980~~306
Total	$	6677,~~469~~452,~~364~~670		3226,~~636~~453,~~132~~651		~~171~~178,~~789~~517	$	99104,~~277~~084,~~285~~838

10Revenue recognition

Effective March 31, 2018, the Company began recognizing revenue under Accounting Standards Codification (“ASC”) Topic 606, Revenue ~~recognition~~from Contracts with Customers (“ASC 606”), using the modified retrospective transition method. The impact of adopting the new revenue standard was not material to the Company’s consolidated financial statements. The core principle of this new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

~~Effective~~● ~~March~~Step ~~31,~~1: ~~2018,~~Identify the ~~Company~~contract ~~began recognizing revenue under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts~~ with ~~Customers (“ASC 606”), using~~ the modified retrospective transition method. The impact of adopting the new revenue standard was not material to the Company’s consolidated financial statements. The core principle of this new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:customer

● Step 1: Identify the contract with the customer

	●	Step 2: Identify the performance obligations in the contract

	●	Step 3: Determine the transaction price

	●	Step 2: Identify the performance obligations in the contract
	●	Step 3: Determine the transaction price

●

Step 4: Allocate the transaction price to the performance obligations in the contract

● Step 45: ~~Allocate~~Recognize ~~the~~revenue ~~transaction~~when ~~price to~~ the ~~performance~~company ~~obligations~~satisfies ina ~~the~~performance ~~contract~~obligation

~~● Step 5: Recognize revenue when the company satisfies a performance obligation~~10

In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:

	●	The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct).

	●	The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

11If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

IfThe atransaction ~~good~~price ~~or service~~ is ~~not~~the ~~distinct,~~amount ~~the~~of ~~good~~consideration orto ~~service~~which isan ~~combined~~entity ~~with~~expects ~~other~~to be entitled in exchange for transferring promised goods or services ~~until~~to a ~~bundle~~customer, excluding amounts collected on behalf of ~~goods~~third parties (for example, some sales taxes). The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or ~~services~~both. Variable consideration is ~~identified~~included in the transaction price only to the extent that it is ~~distinct~~probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The transaction price is ~~the~~allocated ~~amount of consideration~~ to ~~which an entity expects to be entitled in exchange for transferring promised goods or services to a customer,~~each ~~excluding~~performance ~~amounts~~obligation ~~collected~~ on ~~behalf~~a ofrelative ~~third~~standalone ~~parties~~selling ~~(for~~price ~~example, some sales taxes)~~basis. The ~~consideration~~transaction ~~promised~~price inallocated ato ~~contract with~~each aperformance ~~customer may include fixed amounts, variable amounts, or both. Variable consideration~~ obligation is ~~included~~recognized inwhen ~~the transaction price only to the extent~~ that itperformance obligation is ~~probable~~satisfied, ~~that~~at a ~~significant~~point ~~reversal~~ in ~~the~~time ~~amount~~or ofover ~~cumulative~~time ~~revenue~~as ~~recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved~~appropriate.

The ~~transaction~~Company’s ~~price~~revenue is ~~allocated~~net toof ~~each~~value ~~performance~~added ~~obligation~~tax on(“VAT”) acollected ~~relative~~on ~~standalone~~behalf ~~selling~~of ~~price~~the ~~basis.~~PRC ~~The~~tax ~~transaction~~authorities ~~price~~with ~~allocated~~respect to ~~each~~the ~~performance~~sales ~~obligation~~of merchandise. VAT collected isfrom ~~recognized~~customers, ~~when~~net ~~that~~of ~~performance~~VAT ~~obligation~~paid isfor ~~satisfied~~purchases, atis recorded as a ~~point~~liability in ~~time~~the oraccompanying ~~over~~consolidated ~~time~~balance assheets ~~appropriate~~until it is paid to the relevant PRC tax authorities.

~~The~~Certain contract liabilities primarily represent the Company’s ~~revenue~~obligation isto ~~net~~transfer ofadditional ~~value added~~goods ~~tax~~or ~~(“VAT”)~~services ~~collected~~to ona ~~behalf~~customer offor which the ~~PRC~~Company ~~tax~~has ~~authorities~~received consideration, ~~with~~for ~~respect~~example, tomembership ~~the sales of merchandise~~points. ~~VAT~~The ~~collected from~~consideration ~~customers,~~received ~~net~~remains ofa ~~VAT~~contract ~~paid~~liability ~~for~~until ~~purchases,~~goods isor ~~recorded~~services have asbeen aprovided ~~liability~~to in the ~~accompanying~~retail ~~consolidated~~customer. ~~balance~~The ~~sheets~~estimated ~~until it~~amount isbased ~~paid~~on toaccrued ~~the~~membership ~~relevant~~points ~~PRC~~was ~~tax~~deducted ~~authorities~~from sales revenue.

~~Certain~~The ~~contract~~following ~~liabilities~~is ~~primarily represent the Company’s obligation to transfer additional goods or services to~~ a ~~customer~~discussion ~~for~~of ~~which~~ the Company ~~has received~~’s ~~consideration,~~revenue ~~for~~recognition ~~example,~~policies ~~membership~~by ~~points.~~segment ~~The~~under ~~consideration received remains a contract liability until goods or services have been provided to~~ the ~~retail~~new ~~customer.~~revenue ~~The~~recognition ~~estimated~~accounting ~~amount based on accrued membership points was deducted from sales revenue.~~standard:

~~The~~Pharmacy ~~following~~retail ~~is a discussion of the Company’s revenue recognition policies by segment under the new revenue recognition accounting standard:~~sales

~~Pharmacy~~The physical pharmacies sell prescription drugs, over-the-counter (“OTC”) drugs, traditional Chinese medicine, nutritional supplements, medical devices and sundry products. Revenue from sales of prescription medicine at drugstores is recognized when the prescription is filled and the customer picks up and pays for the prescription. Revenue from sales of other merchandise at drugstores is recognized at the point of sale, which is when a customer pays for and receives the merchandise. Usually the majority merchandise, such as prescription and OTC drugs, are not refundable after the customers leave the counter. Returns of other products, such as sundry products, are minimal. Sales of drugs reimbursed by the local government medical insurance agency and receivables from the agency are recognized when a customer pays for the drugs at a store. The Company based on historical experience, a reserve for potential losses from denial of reimbursement on certain unqualified drugs is made to the receivables from the government agency. Additionally, several onsite clinics adjacent to pharmacies provide limited medical services. Revenue from medical services is recognized after the service has been rendered to a customer. As revenue from medical services is minimal compared to pharmacy retail sales, it is included as part of the pharmacy retail sales.

The ~~physical~~Company ~~pharmacies~~deduct ~~sell prescription drugs, over-~~the~~-counter~~ ~~(“OTC”)~~membership ~~drugs, traditional Chinese medicine, nutritional supplements, medical devices and sundry~~rewards ~~products.~~directly ~~Revenue~~ from ~~sales of prescription medicine at drugstores is recognized when~~ the ~~prescription~~retail isrevenue, ~~filled~~ and ~~the~~present ~~customer picks~~such upamounts ~~and~~in ~~pays~~net ~~for the prescription. Revenue from~~ sales ofas ~~other~~opposed ~~merchandise~~to ~~at drugstores is recognized at~~ the ~~point~~current reduction of ~~sale, which~~operation ~~is when a customer pays for and receives the merchandise. Usually the majority merchandise, such as prescription and OTC~~expense ~~drugs, are not refundable after the customers leave the counter~~classification. ~~Returns~~Membership ~~of other products~~rewards, ~~such~~usually asmembership ~~sundry products~~points, are ~~minimal. Sales~~accumulated ~~of drugs reimbursed~~ by ~~the~~customers ~~local~~based ~~government~~on ~~medical~~their ~~insurance~~historical ~~agency and receivables from the agency are recognized when~~spending ~~a customer pays for the drugs at a store~~levels. The Company ~~based~~has ondetermined ~~historical~~that ~~experience,~~there ais ~~reserve~~an ~~for~~additional ~~potential~~performance ~~losses~~obligation ~~from~~to ~~denial of~~those ~~reimbursement~~customers onat ~~certain unqualified drugs is made to~~ the ~~receivables~~time ~~from~~of the ~~government agency~~initial transaction. ~~Additionally,~~The ~~several~~customers ~~onsite clinics~~can ~~adjacent~~then toredeem ~~pharmacies~~these ~~provide~~points ~~limited~~against ~~medical~~the ~~services.~~prices ~~Revenue~~of ~~from~~merchandises ~~medical~~they ~~services~~purchase isin ~~recognized after~~ the ~~service has been rendered to a customer~~future. AsAt ~~revenue~~the end ~~from~~of ~~medical~~each ~~services~~period, isunredeemed ~~minimal~~membership ~~compared~~rewards toare ~~pharmacy~~reflected ~~retail sales, it is included~~ as ~~part of the pharmacy retail sales~~a contract liability.

The Company deduct the membership rewards directly from the retail revenue, and present such amounts in net sales as opposed to the current reduction of operation expense classification. Membership rewards, usually membership points, are accumulated by customers based on their historical spending levels. The Company has determined that there is an additional performance obligation to those customers at the time of the initial transaction. The customers can then redeem these points against the prices of merchandises they purchase in the future. At the end of each period, unredeemed membership rewards are reflected as a contract liability.11

Online pharmacy sales

The online pharmacy segment sells various health products except for prescription drugs. Revenue from online pharmacy sales is recognized when merchandise is shipped to customers. While most deliveries take one day, certain deliveries may take longer depending on a customer’s location. Any loss caused in a shipment will be reimbursed by the Company’s courier company. The Company’s sales policy allows for the return of certain merchandises without reason within seven days after a customer’s receipt of the applicable merchandise. Historically, sales returns seven days after merchandise receipts have been minimal.

Wholesale

Jiuxin Medicine purchases medicine in ~~quantity~~ quantity and distributes products primarily to local pharmacies and medical products dealers. Revenue from sales of merchandise to non-retail customers is recognized when the merchandise is transferred to customers. Historically, sales returns have been minimal.

12Disaggregation of Revenue

~~Disaggregation~~The offollowing ~~Revenue~~tables disaggregate the Company’s revenue by major source in each segment for the three and six months ended September 30, 2020 and 2019:

The following table disaggregates the Company’s revenue by major source in each segment for the three months ended June 30, 2020 and 2019:

For the three months ended September 30	2020		2019
Retail drugstores
Prescription drugs	$	5,982,706	$	6,022,934
OTC drugs		7,617,159		7,463,201
Nutritional supplements		1,664,265		1,676,974
TCM		1,054,378		1,954,500
Sundry products		338,112		290,750
Medical devices		1,273,876		592,914
Total retail revenue	$	17,930,496	$	18,001,273
Online pharmacy
Prescription drugs	$	1,758,516	$	-
OTC drugs		1,983,034		1,126,655
Nutritional supplements		208,062		136,513
TCM		72,349		21,969
Sundry products		411,494		374,457
Medical devices		913,557		691,670
Total online revenue	$	5,347,012	$	2,351,264
Drug wholesale
Prescription drugs	$	5,850,267	$	6,816,035
OTC drugs		1,563,344		1,048,542
Nutritional supplements		27,104		35,048
TCM		78,333		81,130
Sundry products		18,760		5,338
Medical devices		27,229		15,149
Total wholesale revenue	$	7,565,037	$	8,001,242
Total revenue	$	30,842,545	$	28,353,779

For the three months ended June 30	2020		2019
Retail drugstores
Prescription drugs	$	7,406,774	$	5,695,286
OTC drugs		6,818,484		7,240,228
Nutritional supplements		1,347,769		1,231,133
TCM		949,012		1,104,050
Sundry products		422,551		298,198
Medical devices		1,865,884		1,166,093
Total retail revenue	$	18,810,474	$	16,734,988
Online pharmacy
Prescription drugs	$	1,869,643	$	-
OTC drugs		1,322,811		1,024,602
Nutritional supplements		221,031		107,194
TCM		23,199		13,681
Sundry products		546,720		438,736
Medical devices		929,430		859,392
Total online revenue	$	4,912,834	$	2,443,605
Drug wholesale
Prescription drugs	$	5,966,148	$	4,880,491
OTC drugs		915,146		1,074,261
Nutritional supplements		59,841		21,691
TCM		28,967		98,828
Sundry products		2,597		5,682
Medical devices		358,305		21,238
Total wholesale revenue	$	7,331,004	$	6,102,191
Total revenue	$	31,054,312	$	25,280,784

Contract Balances

For the six months ended September 30	2020		2019
Retail drugstores
Prescription drugs	$	13,389,480	$	11,718,220
OTC drugs		14,435,643		14,703,429
Nutritional supplements		3,012,034		2,908,107
TCM		2,003,390		3,058,550
Sundry products		760,663		588,948
Medical devices		3,139,760		1,759,007
Total retail revenue	$	36,740,970	$	34,736,261
Online pharmacy
Prescription drugs	$	3,628,159	$	-
OTC drugs		3,305,845		2,151,257
Nutritional supplements		429,093		243,707
TCM		95,548		35,650
Sundry products		958,214		813,193
Medical devices		1,842,987		1,551,062
Total online revenue	$	10,259,846	$	4,794,869
Drug wholesale
Prescription drugs	$	11,816,415	$	11,696,526
OTC drugs		2,478,490		2,122,803
Nutritional supplements		86,945		56,739
TCM		107,300		179,958
Sundry products		21,357		11,020
Medical devices		385,534		36,387
Total wholesale revenue	$	14,896,041	$	14,103,433
Total revenue	$	61,896,857	$	53,634,563

Contract liabilities primarily represent the Company’s obligation to transfer additional goods or services to a customer for which the Company has received consideration, for example membership points and membership rewards. The consideration received remains a contract liability until goods or services have been provided to the retail customer.Balances

~~The~~Contract ~~following~~liabilities ~~table~~primarily ~~provides~~represent the ~~information~~Company’s obligation to transfer additional goods or services to a customer for which the Company has received consideration, ~~about~~for ~~receivables~~example membership points and membership rewards. The consideration received remains a contract ~~liabilities~~liability ~~from~~until ~~contracts~~goods ~~with~~or ~~customers:~~services have been provided to the retail customer.

	June 30, 2020		March 31, 2020
Trade receivable(included in accounts receivable, net)	$	8,984,595	$	9,770,656
Contract liabilities (included in accrued expenses)		1,112,508		1,106,982

The following table provides information about receivables and contract liabilities from contracts with customers:

	September 30, 2020		March 31, 2020
Trade receivable (included in accounts receivable, net)	$	9,992,142	$	9,770,656
Contract liabilities (included in accrued expenses)		1,546,126		1,106,982

Restricted cash

The Company’s restricted cash consists of cash and long-term deposits in a bank as security for its notes payable. The Company has notes payable outstanding with the bank and is required to keep certain amounts on deposit that are subject to withdrawal restrictions. The notes payable are generally short term in nature due to their short maturity period of six to nine months; thus, restricted cash is classified as a current asset.

The following represents a reconciliation of cash and cash equivalents in the Consolidated Condensed Balance Sheets to total cash, cash equivalents and restricted cash in the Consolidated Condensed Statements of Cash Flows as of June 30, 2020 and March 31, 2020:13

	June 30, 2020		March 31, 2020
Cash and cash equivalents	$	18,477,212	$	16,176,318
Restricted cash		15,095,116		14,806,288
Cash, cash equivalents and restricted cash	$	33,572,328	$	30,982,606

Accounts receivable

	September 30, 2020		March 31, 2020
Cash and cash equivalents	$	21,646,487	$	16,176,318
Restricted cash		13,722,479		14,806,288
Cash, cash equivalents and restricted cash	$	35,368,966	$	30,982,606

Accounts receivable represents the following: (1) amounts due from banks relating to retail sales that are paid or settled by the customers’ debit or credit cards, (2) amounts due from government social security bureaus and commercial health insurance programs relating to retail sales of drugs, prescription medicine, and medical services that are paid or settled by the customers’ medical insurance cards, (3) amounts due from non-bank third party payment instruments such as Alipay and certain e-commerce platforms and (4) amounts due from non-retail customers for sales of merchandise.

Accounts receivable ~~are~~represents ~~recorded~~the ~~at net~~following: ~~realizable~~(1) ~~value~~amounts ~~consisting~~due offrom ~~the~~banks ~~carrying~~relating ~~amount~~to ~~less~~retail ansales ~~allowance~~that ~~for~~are ~~uncollectible~~paid ~~accounts,~~or ~~as necessary.~~settled Inby the ~~Company~~customers’~~s retail~~ ~~business,~~debit ~~accounts~~or ~~receivable~~credit ~~mainly~~cards, ~~consist~~(2) amounts ~~of reimbursements~~ due from ~~the~~ government ~~insurance~~social security bureaus and commercial health insurance programs ~~and~~relating ~~are~~to ~~usually~~retail ~~collected~~sales ~~within~~of ~~two~~drugs, prescription ormedicine, ~~three~~and ~~months.~~medical ~~The~~services ~~Company~~that ~~directly~~are ~~writes~~paid ~~off~~or ~~delinquent~~settled ~~account balances,~~by ~~which~~the itcustomers’ ~~determines~~medical toinsurance becards, ~~uncollectible~~(3) ~~after~~amounts due ~~confirming~~from ~~with~~non-bank ~~the~~third ~~appropriate~~party ~~bureau~~payment orinstruments ~~program~~such ~~each~~as ~~month.~~Alipay ~~Additionally, the~~and ~~Company~~certain ~~also~~e-commerce ~~makes~~platforms ~~estimated~~and ~~reserves~~(4) onamounts ~~related~~due ~~outstanding~~from ~~accounts~~non-retail customers ~~receivable~~for ~~based~~sales onof ~~historical trends~~merchandise.

InAccounts ~~the~~receivable ~~Company’s~~are ~~online~~recorded ~~pharmacy~~at net ~~business,~~realizable ~~accounts~~value ~~receivable~~consisting ~~primarily consist~~ of ~~amounts~~the ~~due~~carrying ~~from~~amount ~~non-bank~~less ~~third~~an ~~party~~allowance ~~payment~~for ~~instruments~~uncollectible ~~such~~accounts, as necessary. ~~Alipay~~In ~~and~~the Company’s ~~certain~~retail ~~e-commerce~~business, ~~platforms.~~accounts Toreceivable ~~purchase~~mainly ~~pharmaceutical~~consist ~~products~~of reimbursements due from anthe ~~e-commerce~~government ~~platforms~~insurance ~~such~~bureaus asand ~~Tmall,~~commercial health ~~customers~~insurance programs and are ~~required to~~usually ~~submit~~collected ~~payment~~within totwo ~~certain~~or ~~non-bank~~three ~~third~~months. ~~party~~The ~~payment~~Company ~~instruments,~~directly ~~such~~writes asoff ~~Alipay~~delinquent account balances, which, init ~~turn,~~determines ~~reimburse~~to be uncollectible after confirming with the ~~Company~~appropriate ~~within seven~~bureau ~~days~~or toprogram aeach month. ~~Except~~Additionally, the ~~for~~Company ~~customer~~also ~~returns~~makes ofestimated ~~sold~~reserves ~~products,~~on ~~the~~related ~~receivables~~outstanding ~~from~~accounts ~~these~~receivable ~~payments~~based ~~instruments~~on ~~are~~historical ~~rarely uncollectible~~trends.

In ~~its~~the ~~wholesale~~Company’s online pharmacy business, ~~the~~accounts ~~Company uses~~receivable ~~the~~primarily ~~aging~~consist ~~method~~of toamounts ~~estimate~~due ~~the~~from ~~allowance~~non-bank ~~for~~third ~~anticipated~~party ~~uncollectible~~payment ~~receivable~~instruments ~~balances.~~such ~~Under~~as ~~the~~Alipay ~~aging method, bad~~and ~~debt~~certain ~~percentages~~e-commerce ~~are~~platforms. ~~determined~~To bypurchase ~~management, based~~pharmaceutical onproducts ~~historical~~from ~~experience~~an ~~and~~e-commerce ~~the~~platforms ~~current~~such ~~economic~~as ~~climate~~Tmall, customers are ~~applied~~required to ~~customers’~~submit ~~balances~~payment ~~categorized~~to bycertain ~~the~~non-bank ~~number~~third ofparty ~~months~~payment ~~the~~instruments, ~~underlying~~such ~~invoices~~as ~~have~~Alipay, ~~remained~~which, ~~outstanding.~~in ~~At each reporting period~~turn, reimburse the ~~allowance~~Company ~~balance~~within seven isdays ~~adjusted~~ to ~~reflect the amount computed as~~ a ~~result of the aging method~~month. ~~When~~Except ~~facts~~for ~~subsequently become~~customer ~~available~~returns toof ~~indicate~~sold ~~that~~products, the ~~allowance~~receivables ~~provided~~from ~~requires~~these anpayments ~~adjustment,~~instruments aare ~~corresponding adjustment is made to the allowance~~rarely ~~account as a change in estimate~~uncollectible.

~~Advances~~In its wholesale business, the Company uses the aging method to ~~suppliers~~estimate the allowance for anticipated uncollectible receivable balances. Under the aging method, bad debt percentages are determined by management, based on historical experience and the current economic climate, are applied to customers’ balances categorized by the number of months the underlying invoices have remained outstanding. At each reporting period, the allowance balance is adjusted to reflect the amount computed as a result of the aging method. When facts subsequently become available to indicate that the allowance provided requires an adjustment, a corresponding adjustment is made to the allowance account as a change in estimate.

Advances to suppliers consist of prepayments to its vendors, such as pharmaceutical manufacturers and other distributors. Since the acquisition of Jiuxin Medicine, the Company have transferred almost all logistics services of its retail drugstores to Jiuxin Medicine. Jiuzhou Pharmacy only directly purchases certain non-medical products, such as certain nutritional supplements. As a result, almost all advances to suppliers are made by Jiuxin Medicine.

Advances to suppliers ~~for its drug wholesale business~~ consist of prepayments to its vendors, such as pharmaceutical manufacturers and other distributors. ~~The~~ ~~Company~~Since ~~typically receive~~the ~~products~~acquisition ~~from~~of ~~vendors~~Jiuxin ~~within~~Medicine, ~~three~~the toCompany have ~~nine~~transferred ~~months~~almost ~~after~~all ~~making~~logistics ~~prepayments. The~~services ~~Company~~of ~~continuously~~its ~~monitor~~retail ~~delivery from,~~drugstores ~~and payments~~ to, ~~its~~Jiuxin ~~vendors~~Medicine. ~~while~~Jiuzhou ~~maintaining~~Pharmacy aonly ~~provision~~directly ~~for~~purchases certain ~~estimated~~non-medical ~~credit~~products, ~~losses~~such ~~based~~as ~~upon~~certain ~~historical~~nutritional ~~experience~~supplements. ~~and any~~As ~~specific~~a ~~supplier issues~~result, ~~such~~almost asall ~~discontinuing~~advances ofto ~~inventory~~suppliers ~~supply,~~are ~~that~~made ~~have~~by Jiuxin ~~been identified~~Medicine.

14Advances to suppliers for its drug wholesale business consist of prepayments to its vendors, such as pharmaceutical manufacturers and other distributors. The Company typically receive products from vendors within three to nine months after making prepayments. The Company continuously monitor delivery from, and payments to, its vendors while maintaining a provision for estimated credit losses based upon historical experience and any specific supplier issues, such as discontinuing of inventory supply, that have been identified.

~~Inventories~~14

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first in first out (FIFO) method. The Company carries out physical inventory counts on a monthly basis at each store and warehouse location. Herbs that the Company farms are recorded at their cost, which includes direct costs such as seed selection, fertilizer, labor costs that are spent in growing herbs on the leased farmland, and indirect costs such as amortization of farmland development cost. All costs are accumulated until the time of harvest and then allocated to harvested herbs costs when the herbs are sold. The Company periodically reviews its inventory and records write-downs to inventories for shrinkage losses and damaged merchandise that are identified. The Company provides a reserve for estimated inventory obsolescence or excess quantities on hand equal to the difference, if any, between the cost of the inventory and its estimated realizable value.

~~Farmland~~Inventories ~~assets~~are stated at the lower of cost or net realizable value. Cost is determined using the first in first out (FIFO) method. The Company carries out physical inventory counts on a monthly basis at each store and warehouse location. Herbs that the Company farms are recorded at their cost, which includes direct costs such as seed selection, fertilizer, labor costs that are spent in growing herbs on the leased farmland, and indirect costs such as amortization of farmland development cost. All costs are accumulated until the time of harvest and then allocated to harvested herbs costs when the herbs are sold. The Company periodically reviews its inventory and records write-downs to inventories for shrinkage losses and damaged merchandise that are identified. The Company provides a reserve for estimated inventory obsolescence or excess quantities on hand equal to the difference, if any, between the cost of the inventory and its estimated realizable value.

~~Herbs~~Farmland that the Company farms are recorded at their cost, which includes direct costs such as seed selection, fertilizer, and labor costs that are spent in growing herbs on the leased farmland, and indirect costs such as amortization of farmland development costs. Since April 2014, amortization of farmland development costs has been expensed instead of allocated into inventory due to unpredictable future market value of planted gingko trees.assets

~~All~~Herbs ~~related~~that ~~costs~~the ~~described~~Company infarms ~~the~~are ~~above~~recorded at their cost, which includes direct costs such as seed selection, fertilizer, and labor costs that are ~~accumulated~~spent ~~until~~in growing herbs on the ~~time~~leased farmland, and indirect costs such as amortization of ~~harvest~~farmland ~~and~~development ~~then~~costs. Since April 2014, amortization of farmland development costs has been expensed instead of allocated into inventory due to ~~harvested~~unpredictable ~~herbs~~future ~~when~~market ~~they~~value ~~are~~of ~~sold~~planted gingko trees.

~~Property~~All related costs described in the above are accumulated until the time of harvest and ~~equipment~~then allocated to harvested herbs when they are sold.

Property and equipment are stated at cost, net of accumulated depreciation or amortization. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets, taking into consideration the assets’ estimated residual value. Leasehold improvements are amortized over the shorter of lease term or remaining lease period of the underlying assets. Following are the estimated useful lives of the Company’s property and equipment:

		Estimated Useful Life
Leasehold improvements		3-10 years
Motor vehicles		3-5 years
Office equipment & furniture		3-5 years
Buildings		35 years

Maintenance, repairs and minor renewals are charged to expenses as incurred. Major additions and betterment to property and equipment are capitalized.

		Estimated Useful Life
Leasehold improvements		3-10 years
Motor vehicles		3-5 years
Office equipment & furniture		3-5 years
Buildings		35 years

~~Intangible~~Maintenance, ~~assets~~repairs and minor renewals are charged to expenses as incurred. Major additions and betterment to property and equipment are capitalized.

Intangible assets are acquired individually or as part of a group of assets, and are initially recorded at their fair value. The cost of a group of assets acquired in a transaction is allocated to the individual assets based on their relative fair values.

Intangible assets are acquired individually or as part of a group of assets, and are initially recorded at their fair value. The ~~estimated~~cost ~~useful~~of ~~lives~~a group of ~~the~~assets ~~Company’s~~acquired ~~intangible~~in a transaction is allocated to the individual assets ~~are~~based ason ~~follows:~~their relative fair values.

		Estimated Useful Life
Land use rights		50 years
Software		3 years
License		Infinite

The estimated useful lives of the Company’s intangible assets are as follows:

The Company evaluates intangible assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired.

		Estimated Useful Life
Land use rights		50 years
Software		3 years
License		Infinite

~~Impairment~~The ofCompany ~~long~~evaluates ~~lived~~intangible assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired.

The Company evaluates long lived tangible and intangible assets for impairment, whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Recoverability is measured by comparing the assets’ net book value to the related projected undiscounted cash flows from these assets, considering a number of factors including past operating results, budgets, economic projections, market trends and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired, and a second test is performed to measure the amount of impairment loss. There were no fixed assets and farmland assets impaired for the three months ended June 30, 2020 and 2019.15

~~Notes~~Impairment ~~payable~~of long lived assets

~~During~~The ~~the~~Company ~~normal~~evaluates ~~course~~long oflived ~~business~~tangible and intangible assets for impairment, whenever events or changes in circumstances indicate that the carrying value may not be recoverable ~~Company~~from ~~regularly~~its ~~issues~~estimated ~~bank~~future ~~acceptance~~cash ~~bills~~flows. asRecoverability ais ~~payment~~measured ~~method~~by tocomparing ~~settle~~the ~~outstanding~~assets’ ~~accounts~~net ~~payables~~book ~~with~~value ~~various~~to ~~material~~the related projected ~~suppliers.~~undiscounted ~~The~~cash ~~Company~~flows ~~records~~from ~~such~~these ~~bank~~assets, ~~acceptance~~considering ~~bills~~a asnumber ~~notes~~of ~~payable~~factors including past operating results, budgets, economic projections, market trends and product development cycles. ~~Such~~If ~~notes~~the ~~payable~~net ~~are~~book ~~generally~~value ~~short~~of ~~term~~the inasset ~~nature~~exceeds the related undiscounted ~~due~~cash toflows, ~~their~~the ~~short~~asset ~~maturity~~is ~~period~~considered ofimpaired, ~~six~~and a second test is performed to ~~nine~~measure the amount of impairment loss. There were no fixed assets and farmland assets impaired for the six months ended September 30, 2020 and 2019.

15Notes payable

~~Income~~During ~~taxes~~the normal course of business, the Company regularly issues bank acceptance bills as a payment method to settle outstanding accounts payables with various material suppliers. The Company records such bank acceptance bills as notes payable. Such notes payable are generally short term in nature due to their short maturity period of six to nine months.

~~The Company accounts for income taxes following the liability method pursuant to FASB ASC 740 “~~Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes ~~of a change in tax rate is recognized in income in the period that includes the enactment date.~~

The Company ~~also~~accounts ~~follows~~for ~~FASB~~income ~~ASC~~taxes ~~740,~~following ~~which addresses~~ the ~~determination~~liability ofmethod ~~whether~~pursuant ~~tax~~to ~~benefits~~FASB ~~claimed~~ASC or740 ~~expected~~“Income toTaxes”. beUnder ~~claimed~~this onmethod, adeferred tax ~~return~~assets ~~should~~and ~~be recorded~~liabilities inare ~~the~~determined ~~financial~~based ~~statements.~~on ~~The~~the ~~Company~~difference ~~may~~between ~~recognize~~ the ~~tax~~financial ~~benefit~~reporting ~~from~~and ~~an uncertain~~ tax ~~position~~bases ~~only~~of ifassets itand isliabilities ~~more~~using ~~likely~~enacted tax ~~than~~rates ~~not~~ that ~~the tax position~~ will be ~~sustained~~in oneffect ~~examination~~in by the ~~taxing~~period ~~authorities,~~in ~~based~~which on the ~~technical~~differences ~~merits~~are ofexpected ~~the position~~to reverse. The ~~tax~~Company ~~benefits~~records ~~recognized~~a invaluation ~~the~~allowance to ~~financial~~offset ~~statements~~deferred ~~from~~tax ~~such~~assets aif, ~~position should be measured~~ based on the ~~largest benefit~~weight ~~that has a greater than fifty percent likelihood~~ of ~~being~~available ~~realized upon ultimate settlement. ASC 740 also provides guidance on recognition~~evidence, ~~classification,~~it ~~interest~~is ~~and~~more-likely-than-not ~~penalties~~that onsome ~~income taxes~~portion, ~~accounting~~or ~~in interim periods and requires increased disclosures.~~all, As of ~~June~~the ~~30,~~deferred ~~2020~~tax ~~and~~assets ~~March~~will ~~31, 2020, the Company did~~ not ~~have~~be ~~a liability for unrecognized tax benefits~~realized. ItThe iseffect ~~the~~on ~~Company’s policy~~deferred ~~to include penalties and interest expense related to income~~ taxes asof a ~~component~~change ofin ~~other expense and interest expense, respectively, as necessary. The Company’s historical~~ tax ~~years~~rate ~~will~~is ~~remain~~recognized ~~open~~in ~~for~~income ~~examination by the local authorities~~in ~~until~~ the ~~statute~~period ofthat ~~limitations~~includes ~~has~~the ~~passed~~enactment date.

~~Under~~The Company also follows FASB ASC 740~~-270~~, which ~~entities~~addresses ~~calculate~~ the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded ~~income~~in the financial statements. The Company may recognize the tax ~~provision~~benefit ~~for~~from an ~~interim~~uncertain ~~period~~tax position only if it is more likely than not that the tax position will be sustained on examination by ~~distinguishing~~the ~~between~~taxing ~~elements~~authorities, based on the technical merits of the position. The tax benefits recognized in the ~~income~~financial ~~tax~~statements ~~provision~~from ~~through~~such ~~(1) applying~~a anposition ~~estimated~~should ~~annual~~be ~~effective~~measured ~~tax~~based ~~rate~~on ~~(ETR)~~the tolargest benefit that has a ~~measure~~greater than fifty percent likelihood of ~~year-to-date~~being ~~operating~~realized ~~results~~upon ~~referred~~ultimate tosettlement. asASC ~~“ordinary~~740 also provides guidance on recognition, classification, interest and penalties on income ~~(or~~taxes, ~~loss)~~accounting in interim periods and requires increased disclosures. As of September 30,” 2020 and ~~(2)~~March ~~discretely~~31, ~~recognizing~~2020, ~~specific~~the ~~events~~Company ~~(referred~~did tonot ashave ~~“discrete~~a ~~items”)~~liability asfor ~~they~~unrecognized ~~occur~~tax benefits. ~~Entities~~ ~~should~~It ~~revise~~is the ~~ETR,~~Company’s policy to include penalties and interest expense related to income taxes as ~~necessary~~a component of other expense and interest expense, respectively, as ofnecessary. ~~the~~The ~~end~~Company’s ofhistorical ~~each~~tax ~~successive~~years ~~interim~~will ~~period~~remain ~~during~~open ~~its~~for ~~fiscal~~examination ~~year~~by ~~based~~the onlocal ~~changes~~authorities tountil ~~any~~the statute of ~~these~~limitations ~~estimates~~has ~~and judgments~~passed.

~~The~~Under ~~ETR~~ASC ~~expected~~740-270, toentities ~~apply~~calculate ~~for~~ the ~~full~~ ~~fiscal year is applied to year-to-date ordinary~~ income ~~(or~~tax ~~loss)~~provision atfor ~~the~~an ~~end~~interim ofperiod ~~each~~by ~~interim~~distinguishing ~~period~~between toelements ~~compute~~recognized in the ~~year-to-date~~ income tax ~~(or~~provision ~~benefit~~through (1) applying ~~applicable~~an toestimated ~~ordinary~~annual ~~income~~effective ~~or loss. Income~~ tax ~~expense~~rate (~~or benefit~~ETR) ~~related~~ to ~~each~~a ~~discrete~~measure ~~item~~of ~~is individually~~year-to-date ~~determined~~operating ~~and~~results ~~recognized~~referred into ~~the~~as ~~interim period when the discrete item occurs. As a result, the~~ “ordinary income ~~tax provision~~ (or ~~benefit~~loss),” ~~for~~and an(2) ~~interim~~discretely ~~period~~recognizing ~~might~~specific ~~include~~events ~~elements~~(referred ~~that apply~~ to ~~ordinary~~as ~~income~~“discrete oritems”) ~~loss,~~ as ~~well~~they asoccur. Entities ~~elements~~should ~~related~~revise ~~to discrete~~the ~~items.~~ETR, ~~Discrete~~as ~~items~~necessary, ~~include~~as ~~significant~~of ~~items~~the ~~that~~end ~~are~~of ~~unusual~~each orsuccessive ~~that~~interim ~~occur~~period ~~infrequently.~~during ~~Determining~~its ~~which~~fiscal ~~items~~year ~~are unusual~~based oron ~~infrequent~~changes to ~~often~~any ~~requires~~of athese ~~significant~~estimates ~~degree~~and ~~of judgment~~judgments.

~~Under~~The ~~ASC~~ETR ~~740-270-30-36,~~expected ~~entities~~to ~~subject~~apply tofor ~~income~~the ~~taxes~~full infiscal ~~multiple~~year ~~jurisdictions~~is ~~should~~applied ~~apply~~to ~~one~~year-to-date ~~overall~~ordinary ~~ETR~~income ~~instead~~(or ofloss) ~~separate~~at ~~ETRs~~the ~~for~~end of each ~~jurisdiction~~interim ~~when~~period ~~calculating~~to compute the ~~interim~~year-~~period~~to-date income tax (or benefit) ~~related~~applicable to ~~consolidated~~ ordinary income (or loss). ~~for~~Income ~~the~~tax ~~year-~~expense (or benefit) related to~~-date~~ each discrete item is individually determined and recognized in the interim period, ~~except~~when inthe ~~certain circumstances~~discrete item occurs. ~~The~~As a result, the income tax provision (or benefit) for ~~each~~an interim period ismight ~~the~~include ~~difference~~elements ~~between~~that ~~the~~apply ~~year-~~to~~-date~~ ~~amount~~ordinary ~~for the~~income ~~current~~or ~~period~~loss, ~~and~~as ~~the~~well ~~year-~~as elements related to~~-date~~ discrete ~~amount~~items. ~~for~~Discrete ~~the~~items ~~prior~~include ~~period~~significant items that are unusual or that occur infrequently. Determining which items are unusual or infrequent often requires a significant degree of judgment.

~~Value~~Under ~~added~~ASC 740-270-30-36, entities subject to income taxes in multiple jurisdictions should apply one overall ETR instead of separate ETRs for each jurisdiction when calculating the interim-period income tax or benefit related to consolidated ordinary income (or loss) for the year-to-date interim period, except in certain circumstances. The income tax provision or benefit for each interim period is the difference between the year-to-date amount for the current period and the year-to-date amount for the prior period.

Sales revenue represents the invoiced value of goods, net of VAT. All of the Company’s products are sold in the PRC and are subject to a VAT on the gross sales price. The VAT rates range up to 17%, depending on the type of products sold. The VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing or acquiring its finished products. The Company recorded a VAT payable net of payments in the accompanying financial statements.16

~~Stock~~Value ~~based~~added ~~compensation~~tax

~~The~~Sales ~~Company~~revenue ~~follows~~represents the ~~provisions~~invoiced value of ~~FASB ASC 718~~goods, ~~“Compensation~~net —of ~~Stock Compensation,” which establishes accounting standards for non-employee and employee stock-based awards~~VAT. ~~Under~~All ~~the provisions~~ of ~~FASB ASC 718,~~ the ~~fair~~Company’s ~~value~~products ofare ~~stock~~sold ~~issued~~in ~~is used to measure~~ the ~~fair~~PRC ~~value~~and ofare ~~services received~~subject asto ~~the Company believes such approach is~~ a ~~more~~VAT ~~reliable~~on ~~method of measuring~~ the ~~fair~~gross ~~value~~sales ~~of the services~~price. ~~For non-employee~~ ~~stock-based~~The ~~awards,~~VAT ~~fair~~rates ~~value~~range isup ~~measured~~to ~~based~~13%, depending on the ~~value~~type of ~~the~~products ~~Company’s~~sold. ~~common~~The ~~stock~~VAT onmay ~~the~~be ~~date~~offset ~~that~~by ~~the~~VAT ~~commitment for~~paid ~~performance~~ by the ~~counterparty~~Company ~~has~~on ~~been reached or the counterparty’s performance is complete. The fair value of the~~raw ~~equity~~materials ~~instrument is calculated~~ and ~~then~~other ~~recognized~~materials asincluded ~~compensation~~in ~~expense over~~ the ~~requisite performance period. For employee stock-based awards, share-based compensation~~ cost ~~is measured at the grant date based on the fair value~~ of ~~the~~producing ~~award~~or ~~and~~acquiring isits ~~recognized as~~finished ~~expense~~products. ~~with~~The ~~graded~~Company ~~vesting~~recorded on a ~~straight–line~~VAT payable ~~basis~~net ~~over~~of ~~the~~payments ~~requisite~~in ~~service period for~~ the ~~entire~~accompanying ~~award~~financial statements.

~~Advertising~~Stock ~~and~~based ~~promotion costs~~compensation

~~Advertising~~The ~~and~~Company ~~promotion~~follows ~~costs~~the ~~are~~provisions ~~expensed~~of FASB asASC ~~incurred~~718, ~~and~~“Compensation ~~amounted~~— toStock ~~$77~~Compensation,~~068~~” ~~and~~which ~~$80,049~~establishes accounting standards for non-employee and employee stock-based awards. Under the ~~three~~provisions ~~months~~of ~~ended~~FASB ~~June~~ASC 30718, ~~2020~~the ~~and~~fair ~~2019,~~value ~~respectively~~of stock issued is used to measure the fair value of services received as the Company believes such approach is a more reliable method of measuring the fair value of the services. ~~Such~~For ~~costs~~non-employee stock-based ~~consist~~awards, fair value is measured based on the value of the Company’s common stock on the date that the commitment ~~primarily~~for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of ~~print~~the equity instrument is calculated and ~~promotional~~then ~~materials~~recognized ~~such~~as compensation expense over the requisite performance period. For employee stock-based awards, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as ~~flyers~~expense towith ~~local~~graded ~~communities~~vesting on a straight–line basis over the requisite service period for the entire award.

16Advertising and promotion costs

~~Foreign~~Advertising ~~currency~~and ~~translation~~promotion costs are expensed as incurred and amounted to $60,308 and $76,938 for the three months ended September 30, 2020 and 2019, respectively. Advertising and promotion costs are expensed as incurred and amounted to $137,376 and $156,987 for the six months ended September 30, 2020 and 2019, respectively. Such costs consist primarily of print and promotional materials such as flyers to local communities.

~~The~~Foreign ~~Company uses the United States dollar (“U.S. dollars” or “USD”) for financial reporting purposes. The Company’s subsidiaries and VIEs maintain their books and records in their functional~~ currency ~~the Renminbi (“RMB”), the currency of the PRC.~~translation

InThe ~~general, for consolidation purposes, the~~ Company ~~translates~~uses the ~~assets~~United ~~and~~States ~~liabilities of its subsidiaries and VIEs into~~ dollar (“U.S. dollars” ~~using~~or ~~the~~“USD”) ~~applicable~~for ~~exchange rates~~financial ~~prevailing at the balance sheet date, and the statements of income and cash flows are translated at average exchange rates during the~~ reporting ~~period~~purposes. AsThe aCompany’s ~~result,~~subsidiaries ~~amounts related to assets~~ and ~~liabilities~~VIEs ~~reported on the statement of cash flows will~~maintain ~~not~~their ~~necessarily~~books ~~agree~~and ~~with~~records ~~changes~~ in ~~the~~their ~~corresponding~~functional ~~balances~~currency on the ~~balance~~Renminbi ~~sheet.~~(“RMB”), ~~Equity accounts are translated at historical rates. Adjustments resulting from~~ the ~~translation~~currency of the ~~financial statements of the subsidiaries and VIEs are recorded as accumulated other comprehensive income~~PRC.

~~The~~In ~~balance~~general, ~~sheet~~for ~~amounts~~consolidation purposes, the ~~with~~Company translates the ~~exception of~~assets ~~equity,~~and atliabilities ~~June~~of ~~30,~~its ~~2020~~subsidiaries and atVIEs ~~March~~into ~~31,~~U.S. ~~2020~~dollars ~~were~~using ~~translated~~the applicable exchange rates prevailing at 1the ~~RMB~~balance tosheet ~~0.1414~~date, ~~USD~~and the statements of income and cash flows are translated at 1average ~~RMB~~exchange torates during ~~0.1410~~the ~~USD,~~reporting ~~respectively~~period. ~~The~~ ~~average~~As ~~translation~~a ~~rates~~result, ~~applied~~amounts related to ~~income~~assets and ~~cash~~liabilities ~~flow~~reported on the statement ~~amounts~~of ~~for~~cash flows will not necessarily agree with changes in the ~~three~~corresponding ~~months~~balances ~~ended~~on ~~June~~the ~~30,~~balance ~~2020~~sheet. ~~and~~Equity ~~2019 were~~accounts are translated at 1historical rates. ~~RMB~~Adjustments toresulting ~~0.1411~~from ~~USD~~the translation of the financial statements of the subsidiaries and atVIEs 1are ~~RMB~~recorded toas ~~0.1466~~accumulated other ~~USD,~~comprehensive ~~respectively~~income.

~~Concentrations~~The balance sheet amounts, with the exception of equity, at September 30, 2020 and ~~credit~~at ~~risk~~March 31, 2020 were translated at 1 RMB to 0.1470 USD and at 1 RMB to 0.1410 USD, respectively. The average translation rates applied to income and cash flow statement amounts for the six months ended September 30, 2020 and 2019 were at 1 RMB to 0.1428 USD and at 1 RMB to 0.1446 USD, respectively.

Certain financial instruments, which subject the Company to concentration of credit risk, consist of cash and restricted cash. The Company has cash balances at financial institutions located in Hong Kong and PRC. Balances at financial institutions in Hong Kong may, from time to time, exceed Hong Kong Deposit Protection Board’s insured limits. Since March 31, 2015, balances at financial institutions and state-owned banks within the PRC are covered by insurance up to RMB 500,000 (USD 72,800) per bank. As of June 30, 2020 and March 31, 2020, the Company had deposits totaling $24,279,528 and $30,974,714 that were covered by such limited insurance, respectively. Any balance over RMB 500,000 (USD 72,800) per bank in PRC will not be covered. To date, the Company has not experienced any losses in such accounts.17

~~For~~Concentrations ~~the three months ended June 30, 2020, two vendors accounted for 35.0% of the Company’s total purchases~~ and ~~two~~credit vendors accounted for more than 10% of total advances to suppliers. For the three months ended June 30, 2019, two vendors accounted for 49.2% of the Company’s total purchases and two vendors accounted for more than 10% of total advances to suppliers.risk

~~For~~Certain financial instruments, which subject the ~~three~~Company ~~months~~to ~~ended~~concentration ~~June~~of ~~30,~~credit ~~2020~~risk, consist of cash and restricted cash. The Company has cash balances at financial institutions nolocated ~~customer~~in ~~accounted~~Hong ~~for~~Kong ~~more~~and ~~than~~PRC. ~~10%~~Balances ofat ~~the~~financial ~~Company~~institutions in Hong Kong may, from time to time, exceed Hong Kong Deposit Protection Board’s ~~total~~insured ~~sales~~limits. Since March 31, 2015, balances at financial institutions and ~~more~~state-owned ~~than~~banks ~~10%~~within the ofPRC ~~total~~are ~~accounts~~covered ~~receivable~~by insurance up to RMB 500,000 (USD 72,800) per bank. ~~For~~ As of September 30, 2020, and March 31, 2020, the ~~three~~Company had ~~months~~deposits ~~ended~~totaling ~~June~~$35,327,793 and $30,974,714 ~~2019~~that were covered by such limited insurance, norespectively. ~~customer~~Any ~~accounted~~balance ~~for~~over ~~more~~RMB 500,000 ~~than~~(USD ~~10%~~72,800) ofper bank in PRC will not be covered. To date, the Company’s ~~total~~has ~~sales~~not orexperienced ~~more~~any ~~than~~losses ~~10% of~~in ~~total~~such accounts ~~receivable~~.

~~Leases~~For the three months ended September 30, 2020, two largest vendors accounted for 44.6% of the Company’s total purchases and one vendor accounted for 22.5% of the Company’s total advances to suppliers. For the three months ended September 30, 2019, two largest vendors accounted for 52.2% of the Company’s total purchases and one vendor accounted for 28.2% of the Company’s total advances to suppliers.

InFor ~~February 2016,~~ the ~~FASB~~six ~~issued~~months ~~ASU~~ended ~~2016-02~~September 30, ~~Leases~~2020, ~~(Topic~~two ~~842).~~vendors ~~Lessees~~accounted ~~are~~for ~~required~~39.7% toof ~~recognize~~the aCompany’s ~~right-of-use~~total ~~asset~~purchases and atwo ~~lease~~vendors ~~liability~~accounted for ~~virtually~~more ~~all of their leases (other~~ than ~~leases~~10% ~~that meet the definition~~ of atotal advances ~~short-term lease). The liability is equal~~ to ~~the present value of lease payments~~suppliers. ~~The~~For ~~asset is based on~~ the ~~liability,~~six ~~subject~~months toended ~~certain~~September ~~adjustments~~30, ~~such as for initial direct costs. For income statement purposes~~2019, atwo ~~dual~~vendors ~~model~~accounted ~~was~~for ~~retained, requiring leases to be classified as either operating or finance leases~~51.0% ~~Operating~~of ~~leases result in straight-line expense (similar to operating leases under~~ the ~~prior~~Company’s ~~accounting standard) while finance leases result in~~total apurchases ~~front-loaded~~and ~~expense~~two ~~pattern~~vendors ~~(similar~~accounted tofor ~~capital~~more ~~leases~~than ~~under~~10% ~~the~~of ~~prior~~total ~~accounting~~advances ~~standard). Lessor accounting is similar~~ to ~~the~~ ~~prior model, but updated to align with certain changes to the lessee model (e~~suppliers.~~g., certain definitions, such as initial direct costs, have been updated) and the new revenue standard, ASU 2014-9.~~

17For the three months ended September 30, 2020 and 2019, no customer accounted for more than 10% of the Company’s total sales and more than 10% of total accounts receivable. For the six months ended September 30, 2020 and 2019, no customer accounted for more than 10% of the Company’s total sales or more than 10% of total accounts receivable.

The Company adopted this new accounting standard on April 1, 2019 on a modified retrospective basis and applied the new standard to all leases through a cumulative-effect adjustment to beginning retained earnings. As a result, comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which includes, among other things, the ability to carry forward the existing lease classification. On April 1, 2019, the Company recorded an after-tax transition adjustment to increase retained earnings by approximately $422,354. The new standard had a material impact on the unaudited condensed consolidated balance sheet, but did not materially impact the Company’s consolidated operating results and had no impact on the Company’s cash flows. The following is a discussion of the Company’s lease policy under the new lease accounting standard:Leases

~~The~~In ~~Company~~February ~~determines~~2016, ifthe anFASB ~~arrangement~~issued ASU ~~contains~~2016-02, aLeases ~~lease~~(Topic at842). ~~the~~Lessees ~~inception~~are ofrequired ato ~~contract.~~recognize ~~Right~~a right-of-use ~~assets~~asset ~~represent~~and ~~the~~a ~~Company’s~~lease ~~right~~liability tofor ~~use~~virtually all anof ~~underlying~~their ~~asset for~~leases (other than leases that meet the ~~lease~~definition ~~term~~of ~~and~~a short-term lease). ~~liabilities~~The ~~represent~~liability ~~the~~is ~~Company’s~~equal ~~obligation~~ to ~~make~~the present value of lease payments. ~~arising~~The ~~from~~asset is based on the ~~lease~~liability, subject to certain adjustments, such as for initial direct costs. ~~Right-of-use~~For ~~assets~~income ~~and~~statement ~~lease~~purposes, ~~liabilities~~a ~~are~~dual ~~recognized~~model atwas ~~the~~retained, ~~commencement~~requiring ~~date~~leases ~~based~~to onbe ~~the~~classified ~~present~~as ~~value~~either ofoperating ~~the~~or ~~remaining~~finance ~~future~~leases. ~~minimum~~Operating ~~lease~~leases ~~payments.~~result Asin ~~the~~straight-line ~~interest~~expense ~~rate~~(similar ~~implicit~~to inoperating leases under the ~~Company’s~~prior accounting standard) while finance leases isresult ~~not~~in ~~readily~~a ~~determinable,~~front-loaded expense pattern (similar to capital leases under the ~~Company~~prior ~~utilizes~~accounting standard). Lessor accounting ~~its~~is ~~incremental~~similar ~~borrowing~~to ~~rate~~the prior model, ~~determined~~but byupdated ~~class~~to ofalign ~~underlying~~with ~~asset,~~certain changes to ~~discount~~ the ~~lease~~lessee ~~payments~~model (e.g., ~~The~~certain ~~operating~~definitions, ~~lease right-of-use~~such ~~assets~~as ~~also~~initial ~~include~~direct ~~lease~~costs, ~~payments~~have ~~made~~been ~~before~~updated) ~~commencement~~ and ~~exclude~~the ~~lease~~new ~~incentives~~revenue standard, ASU 2014-9.

The Company ~~leases~~adopted ~~premises~~this ~~for~~new ~~retail~~accounting ~~drugstores,~~standard ~~and~~on ~~offices~~April ~~under~~1, ~~non-cancellable~~2019 ~~operating~~on ~~leases.~~a ~~Operating~~modified ~~lease~~retrospective ~~payments~~basis ~~are~~and ~~expensed~~applied ~~over~~ the ~~term~~new ofstandard ~~lease~~to ~~using straight~~all ~~line method. A majority of the Company’s retail drugstore~~ leases ~~have~~through a 3cumulative-effect adjustment to 10beginning ~~year~~retained ~~term~~earnings. ~~Usually~~As ~~within one to three months prior to the expiration date of~~ a ~~lease~~result, ~~the~~comparative ~~Company~~financial isinformation ~~required~~has tonot ~~notify~~been ~~the~~restated ~~lessor~~ and ~~has~~continues ~~a priority~~ to ~~continue~~ ~~renting~~be ~~the~~reported ~~lease~~under ~~property~~the ifaccounting astandards ~~lessor~~in ~~intends~~effect tofor ~~lease~~those ~~property~~periods. The ~~lease~~Company ~~itself~~elected ~~does~~the ~~not~~package ~~have~~of ~~restriction~~practical ~~or covenants. If both~~expedients ~~parties~~permitted ~~agree~~under tothe ~~continue,~~transition aguidance ~~new~~within ~~lease~~the ~~contract with~~ new ~~lease~~standard, ~~terms~~which ~~has~~includes, toamong ~~been~~other ~~signed~~things, ~~by both parties. Usually~~ the ~~rent~~ability ~~may~~to ~~increase year~~carry ~~by year based on~~ forward the existing lease ~~contract~~classification. ~~Sublease~~On isApril ~~typically~~1, ~~not~~2019, ~~allowed.~~the ~~Any~~Company ~~damage,~~recorded ifan ~~made~~after-tax bytransition ~~the~~adjustment ~~lessee,~~ to ~~the~~increase ~~property~~retained ~~and~~earnings ~~equipment~~by ~~within~~approximately ~~the~~$422,354. ~~property~~The ~~has~~new tostandard ~~been~~had ~~fixed~~a ormaterial ~~reimbursed~~impact byon the ~~lessee.~~unaudited ~~The~~condensed ~~Company~~consolidated ~~does~~balance ~~not have any leases entered into~~sheet, but ~~which~~did ~~have~~ not ~~yet~~materially ~~commenced.~~impact ~~The~~the Company’s ~~has~~consolidated ~~historically~~operating ~~been~~results ~~able~~and tohad ~~renew~~no aimpact ~~majority~~on ofthe ~~its~~Company’s ~~drugstores leases~~cash flows. The ~~weighted average~~following ~~remaining lease term~~ is ~~3.2~~a ~~years~~discussion ~~and the weighted average discount rate is 4.19%. Under the terms~~ of the ~~lease agreements, the~~ Company’s ~~has~~lease nopolicy ~~legal~~under ~~or contractual asset retirement obligations at~~ the ~~end~~new oflease ~~the~~accounting ~~leases. See Note 14 “Leases” for additional information.~~standard:

~~Recent~~The ~~Accounting~~Company ~~Pronouncements~~determines if an arrangement contains a lease at the inception of a contract. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments. As the interest rate implicit in the Company’s leases is not readily determinable, the Company utilizes its incremental borrowing rate, determined by class of underlying asset, to discount the lease payments. The operating lease right-of-use assets also include lease payments made before commencement and exclude lease incentives.

~~Accounting~~The ~~pronouncements~~Company ~~adopted~~leases premises for retail drugstores, and offices under non-cancellable operating leases. Operating lease payments are expensed over the term of lease using straight line method. A majority of the Company’s retail drugstore leases have a 3 to 10 year term. Usually within one to three months prior to the expiration date of a lease, the Company is required to notify the lessor and has a priority to continue renting the lease property if a lessor intends to lease property. The lease itself does not have restriction or covenants. If both parties agree to continue, a new lease contract with new lease terms has to been signed by both parties. Usually the rent may increase year by year based on the lease contract. Sublease is typically not allowed. Any damage, if made by the lessee, to the property and equipment within the property has to been fixed or reimbursed by the lessee. The Company does not have any leases entered into but which have not yet commenced. The Company has historically been able to renew a majority of its drugstores leases. The weighted average remaining lease term is 2.9 years and the weighted average discount rate is 4.19%. Under the terms of the lease agreements, the Company has no legal or contractual asset retirement obligations at the end of the leases. See Note 14 “Leases” for additional information.

InRecent ~~June~~Accounting 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” providing financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. For public business entities that are U.S. Securities and Exchange Commission (SEC) filers, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The FASB has voted to defer the effective date for public companies that are smaller reporting companies to fiscal years beginning after December 15, 2022. All entities may adopt the amendments in this Update earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact of the adoption of ASU 2016-13 on our consolidated financial statements.Pronouncements

InAccounting ~~August~~pronouncements 2018, the FASB issued ASU 2018-13 Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds, and modifies certain disclosure requirements for fair value measurements under ASC 820. This ASU is to be applied on a prospective basis for certain modified or new disclosure requirements, and all other amendments in the standard are to be applied on a retrospective basis. The new standard is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted. ASU 2018-13 has no impact on its consolidated financial statements.adopted

In ~~January~~June ~~2017~~2016, the FASB issued ~~ASU~~ ~~No. 2017~~ASU 2016-0413, “~~Intangibles~~Financial Instruments—~~Goodwill~~Credit ~~and~~Losses ~~Other~~ (Topic ~~350~~326): ~~Simplifying~~Measurement ~~the~~of ~~Test~~Credit ~~for~~Losses ~~Goodwill~~on ~~Impairment” (“ASU~~Financial ~~2017-04”)~~Instruments,” ~~which~~providing ~~removes~~financial ~~Step~~statement 2users ~~from~~with ~~the~~more ~~goodwill~~decision-useful ~~impairment~~information ~~test.~~about Anthe ~~entity~~expected ~~will~~credit losses ~~apply~~on afinancial ~~one-step~~instruments ~~quantitative test~~ and ~~record~~ ~~the~~other ~~amount~~commitments ofto ~~goodwill~~extend ~~impairment~~credit asheld ~~the~~by ~~excess of~~ a reporting ~~unit’s~~entity ~~carrying~~at ~~amount~~each ~~over~~reporting ~~its~~date. ~~fair~~For public ~~value,~~business ~~not~~entities ~~to exceed~~that ~~the~~are ~~total~~U.S. ~~amount~~Securities ofand ~~goodwill~~Exchange ~~allocated~~Commission to(SEC) filers, the ~~reporting~~amendments ~~unit.~~in ~~The~~this ~~new~~Update ~~guidance~~are effective ~~does~~for ~~not~~fiscal ~~amend~~years ~~the~~beginning ~~optional~~after ~~qualitative~~December ~~assessment of~~15, ~~goodwill~~2019, ~~impairment.~~including ~~Public~~interim ~~business~~periods ~~entity~~within ~~that~~those isfiscal ~~a U~~years.S. ~~Securities~~The ~~and~~FASB has ~~Exchange~~voted ~~Commission~~to ~~filer~~defer ~~should adopt~~ the ~~amendments in~~effective ~~this~~date ~~ASU~~ for ~~its~~public ~~annual~~companies orthat ~~any~~are ~~interim~~smaller ~~goodwill~~reporting ~~impairment~~companies ~~test~~to in fiscal years beginning after December 15, ~~2019~~2022. ~~Early~~All ~~adoption is~~entities ~~permitted~~may ~~for~~adopt ~~interim~~the oramendments ~~annual~~in ~~goodwill~~this ~~impairment~~Update ~~tests~~earlier ~~performed~~as onof ~~testing~~the ~~dates~~fiscal years beginning after December ~~January~~15, 12018, ~~2017.~~including ~~The~~interim ~~Company~~periods ~~adopted ASU~~within ~~2017-04~~those onfiscal ~~January~~years. 1,We ~~2020.~~are ~~The~~currently ~~adoption~~evaluating the impact of the adoption of ASU ~~2017~~2016-0413 ~~did not have a material impact~~ on the Company’s our consolidated financial statements.

~~Accounting~~In ~~pronouncements~~August ~~not~~2018, ~~yet~~the ~~effective~~FASB issued ASU 2018-13 Disclosure Framework — Changes to ~~adopt~~the Disclosure Requirements for Fair Value Measurement, which eliminates, adds, and modifies certain disclosure requirements for fair value measurements under ASC 820. This ASU is to be applied on a prospective basis for certain modified or new disclosure requirements, and all other amendments in the standard are to be applied on a retrospective basis. The new standard is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted. ASU 2018-13 has no impact on the Company’s its consolidated financial statements.

In ~~December~~January ~~2019~~2017, the FASB issued ASU No. ~~2019~~ 2017-1204, “~~Income~~Intangibles—Goodwill ~~Taxes”~~and Other (Topic ~~740~~350): Simplifying the ~~Accounting~~Test for ~~Income~~Goodwill ~~Taxes~~Impairment” (“ASU ~~2019~~ 2017-1204”)., ~~ASU~~which ~~2019-12 will~~removes ~~simplify~~Step 2 from the ~~accounting~~goodwill ~~for~~impairment ~~income~~test. ~~taxes~~An byentity ~~removing~~will ~~certain~~apply ~~exceptions~~a toone-step ~~the~~quantitative ~~general~~test ~~principles~~and record inthe ~~Topic~~amount ~~740.~~of ~~The~~goodwill ~~amendments also~~impairment ~~improve~~as ~~consistent~~the ~~application~~excess of ~~and~~a ~~simplify~~reporting ~~GAAP~~unit’s ~~for~~carrying ~~other~~amount ~~areas~~over ofits ~~Topic~~fair ~~740~~value, bynot ~~clarifying~~to exceed ~~and~~the ~~amending~~total ~~existing~~amount ~~guidance. For~~of ~~public~~goodwill ~~business~~allocated ~~entities,~~to the ~~amendments~~reporting inunit. ~~this~~The ~~Update~~new ~~are~~guidance ~~effective~~does ~~for~~not ~~fiscal~~amend ~~years,~~the ~~and~~optional ~~interim~~qualitative ~~periods~~assessment of ~~within~~goodwill ~~those~~impairment. ~~fiscal years,~~Public ~~beginning~~business ~~after~~entity ~~December~~that ~~15,~~is ~~2020~~a U.S. ~~For~~Securities ~~all~~and ~~other~~Exchange ~~entities,~~Commission filer should adopt the amendments in ~~are~~this ~~effective~~ASU for its annual or any interim goodwill impairment test in fiscal years beginning after December 15, ~~2021,~~2019. ~~and~~Early adoption is permitted for interim ~~periods~~or ~~within~~annual ~~fiscal~~goodwill ~~years~~impairment ~~beginning~~tests performed on testing dates after ~~December~~January 151, ~~2022~~2017. The Company ~~does~~adopted ASU ~~not~~2017-04 ~~expect~~on ~~that the~~January ~~requirements~~1, 2020. The adoption of the ASU ~~2019~~2017-1204 ~~will~~did not have a material impact on ~~its~~the ~~consolidated~~Company’s consolidated financial statements.

~~Note~~Accounting 4pronouncements –not ~~FINANCIAL ASSETS AVAILABLE FOR SALE~~yet effective to adopt

AsIn ofDecember ~~June 30~~2019, ~~2020~~the ~~and~~FASB ~~March~~issued ~~31,~~ASU No. ~~2020~~2019-12, ~~financial assets available for sale~~ ~~amounted~~“Income toTaxes” ~~$157,644~~ (~~RMB~~Topic ~~1,114,500~~740): ~~and~~Simplifying ~~$157,159~~the Accounting for Income Taxes (~~RMB~~“ASU ~~1,114,500~~2019-12”)~~, respectively~~. AsASU of2019-12 ~~June~~will ~~30,~~simplify ~~2020,~~ the ~~fair~~accounting ~~value~~for ofincome antaxes ~~investment~~by inremoving acertain ~~limited~~exceptions ~~partner~~to ~~(LP)~~the general principles in aTopic ~~private~~740. The ~~equity~~amendments ~~fund~~also ~~(PE~~improve ~~fund),~~consistent ~~which~~application isof ~~intended to~~and ~~invest~~simplify inGAAP ~~retail~~for ~~pharmaceutical~~other ~~business,~~areas isof ~~$72,551~~Topic ~~(RMB514,500)~~740 by clarifying and amending existing guidance. ~~Additionally~~For public business entities, the ~~Company~~amendments ~~has~~in ~~invested~~this inUpdate ~~Inner~~are ~~Mongolia~~effective for fiscal years, and interim periods ~~Songlu~~within ~~Pharmaceutical~~those ~~Co.(“Songlu~~fiscal ~~Pharmaceutical”).~~years, Asbeginning ofafter ~~June~~December 3015, 2020. For all other entities, the ~~fair~~amendments ~~value~~are ofeffective ~~the~~for ~~investment~~fiscal years isbeginning ~~$84~~after December 15,~~608 (RMB600~~ 2021,~~000),~~ ~~which~~and ~~accounts~~interim ~~for~~periods 0within fiscal years beginning after December 15, 2022.5% ~~shares~~The Company does not expect that the requirements of ~~Songlu~~ASU ~~Pharmaceutical~~2019-12 will have a material impact on its consolidated financial statements.

Note 54 – ~~TRADE ACCOUNTS RECEIVABLE~~FINANCIAL ASSETS AVAILABLE FOR SALE

~~Trade~~As ~~accounts~~of ~~receivable~~September ~~consisted~~30, 2020 and March 31, 2020, financial assets available for sale amounted to $163,818 (RMB 1,114,500) and $157,159 (RMB 1,114,500), respectively. As of September 30, 2020, the fair value of an investment in a limited partner (LP) in a private equity fund (PE fund), which is intended to invest in retail pharmaceutical business, is $75,625 (RMB514,500). Additionally, the ~~following:~~Company has invested in Inner Mongolia Songlu Pharmaceutical Co.(“Songlu Pharmaceutical”). As of September 30, 2020, the fair value of the investment is $88,193 (RMB600,000), which accounts for 0.5% shares of Songlu Pharmaceutical.

	June 30, 2020			March 31, 2020
Accounts receivable	$	11,378,909		$	12,034,726
Less: allowance for doubtful accounts		(2,394,314	)		(2,264,070	)
Trade accounts receivable, net	$	8,984,595		$	9,770,656

Note 5 – TRADE ACCOUNTS RECEIVABLE

~~For~~Trade ~~the three months ended June 30, 2020 and 2019, $26,834 and $36,068 in~~ accounts receivable ~~were~~consisted ~~directly written off, respectively. As~~ of ~~June 30, 2020, $515,771 were~~ ~~pledged~~the ~~as collateral for borrowings from financial institutions. As of March 31, 2020, $627,055 were pledged as collateral for borrowings from financial institutions.~~following:

Note 6 – OTHER CURRENT ASSETS

	September 30, 2020			March 31, 2020
Accounts receivable	$	12,215,726		$	12,034,726
Less: allowance for doubtful accounts		(2,223,584	)		(2,264,070	)
Trade accounts receivable, net	$	9,992,142		$	9,770,656

~~Other~~For ~~current~~the ~~assets~~three ~~consisted~~months ofended September 30, 2020 and 2019, $28,589 and $101,660 in accounts receivable were written off, respectively. For the ~~following:~~six months ended September 30, 2020 and 2019, $55,423 and $137,728 in accounts receivable were written off, respectively. As of September 30, 2020, $398,415 were pledged as collateral for borrowings from financial institutions. As of March 31, 2020, $627,055 were pledged as collateral for borrowings from financial institutions.

	June 30, 2020		March 31, 2020
Rental deposits (1)	$	1,558,965	$	1,364,975
Prepaid and other current assets		276,962		163,565
Total	$	1,835,927	$	1,528,540

Note 6 – OTHER CURRENT ASSETS

~~(1)~~Other ~~The~~current ~~balance~~assets asconsisted of ~~June~~the ~~30, 2020 and March 31, 2020 includes short-term refundable rental security deposits.~~following:

	September 30, 2020		March 31, 2020
Rental deposits ⁽¹⁾	$	1,693,517	$	1,364,975
Prepaid and other current assets		139,691		163,565
Total	$	1,833,208	$	1,528,540

~~Note 7~~(1) –The ~~PROPERTY~~balance ~~AND~~as ~~EQUIPMENT~~of September 30, 2020 and March 31, 2020 includes short-term refundable rental security deposits.

~~Property and equipment consisted of the following:~~20

	June 30, 2020			March 31, 2020
Building	$	5,898,768		$	5,880,627
Leasehold improvements		9,397,190			9,209,136
Farmland development cost		1,691,632			1,686,430
Office equipment and furniture		5,587,888			5,632,955
Motor vehicles		505,883			504,327
Total		23,081,361			22,913,475
Less: Accumulated depreciation		(13,758,940	)		(13,059,852	)
Impairment*		(2,226,731	)		(2,219,883	)
Property and equipment, net	$	7,095,690		$	7,633,740

Note 7 – PROPERTY AND EQUIPMENT

*Property ~~The~~and ~~variance~~equipment consisted of ~~impairment from March 31, 2020 to June 30, 2020 is solely caused by exchange rate variance.~~the following:

Depreciation expenses for property and equipment totaled $695,151 and $441,559 for the three months ended June 30, 2020 and 2019, respectively. There were no fixed assets impaired in the three months ended June 30, 2020 and June 30, 2019.

	September 30, 2020			March 31, 2020
Building	$	6,129,801		$	5,880,627
Leasehold improvements		9,426,295			9,209,136
Farmland development cost		1,757,887			1,686,430
Office equipment and furniture		5,762,776			5,632,955
Motor vehicles		363,866			504,327
Total		23,440,625			22,913,475
Less: Accumulated depreciation		(14,358,203	)		(13,059,852	)
Impairment*		(2,313,944	)		(2,219,883	)
Property and equipment, net	$	6,768,478		$	7,633,740

~~Note 8 –~~* ~~LONG-TERM~~The ~~INVESTMENT~~variance of impairment from March 31, 2020 to September 30, 2020 is solely caused by exchange rate variance.

~~Long-term~~Depreciation expenses for property and ~~investment~~equipment ~~consists~~totaled of$413,008 and $497,430 for the ~~following:~~three months ended September 30, 2020 and 2019, respectively. Depreciation expenses for property and equipment totaled $1,108,159 and $938,989 for the six months ended September 30, 2020 and 2019, respectively. There were no fixed assets impaired in the six months ended September 30, 2020 and September 30, 2019.

	June 30, 2020			March 31, 2020
Kahamadi Bio (1)	$	3,214	*	$	6,217	*
Zhetong Medical (2)		3,960,544			2,538,234
Advance to suppliers, net	$	3,963,758		$	2,544,451

Note 8 – LONG-TERM INVESTMENT

~~(1)~~Long-term ~~It represents 49%~~ investment inconsists ~~Kahamadi Bio. The investment is recorded using the equity method. Kahamadi Bio suffered loss~~ of ~~$3,015~~ the ~~three months ended June 30, 2020.~~following:

(2) It represents 39% investment in Zhejiang Zhetong Medical Co., Ltd. Zhetong Medical was established in March 2020 to target potential acquisitions or cooperate with local pharmacies. By attracting more funds from local investors, the Company expects to continue growing its local network in the future.

	September 30, 2020			March 31, 2020
Kahamadi Bio ⁽¹⁾	$	175	*	$	6,217	*
Zhetong Medical ⁽²⁾		4,115,664			2,538,234
Long-term investment	$	4,115,839		$	2,544,451

~~Note 9~~(1) –It ~~ADVANCES~~represents TO49% ~~SUPPLIERS~~investment in Kahamadi Bio. The investment is recorded using the equity method. Kahamadi Bio suffered loss of $6,127 in the six months ended September 30, 2020.

~~Advances to~~(2) ~~suppliers~~It ~~consist~~represents of39% ~~deposits,~~investment ~~with~~in orZhejiang ~~advances~~Zhetong toMedical Co., ~~outside~~Ltd. ~~vendors~~(“Zhetong ~~for~~Medical”). ~~future~~Zhetong ~~inventory~~Medical ~~purchases.~~was ~~Most~~established ofin ~~the~~March ~~Company’s suppliers~~2020 ~~require~~to atarget ~~certain~~potential ~~amount~~acquisitions ofor ~~money~~cooperate towith belocal ~~deposited~~pharmacies. ~~with~~By ~~them~~attracting asmore afunds ~~guarantee~~from ~~that~~local investors, the Company ~~will~~expects ~~receive~~to continue growing its ~~purchase on~~local anetwork ~~timely~~in ~~basis~~the future. ~~This~~In ~~amount~~the issix ~~refundable~~months ~~and~~ended ~~bears~~September no30, ~~interest.~~2020, AsJiuzhou Pharmacy injected funds of ~~June~~approximately 30$1,577,430 ~~2020~~into ~~and~~Zhetong ~~March~~Medical. ~~31,~~The ~~2020,~~investment ~~advance~~is torecorded ~~suppliers consist~~based ofon ~~the~~equity ~~following:~~method.

	June 30, 2020			March 31, 2020
Advance to suppliers	$	3,160,046		$	2,198,863
Less: allowance for unrefundable advances		(922,326	)		(1,024,063	)
Advance to suppliers, net	$	2,237,720		$	1,174,800

Note 9 – ADVANCES TO SUPPLIERS

~~For the~~Advances ~~three~~to ~~months~~suppliers ~~ended~~consist ~~June~~of 30deposits, with ~~2020~~or ~~and~~advances ~~2019~~to, ~~none~~outside vendors for future inventory purchases. Most of the ~~advances~~Company’s suppliers require a certain amount of money to ~~suppliers~~be ~~were~~deposited ~~written~~with ~~off~~them ~~against~~as ~~previous~~a ~~allowance~~guarantee ~~for~~that the Company will receive its purchase on a timely basis. This amount is ~~unrefundable~~refundable ~~advances,~~and ~~respectively~~bears no interest. As of September 30, 2020 and March 31, 2020, advance to suppliers consist of the following:

	September 30, 2020			March 31, 2020
Advance to suppliers	$	2,838,746		$	2,198,863
Less: allowance for nonrefundable advances		(909,473	)		(1,024,063	)
Advance to suppliers, net	$	1,929,273		$	1,174,800

~~Note~~For the six months ended September 30, 102020 –and ~~INVENTORY~~2019, none of the advances to suppliers were written off against previous allowance for unrefundable advances, respectively.

Inventory consisted of finished goods, valued at $11,141,411 and $12,247,004 as of June 30, 2020 and March 31, 2020, respectively. The Company constantly monitors its potential obsolete products and is allowed to return products close to their expiration dates to its suppliers. Any loss on damaged items is immaterial and will be recognized immediately. As a result, no reserves were made for inventory as of June 30, 2020 and March 31, 2020.21

Note 11 10 – ~~FARMLAND ASSETS~~INVENTORY

~~Farmland~~Inventory consisted of finished ~~assets~~goods, ~~consist~~valued at $13,227,559 and $12,247,004 as of ~~ginkgo~~September ~~trees~~30, ~~planted~~2020 inand ~~2012~~March 31, 2020, respectively. The Company constantly monitors its potential obsolete products and ~~expected~~is allowed to bereturn ~~harvested~~products close to their expiration dates to its suppliers. Any loss on damaged items is immaterial and ~~sold~~will inbe ~~several~~recognized ~~years~~immediately. As a result, no reserves were made for inventory as of ~~June~~September 30, 2020 and March 31, 2020~~, farmland assets are valued as follows:~~.

	June 30,			March 31,
	2020			2020
Farmland assets	$	2,191,944		$	2,177,606
Less: Impairment*		(1,439,687	)		(1,435,259	)
Farmland assets, net	$	752,257		$	742,347

Note 11 – FARMLAND ASSETS

*Farmland Asassets ofconsist ~~March 31, 2018, the book value~~ of ~~the~~ginkgo ~~Ginkgo~~ trees planted in ~~Qianhong~~2012 ~~Agriculture’s~~and ~~farmland,~~expected ~~including~~to ~~their~~be ~~cultivation~~harvested ~~cost~~ and ~~land~~sold ~~lease~~in ~~amortization~~several ~~expense, was approximately $2,416,839~~years. ~~Based~~As ~~on an independent appraisal report, the value~~ of ~~the~~September ~~Ginkgo trees was approximately $796~~30,~~286~~ as2020 ofand March 31, ~~2018. As a result~~2020, ~~the~~farmland ~~Company~~assets are ~~recorded~~valued ~~an agricultural inventory impairment of $1,620,553~~ as of March 31, 2018. The difference between the recorded impairment loss and impairment balance in the above is primarily due to the exchange rate variance over years. There are no leasehold impairment expense in the three months ended June 30, 2020 and 2019.follows:

Note 12 – LONG TERM REFUNDABLE DEPOSITS, LANDLORDS

	September 30,			March 31,
	2020			2020
Farmland assets	$	2,285,712		$	2,177,606
Less: Impairment*		(1,496,074	)		(1,435,259	)
Farmland assets, net	$	789,638		$	742,347

* As of ~~June~~March 3031, ~~2020~~2018, ~~and~~the ~~March~~book ~~31,~~value ~~2020,~~of ~~long~~the ~~term~~Ginkgo ~~deposits~~trees ~~amounted~~planted toin $1Qianhong Agriculture’s farmland,~~447,547~~ including their cultivation cost and land lease amortization expense, was approximately $12,~~456~~416,~~384~~839. Based on an independent appraisal report, ~~respectively.~~the ~~Long~~value ~~term~~of ~~deposits are~~the ~~money~~Ginkgo ~~deposited~~trees ~~with~~was approximately $796,286 oras ~~advanced~~of toMarch 31, ~~landlords~~2018. ~~for~~As a result, the ~~purpose~~Company recorded an agricultural inventory impairment of ~~securing~~$1,620,553 ~~retail~~as ~~store~~of ~~leases~~March ~~that~~31, 2018. The difference between the ~~Company~~recorded ~~does~~impairment ~~not anticipate~~loss ~~being~~and ~~returned~~impairment ~~within~~balance in the ~~next~~above ~~twelve~~is ~~months.~~primarily ~~Most~~due ofto the ~~Company’s~~exchange ~~landlords~~rate ~~require~~variance aover ~~minimum~~years. ~~payment~~There ofare ~~nine months’~~no ~~rent,~~leasehold ~~paid~~impairment upexpense ~~front~~in the six months ended September 30, ~~plus~~2020 ~~additional~~and ~~deposits~~2019.

Note 13 12 – ~~OTHER~~LONG ~~NONCURRENT~~TERM ~~ASSETS~~REFUNDABLE DEPOSITS, LANDLORDS

~~Other~~As of September 30, 2020 and March 31, ~~noncurrent~~2020, ~~assets~~long ~~consisted~~term deposits amounted to $1,533,640 and $1,456,384, respectively. Long term deposits are money deposited with, or advanced to, landlords for the purpose of securing retail store leases that the ~~following:~~Company does not anticipate being returned within the next twelve months. Most of the Company’s landlords require a minimum payment of nine months’ rent, paid up front, plus additional deposits.

	June 30, 2020		March 31, 2020
Forest land use rights*	$	985,156	$	994,558
Others		64,028		52,205
Total	$	1,049,184	$	1,046,763

Note 13 – OTHER NONCURRENT ASSETS

*Other ~~The~~noncurrent ~~prepayment~~assets ~~for~~consisted ~~lease~~ of forest land use rights is a payment made to a local government in connection with entering into an operating land lease agreement. The land is currently used to cultivate Ginkgo trees. The forest rights certificate from the ~~local village extends the life of the lease to January 31, 2060.~~ following:

The amortization of the prepayment for the lease of forest land use right was approximately $12,441 and $6,885 for the three months ended June 30, 2020 and 2019, respectively.

	September 30, 2020		March 31, 2020
Forest land use rights*	$	1,010,782	$	994,558
Others		66,318		52,205
Total	$	1,077,100	$	1,046,763

* The ~~Company’s~~ ~~amortizations of the~~ prepayment for lease of forest land use ~~right~~rights ~~for~~is a payment made to a local government in connection with entering into an operating land lease agreement. The land is currently used to cultivate Ginkgo trees. The forest rights certificate from the ~~next~~local ~~five~~village ~~years~~extends ~~and~~the ~~thereafter~~life ~~are~~of asthe ~~follows:~~lease to January 31, 2060.

For the year ending June 30,	Amount
2021	$	26,515
2022		26,515
2023		26,515
2024		26,515
2025		26,515
Thereafter		852,581

The amortization of the prepayment for the lease of forest land use right was approximately $6,790 and $6,697 for the three months ended September 30, 2020 and 2019, respectively. The amortization of the prepayment for the lease of forest land use right was approximately $13,418 and $13,582 for the six months ended September 30, 2020 and 2019, respectively.

22The Company’s amortizations of the prepayment for lease of land use right for the next five years and thereafter are as follows:

Note 14 – LEASES

For the year ending September 30,	Amount
2021	$	26,838
2022		26,838
2023		26,838
2024		26,838
2025		26,838
Thereafter	$	876,592

The Company leases most of its retail stores and corporate offices under operating leases, typically with initial terms of 3 to 10 years. Usually within one to three months prior to the expiration date of a lease, the Company is required to notify the lessor and has a priority to continue renting the lease property if a lessor intends to lease property. The lease itself does not have restriction or covenants. If both parties agree to continue, a new lease contract with new lease terms has to been signed by both parties. Usually the rent may increase year by year based on the lease contract. Sublease is typically not allowed. Any damage, if made by the lessee, to the property and equipment within the property has to been fixed or reimbursed by the lessee. The Company does not have any leases entered into but which have not yet commenced. The net lease cost for the three months ended June 30, 2020 is $1,671,118. The Company does not have finance lease according to the definition of ASU 2016-02, Leases (Topic 842). Supplemental cash flow information related to leases for the three months ended June 30, 2020 is as follows:22

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	1,671,118
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		-

Note 14 – LEASES

~~Supplemental~~The Company leases most of its retail stores ~~balance~~and ~~sheet~~corporate ~~information~~offices ~~related~~under operating leases, typically with initial terms of 3 to 10 years. Usually within one to three months prior to the expiration date of a lease, the Company is required to notify the lessor and has a priority to continue renting the lease property if a lessor intends to lease property. The lease itself does not have restriction or covenants. If both parties agree to continue, a new lease contract with new lease terms has to been signed by both parties. Usually the rent may increase year by year based on the lease contract. Sublease is typically not allowed. Any damage, if made by the lessee, to the property and equipment within the property has to been fixed or reimbursed by the lessee. The Company does not have any leases asentered into but which have not yet commenced. The net lease cost for the six months ended September 30, 2020 is $3,425,594. The Company does not have finance lease according to the definition of ASU 2016-02, Leases (Topic 842). Supplemental cash flow information related to leases for the ~~June~~six months ended September 30, 2020 is as follows:

Operating leases:
Cash paid for amounts included in the measurement of lease liabilities:
Operating lease right-of-use assets	$	19,351,247
Operating cash flows paid for operating leases	$	3,425,594
Current portion of operating lease liabilities	$	466,213
Right-of-use assets obtained in exchange for lease obligations:
Long-term operating lease liabilities		16,917,159
Operating leases		-
Total operating lease liabilities	$	17,383,372
Weighted average remaining lease term
Operating leases		3.2
Weighted average discount rate
Operating leases		4.19	%

~~The following~~Supplemental ~~table~~balance ~~summarizes~~sheet ~~the~~information ~~maturity~~related ofto ~~lease liabilities under operating~~ leases as of ~~June~~ September 30, 2020 is as follows:

	Operating
Operating leases:
For the year ending June 30,	Leases
Operating lease right-of-use assets	$	19,946,821
2021	$	485,355
Current portion of operating lease liabilities	$	1,056,181
2022		6,345,189
Long-term operating lease liabilities		16,500,499
2023		4,510,762
Total operating lease liabilities	$	17,556,680
2024		3,277,971
Weighted average remaining lease term
2025		1,995,568
Operating leases		2.9
Thereafter		2,575,035
Weighted average discount rate
Total lease payments		19,189,880
Operating leases		4.19	%
Less: imputed interest		(1,806,508	)
Total lease liabilities	$	17,383,372

23The following table summarizes the maturity of lease liabilities under operating leases as of September 30, 2020:

Note 15 – INTANGIBLE ASSETS

	Operating
For the year ending September 30,	Leases
2021	$	1,070,963
2022		6,245,719
2023		4,440,048
2024		3,226,584
2025		1,964,284
Thereafter		2,534,667
Total lease payments		19,482,265
Less: imputed interest		(1,925,585	)
Total lease liabilities	$	17,556,680

~~Net intangible assets consisted of the following at:~~23

	June 30, 2020			March 31, 2020
License (1)	$	2,246,880		$	2,220,512
Software(2)		1,086,366			1,083,024
Land use rights (3)		1,379,337			1,375,095
Total intangible assets		4,712,583			4,678,631
Less: accumulated amortization		(735,234	)		(667,633	)
Less: impairment(4)		(618,942	)		(617,038	)
Intangible assets, net	$	3,358,407		$	3,393,960

Note 15 – INTANGIBLE ASSETS

~~Amortization expense~~Net ofintangible ~~intangibles~~assets ~~amounted~~consisted toof ~~$65,389 and $58,466 for~~ the following ~~three months ended June 30, 2020 and 2019, respectively.~~at:

(1)	This represents the fair value of the licenses of insurance applicable drugstores acquired from a variety of drugstores such as Sanhao Pharmacy and several local stores. The licenses allow patients to pay by using insurance cards at stores. The stores are reimbursed from the Human Resource and Social Security Department of Hangzhou City. In 2014, the Company acquired Sanhao Pharmacy, a drugstore chain. In September 2017, the Company acquired several new stores for the purpose of the Municipal Social Medical Reimbursement Qualification Certificates. On January 9, 2020, the Company acquired a local drugstore chain. The acquired drugstores ceased their stores’ business and liquidate all of the stores’ accounts after Jiuzhou Pharmacy acquired them. In March 2020, the drugstore chain has dissolved and its certificates were transferred to new stores opened at the same time.
		September 30, 2020			March 31, 2020
(2)	These balances primarily include the SAP ERP system, the Internet Clinic Diagnosis Terminal system and the Chronic Disease Management system. In 2017, we have installed a leading ERP system, SAP from Germany. SAP is a well-known management system used by many fortune 500 companies. It is being amortized over three years since its installation. In 2020, we have installed an internet Clinic Diagnosis System used to strengthen our ability to perform online diagnosis which may increase more customer spending and a Chronic Disease Management System used to better manage and monitor our members’ health. As of June 30, 2020, the SAP system has a net value of $135,698 (RMB 959,352), the internet Clinic Diagnosis System has a net value of approximately $380,313 (RMB 2,688,709), the Chronic Disease Management System has a net value of approximately $16,462 (RMB 116,379) .
License (1)		$	2,337,529		$	2,220,512
(3)	In July 2013, the Company purchased the land use rights of a plot of land in Lin’an, Hangzhou, intended for the establishment of an herb processing plant in the future. However, as the Company’s farming business in Lin’an has not grown, the Company does not expect completion of the plant in the near future.
Software(2)			1,162,623			1,083,024
(4)	In the year ended March 31, 2020, the company evaluated the licenses of insurance applicable drugstores acquired in the past based on the discounted positive cash value. Due to the stricter government insurance policy in fiscal year 2021, the value of these licenses has declined. As a result, the company recorded an impairment. There are no impairment expense in the three months ended June 30, 2020 and 2019.
Land use rights (3)			1,433,361			1,375,095
Total intangible assets			4,933,513			4,678,631
Less: accumulated amortization			(850,283	)		(667,633	)
Less: impairment(4)			(643,184	)		(617,038	)
Intangible assets, net		$	3,440,046		$	3,393,960

24Amortization expense of intangibles amounted to $84,608 and $44,423 for the three months ended September 30, 2020 and 2019, respectively. Amortization expense of intangibles amounted to $149,997 and $102,889 for the six months ended September 30, 2020 and 2019, respectively.

Note 16 – NOTES PAYABLE

(1)	This represents the fair value of the licenses of insurance applicable drugstores acquired from a variety of drugstores such as Sanhao Pharmacy and several local stores. The licenses allow patients to pay by using insurance cards at stores. The stores are reimbursed from the Human Resource and Social Security Department of Hangzhou City. In 2014, the Company acquired Sanhao Pharmacy, a drugstore chain. In September 2017, the Company acquired several new stores for the purpose of the Municipal Social Medical Reimbursement Qualification Certificates. On January 9, 2020, the Company acquired a local drugstore chain. The acquired drugstores ceased their stores’ business and liquidated all of the stores’ accounts after Jiuzhou Pharmacy acquired them. In March 2020, the drugstore chain has dissolved and its certificates were transferred to new stores opened at the same time.

(2)	These balances primarily include the SAP ERP system, the Internet Clinic Diagnosis Terminal system and the Chronic Disease Management system. In 2017, the Company installed a leading ERP system, SAP from Germany. SAP is a well-known management system used by many fortune 500 companies. It is being amortized over three years since its installation. In 2020, the Company installed an internet Clinic Diagnosis System used to strengthen its ability to perform online diagnosis which may increase more customer spending and a Chronic Disease Management System used to better manage and monitor its members’ health. As of September 30, 2020, the SAP system has a net value of $739,257 (RMB 5,029,372), the internet Clinic Diagnosis System has a net value of approximately $395,208 (RMB 2,688,709), and the Chronic Disease Management System has a net value of approximately $17,106 (RMB 116,379).

(3)	In July 2013, the Company purchased the land use rights of a plot of land in Lin’an, Hangzhou, intended for the establishment of an herb processing plant in the future. However, as the Company’s farming business in Lin’an has not grown, the Company does not expect the completion of the plant in the near future.

(4)	In the year ended March 31, 2020, the Company evaluated the licenses of insurance applicable drugstores acquired in the past based on the discounted positive cash value. Due to the stricter government insurance policy in fiscal year 2021, the value of these licenses has declined. As a result, the Company recorded an impairment. There are no impairment expenses in the six months ended September 30, 2020 and 2019.

~~The Company has credit facilities with Hangzhou United Bank (“HUB”) that provided working capital in the form of the following bank acceptance notes at June 30, 2020 and March 31, 2020:~~24

Origination

Maturity

June 30,

March 31,

Beneficiary

Endorser

date

2020

Jiuzhou Pharmacy(1)

HUB

10/09/19

04/09/20

3,478,259

Jiuzhou Pharmacy(1)

HUB

11/06/19

05/06/20

164,582

Jiuzhou Pharmacy(1)

HUB

12/05/19

06/05/20

3,106,474

Jiuzhou Pharmacy(1)

HUB

12/31/19

06/30/20

2,289,308

Jiuzhou Pharmacy(1)

HUB

01/06/20

07/06/20

129,856

129,457

Jiuzhou Pharmacy(1)

HUB

02/19/20

08/19/20

5,120,844

5,105,096

Jiuzhou Pharmacy(1)

HUB

03/10/20

09/10/20

5,341,297

5,324,871

Jiuxin Medicine(1)

HUB

12/26/19

06/26/20

1,371,992

Jiuxin Medicine(1)

HUB

12/31/19

06/30/20

3,943,776

Jiuxin Medicine(1)

HUB

03/31/20

09/30/20

1,697,376

1,692,156

Jiuzhou Pharmacy(1)

HUB

04/10/20

10/10/20

2,969,129

Jiuzhou Pharmacy(1)

HUB

04/29/20

10/29/20

546,874

Jiuzhou Pharmacy(1)

HUB

05/09/20

11/09/20

3,803,552

Jiuzhou Pharmacy(1)

HUB

06/24/20

12/24/20

1,405,995

Jiuzhou Pharmacy(1)

HUB

06/30/20

12/30/20

891,122

Jiuxin Medicine(1)

HUB

06/30/20

12/30/20

4,809,329

Total

26,715,374

26,605,971

Note 16 – NOTES PAYABLE

~~(1) As of June 30, 2020, the Company had $26,715,374 (RMB 188,870,639) of notes payable from HUB.~~ The Company ishas ~~required~~credit tofacilities ~~hold restricted cash in the amount of $14,913,825 (RMB 105,684,113)~~ with Hangzhou ~~HUB~~United asBank ~~collateral against these bank notes. Included in the restricted cash is a total of $8,770,422 three-year deposit~~ (~~RMB 62,150,000) deposited into~~ “HUB ~~as a collateral for current and future notes payable from HUB. As of March 31, 2020, the Company had $26,605,971 (RMB 188,677,437~~”) ofthat ~~notes~~provided ~~payable~~working ~~from~~capital ~~HUB. The Company is required to hold restricted cash~~ in the ~~amount~~form of ~~$14,596,179~~the ~~(RMB~~following ~~103,509,456) with HUB as collateral against these~~ bank acceptance notes. ~~Included~~at ~~in the restricted cash is a total of $8~~September 30,~~763,958~~ ~~three-year~~2020 ~~deposit~~and ~~(RMB~~March 6231,~~150,000)~~ ~~deposited into HUB as a collateral for current and future notes payable from HUB.~~2020:

As of June 30, 2020, the Company had a credit line of approximately $12.55 million in the aggregate from HUB. By putting up a three-year deposit of $8.77 million and the additional short-term deposits of $6.14 million deposited in the banks, the total credit line was $27.46 million. As of June 30, 2020, the Company had approximately $26.72 million of bank notes payable and approximately $0.74 million bank credit line was still available for further borrowing. The bank notes are secured by three shops of Jiuzhou Pharmacy and guaranteed by the Company’s major shareholders.

Origination

Maturity

September 30,

March 31,

Beneficiary⁽¹⁾

Endorser

date

2020

Jiuzhou Pharmacy

HUB

10/09/19

04/09/20

3,478,259

Jiuzhou Pharmacy

HUB

11/06/19

05/06/20

164,582

Jiuzhou Pharmacy

HUB

12/05/19

06/05/20

3,106,474

Jiuzhou Pharmacy

HUB

12/31/19

06/30/20

2,289,308

Jiuzhou Pharmacy

HUB

01/06/20

07/06/20

129,457

Jiuzhou Pharmacy

HUB

02/19/20

08/19/20

5,105,096

Jiuzhou Pharmacy

HUB

03/10/20

09/10/20

5,324,871

Jiuxin Medicine

HUB

12/26/19

06/26/20

1,371,992

Jiuxin Medicine

HUB

12/31/19

06/30/20

3,943,776

Jiuxin Medicine

HUB

03/31/20

09/30/20

1,692,156

Jiuzhou Pharmacy

HUB

04/10/20

10/10/20

3,085,420

Jiuzhou Pharmacy

HUB

04/29/20

10/29/20

568,293

Jiuzhou Pharmacy

HUB

05/09/20

11/09/20

3,952,523

Jiuzhou Pharmacy

HUB

06/24/20

12/24/20

1,461,063

Jiuzhou Pharmacy

HUB

06/30/20

12/30/20

926,024

Jiuzhou Pharmacy

HUB

11/08/20

02/11/21

4,185,848

Jiuzhou Pharmacy

HUB

08/31/20

03/01/21

455,663

Jiuzhou Pharmacy

HUB

09/08/20

03/08/21

3,695,447

Jiuxin Medicine

HUB

06/30/20

12/30/20

4,997,691

Total

23,327,972

26,605,971

25(1) As of September 30, 2020, the Company had $23,327,972 (RMB 158,706,646) of notes payable from HUB. The Company is required to hold restricted cash in the amount of $13,359,236 (RMB 90,886,577) with HUB as collateral against these bank notes. Included in the restricted cash is a total of $8,326,870 three-year deposit (RMB 56,650,000) deposited into HUB as a collateral for current and future notes payable from HUB. As of March 31, 2020, the Company had $26,605,971 (RMB 188,677,437) of notes payable from HUB. The Company is required to hold restricted cash in the amount of $14,596,179 (RMB 103,509,456) with HUB as collateral against these bank notes. Included in the restricted cash is a total of $8,763,958 three-year deposit (RMB 62,150,000) deposited into HUB as a collateral for current and future notes payable from HUB.

~~Note~~As 17of –September ~~LOAN~~30, ~~PAYABLE~~2020, the Company had a credit line of approximately $13.08 million in the aggregate from HUB. By putting up a three-year deposit of $8.33 million and the additional short-term deposits of $5.03 million deposited in the banks, the total credit line was $26.44 million. As of September 30, 2020, the Company had approximately $23.33 million of bank notes payable and approximately $3.11 million bank credit line was still available for further borrowing. The bank notes are secured by three drugstores of Jiuzhou Pharmacy and guaranteed by the Company’s major shareholders.

On August 2, 2019 and December 11, 2019, the Company borrowed $717,810 and $6,460,290 from Haihui Commercial, respectively. After deducting processing fee and deposits which are refundable at the end of loan period, the Company received $617,317 and $5,878,864 respectively. The Company is required to pledge accounts receivable of three drugstores to Haihui Commercial. As of June 30, 2020, the remaining loan balance is $5,851,778. The Company is scheduled to make monthly repayments, among which $2,300,271 is due within a year. The Company has an option to pay off the debts earlier than the repayment schedule upon approval from Haihui Commercial.25

Note 18 17 – ~~TAXES~~LOAN PAYABLE

~~Income~~On August 2, 2019 and December 11, ~~tax~~2019, the Company borrowed $717,810 and $6,460,290 from Haihui Commercial, respectively. After deducting processing fee and deposits which are refundable at the end of loan period, the Company received $617,317 and $5,878,864 respectively. The Company is required to pledge accounts receivable of three drugstores to Haihui Commercial. As of September 30, 2020, the remaining loan balance is $5,465,102. The Company is scheduled to make monthly repayments, among which $2,375,729 is due within a year. The Company has an option to pay off the debts earlier than the repayment schedule upon approval from Haihui Commercial.

~~Income~~Note ~~tax~~18 ~~expense~~– includes a provision for federal, state and foreign taxes based on the annual estimated effective tax rate applicable to the Company and its subsidiaries, adjusted for items which are considered discrete to the period.TAXES

~~The~~Income ~~effective~~ tax rates on income before income taxes for the three months ended June 30, 2020 was (17.4)%. The (17.4) % rate adjustments for the three months ended June 30, 2020 represent expenses that primarily include stock option expenses and legal, accounting and other expenses incurred by the Company that are not deductible for PRC income tax. The effective tax rate is based on forecasted annual results and these amounts may fluctuate significantly through the rest of the year as a result of the unpredictable impact of COVID-19 on its operating activities.

~~The~~Income ~~effective~~ tax ~~rate~~expense onincludes ~~income~~a ~~before~~provision ~~income taxes~~ for ~~the~~federal, ~~three~~state ~~months~~and ~~ended~~foreign ~~June~~taxes ~~30,~~based ~~2019~~on ~~was~~the ~~(0.4)%.~~annual ~~The~~estimated ~~(0.4)%~~effective tax rate ~~adjustments~~applicable ~~for~~to the ~~three~~Company ~~months~~and ~~ended~~its ~~June 30~~subsidiaries, ~~2019~~adjusted ~~represent~~for ~~expenses~~items ~~that~~which ~~primarily~~are ~~include~~considered ~~stock~~discrete ~~option~~to ~~expenses and legal, accounting and other expenses incurred by~~ the ~~Company that are not deductible for PRC income tax~~period.

The ~~Company~~effective ~~has~~tax ~~recorded~~rate $0based ~~unrecognized~~on ~~benefit~~forecasted annual asresults offor ~~June~~the FYE 2021 is 5.46%. The effective tax rates on income before income taxes for the six months ended September 30, 2020 was (2.1)%. OnThe (2.1)% rate adjustments for the ~~information~~six ~~currently~~months ~~available~~ended September 30, 2020 represent expenses that primarily include stock option expenses and legal, accounting and other expenses incurred by the Company ~~does~~that are not ~~anticipate~~deductible afor ~~significant~~PRC income ~~increase~~tax. orThe ~~decrease~~effective totax ~~its~~rate ~~unrecognized~~is based on forecasted annual results and these amounts may fluctuate significantly through ~~benefit~~the ~~within~~rest of the ~~next~~year 12as ~~months~~a result of the unpredictable impact of COVID-19 on its operating activities.

~~Note~~The effective tax rate on income before 19income –taxes ~~POSTRETIREMENT~~for ~~BENEFITS~~the six months ended September 30, 2019 was (0.4)%. The (0.4)% rate adjustments for the six months ended September 30, 2019 represent expenses that primarily include stock option expenses and legal, accounting and other expenses incurred by the Company that are not deductible for PRC income tax.

~~Regulations in~~A ~~the~~reconciliation ~~PRC~~of ~~require~~ the ~~Company~~income totax ~~contribute to a defined contribution retirement plan for all permanent employees. The contribution~~provision ~~for~~at ~~each employee is based on a percentage of~~ the ~~employee’s~~federal ~~current~~statutory ~~compensation~~rate ~~as required by the local government. The Company contributed $204,538~~ and ~~$341,024 in employment benefits and pension for~~ the ~~three~~effective ~~months~~rate ~~ended~~is ~~June~~as ~~30, 2020 and 2019, respectively.~~follows:

	For the six months Ended September 30
	2020			2019
U.S. Statutory rates		21.0	%		21.0	%
Foreign income not recognized in the U.S.		(21.0	)		(21.0	)
China income taxes		25.0			25.0
Change in valuation allowance		(25.0	)		(25.0	)
Non-deductible expenses-permanent difference		(2.1	)		(0.4	)
Effective tax rate		(2.1	)%		(0.4	)%

~~Note~~The Company has recorded $0 unrecognized 20benefit –as ~~RELATED~~of ~~PARTY~~September ~~TRANSACTIONS~~30, ~~AND~~2020. ~~ARRANGEMENTS~~On the information currently available, the Company does not anticipate a significant increase or decrease to its unrecognized benefit within the next 12 months.

~~Amounts payable~~Note to19 ~~related~~– ~~parties~~POSTRETIREMENT ~~are summarized as follows:~~BENEFITS

		June 30, 2020				March 31, 2020
Due to a director and CEO (1) :			491,300				490,218

Regulations in the PRC require the Company to contribute to a defined contribution retirement plan for all permanent employees. The contribution for each employee is based on a percentage of the employee’s current compensation as required by the local government. The Company contributed $255,252 and $340,297 in employment benefits and pension for the three months ended September 30, 2020 and 2019, respectively. The Company contributed $459,790 and $681,321 in employment benefits and pension for the six months ended September 30, 2020 and 2019, respectively.

~~(1) Due to foreign exchange restrictions, the Company’s director and CEO, Mr. Lei Liu personally lent U.S. dollars to the Company to facilitate its payments of expenses in the United States.~~26

~~The Company~~Note ~~leases~~20 ~~from~~– ~~Mr.~~RELATED ~~Lei~~PARTY ~~Liu a retail space; the lease expires in September 2020. Rent expenses totaled $6,532 and $6,785 for~~TRANSACTIONS ~~the~~AND ~~three months ended June 30, 2020 and 2019, respectively. The amounts owed under the lease for the three months ended June 30, 2020 and 2019 were not paid to Mr. Liu as of June 30, 2020.~~ARRANGEMENTS

~~On April~~Amounts ~~28,~~payable ~~2018, 10% of Jiuxin Medicine was sold~~ to ~~Hangzhou~~related ~~Kangzhou~~parties ~~Biotech Co. Ltd. for a total proceeds of approximately $75,643~~are ~~(RMB507,760).~~summarized ~~Mr.~~as ~~Lei Liu owns 51% of Hangzhou Kangzhou Biotech Co. Ltd.~~follows:

Note 21 – WARRANTS

		September 30, 2020				March 31, 2020
Due to a director and CEO ⁽¹⁾ :		$	574,103			$	490,218

~~In connection~~(1) ~~with~~Due ~~the~~to ~~registered~~foreign ~~direct~~exchange ~~offering closed on July 19~~restrictions, ~~2015,~~ the Company’s ~~issued~~director toand ~~an investor a warrant to purchase up to 600~~CEO,~~000~~ ~~shares~~Mr. ofLei ~~common~~Liu ~~stock~~personally atlent ~~an exercise price of $3~~U.~~10 per share~~S. ~~The~~dollars ~~warrant~~to ~~became exercisable on January 19, 2016 and will expire on January 18, 2021. In connection with~~ the ~~offering, the~~ Company ~~also issued a warrant~~ to facilitate its ~~placement~~payments ~~agent~~ of ~~this~~expenses ~~offering, pursuant to which the agent may purchase up to 6% of the aggregate number of shares of common stock sold~~ in ~~the~~ ~~offering, i.e. 72,000 shares. Such warrant has~~ the ~~same~~United ~~terms as the warrant issued to investor in the offering~~States.

~~On June~~The 1,Company ~~2020,~~leases ~~the~~from ~~investor~~Mr. ~~exercised~~Lei ~~25,000~~Liu ~~warrants~~a atretail space; the ~~price~~lease ofexpires ~~$3.10 per share~~ in ~~cash~~September 2020. AsRent ofexpenses ~~June~~totaled 30$6,691 ~~2020,~~and ~~647~~$6,~~000~~599 ~~warrants had~~for ~~not~~the ~~been~~three ~~exercised.~~months ~~The~~ended ~~fair~~September ~~value~~30, of2020 and ~~the~~2019, ~~warrants~~respectively. ~~issued~~Rent toexpenses ~~purchase~~totaled ~~647~~$13,~~000~~223 and ~~672~~$13,~~000~~384 ~~shares~~for asthe ofsix ~~June~~months ended September 30, 2020 and ~~March 31~~2019, ~~2020,~~respectively. The asamounts ~~described~~owed ~~above~~under ~~was~~the ~~estimated~~lease byfor ~~using~~ the ~~binominal~~six ~~pricing~~months ~~model~~ended ~~with~~September ~~the~~30, ~~following~~2020 ~~assumptions:~~and 2019 were not paid to Mr. Liu as of September 30, 2020.

	Common Stock Warrants			Common Stock Warrants
	June 30, 2020			March 31, 2020
Stock price	$	1.44		$	1.77
Exercise price	$	3.10		$	3.10
Annual dividend yield		-	%		-	%
Expected term (years)		0.56			0.81
Risk-free interest rate		0.18	%		0.71	%
Expected volatility		98.86	%		62.08	%

On April 28, 2018, 10% of Jiuxin Medicine was sold to Hangzhou Kangzhou Biotech Co. Ltd. for a total proceeds of approximately $75,643 (RMB507, 760). Mr. Lei Liu owns 51% of Hangzhou Kangzhou Biotech Co. Ltd.

~~Upon evaluation,~~Note ~~the~~21 ~~warrants~~– meet the definition of a derivative under FASB ASC 815, as the Company cannot avoid a net cash settlement under certain circumstances. Accordingly, the fair value of the warrants was classified as a liability of $64,090 as of March 31, 2020. For the three months ended June 30, 2020 and June 30, 2019, the Company recognized a loss of $4,890 and a gain of $403,555 for the investor warrant and placement agent warrant, from the change in fair value of the warrant liability. As a result, the warrant liability is carried on the consolidated balance sheets at the fair value of $68,980 for the investor warrant and placement agent warrant, collectively, as of June 30, 2020.WARRANTS

27In connection with the registered direct offering closed on July 19, 2015, the Company issued to an investor a warrant to purchase up to 600,000 shares of common stock at an exercise price of $3.10 per share. The warrant became exercisable on January 19, 2016 and will expire on January 18, 2021. In connection with the offering, the Company also issued a warrant to its placement agent of this offering, pursuant to which the agent may purchase up to 6% of the aggregate number of shares of common stock sold in the offering, i.e. 72,000 shares. Such warrant has the same terms as the warrant issued to the investor in the offering.

~~Note~~On June 1, 2020, one investor exercised 2225,000 –warrants ~~EMPLOYEE~~at ~~DEPOSITS~~the price of $3.10 per share in cash. As of September 30, 2020, 647,000 warrants had not been exercised. The fair value of the warrants issued to purchase 647,000 and 672,000 shares as of September 30, 2020 and March 31, 2020, as described above was estimated by using the binominal pricing model with the following assumptions:

To encourage operating team, which consists of doctors and nurses, to devote their efforts to run clinics, Linjia Medical allows them to put deposits in the clinic where doctors and nurses work, and take shares in any profit of the clinic. The principal amounts of these deposits are refundable in the event the doctors and nurses leave the clinic. In order to properly reflect Linjia Medical’s liabilities, the Company reclassified the deposit of $14,145 (RMB100,000) and $70,507 (RMB500,000) as financial liability as of June 30, 2020 and March 31, 2020.

	Common Stock Warrants			Common Stock Warrants
	September 30, 2020			March 31, 2020

Stock price	$	0.97		$	1.77
Exercise price	$	3.10		$	3.10
Annual dividend yield		-	%		-	%
Expected term (years)		0.30			0.81
Risk-free interest rate		0.10	%		0.71	%
Expected volatility		158.08	%		62.08	%

~~Note~~Upon evaluation, the warrants meet the 23definition –of ~~STOCKHOLDER’S~~a ~~EQUITY~~derivative under FASB ASC 815, as the Company cannot avoid a net cash settlement under certain circumstances. Accordingly, the fair value of the warrants was classified as a liability of $64,090 as of March 31, 2020. For the three months ended September 30, 2020 and September 30, 2019, the Company recognized a gain of $32,674 and a gain of $6,865 for the investor warrant and placement agent warrant, from the change in fair value of the warrant liability. For the six months ended September 30, 2020 and September 30, 2019, the Company recognized a gain of $27,784 and a gain of $410,420 for the investor warrant and placement agent warrant, from the change in fair value of the warrant liability. As a result, the warrant liability is carried on the consolidated balance sheets at the fair value of $36,306 and $64,090 for the investor warrant and placement agent warrant, collectively, as of September 30, 2020 and March 31, 2020.

~~Common stock~~27

~~On April~~Note ~~15,~~22 ~~2019,~~– ~~the~~EMPLOYEE ~~Company closed a registered direct offering of 4,000,008 shares of common stock at $2.50 per share with gross proceeds of $10,000,020 from our effective shelf registration statement.~~DEPOSITS

~~On June~~To 1encourage operating team, ~~2020~~which consists of doctors and nurses, anto ~~investor~~devote ~~exercised~~their 25efforts to run clinics,~~000~~ ~~warrants~~Linjia atMedical allows them to put deposits in the ~~price~~clinic where doctors and nurses work, and take shares in any profit of $3the clinic.10 ~~per~~The ~~share~~principal amounts of these deposits are refundable in the ~~cash~~event the doctors and nurses leave the clinic. ~~The~~In order to properly reflect Linjia Medical’s liabilities, the Company reclassified ~~issued~~the 25deposit of $14,699 (RMB100,000) ~~shares~~ and $70,507 (RMB500,000) as financial liability as of ~~common~~September ~~stocks~~30, 2020 and March 31, 2020.

~~On June~~Note 3,23 ~~2020,~~– ~~the Company closed a registered direct offering of 5,000,004 shares of common stock at $2.00 per share with gross~~STOCKHOLDER’S ~~proceeds of $10,000,008 from its effective shelf registration statement.~~EQUITY

~~Stock warrants~~Common stock

~~Concurrent with~~On ~~the registered direct offering of common stock that closed on~~ April 15, 2019, the Company ~~issued to several investors in~~closed a ~~private~~registered ~~placement~~direct ~~warrants~~offering toof ~~purchase up to 3~~4,000,~~006~~008 shares of common stock. In connection with the offering, the Company also issued a warrant to its placement agent of this offering, pursuant to which the agent may purchase up to 6% of the aggregate number of shares of common stock sold in the offering, i.e. 240,000 shares at ~~an exercise price of~~ $32.~~125~~50 per share. ~~The~~with ~~warrant became~~gross ~~exercisable~~proceeds onof ~~October 11~~$10,000,020 ~~2019~~from ~~and~~its effective ~~will~~shelf ~~expire~~registration ~~on April 11, 2024~~statement.

~~Concurrent with~~On ~~the registered direct offering of common stock that closed on~~ June 31, 2020, ~~the~~an ~~Company~~investor ~~issued to several investors in a~~exercised ~~private~~25,000 ~~placement~~ warrants toat ~~purchase~~the upprice toof $3~~,750,003~~.10 ~~shares~~per ofshare ~~common~~in ~~stock~~cash. InThe ~~connection with the offering, the~~ Company ~~also~~ issued ~~a warrant to its placement agent of this offering~~25,000 ~~pursuant to which the agent may purchase up to 6.5% of the aggregate number of~~ shares of common stock ~~sold~~as ina ~~the offering, i~~result.~~e. 300,000 shares at an exercise price of $2.57 per share. The warrant becomes exercisable on December 2, 2020 and will expire on June 2, 2025.~~

~~Upon evaluation~~On June 3, ~~both~~2020, the ~~warrants~~Company ~~issued~~closed ina registered ~~April~~direct ~~2019~~offering ~~and~~of ~~June~~5,000,004 ~~2020~~shares ~~meet the definition~~ of ancommon ~~equity~~stock ~~transaction~~at ~~under~~$2.00 ~~FASBASC~~per ~~815. Accordingly,~~share ~~the~~with ~~fair~~gross ~~value~~proceeds of ~~the~~$10,000,008 ~~warrants~~from isits effective ~~recorded~~shelf asregistration ~~a part of additional paid-in capital~~statement.

Stock~~-based compensation~~ warrants

~~The Company~~Concurrent ~~accounts~~with ~~for share-based payment awards granted to employees and directors by recording compensation expense based on estimated fair values. The Company estimates~~ the ~~fair~~registered ~~value of share-based payment awards on the date of grant. The value of the~~direct ~~portion~~offering of ~~the~~common ~~award~~stock that isclosed ~~ultimately~~on ~~expected~~April to15, ~~vest~~2019, ~~is recognized as an expense over~~ the ~~requisite service periods in the~~ Company’s ~~consolidated~~issued ~~statements~~to ofseveral ~~operations.~~investors ~~Share-based~~in ~~awards~~a ~~are~~private ~~attributed~~placement warrants to ~~expenses~~purchase ~~using~~up ~~the~~to ~~straight-line~~3,000,006 ~~method over~~shares ~~the~~of ~~vesting~~common ~~period~~stock. ~~The~~In ~~Company~~connection ~~determines~~with the ~~value~~offering, ofthe ~~each~~Company ~~option~~also ~~award~~issued ~~that contains~~ a ~~market~~warrant ~~condition~~to ~~using a Monte~~its ~~Carlo~~placement ~~Simulation~~agent ~~valuation~~of ~~model~~this offering, ~~while~~pursuant ~~all~~to ~~other~~which ~~option awards are valued using~~ the ~~Black-Scholes~~agent ~~valuation~~may ~~model~~purchase asup ~~permitted under~~to ~~FASB~~6% ~~ASC~~of ~~718~~the ~~“Compensation~~aggregate -number ~~Stock~~of ~~Compensation.”~~shares ~~The assumptions used in calculating the fair value~~ of ~~share-based~~common ~~payment~~stock ~~awards~~sold ~~represent~~in the ~~Company’s~~offering, ~~best estimates~~i.e. ~~The~~240,000 ~~Company’s~~shares ~~estimates~~at ofan ~~the~~exercise ~~fair~~price ~~values~~ of ~~stock~~$3.125 ~~options granted~~per ~~and the resulting amounts of~~ share~~-based~~. ~~compensation~~The ~~recognized~~warrant ~~may~~became beexercisable ~~impacted~~on ~~by certain variables including stock~~October ~~price volatility~~11, ~~employee~~2019 ~~stock~~and ~~option~~will ~~exercise~~expire ~~behaviors,~~on ~~additional~~April ~~stock option modifications~~11, ~~estimates of forfeitures, and the related income tax impact~~2024.

~~Stock~~Concurrent with the registered direct ~~option~~offering of common stock that closed on June 3, 2020, the Company issued to several investors in a private placement warrants to purchase up to 3,750,003 shares of common stock. In connection with the offering, the Company also issued warrants to its placement agent of this offering, pursuant to which the agent may purchase up to 6.5% of the aggregate number of shares of common stock sold in the offering, i.e. 300,000 shares at an exercise price of $2.57 per share. The warrant becomes exercisable on December 2, 2020 and will expire on June 2, 2025.

~~On November~~Upon 18evaluation, ~~2014,~~both the ~~Company~~warrants ~~granted~~issued in aApril ~~total~~2019 ofand ~~967,000~~June ~~shares~~2020 ofmeet ~~stock options under~~ the ~~Plan~~definition ~~to a group~~ of aan ~~total~~equity oftransaction 46under ~~grantees including~~FASBASC ~~directors, officers and employees~~815. ~~The exercise price of the stock option is $2.50. The option vests on November 18~~Accordingly, ~~2017,~~ ~~provided that~~ the ~~grantees~~fair ~~are~~value ~~still~~of ~~employed by~~ the ~~Company on such a date. The options will be exercisable for five years~~ ~~from~~warrants ~~the~~is ~~vesting date, or November 18, 2017 until November 17, 2022. For the three months ended June 30, 2020 and 2019, none was~~ recorded as ~~compensation~~a ~~expense.~~part As of ~~June~~additional ~~30,~~paid-in ~~2020, all compensation costs related to stock option compensation arrangements granted have been recognized~~capital.

28Stock-based compensation

~~Statutory~~The Company accounts for share-based payment ~~reserves~~awards granted to employees and directors by recording compensation expense based on estimated fair values. The Company estimates the fair value of share-based payment awards on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s consolidated statements of operations. Share-based awards are attributed to expenses using the straight-line method over the vesting period. The Company determines the value of each option award that contains a market condition using a Monte Carlo Simulation valuation model, while all other option awards are valued using the Black-Scholes valuation model as permitted under FASB ASC 718 “Compensation - Stock Compensation.” The assumptions used in calculating the fair value of share-based payment awards represent the Company’s best estimates. The Company’s estimates of the fair values of stock options granted and the resulting amounts of share-based compensation recognized may be impacted by certain variables including stock price volatility, employee stock option exercise behaviors, additional stock option modifications, estimates of forfeitures, and the related income tax impact.

~~Statutory reserves~~Stock represent restricted retained earnings. Based on their legal formation, the Company is required to set aside 10% of its net income as reported in their statutory accounts on an annual basis to the Statutory Surplus Reserve Fund (the “Reserve Fund”). Once the total amount set aside in the Reserve Fund reaches 50% of the entity’s registered capital, further appropriations become discretionary. The Reserve Fund can be used to increase the entity’s registered capital upon approval by relevant government authorities or eliminate its future losses under PRC GAAP upon a resolution by its board of directors. The Reserve Fund is not distributable to shareholders, as cash dividends or otherwise, except in the event of liquidation.option

~~Appropriations~~On November 18, 2014, the Company granted a total of 967,000 shares of stock options under the Plan to a group of a total of 46 grantees including directors, officers and employees. The exercise price of the ~~Reserve~~stock ~~Fund~~option is $2.50. The option vests on November 18, 2017, provided that the grantees are ~~accounted~~still ~~for~~employed asby the Company on such a ~~transfer~~date. The options will be exercisable for five years from ~~unrestricted~~the ~~earnings~~vesting todate, ~~statutory~~or ~~reserves~~November 18, 2017 until November 17, 2022. ~~During~~For the ~~three~~six months ended ~~June~~September 30, 2020 and 2019, ~~the~~none ~~Company~~was ~~did~~recorded ~~not~~as ~~make~~compensation ~~appropriations~~expense. As of September 30, 2020, all compensation costs related to ~~statutory~~stock ~~reserves~~option compensation arrangements granted have been recognized.

~~There are no legal requirements in the PRC to fund the Reserve Fund by transfer of cash to any restricted accounts, and the Company does not do so.~~28

~~Note 24~~Statutory ~~– LOSS PER SHARE~~reserves

~~The Company~~Statutory ~~reports~~reserves represent restricted retained earnings. ~~per~~Based ~~share~~on intheir ~~accordance~~legal ~~with~~formation, the ~~provisions~~Company is required to set aside 10% of ~~the~~its ~~FASB’s~~net ~~related~~income ~~accounting~~as ~~standard.~~reported ~~This~~in ~~standard~~their ~~requires~~statutory ~~presentation~~accounts ofon ~~basic~~an ~~and~~annual ~~diluted~~basis ~~earnings~~to ~~per~~the ~~share~~Statutory inSurplus ~~conjunction~~Reserve ~~with~~Fund (the ~~disclosure~~“Reserve ofFund”). Once the ~~methodology~~total ~~used~~amount set aside in ~~computing such~~the ~~earnings~~Reserve ~~per~~Fund ~~share.~~reaches ~~Basic~~50% ~~earnings~~of ~~per~~the ~~share~~entity’s ~~excludes~~registered ~~dilution~~capital, ~~but~~further ~~includes~~appropriations ~~vested~~become ~~restricted~~discretionary. The ~~stocks~~Reserve ~~and~~Fund iscan ~~computed~~be ~~by dividing~~used ~~income~~to ~~available~~increase tothe ~~common~~entity’s ~~stockholders~~registered bycapital ~~the~~upon ~~weighted~~approval ~~average~~by ~~common~~relevant ~~shares~~government ~~outstanding~~authorities or ~~during~~eliminate ~~the~~its ~~period.~~future ~~Diluted earnings~~losses ~~per~~under ~~share~~PRC ~~takes~~GAAP ~~into~~upon ~~account~~a ~~the~~resolution ~~potential~~by ~~dilution~~its ~~that~~board ~~could~~of ~~occur~~directors. ifThe ~~securities~~Reserve orFund ~~other~~is ~~contracts~~not distributable to ~~issue~~shareholders, ~~common stock~~as ~~were~~cash ~~exercised~~dividends ~~and~~or ~~converted~~otherwise, ~~into~~except ~~common~~in ~~stock~~the event of liquidation.

~~The~~Appropriations to the Reserve Fund are ~~following~~accounted isfor as a ~~reconciliation~~transfer offrom unrestricted earnings to statutory reserves. During the ~~basic~~six months ended September 30, 2020 and 2019, ~~diluted~~the ~~(loss)~~Company ~~earnings~~did ~~per~~not ~~share~~make ~~computation:~~appropriations to statutory reserves.

	The three months ended June 30,
	2020			2019
Net loss attributable to controlling interest	$	(231,509	)	$	(2,134,951	)
Weighted average shares used in basic computation		34,428,271			32,453,269
Diluted effect of stock options and warrants		-			-
Weighted average shares used in diluted computation		34,428,271			32,453,269
Loss per share – Basic:		-			-
Net loss attributable to controlling interest	$	(0.01	)	$	(0.07	)
Loss per share – Diluted:
Net loss attributable to controlling interest	$	(0.01	)	$	(0.07	)

There are no legal requirements in the PRC to fund the Reserve Fund by transfer of cash to any restricted accounts, and the Company does not do so.

~~For the~~Note ~~three~~24 ~~months~~– ~~ended~~LOSS ~~June~~PER 30, 2020, 967,000 shares underlying employee stock options and 575,000 shares underlying outstanding purchase options to an investor, and 72,000 shares underlying outstanding purchase option to an investment placement agent were excluded from the calculation of diluted loss per share as the options were anti-dilutive.SHARE

~~Note~~The Company reports earnings per share 25in –accordance ~~SEGMENTS~~with the provisions of the FASB’s related accounting standard. This standard requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution, but includes vested restricted stocks and is computed by dividing income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock.

The ~~Company~~ ~~operates~~following ~~within~~is ~~four~~a ~~main~~reconciliation ~~reportable~~of ~~segments: retail drugstores, online pharmacy, drug wholesale and herb farming. The retail drugstores segment sells prescription and over-~~the~~-counter (“OTC”) medicines, TCM, dietary supplements, medical~~ ~~devices,~~basic and ~~sundry~~diluted items to retail customers. The online pharmacy sells OTC drugs, dietary supplements, medical devices and sundry items to customers through several third-party platforms such as Alibaba’s Tmall, JD.com and Amazon.com, and the Company’s own platform all over China. The drug wholesale segment includes supplying the Company’s own retail drugstores with prescription and OTC medicines, TCM, dietary supplement, medical devices and sundry items (~~which sales have been eliminated as intercompany transactions~~loss), ~~and~~earnings ~~also~~per ~~selling~~share them to other drug vendors and hospitals. The Company’s herb farming segment cultivates selected herbs for sales to other drug vendors. The Company is also involved in online sales and clinic services that do not meet the quantitative thresholds for reportable segments and are included in the retail drugstores segment. The segments’ accounting policies are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on profit or loss from operations before interest and income taxes not including nonrecurring gains and losses.computation:

The Company’s reportable business segments are strategic business units that offer different products and services. Each segment is managed separately because they require different operations and markets to distinct classes of customers.

	Three months ended September 30,						Six months ended September 30,
	2020			2019			2020			2019
Net income attributable to controlling interest	$	(1,493,719	)	$	(1,224,963	)	$	(1,725,228	)	$	(3,359,914	)
Weighted average shares used in basic computation		37,961,790			32,936,786			36,232,144			32,696,348
Diluted effect of purchase options and warrants		-			-			-			-
Weighted average shares used in diluted computation		37,961,790			32,936,786			36,232,144			32,696,348
Income per share – Basic:
Net loss attributable to controlling interest	$	(0.04	)	$	(0.04	)	$	(0.05	)	$	(0.10	)
Loss per share – Diluted:
Net loss attributable to controlling interest	$	(0.04	)	$	(0.04	)	$	(0.05	)	$	(0.10	)

29For the three and six months ended September 30, 2020, 967,000 shares underlying employee stock options and 575,000 shares underlying outstanding purchase options to an investor, and 72,000 shares underlying outstanding purchase option to an investment placement agent were excluded from the calculation of diluted loss per share as the options were anti-dilutive.

~~The following~~Note ~~table~~25 ~~presents~~– ~~summarized information by segment of the continuing operations for the three months ended June 30, 2020.~~SEGMENTS

	Retail drugstores		Online Pharmacy			Drug wholesale			Herb farming		Total
Revenue	$	18,810,474	$	4,912,834			7,331,004			-		31,054,312
Cost of goods		12,402,182		4,228,411			6,443,500			-		23,074,093
Gross profit	$	6,408,292	$	684,423			887,504			-		7,980,219
Selling expenses		4,977,047		704,876			590,484			-		6,272,407
General and administrative expenses		1,128,083		59,011			933,072			-		2,120,166
Loss from operations	$	303,162	$	(79,464	)		(636,052	)		-		(412,354	)
Depreciation and amortization	$	750,498	$	-			10,042			-		760,540
Total capital expenditures	$	169,807	$	-						-		169,807

The Company operates within four main reportable segments: retail drugstores, online pharmacy, drug wholesale and herb farming. The retail drugstores segment sells prescription and over-the-counter (“OTC”) medicines, TCM, dietary supplements, medical devices, and sundry items to retail customers. The online pharmacy sells OTC drugs, dietary supplements, medical devices and sundry items to customers through several third-party platforms such as Alibaba’s Tmall, JD.com and Amazon.com, and the Company’s own platform all over China. The drug wholesale segment includes supplying the Company’s own retail drugstores with prescription and OTC medicines, TCM, dietary supplement, medical devices and sundry items (which sales have been eliminated as intercompany transactions), and also selling them to other drug vendors and hospitals. The Company’s herb farming segment cultivates selected herbs for sales to other drug vendors. The Company is also involved in online sales and clinic services that do not meet the quantitative thresholds for reportable segments and are included in the retail drugstores segment. The segments’ accounting policies are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on profit or loss from operations before interest and income taxes not including nonrecurring gains and losses.

The Company’s reportable business ~~following~~segments ~~table~~are ~~presents~~strategic ~~summarized~~business ~~information~~units bythat offer different products and services. Each segment ofis ~~the~~managed ~~continuing~~separately ~~operations~~because ~~for~~they require ~~the~~different ~~three~~operations ~~months~~and ~~ended~~markets ~~June~~to ~~30,~~distinct ~~2019~~classes of customers.

	Retail drugstores			Online Pharmacy			Drug wholesale			Herb farming		Total
Revenue	$	16,734,988		$	2,443,605			6,102,191			-		25,280,784
Cost of goods		11,682,721			2,096,850			5,439,775			-		19,219,346
Gross profit	$	5,052,267		$	346,755			662,416			-		6,061,438
Selling expenses		4,835,666			473,380			659,505			-		5,968,551
General and administrative expenses		1,733,704			55,123			1,062,785			-		2,851,612
Loss from operations	$	(1,517,103	)	$	(181,748	)		(1,059,874	)		-		(2,758,725	)
Depreciation and amortization	$	504,463		$	-			8,486			-		512,949
Total capital expenditures	$	753,173		$	-						-		753,173

The following table presents summarized information by segment of the continuing operations for the three months ended September 30, 2020.

The Company does not have long-lived assets located outside the PRC. In accordance with the enterprise-wide disclosure requirements of FASB’s accounting standard.

	Retail drugstores			Online Pharmacy			Drug wholesale			Herb farming		Total
Revenue	$	17,930,496		$	5,347,012			7,565,037			-		30,842,545
Cost of goods		12,326,579			4,744,725			6,758,489			-		23,829,793
Gross profit	$	5,603,917		$	602,287			806,548			-		7,012,752
Selling expenses		5,437,046			621,883			416,583			-		6,475,512
General and administrative expenses		1,412,325			62,110			587,124			-		2,061,559
Loss from operations	$	(1,245,454	)	$	(81,706	)		(197,159	)		-		(1,524,319	)
Depreciation and amortization	$	491,356		$	-			6,259			-		497,615
Total capital expenditures	$	149,049		$	-						-		149,049

The ~~Company’s~~ ~~net~~following ~~revenue~~table ~~from~~presents ~~external~~summarized information ~~customers~~by ~~through~~segment ~~its~~of ~~retail~~the ~~drugstores~~continuing byoperations ~~main product category~~ for the three months ended ~~June~~September 30, ~~2020 and~~ 2019 ~~were as follows:~~.

	For the three months ended
	Retail drugstores			Online Pharmacy			Drug wholesale			Herb farming		Total
	June 30,
Revenue	$	18,001,273		$	2,351,264			8,001,242			-		28,353,779
	2020			2019
Cost of goods		12,471,047			2,032,464			7,156,904			-		21,660,415
Prescription drugs	$	7,406,774		$	5,695,286
Gross profit	$	5,530,226		$	318,800			844,338			-		6,693,364
OTC drugs		6,818,484			7,240,228
Selling expenses		5,395,626			462,154			628,068			-		6,485,848
Nutritional supplements		1,347,769			1,231,133
General and administrative expenses		1,259,535			60,476			503,924			-		1,823,935
TCM		949,012			1,104,050
Loss from operations	$	(1,124,935	)	$	(203,830	)		(287,654	)		-		(1,616,419	)
Sundry products		422,551			298,198
Depreciation and amortization	$	531,569		$	-			22,852			-		554,421
Medical devices		1,865,884			1,166,093
Total capital expenditures	$	236,961		$	-						-		236,961
Total	$	18,810,474		$	16,734,988

The ~~Company’s~~ ~~net~~following ~~revenue~~table ~~from~~presents ~~external~~summarized information ~~customers~~by ~~through~~segment ~~online~~of ~~pharmacy~~the bycontinuing ~~main~~operations ~~product~~for ~~category~~the issix asmonths ~~follows:~~ended September 30, 2020.

	For the three months ended
	Retail drugstores			Online Pharmacy			Drug wholesale			Herb farming		Total
	June 30,
Revenue	$	36,740,970		$	10,259,846			14,896,041			-		61,896,857
	2020			2019
Cost of goods		24,728,761			8,973,136			13,201,989			-		46,903,886
Prescription drugs	$	1,869,643		$	-
Gross profit	$	12,012,209		$	1,286,710			1,694,052			-		14,992,971
OTC drugs		1,322,811			1,024,602
Selling expenses		10,414,093			1,326,759			1,007,067			-		12,747,919
Nutritional supplements		221,031			107,194
General and administrative expenses		2,540,408			121,121			1,520,196			-		4,181,725
TCM		23,199			13,681
Loss from operations	$	(942,292	)	$	(161,170	)		(833,211	)		-		(1,936,673	)
Sundry products		546,720			438,736
Depreciation and amortization	$	1,241,854		$	-			16,301			-		1,258,155
Medical devices		929,430			859,392
Total capital expenditures	$	318,856		$	-						-		318,856
Total	$	4,912,834		$	2,443,605

The following table presents summarized ~~Company’s~~information ~~net~~by ~~revenue~~segment ~~from~~of ~~external~~the ~~customers~~continuing ~~through~~operations ~~wholesale~~for bythe ~~main~~six ~~product~~months ~~category~~ended isSeptember as30, ~~follows:~~2019.

	For the three months ended
	Retail drugstores			Online pharmacy			Drug wholesale			Herb farming	Total
	June 30,
Revenue	$	34,736,261		$	4,794,869			14,103,433				53,634,563
	2020			2019
Cost of goods		24,153,768			4,129,314			12,596,679				40,879,761
Prescription drugs	$	5,966,148		$	4,880,491
Gross profit	$	10,582,493		$	665,555			1,506,754				12,754,802
OTC drugs		915,146			1,074,261
Selling expenses		10,231,292			935,534			1,287,573				12,454,399
Nutritional supplements		59,841			21,691
General and administrative expenses		2,993,239			115,599			1,566,709				4,675,547
TCM		28,967			98,828
Loss from operations	$	(2,642,038	)	$	(385,578	)		(1,347,528	)			(4,375,144	)
Sundry products		2,597			5,682
Depreciation and amortization	$	1,036,032		$	-			31,338				1,067,370
Medical devices		358,305			21,238
Total capital expenditures	$	990,134		$	-							990,134
Total	$	7,331,004		$	6,102,191

~~Note 26 – Subsequent Events~~30

~~Management of~~The ~~the~~ Company ~~has~~does ~~evaluated~~not ~~subsequent~~have ~~events~~long-lived ~~through~~assets located ~~the~~outside ~~date of~~ the ~~report,~~PRC. ~~and~~In ~~there~~accordance ~~was~~with nothe ~~material~~enterprise-wide ~~subsequent~~disclosure ~~event~~requirements ~~requiring adjustments~~of toFASB’s ~~the~~accounting ~~financial statements or disclosure~~standard.

31The Company’s net revenue from external customers through its retail drugstores by main product category for the three and six months ended September 30, 2020 and 2019 were as follows:

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

	Three months ended September 30,				Six months ended September 30,
	2020		2019		2020		2019
Prescription drugs	$	5,982,706	$	6,022,934	$	13,389,480	$	11,718,220
OTC drugs		7,617,159		7,463,201		14,435,643		14,703,429
Nutritional supplements		1,664,265		1,676,974		3,012,034		2,908,107
TCM		1,054,378		1,954,500		2,003,390		3,058,550
Sundry products		338,112		290,750		760,663		588,948
Medical devices		1,273,876		592,914		3,139,760		1,759,007
Total	$	17,930,496	$	18,001,273	$	36,740,970	$	34,736,261

The ~~following~~ ~~management~~Company’s ~~discussion~~net ~~and~~revenue ~~analysis~~from ~~should be read in conjunction with our unaudited condensed consolidated financial~~external ~~statements~~customers ~~and~~through ~~the~~online ~~notes~~pharmacy thereto and the other financial information appearing elsewhere in this item. In addition to historical information, the following discussion contains certain forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements relate to our future plans, objectives, expectations and intentions. These statements may be identified by ~~the~~main ~~use~~product ofcategory ~~words~~is ~~such~~ as “may,” “will,” “could,” “expect,” “anticipate,” “intend,” “believe,” “estimate,” “plan,” “predict,” and similar terms or terminology, or the negative of such terms or other comparable terminology. Although we believe the expectations expressed in these forward-looking statements are based on reasonable assumptions within the bound of our knowledge of our business, our actual results could differ materially from those discussed in these statements. Factors that could contribute to such differences include, but are not limited to, those discussed in the “Risk Factors” section of our annual report on Form 10-K for the year ended March 31, 2020 and filed with the SEC on July 10, 2020. We undertake no obligation to update publicly any forward-looking statements for any reason even if new information becomes available or other events occur in the future.follows:

Our financial statements are prepared in U.S. Dollars and in accordance with accounting principles generally accepted in the United States. See “Exchange Rates” below for information concerning the exchanges rates at which Renminbi (“RMB”) were translated into U.S. Dollars (“USD” or “$”) at various pertinent dates and for pertinent periods.

	Three months ended September 30,				Six months ended September 30,
	2020		2019		2020		2019
Prescription drugs	$	1,758,516	$	-	$	3,628,159	$	-
OTC drugs		1,983,034		1,126,655		3,305,845		2,151,257
Nutritional supplements		208,062		136,513		429,093		243,707
TCM		72,349		21,969		95,548		35,650
Sundry products		411,494		374,457		958,214		813,193
Medical devices		913,557		691,670		1,842,987		1,551,062
Total	$	5,347,012	$	2,351,264	$	10,259,846	$	4,794,869

~~Overview~~The Company’s net revenue from external customers through wholesale by main product category is as follows:

We currently operate in four business segments in China: (1) retail drugstores, (2) online pharmacy, (3) wholesale of products similar to those that we carry in our pharmacies, and (4) farming and selling herbs used for traditional Chinese medicine (“TCM”).

	Three months ended September 30,				Six months ended September 30,
	2020		2019		2020		2019
Prescription drugs	$	5,850,267	$	6,816,035	$	11,816,415	$	11,696,526
OTC drugs		1,563,344		1,048,542		2,478,490		2,122,803
Nutritional supplements		27,104		35,048		86,945		56,739
TCM		78,333		81,130		107,300		179,958
Sundry products		18,760		5,338		21,357		11,020
Medical devices		27,229		15,149		385,534		36,387
Total	$	7,565,037	$	8,001,242	$	14,896,041	$	14,103,433

~~Our drugstores~~Note ~~offer~~26 ~~customers a wide variety of pharmaceutical products, including prescription and over-the-counter (“OTC”)~~– ~~drugs,~~Subsequent nutritional supplements, TCM, personal and family care products, medical devices, and convenience products, including consumable, seasonal, and promotional items. Additionally, we have licensed doctors of both western medicine and TCM on site for consultation, examination and treatment of common ailments at scheduled hours. As of June 30, 2020, we had 117 pharmacies in Hangzhou city and its adjacent town Lin’an under the store brand of “Jiuzhou Grand Pharmacy” and 4 independent pharmacies controlled by Jiuzhou Pharmacy. During the three months ended June 30, 2020, we dissolved one pharmacy.Events

~~Since May~~Management ~~2010,~~of wethe ~~have~~Company ~~also~~has ~~been selling certain OTC drugs, medical devices, nutritional supplements and other sundry products online.~~evaluated ~~Our~~subsequent ~~online~~events ~~pharmacy sells~~ through ~~several~~the ~~third-party~~date ~~platforms~~of ~~such~~the ~~as Alibaba’s Tmall~~report, ~~JD.com, Amazon.com~~ and ~~the~~there ~~Company’s own~~was ~~platform~~no ~~all~~material ~~over~~subsequent ~~China.~~event ~~Our~~requiring ~~sales~~adjustments ~~through~~to ~~our~~the ~~own platform are primarily generated by customers who use their private commercial~~financial ~~medical~~statements ~~insurances~~or ~~packages~~disclosure.

We operate a wholesale business through Jiuxin Medicine distributing third-party pharmaceutical products (similar to those carried by our pharmacies) primarily to trading companies throughout China. We also planted gingkgo trees but have not incurred sales in the three months ended June 30, 2020.31

~~Amidst the~~ITEM ~~COVID-19 outbreak in February 2020, we experienced a decline in the number of customer visits~~2. ~~However,~~MANAGEMENT’S ~~the~~DISCUSSION ~~spread~~AND ofANALYSIS ~~the disease~~OF ~~has~~FINANCIAL ~~been~~CONDITION ~~effectively~~AND ~~controlled~~RESULTS inOF ~~the three months ended June 30, 2020~~OPERATIONS. ~~The number of the new infected daily has become limited. People tend to work and live as usual. As a result, we believe these negative impacts are temporary.~~

32The following management’s discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto and the other financial information appearing elsewhere in this item. In addition to historical information, the following discussion contains certain forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements relate to our future plans, objectives, expectations and intentions. These statements may be identified by the use of words such as “may,” “will,” “could,” “expect,” “anticipate,” “intend,” “believe,” “estimate,” “plan,” “predict,” and similar terms or terminology, or the negative of such terms or other comparable terminology. Although we believe the expectations expressed in these forward-looking statements are based on reasonable assumptions within the bound of our knowledge of our business, our actual results could differ materially from those discussed in these statements. Factors that could contribute to such differences include, but are not limited to, those discussed in the “Risk Factors” section of our annual report on Form 10-K for the year ended March 31, 2020 and filed with the SEC on July 10, 2020 (the “Annual Report for FY2020”). We undertake no obligation to update publicly any forward-looking statements for any reason even if new information becomes available or other events occur in the future.

~~Critical~~Our ~~Accounting~~financial ~~Policies~~statements are prepared in U.S. Dollars and ~~Estimates~~in accordance with accounting principles generally accepted in the United States. See “Exchange Rates” below for information concerning the exchanges rates at which Renminbi (“RMB”) were translated into U.S. Dollars (“USD” or “$”) at various pertinent dates and for pertinent periods.

In preparing our audited consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, we are required to make judgments, estimates and assumptions that affect: (i) the reported amounts of our assets and liabilities; (ii) the disclosure of our contingent assets and liabilities at the end of each reporting period; and (iii) the reported amounts of revenue and expenses during each reporting period. We continually evaluate these estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and reasonable assumptions, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ materially from those estimates.Overview

We ~~believe~~currently ~~that~~operate ~~any~~in ~~reasonable~~four ~~deviation~~business ~~from~~segments ~~those~~in ~~judgments~~China: ~~and~~(1) ~~estimates~~retail ~~would~~drugstores, ~~not~~(2) ~~have~~online apharmacy, ~~material~~(3) ~~impact~~wholesale onof ~~our~~products ~~financial condition~~similar orto ~~results~~those ~~of operations. To the extent~~ that ~~the~~we ~~estimates~~carry ~~used~~in ~~differ~~our ~~from actual results~~pharmacies, ~~however,~~and ~~adjustments~~(4) tofarming ~~the statement of operations~~ and ~~corresponding~~selling ~~balance~~herbs ~~sheet~~used ~~accounts~~for ~~would~~traditional beChinese ~~necessary.~~medicine ~~These adjustments would be made in future financial statements~~(“TCM”).

~~When~~Our ~~reading~~drugstores ~~our~~offer ~~financial~~customers ~~statements~~a wide variety of pharmaceutical products, ~~you~~including ~~should~~prescription ~~consider:~~and over-the-counter (i“OTC”) drugs, ~~our~~nutritional ~~critical~~supplements, ~~accounting~~TCM, ~~policies;~~personal ~~(ii)~~and ~~the~~family ~~judgment~~care products, medical devices, and ~~other~~convenience ~~uncertainties~~products, including consumable, ~~affecting~~seasonal, ~~the~~and ~~application~~promotional items. Additionally, we have licensed doctors of ~~such~~both ~~policies;~~western medicine and ~~(iii)~~TCM ~~the~~on ~~sensitivity~~site offor ~~reported~~consultation, examination ~~results~~and totreatment ~~changes~~of incommon ~~conditions~~ailments ~~and~~at ~~assumptions~~scheduled hours. ~~The~~ ~~critical~~As ~~accounting~~of ~~policies~~September ~~and~~30, ~~related~~2020, ~~judgments~~we had 115 pharmacies in Hangzhou city and ~~estimates~~its ~~used~~adjacent totown ~~prepare~~Lin’an ~~our~~under ~~financial~~the ~~statements~~store ~~are~~brand ~~identified~~of in“Jiuzhou Grand Pharmacy” and 4 independent pharmacies ~~Note~~controlled 2by toJiuzhou ~~our~~Pharmacy. ~~audited~~During ~~consolidated~~the ~~financial~~six ~~statements~~months ~~accompanying~~ended inSeptember ~~this~~30, ~~report~~2020, we dissolved three pharmacies.

~~Revenue~~Since May ~~recognition~~2010, we have also been selling certain OTC drugs, medical devices, nutritional supplements and other sundry products online. Our online pharmacy sells through several third-party platforms such as Alibaba’s Tmall, JD.com, Amazon.com and the Company’s own platform all over China. Our sales through our own platform are primarily generated by customers who use their private commercial medical insurances packages.

~~In May 2014, the FASB~~We ~~issued~~operate ~~ASU No. 2014-09, which creates Topic 606, Revenue from Contracts with Customers. The new guidance outlines~~ a ~~single~~wholesale ~~comprehensive model~~business ~~for~~through ~~entities~~Jiuxin toMedicine ~~use~~distributing inthird-party ~~accounting~~pharmaceutical ~~for~~products ~~revenue~~(similar ~~arising from contracts with customers. The core principle of the guidance is that an entity should recognize revenue~~ to ~~depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for~~ those ~~goods and services. Additionally, the guidance~~carried ~~requires~~by improved disclosure to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The new guidance supersedes most current revenue recognition guidance, including industry-specific guidance. The standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and permits early adoption on a limited basis. The update permits the use of either the retrospective or cumulative effect transition method. On April 1, 2018, we adopted the guidance in ASC 606 and all the related amendments and applied the new revenue standard to all contracts using the modified retrospective method. Based on the new standard our ~~revenue~~pharmacies) ~~recognition policies~~primarily ~~related~~ to ~~membership~~trading ~~rewards~~companies ~~programs~~throughout ~~has changed~~China. ~~Membership~~We ~~rewards,~~also ~~usually~~planted ~~membership~~gingkgo ~~points,~~trees ~~are~~but ~~accumulated~~have ~~by customers~~not ~~based~~incurred ~~on their historical spending levels. The Company has determined that there is an additional performance obligation~~sales ~~to those customers at the time of the initial transaction. The customers can then redeem these points against the prices of merchandises they purchase~~ in the ~~future.~~three Atmonths ~~the~~ended ~~end~~September ~~of each period~~30, ~~unredeemed membership rewards are reflected as a contract liability~~2020. ~~The adoption of the new revenue standard was not material and is not expected to be material to our net income on an ongoing basis.~~

~~Impairment~~Amidst the COVID-19 outbreak, we experienced a decline in the number of ~~definite~~customer visits. To avoid face-~~lived~~to-face ~~intangible~~contact, ~~assets~~customers tend to shop online. In order to keep pace with customers’ change in their ways of shopping, we strengthened our O2O service team, which takes orderts online, i.e. via mobile phone app, and delivers products to local community from our stores. The spread of the disease has been effectively controlled in China in the past few months. The number of the new infected daily has become limited. People tend to work and live as usual. As a result, we believe the negative impacts on our operations are temporary. However, the extent to which the COVID-19 impacts our operations will depend on its future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or minimize its harm, among others.

The Company evaluates the recoverability of definite-lived intangible assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. These long-lived assets are grouped and evaluated for impairment at the lowest level at which individual cash flows can be identified. When evaluating these long-lived assets for potential impairment, the Company first compares the carrying amount of the asset group to the asset group’s estimated future cash flows (undiscounted and without interest charges). If the estimated future cash flows are less than that carrying amount of the asset group, an impairment loss calculation is prepared. The impairment loss calculation compares the carrying amount of the asset group to the asset group’s estimated future cash flows (discounted and with interest charges). If required, an impairment loss is recorded for the portion of the asset group’s carrying value that exceeds the asset group’s estimated future cash flows (discounted and with interest charges).32

~~The~~Critical ~~long-lived~~Accounting ~~asset~~Policies ~~impairment loss calculation contains uncertainty since management must use judgment to estimate each asset group’s future sales, profitability~~ and cash flows. When preparing these estimates, the Company considers historical results and current operating trends and consolidated sales, profitability and cash flow results and forecasts. These estimates can be affected by a number of factors including, but not limited to, general economic and regulatory conditions, efforts of third party organizations to reduce their prescription drug costs and/or increased member co-payments, the continued efforts of competitors to gain market share and consumer spending patterns.Estimates

~~The~~In ~~long-lived~~preparing ~~asset~~our ~~impairment~~audited ~~loss~~consolidated ~~calculation~~financial ~~contains~~statements ~~uncertainty~~in ~~since~~accordance ~~management~~with ~~must~~accounting ~~use~~principles ~~judgment~~generally toaccepted ~~estimate~~in ~~each~~the ~~asset group’s~~United ~~future~~States ~~sales~~of America, ~~profitability~~we ~~and~~are ~~cash~~required ~~flows.~~to ~~When~~make ~~preparing~~judgments, ~~these~~ estimates, and assumptions that affect: (i) the ~~Company~~reported ~~considers~~amounts ~~historical~~of ~~results~~our assets and ~~current operating~~liabilities; ~~trends~~(ii) the disclosure of our contingent assets and ~~consolidated~~liabilities ~~sales,~~at ~~profitability~~the end of each reporting period; and ~~cash~~(iii) ~~flow~~the reported ~~results~~amounts of revenue and ~~forecasts~~expenses during each reporting period. ~~These~~We ~~estimates~~continually ~~can~~evaluate bethese ~~affected~~estimates ~~by a~~based ~~number~~on ofour ~~factors~~own historical ~~including~~experience, ~~but~~knowledge ~~not~~and ~~limited~~assessment ~~to,~~of ~~general~~current ~~economic~~business and ~~regulatory~~other conditions, ~~efforts~~our ofexpectations ~~third~~regarding ~~party~~the ~~organizations~~future tobased ~~reduce~~on ~~their~~available ~~prescription~~information ~~drug~~and ~~costs~~reasonable ~~and/or~~assumptions, ~~increased~~which ~~member~~together ~~co-payments,~~form ~~the~~our ~~continued~~basis ~~efforts~~for ofmaking ~~competitors~~judgments toabout ~~gain~~matters ~~market~~that ~~share~~are ~~and~~not ~~consumer~~readily ~~spending~~apparent ~~patterns.~~from ~~There~~other ~~were~~sources. noSince ~~material~~the ~~impairment~~use ~~losses~~of ~~for~~estimates ~~definite-lived~~is ~~intangible~~an ~~assets~~integral ~~recognized in~~component of the ~~three~~financial ~~months~~reporting ~~ended~~process, our ~~June~~actual ~~30,~~results ~~2020~~could ~~and~~differ ~~2019~~materially from those estimates.

33We believe that any reasonable deviation from those judgments and estimates would not have a material impact on our financial condition or results of operations. To the extent that the estimates used differ from actual results, however, adjustments to the statement of operations and corresponding balance sheet accounts would be necessary. These adjustments would be made in future financial statements.

~~Results~~When reading our financial statements, you should consider: (i) our critical accounting policies; (ii) the judgment and other uncertainties affecting the application of ~~Operations~~such policies; and (iii) the sensitivity of reported results to changes in conditions and assumptions. The critical accounting policies and related judgments and estimates used to prepare our financial statements are identified in Note 2 to our audited consolidated financial statements accompanying in the Annual Report for FY2020.

~~Comparison~~Revenue ~~of the three months ended June 30, 2020 and 2019~~recognition

In May 2014, the FASB issued ASU No. 2014-09, which creates Topic 606, Revenue from Contracts with Customers. The new guidance outlines ~~following~~a ~~table~~single ~~summarizes~~comprehensive ~~our~~model ~~results~~for entities to use in accounting for revenue arising from contracts with customers. The core principle of ~~operations~~the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Additionally, the ~~three~~guidance ~~months~~requires ~~ended~~improved ~~June~~disclosure 30to help users of financial statements better understand the nature, ~~2020~~amount, timing, and ~~2019:~~uncertainty of revenue that is recognized. The new guidance supersedes most current revenue recognition guidance, including industry-specific guidance. The standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and permits early adoption on a limited basis. The update permits the use of either the retrospective or cumulative effect transition method. On April 1, 2018, we adopted the guidance in ASC 606 and all the related amendments and applied the new revenue standard to all contracts using the modified retrospective method. Based on the new standard our revenue recognition policies related to membership rewards programs has changed. Membership rewards, usually membership points, are accumulated by customers based on their historical spending levels. The Company has determined that there is an additional performance obligation to those customers at the time of the initial transaction. The customers can then redeem these points against the prices of merchandises they purchase in the future. At the end of each period, unredeemed membership rewards are reflected as a contract liability. The adoption of the new revenue standard was not material and is not expected to be material to our net income on an ongoing basis.

	Three months ended June 30,
	2020						2019
	Amount			Percentage of total revenue			Amount			Percentage of total revenue
Revenue	$	31,054,312			100.0	%	$	25,280,784			100.0	%
Gross profit	$	7,980,219			25.7	%	$	6,061,438			24.0	%
Selling expenses	$	6,272,407			20.2	%	$	5,968,551			23.6	%
General and administrative expenses	$	2,120,166			6.8	%	$	2,851,612			11.3	%
Loss from operations	$	(412,354	)		(1.3	)%	$	(2,758,725	)		(10.9	)%
Other Income(expense), net	$	86,222			0.3	%	$	(14,612	)		(0.1	)%
Change in fair value of derivative liability	$	(4,890	)		0.0	%	$	403,555			1.6	%
Income tax expense	$	57,570			0.2	%	$	8,388			0.0	%
Net loss	$	(388,592	)		(1.3	)%	$	(2,378,170	)		(9.4	)%

Impairment of definite-lived intangible assets

~~Revenue~~The Company evaluates the recoverability of definite-lived intangible assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. These long-lived assets are grouped and evaluated for impairment at the lowest level at which individual cash flows can be identified. When evaluating these long-lived assets for potential impairment, the Company first compares the carrying amount of the asset group to the asset group’s estimated future cash flows (undiscounted and without interest charges). If the estimated future cash flows are less than that carrying amount of the asset group, an impairment loss calculation is prepared. The impairment loss calculation compares the carrying amount of the asset group to the asset group’s estimated future cash flows (discounted and with interest charges). If required, an impairment loss is recorded for the portion of the asset group’s carrying value that exceeds the asset group’s estimated future cash flows (discounted and with interest charges).

~~Due~~The long-lived asset impairment loss calculation contains uncertainty since management must use judgment to ~~the~~estimate ~~growth~~each inasset ~~our~~group’s future ~~retail~~sales, ~~drugstores~~profitability ~~business~~and cash flows. When preparing these estimates, ~~online~~the ~~pharmacy~~Company considers historical results and ~~wholesale~~current operating ~~business~~trends and consolidated sales, ~~revenue~~profitability ~~increased~~and bycash ~~$5,773,528~~flow orresults 22and forecasts.8% These estimates can be affected by ~~for~~a ~~the~~number ~~three~~of ~~months~~factors ~~ended~~including, ~~June~~but 30not limited to, ~~2020~~general economic and regulatory conditions, asefforts ~~compared~~of third party organizations to ~~the~~reduce ~~three~~their ~~months~~prescription ~~ended~~drug ~~June~~costs 30and/or increased member co-payments, ~~2019~~the continued efforts of competitors to gain market share and consumer spending patterns.

~~Revenue~~The long-lived asset impairment loss calculation contains uncertainty since management must use judgment to estimate each asset group’s future sales, profitability and cash flows. When preparing these estimates, the Company considers historical results and current operating trends and consolidated sales, profitability and cash flow results and forecasts. These estimates can be affected by a ~~Segment~~number of factors including, but not limited to, general economic and regulatory conditions, efforts of third party organizations to reduce their prescription drug costs and/or increased member co-payments, the continued efforts of competitors to gain market share and consumer spending patterns. There were no material impairment losses for definite-lived intangible assets recognized in the three and six months ended September 30, 2020 and 2019.

~~The following table breaks down the revenue of our four business segments for the three months ended June 30, 2020 and 2019:~~33

	For the three months ended June 30,
	2020					2019
	Amount		% of total revenue			Amount		% of total revenue			Variance by amount		% of change
Revenue from retail drugstores	$	18,810,474		60.6	%	$	16,734,988		66.2	%	$	2,075,486		12.4	%
Revenue from online sales		4,912,834		15.8	%		2,443,605		9.7	%		2,469,229		101.1	%
Revenue from wholesale business		7,331,004		23.6	%		6,102,191		24.1	%		1,228,813		20.1	%
Revenue from farming business		-		-	%		-		-	%		-		-	%
Total revenue	$	31,054,312		100.0	%	$	25,280,784		100.0	%	$	5,773,528		22.8	%

Results of Operations

34Comparison of the three months ended September 30, 2020 and 2019

~~Retail~~The ~~drugstores~~following ~~sales,~~table ~~which~~summarizes ~~accounted~~our ~~for~~results ~~approximately 60.6%~~ of ~~total~~operations ~~revenue~~ for the three months ended ~~June~~September 30, 2020, ~~increased by~~and ~~$2,075,486, or 12.4% compared to the three months ended June 30,~~ 2019~~, to $16,734,988. Same-store sales increased by approximately $1,610,851, or 9.9%, while new stores contributed approximately $459,074 in revenue in the three months ended June 30, 2020.~~:

The increase in our retail drugstore sales is primarily due to consumer-facing benefits such as emphasis on on-site medical care, chronic disease management services, incremental DTP (Direct-to-Patient) business caused by continuous hospital medical reform, and maturing of stores opened a year ago. Convenient on-site medical support at our pharmacies has been our hallmark from the beginning of our business. Suitable medical support from our doctors has proven to be critical to our superior store sales. Linking doctor care with drug sales has become our business guidance for the future. By adding more doctor-provided services at stores, we have been able to promote our store sales.

	Three months ended September 30,
	2020						2019
	Amount			Percentage of total revenue			Amount			Percentage of total revenue
Revenue	$	30,842,545			100.0	%	$	28,353,779			100.0	%
Gross profit	$	7,012,752			22.7	%	$	6,693,364			23.6	%
Selling expenses	$	6,475,512			21.0	%	$	6,485,848			22.9	%
General and administrative expenses	$	2,061,559			6.7	%	$	1,823,935			6.4	%
Loss from operations	$	(1,524,319	)		(4.9	)%	$	(1,616,419	)		(5.7	)%
Other Income(expense), net	$	(54,521	)		(0.2	)%	$	268,289			0.9	%
Change in fair value of derivative liability	$	32,674			0.1	%	$	6,865			0.0	%
Income tax expense	$	(18,975	)		(0.1	)%	$	5,702			0.0	%
Net loss	$	(1,527,191	)		(5.0	)%	$	(1,346,967	)		(4.8	)%

Chronic diseases such as high blood pressure, diabetes and hyperlipidemia become more and more prevalent nationwide. These types of patients usually visit doctors who prescribe chronic disease drugs every couple weeks. In order to attract these patients to continuously purchase products at our stores, we created chronic disease management program. Once a patient visits our store, we will record their information, type in our electronic system and then closely monitor these patients. After they become members in our chronic disease management program, we send regular reminders and health tips to them. Usually these patient are old people, which have more spare time than the young people. We provide in-store spaces for them to take free tests such as blood pressure test, talk to our doctors and listen to specialists. As a result, more chronic diseases patients became our loyal members and spent more in purchasing our products.Revenue

~~DTP~~Due ~~drugs~~to ~~are usually new medicines not sold at hospitals with low profit margin. As part of~~ the ~~PRC’s~~growth ~~recent~~in ~~medical~~our ~~reform package~~online pharmacy, ~~local governments require the~~ revenue ~~percentage~~increased ~~from~~by ~~drug sales at public hospitals to decline. In order to achieve lower drug sales percentage out of their total revenue~~$2,488,766 ~~the~~or ~~public hospitals chose to abandon sales of low-profit-margin DTP products first~~8.8% Asfor the ~~biggest~~three ~~drugstore~~months ~~network~~ended inSeptember ~~Hangzhou City~~30, ~~Jiuzhou Pharmacy had quite a few of our stores located adjacent to local hospitals. Additionally~~2020, ~~we have actively contacted local vendors of certain DTP products that we were previously not selling~~as ~~and~~compared ~~were able~~ to ~~sell~~the ~~these~~three ~~DTP~~months ~~products~~ended inSeptember ~~our stores. By setting special counters selling DTP products at our stores~~30, ~~sales in our drugstores have increased~~2019.

~~Furthermore,~~Revenue inby fiscal years 2018 and 2019, we have accelerated our expansion of new stores, which have generated more retail drugstore revenues. Among the new stores, thirty stores have become qualified for municipal government insurance reimbursement after operation of a year or more. Sales reimbursed from municipal government insurance program usually account for more than 50% of our total sales at maturing stores. As these stores gained such qualifications, their sales increased quickly as compared to the previous year. Our store count is 117 at June 30, 2020 and 119 at June 30, 2019.Segment

~~Our~~The ~~online~~following ~~pharmacy~~table ~~sales~~breaks ~~increased~~down ~~by approximately $2,469,229, or 101.1% for~~ the ~~three~~revenue ~~months ended June 30, 2020, as compared to the three months ended June 30, 2019. The increase was primarily caused by an increase in sales~~ of ~~prescription~~our ~~drugs~~four ~~via e-commerce~~business ~~platforms~~segments ~~such~~for ~~as Tmall. Prescription drugs used to be prohibited from sales online due to safety concern. However, because~~ the ~~nation has lifted the ban order, online prescription drug sales become popular. As a result, the sale of prescription drugs was $1,869,643 in the~~ three months ended ~~June~~September 30, 2020 as compared to none in the three month ended June 30, 2019. Additionally, we maintained a membership care program targeted at chronic disease customers. We have closely interacted with our members via WeChat by providing healthcare knowledge and ~~reminding our customers to refill medicine. By implementing a personalized customer care program, we were able to promote our sales.~~2019:

Wholesale revenue increased by $1,228,813 or 20.1% primarily as a result of our ability to resell certain products, which our retail stores made large order on, to other vendors. As our retail drugstores achieved large quantity sales of certain brand name products, we were able to bargain for lower purchase prices than the market level on these merchandises. As a result, vendors who were unable to obtain a better price than ours, turned to us for these products, causing the increase in the wholesale volume. However, hospitals are still the dominant drug retailers in China. Local hospitals usually have strong ties with their existing suppliers and we have not been able to make significant progress in becoming a major supplier to local hospitals.

	For the three months ended September 30,
	2020					2019
	Amount		% of total revenue			Amount		% of total revenue			Variance by amount			% of change
Revenue from retail drugstores	$	17,930,496		58.2	%	$	18,001,273		63.5	%	$	(70,777	)		(0.4	)%
Revenue from online sales		5,347,012		17.3	%		2,351,264		8.3	%		2,995,748			127.4	%
Revenue from wholesale business		7,565,037		24.5	%		8,001,242		28.2	%		(436,205	)		(5.5	)%
Revenue from farming business		-		-	%		-		-	%		-			-	%
Total revenue	$	30,842,545		100.0	%	$	28,353,779		100.0	%	$	2,488,766			8.8	%

In the three months ended June 30, 2020 and 2019, we have not generated revenue from our farming business. We planted ginkgo and maidenhair trees during the year ended March 31, 2013, more than seven years ago. A ginkgo tree may have a growth period of up to twenty-three months before it is mature enough for harvest. Usually, the longer a ginkgo tree grows the more valuable it becomes. Therefore, we have not yet harvested our ginkgo trees. We plan to continue cultivating the trees in order to maximize their market value in the future. We will continue to grow ginkgo trees in the future.34

35Retail drugstores sales, which accounted for approximately 58.1% of total revenue for the three months ended September 30, 2020, decreased by $70,777, or 0.4% compared to the three months ended September 30, 2019, to $17,930,496. Same-store sales decreased by approximately $1,020,093, or 5.9%, while new stores contributed approximately $745,753 in revenue in the three months ended September 30, 2020.

~~Gross~~The ~~Profit~~slight decrease in our retail drugstore sales is primarily due to our strategical abandoning of the sales of certain low-profit margin products reimbursed by National Healthcare Security Administration (“NHSA” hereafter) due to its overall budget, elimination of a variety of drugs off the list of drugs reimbursed by the local NHSA since September 1, 2020, and the negative effect on the overall economy from COVID-19.

~~Gross~~In the first half of Calendar 2020, to boost our sales, we promoted sale of DTP (Direct-to-Patient) drugs. DTP drugs are usually new medicines not sold at hospitals with low profit ~~increased~~margin. byAs $1part of the PRC’s recent medical reform package,~~918~~ local governments require the revenue percentage from drug sales at public hospitals to decline. In order to achieve lower drug sales percentage out of their total revenue,~~781~~ orthe 31public hospitals chose to abandon sales of low-profit-margin DTP products first.7% ~~period~~As ~~over~~the ~~period~~biggest local ~~primarily~~drugstore asnetwork in Hangzhou City, Jiuzhou Pharmacy had quite a ~~result~~few of anour ~~increase~~stores inlocated ~~gross~~adjacent ~~profit~~to ~~provided~~local byhospitals. Additionally, ~~retail~~we have actively contacted local vendors of certain DTP products that we were previously not selling and were able ~~pharmacy~~to ~~business~~sell these DTP products in our stores. By setting special counters selling DTP products at our stores, ~~which~~sales in our drugstores have increased ~~significantly~~especially in the ~~three~~first ~~months~~half ~~ended~~of ~~June~~Calendar ~~30,~~ 2020. AtHowever, ~~the~~sales ~~same~~of ~~time,~~quite ~~gross~~a ~~margin~~few ~~increased~~DTP drugs are reimbursed by local ~~slightly~~NHSA ~~from~~and ~~24.0%~~counted tointo 25our stores reimbursement budget.7% ~~due~~If we continue to ~~higher~~sell ~~retail~~large ~~pharmacy~~quantity ~~profit~~of ~~margins~~products reimbursed by the NHSA, the agency may refuse to pay us eventually. ~~The~~As ~~average~~a ~~gross~~result, ~~margins~~we ~~for~~chose ~~each~~to actively control sales of ~~our~~certain ~~four~~low-profit ~~business~~margin products ~~segments~~covered ~~are~~by ~~as follows:~~NHSA.

	For the three months ended June 30,
	2020			2019
Average gross margin for retail drugstores		34.1	%		30.2	%
Average gross margin for online sales		13.9	%		14.2	%
Average gross margin for wholesale business		12.1	%		10.9	%
Average gross margin for farming business		N/A			N/A

In order to further balance its budget, the local NHSA announced to eliminate a variety of medicines, including nutritional supplements, off its list of reimbursed drugs beginning from September 1, 2020. Certain eliminated items are quite popular at the market. As these products are not reimbursed by their insurance program, customers usually choose to order less on these products. As a result, our overall sales were affected. However, as we quickly searched for substitute products favored by our customers, we expect to recover our sales in the future.

~~Retail~~Although ~~gross~~local ~~margins~~economy ~~increased~~has ~~primarily~~quickly ~~because~~recovered offrom ~~introducing~~COVID-19, ~~certain~~the ~~popular~~economy ~~products~~growth ~~with~~has ~~high~~slowed ~~profit~~down ~~margin,~~in ~~and renegotiating prices with our suppliers continuously~~general. InLocal ~~order~~people tohave ~~promote~~become ~~our sales and profits, we specifically selected a series of popular products~~more ~~such~~conservative asin ~~radix bupleuri, which we believe are suitable to local community~~consumption. ~~As a result~~However, weas ~~were~~the ~~able~~spread toof ~~keep~~COVID-19 uphas ~~with~~been ~~our~~effectively ~~sales profit margin. Additionally~~controlled, we ~~continuously~~expect ~~renegotiate~~the ~~with our vendors and press price down to acceptable levels. For example, we explore more suppliers to search for lower prices. We also try to directly purchase from manufacturers instead of~~ local ~~vendors~~consumption towill ~~cut~~surge ~~off~~again ~~middle-man expenses. We expect to keep our profit margin at a reasonable level~~ in the future.

~~Gross~~Our ~~margin of~~ online pharmacy sales ~~decreased~~increased ~~primarily~~by ~~due~~approximately $2,995,748, or 127.4% for the three months ended September 30, 2020, as compared to ~~intense~~the ~~market~~three ~~competition~~months ended September 30, 2019. WeThe ~~conduct~~increase ~~our~~was ~~business~~primarily ~~either~~caused ~~through~~by an increase in sales of prescription drugs ~~certain~~via e-commerce platforms such as Tmall. ~~and~~Prescription ~~JD.com~~drugs orused ~~via~~to ~~our~~be ~~own~~prohibited ~~official~~from sales online ~~pharmacy~~due ~~website,~~to ~~www~~safety concern.~~dada360.com.~~ ~~The online~~However, ~~prices~~because ofthe ~~healthcare~~nation ~~products~~has ~~are~~lifted ~~transparent~~the asban ~~customers~~order, ~~can~~online ~~easily~~prescription ~~compare~~drug ~~prices~~sales ~~from~~become ~~websites~~popular. InAs ~~order~~a toresult, ~~promote~~the ~~our~~sale ~~sales~~of prescription ~~through~~drugs ~~e-commerce~~was ~~platforms~~$1,758,516 wein ~~have~~the tothree ~~lower~~months ~~our~~ended ~~prices~~September ~~leading~~30, 2020 as compared to ~~lower~~none ~~profit~~in ~~margin~~the three month ended September 30, 2019. Additionally, Aswe maintained a ~~way~~membership tocare ~~retain~~program ~~new~~targeted at chronic disease customers. ~~from~~We have closely interacted with our ~~insurance~~members ~~companies,~~via weWeChat ~~also~~by ~~kept~~providing ~~low~~healthcare ~~prices~~knowledge onand reminding our ~~official~~customers ~~online~~to ~~pharmacy~~refill ~~websites~~medicine. AsBy implementing a ~~result~~personalized customer care program, ~~our~~we ~~profit~~were ~~margin~~able ~~for~~to ~~online sales~~promote ~~decreased~~our sales.

Wholesale ~~gross~~revenue ~~margin~~decreased ~~increased~~by ~~primarily~~$436,205 ~~due~~or to5.5%. ~~various~~The ~~products~~sale ~~with~~of ~~different~~our ~~profit~~wholesale ~~margin~~business may vary based on customer’s need. Usually we resell ~~carried~~certain ~~and~~products, ~~sold~~which our retail stores made large order on, to ~~certain~~other ~~pharmaceutical~~ vendors. ~~Although~~As weour ~~have~~retail ~~attempted~~drugstores toachieved ~~market~~large quantity ~~our~~sales of certain brand name products, we were able to ~~major~~bargain ~~local~~for ~~hospitals~~lower ~~and~~purchase ~~other~~prices ~~pharmacies,~~than wethe ~~have~~market ~~not~~level ~~been~~on ~~able~~these tomerchandises. ~~make~~As ~~significant~~a ~~progress.~~result, ~~Until~~vendors wewho ~~are~~were ~~able~~unable to obtain ~~status as~~ a ~~provincial~~better orprice ~~national~~than ~~exclusive~~ours, ~~sale~~turned ~~agent~~to us for these products. In the three months ended September 30, 2020, a key salesperson was sick and slowed certain business with customers. As a result, overall ~~popular~~business ~~drugs~~decreased orslight. ~~have~~On ~~sales~~the ~~access~~other toside, ~~large~~hospitals ~~local~~are still the dominant drug retailers in China. Local hospitals, weusually have ~~may~~strong ties with their existing suppliers and we have tonot ~~maintain~~been ~~low~~able ~~profit~~to ~~margins~~make significant progress in ~~order~~becoming toa ~~drive~~major ~~sales~~supplier onto ~~our~~local ~~wholesale business~~hospitals.

36In the three months ended September 30, 2020 and 2019, we have not generated revenue from our farming business. We planted ginkgo and maidenhair trees during the year ended March 31, 2013, more than seven years ago. A ginkgo tree may have a growth period of up to twenty-three months before it is mature enough for harvest. Usually, the longer a ginkgo tree grows the more valuable it becomes. Therefore, we have not yet harvested our ginkgo trees. We plan to continue cultivating the trees in order to maximize their market value in the future. We will continue to grow ginkgo trees in the future.

~~Selling and Marketing Expenses~~35

~~Selling~~Gross and marketing expenses increased by $303,856, or 5.1%, as compared to the same period of last fiscal year, primarily due to increase in fee charged by various platforms as a result of sale increase in our online pharmacy. As our online pharmacy sales more than doubled in the three months ended June 30, 2020 as compared to the same period last year. We incurred service fee from third-party platforms such as Tmall and JD.com, which usually charge their fee based on a proportion of our sales via their platforms. The service fee increased by $210,771 period over period Overall, such expenses as a percentage of our revenue were 20.2% and 23.6% respectively, in the three months ended June 30, 2020 and 2019.Profit

~~General~~Gross ~~and~~profit ~~Administrative~~increased ~~Expenses~~by $319,388 or 4.8% period over period primarily as a result of an increase in gross profit provided by retail pharmacy business, which increased significantly in the three months ended September 30, 2020. At the same time, gross margin decreased slightly from 23.6% to 22.7% due to lower online pharmacy profit margins. The average gross margins for each of our four business segments are as follows:

General and administrative expenses decreased by $731,446, or 25.7%, as compared to the same period of last year. Such expenses as a percentage of revenue decreased to 6.8% from 11.3% for the same period of last year. In the three months ended June 30, 2020, we recorded bad debt allowance expense of $18,320 as compared to $758,231 in the same period of last year. Excluding such an effect, the general and administrative expenses increased by $8,465 period over period.

	For the three months ended September 30,
	2020			2019
Average gross margin for retail drugstores		31.3	%		30.7	%
Average gross margin for online sales		11.3	%		13.6	%
Average gross margin for wholesale business		10.7	%		10.6	%
Average gross margin for farming business		N/A			N/A

~~Loss~~Retail gross margins increased primarily because of the control on sale of low profit margin products reimbursed by NHSA, introducing certain popular products with high profit margin, and renegotiating prices with our suppliers continuously. As described above, in order to meet the NHSA budget, we chose to actively control sales of certain low-profit margin products covered by NHSA. In order to promote our sales and profits, we specifically selected a series of popular products such as radix bupleuri, which we believe are suitable to local community. As a result, we were able to keep up with our sales profit margin. Additionally, we continuously renegotiate with our vendors and press price down to acceptable levels. For example, we explore more suppliers to search for lower prices. We also try to directly purchase from ~~Operations~~manufacturers instead of local vendors to cut off middle-man expenses. We expect to keep our profit margin at a reasonable level in the future.

AsGross amargin ~~result~~ of ~~the~~online ~~above,~~pharmacy wesales ~~had~~decreased ~~loss~~primarily ~~from~~due ~~operations~~to ofintense ~~$412,354~~market incompetition. ~~the~~We ~~quarter~~conduct ~~ended~~our ~~June~~business ~~30,~~either ~~2020~~through certain e-commerce platforms such as Tmall and JD.com or via our own official online pharmacy website, www.dada360.com. The online prices of healthcare products are transparent as ~~compared~~customers tocan ~~loss~~easily compare prices from ~~operations~~websites. In order to promote our sales ofthrough $2e-commerce platforms,~~758,725~~ awe ~~year~~have ~~ago.~~to ~~Our~~lower ~~operating~~our prices leading to lower profit margin. ~~for~~As ~~the~~a ~~three~~way ~~months~~to ~~ended~~retain ~~June~~new 30customers from insurance companies, ~~2020~~we ~~and~~also ~~2019~~kept ~~was~~low ~~(1.3)%~~prices ~~and~~on ~~(10~~our official online pharmacy websites.~~9)%~~ As a result, ~~respectively~~our profit margin for online sales decreased.

~~Income~~Wholesale ~~Taxes~~gross margin increased primarily due to various products with different profit margin we carried and sold to certain pharmaceutical vendors. Although we have attempted to market our products to major local hospitals and other pharmacies, we have not been able to make significant progress. Until we are able to obtain status as a provincial or national exclusive sale agent for certain popular drugs or have sales access to large local hospitals, we may have to maintain low profit margins in order to drive sales on our wholesale business.

~~Our income tax expense~~Selling ~~increased~~and byMarketing ~~$49,182 period over period due to an increase in overall profit.~~Expenses

~~Net~~Selling ~~Loss~~and marketing expenses decreased by $10,336, or 0.2%, as compared to the same period of last fiscal year, primarily due to the control of in-store advertising expense, offset by the increase in fee charged by various platforms as a result of sale increase in our online pharmacy. In responses to the cut on sales of products reimbursed by NHSA, we scrutinized and strictly controlled unnecessary expense such as in-store ads expense. On the other side, our online pharmacy sales more than doubled in the three months ended September 30, 2020 as compared to the same period last year. We incurred service fee from third-party platforms such as Tmall and JD.com, which usually charge their fee based on a proportion of our sales via their platforms. The service fee increased by $177,526 period over period. Overall, such expenses as a percentage of our revenue were 21.0% and 22.9% respectively, in the three months ended September 30, 2020 and 2019.

~~As a result of the~~General ~~foregoing,~~and ~~net~~Administrative ~~loss is $388,592 in the three months ended June 30, 2020 as compared to a net loss of $2,378,170 in the three months ended June 30, 2019.~~Expenses

~~Accounts~~General ~~receivable~~and administrative expenses increased by $237,624, or 13.0%, as compared to the same period of last year. Such expenses as a percentage of revenue increased to 6.7% from 6.4% for the same period of last year. In the three months ended September 30, 2020, we reversed bad debt allowance of $304,397 as compared to an increase in bad debt allowance of $9,018 in the same period of last year. Excluding such effect, the general and administrative expenses increased by $551,039 period over period, which reflects the increase in staff and administration expense.

Accounts receivable, which are unsecured, are stated at the amount we expect to collect. We continuously monitor collections and payments from our customers (our distributors) and maintain a provision for estimated credit losses. To prepare for potential loss in such accounts, we made corresponding reserves.36

~~Our~~Loss ~~accounts~~from ~~receivable aging was as follows for the periods described below:~~Operations

From date of invoice to customer	Retail drugstores			Online Pharmacy			Drug wholesale			Herb farming		Total amount
1- 3 months	$	6,510,697		$	763,651		$	854,273		$	-	$	8,128,621
4- 6 months		178,253			106,441			170,485			-		455,179
7- 12 months		29,847			-			395,889			-		425,736
Over one year		1,997,237			-			372,137					2,369,374
Allowance for doubtful accounts		(1,833,796	)		(12,959	)		(547,560	)				(2,394,315	)
Total accounts receivable	$	6,882,238		$	857,133		$	1,245,224		$	-	$	8,984,595

As a result of the above, we had loss from operations of $1,524,319 in the quarter ended September 30, 2020, as compared to loss from operations of $1,616,419 a year ago. Our operating margin for the three months ended September 30, 2020 and 2019 was (4.9)% and (5.7)%, respectively.

~~Accounts~~Income receivable from our retail business mainly consist of reimbursements from government health insurance bureaus and commercial health insurance programs. In the three months ended June 30, 2020, we wrote off an approximately $26,834 collectible from provincial and Hangzhou City government insurance, as such amount has been determined by the health insurance bureaus to be unqualified for reimbursement. Taxes

37Our income tax expense decreased by $24,677 period over period due to a decrease in overall profit.

~~Accounts~~Net receivables from our online pharmacy business mainly consist of receivables from insurance company and a service company handling with insurance companies. As we continue to expand our business with commercial insurance company, our receivables from them increased. Additionally, certain receivables are from third-party platforms such as JD.com where we sell products. Usually the third-party platforms will collect from customers ordering on their platforms and then reimburse us at a later date. Such reimbursement periods range from several days to a month after orders are placed.Loss

~~Accounts~~As ~~receivable~~a ~~from~~result ~~our drug wholesale business consist~~ of ~~receivables~~the ~~from~~foregoing, ~~our~~net ~~customers~~loss ~~such~~is as$1,527,191 ~~pharmaceutical distributors and local drugstores primarily~~ in ~~Zhejiang~~the ~~Province.~~three Inmonths ~~fiscal~~ended ~~2019,~~September ~~we accelerated collection of certain aged accounts from customers which we no longer or rarely sold products to. By doing so~~30, we2020 ~~are~~as ~~able~~compared to ~~take~~a ~~better~~net ~~use~~loss of ~~our cash. As a result~~$1,346,967 in the ~~overall reserve~~three onmonths ~~wholesale~~ended ~~accounts~~September ~~receivables~~30, ~~decreased~~2019.

~~Subsequent~~Comparison toof ~~June~~the ~~30,~~six ~~2020~~months ~~and~~ended ~~through~~September ~~July 31~~30, 2020, we collected approximately $2.8 million in receivables relating to our drugstore business, approximately $0.6 million in receivables relating to our online pharmacy business, approximately $1.0 million relating to our wholesale business, and ~~$0 relating to our herb farming business.~~2019

~~Advances~~The tofollowing ~~suppliers~~table summarizes our results of operations for the six months ended September 30, 2020 and 2019:

Advances to suppliers are mainly prepayments to secure certain products or services at favorable pricing. The aging of our advances to suppliers is as follows for the periods described below:

	Six months ended September 30,
	2020						2019
	Amount			Percentage of total revenue			Amount			Percentage of total revenue
Revenue	$	61,896,857			100.0	%	$	53,634,563			100.0	%
Gross profit	$	14,992,971			24.2	%	$	12,754,802			23.8	%
Selling expenses	$	12,747,919			20.6	%	$	12,454,399			23.2	%
General and administrative expenses	$	4,181,725			6.8	%	$	4,675,547			8.7	%
Loss from operations	$	(1,936,673	)		(3.1	)%	$	(4,375,144	)		(8.2	)%
Other Income(expense), net	$	31,701			0.1	%	$	253,677			0.5	%
Change in fair value of derivative liability	$	27,784			0.0	%	$	410,420			0.8	%
Income tax expense	$	38,595			0.1	%	$	14,090			0.0	%
Net loss	$	(1,915,783	)		(3.1	)%	$	(3,725,137	)		(6.9	)%

From date of cash prepayment to suppliers	Retail drugstores			Online Pharmacy		Drug wholesale			Herb farming		Total amount
1- 3 months	$	219,481		$	-	$	1,428,813		$	-	$	1,648,294
4- 6 months		35,556			-		276,464			-		312,020
7- 12 months		180,565			-		206,598			-		387,163
Over one year		171,611			-		640,958			-		812,569
Allowance for doubtful accounts		(211,937	)		-		(710,389	)		-		(922,326	)
Total advances to suppliers	$	395,276		$	-	$	1,842,444		$	-	$	2,237,720

Revenue

~~Since~~Due to the ~~acquisition~~growth ofin ~~Jiuxin Medicine, we have gradually transferred almost all logistics services of~~ our retail drugstores tobusiness, ~~Jiuxin Medicine.~~online ~~Jiuzhou~~pharmacy ~~Pharmacy~~and ~~only~~wholesale ~~makes~~business, ~~purchases~~revenue ofincreased ~~certain~~by ~~non-medical products. As a result~~$8,262,294 ~~our~~or ~~retail chain had little advances~~15.4% tofor ~~suppliers as of June 30, 2020. In~~ the ~~three~~six months ended ~~June~~September 30, 2020, weas ~~had~~compared ~~outstanding advances~~ to ~~suppliers~~the ~~with~~six ~~which we~~months ~~have~~ended ~~ceased~~September ~~doing~~30, ~~business~~2019. ~~These advances have been fully reserved.~~

~~Advances~~Revenue toby suppliers for our drug wholesale business consist of prepayments to our vendors such as pharmaceutical manufacturers and other distributors. We typically receive products from vendors within three to nine months after making prepayments. We continuously monitor delivery from and payments to our vendors while maintaining a provision for estimated credit losses based upon past experience and any supplier-specific issues such as the discontinuation of inventory supply that have been identified. If we are having difficulty receiving products from a vendor, we take the following steps: ceasing purchasing products from the vendor, asking for return of our prepayment promptly, and if necessary, taking legal actions. If all of these steps are unsuccessful, management then determines whether or not the prepayments should be reserved or written off. Segment

~~Liquidity~~The ~~and~~following ~~Capital~~table ~~Resources~~breaks down the revenue of our four business segments for the six months ended September 30, 2020 and 2019:

Our cash flows for the periods indicated are as follows:

	For the six months ended September 30,
	2020					2019
	Amount		% of total revenue			Amount		% of total revenue			Variance by amount		% of change
Revenue from retail drugstores	$	36,740,970		59.4	%	$	34,736,261		64.8	%	$	2,004,709		5.8	%
Revenue from online sales		10,259,846		16.6	%		4,794,869		8.9	%		5,464,977		114.0	%
Revenue from wholesale business		14,896,041		24.0	%		14,103,433		26.3	%		792,608		5.6	%
Revenue from farming business		-		-	%		-		-	%		-		-	%
Total revenue	$	61,896,857		100.0	%	$	53,634,563		100.0	%	$	8,262,294		15.4	%

	For the three months ended June 30,
	2020			2019
Net cash used in operating activities	$	(5,478,357	)	$	(8,164,764	)
Net cash used in investing activities	$	(1,597,437	)	$	(1,171,543	)
Net cash provided by financing activities	$	9,470,664		$	8,018,325

38Retail drugstores sales, which accounted for approximately 59.4% of total revenue for the six months ended September 30, 2020, increased by $2,004,709, or 5.8% compared to the six months ended September 30, 2019, to $34,736,261. Same-store sales increased by approximately $590,758, or 1.8%, while new stores contributed approximately $1,204,827 in revenue in the six months ended September 30, 2020.

~~For~~The increase ~~the~~in ~~three~~our ~~months~~retail drugstore sales is primarily due to consumer-facing benefits such as emphasis on on-site medical care, ~~ended~~chronic ~~June~~disease 30management services, ~~2020~~incremental DTP business caused by continuous hospital medical reform, ~~cash~~partially ~~used~~offset by the decline in ~~operating~~sale ~~activities~~reimbursed ~~amounted~~by toNHSA ~~$(5,478,357),~~in asthe ~~compared~~second toquarter ~~$(8~~of fiscal 2021,~~164,764)~~ ~~for~~and ~~the~~maturing ~~same~~of ~~period~~ stores opened a year ago. ~~The~~Convenient on-site ~~change~~medical issupport ~~primarily~~at ~~attributable~~our topharmacies ahas ~~decrease~~been inour ~~cash~~hallmark ~~provided~~from bythe ~~inventories~~beginning ~~and~~of ~~biological~~our ~~assets~~business. ofSuitable ~~$1,710,955,~~medical support from aour ~~decrease~~doctors inhas ~~cash~~proven ~~provided~~to bybe ~~advances~~critical to ~~suppliers~~our ofsuperior ~~$1,194,818,~~store asales. ~~decrease~~Linking indoctor ~~cash~~care ~~provided~~with bydrug ~~bad~~sales ~~debt~~has ~~direct~~become ~~write-off~~our ~~and~~business ~~provision~~guidance offor ~~$739,911~~the ~~offset~~future. byBy anadding ~~increase~~more ofdoctor-provided ~~$3,462,675~~services inat ~~accounts payable~~stores, ~~and~~we anhave ~~increase~~been inable ~~cash~~to ~~provided~~promote byour ~~accounts~~store ~~receivable of $1,404,352~~sales.

~~For~~Chronic diseases ~~the~~such ~~three~~as ~~months ended~~high ~~June~~blood 30pressure, ~~2020,~~diabetes ~~net~~and ~~cash~~hyperlipidemia ~~used~~become inmore ~~investing~~and ~~activities~~more ~~amounted~~prevalent nationwide. These types of patients usually visit doctors who prescribe chronic disease drugs every couple weeks. In order to ~~$(1,597,437),~~attract asthese ~~compared~~patients to ~~$(1~~continuously purchase products at our stores,~~171~~ we created chronic disease management program. Once a patient visits our store,~~543)~~ ~~provided~~we bywill ~~investing~~record ~~activities~~their ~~for~~information, ~~the~~type ~~same~~in ~~period~~our aelectronic ~~year~~system ~~ago~~and then closely monitor these patients. ~~The~~After ~~change~~they isbecome ~~primarily~~members ~~attributable~~in our chronic disease management program, we send regular reminders and health tips to athem. ~~decrease~~Usually inthese ~~cash~~patient ~~provided~~are byold ~~investment~~people, inwhich have amore ~~joint~~spare ~~venture~~time ofthan ~~$1,408,155,~~the ~~offset~~young bypeople. anWe ~~increase~~provide in-store ~~additions~~spaces for them to ~~leasehold~~take ~~improvements~~free tests such as blood pressure test, talk to our doctors and ~~increase~~listen ~~intangible~~to ~~assets~~specialists. As a result, more chronic diseases patients became our loyal members and spent more in purchasing our products.

~~For~~DTP drugs are usually new medicines not sold at hospitals with low profit margin. As part of the ~~three~~PRC’s ~~months ended~~recent ~~June~~medical 30reform package, ~~2020,~~local ~~net~~governments ~~cash~~require ~~provided~~the byrevenue ~~financing~~percentage ~~activities~~from ~~amounted~~drug sales at public hospitals to ~~$9,470,664,~~decline. asIn ~~compared~~order to $8achieve lower drug sales percentage out of their total revenue,~~018,325~~ ~~net~~the ~~cash~~public ~~used~~hospitals chose to abandon sales of low-profit-margin DTP products first. As the biggest drugstore network in ~~financing~~Hangzhou ~~activities~~City, ~~for~~Jiuzhou ~~the~~Pharmacy ~~same~~had ~~period~~quite a ~~year~~few ~~ago~~of our stores located adjacent to local hospitals. ~~The~~Additionally, ~~increase~~we ishave ~~primarily~~actively ~~due~~contacted tolocal ~~proceeds~~vendors of ~~notes~~certain ~~payable~~DTP ~~and~~products ~~proceeds~~that we were previously not selling ~~from~~and ~~equity~~were ~~financing~~able to sell these DTP products in our stores. ~~Additionally~~By setting special counters selling DTP products at our stores, wesales in ~~borrowed~~our andrugstores ~~one-year~~have ~~loan~~increased in the first quarter of ~~$705~~fiscal 2021. However,~~585~~ ~~from~~in ~~Beijing~~the ~~Bank~~second quarter of fiscal 2021, we controlled the sales of products reimbursed by NHSA as described in the above.

AsFurthermore, from offiscal ~~June~~years ~~30,~~2018 to 2020, we ~~had~~have ~~cash~~accelerated our expansion of ~~approximately~~new ~~$18~~stores,~~477~~ which have generated more retail drugstore revenues. Among the new stores,~~212~~ forty seven stores have become qualified for municipal government insurance reimbursement after operation of a year or more. ~~Our~~Sales ~~total~~reimbursed ~~current~~from ~~assets~~municipal asgovernment insurance program usually account for more than 50% of ~~June~~our ~~30,~~total sales ~~2020,~~at ~~were~~maturing ~~$63~~stores. As these stores gained such qualifications,~~557,480~~ ~~and~~their ~~total~~sales ~~current~~increased ~~liabilities~~quickly as compared to the previous ~~were~~year. ~~$52,176,073,~~Our ~~which~~store ~~resulted~~count inis a115 ~~working~~at ~~capital~~September of30, ~~$11~~2020 and 114 at September 30,~~381,407~~ 2019.

~~Contractual~~Our ~~Obligations~~online ~~and~~pharmacy ~~Off~~sales increased by approximately $5,464,977, or 114.0% for the six months ended September 30, 2020, as compared to the six months ended September 30, 2019. The increase was primarily caused by an increase in sales of prescription drugs via e-~~Balance~~commerce ~~Sheet~~platforms ~~Arrangements~~such as Tmall. Prescription drugs used to be prohibited from sales online due to safety concern. However, because the nation has lifted the ban order, online prescription drug sales become popular. As a result, the sale of prescription drugs was $3,628,159 in the six months ended September 30, 2020 as compared to none in the six month ended September 30, 2019. Additionally, we maintained a membership care program targeted at chronic disease customers. We have closely interacted with our members via WeChat by providing healthcare knowledge and reminding our customers to refill medicine. By implementing a personalized customer care program, we were able to promote our sales.

~~Contractual~~Wholesale ~~Obligations~~revenue increased by $792,608 or 5.6% primarily as a result of our ability to resell certain products, which our retail stores made large order on, to other vendors. As our retail drugstores achieved large quantity sales of certain brand name products, we were able to bargain for lower purchase prices than the market level on these merchandises. As a result, vendors who were unable to obtain a better price than ours, turned to us for these products, causing the increase in the wholesale volume. Although in August and September, the sales slowed down due to the absence of a key salesperson caused by the personal health condition, we believe the sales volume will recover in the future. However, hospitals are still the dominant drug retailers in China. Local hospitals usually have strong ties with their existing suppliers and we have not been able to make significant progress in becoming a major supplier to local hospitals.

~~The~~In ~~following~~the ~~table~~six ~~summarizes~~months ended September 30, 2020 and 2019, we have not generated revenue from our ~~contractual~~farming ~~obligations:~~business. We planted ginkgo and maidenhair trees during the year ended March 31, 2013, more than seven years ago. A ginkgo tree may have a growth period of up to twenty years before it is mature enough for harvest. Usually, the longer a ginkgo tree grows the more valuable it becomes. Therefore, we have not yet harvested our ginkgo trees. We plan to continue cultivating the trees in order to maximize their market value in the future. We will continue to grow ginkgo trees in the future.

Contractual obligations	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Short-term loan payable	$	2,121,720		2,121,720		-		-		-
Notes payable		26,715,374		26,715,374		-		-		-
Long-term loan payable		3,551,507		-		3,551,507		-		-
Long-Term Debt Obligations		-		-		-		-		-
Capital Lease Obligations		-		-		-		-		-
Operating Lease Obligations		17,383,372		466,213		9,818,579		4,769,610		2,328,970
Purchase Obligations		-		-		-		-		-
Other Long-Term Liabilities Reflected on the Registrant’s Balance Sheet under GAAP*		68,980		-		68,980		-		-
Total	$	49,840,953		29,303,307		13,439,066		4,769,610		2,328,970

* This refers to warrants to purchase shares of common stock issued to an institutional investor and a placement agent (See Note 19).Gross Profit

39Gross profit increased by $2,238,169 or 17.5% period over period primarily as a result of an increase in gross profit provided by retail pharmacy business, which increased significantly in the six months ended September 30, 2020. At the same time, gross margin increased slightly from 23.8% to 24.2% due to higher retail pharmacy profit margins. The average gross margins for each of our four business segments are as follows:

Off-balance Sheet Arrangements

	For the six months ended September 30,
	2020			2019
Average gross margin for retail drugstores		32.7	%		30.5	%
Average gross margin for online sales		12.5	%		13.9	%
Average gross margin for wholesale business		11.4	%		10.7	%
Average gross margin for farming business		N/A			N/A

WeRetail dogross ~~not~~margins ~~have~~increased ~~any~~primarily ~~outstanding~~because ~~financial~~of ~~guarantees~~introducing orcertain ~~commitments~~popular toproducts ~~guarantee~~with ~~the~~high ~~payment~~profit ~~obligations~~margin, ofand ~~any~~renegotiating ~~third~~prices with ~~parties~~our suppliers continuously. ~~We have~~In ~~not~~order ~~entered~~to ~~into~~promote ~~any~~our ~~derivative~~sales ~~contracts~~and ~~that~~profits, ~~are~~we ~~indexed~~specifically toselected ~~our~~a ~~shares~~series ~~and~~of ~~classified~~popular products such as ~~stockholder’s~~radix ~~equity~~bupleuri, ~~or that~~which ~~are~~we ~~not~~believe ~~reflected~~are insuitable ~~our~~to ~~consolidated~~local ~~financial statements~~community. ~~Furthermore~~As a result, we dowere ~~not~~able ~~have~~to ~~any~~keep ~~retained~~up orwith ~~contingent~~our ~~interest~~sales inprofit ~~assets~~margin. ~~transferred~~Additionally, towe ancontinuously ~~unconsolidated~~renegotiate ~~entity~~with ~~that~~our ~~serves~~vendors asand ~~credit,~~press ~~liquidity~~price ordown ~~market risk support~~ to ~~such~~acceptable ~~entity~~levels. WeFor doexample, ~~not~~we ~~have~~explore ~~any~~more ~~variable~~suppliers ~~interest~~to insearch ~~any~~for ~~unconsolidated~~lower ~~entity~~prices. ~~that~~We ~~provides~~also ~~financing,~~try ~~liquidity,~~to ~~market~~directly ~~risk~~purchase orfrom ~~credit~~manufacturers ~~support~~instead of local vendors to uscut oroff ~~engages~~middle-man inexpenses. ~~leasing,~~We ~~hedging~~expect orto ~~research~~keep ~~and~~our ~~development~~profit ~~services~~margin ~~with~~at usa reasonable level in the future.

~~Exchange~~Gross ~~Rates~~margin of online pharmacy sales decreased primarily due to intense market competition. We conduct our business either through certain e-commerce platforms such as Tmall and JD.com or via our own official online pharmacy website, www.dada360.com. The online prices of healthcare products are transparent as customers can easily compare prices from websites. In order to promote our sales through e-commerce platforms, we have to lower our prices leading to lower profit margin. As a way to retain new customers from insurance companies, we also kept low prices on our official online pharmacy websites. As a result, our profit margin for online sales decreased.

~~Our~~Wholesale ~~subsidiaries~~gross ~~and~~margin ~~affiliated~~increased ~~companies~~primarily indue ~~the~~to ~~PRC~~various ~~maintain~~products ~~their~~with ~~books~~different profit margin we carried and ~~records~~sold into ~~RMB,~~certain ~~the~~pharmaceutical vendors. ~~lawful~~Although ~~currency~~we ofhave ~~the~~attempted ~~PRC.~~to Inmarket ~~general, for~~our ~~consolidation~~products ~~purposes~~to major local hospitals and other pharmacies, we ~~translate~~have ~~their~~not ~~assets~~been ~~and~~able to ~~liabilities~~make ~~into~~significant ~~USD~~progress. ~~using~~Until ~~the~~we ~~applicable~~are ~~exchange~~able ~~rates~~to ~~prevailing at~~obtain ~~the~~status ~~balance~~as ~~sheet~~a ~~date,~~provincial ~~and~~or ~~the~~national ~~statement~~exclusive ofsale ~~income~~agent isfor ~~translated~~certain popular atdrugs ~~average~~or ~~exchange~~have ~~rates~~sales ~~during~~access ~~the~~to ~~reporting~~large ~~period.~~local ~~Adjustments resulting~~hospitals, ~~from~~we ~~the~~may ~~translation~~have ofto ~~their~~maintain ~~financial~~low ~~statements~~profit ~~are~~margins ~~recorded~~in asorder ~~accumulated~~to ~~other~~drive ~~comprehensive~~sales on ~~income~~our wholesale business.

~~The exchange rates used to translate amounts in RMB into USD for the purposes of preparing the audited consolidated financial statements or otherwise disclosed in this report were as follows:~~39

	June 30, 2020	March 31, 2020
Balance sheet items, except for the registered and paid-up capital, as of end of period	USD1: RMB0.1414	USD1: RMB0.1410
Amounts included in the statement of Operations and statement of cash flows for the period ended	USD1: RMB0.1411	USD1: RMB0.1436

Selling and Marketing Expenses

~~Inflation~~Selling and marketing expenses increased by $293,520, or 2.4%, as compared to the same period of last fiscal year, primarily due to increase in fee charged by various platforms as a result of sale increase in our online pharmacy. As our online pharmacy sales more than doubled in the six months ended September 30, 2020 as compared to the same period last year. We incurred service fee from third-party platforms such as Tmall and JD.com, which usually charge their fee based on a proportion of our sales via their platforms. The service fee increased by $399,069 period over period. Overall, such expenses as a percentage of our revenue were 20.6% and 23.2% respectively, in the six months ended September 30, 2020 and 2019.

WeGeneral ~~believe~~and ~~that~~Administrative ~~inflation has not had a material effect on our operations to date.~~Expenses

~~ITEM~~General and 3administrative expenses decreased by $493,822, or 10.6%, ~~QUANTITATIVE~~as ~~AND~~compared ~~QUALITATIVE~~to ~~DISCLOSURES~~the ~~ABOUT~~same ~~MARKET~~period ~~RISK~~of last year. Such expenses as a percentage of revenue decreased to 6.8% from 8.7% for the same period of last year. In the six months ended September 30, 2020, we reversed bad debt allowance of $286,076 as compared to an increase in bad debt allowance of $767,249 in the same period of last year. Excluding such an effect, the general and administrative expenses increased by $559,503 period over period, which reflects the increases in staff and administration expense as our online business grew.

~~Not~~Loss ~~applicable.~~from Operations

40As a result of the above, we had loss from operations of $1,936,673 in the quarter ended September 30, 2020, as compared to loss from operations of $4,375,144 a year ago. Our operating margin for the six months ended September 30, 2020 and 2019 was (3.1) % and (8.2) %, respectively. The decrease in loss from operations was mainly because of introducing certain popular products with high profit margin and renegotiating prices with our suppliers continuously in the six months ended September 30, 2020.

~~ITEM 4. CONTROLS AND PROCEDURES~~Income Taxes

~~Evaluation~~Our ofincome ~~Disclosure~~tax ~~Controls~~expense ~~and~~increased ~~Procedures~~by $24,505 period over period due to an increase in overall profit.

AsNet of June 30, 2020, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon such evaluation, our chief executive officer and chief financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were ineffective. Such conclusion is based on the presence of the following material weakness in internal control over financial reporting as described in our annual report on Form 10-K for the year ended March 31, 2020:Loss

~~Accounting~~As ~~and~~a ~~Finance~~result ~~Personnel Weaknesses - As noted in Item 9A~~ of ~~our~~the ~~annual~~foregoing, ~~reports~~net onloss ~~Form~~is ~~10-K for the preceding fiscal years~~$1, ~~management~~915,783 ~~concluded that~~ in ~~light of~~ the ~~inexperience~~six ofmonths ~~our~~ended ~~accounting~~September ~~staff with respect to the requirements of U.S. GAAP-based reporting and SEC rules and regulations~~30, we2020 ~~did~~as ~~not~~compared ~~maintain~~to ~~effective~~a ~~controls~~net ~~and~~loss ~~did~~of ~~not implement adequate and proper supervisory~~$3,725,137 ~~review~~in tothe ~~ensure~~six ~~that~~months ~~significant~~ended ~~internal~~September ~~control~~30, ~~deficiencies can be detected or prevented~~2019.

~~Management’s~~Accounts ~~assessment of the control deficiency over accounting and finance personnel as of June 30, 2020 considered the same factors, including:~~receivable

●Accounts receivable, ~~the~~which ~~number~~are ofunsecured, ~~adjustments~~are ~~proposed~~stated byat ~~our~~the ~~independent~~amount ~~auditors~~we ~~during~~expect ~~our~~to ~~quarterly~~collect. ~~review~~We ~~and~~continuously ~~annual~~monitor ~~audit~~collections ~~processes;~~and ●payments from ~~how~~our ~~adequately~~customers we(our ~~complied~~distributors) ~~with U.S. GAAP on transactions;~~ and ●maintain ~~how~~a ~~accurately~~provision wefor ~~prepared~~estimated ~~supporting~~credit ~~information~~losses. toTo ~~provide~~prepare tofor ~~our~~potential ~~independent~~loss ~~auditors~~in onsuch accounts, awe ~~quarterly~~made ~~and~~corresponding ~~annual basis~~reserves.

~~Based~~Our onaccounts ~~the~~receivable ~~above~~aging ~~factors,~~was ~~management~~as ~~concluded~~follows ~~that~~for the ~~lack~~periods ofdescribed ~~timely reconciliation of booking and recording from China GAAP to US GAAP and lack of accounting staff with sufficient U.S. GAAP experiences are material weaknesses.~~below:

Changes in Internal Control over Financial Reporting

From date of invoice to customer	Retail drugstores			Online Pharmacy			Drug wholesale			Herb farming		Total amount
1- 3 months	$	7,522,572		$	386,473		$	374,722		$	-	$	8,283,767
4- 6 months		232,995			132,078			769,058			-		1,134,131
7- 12 months		68,937			6,884			446,664			-		522,485
Over one year		1,873,563			-			401,780					2,275,343
Allowance for doubtful accounts		(1,950,006	)		(13,222	)		(260,356	)				(2,223,584	)
Total accounts receivable	$	7,748,061		$	512,213		$	1,731,868		$	-	$	9,992,142

~~There~~Accounts ~~were~~receivable nofrom ~~changes in~~ our ~~internal~~retail ~~control~~business ~~over~~mainly ~~financial~~consist ~~reporting~~of ~~(as~~reimbursements ~~defined~~from ingovernment ~~Rule~~health ~~13a-15(f)~~insurance ofbureaus ~~the~~and ~~Securities~~commercial ~~Exchange Act~~health ofinsurance ~~1934)~~programs. ~~during~~In the ~~period~~six ~~covered~~months byended ~~this~~September ~~Quarterly~~30, ~~Report~~2020, onwe ~~Form~~wrote ~~10-Q~~off ~~that~~an ~~have~~approximately ~~materially affected~~$55,423 orcollectible ~~are~~from ~~reasonably likely~~provincial toand ~~materially~~Hangzhou ~~affect,~~City ~~our~~government ~~internal~~insurance, ~~control~~as ~~over~~such ~~financial~~amount ~~reporting,~~has ~~other~~been ~~than~~determined by the ~~following:~~health insurance bureaus to be unqualified for reimbursement.

~~Remediation of Material Weakness for the quarter ended June 30, 2020~~40

~~Subsequent~~Accounts toreceivables ~~the~~from ~~identification~~our ofonline ~~the~~pharmacy ~~material~~business ~~weakness,~~mainly weconsist ~~have~~of ~~enhanced~~receivables ~~existing~~from ~~controls~~insurance ~~and~~company ~~design~~ and ~~implemented~~a ~~new~~service ~~controls.~~company Wehandling ~~have~~with ~~devoted~~insurance ~~significant~~companies. ~~time~~As ~~and~~we ~~attention~~continue to ~~remediate~~expand ~~the~~our ~~above~~business ~~material~~with ~~weakness.~~commercial ~~For~~insurance ~~example~~company, ~~we redesigned~~ our ~~system~~receivables ~~to retrieve~~from ~~data~~them ~~faster~~increased. Additionally, socertain wereceivables are ~~able~~from tothird-party ~~identify~~platforms ~~and~~such ~~reconcile~~as ~~the GAAP difference more efficiently~~JD.com Inwhere ~~addition,~~ we ~~trained~~sell ~~our accounting staff with U~~products.S. ~~GAAP~~Usually ~~knowledge,~~the sothird-party platforms ~~they~~will ~~can~~collect ~~meet the requirement~~ from ~~our~~customers ~~auditors~~ordering ~~more~~on ~~efficiently.~~their ~~These~~platforms ~~improvements to our internal control infrastructure were implemented,~~ and ~~were~~then inreimburse ~~place~~us inat ~~connection~~a ~~with~~later ~~the~~date. ~~preparation~~Such ofreimbursement ~~our financial~~periods ~~statements~~range ~~for~~from ~~the~~several ~~three~~days ~~months ended June 30, 2020. As such, we believe that the remediation initiative outlined above will be sufficient~~ to ~~remediate~~a asmonth ~~the~~after ~~changes~~orders ~~become~~are ~~operational for future years the material weakness in internal control over financial reporting as discussed~~placed.

41Accounts receivable from our drug wholesale business consist of receivables from our customers such as pharmaceutical distributors and local drugstores primarily in Zhejiang Province. In fiscal 2019, we accelerated collection of certain aged accounts from customers which we no longer or rarely sold products to. By doing so, we are able to take better use of our cash. However, as our wholesale business kept growing in a steady rate, receivable from wholesale customers increased accordingly. We usually put reserve on new accounts based on historical collection experience. As a result, the overall reserve on wholesale accounts receivables increased slightly.

~~PART~~Subsequent IIto –September ~~OTHER~~30, ~~INFORMATION~~2020 and through October 31, 2020, we collected approximately $3.2 million in receivables relating to our drugstore business, approximately $0.3 million in receivables relating to our online pharmacy business, approximately $1.1 million relating to our wholesale business, and $0 relating to our herb farming business.

~~ITEM~~Advances to ~~6. EXHIBITS.~~suppliers

~~EXHIBIT~~Advances ~~INDEX~~to suppliers are mainly prepayments to secure certain products or services at favorable pricing. The aging of our advances to suppliers is as follows for the periods described below:

Exhibit Number	Description
From date of cash prepayment to suppliers	Retail drugstores			Online Pharmacy		Drug wholesale			Herb farming		Total amount
4.1	Form of Warrant to the investors in June 2020 (Incorporated by reference from the registrant’s Current Report on Form 8-K filed on June 2, 2020)
1- 3 months	$	418,409		$	-	$	570,833		$	-	$	989,242
4.2	Form of Warrant to the placement agent in June 2020 (Incorporated by reference from the registrant’s Current Report on Form 8-K filed on June 2, 2020)
4- 6 months		89,578			-		761,333			-		850,911
10.1	Form of Securities Purchase Agreement dated June 1, 2020 (Incorporated by reference from the registrant’s Current Report on Form 8-K filed on June 2, 2020)
7- 12 months		23,614			-		81,690			-		105,304
10.2	Engagement Agreement with H.C. Wainwright & Co. dated May 31, 2020 (Incorporated by reference from the registrant’s Current Report on Form 8-K filed on June 2, 2020)
Over one year		190,015			-		703,274			-		893,289
31.1	Section 302 Certification by the Corporation’s Chief Executive Officer
Allowance for doubtful accounts		(129,749	)		-		(779,724	)		-		(909,473	)
31.2	Section 302 Certification by the Corporation’s Chief Financial Officer
Total advances to suppliers	$	591,867		$	-	$	1,337,406		$	-	$	1,929,273
32.1	Section 906 Certification by the Corporation’s Chief Executive Officer and 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

42Since the acquisition of Jiuxin Medicine, we have gradually transferred almost all logistics services of our retail drugstores to Jiuxin Medicine. Jiuzhou Pharmacy only makes purchases of certain non-medical products. As a result, our retail chain had little advances to suppliers as of September 30, 2020. In the six months ended September 30, 2020, we had outstanding advances to suppliers with which we have ceased doing business. These advances have been fully reserved.

~~SIGNATURES~~Advances to suppliers for our drug wholesale business consist of prepayments to our vendors such as pharmaceutical manufacturers and other distributors. We typically receive products from vendors within three to nine months after making prepayments. We continuously monitor delivery from and payments to our vendors while maintaining a provision for estimated credit losses based upon past experience and any supplier-specific issues such as the discontinuation of inventory supply that have been identified. If we are having difficulty receiving products from a vendor, we take the following steps: ceasing purchasing products from the vendor, asking for return of our prepayment promptly, and if necessary, taking legal actions. If all of these steps are unsuccessful, management then determines whether or not the prepayments should be reserved or written off.

~~Pursuant~~Liquidity toand ~~the~~Capital ~~requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.~~Resources

	CHINA JO-JO DRUGSTORES, INC.
	(Registrant)
Date: August 14, 2020	By:	/s/ Lei Liu
		Lei Liu Chief Executive Officer
Date: August 14, 2020	By:	/s/ Ming Zhao
		Ming Zhao
		Chief Financial Officer

Our cash flows for the periods indicated are as follows:

	For the six months ended September 30,
	2020			2019
Net cash used in/provided by operating activities	$	(348,834	)	$	973,509
Net cash used in investing activities	$	(1,758,045	)	$	(1,445,265	)
Net cash provided by financing activities	$	4,552,181		$	6,380,681

For the six months ended September 30, 2020, cash used in operating activities amounted to $(348,834), as compared to $973,509 for the same period a year ago. The change is primarily attributable to a decrease in cash provided by inventories and biological assets of $1,423,743, a decrease in cash provided by accounts receivable of $513,565, a decrease in cash provided by bad debt direct write-off and provision of $1,053,326 offset by an increase of $424,323 in accounts payable, and an increase in change in fair value of purchase option derivative liability of $382,636.

For the six months ended September 30, 2020, net cash used in investing activities amounted to $(1,758,045), as compared to $(1,445,265) provided by investing activities for the same period a year ago. The change is primarily attributable to a decrease in cash provided by investment in a joint venture of $1,422,193, offset by an increase in additions to leasehold improvements and increase intangible assets.

For the six months ended September 30, 2020, net cash provided by financing activities amounted to $4,552,181, as compared to $6,380,681 net cash used in financing activities for the same period a year ago. The change is primarily due to repayment of notes payable and proceeds from equity financing. Additionally, we borrowed a one-year loan of $714,160 from Beijing Bank.

As of September 30, 2020, we had cash of approximately $21,646,487. Our total current assets as of September 30, 2020, were $67,813,878 and total current liabilities were $58,492,587, which resulted in a working capital of $9,321,291.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

The following table summarizes our contractual obligations:

Contractual obligations	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Short-term loan payable	$	2,204,820		2,204,820		-		-		-
Notes payable		23,327,972		23,327,972		-		-		-
Long-term loan payable		3,089,373		-		3,089,373		-		-
Long-Term Debt Obligations		-		-		-		-		-
Capital Lease Obligations		-		-		-		-		-
Operating Lease Obligations		17,556,680		1,056,181		9,576,753		4,652,138		2,271,608
Purchase Obligations		-		-		-		-		-
Other Long-Term Liabilities Reflected on the Registrant’s Balance Sheet under GAAP*		36,306		-		36,306		-		-
Total	$	46,215,151		26,588,973		12,702,432		4,652,138		2,271,608

*	This refers to warrants to purchase shares of common stock issued to an institutional investor and a placement agent (See Note 19).

Off-balance Sheet Arrangements

We do not have any outstanding financial guarantees or commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Exchange Rates

Our subsidiaries and affiliated companies in the PRC maintain their books and records in RMB, the lawful currency of the PRC. In general, for consolidation purposes, we translate their assets and liabilities into USD using the applicable exchange rates prevailing at the balance sheet date, and the statement of income is translated at average exchange rates during the reporting period. Adjustments resulting from the translation of their financial statements are recorded as accumulated other comprehensive income.

The exchange rates used to translate amounts in RMB into USD for the purposes of preparing the audited consolidated financial statements or otherwise disclosed in this report were as follows:

	September 30, 2020	March 31, 2020
Balance sheet items, except for the registered and paid-up capital, as of end of period	USD1: RMB 0.1470	USD1: RMB 0.1410

Amounts included in the statement of Operations and statement of cash flows for the period ended	USD1: RMB 0.1428	USD1: RMB 0.1446

Inflation

We believe that inflation has not had a material effect on our operations to date.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of September 30, 2020, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon such evaluation, our chief executive officer and chief financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were ineffective. Such conclusion is based on the presence of the following material weakness in internal control over financial reporting as described in our annual report on Form 10-K for the year ended March 31, 2020:

Accounting and Finance Personnel Weaknesses - As noted in Item 9A of our annual reports on Form 10-K for the preceding fiscal years, management concluded that in light of the inexperience of our accounting staff with respect to the requirements of U.S. GAAP-based reporting and SEC rules and regulations, we did not maintain effective controls and did not implement adequate and proper supervisory review to ensure that significant internal control deficiencies can be detected or prevented.

Management’s assessment of the control deficiency over accounting and finance personnel as of September 30, 2020 considered the same factors, including:

	●	the number of adjustments proposed by our independent auditors during our quarterly review and annual audit processes;

	●	how adequately we complied with U.S. GAAP on transactions; and

	●	how accurately we prepared supporting information to provide to our independent auditors on a quarterly and annual basis.

Based on the above factors, management concluded that the lack of timely reconciliation of booking and recording from China GAAP to US GAAP and lack of accounting staff with sufficient U.S. GAAP experiences are material weaknesses.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, other than the following:

Remediation of Material Weakness for the quarter ended September 30, 2020

Subsequent to the identification of the material weakness, we have enhanced existing controls and design and implemented new controls. We have devoted significant time and attention to remediate the above material weakness. For example, we redesigned our system to retrieve data faster, so we are able to identify and reconcile the GAAP difference more efficiently. We implemented a series of submodules in SAP system to facilitate our business control. In addition, we trained our accounting staff with U.S. GAAP knowledge, so they can meet the requirement from our auditors more efficiently. These improvements to our internal control infrastructure were implemented, and were in place in connection with the preparation of our financial statements for the six months ended September 30, 2020. As such, we believe that the remediation initiative outlined above will be sufficient to remediate as the changes become operational for future years the material weakness in internal control over financial reporting as discussed.

PART II – OTHER INFORMATION

ITEM 6.

EXHIBITS.

EXHIBIT INDEX

Exhibit Number		Description
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 and 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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CHINA JO-JO DRUGSTORES, INC.
	(Registrant)

Date: November 12, 2020	By:	/s/ Lei Liu
		Lei Liu Chief Executive Officer

Date: November 12, 2020	By:	/s/ Ming Zhao
		Ming Zhao
		Chief Financial Officer

Filing Compare · CHINA JO-JO DRUGSTORES, INC.