CHINA JO-JO DRUGSTORES, INC. The following discussion and analysis of our results of operations and financial condition for the fiscal years endedMarch 31, 2021 and 2020 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the "Risk Factors," "Cautionary Notice Regarding Forward-Looking Statements" and "Description of Business" sections and elsewhere in this report. We use words such as "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could," "predict" and similar expressions to identify forward-looking statements. 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 this report. 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 other than in compliance with theSEC rules and regulations. Our financial statements are prepared inU.S. Dollars and in accordance with accounting principles generally accepted inthe United States . See "Exchange Rates" at the end of this section for information concerning the exchanges rates at which Renminbi ("RMB") were translated intoU.S. Dollars ("USD" or "$") at various pertinent dates and for pertinent periods. Overview We currently operate in four business segments inChina : (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"). Our drugstores offer customers a wide variety of pharmaceutical products, including prescription and over-the-counter ("OTC") drugs, 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 ofMarch 31, 2021 , we had 109 pharmacies inHangzhou city under the store brand of "Jiuzhou Grand Pharmacy ". During the year endedMarch 31, 2021 , the Company sold its Lin'An Jiuzhou Pharmacy Co., Ltd ("Lin'An Jiuzhou"), which runs ten stores in Linan City, to local investors for a total proceeds of $. On the other side, we have been concentrating on new stores withinHangzhou metropolitan area and opened five in the fiscal year 2021. 35 SinceMay 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 asAlibaba's Tmall, JD.com and Amazon.com, and the Company's own platform all overChina . In fiscal year 2020, in order to keep competitive in certain third-party platforms such as Tmall, we have spent reasonable resources on marketing our products through these third-party platforms. Our sales through our own platform are primarily generated by customers who use their private commercial medical insurances package. We operate a wholesale business through Jiuxin Medicine distributing third-party pharmaceutical products (similar to those carried by our pharmacies) primarily to trading companies and other local drugstores inChina . We also farm certain herbs used in TCM but have not made sales in the year endedMarch 31, 2021 . Amidst COVID-19 outbreak, we experienced a decline in the number of customer visits. To avoid face-to-face contact, 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 orders 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 inChina in the past few months. The number of the new daily cases has become limited. People now work and live as normal. As a result, we believe the negative impacts on our operations are temporary. However, the impact of COVID-19 on our operations depends on its future developments, which are highly uncertain and cannot be predicted. Major factors include the duration of the outbreak, new information concerning the severity of the coronavirus, and actions to contain coronavirus or minimize its harm, among others.
Critical Accounting Policies and Estimates
In preparing our audited consolidated financial statements in accordance with accounting principles generally accepted inthe 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. We 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. When reading our financial statements, you should consider: (i) our critical accounting policies; (ii) the judgment and other uncertainties affecting the application of 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 this report. Revenue recognition InMay 2014 , the FASB issued ASU No. 2014-09, which creates Topic 606, Revenue from Contracts with Customers. The new guidance outlines a single comprehensive model for entities to use in accounting for revenue 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 requires 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 afterDecember 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. OnApril 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. 36
Impairment of definite-lived intangible assets
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).
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 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. In the year endedMarch 31, 2020 , we evaluated the use rights of the forest land, which is currently used to cultivate Ginkgo trees. The forest rights certificate from the local village extends the life of the lease toJanuary 31 , 2060.Based on the evaluation of the forest land use rights, the Company recorded an impairment of$228,506 . Results of Operations
Comparison of years ended
The following table summarizes our results of operations for the years endedMarch 31, 2021 and 2020: Years ended December 31, 2021 2020 Percentage Percentage of total of total Amount revenue Amount revenue Revenue$ 133,134,633 100.0 %$ 117,327,689 100.0 % Cost of goods sold$ 103,890,824 78.0 % 91,801,259 78.2 % Gross profit$ 29,243,809 22.0 %$ 25,526,430 21.8 % Selling expenses$ 26,954,914 20.2 %$ 23,793,603 20.3 % General and administrative expenses$ 10,897,629 8.2 %$ 8,108,377 6.9 % Impairment of long-lived assets$ 228,506 0.2 %$ 628,192 0.5 % Loss from operations$ (8,837,240 ) (6.6 )%$ (7,003,742 ) (6.0 )% Other Expense, net$ 429,210 0.3 %$ 562,323 0.5 % Change in fair value of derivative liability$ 64,090 0.0 %$ 401,158 0.3 % Income tax expense$ 31,638 0.0 %$ 16,258 0.0 % Net loss$ (8,375,578 ) (6.3 )%$ (6,457,677 ) (5.5 )% Revenue Primarily due to the rise in our online pharmacy and wholesale business, revenue increased by$15,806,944 or 13.5% for the year endedMarch 31, 2021 , as compared to the year endedMarch 31, 2020 . 37 Revenue by Segment
The following table breaks down the revenue for our four business segments for
the year ended
For the year ended March 31,
2021 2020
% of total % of total Variance by % of
Amount revenue Amount revenue amount change
Revenue from retail
drugstores $ 76,098,975 57.2 % $ 74,081,237 63.1 % $ 2,017,738 2.7 %
Revenue from online
sales 22,485,919 16.8 % 13,541,215 11.6 % 8,944,704 66.1 %
Revenue from
wholesale business 34,549,739 26.0 % 29,705,237 25.3 % 4,844,502 16.3 %
Revenue from farming
business - - % - - % - - %
Total revenue $ 133,134,633 100.0 % $ 117,327,689 100.0 % $ 15,806,944 13.5 %
Retail drugstores sales, which accounted for approximately 57.2% of total
revenue for the year ended March 31, 2021 , increased by $2,017,738 or 2.7%
compared to the year ended March 31, 2020 , to $76,098,975 . However, after
removing the impact of exchange rate fluctuation, the actual retail drugstores
sales decreased 1.5%. Same-store sales decreased by approximately $949,110 , or
1.3%, while new stores contributed approximately $548,403 in revenue in theyear endedMarch 31, 2021 .
The actual decrease in our retail drugstore sales is primarily due to the
negative effect on the overall economy from COVID-19 and our strategic decision
to cease selling certain low-profit margin products that are eligible for
reimbursement by NHSA since
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 margin. As part of the PRC's recent medical reform package, local governments require local hospitals to reduce the revenue percentage from drug sales. In order to achieve such goal, public hospitals first chose to case to sell low-profit-margin DTP products. As the biggest local drugstore network inHangzhou City,Jiuzhou Pharmacy has a few stores located adjacent to local hospitals. Additionally, we have actively contacted local vendors of certain DTP products that we were previously not selling and were able to sell these DTP products in our stores. By setting special counters sell DTP products at our stores, sales in our drugstores have increased especially in the first half of Calendar 2020. However, sales of a few DTP drugs are reimbursed by local NHSA. If we continue to sell large quantity of products reimbursed by the NHSA, the agency may refuse to pay us due to its limited budget. As a result, we chose to actively control sales of certain low-profit margin products covered by NHSA. In order to further balance its budget, the local NHSA announced to eliminate a variety of medicines, including nutritional supplements, from its list of reimbursed drugs beginning fromSeptember 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. Although local economy has quickly recovered from COVID-19, the economy growth has slowed down in general. Local people have become more conservative in consumption. Once the spread of COVID-19 is effectively controlled, we expect the local consumption will surge again in the future. Our store count is 118 at March, 2020 and 109 atMarch 31, 2021 . Our online pharmacy sales increased by approximately$8,944,704 , or 66.1% for the year endedMarch 31, 2021 , as compared to the year endedMarch 31, 2020 . The increase was primarily caused by an increase in sales of prescription drugs via e-commerce platforms such as Tmall. In the past, prescription drugs cannot be sold 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$8,243,099 in the year endedMarch 31, 2021 as compared to$1,447,469 in the year endedMarch 31, 2020 . 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. 38
The sales via our official website were primarily made by certain pharmacy benefit management providers and insurance companies. For example, we have signed a service contract withYingda Taihe Life Insurance Co. Ltd. ("Yingda"), a national insurance company. Certain companies bought private health insurances fromYingda for their employees. By linking our online pharmacy platform withYingda and educating these employees, they are able to buy health products on our online stores. The sales from these customers contributed significantly to our official website sales. Additionally, in the first quarter of calendar 2021, at the outbreak of COVID-19, we sold a large quantity of health protective products such as masks. Our official website sales decreased by 74,238 or 2.5% year over year. Wholesale revenue increased by$4,844,502 or 16.3%, 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 inChina . 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. In the year endedMarch 31, 2021 and 2020, we have not harvested and generated revenue from our farming business. We planted ginkgo trees during the year endedMarch 31, 2013 . A ginkgo tree may have a growth period of up to twenty years before it is mature enough for harvest. Usually, the longer it grows the more valuable it becomes. We plan to continue cultivating the trees in order to maximize their market value in the future. Gross Profit
Gross profit increased by$3,717,379 or 14.6% period over period primarily as a result of an increase in gross profit provided by both wholesale business and retail drugstores, which increased significantly in the year endedMarch 31, 2021 . At the same time, gross margin increased from 21.8% to 22.0% due to higher retail drugstores profit margins. The average gross margins for each of our four business segments are as follows: Year ended March 31, 2021 2020 Average gross margin for retail drugstores 30.2 % 28.1 % Average gross margin for online sales 10.4 % 10.6 % Average gross margin for wholesale business 11.3 % 11.0 % Average gross margin for farming business N/A N/A Retail gross margins increased primarily because we introduced certain popular products with high profit margin and renegotiated prices with our suppliers continuously. 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 manufacturers instead of local vendors to cut off middle-man expenses. We expect to keep our profit margin at a similar level in the future. Gross 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. Wholesale 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. 39
Selling and Marketing Expenses
Sales and marketing expenses increased by$3,161,311 or 13.3% year over year, primarily due to increase in salary and rent. Retaining key employees such as store manager and pharmacists is critical to our success in the local market. To retain our employees and keep competitive in compensation, we raised our sales staff salary by approximately$1.1 million . In addition, the rent expense increased by approximately$1.3 million as a result of local real estate boom. Excluding the effect from the salary and rent, the sales and marketing expenses increased by approximately$0.8 million , which primarily reflects the increase in fee charged by distribution channels Such as Tmall and JD as a percentage of online pharmacy sales. Overall, such expenses as a percentage of our revenue were 20.2% and 20.3% respectively, in the year endedMarch 31, 2021 and 2020.
General and Administrative Expenses
General and administrative expenses increased by$2,789,252 or 34.4% period over period primarily due to the increase in stock-based compensation, offset by the decrease in bad debt expense. Such expenses as a percentage of revenue increased to 8.2% from 6.9% for the same period a year ago. InDecember 2020 , we issued a total of 3,790,000 shares of common stock and recorded stock-based compensation of approximately$3.9 million . In the year endedMarch 31, 2021 , we recorded the reduction in the allowance for bad debts of$1.0 million as compared to increase in bad debt expense in of$0.1 million in FY2020. Excluding the above effects, general and administrative expenses decreased by approximately$0.06 million .
Impairment of Long-lived Assets
We recorded an impairment of long-lived assets of$228,506 and$628,192 for the year endedMarch 31, 2021 and 2020. In the year endedMarch 31, 2021 , we evaluated the forest land use rights and recorded an impairment of$228,506 . In the year endedMarch 31, 2020 , we evaluated the licenses of insurance applicable drugstores acquired in the past based on their discounted positive cash value. Loss from Operations As a result of the above, we had loss from operations of$8,837,240 , as compared to loss from operations of$7,003,742 a year ago. Our operating margin for the year endedMarch 31, 2021 and 2020 was (6.6) % and (6.0) %, respectively. Income Taxes
Our income tax expense increased by
Net Loss
As a result of the foregoing, net loss is
Accounts receivable
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.
40
Our accounts receivable aging was as follows for the periods described below:
Retail Online Drug Herb Total
From date of invoice to customer drugstores Pharmacy wholesale farming amount
1- 3 months $ 8,574,015 $ 1,365,251 $ 3,440,787 $ - $ 13,380,053
4- 6 months 602,296 42,560 46,219 - 691,075
7- 12 months 65,186 26,425 21,605 - 113,216
Over one year 2,097,656 7,709 14,533 - 2,119,898
Allowance for doubtful accounts (2,214,061 ) (34,060 ) (632,393 ) - (2,880,514 )
Total accounts receivable $ 9,125,092 $ 1,407,885 $ 2,890,751 $ - $ 13,423,728
Accounts receivable from our retail business mainly consist of reimbursements
from local government health insurance bureaus and commercial health insurance
programs. In the year ended March 31, 2021 , we wrote off an approximately
$118,349 collectible from provincial and Hangzhou City government insurance, as
such amounts have been determined by the health insurance bureaus to be
unqualified for reimbursement.
Accounts 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
times ranging from several days to a month after orders are placed.
Accounts 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 2021, 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. As a result, the overall reserve
on wholesale accounts receivables decreased.
Subsequent to March 31, 2021 and through June 29, 2021 , we collected
approximately $6.8 million in receivables relating to our drugstore business,
approximately $0.9 million in receivables relating to our online pharmacy
business, approximately $2.1 million relating to our wholesale business, and $0
relating to our herb farming business.
Advances to suppliers
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:
From date of cash prepayment to Retail Online Drug
Herb Total
suppliers drugstores Pharmacy wholesale farming amount
1- 3 months $ 29,586 $ - $ 94,455 $ - $ 124,041
4- 6 months 14,575 - 18,625 - 33,200
7- 12 months 122,958 - 19,182 - 142,140
Over one year 105,751 - 16,831 - 122,582
Total advances to suppliers
Since the acquisition of Jiuxin Medicine, we have gradually transferred almost all logistics services of our retail drugstores to Jiuxin Medicine.Jiuzhou Pharmacy only purchases certain non-medical products such as sundry. As a result, our retail chain made few advances to suppliers as ofMarch 31, 2021 . At the end of 2021 we had outstanding advances to suppliers with which we have ceased doing business. These advances have been fully reserved. 41 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: cease purchasing products from the vendor, ask for return of our prepayment promptly, and if necessary, take legal action. If all of these steps are unsuccessful, management then determines whether or not the prepayments should be reserved or written off. In fiscal 2021, in order to use our cash more efficiently, we accelerated the collection of deposits from quite a few suppliers, especially aged accounts. We chose to only leave deposits with critical suppliers who supply large quantities of merchandise. As a result, the outstanding advances to suppliers decreased dramatically.
Liquidity and Capital Resources
Our cash flows for the periods indicated are as follows:
For the year ended
March 31,
2021 2020
Net cash used in operating activities
For the year endedMarch 31, 2021 cash used in operating activities amounted to$(62,292) , as compared to$(6,907,945) a year ago. The change is primarily attributable to a decrease in cash provided by inventories and biological assets of$4,594,952 , a decrease in cash provided by accounts receivable of$1,740,172 , a decrease in cash provided by bad debt direct write-off and provision of$1,153,216 offset by an increase of$6,697,870 in accounts payable, an increase in cash provided by Stock compensation of$3,907,040 and an increase in cash provided by other current assets of$2,283,281 . For the year endedMarch 31, 2021 , net cash used in investing activities amounted to$(1,998,325) , as compared to$(4,836,613) provided by investing activities a year ago. The change is primarily attributable to an increase in cash provided by investment in a joint venture of$1,096,964 and an increase of$773,343 in purchases of intangible assets. For the year endedMarch 31, 2021 , net cash provided by financing activities amounted to$3,079,853 , as compared to$19,013,706 a year ago. The change is primarily due to repayment of notes payable and proceeds from third parties loan.OnJune 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.
As of
Contractual Obligations and Off-Balance Sheet Arrangements
Contractual Obligations
The following table summarizes our contractual obligations:
Payments due by period
Less than More than
Contractual obligations Total 1 year 1-3 years 3-5 years 5 years
Short-term loan payable $ 762,270 762,270 - - -
Notes payable 25,663,633 25,663,633 - - -
Long-term loan payable 4,449,903 2,557,634 1,892,269 - -
Total $ 30,875,806 28,983,537 1,892,269 - -
42
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:
March 31 , March 31,
2021 2020
Balance sheet items, except for the registered
and paid-up capital, as of end of period/year USD1:
Amounts included in the statement of Operations and statement of cash flows for the period/ year ended USD1:RMB 0.1477 USD1:RMB 0.1436 Inflation
We believe that inflation has not had a material effect on our operations to date.
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