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Dehaier Medical Announces Record Third Quarter 2011 Financial Results
Date:11/14/2011

BEIJING, Nov. 14, 2011 /PRNewswire-Asia-FirstCall/ -- Dehaier Medical Systems Ltd. (Nasdaq: DHRM) ("Dehaier" or the "Company"), an emerging leader in the development, assembly, marketing and sale of medical devices and homecare medical products in China, today announced its financial results for the third quarter ended September 30, 2011.

(Logo: http://photos.prnewswire.com/prnh/20100422/CNTH001LOGO)

Third Quarter 2011 Financial Highlights  

  • Revenue of $5.69 million, up 4.2% over the $5.46 million reported in the third quarter of 2010.
  • Gross profit was $2.4 million, or 42.5% of revenue, compared with $2.3 million, or 41.4% of revenue in the third quarter of 2010.
  • Operating income and operating margin were $1.66 million and 29.2%, respectively, compared with $1.61 million and 29.4%, respectively, in the third quarter of 2010.
  • Net income attributable to the Company was $1.38 million or $0.31 per diluted share, which compares to net income of $1.41 million, or $0.30 per diluted share in the third quarter of 2010.

  • Financial Highlights for the Nine Months Ended September 30, 2011  

  • Revenue of $16.4 million, an increase of 26.5% over the $12.9 million reported for the nine month ended September 30, 2010
  • Gross profit was $6.3 million, or 38.3% of revenue, compared with $5.2 million, or 39.9% of revenue in the same period in 2010.
  • Operating income and operating margin were $3.88 million and 23.7%, respectively, compared with $3.61 and 27.9%, respectively, in the first nine months of 2010.
  • Net income attributable to the Company was $3.32 million, or $0.74 per diluted share, based on weighted average shares outstanding of 4.5 million, compared with $3.07 million, or $0.77 per diluted share, based on weighted average shares outstanding of 4.0 million in the nine months of 2010.

  • Third Quarter 2011 and Recent Business Highlights

  • Since home oxygen therapy service center began operating, we made effort on marketing and constantly promoting our new business by our professional team, we have marked this service to more than 50 hospitals in Beijing. The number of potential customers for home oxygen therapy service is increasing.

  • Continued implementing our existing contract projects with Hospital 301 for a medical supply agreement and with Beijing Kanglian Medicine Co, Ltd for a rural healthcare project in Hunan and Anhui Province. During the third quarter, we recruited several professionals to further strengthen our team for the state-level contract projects. It is expected that we will continue to establish further cooperative relations to engage more projects.

  • Sustained investment on our R&D of homecare products. We began to develop our second generation respiratory homecare products. We expect to launch a brand new series of CPAP devices by the first half of 2012. Registration for CE Mark and FDA approval will follow afterwards.

  • Mr. Ping Chen, Chief Executive officer of Dehaier Medical, stated that: "Homecare business is our strategic focus, we are glad to see the solid increase in revenue for our homecare products as expected. As we are aiming to provide customers with an all-in-one solution in home healthcare field, we are pushing forward on our product portfolio through continued investment in research and development and acquisition of companies with proper products complementary to our core business. We are continuing to aggressively seek opportunities to increase our market penetration worldwide, and we are confident in our expansion strategy and growth prospects."

    Third Quarter 2011 Financial ResultsRevenuesRevenues for the three months ended September 30, 2011 were $5.69 million, compared with $5.46 million for the three months ended September 30, 2010.

  • Sales of self-branded and third party medical devices, including technical service products, decreased 3% to $4.2 million, or 74% of total revenue, compared with $4.3 million, or 79% of revenue in the same period a year ago. The micro sales decrease was due to the adjustment of the company's development strategy and business focus. The sales increase in the technical service segment was primarily related to the increased acceptance of Dehaier's air compressor among hospitals and other healthcare facilities
  • Homecare products revenue increased 33% to $1.49 million, or 26% of total revenue, compared to $1.12 or 21% in the third quarter of 2010. The increase in sales from homecare products was primarily attributable to additional market penetration and expansion of Dehaier's homecare products.

  • Gross ProfitGross profit for the three months ended September 30, 2011 were $2.4 million, compared with $2.3 million in the three months ended September 30, 2010. As a percentage of revenue, the Company's gross margin was 42.5% for the three months ended September 30, 2011, compared with 41.4% for the same period in 2010.

    Income from OperationsOperating income for the three months ended September 30, 2011 totaled $1.66 million, compared with $1.61 million for the three months ended September 30, 2010.

    Operating expenses consisting of selling expenses and general and administrative expenses, were $790,000, an increase of 11%, compared with $710,000 for the same period a year ago. In addition to the business expansion, the increase in operating expenses was primarily due to a 12% increase in G&A expenses associated with increased R&D related to clinical testing of oxygen and respiratory products and R&D of the second generation products, and expenses associated with being a publicly traded company, including expenses on hiring professional employees and retained professional consulting firms, and a 13% increase in selling expenses for marketing,  

    Net IncomeNet income attributable to the Company for the three months ended September 30, 2011 was $1.38 million, compared with $1.41 million for the three months ended September 30, 2010. The decrease in net income was primarily due to the increase of operating expenses.

    Nine Months Ended September 30, 2011 Financial Results RevenuesRevenues for the nine months ended September 30, 2011 were $16.4 million as compared to $12.9 million for the nine months ended September 30, 2010. The increase of $3.4 million, or 26.5%. This was primarily due to increased acceptance of our products resulting in additional units sold among hospital and other health facilities, and we keep good relationship with clients. We continue to expand our homecare business domestically and internationally, which promotes a greater market presence for our self branded products, and we have engaged in several provincial or government level healthcare procurement projects.

    Gross ProfitGross profit for the nine months ended September 30, 2011 was $6.3 million, up 21.4% from $5.2 million for the nine months ended September 30, 2010. Costs of revenue were $10.1 million for the nine-month period, up 30% from $7.8 million in the same period a year ago. The Company's gross margin was 38.3% and 39.9%, respectively, for the nine months ended September 30, 2011 and 2010. Decrease of gross profit margin was primarily due to that our cost of revenues grew slightly faster than our revenues. The cost of medical components and parts are the major cause for the increase in cost of revenues.

    Income from OperationsOperating income for the nine months ended September 30, 2011 amounted to $3.88 million as compared to $3.61 million for the nine months ended September 30, 2010. The increase of $0.27 million, or 7.6%, was primarily due to the increase in revenues.

    Net IncomeNet income for the nine months ended September 30, 2011 was $3.32 million as compared to $3.08 million for the nine months ended September 30, 2010. Earnings per diluted share were $0.74 for the nine-month period, compared with diluted EPS of $0.77 for the same period in 2010.

    Liquidity and Capital ResourcesAs of September 30, 2011, Dehaier had $2.6 million in cash and cash equivalents, compared with $5.9 million as of December 31, 2010. The decrease was primarily due to the result of an increase in accounts receivable, and prepayment due to more distribution agreements requiring prepayment for products. Working capital was $26.8 million, compared with $22.6 million, respectively, as of December 31, 2010.

    Conference Call and WebcastManagement will host a conference call to discuss these financial results on Monday, November 14, 2011 at 7:30 a.m. EST.

    To participate in the call please dial + 86 10-5137-7322 for international calls, and enter account No.: 16833078#, passcode: 999999#, approximately 10 minutes prior to the scheduled start time. Interested parties can also listen via a live Internet webcast, which can be found on the Company's website at http://www.chinadhr.com.

    In addition, a recording of the call will be available via the company's website at http://www.chinadhr.com for one year.

    About Dehaier Medical Systems Ltd.Dehaier is an emerging leader in the development, assembly, marketing and sale of medical products in China, including respiratory and oxygen homecare medical products. The company develops and assembles its own branded medical devices and homecare medical products from third-party components. The company also distributes products designed and manufactured by other companies, including medical devices from IMD (Italy), Welch Allyn (USA), HEYER (Germany), Timesco (UK), eVent Medical (US) and JMS (Japan). Dehaier's technology is based on five patents and five software copyrights; additionally, we have three pending patents and six pending software copyrights, and proprietary technology. More information may be found at http://www.chinadhr.com.

    Forward-looking StatementsThis news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

    Contact UsDehaier Medical Systems Limited
    Surie Liu
    +86 10-5166-0080
    lius@dehaier.com.cn
    Dehaier Medical Systems Limited
    Lisa Zhou
    +86 10-5166-0080
    zhouyj@dehaier.com.cn DEHAIER MEDICAL SYSTEMS
    LIMITED AND AFFILIATECONDENSED CONSOLIDATED BALANCE SHEETS(UNAUDITED)September 30,December 31, 20112010US$US$ASSETSCURRENT ASSETS:Cash and cash equivalents

    2,600,9075,923,386Accounts receivable-less allowance for doubtful accounts of $90,546 and $87,555 at September 30, 2011 and December 31, 2010, respectively

    15,032,5299,112,077Other receivables

    3,705,8093,164,423Prepayment and other current assets

    8,372,6335,300,825Inventories, net

    6,436,7646,374,363Tax receivable

    4,789,3183,518,919Total Current Assets 40,937,96033,393,993Property and equipment, net

    3,366,2663,488,947Total Assets 44,304,22636,882,940LIABILITIES AND EQUITY CURRENT LIABILITIES:Short-term borrowings

    1,566,3501,514,620Accounts payable  

    38,75029,318Advances from customers

    465,848269,189Accrued expenses and other current liabilities

    357,501330,601Tax payable

    11,356,6528,327,708Warranty obligation

    311,760301,464Due to officer

    -2,358Total Current Liabilities 14,096,86110,775,258OTHER LIABILITIESWarrants liability

    140,751318,109Total Liabilities14,237,61211,093,367Commitments and ContingencyEquity Common shares, $0.002731 par value, 18,307,038 shares authorized, 4,510,000 and 4,500,000 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively

    12,31712,290Additional paid in capital

    13,196,35713,137,085Retained earnings

    13,161,1989,838,452Accumulated other comprehensive income

    2,312,5241,474,455Total Dehaier Medical Systems Limited shareholders' equity 28,682,39624,462,282Non-controlling interest

    1,384,2181,327,291Total equity 30,066,61425,789,573Total liabilities and equity 44,304,22636,882,940The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATECONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME(UNAUDITED) For the nine months ended
    September 30,  For the three months ended 
    September 30,  2011  2010  2011  2010 US$US$US$US$Revenue 16,354,53312,930,7695,689,0435,458,818Costs of revenue (10,098,506)(7,776,867)(3,272,012)(3,199,072)Gross profit 6,256,0275,153,9022,417,0312,259,746Service income

    215,069274,15458,64192,648Service expenses

    (83,355)(108,825)(21,983)(40,479)General and administrative expense

    (1,412,859)(875,840)(396,692)(355,431)Selling expense

    (1,093,013)(834,279)(398,520)(351,469)Operating Income 3,881,8693,609,1121,658,4771,605,015Financial expenses (including interest expense of $53,915, $48,255, $26,922 and $21,452 for the nine and three months ended September 30, 2011 and 2010, respectively)

    (57,689)(98,411)(30,217)(43,725)Change in fair value of warrants liability

    177,358114,80627,49196,412Income before provision for income taxes and non-controlling interest  4,001,5383,625,5071,655,7511,657,702Provision for income tax

    (667,400)(543,749)(270,758)(245,569)Net income 3,334,1383,081,7581,384,9931,412,133Non-Controlling interest in income

    (11,392)(14,561)(5,738)(4,570)Net income attributable to Dehaier Medical Systems Limited 3,322,7463,067,1971,379,2551,407,563Net Income3,334,1383,081,7581,384,9931,412,133Other comprehensive incomeForeign currency translation adjustments

    838,069412,050326,694284,892Comprehensive Income4,172,2073,493,8081,711,6871,697,025Comprehensive income attributable to the non-controlling interest

    (56,927)(40,871)(22,682)(22,334)Comprehensive income attributable to Dehaier Medical Systems Limited4,115,2803,452,9371,689,0051,674,691Earnings per share-Basic

    0.740.790.310.31-Diluted

    0.740.770.310.30Weighted average number of common shares used in computation-Basic

    4,507,5823,887,8684,510,0004,500,000-Diluted

    4,507,5823,981,0944,510,0004,657,500The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATECONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)For the nine months ended 
    September 30,20112010US$US$Cash flows from operating activitiesNet income3,334,1383,081,758Adjustments to reconcile net income to net cash used in operating activities   Stock-based compensation expense59,300-   Depreciation and amortization333,580261,438   Change in fair value of warrants liability(177,358)114,806   Recovery of doubtful accounts-(30,336)   Recovery of inventory obsolescence-(5,756)   Provision for warranty reserve-3,689Changes in assets and liabilities:   Increase in accounts receivable(5,920,452)(2,153,214)   Increase in prepayments and other current assets(3,071,808)(4,433,546)   Increase in other receivables(541,386)(1,608,240)   Increase in inventories(62,401)(1,969,143)   Increase in tax receivable(1,270,399)(1,088,309)   Increase (Decrease) in accounts payable9,432(56,675)   Increase in advances from customers196,659262,372   Increase (Decrease) in accrued expenses and other current liabilities26,900(80,286)   Increase in tax payable3,028,9442,005,420Net cash used in operating activities(4,054,851)(5,696,022)Cash flows from investing activitiesCapital expenditures and other additions(95,742)(839,456)Advances to related parties(2,358)(3,861)Net cash used in investing activities(98,100)(843,317)Cash flows from financing activitiesProceeds from bank loan1,542,680-Repayment of bank loan(1,533,604)-Net proceeds from issuance of common shares-9,944,207Net cash provided by financing activities9,0769,944,207Effect of exchange rate fluctuations on cash and cash equivalents 821,396407,861Net (decrease) increase in cash and cash equivalents(3,322,479)3,812,729Cash and cash equivalents at beginning of period5,923,3861,151,721Cash and cash equivalents at end of period2,600,9074,964,450Supplemental cash flow informationIncome tax paid13,34417,197Interest paid53,91548,255Non-Cash transaction of investing and financing activitiesIssuance of common shares for investment relations activities  59,300-The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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    SOURCE Dehaier Medical Systems Ltd.
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