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Dehaier Medical Announces Third Quarter 2010 Financial Results
Date:11/12/2010

BEIJING, Nov. 12, 2010 /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, 2010. The Company posted revenues of $5.5 million and quarterly GAAP net income of $1.4 million, or $0.30 per diluted share. These results compare to revenue of $3.6 million and quarterly GAAP net income of $1.0 million, or $0.34 per diluted share, for the same period last year. Summary financial data is provided below:

Third Quarter 2010 Financial Highlights

  • Revenues for the third quarter of fiscal year 2010 increased by 52.1% year-over-year to $5.5 million, up from $3.6 million in the third quarter of 2009.
  • Net income attributable to the Company for the third quarter increased 38.2% year-over-year to $1.4 million, compared with $1.0 million for the third quarter of 2009.
  • Gross margin for the third quarter was 41.4% based on gross profit of $2.3 million, compared with a 41.4% margin in the same period last year.
  • Operating income and operating margin for the third quarter were $1.6 million and 29.4%, respectively, compared to $1.2 million and 34.5%, respectively, in the third quarter of 2009.
  • Earnings per diluted share were $0.30 for the quarter, compared with diluted EPS of $0.34 achieved in the same period a year ago.

  • 2010 Nine Months Financial Highlights

  • Revenues for the nine months ended September 30, 2010 increased by 37.2% year-over-year to $12.9 million, up from $9.4 million for the nine months ended September 30, 2009.
  • Net income attributable to the Company increased 48.0% year-over-year to $3.1 million, compared with $2.1 million for the first nine months of 2009.
  • Gross margin was 39.9% based on gross profit of $5.2 million, compared with a 39.6% margin in the same period last year.
  • Operating income and operating margin were $3.6 million and 27.9%, respectively, compared to $2.6 million and 27.5%, respectively, in the first nine months of 2009.
  • Earnings per diluted share were $0.77, compared with diluted EPS of $0.69 achieved in the same period a year ago.

  • Mr. Ping Chen, CEO of Dehaier, stated, "We are very pleased with the 52% sales growth we achieved during the third quarter. As the domestic medical equipment market continues to grow, driven by national healthcare reform initiatives, we will capitalize upon our strong partnerships with leading global manufacturers to increase our market share."

    Mr. Chen continued, "Our home healthcare equipment segment is a major strategic focus for Dehaier, and we plan to grow this part of our business by diversifying our product line, aggressively developing our domestic sales network, and expanding into international markets. Building upon our successful market penetration in China, we remain fully committed to becoming a leader in the global respiratory and oxygen homecare market."

    Third Quarter 2010 Results of OperationsRevenuesRevenues for the three months ended September 30, 2010 were $5.5 million as compared to $3.6 million for the three months ended September 30, 2009. The increase of $1.9 million, or 52.1%, was primarily due to the increased acceptance of Dehaier's products among hospitals and other healthcare facilities. The Company also generated revenues from exclusive medical equipment distribution agreements signed during the second quarter with Penlon, HEYER Medical, and Welch Allyn.

    Gross ProfitGross profit for the three months ended September 30, 2010 was $2.3 million, up 52.0% from $1.5 million for the three months ended September 30, 2009. Costs of sales for the three-month period were $3.2 million as compared to $2.1 million for the same period in 2009. The Company's gross margin was 41.4% for the three months ended September 30, 2010 as compared to 41.4% for the same period in 2009.

    Income from OperationsOperating income for the three months ended September 30, 2010 amounted to $1.6 million as compared to $1.2 million for the three months ended September 30, 2009. The increase of $0.4 million, or 30.0%, was primarily due to the increase in sales. Operating expenses for the three-month period totaled $0.71 million as compared to $0.31 million for the same period a year ago. The increase in operating expenses was largely attributable to the expansion of the Company's marketing strategy, implementation expenses associated with Sarbanes-Oxley Section 404 compliance, and an increase in R&D expenses.

    Net IncomeNet income for the three months ended September 30, 2010 was $1.4 million as compared to $1.0 million for the three months ended September 30, 2009, due to the reasons set forth above. Earnings per diluted share were $0.30 for the quarter, compared with diluted EPS of $0.34 for the same period a year ago.

    Nine Months Ended September 30, 2010 Results of OperationsRevenuesRevenues for the nine months ended September 30, 2010 were $12.9 million as compared to $9.4 million for the nine months ended September 30, 2009. The increase of $3.5 million, or 37.2%, was primarily due to an increase in repeat customers among hospitals and other healthcare facilities. The Company also generated revenues from exclusive medical equipment distribution agreements signed during the second quarter with Penlon, HEYER Medical, and Welch Allyn.

    Gross ProfitGross profit for the nine months ended September 30, 2010 was $5.2 million, up 38.0% from $3.7 million for the nine months ended September 30, 2009. Costs of sales were $7.8 million for the nine-month period, up 36.7% from $5.7 million in the same period a year ago. The Company's gross margin was 39.9% and 39.6%, respectively, for the nine months ended September 30, 2010 and 2009.

    Income from OperationsOperating income for the nine months ended September 30, 2010 amounted to $3.6 million as compared to $2.6 million for the nine months ended September 30, 2009. The increase of $1.0 million, or 39.5%, was primarily due to the increase in revenues. Operating expenses for the nine months ended September 30, 2010 totaled $1.7 million, up 28.4% from $1.3 million in the same period a year ago.

    Net IncomeNet income for the nine months ended September 30, 2010 was $3.1 million as compared to $2.1 million for the nine months ended September 30, 2009. Earnings per diluted share were $0.77 for the nine-month period, compared with diluted EPS of $0.69 for the same period in 2009.  

    Liquidity and Capital ResourcesAs of September 30, 2010, the Company had current assets of $27.6 million and current liabilities of $9.6 million. Cash and cash equivalents totaled $4.96 million as of September 30, 2010. The Company's shareholders' equity at September 30, 2010 was $24.0 million. The Company used $6.0 million in cash for operating activities during the nine months ended September 30, 2010, as compared to $1.6 million in cash provided by operating activities for the nine months ended September 30, 2009. The Company used $0.8 million in cash for investing activities during the nine months ended September 30, 2009, as compared to $0.9 million for the same period in 2009. The Company generated $9.9 million in cash from financing activities for the nine months ended September 30, 2010.

    Conference Call and WebcastManagement will host a conference call to discuss these financial results on Tuesday, November 16, 2010 at 10:00 a.m. EST (7:00 a.m. PST).

    To participate in the call please dial (877) 941-8602, or (480) 629-9810 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties can also listen via a live Internet webcast, which can be found via the Company's website at http://www.chinadhr.com, or alternately at http://ViaVid.net.

    A replay of the call will be available for two weeks from 1:00 p.m. on November 16, 2010, EST until 11:59 p.m. EST on November 30, 2010. The number for the replay is (877) 870-5176, or (858) 384-5517 for international calls; the pass code for the replay is 4384115. 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 Medical Systems 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 products from third-party components. The company also distributes products designed and manufactured by other companies, including medical devices and respiratory and oxygen homecare products from IMD (Italy), Welch Allyn (USA), Penlon (UK), HEYER (Germany), Timesco (UK), ResMed (Australia), and JMS (Japan). Dehaier's technology is based on two patents, five pending patents, 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 UsInvestor Relations:Dave Gentry, U.S.RedChip Companies, Inc.Tel: +1-800-733-2447, Ext. 104Email: info@redchip.comJing Zhang, ChinaRedChip Beijing Representative OfficeTel: +86 10-8591-0635Web: http://www.RedChip.comDEHAIERMEDICAL SYSTEMS LIMITED AND AFFILIATECONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED) For the nine months ended
    September 30, For the three months ended
    September 30, 2010 2009 2010 2009 US$US$US$US$Revenue 12,930,7699,422,4605,458,8183,588,442Costs of revenue (7,776,867)(5,688,352)(3,199,072)(2,101,639)Gross profit 5,153,9023,734,1082,259,7461,486,803Service income

    274,154298,03692,648101,708Service expenses

    (108,825)(113,066)(40,479)(38,085)General and administrative expense

    (875,840)(787,784)(355,431)(159,203)Selling expense

    (834,279)(544,470)(351,469)(152,776)Operating Income 3,609,1122,586,8241,605,0151,238,447Financial expenses ( including interest expense of $48,255, $67,704, $21,452 and $23,772)

    (98,411)(66,384)(43,725)(21,302)Change in fair value of warrants liability

    114,806-96,412-Income before provision for income taxes and non-controlling interest  3,625,5072,520,4401,657,7021,217,145Provision for income tax

    (543,749)(410,162)(245,569)(183,712)Net income 3,081,7582,110,2781,412,1331,033,433Non-Controlling interest in income

    (14,561)(38,502)(4,570)(14,782)Net income attributable to Dehaier Medical Systems Limited 3,067,1972,071,7761,407,5631,018,651Earnings per share-Basic

    0.791.100.310.54-Diluted

    0.770.690.300.34Weighted average number of common shares used in computation-Basic

    3,887,8681,891,9304,500,0001,891,930-Diluted

    3,981,0943,000,0004,657,5003,000,000DEHAIERMEDICAL SYSTEMS LIMITED AND AFFILIATECONDENSED CONSOLIDATED BALANCE SHEETS(UNAUDITED) September 30, December 31,20102009US$US$ASSETSCURRENT ASSETS:Cash and cash equivalents

    4,964,4501,151,721Accounts receivable-less allowance for doubtful accounts of $ 74,179 and $102,939

    9,074,8416,891,291Other receivables

    3,107,3511,499,111Prepayment and other current assets

    6,124,9331,691,387Inventories, net

    4,301,0252,326,126Total Current Assets 27,572,60013,559,636Property and equipment, net

    3,541,7632,862,625Tax receivable

    2,450,6811,362,372Total assets 33,565,04417,784,633LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES:Short-term borrowings

    1,495,0001,464,770Accounts payable  

    37,09593,770Advances from customers

    436,625174,253Accrued expenses and other current liabilities

    256,126336,412Tax payable

    6,998,8074,993,387Warranty obligation

    182,444178,755Warrants liability

    155,194-Due to officer

    -3,861Total Current Liabilities 9,561,2917,245,208Commitments and contingency  Shareholders' equity Common stock, $0.002731 par value, 18,307,038 shares authorized, 4,500,000 and 3,000,000 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively

    12,2908,193Additional paid in capital

    13,137,0853,196,974Retained earnings

    8,365,9395,298,742Accumulated other comprehensive income

    1,185,177773,127Total Dehaier Medical Systems Limited shareholders' equity 22,700,4919,277,036Non-controlling interest

    1,303,2621,262,389Total shareholders' equity 24,003,75310,539,425Total liabilities and shareholders' equity 33,565,04417,784,633DEHAIERMEDICAL SYSTEMS LIMITED AND AFFILIATECONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)For the nine months ended September 3020102009US$US$Operating ActivitiesNet income

    3,081,7582,110,278Adjustment to reconcile net income to net cash provided by (used in) operating activities Depreciation and amortization

    261,438210,231Recovery of doubtful accounts

    (30,336)-Recovery of inventory obsolescence

    (5,756)-Change in fair value of warrants liability

    114,806-Provision for warranty reserve

    3,68941,662Change in assets and liabilitiesIncrease in accounts receivable

    (2,153,214)(642,778)Decrease (increase) in prepayments and other current assets

    (4,433,546)498,145Increase in other receivable

    (1,608,240)(274,275)Increase in inventories

    (1,969,143)(1,050,453)Increase in tax receivable

    (1,088,309)(610,511)(Decrease) increase in accounts payable

    (56,675)5,536(Decrease) increase in advances from customers

    262,372(170,699)(Decrease) increase in accrued expenses and other current liabilities

    (80,286)46,609Increase in tax payable

    2,005,4201,409,645Net cash provided by (used in) operating activities(5,696,022)1,573,390Investing ActivitiesCapital expenditures and other additions

    (839,456)(915,693)Proceeds from (advances to) related parties

    (3,861)1,976Net cash used in investing activities(843,317)(913,717)Financing ActivitiesNet proceeds from issuance of common stock

    9,944,207-Net cash provided by financing activities9,944,207-Effect of exchange rate fluctuations on cash and cash equivalents

    407,861(4,306)Net increase in cash and cash equivalents3,812,729655,367Cash and cash equivalents at beginning of period

    1,151,721282,603Cash and cash equivalents at end of period

    4,964,450937,970Supplemental cash flow informationIncome tax paid

    17,19712,824Interest paid

    48,25567,704
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    SOURCE Dehaier Medical Systems Ltd.
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