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Dehaier Medical Systems Announces First Quarter Net Income Up 54%

BEIJING, May 14 /PRNewswire-Asia-FirstCall/ -- Dehaier Medical Systems Ltd. (Nasdaq: DHRM), an emerging leader in the development, assembly, marketing and sale of medical products in China, today reported financial results for its first quarter 2010 ended March 31, 2010.

    (Logo: )

    Q1 2010 Highlights
    -- Revenue for the first quarter ended March 31, 2010 increased 5% to
       $2.6 million from $2.5 million in the same quarter a year ago
       reflecting the increased acceptance of the company's products among
       hospitals and other healthcare facilities.
    -- Gross profit increased 4% to $0.97 million for Q1 FY'10 from
       $0.94 million in Q1 FY'09.
    -- Gross margin for the first quarter ended March 31, 2010 remained
       constant at 37%, which is the same as that of the first quarter in 2009.
    -- Operating income rose 40.67% to $0.65 million in Q1 FY'10 compared with
       $0.46 million in Q1 FY'09 primarily due to the increase in revenues and
       a decrease in general and administrative expense.
    -- Net income attributable to Dehaier in the first quarter was
       $0.52 million, an increase of 54% from $0.34 million for the same
       period in 2009.
    -- Earnings per diluted share in Q1 FY'10 was $0.17, compared to $0.11 per
       diluted share in Q1 FY'09, due to the decrease in general and
       administrative expense.

Liquidity and Capital Resources

The company's cash balance on March 31, 2010 was approximately $1.22 million. On March 31, 2010 Dehaier had short-term debt of $879,006 consisting of a final loan payment to a bank, which is due on May 20, 2010. The company had no long-term debt. Working capital was $6.75 million. Stockholders' equity totaled $11.08 million. The current ratio was 1.96, up from 1.87 at December 31, 2009.

Chen Ping, Dehaier's Chief Executive Officer, said, "The first quarter of 2010 has been an exciting period for Dehaier Medical Systems as we prepared for our Initial Public Offering on Nasdaq of 1,500,000 ordinary shares. The IPO closed on April 22nd and the management team has been invited to ring the bell at Nasdaq in early July. We are looking forward to visiting New York and meeting with analysts and portfolio managers to tell the American investment community about Dehaier.

"For the three months ended March 31, 2010, our total revenues increased by approximately 5% to $2.64 million from $2.52 million for the first three months in the prior year. Many of our end users such as hospitals became repeat customers when they needed new medical equipment, demonstrating the increased acceptance of our products among hospitals and other healthcare facilities.

"To strengthen our market presence, we plan to open new Customer Experience Centers in China. These centers will give our potential customers an opportunity to experience our products first-hand in an environment that is similar to the environment in which they will use the products, whether that is a home or healthcare facility. We anticipate using a portion of the net proceeds of the IPO to expand our marketing efforts in order to continue to grow our revenues in China and internationally.

"Our selling expense decreased in both U.S. dollars and as a percentage of our total net revenues for the three months ended March 31, 2010, primarily due to decreased spending in expanding our distribution network built in 2009.

"In the near term we will be introducing new products to the market which we plan to promote through a variety of advertising methods," said Ping.

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 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), 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 .

Information for investors, including an investment profile about Dehaier is available at . An online investor kit including press releases, current price quotes, stock charts and other valuable information for investors is available at .

Forward-looking Statements

This 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.

    For further information, please contact:

    Hawk Associates
     Julie Marshall or Frank Hawkins
     Tel:   +1-305-451-1888


                                                March 31,        December 31,
                                                   2010              2009
                                                    US$               US$
    Cash and cash equivalents                    1,222,933         1,151,721
    Accounts receivable, less allowance
     for doubtful accounts of $ 102,956
     and $ 102,939                               7,138,891         6,891,291
    Other receivables                            1,624,819         1,499,111
    Prepaid expenses and other current
     assets                                      1,392,455         1,691,387
    Inventory, net                               2,404,842         2,326,126
    Total current assets                        13,783,940        13,559,636

    Property and equipment, net                  2,781,904         2,862,625
    Tax receivable                               1,546,962         1,362,372
    Total assets                                18,112,806        17,784,633

    Short-term borrowings                          879,006         1,464,770
    Accounts payable                                64,233            93,770
    Advances from customers                        164,955           174,253
    Accrued expenses and other current
     liabilities                                   375,023           336,412
    Taxes payable                                5,375,561         4,993,387
    Warranty obligation                            178,784           178,755
    Due to officer                                      --             3,861
    Total current liabilities                    7,037,562         7,245,208

    Commitments and contingency

    Shareholders' equity
    Common stock, $0.002731 par value,
     18,307,038 shares authorized,
     3,000,000 shares issued and
     outstanding                                     8,193             8,193
    Additional paid-in capital                   3,196,974         3,196,974
    Retained earnings                            5,818,953         5,298,742
    Accumulated other comprehensive
     income                                        774,763           773,127
    Total Dehaier Medical Systems Limited
     shareholders' equity                        9,798,883         9,277,036
    Non-controlling interest                     1,276,361         1,262,389
    Total shareholders' equity                  11,075,244        10,539,425

    Total liabilities and shareholders'
     equity                                     18,112,806        17,784,633


                                         For the three months ended March 31,
                                                  2010              2009
                                                  US$               US$

    Revenue                                     $2,641,089        $2,524,284

    Cost of revenues                            (1,666,718)       (1,587,488)

    Gross profit                                   974,371           936,796
    Service income                                  93,067            99,235
    Service expense                                (28,021)          (37,268)
    General and administrative expense            (223,385)         (337,566)
    Selling expense                               (167,851)         (200,429)

    Operating income                               648,181           460,768
    Financial expense (including
     interest expense of $ 18,828 and
     $28,365)                                      (19,326)          (28,956)

    Income before provision for income
     taxes and non-controlling interest            628,855           431,812

    Provision for income taxes                     (94,883)          (80,612)

    Net income                                     533,972           351,200

    Non-controlling interest in income             (13,761)          (13,344)

    Net income attributable to Dehaier
     Medical Systems Limited                      $520,211          $337,856

    Earnings per share
    -Basic                                            0.17              0.18
    -Diluted                                          0.17              0.11

    Weighted average number of common
     shares used in computation
    -Basic                                       3,000,000         1,891,930
    -Diluted                                     3,000,000         3,000,000

                                         For the three months ended March 31,
                                                   2010              2009
                                                   US$               US$
    Operating Activities
    Net income                                    $533,972          $351,200
    Adjustments to reconcile net income
     to net cash provided by operating
    Depreciation and amortization                   85,750            69,758
    Provision for inventory obsolescence                --            52,917
    Provision for warranty                              --            18,534
    Changes in assets and liabilities:
    Increase in accounts receivable               (247,601)       (1,247,041)
    Decrease in prepayments and other
     current assets                                298,932           633,009
     Increase in other receivables                (125,708)         (100,682)
     Increase in inventory                         (78,717)         (106,480)
     Increase in tax receivable                   (184,590)         (152,567)
     (Decrease) increase in accounts
      payable                                      (29,537)          293,340
     (Decrease) increase in advances from
      customers                                     (9,298)           48,822
     Increase in accrued expenses and
      other current liabilities                     38,611             2,890
     Increase in tax payable                       382,174           331,251
    Net cash provided by operating
     activities                                   $663,988          $194,951

    Investing Activities
    Capital expenditures and other
     additions                                     $(4,578)          $(4,410)
    Advance to related parties                      (3,861)             (969)
    Net cash used in investing activities          $(8,439)          $(5,379)

    Financing Activities
    Repayment of Bank loan                       $(585,764)        $(295,060)
    Net cash used in financing activities        $(585,764)        $(295,060)

    Effect of exchange rate fluctuations
     on cash and cash equivalents                    1,427            (8,830)

    Net increase (decrease) in cash and
     cash equivalents                               71,212          (114,318)

    Cash and cash equivalents at
     beginning of period                         1,151,721           282,603

    Cash and cash equivalents at end of
     period                                     $1,222,933          $168,285

    Supplemental cash flow information
    Income tax paid                                 $1,616              $160
    Interest paid                                  $18,828           $28,365

SOURCE Dehaier Medical Systems Ltd.
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