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Dehaier Medical Systems Q2 Revenue Up 46% to $4.83 Million; Net Income Up 59% to 1.14 Million; EPS 0.27

Dehaier Medical Systems Q2 Revenue Up 46% to $4.83 Million; Net Income Up 59%... -- BEIJING, Aug. 16 /PRNewswire-Asia-FirstCall/ --

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Biotechnology, Health Care & Hospitals, Medical Equipment, Earnings Forecasts & Projections, Earnings Click to view news release full screen  

Dehaier Medical Systems Q2 Revenue Up 46% to $4.83 Million; Net Income Up 59% to 1.14 Million; EPS 0.27


Company Continues to Expand Marketing Strategies

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BEIJING, Aug. 16 /PRNewswire-Asia-FirstCall/ -- Dehaier Medical Systems Ltd. (Nasdaq: DHRM), an emerging leader in the development, assembly, marketing and sale of medical devices and homecare medical products in China, today reported financial results for its second quarter 2010 ended June 30, 2010.

(Logo: ) (Logo: ) Q2 2010 Financial Highlights -- Revenue for the second quarter ended June 30, 2010 increased 46% to $4.83 million from $3.31 million in the same quarter a year ago reflecting the increased acceptance of the company's products among hospitals and other healthcare facilities. Expanded product lines also contributed to the revenue growth. -- Gross profit increased 46% to $1.92 million for Q2 FY'10 from $1.31 million in Q2 FY'09. -- Gross margin for the second quarter ended March 31, 2010 remained constant at 40%, the same as the second quarter in 2009. -- Operating income rose 52.76% to $1.36 million in Q2 FY'10 compared with $0.89 million in Q2 FY'09 primarily due to the increased revenues. -- Net income attributable to Dehaier for the second quarter ended June 30, 2010 increased 59% to $1.14 million, compared to $0.72 million for the same period of 2009. -- Earnings per diluted share in Q2 FY'10 was $0.27, compared to $0.24 per diluted share in Q2 FY'09. Six Months Highlights -- Revenue for the first six months of 2010 increased by 28% to $7.47 million from $5.83 million in the first six months of 2009. -- Gross profit increased 29% to $2.89 million from $2.25 million in the same period of 2009. -- Gross margin for the first six months ended June 30, 2010 remained constant at 39%, which is the same as that of the first six months in 2009. -- Operating income rose 49% to $2.0 million from $1.35 million in the same period of 2009. -- Net income attributable to Dehaier for the first six months increased 58% to $1.66 million, compared to $1.05 million for the same period of 2009. -- Earnings per diluted share in H1 FY'10 was $0.46, compared to $0.35 per diluted share in H1 FY'09.

Liquidity and Capital Resources

The company's cash balance on June 30, 2010 was approximately $6.54 million. On June 30, 2010 Dehaier had short-term debt of $1,474,610 in the form of a short-term bank loan due in June 2011. The company had no long-term debt. Working capital was $17,559,244, which the company said would be adequate to meet anticipated cash needs and sustain current operations for at least 12 months.

Management Comments

Dehaier CEO Mr. Ping Chen said, "The second quarter of 2010 was an exciting period for our rapidly growing company. We recorded another quarter of excellent financial results and our stock began trading on the Nasdaq Capital Market with our successful initial public offering ("IPO"), which closed on April 22, 2010. We sold 1,500,000 shares that produced net proceeds of $9,944,207.

"This has provided us with sufficient working capital to expand our marketing efforts in order to grow our revenues in China and internationally.

"The increase in revenues reflected increased acceptance of our products among hospitals and other healthcare facilities as many of our end users such as hospitals became repeat customers when they needed new medical equipment. The increase in revenue was also due to Dehaier's growing line of product offerings.

"We signed several exclusive distribution agreements this quarter with international firms Penlon, HEYER and Welch Allyn to expand our product lines. Sales of products from these companies are already contributing to revenue growth.

"We are targeting the addition of four to eight new product offerings per year. We anticipate these new products will include distributed products as well as products that are developed or acquired by Dehaier. We have designated 25 percent of the IPO proceeds for product research and development. Another 20 percent of the IPO proceeds have been budgeted for potential acquisitions, clearly showing our focus on building a pipeline of products to introduce to our customers. We will be concentrating on products that enhance our capability to serve the respiratory and oxygen homecare markets.

"Underscoring the important competitive advantage we are achieving with our proprietary home oxygen therapy products is our previously-announced new contract with Beijing C&D Co. to purchase Dehaier oxygen-chip units.

"In addition to increasing sales of our fast-growing Dehaier brand homecare medical products, we are building new revenue streams by adding to our product line offerings through complementary acquisitions, such as the emergency ventilator product line we purchased from Beijing Qiumanshi Technology Co., as announced last month. That acquisition included the production technology as well as the complete proprietary intellectual property.

"With the marketing capital provided by our IPO, we plan to open new customer experience centers ("CECs") to strengthen our market presence throughout China. These CECs give our potential customers an opportunity to experience our products first-hand in an environment similar to the environment in which they will use the products, either in a home or in a healthcare facility. Our initial CEC is already operational in Beijing and we anticipate opening three new CECs in the third quarter and up to nine CECs during the fourth quarter, so that we will operate CECs in twelve cities at the end of 2010. Our plan to open CECs in provincial capitals and big cities throughout China is a key part of our strategy for growing our high-margin homecare medical product sales.

"We have participated in several medical exhibitions and tradeshows in China and abroad to network and build relationships and alliances as we further build our distribution network in China and internationally.

"Our business outlook continues to be very favorable. We are excited to bring our growth story to the financial community, and were very pleased to participate recently in the Global Hunter investment conference in San Francisco. We remain comfortable with our previously announced earnings per share target for 2010 of $0.80," Mr. Chen said.

Conference Call

Dehaier will host an earnings conference call on Tuesday, August 17, 2010 at 9:00 a.m. Eastern Time (9:00 pm Beijing time on August 17). The call will cover the company's second quarter 2010 results, and a question-and-answer session will follow.

To participate, call U.S. toll free number 1-888-549-7735 approximately 10 minutes before the call. International callers, please dial 1-480-629-9858. The conference ID number is 4349036. A live and archived webcast of the call will be available at . Both an MP3 file one hour after the call and a transcript 24 hours after the call will be available. These will be archived for 90 days via .

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 .

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 more information, please contact: Investor contact: Hawk Associates Julie Marshall or Grace Huang Tel: +1-305-451-1888 Email: DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE CONDENSED CONSOLIDATED BALANCE SHEETS June 30, December 31, 2010 2009 US$ US$ (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents 6,540,009 1,151,721 Accounts receivable, less allowance for doubtful accounts of $77,783 and $102,939 8,867,002 6,891,291 Other receivables 2,765,248 1,499,111 Prepayment and other current assets 4,611,990 1,691,387 Inventory, net 3,165,490 2,326,126 Total Current Assets 25,949,739 13,559,636 Property and equipment, net 2,803,429 2,862,625 Tax receivable 1,926,290 1,362,372 Total assets 30,679,458 17,784,633 LIABILITIES AND SHAREHOLDERS' EQUITY Short-term borrowings 1,474,610 1,464,770 Accounts payable 16,675 93,770 Advances from customers 92,606 174,253 Accrued expenses and other current liabilities 263,076 336,412 Tax payable 6,111,966 4,993,387 Warranty obligation 179,956 178,755 Warrants Liability 251,606 -- Due to officer -- 3,861 Total current liabilities 8,390,495 7,245,208 Commitments and contingency -- -- Shareholders' equity Common stock, $0.002731 par value, 18,307,038 shares authorized, 4,500,000 and 3,000,000 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively 12,290 8,193 Additional paid in capital 13,137,085 3,196,974 Retained earnings 6,958,377 5,298,742 Accumulated other comprehensive income 900,285 773,127 Total Dehaier Medical Systems Limited shareholders' equity 21,008,037 9,277,036 Non-controlling interest 1,280,926 1,262,389 Total shareholders' equity 22,288,963 10,539,425 Total liabilities and shareholders' equity 30,679,458 17,784,633 DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the six months ended For the three months ended June 30, June 30, 2010 2009 2010 2009 US$ US$ US$ US$ Revenue 7,471,951 5,834,018 4,830,862 3,309,734 Costs of revenue (4,577,795) (3,586,713) (2,911,077) (1,999,225) Gross profit 2,894,156 2,247,305 1,919,785 1,310,509 Service income 181,506 196,328 88,439 97,093 Service expenses (68,346) (74,981) (40,325) (37,713) General and administrative expense (520,409) (628,581) (297,024) (291,015) Selling expense (482,810) (391,694) (314,959) (191,265) Operating Income 2,004,097 1,348,377 1,355,916 887,609 Financial expense (including interest expense of $26,728, $43,932, $7,900 and $15,567) (54,686) (45,082) (35,360) (16,126) Change in fair value of warrants liability 18,394 -- 18,394 -- Income before provision for income taxes and non-controlling interest 1,967,805 1,303,295 1,338,950 871,483 Provision for income tax (298,180) (226,450) (203,297) (145,838) Net income 1,669,625 1,076,845 1,135,653 725,645 Non-Controlling interest in (income) loss (9,991) (23,720) 3,770 (10,376) Net income attributable to Dehaier Medical Systems Limited 1,659,634 1,053,125 1,139,423 715,269 Earnings per share -Basic 0.46 0.56 0.27 0.38 -Diluted 0.46 0.35 0.27 0.24 -- -- -- -- Weighted average number of common shares used in computation -Basic 3,575,000 1,891,930 4,150,000 1,891,930 -Diluted 3,632,500 3,000,000 4,265,000 3,000,000 DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the six months ended June 30, 2010 2009 US$ US$ Operating Activities Net income 1,669,625 1,076,845 Adjustment to reconcile net income to net cash provided by (used in)operating activities -- -- Depreciation and amortization 172,314 139,012 Recovery of doubtful accounts (25,680) -- Provision for (recovery of)inventory obsolescence (1,922) 52,989 Change in Warrants Liability 18,394 -- Changes in assets and liabilities Increase in accounts receivable (1,950,032) (1,593,441) Decrease (increase) in prepayments and other current assets (2,920,603) 938,541 Increase in other receivable (1,266,137) (107,157) Increase in inventory (837,443) (1,392,611) Increase in tax receivable (563,918) (462,317) (Decrease) increase in accounts payable (77,095) 677,283 Decrease in advances from customers (81,647) (43,896) (Decrease) increase in accrued expenses and other current liabilities 159,880 (10,911) Increase in tax payable 1,118,579 780,699 Net cash provided by (used in) operating activities (4,585,685) 55,036 Investing Activities Capital expenditures and other additions (94,397) (18,696) Proceeds from (advances to) related parties (3,861) 5,656 -- -- Net cash used in investing activities (98,258) (13,040) Financing Activities Proceeds from initial public offering 9,944,207 -- Net cash provided by financing activities 9,944,207 -- Effect of exchange rate fluctuations on cash and cash equivalents 128,024 10,818 Net increase in cash and cash equivalents 5,388,288 52,814 Cash and cash equivalents at beginning of period 1,151,721 282,603 Cash and cash equivalents at end of period 6,540,009 335,417 Supplemental cash flow information Income tax paid 24,604 12,823 Interest paid 26,728 43,932

SOURCE Dehaier Medical Systems Ltd.
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