Dehaier Medical Announces 2012 Second Quarter and Six Month Financial Results

BEIJING, Aug. 13, 2012 /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, today announced its financial results for its second quarter and six months ended June 30, 2012.

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Comments from Management

Mr. Ping Chen, Chief Executive Officer of Dehaier Medical, stated, "Throughout the first half of 2012, we continued to focus on diversifying our revenues.  While we have continued to build on our medical device sales and distribution foundation, we have also devoted sales resources to growing our proprietary respiratory and oxygen homecare products, explored international expansion possibilities and put more energy into developing and researching homecare products and protecting our intellectual property. Throughout this process we have continued to report strong operating profits.  We improved our gross and operating margins and continue to leverage a strong balance sheet with minimal long-term debt.  We believe that our business will continue to grow at a healthy rate in the long term as we strengthen our medical device distribution network; increase the market recognition and demand for our proprietary products; research, develop and begin to sell new products; and ramp up our international expansion."

Operating Highlights

  • In April 2012, Dehaier renewed its strategic cooperation agreement with Timesco of London Ltd ("Timesco"). The agreement appointed Dehaier as the exclusive distributor for Timesco's CXL and Eclipse series laryngoscope products in mainland China for three years.
  • In May 2012, the Company extended its exclusive distribution authorization with INTERMEDICAL ("IMD"), to distribute IMD's RADIUS C-arm X-ray machines in mainland China. The extended term runs through 2014.
  • In June 2012, Dehaier entered a three-year strategic mutual cooperation agreement with HEYER Medical AG ("Heyer"). According to this agreement, Dehaier will continue to be one of the key Chinese distributors for Heyer's anesthesia machines and the exclusive distributor of its nebulizers in China. 
  • Also in June 2012, the Company co-developed a "High-Efficiency Oxygen Inhaler" with Dr. Ding Jianzhang of Beijing Haidian Hospital. This inhaler is expected to begin selling in mainland China in the third quarter of 2012. The portable device is designed for use in homecare oxygen therapy, emergency treatment, disaster relief activities and high-altitude settings.
  • Between April and June 2012, the company obtained software copyrights from China's National Copyright Administration for four of its proprietary technologies, including (1) Analysis and Monitoring Software of Adsorption Tower Oxygen Generation Process, (2) Dehaier Homecare CPAP Controlling Software, (3) Ventilator of CPAP Controlling Software and (4) Air Compressor Controlling Software. These copyrights have been approved for 50 years from the grant date.
  • In July 2012, Dehaier received approval from China's State Food and Drug Administration ("SFDA") for its proprietary homecare medical CPAP device, the DHR-CPAP-C5.

Second Quarter 2012 Financial Highlights

  • Total revenues were $7.0 million for the three months ended June 30, 2012, compared to $7.7 million in the prior-year quarter.  The decrease was largely a result of the aforementioned change in operating strategy to focus on Dehaier's own homecare products and larger government procurement projects.
  • The Company's gross profit for the quarter ended June 30, 2012 was $2.7 million, or 39.2% of revenue, compared to $2.8 million, or 36.8% of revenue, in the prior-year period.  Gross margin improved largely as a result of improved operating efficiencies and inventory management.
  • Dehaier's income from operations improved slightly, or 0.1%, to $1,928,212 in the 2012 second quarter from $1,925,024 in the prior-year period, largely due to lower selling expenses for the period. The Company expects its selling expenses to grow as it invests in strengthening its distribution network, growing relationships with customers, developing the homecare device market (in particular its oxygen therapy service initiative) and driving top-line growth in these areas.
  • The Company reported net income attributable to the Company of $1.7 million, or $0.36 per diluted share in the 2012 second quarter, compared to $1.7 million, or $0.39 per diluted share in the prior year.

Fiscal 2012 Six Month Financial Highlights

  • Total revenues decreased by 3% to $10.3 million for the six months ended June 30, 2012, from $10.7 million in the prior-year period.
  • The Company's gross profit for the six months ended June 30, 2012 was $4.0 million, or 39% of revenue, compared to $3.8 million, or 36% of revenue, in the prior-year period. 
  • Dehaier's income from operations improved 7% to $2.4 million for the six months ended June 30, 2012, from $2.2 million in the prior-year period.
  • The Company reported net income attributable to the Company of $1.8 million, or $0.39 per diluted share in the six months ended June 30, 2012, compared to $1.9 million, or $0.43 per diluted share in the prior year.

Balance Sheet Highlights

(in millions)


6/30/2012


12/31/2011

Cash and Cash Equivalents

$

1.1

$

3.7

Working Capital


25.9


27.0

Total Long-term Debt


0


0

Stockholders' Equity


31.9


30.2

  • As a result of the total cash activities, net cash decreased from $3.7 million at December 31, 2011 to $1.1 million at June 30, 2012. This is mainly because we invested in obtaining copyright protection for our software, for our future development.
  • The Company believes that its currently available working capital of $25.9 million, including cash of $1.1 million, should be adequate to meet its anticipated cash needs and sustain its current operations for at least 12 months.

About Dehaier Medical Systems Ltd.

Dehaier is an emerging leader in the development, assembly, marketing and sale of medical products, 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), HEYER (Germany), Timesco (UK) and eVent Medical (US). Dehaier's technology is based on six patents and five software copyrights; additionally Dehaier has two pending software copyrights and proprietary technology. More information may be found at http://www.dehaier.com.cn.

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, government approvals 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, future developments in payment for and demand for medical equipment and services, implementation of and performance under the joint venture agreement by all parties, 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 Us

Dehaier Medical Systems Limited
Surie Liu
+86 10-5166-0080
[email protected]

Dehaier Medical Systems Limited
Tina He
+86 10-5166-0080
[email protected]

 

(Tables to Follow)

 

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)


For the six months ended
June 30,


For the three months ended
June 30,


2012


2011


2012


2011


US$


US$


US$


US$

Revenue

10,299,059


10,665,490


6,983,128


7,712,784









Costs of revenue

(6,317,316)


(6,826,494)


(4,242,660)


(4,871,247)









Gross profit

3,981,743


3,838,996


2,740,468


2,841,537

Service income

132,915


156,428


92,518


71,595

Service expenses

(37,272)


(61,372)


(19,812)


(20,675)

General and administrative expense

(1,031,502)


(1,016,167)


(540,789)


(512,641)

Selling expense

(662,852)


(694,493)


(344,173)


(454,792)









Operating Income

2,383,032


2,223,392


1,928,212


1,925,024









Financial expenses (including interest expense of $64,904, $26,993, $37,741 and $10,816 for the six and three months ended June 30, 2012 and 2011, respectively)

(65,969)


(27,472)


(38,320)


(11,859)

Non-operating Income

395


-


395


-

Change in fair value of warrants liability

(92,067)


149,867


107,441


140,341









Income before provision for income taxes and non-controlling interest 

2,225,391


2,345,787


1,997,728


2,053,506









Provision for income tax

(416,468)


(396,642)


(319,420)


(314,105)









Net income

1,808,923


1,949,145


1,678,308


1,739,401









Non-Controlling interest in (income) loss

7,478


(5,654)


12,072


(1,324)









Net income attributable to Dehaier Medical Systems Limited

1,816,401


1,943,491


1,690,380


1,738,077









Net Income

1,808,923


1,949,145


1,678,308


1,739,401









Other comprehensive income








Foreign currency translation adjustments

(226,067)


511,375


(268,862)


324,095









Comprehensive Income

1,582,856


2,460,520


1,409,446


2,063,496

Comprehensive income attributable to the non-controlling interest

21,019


(28,591)


13,253


(17,685)









Comprehensive income attributable to Dehaier Medical Systems Limited

1,603,875


2,431,929


1,422,699


2,045,811









Earnings per share








-Basic

0.40


0.43


0.37


0.39

-Diluted

0.39


0.43


0.36


0.39









Weighted average number of common shares used in computation








-Basic

4,566,160


4,506,354


4,569,722


4,510,000

-Diluted

4,714,077


4,506,354


4,717,639


4,510,000

 

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE
CONDENSED CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)


June 30,


December 31,


2012


2011


US$


US$





ASSETS




CURRENT ASSETS:




Cash and cash equivalents

1,107,942


3,694,486

Accounts receivable
-less allowance for doubtful accounts of $880,587 and $859,509

12,414,588


12,159,842

Other receivables

4,192,759


2,522,136

Prepayment and other current assets

7,288,515


6,714,001

Inventories, net

4,799,302


5,532,311

Tax receivable

503,853


888,452

Deferred tax asset

117,110


118,030

Total Current Assets

30,424,069


31,629,258





Property and equipment, net

3,063,366


3,348,533

Intangible assets, net

2,393,781


-

Total Assets

35,881,216


34,977,791





LIABILITIES AND EQUITY




CURRENT LIABILITIES:




Short-term borrowings

2,360,295


1,585,890

Accounts payable 

39,040


32,925

Advances from customers

237,653


303,000

Accrued expenses and other current liabilities

319,836


349,158

Taxes payable

425,089


2,042,048

Warranty obligation

332,072


334,680

Total Current Liabilities

3,713,985


4,647,701





OTHER LIABILITIES




Warrants liability

286,041


96,469

Total Liabilities

4,000,026


4,744,170





Commitments and Contingency








Equity




Common shares, $0.002731 par value, 18,307,038 shares authorized, 4,570,000 and 4,560,000 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively

12,481


12,454

Additional paid in capital

13,359,602


13,281,374

Retained earnings

14,757,972


12,941,572

Accumulated other comprehensive income

2,359,421


2,585,488

Total Dehaier Medical Systems Limited shareholders' equity

30,489,476


28,820,888

Non-controlling interest

1,391,714


1,412,733

Total equity

31,881,190


30,233,621

Total liabilities and equity

35,881,216


34,977,791

 

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)



For the six months ended

June 30,



2012


2011



US$


US$

Cash flows from operating activities










Net income


1,808,923


1,949,145

Adjustments to reconcile net income to net cash used in operating activities





Stock-based compensation expense


124,077


59,300

Depreciation and amortization


246,448


219,976

Change in fair value of warrants liability


92,067


(149,867)

Recovery of doubtful accounts


27,942


-

Changes in assets and liabilities:





Increase in accounts receivable


(282,688)


(3,451,269)

Increase in prepayments and other current assets


(522,831)


(4,240,759)

   Decrease (Increase) in other receivables


(1,670,623)


2,810

   Decrease (Increase) in inventories


733,009


96,299

   Decrease in tax receivable


384,599


(911,942)

   Increase (Decrease) in accounts payable


6,115


1,153,882

   Decrease in advances from customers


(65,347)


(116,220)

   Increase in accrued expenses and other current liabilities


(31,931)


9,502

   Increase in tax payable


(1,616,959)


2,022,812

Net cash used in operating activities


(767,199)


(3,356,331)






Cash flows from investing activities





Acquisition of machinery and software copyrights


(2,405,707)


(62,302)

Advances to related parties


-


(2,358)

Net cash used in investing activities


(2,405,707)


(64,660)






Cash flows from financing activities





Proceeds from bank loan


2,373,145


1,542,680

Repayment of bank loan


(1,580,436)


(1,533,604)

Net cash provided by financing activities


792,709


9,076






Effect of exchange rate fluctuations on cash and cash equivalents


(206,347)


496,552






Net decrease in cash and cash equivalents


(2,586,544)


(2,915,363)






Cash and cash equivalents at beginning of period


3,694,486


5,923,386






Cash and cash equivalents at end of period


1,107,942


3,008,023






Supplemental cash flow information





Income tax paid


779,678


13,260

Interest paid


64,904


26,993

  

SOURCE Dehaier Medical Systems Ltd.

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