BEIJING, March 19, 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 the fourth
quarter and year ended December 31,
2011.
(Logo:
http://photos.prnewswire.com/prnh/20100422/CNTH001LOGO)
Mr. Ping Chen, Chief Executive
Officer of Dehaier Medical, stated, "We were very pleased to report
steady growth during 2011 as we continue to slowly transition from
traditional domestic distribution of medical devices to diversified
sales of homecare medical devices, both domestically and
internationally. Within China, our homecare medical products,
focused primarily on sleep disorder and respiratory ailments,
continued to gain traction among Chinese consumers. We also
have worked diligently to secure larger, State-level contracted
business, as evidenced by our cooperation with China Developmental
Bank for healthcare infrastructure projects in Hunan and Anhui provinces. We also worked to establish
the first oxygen filling facility and service center for home
oxygen therapy service in Beijing,
which represents the initial step of expansion into home oxygen
therapy treatment domestically."
Mr. Chen continued, "We also recently expanded outside of
China, and invested time and
resources during the second half of 2011 on increasing our
geographic footprint. We received CE Mark certification on
three of our products, our Medical Air Compressor, Oxygen
Concentrator, and Sleep Diagnostic Devices. We enhanced our
sales and distribution channels in international markets, most
notably signing with three companies to distribute Dehaier's DHR-5L
oxygen concentrators in Romania,
which marked Dehaier's first entry into the European homecare
medical product market. Finally, we recently established a
wholly-owned subsidiary in Illinois, as part of a long-term goal of
establishing sales channels in North America. Because of these
strategic growth initiatives, we incurred expenses without
corresponding revenue; however, as we enter 2012 we believe that
these developments will begin to drive a more diverse and robust
revenue stream to the Company."
Operating Highlights for Fiscal Year 2011
- March 14, 2011: the Company
signed a distribution agreement to become a regional distributor of
eVent Medical's inspiration ventilators in the Chinese market.
These ventilators are used for hospitals, and are supplementary to
Dehaier's home use ventilators (including its CPAP and other
products), allowing the Company's ventilator portfolio to address
broader market needs.
- April 21, 2011: the Company
signed a three-way strategic cooperation agreement with Taiyo
Nippon Sanso Shenwei (Shanghai)
Medical Gas Co., Ltd and Beijing Orient Medical Gas Co., Ltd to
develop oxygen therapy services for the home use market in
Beijing. On July 18, 2011, the first oxygen filling facility
and first service center for home oxygen therapy service was opened
in Beijing, with Dehaier marketing
the oxygen therapy services.
- May 2, 2011: Supported by China
Development Bank, the Company signed a cooperation agreement worth
approximately $2.1 million with
Beijing Kanglian Medicines Co, Ltd ("Beijing Kanglian"), to
develop, operate and implement a new rural healthcare
infrastructure project in Hunan
and Anhui provinces.
- June 1, 2011: the Company won a
$1.3 million procurement contract to
supply medical equipment to a large state-owned hospital in
Beijing. The Company cooperated
with German-based Leica Microsystems ("Leica") and U.S.-based ABI
Medical ("ABI") on the contracted project.
- June 2011: the Company's
international department authorized distributors in Taiwan for its CPAP devices, which marks the
first distribution authorization outside of China.
- August 2011: the Company obtained
export certificates for homecare medical products from the State
Food and Drug Administration ("SFDA") of the PRC, allowing five of
Dehaier's sleep diagnostics products to be exported without
restriction.
- November 2011: the Company
established a wholly-owned subsidiary in the state of Illinois, USA. This is a long-term strategic
action aimed at penetrating North American markets.
- December 2011: the Company signed
with three Romanian companies to distribute Dehaier's DHR-5L oxygen
concentrators in Romania. This
marks Dehaier's first entry into the European homecare medical
product market.
- In fiscal 2011, the Company received multiple intellectual
property protections, including three design patents for products
of sleep diagnostic device DHR998, CPAP DHR-C5, and air compressor
DHR280, and two software copyrights for CPAP devices.
Financial Review
Ms. Aileen Qi, Chief Financial
Officer of Dehaier, commented, "We were pleased with our financial
performance during the year, as we continued to gain traction with
direct sales of our respiratory and oxygen homecare products and
participated in frequent bids for government centralized
procurement projects. Our 2011 fourth quarter and year end
results were affected by Dehaier reporting a non-cash provision for
doubtful accounts of approximately $0.86
million. During 2011, we experienced delays in payments
from certain distributors, largely due to difficult market
conditions that affected these distributors' businesses. After
a thorough review, we changed the accounting estimate on the
allowance for doubtful accounts. We are also continuing to
work with our distributors to collect receivables efficiently and
believe that we will be able to collect on these receivables in the
coming quarters. We continue to expand our accounts collection
department to seek prompt payment from customers and increase the
likelihood that these internal payment periods are met and continue
to focus on shortening our days-sales-outstanding every quarter.
Despite this provision, we reported a year of strong profitability,
and would have reported a profit in the fourth quarter prior to
this accounting correction. We continue to focus on
cost-effective expansion, and expect to see long-term benefits from
the gradual shift to selling of our own proprietary product
line."
Fourth Quarter 2011 Financial Highlights
- For its fourth quarter ended December
31, 2011, the Company reported revenue of $5.4 million, compared to $6.7 million in the prior year period. The
decrease was largely due to the adjustment of business strategies
that company made in the fourth quarter and second half of 2011
(referenced above), which focused on expanding market penetration
of its home oxygen therapy service and international
expansion. The Company is spending significant resources on
upgrading products and accumulating market insight for these
initiatives and expects corresponding revenues from these business
areas in the near future.
- The Company's gross profit for the quarter ended December 31, 2011 was $1.8
million, or 33.6% of revenue, compared to $2.5 million, or 37% of revenue in the prior year
period. The decrease in gross margin was largely due to increased
expenses related to marketing and pursuing our new business
initiatives.
- As discussed above, the Company incurred a non-cash charge due
to an increase in provision for doubtful accounts of approximately
$0.86 million for the year ended
December 31, 2011. As a result,
the Company reported an operating loss of $46,139 for the period, compared to operating
income of $1.5 million in the prior
year. The Company also reported a net loss attributable to the
Company of $36,104, or negative
$0.01 per diluted share, compared to
net income of $1.5 million, or
$0.32 per diluted share, in the
fourth quarter of 2010.
2011 Financial Review
- For the year ended December 31,
2011, Dehaier reported revenue of $21.6 million, an increase of 10.4% compared to
$19.6 million in 2010. In 2011,
the Company expanding its business model from a traditional medical
device distributor, to direct sales to the growing respiratory and
oxygen homecare product market in China. The Company also
began to bid on larger government procurement projects. In
2011, revenues from traditional medical devices, including
government procurement projects, was 89.5% of the annual revenues,
while respiratory and oxygen homecare was 10.5% of revenues. In
2010, revenues from traditional medical devices was 97.8%, and
respiratory and oxygen homecare revenues comprised 2.25% of total
revenues. This shift in revenue mix reflects management's efforts
to drive growth in homecare medical device sales.
- Gross profit was $7.9 million, or
36.7% of revenue, compared to $7.6
million, or 38.9% of revenue, in the prior year. The
Company's gross margin decreased because of a market-wide increase
the pricing of products and assembly parts, in addition to higher
labor costs. However, this was offset by increasing sales of
the Company's higher margin proprietary homecare products.
- As a result of increased operating expenses associated with
developing the Company's new business initiatives, Dehaier
generated operating income of approximately $3.6 million in 2011, compared to approximately
$5.1 million in 2010.
- Net income attributable to the Company was $3.1 million, or $0.69 per diluted share, based on weighted
average shares outstanding of 4.56 million, compared with
$4.5 million, or $1.09 per diluted share, based on weighted
average shares outstanding of 4.5 million for the full year of
2010.
Balance Sheet Highlights
(in millions except
for percentages)
|
|
12/31/2011
|
|
12/31/2010
|
%
Change
|
Cash and Cash
Equivalents
|
$
|
3.7
|
$
|
5.9
|
-37.6%
|
Working
Capital
|
|
27.0
|
|
22.6
|
19.5%
|
Total Long-term
Debt
|
|
0
|
|
0
|
N/A
|
Stockholders'
Equity
|
|
30.2
|
|
25.8
|
17.0%
|
The Company believes that its currently available working
capital of $27.0 million, including
cash of $3.7 million, should be
adequate to meet its anticipated cash needs and sustain its current
operations for at least 12 months.
Outlook for 2012
Mr. Chen concluded, "We continue to see strong market trends on
the consumer level in the homecare medical device sector in
China and expect government
expansion and vigorous promotion of healthcare projects by the
newly-released state policies over the next five years. We
remain confident about the long-term growth prospects for the
healthcare sector in China and
look forward to continuing to expand our unique product lines and
distribution abilities throughout the country. We are also
supported by a moderate balance sheet, with $27.0 million in working capital and no long-term
debt. As a result, we feel that the Company is in an excellent
position to expand into new markets."
Conference Call and Webcast
Dehaier's management team will host a conference call for
investors tomorrow morning on Tuesday, March
20, 2012 at 8:30 a.m. ET.
Interested parties may access the call by dialing:
Live Participant Dial In
(Toll Free):
|
877-407-8033
|
Live Participant Dial In
(International):
|
001-201-689-8033
|
For those unable to participate, the call will be available as a
live, listen-only webcast on the Company's website at
http://www.dehaier.com.cn/IR/index.html or by clicking the
following link:
http://www.investorcalendar.com/IC/CEPage.asp?ID=167810
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
lius@dehaier.com.cn
Dehaier Medical Systems Limited
Tina He
+86 10-5166-0080
hexw@dehaier.com.cn
The Equity Group Inc.
Katherine Yao
+86 10-6587-6435
kyao@equityny.com
In America
The Equity Group Inc.
Adam Prior
(212) 836-9606
aprior@equityny.com
DEHAIER MEDICAL
SYSTEMS LIMITED AND AFFILIATE
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
For the quarter
ended
|
|
For the years
ended
December 31,
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
Revenue
|
5,415,064
|
|
6,667,691
|
|
21,639,283
|
|
19,598,460
|
Costs of
revenue
|
(3,594,955)
|
|
(4,204,953)
|
|
(13,696,743)
|
|
(11,981,820)
|
|
|
|
|
|
|
|
|
Gross profit
|
1,820,109
|
|
2,462,737
|
|
7,942,540
|
|
7,616,640
|
|
|
|
|
|
|
|
|
Service income
|
66,587
|
|
65,225
|
|
281,656
|
|
339,379
|
Service expenses
|
(30,506)
|
|
(39,191)
|
|
(113,861)
|
|
(148,016)
|
General and administrative
expense
|
(1,206,793)
|
|
(381,681)
|
|
(2,620,845)
|
|
(1,257,520)
|
Selling expense
|
(695,536)
|
|
(587,136)
|
|
(1,877,303)
|
|
(1,421,415)
|
|
|
|
|
|
|
|
|
Operating Income
(loss)
|
(46,139)
|
|
1,519,955
|
|
3,612,187
|
|
5,129,068
|
|
|
|
|
|
|
|
|
Financial expenses (including
interest expense)
|
(29,023)
|
|
(27,353)
|
|
(86,712)
|
|
(125,764)
|
Other income
|
34,965
|
|
455,950
|
|
34,965
|
|
455,950
|
Other expense
|
(232)
|
|
-
|
|
(232)
|
|
-
|
Change in fair value of
warrants liability
|
44,282
|
|
(162,915)
|
|
221,640
|
|
(48,109)
|
|
|
|
|
|
|
|
|
Income before provision for
income tax and non-controlling interest
|
2,660
|
|
1,785,638
|
|
3,781,848
|
|
5,411,145
|
|
|
|
|
|
|
|
|
Provision for income
tax
|
(27,724)
|
|
(306,285)
|
|
(656,297)
|
|
(850,034)
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
(25,064)
|
|
1,479,353
|
|
3,125,551
|
|
4,561,111
|
|
|
|
|
|
|
|
|
Non-Controlling interest in
income
|
(11,040)
|
|
(6,841)
|
|
(22,431)
|
|
(21,401)
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to Dehaier Medical Systems Limited
|
(36,104)
|
|
1,472,512
|
|
3,103,120
|
|
4,539,710
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
(25,064)
|
|
1,479,353
|
|
3,125,551
|
|
4,561,111
|
|
|
|
|
|
|
|
|
Other comprehensive
income
|
|
|
|
|
|
|
|
Foreign currency translation
adjustments
|
335,975
|
|
332,779
|
|
1,174,044
|
|
744,829
|
|
|
|
|
|
|
|
|
Comprehensive
Income
|
127,388
|
|
1,812,132
|
|
4,299,595
|
|
5,305,940
|
Comprehensive income
attributable to the non-controlling interest
|
(28,515)
|
|
(24,031)
|
|
(85,442)
|
|
(64,902)
|
|
|
|
|
|
|
|
|
Comprehensive income
attributable to Dehaier Medical Systems Limited
|
98,873
|
|
1,788,101
|
|
4,214,153
|
|
5,241,038
|
|
|
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
|
|
|
-Basic
|
(0.01)
|
|
0.33
|
|
0.69
|
|
1.12
|
-Diluted
|
(0.01)
|
|
0.32
|
|
0.69
|
|
1.09
|
Weighted average number of
common shares used in computation
|
|
|
|
|
|
|
|
-Basic
|
4,516,164
|
|
4,500,000
|
|
4,514,329
|
|
4,043,836
|
-Diluted
|
4,516,164
|
|
4,657,500
|
|
4,514,329
|
|
4,153,438
|
DEHAIER MEDICAL
SYSTEMS LIMITED AND AFFILIATE
|
CONSOLIDATED BALANCE
SHEETS
|
|
|
|
December
31,
|
|
2011
|
|
2010
|
|
US$
|
|
US$
|
|
|
|
|
ASSETS
|
|
|
|
CURRENT ASSETS:
|
|
|
|
Cash and cash
equivalents
|
3,694,486
|
|
5,923,386
|
Accounts receivable
-less allowance for doubtful accounts of $859,509 and
$87,555
|
12,159,842
|
|
9,112,077
|
Other receivables
|
2,522,136
|
|
3,164,423
|
Prepayment and other current
assets
|
6,714,001
|
|
5,300,825
|
Inventories, net
|
5,532,311
|
|
6,374,363
|
Tax receivable
|
888,452
|
|
3,518,919
|
Deferred tax asset
|
118,030
|
|
-
|
Total Current
Assets
|
31,629,258
|
|
33,393,993
|
|
|
|
|
Property and equipment,
net
|
3,348,533
|
|
3,488,947
|
Total Assets
|
34,977,791
|
|
36,882,940
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Short-term
borrowings
|
1,585,890
|
|
1,514,620
|
Accounts
payable
|
32,925
|
|
29,318
|
Advances from
customers
|
303,000
|
|
269,189
|
Accrued expenses and other
current liabilities
|
349,158
|
|
330,601
|
Taxes payable
|
2,042,048
|
|
8,327,708
|
Warranty obligation
|
334,680
|
|
301,464
|
Due to officer
|
-
|
|
2,358
|
Total Current
Liabilities
|
4,647,701
|
|
10,775,258
|
|
|
|
|
OTHER
LIABILITIES
|
|
|
|
Warrants liability
|
96,469
|
|
318,109
|
Total
Liabilities
|
4,744,170
|
|
11,093,367
|
Commitments and
Contingency
|
|
|
|
Equity
|
|
|
|
Common shares, $0.002731 par
value, 18,307,038 shares authorized, 4,560,000 and 4,500,000 shares
issued and
outstanding at December 31, 2011 and 2010,
respectively
|
12,454
|
|
12,290
|
Additional paid in
capital
|
13,281,374
|
|
13,137,085
|
Retained earnings
|
12,941,572
|
|
9,838,452
|
Accumulated other
comprehensive income
|
2,585,488
|
|
1,474,455
|
Total Dehaier Medical
Systems Limited shareholders' equity
|
28,820,888
|
|
24,462,282
|
Non-controlling
interest
|
1,412,733
|
|
1,327,291
|
Total equity
|
30,233,621
|
|
25,789,573
|
Total liabilities and
equity
|
34,977,791
|
|
36,882,940
|
DEHAIER MEDICAL
SYSTEMS LIMITED AND AFFILIATE
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
For the years
ended
December
31,
|
|
|
2011
|
|
2010
|
|
|
US$
|
|
US$
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
|
|
Net income
|
|
3,125,551
|
|
4,561,111
|
Adjustments to reconcile
net income to net cash used in operating activities
|
|
|
|
|
Stock-based compensation
expense
|
|
144,453
|
|
-
|
Depreciation and
amortization
|
|
450,518
|
|
365,336
|
Change in fair value of
warrants liability
|
|
(221,640)
|
|
318,109
|
(Recovery of) Provision for
doubtful accounts
|
|
749,280
|
|
(18,311)
|
(Recovery of) Provision for
inventory obsolescence
|
|
-
|
|
(5,756)
|
Gain on sale of
equipment
|
|
-
|
|
(3,894)
|
Provision for warranty
reserve
|
|
37,303
|
|
122,709
|
Deferred tax
benefit
|
|
(118,030)
|
|
-
|
Changes in assets and
liabilities:
|
|
|
|
|
Increase in accounts
receivable
|
|
(3,797,045)
|
|
(2,202,475)
|
Increase in prepayments and
other current assets
|
|
(1,413,176)
|
|
(3,609,438)
|
Decrease (Increase) in other
receivables
|
|
642,287
|
|
(1,665,312)
|
Decrease (Increase) in
inventories
|
|
842,052
|
|
(4,042,481)
|
Decrease (Increase) in
tax receivable
|
|
2,630,467
|
|
(2,156,547)
|
Increase (Decrease) Increase
in accounts payable
|
|
3,607
|
|
(64,452)
|
Increase in advances from
customers
|
|
33,811
|
|
94,936
|
(Decrease) Increase in accrued
expenses and other current liabilities
|
|
14,470
|
|
(5,811)
|
(Decrease) Increase in tax
payable
|
|
(6,285,660)
|
|
3,334,321
|
Net cash used in
operating activities
|
|
(3,161,752)
|
|
(4,977,955)
|
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
|
Proceeds from sale of
equipment
|
|
-
|
|
10,342
|
Capital expenditures and
other additions
|
|
(153,061)
|
|
(887,541)
|
Advances to related
parties
|
|
(2,358)
|
|
(1,503)
|
Net cash used in
investing activities
|
|
(155,419)
|
|
(878,702)
|
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
|
Proceeds from bank
loan
|
|
1,542,680
|
|
-
|
Repayment of bank
loan
|
|
(1,533,604)
|
|
-
|
Net proceeds from
issuance of common stock
|
|
-
|
|
9,944,207
|
Net cash provided by
financing activities
|
|
9,076
|
|
9,944,207
|
|
|
|
|
|
Effect of exchange rate
fluctuations on cash and cash equivalents
|
|
1,079,195
|
|
684,115
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
(2,228,900)
|
|
4,771,665
|
|
|
|
|
|
Cash and cash
equivalents at beginning of year
|
|
5,923,386
|
|
1,151,721
|
|
|
|
|
|
Cash and cash
equivalents at end of year
|
|
3,694,486
|
|
5,923,386
|
|
|
|
|
|
Supplemental cash
flow information
|
|
|
|
|
Income tax
paid
|
|
1,906,763
|
|
24,813
|
Interest paid
|
|
82,136
|
|
70,343
|
SOURCE Dehaier Medical Systems Ltd.