BEIJING, Nov. 12, 2012 (GLOBE NEWSWIRE) -- 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 third quarter ended September 30, 2012.
Comments from Management
- Mr. Ping Chen, Chief Executive Officer of Dehaier Medical, stated, "For the nine months ended September 30, 2012, our performance has been in line with management's expectations. We are adjusting our business strategy, to expand into government procurement projects and the burgeoning respiratory and oxygen homecare market. This shift has softened our revenue growth, we believe temporarily. However, management expects the new strategy to benefit the Company in the future as we rely more on a combination of higher margin proprietary products and services and higher revenue large-scale projects. We believe our business will accelerate its expansion and grow at a healthy rate in long term."
Recent Operating Highlights
September 2012
- Awarded a 3-year procurement agreement for our proprietary air compressors and customized trolleys from a major medical equipment manufacturer in Ukraine.
- Entered into a two-year distribution agreement with GCE group, a leading global compressed gas-equipment company, to become the exclusive distributor for GCE's EASE II product in Mainland China. The newly-distributed product can be widely used in many fields including disaster relief efforts, national defense, emergency rooms, ambulances, and medical institutions.
- Signed three medical equipment procurement agreements with Beijing's Hospitals 304 and 307, two of China's most well-known first-tier hospitals, and with Beijing Kanglian Medicines Co. for the China Development Bank Rural Medical and Health Construction Project.
- Obtained software copyrights for Mega Pixels, which is used in our Dehaier Explorer C-Armed X Ray Machine Series. This is our fifth software copyright this year.
October 2012
- Won a government procurement contract with Xinjiang Province to distribute medical equipment to Hospitals in Xinjiang. The contract will be implemented by the end of 2012.
- Received government subsidies worth RMB118,100 for short-term bank loan interest, as a result of favorable treatment granted to High Technology Enterprises like ours.
Third Quarter 2012 Financial Highlights
- Our total revenues decreased by 2.81% from $5.69 million for the three months ended September 30, 2011 to $5.53 million for the three months ended September 30, 2012. In the third quarter of 2012, the decrease in revenues was mainly due to our operating strategy changes to expand into government procurement projects and homecare oxygen therapy services, while maintaining our traditional medical devices business.
- Our gross profit decreased from $2.42 million in the three months ended September 30, 2011 to $2.07 million in the same period of 2012, while the gross margin decreased from 42.49% in 2011 to 37.39% in 2012. The management believes such decrease in gross margin is a result of the increase in cost of revenue. The amortization of our newly launched software and raw material cost increases resulted in this increase in cost of revenue.
- As a result of the foregoing, we generated operating income of approximately $1.41 million and $1.66 million in the three months ended September 30, 2012 and 2011.
- Our net income was approximately $1.04 million in the three months ended September 30, 2012, compared to approximately $1.38 million in 2011, a decrease of 24.72%, mainly because of the increase in general and administrative expenses, financial expenses and non-cash change in the fair value of our warrants liability.
- After deduction of non-controlling interest in income, the Company reported net income attributable to the Company of $1.04 million, or $0.22 per diluted share in the 2012 third quarter, compared to $1.37 million, or $0.31 per diluted share in the prior year.
Fiscal 2012 Nine Month Financial Highlights
- Our total revenues decreased by 3.22% from $16.35 million for the nine months ended September 30, 2011 to $15.83 million for the nine months ended September 30, 2012. Since our government procurement efforts and homecare business are still at a relatively early stage, our overall revenues and net income are slightly lower than in 2011.
- Our gross profit decreased from $6.26 million in the three months ended September 30, 2011 to $6.05 million in the same period of 2012, while our gross margin decreased slightly from 38.25% in 2011 to 38.22% in 2012 due to the faster decrease in revenues than in cost of revenues. Management believes the Company's gross margin is likely to remain relatively stable over the near term.
- As a result of the foregoing, we generated operating income of approximately $3.79 million in the nine months ended September 30, 2012, compared to approximately $3.88 million in the same period of 2011. Operating income decreased by 2.25%, mainly because of the narrowed gross margin.
- Our net income was approximately $2.85 million in the nine months ended September 30, 2012, compared to approximately $3.33 million in 2011, a decrease of 14.47%, mainly because of a change in the fair value of our warrants liability, a non-cash expense.
- After deduction of non-controlling interest in income, the Company reported net income attributable to the Company of $2.85 million, or $0.61 per diluted share in the nine months ended September 30, 2012, compared to $332 million, or $0.74 per diluted share in the prior year.
| Balance Sheet Highlights | ||
| (in millions) | 9/30/2012 | 12/31/2011 |
| Cash and Cash Equivalents | $3.2 | $3.7 |
| Working Capital | 28.0 | 27.0 |
| Total Long-term Debt | 0 | 0 |
| Stockholders' Equity | 33.4 | 30.2 |
- As of September 30, 2012, we had $3.17 million cash and cash equivalents. As a result of the total cash activities, net cash decreased from $3.69 million at December 31, 2011, mainly because we invested in obtaining copyright protection for our software for our future development.
- We believe that our currently available working capital of $28 million including cash, should be adequate to meet our anticipated cash needs and sustain our 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.
(Tables to Follow)
| DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (UNAUDITED) | ||
| September 30, | December 31, | |
| 2012 | 2011 | |
| US$ | US$ | |
| ASSETS | ||
| CURRENT ASSETS: | ||
| Cash and cash equivalents | 3,165,481 | 3,694,486 |
| Accounts receivable | ||
| -less allowance for doubtful accounts of $898,900 and $859,509 | 13,153,751 | 12,159,842 |
| Contract Deposits | 3,602,709 | 2,110,942 |
| Other receivables | 504,418 | 411,194 |
| Advances to Suppliers | 5,196,015 | 4,348,847 |
| Prepayment and other current assets | 2,092,196 | 2,365,154 |
| Inventories, net | 3,808,805 | 5,532,311 |
| Tax receivable | 320,140 | 888,452 |
| Deferred tax asset | 118,403 | 118,030 |
| Total Current Assets | 31,961,918 | 31,629,258 |
| Property and equipment, net | 2,987,516 | 3,348,533 |
| Intangible assets, net | 2,706,301 | -- |
| Total Assets | 37,655,735 | 34,977,791 |
| LIABILITIES AND EQUITY | ||
| CURRENT LIABILITIES: | ||
| Short-term borrowings | 2,386,365 | 1,585,890 |
| Accounts payable | 68,862 | 32,925 |
| Advances from customers | 201,883 | 303,000 |
| Accrued expenses and other current liabilities | 325,323 | 349,158 |
| Taxes payable | 618,437 | 2,042,048 |
| Warranty obligation | 335,739 | 334,680 |
| Total Current Liabilities | 3,936,609 | 4,647,701 |
| OTHER LIABILITIES | ||
| Warrants liability | 381,797 | 96,469 |
| Total Liabilities | 4,318,406 | 4,744,170 |
| Commitments and Contingency | ||
| Equity | ||
| Common shares, $0.002731 par value, 18,307,038 shares authorized,4,590,000 and 4,560,000 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively | 12,536 | 12,454 |
| Additional paid in capital | 13,419,238 | 13,281,374 |
| Retained earnings | 15,794,528 | 12,941,572 |
| Accumulated other comprehensive income | 2,695,246 | 2,585,488 |
| Total Dehaier Medical Systems Limited shareholders' equity | 31,921,548 | 28,820,888 |
| Non-controlling interest | 1,415,781 | 1,412,733 |
| Total equity | 33,337,329 | 30,233,621 |
| Total liabilities and equity | 37,655,735 | 34,977,791 |
| The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. | ||
| F2 | ||
| DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | ||||
| （UNAUDITED） | ||||
| For the nine months ended | For the three months ended | |||
| September 30, | September 30, | |||
| 2012 | 2011 | 2012 | 2011 | |
| US$ | US$ | US$ | US$ | |
| Revenue | 15,828,179 | 16,354,533 | 5,529,120 | 5,689,043 |
| Costs of revenue | (9,779,058) | (10,098,506) | (3,461,742) | (3,272,012) |
| Gross profit | 6,049,121 | 6,256,027 | 2,067,378 | 2,417,031 |
| Service income | 225,326 | 215,069 | 92,411 | 58,641 |
| Service expenses | (49,150) | (83,355) | (11,877) | (21,983) |
| General and administrative expense | (1,463,671) | (1,412,859) | (432,169) | (396,692) |
| Selling expense | (966,937) | (1,093,013) | (304,085) | (398,520) |
| Operating Income | 3,794,689 | 3,881,869 | 1,411,658 | 1,658,477 |
| Financial expenses (including interest expense of $107,965, $53,915, $43,061 and $26,922 for the nine and three months ended September 30, 2012 and 2011, respectively) | (109,631) | (57,689) | (43,662) | (30,217) |
| Non-operating Income | 395 | -- | -- | -- |
| Change in fair value of warrants liability | (187,823) | 177,358 | (95,756) | 27,491 |
| Income before provision for income taxes and non-controlling interest | 3,497,630 | 4,001,538 | 1,272,240 | 1,655,751 |
| Provision for income tax | (646,085) | (667,400) | (229,618) | (270,758) |
| Net income | 2,851,545 | 3,334,138 | 1,042,622 | 1,384,993 |
| Non-Controlling interest in (income) loss | 1,411 | (11,392) | (6,067) | (5,738) |
| Net income attributable to Dehaier Medical Systems Limited | 2,852,956 | 3,322,746 | 1,036,555 | 1,379,255 |
| Net Income | 2,851,545 | 3,334,138 | 1,042,622 | 1,384,993 |
| Other comprehensive income | ||||
| Foreign currency translation adjustments | 109,758 | 838,069 | 335,825 | 326,694 |
| Comprehensive Income | 2,961,303 | 4,172,207 | 1,378,447 | 1,711,687 |
| Comprehensive income attributable to the non-controlling interest | (3,048) | (56,927) | (24,067) | (22,682) |
| Comprehensive income attributable to Dehaier Medical Systems Limited | 2,958,255 | 4,115,280 | 1,354,380 | 1,689,005 |
| Earnings per share | ||||
| -Basic | 0.62 | 0.74 | 0.23 | 0.31 |
| -Diluted | 0.61 | 0.74 | 0.22 | 0.31 |
| Weighted average number of common shares used in computation | ||||
| -Basic | 4,570,311 | 4,507,582 | 4,578,571 | 4,510,000 |
| -Diluted | 4,695,684 | 4,507,582 | 4,703,945 | 4,510,000 |
| The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. | ||||
| F-3 | ||||
| DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (UNAUDITED) | ||
| For the nine months ended | ||
| September 30, | ||
| 2012 | 2011 | |
| US$ | US$ | |
| Cash flows from operating activities | ||
| Net income | 2,851,545 | 3,334,138 |
| Adjustments to reconcile net income to net cash (used in) provided by operating activities | ||
| Stock-based compensation expense | 271,349 | 59,300 |
| Depreciation and amortization | 399,135 | 333,580 |
| Change in fair value of warrants liability | 187,823 | (177,358) |
| Provision for doubtful accounts | 36,419 | -- |
| Changes in assets and liabilities: | ||
| Increase in accounts receivable | (985,298) | (5,920,452) |
| Increase in prepayments and other current assets | (587,315) | (3,071,808) |
| Increase in other receivables | (1,568,096) | (541,386) |
| Decrease (Increase) in inventories | 1,729,100 | (62,401) |
| Decrease (Increase) in tax receivable | 567,215 | (1,270,399) |
| Decrease in accounts payable | 35,587 | 9,432 |
| Increase (Decrease) in advances from customers | (101,379) | 196,659 |
| Increase (Decrease) in accrued expenses and other current liabilities | (24,839) | 26,900 |
| Increase (Decrease) in tax payable | (1,420,286) | 3,028,944 |
| Net cash (used in) provided by operating activities | 1,390,960 | (4,054,851) |
| Cash flows from investing activities | ||
| Acquisition of machinery and software copyrights | (2,717,838) | (95,742) |
| Advances to related parties | -- | (2,358) |
| Net cash used in investing activities | (2,717,838) | (98,100) |
| 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 | 5,164 | 821,396 |
| Net decrease in cash and cash equivalents | (529,005) | (3,322,479) |
| Cash and cash equivalents at beginning of period | 3,694,486 | 5,923,386 |
| Cash and cash equivalents at end of period | 3,165,481 | 2,600,907 |
| Supplemental cash flow information | ||
| Income tax paid | 1,187,535 | 13,344 |
| Interest paid | 107,965 | 53,915 |
| Issuance of common shares for investment relation activities | -- | 59,300 |
| The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. | ||
| F-4 | ||