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

2010-08-16 22:23 1359
Company Continues to Expand Marketing Strategies

    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.
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    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 

    -- 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 

    -- 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


                                                  June 30,       December 31, 
                                                   2010              2009 
                                                    US$              US$      
    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 


                          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                                                
     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                                                       
    -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 


                                                  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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