EX-99.1 2 v306577_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

 

Dehaier Medical Announces 2011 Fourth Quarter and Year End Financial Results

 

Company to Conduct Conference Call at 8:30 a.m. of March 20, 2012

 

BEIJING -- March 19, 2012 -- 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.

 

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.

 
 

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·         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.

 

 
 

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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.”

 

 
 

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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. EST.

 

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.

 

 
 

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Contact Us

 

Dehaier Medical Systems Limited

Surie Liu

+86 10-5166-0080

[email protected]

The Equity Group Inc.

Katherine Yao

+86 10-6587-6435

[email protected]

   

Dehaier Medical Systems Limited

Tina He

+86 10-5166-0080

[email protected]

In America

The Equity Group Inc.

Adam Prior

(212) 836-9606

[email protected]

 
 

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 DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

CONSOLIDATED STATEMENTS OF OPERATIONS

 

   For the quarter ended   For the years ended 
   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 

 

 
 

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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
   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 

 

 
 

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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