Dehaier Medical Announces 2012 Fourth Quarter and Year End Financial Results
March 18 2013 - 4:30PM
Net Income Up 2.91% Gross Margin Increased
1.28%
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, 2012.
Mr. Ping Chen, Chief Executive Officer of Dehaier Medical,
stated, "We are pleased with our progress in 2012 as our business
strategy has proved to be the right decision for our company. We
strengthened the force of our state-level medical procurement
department and gained abundant experience in bidding and project
implementation. In addition, we enhanced our intellectual property
portfolio by obtaining copyrights for our newly-developed products
and technologies. We also refined our sleep respiratory and oxygen
therapy business strategies and enriched our product pipeline by
becoming a distributor of GCE's efficient oxygen valve and an
effective sleep diagnosis and management system to address the
increasing demands of the sleep apnea and oxygen therapy
market."
Mr. Ping Chen continued, "Outside of China, one of our products
was selected for a long-term purchasing agreement in Ukraine and
Germany. Finally, we realized improved net profit and EPS by
controlling our internal costs, adjusting our revenue mix of
homecare products sales and medical equipment sales and
streamlining the inventory and manufacturing process. We will
devote much of our effort to the burgeoning sleep diagnostic and
oxygen therapy markets and expect to drive a more diverse and
robust revenue stream to the Company."
Operating Highlights for Fiscal Year 2012
Major State-level Medical Procurement
Contracts:
- In March 2012, the Company won a new bid to implement a
government procurement project to provide imaging equipment for
township hospitals in Xi'an, Shaanxi, China.
- In September 2012, the Company won a 3-year procurement
agreement for its proprietary air compressors and customized
trolleys from a major medical equipment manufacturer in
Ukraine.
- In September 2012, the Company 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.
- In October 2012, the Company won a government procurement
contract with Xinjiang Province to distribute medical equipments to
Hospitals in Xinjiang. The contract will be implemented by the end
of 2012.
- In December 2012, the Company signed a medical equipment
procurement agreement with Hebei province for the China Development
Bank Rural Medical and Health Construction Project.
Intellectual Property Progress:
- In January 2012, the Company received Conformité Européenne
(CE) certification for the sleep diagnostic devices and air
compressors. The CE mark recognizes that the two products meet
European Union (EU) health and safety standards and are approved
for sale in the 27 member states of the EU and in the four members
of the European Free Trade Association (EFTA).
- Also in March 2012, the Company obtained two software
copyrights for its CPAP devices. The addition of these copyrights
to our intellectual property portfolio reflects progress in our
ongoing research and development efforts into the new generation of
homecare CPAP devices.
- In July 2012, the Company received approval from China's State
Food and Drug Administration ("SFDA") for its proprietary homecare
medical CPAP device, the DHR-CPAP-C5. The certificate is valid
until July 1, 2016 (subject to renewal) and allows us to sell the
product in mainland China.
- Also 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 September 2012, the Company obtained Megapixels software
copyrights for its DHR C-Arm X Ray Machine. The upgraded technology
can produce optimized images with minimal user involvement through
its advanced imaging technology.
Distribution Authorizations Extension:
- In April 2012, the Company renewed its strategic cooperation
agreement with Timesco of London Ltd. The agreement appoints
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 its RADIUS
C-arm X-ray machines in mainland China. The extended term runs
through 2014.
- In June 2012, the Company entered a three-year strategic mutual
cooperation agreement with HEYER Medical AG ("Heyer"). According to
this agreement, the Company will continue to be one of the key
Chinese distributors for Heyer's anesthesia machines and the
exclusive distributor of its nebulizers in China.
- In September 2012, the Company 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.
Research and Development Achievements and Company
Progress:
- Also in June 2012, the Company co-developed a "High-Efficiency
Oxygen Inhaler" with Dr. Ding Jianzhang of Beijing Haidian
Hospital. The portable device is designed for use in homecare
oxygen therapy, emergency treatment, disaster relief activities and
high-altitude settings.
- In October 2012, the Company renewed its status of National
High Technology Enterprises and received government subsidies of
RMB118,100 for short-term bank loan interest, as a result of
favorable treatment granted to High Technology Enterprises.
- In December 2012, Beijing Zhongguancun Enterprises Credit
Promotion Association improved the Company's credit rating from
BBB+ to A-, as a result of its improved performance of
competitiveness in the industry, relatively strong enterprise
system, sustainable business model and low credit risk.
- In December 2012, the Company presented its newly-developed
Efficient Oxygen Supplement System ("EOS System") at the 2012
Military Surgical Symposium, held in Tianjin from November 30 to
December 2, 2012. The symposium featured high level,
forward-looking medical concepts and theories and best
practices.
Financial Overview
- For the years ended December 31, 2012 and 2011, our total
revenues amounted to approximately $21.37 million and $21.64
million, respectively. Our net income attributable to Dehaier for
the years ended December 31, 2012 and 2011 was approximately $3.21
million and $3.10 million, respectively. Net income attributable to
Dehaier increased slightly on slightly decreased revenues, mainly
due to the Company's operating strategy changes that reduced
expenses. While we continuously developed our sales channels on
traditional medical devices sales, we have also been adjusting our
strategy to expand into government procurement projects and the
burgeoning respiratory and oxygen homecare market.
Fiscal 2012 Financial Highlights
- Our total revenues decreased by 1.24% from $21.64 million for
the fiscal year ended December 31, 2011 to $21.37 million for the
fiscal year ended December 31, 2012. In 2012, we continuously
developed our sales channels for traditional medical devices sales.
At the same time, we also began to adjust our operating strategy to
expand into government procurement projects and the burgeoning
respiratory and oxygen homecare market. Management believes
revenues have decreased slightly in traditional device sales due to
an increasingly challenging market and new competitors. Further,
our government procurement efforts and homecare business are still
at a relatively early stage. As a result, our overall revenues are
slightly lower than in 2011.
- Our gross profit increased from $7.94 million in 2011 to $8.12
million in 2012, and our gross margin increased slightly from
36.70% in 2011 to 37.98% in 2012. Management believes the shift in
the Company's revenue mix away from traditional device sales
resulted in increases in gross margin and net income.
- As a result of the foregoing, we generated an operating income
of approximately $4.39 million in 2012, compared to approximately
$3.61 million in 2011. Operating income increased by 21.46% largely
due to the decrease in selling expenses.
- As a result of the foregoing, we had net income of
approximately $3.22 million in 2012, compared to approximately
$3.13 million in 2011. After deduction of non-controlling interest
in income, net income attributable to Dehaier was approximately
$3.21 million and $3.10 million in 2012 and 2011,
respectively.
Balance Sheet Highlights
(in millions) |
12/31/2012 |
12/31/2011 |
Cash and Cash Equivalents |
$3.5 |
$3.7 |
Working Capital |
28.9 |
27.0 |
Total Long-term Debt |
0 |
0 |
Equity |
34.1 |
30.2 |
- As of December 31, 2012, we had $3.51 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
$28.9 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), Welch Allyn (USA), HEYER
(Germany), Timesco (UK), eVent Medical (US) and JMS (Japan).
Dehaier's technology is based on six patents, nine 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.
DEHAIER MEDICAL SYSTEMS
LIMITED AND AFFILIATE |
|
CONSOLIDATED STATEMENTS
OF INCOME AND COMPREHENSIVE INCOME |
|
|
For the years
ended December 31, |
|
2012 |
2011 |
|
US$ |
US$ |
Revenue |
21,370,325 |
21,639,283 |
|
|
|
Costs of revenue |
(13,254,587) |
(13,696,743) |
|
|
|
Gross profit |
8,115,738 |
7,942,540 |
|
|
|
Service income |
300,338 |
281,656 |
Service expenses |
(71,376) |
(113,861) |
General and administrative expense |
(2,599,368) |
(2,620,845) |
Selling expense |
(1,357,972) |
(1,877,303) |
|
|
|
Operating Income |
4,387,360 |
3,612,187 |
|
|
|
Financial expenses (including interest
expense of $149,488 and $82,136) |
(151,720) |
(86,712) |
Other income |
23,872 |
34,965 |
Other expense |
(173) |
(232) |
Change in fair value of warrants
liability |
(180,192) |
221,640 |
|
|
|
Income before provision for income
tax and non-controlling interest |
4,079,147 |
3,781,848 |
|
|
|
Provision for income tax |
(862,795) |
(656,297) |
|
|
|
Net income |
3,216,352 |
3,125,551 |
|
|
|
Non-Controlling interest in income |
(10,201) |
(22,431) |
|
|
|
Net income attributable to Dehaier
Medical Systems Limited |
3,206,151 |
3,103,120 |
|
|
|
Net income |
3,216,352 |
3,125,551 |
|
|
|
Other comprehensive
income |
|
|
Foreign currency translation adjustments |
398,686 |
1,174,044 |
|
|
|
Comprehensive Income |
3,615,038 |
4,299,595 |
Comprehensive income
attributable to the non-controlling interest |
(27,173) |
(85,442) |
|
|
|
Comprehensive income attributable to
Dehaier Medical Systems Limited |
3,587,865 |
4,214,153 |
|
|
|
Earnings per share |
|
|
-Basic |
0.70 |
0.69 |
-Diluted |
0.70 |
0.69 |
|
|
|
Weighted average number of common
shares used in computation |
|
|
-Basic |
4,578,151 |
4,514,329 |
-Diluted |
4,601,907 |
4,514,329 |
|
DEHAIER MEDICAL SYSTEMS
LIMITED AND AFFILIATE |
|
CONSOLIDATED BALANCE
SHEETS |
|
|
December
31, |
|
2012 |
2011 |
|
US$ |
US$ |
|
|
|
ASSETS |
|
|
CURRENT ASSETS: |
|
|
Cash and cash equivalents |
3,505,330 |
3,694,486 |
Accounts receivable |
|
|
-less allowance for doubtful
accounts of $865,769 and $859,509 |
11,960,193 |
12,159,842 |
Contract Deposits |
3,027,616 |
2,110,942 |
Other receivables, net |
556,635 |
411,194 |
Advances to Suppliers |
4,470,756 |
4,348,847 |
Prepayment and other current assets |
4,069,975 |
2,365,154 |
Inventories, net |
4,654,827 |
5,532,311 |
Tax receivable |
328,208 |
888,452 |
Deferred tax asset |
119,437 |
118,030 |
Total Current Assets |
32,692,977 |
31,629,258 |
|
|
|
Property and equipment, net |
2,895,523 |
3,348,533 |
Intangible assets, net |
2,694,439 |
-- |
Total Assets |
38,282,939 |
34,977,791 |
|
|
|
LIABILITIES AND EQUITY |
|
|
CURRENT LIABILITIES: |
|
|
Short-term borrowings |
2,407,200 |
1,585,890 |
Accounts payable |
37,640 |
32,925 |
Advances from customers |
248,940 |
303,000 |
Accrued expenses and other current
liabilities |
406,452 |
349,158 |
Taxes payable |
401,574 |
2,042,048 |
Warranty obligation |
338,671 |
334,680 |
Total Current
Liabilities |
3,840,477 |
4,647,701 |
|
|
|
OTHER LIABILITIES |
|
|
Warrants liability |
374,166 |
96,469 |
Total Liabilities |
4,214,643 |
4,744,170 |
Commitments
and Contingency |
|
|
Equity |
|
|
Common shares, $0.002731 par value,
18,307,038 shares authorized, 4,620,000 and 4,560,000 shares issued
and outstanding at December 31, 2012 and 2011, respectively |
12,618 |
12,454 |
Additional paid in capital |
13,500,847 |
13,281,374 |
Retained earnings |
16,147,723 |
12,941,572 |
Accumulated other comprehensive income |
2,967,202 |
2,585,488 |
Total Dehaier Medical Systems Limited
shareholders' equity |
32,628,390 |
28,820,888 |
Non-controlling interest |
1,439,906 |
1,412,733 |
Total equity |
34,068,296 |
30,233,621 |
Total liabilities and
equity |
38,282,939 |
34,977,791 |
|
DEHAIER MEDICAL SYSTEMS
LIMITED AND AFFILIATE |
|
CONSOLIDATED STATEMENTS
OF CASH FLOWS |
|
|
For the years ended
December 31, |
|
2012 |
2011 |
|
US$ |
US$ |
Cash flows from operating
activities |
|
|
|
|
|
Net income |
3,216,352 |
3,125,551 |
Adjustments to reconcile net income to net
cash provided by (used in) operating activities |
|
|
Stock-based compensation
expense |
314,479 |
144,453 |
Depreciation and
amortization |
552,086 |
450,518 |
Change in fair value of
warrants liability |
180,192 |
(221,640) |
(Recovery of) Provision for
doubtful accounts |
(3,939) |
749,280 |
Provision for doubtful accounts
- other receivables |
598,747 |
-- |
Provision for warranty
reserve |
-- |
37,303 |
Deferred tax benefit |
-- |
(118,030) |
Changes in assets and liabilities: |
|
|
Decrease (Increase) in accounts
receivable |
344,341 |
(3,797,045) |
Increase in prepayments and
other current assets |
(1,730,704) |
(1,413,176) |
Decrease (Increase) in other
receivables |
(1,617,781) |
642,287 |
Decrease in inventories |
931,844 |
842,052 |
Decrease in tax receivable |
563,816 |
2,630,467 |
Increase in accounts
payable |
4,271 |
3,607 |
(Decrease) Increase in advances
from customers |
(56,965) |
33,811 |
Increase in accrued expenses
and other current liabilities |
52,482 |
14,470 |
Decrease in taxes payable |
(1,644,345) |
(6,285,660) |
Net cash provided by (used in)
operating activities |
1,704,876 |
(3,161,752) |
|
|
|
Cash flows from investing
activities |
|
|
Capital expenditures and other additions |
(11,054) |
(153,061) |
Software Copyrights |
(2,715,453) |
-- |
Advances to related parties |
-- |
(2,358) |
Net cash used in investing
activities |
(2,726,507) |
(155,419) |
|
|
|
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 |
39,766 |
1,079,195 |
|
|
|
Net decrease in cash and cash
equivalents |
(189,156) |
(2,228,900) |
|
|
|
Cash and cash equivalents at beginning of
year |
3,694,486 |
5,923,386 |
|
|
|
Cash and cash equivalents at end of year |
3,505,330 |
3,694,486 |
|
|
|
Supplemental cash flow
information |
|
|
Income tax paid |
1,416,958 |
1,906,763 |
Interest paid |
149,488 |
82,136 |
CONTACT: 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
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