Dehaier Medical first quarter revenues increase 12.3% to $3.3 million

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 first quarter ended March 31, 2012.

First Quarter 2012 Financial and Operating Highlights (percentage comparisons are year over year)

• Revenues of $3.3 million, up 12.3%
• Gross profit of $1.2 million, up 24.4%; gross margin improved to 37.4% from 33.8%
• Income from operations of $454,820, an increase of 52.4%
• Net income attributable to the Company of $126,021, or $0.03 per basic and diluted share, compared to $205,414, or $0.04 per diluted share in the prior year.  Net income included a non-cash change in fair value of warrants liability of $199,508 in the first quarter of 2012.

Mr. Ping Chen, Chief Executive Officer of Dehaier Medical, stated, "In the first quarter of 2012, we continued to show strong growth in China and have begun to enter international markets. We continue to grow our medical device distribution platform business, which includes working with a number of larger international manufacturers.  We recently extended our exclusive agreement with Timesco of London Ltd., a progressive surgical and medical company.  Simultaneously, we are developing our own branded product line domestically and abroad.  Within China, our homecare medical products, focused primarily on sleep disorder and respiratory ailments, continued to gain traction among Chinese consumers." 

Mr. Chen continued, "We are also continuing to diversify our revenues.  In the first quarter of 2012, we focused on implementing state-level government-contracted projects.  We have placed a strong emphasis on obtaining provincial contracts throughout China, which are larger in size and scale. In March, Dehaier won a new bid to implement a government procurement project to provide imaging equipment for township hospitals in Xi'an, Shaanxi, China.  We believe this bid demonstrates how far our Company has grown, indicates the government's faith in our ability to complete these projects, and could significantly contribute to our revenues in 2012."

Financial Review

Ms. Aileen Qi, Chief Financial Officer of Dehaier, commented, "We were pleased with our first quarter financial results, which were in line with the Company's expectations.  Our favorable mix of product sales and market share gains led to a 12.3% revenue increase over the prior-year's quarter.  Dehaier's growth was mainly driven by sales of our traditional medical devices and government procurement projects.  We have also focused on streamlining our costs and improving our inventory management and were pleased to lower our operating expenses as a percentage of sales.  This has benefitted the Company considerably during a time of inflationary pressures on our products and has allowed Dehaier to remain cost-competitive." 

First Quarter 2012 Financial Highlights

• Total revenues increased by 12.3% to $3.3 million for the three months ended March 31, 2012 from $3.0 million in the prior-year quarter, largely as a result of wider distribution of third-party products and the expansion of Dehaier's own branded respiratory products. 
• The Company's gross profit for the quarter ended March 31, 2012 was $1.2 million, or 37.4% of revenue, compared to $1.0 million, or 33.8% of revenue in the prior-year period.  Gross margin improved largely as a result of improved inventory management by the Company, along with increased operating effectiveness.
• Dehaier's income from operations improved 52.4% to $454,820 in the 2012 first quarter from $298,368 in the prior-year period, largely as a result of increased sales, improved gross margin, and lower selling, general, and administrative expenses ("SG&A") as a percent of revenue.
• The Company reported net income attributable to the Company of $126,021, or $0.03 per diluted share in the 2012 first quarter, compared to $205,414, or $0.04 per diluted share in the prior year. The decrease in net income per diluted share was due to a non-cash expense related to changes in the fair value of warrant liability of $199,508, compared to a gain for the prior year period of $9,526.  

Balance Sheet Highlights

The Company believes that its currently available working capital of $27.5 million, including cash of $2.3 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, "Over the next few months, our primary focus is to utilize our existing distribution business as a platform to expand and grow into new revenue streams.  We launched our home oxygen therapy service ("HOTS") in Beijing in the third quarter of 2011, and our management team remains focused on development and research of products as well as identifying the target customers, which we feel will contribute significantly to our future growth.  We also have continued our expansion into the International healthcare market.  In early 2012, we received CE Mark approval for our sleep diagnostic devices and air compressors, which will facilitate our efforts to sell our products in the European Union. We are seeking new and cost-effective means of distributing our products worldwide and are always looking for ways to corporate with others. Medical equipment sales and distribution will remain our main source of revenue going forward, and we expect this segment to develop at a stable pace and to serve as our foundation for growth.  We will continuously leverage our cross-selling opportunities by expanding existing relationships of third-party distributed products, seeking new distribution partners and building international business for our proprietary products."