SHENZHEN, China, May 16 /Xinhua-PRNewswire-FirstCall/ -- Huiheng Medical, Inc. ("Huiheng" or the "Company") , a China-based leader in the development, sales and support of radiation therapy equipment used for the treatment of cancer, announced financial results for the year ended December 31, 2007 and for the three months ended March 31, 2008.
Comments from Mr. Hui Xiaobing, Chairman & CEO
Mr. Hui commented, "We believe the market for radiation therapy in China has strong secular growth drivers in place. China's aging population, high rate of cancer incidence, and increasing demand for high-quality medical equipment and efficient healthcare services are some of the key factors we believe will contribute to the growth of the radiotherapy equipment market."
Mr. Hui concluded, "2007 was a very successful year for us, as our revenues grew by nearly 30% and our bottom line comprehensive income grew by more than 40%. We are now looking forward to 2008 and anticipating another strong year. Despite the Chinese New Year Holiday and the severe snowstorms that struck China in the first quarter, 2008 has started off strong as our revenue backlog from product sales increased to approximately $12.24 million as of March 31st, 2008 from approximately $2.4 million as of December 31, 2007."
Overview of 2007 Results
For the year ended December 31, 2007, net revenues were $15.94 million, an increase of $3.59 million, or 29%, compared to $12.35 million for year ended 2006.
Total revenues from product sales were $9.53 million for 2007, an increase of $2.92 million or 44%, compared to $6.61 million for the same period of the prior year. This increase in unit sales in 2007 was due to an increased demand in the market for our radiotherapy products.
Total revenues from services were $5.04 million in 2007, an increase of $0.36 million or 7.7%, compared to $4.68 million in 2006. The increase was due to the signing of 3 new service contracts in mid-2006 which resulted in revenues on those contracts for roughly half of 2006 and all of 2007.
Total revenues from tax refunds and subsidies were $1.38 million in 2006, an increase of approximately $320,000 or 30% over the $1.06 million in tax refunds and subsidies for 2007. Tax refunds and subsidies accumulate each current year and are paid and recognized as revenue the following year.
Cost of revenues
The total cost of revenues in 2007 amounted to $3.76 million, an increase of $1.11 million or 41.9%, compared to $2.65 million in 2006. The increase was due to increased number of units sold in 2007 compared with 2006.
As a percentage of total revenues, the overall gross margin in 2007 decreased to 76.4% from 78.5% in 2006. The decrease was due to product sales accounting for a larger percentage of total revenues in 2007 compared with 2006, when higher margin service revenues accounted for a larger percentage of total revenues.
Sales and marketing expenses. Sales and marketing expenses were approximately $82,000 in 2007, a decrease of 33%, or roughly $41,000 compared to approximately $123,300 in 2006. The decrease was due to a fewer commissions paid to sales staff as senior management was responsible for several sales and were not paid any commissions.
General and administrative expenses. General and administrative expenses were $1.53 million in 2007, an increase of roughly $250,000 compared to approximately $1.28 million in 2006. The increase in general and administrative expenses was due primarily to increased expenses associated with human resources, increased administrative expenses resulting from our growth over that period and from additional expenses resulting from becoming a publicly listed company in the U.S.
Research and development expenses. Research and development expenses were $263,300 in 2007 compared to $124,300 in 2006. This was due to new product development including our MLC, linear accelerator and next generation SGS device.
Net income for 2007 was $9.02 million, an increase of 2.2 million or 32% compared to $6.82 million in 2006. This increase was due primarily to the increase in product sales.
Comprehensive income for 2007 was $9.72 million, an increase of $2.89 million or 42% compared to $6.82 million in 2006.
As of December 31, 2007, the Company had total assets of $18.86 million, of which cash amounted to $866,585, accounts receivable amounted to $8.25 million, prepayment and other current assets amounted to $3.27 million and inventories amounted to $1.07 million. Working capital was approximately $11.08 million. The quick ratio was approximately 4.18:1.
Overview of results for quarter ended March 31, 2008
Total revenues for the three months ended March 31, 2008 were approximately $1.36 million, a decrease by roughly $2.57 million compared to approximately $3.93 million for the same period of the prior year. This decrease resulted from delays in installations of our radiotherapy units. The Company recognizes revenue only once a purchased radiotherapy unit is actually installed. The reason for the delays in product installations in the first quarter was due to the combination of the Spring Festival holiday and the unexpected, severe snow storms and generally bad weather that impacted China over that period.
Revenue backlog from product sales as of March 31, 2008 was approximately $12.24 million, an increase of $9.39 million or 329% compared to our revenue backlog from product sales of approximately $2.85 million for as of March 31, 2007.
The increase in our product sales backlog in the first quarter of 2008 was due to a high demand for products as well as installation delays in the first quarter of 2008 due to the snowstorms and bad weather over that period. The backlog orders are not cancellable and the Company expects that all of them will be filled in 2008.
Cost of revenues
For the three months ended March 31, 2008 the total cost of revenues amounted to $34,280, a decrease by approximately $1.08 million, compared to roughly $1.12 million for the same period of the prior year. This decrease was due to all the revenues for the period being generated from service contracts and from tax refunds and subsidies, which have minimal associated direct costs.
Sales and marketing expenses. Sales and marketing expenses were $21,888 for the three months ended March 31, 2008, an increase of 79% or roughly $9,626, compared to $12,262 for the same period of the prior year. This increase in sales and marketing expenses resulted from increased sales and marketing activity and increased sales of our radiotherapy units over the period.
General and administrative expenses. General and administrative expenses amounted to $405,765 for the three months ended March 31, 2008, representing an increase of roughly $84,188, or 26%, compared to $321,577 for the same period of the prior year. The increase in general and administrative expenses resulted from an increase in the number of employees that were hired since the end of the first quarter of 2007 to facilitate and manage our rapid growth.
Research and development expenses. Research and development expenses were presented on the statement of income as $96,520 for the three months ended March 31, 2008, an increase of $65,235 or 209% compared to $31,285 in the same period of the prior year. The increase was due to a higher amount of research and development activity over the period.
For the three months ended March 31, 2008, the Company's net income amounted to $773,670, a decrease of approximately $1.40 million compared to roughly $2.18 million for the prior year. This decrease was attributable to no revenues from product sales being recognized over the period.
For the three months ended March 31, 2008, the Company's comprehensive income, which reflects the change in currency translations on the net income, amounted to approximately $1.37 million, a decrease by $839,038 compared to approximately $2.21 million for the prior year.
As of March 31, 2008, the Company had total assets of $19.71 million, of which cash amounted to $625,027, accounts receivable amounted to $8.67 million, prepayment and other receivables amounted to $4.54 million, inventories amounted to $1.24 million, and amounts due from related parties totaled $775,528. Working capital was approximately $13.21 million. The quick ratio was approximately 5.52:1.
About Huiheng Medical, Inc.
Huiheng is a leader in the development, sales and support of advanced radiation oncology equipment in China. The Company maintains strong research and development capabilities and has developed partnerships with a number of China's leading universities, including Beijing University and China Science & Technology University.
Cautionary Statement Regarding Forward Looking Information
The foregoing compilation relates to Huiheng Medical, Inc. (HHGM) and contains forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 which involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Words like "anticipate," "believe," "estimate," "expect" and similar expressions as they relate to HHGM, its subsidiaries or management, are intended to identify such forward-looking statements. HHGM actual results, performance or achievements could differ materially from the results expressed in, or implied by these forward-looking statements as a result of business conditions in our markets, customer installation schedules and other risks discussed in our filings with the Securities Exchange Commission. For more detailed information the reader is referred to HHGM Form 10-K, 10-Q and other related documents filed with the Securities and Exchange Commission.
CONTACT: Mr. Richard Shen, CFO of Huiheng Medical, Inc. at +86-755-2533-
1322; or Michael Walas at +1-619-795-4627