Baysman Faces Persistent Losses and High Debt

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The journey of Bestman Precision Instruments, Inc. (BSME.US), a Chinese medical device manufacturer and retailer, appears far from over as it struggles with continuous losses and has submitted its initial public offering (IPO) documents for the eighth time, now looking ahead to 2025. Founded in 2001, Bestman focuses on producing medical equipment and selling it both domestically and internationallySince its confidential filing with the U.SSecurities and Exchange Commission (SEC) in February 2022, almost three years have passed without significant development for the company.

Financial difficulties persist, making the urgency for capital evident.

According to their prospectus, Bestman operates through two entities in China: Shenzhen Bestman, which mainly manufactures medical devices for both domestic and global markets, and Nanjing Yonglei, which specializes in exporting the devices produced by Shenzhen BestmanOver two decades, Shenzhen Bestman has provided more than 567,000 Class I and Class II medical device products to hospitals, pharmacies, medical equipment companies, and individual clientsKey products offered include various ultrasonic Doppler blood flow detectors, fetal heart rate monitors, IV fluid warmers, maternal/fetal monitoring devices, syringe destroyers, enteral nutrition pumps, insulin refrigerators, vein finders, breast self-examination devices, infrared thermometers, ultrasonic beauty devices, and smart disinfection carts.

Beyond the domestic market, Bestman has partnered with 1,646 export distributors to ship their products across 98 countries and regions, including Europe, the Americas, Oceania, Africa, the Middle East, and Southeast Asia, with international sales representing a substantial portion of their revenue.

The prospectus reveals the revenue for the fiscal years ending June 30 showed a decline of nearly $3 million in 2023 and $3.28 million in 2024, paralleled by increasing net losses of $704,900 and $1.0434 million, respectively

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A troubling trend indicates that as revenues decreased, net losses track similarly upwardWithin this, Bestman’s domestic sales represented 40% of total revenue in 2023 and fell to 27% by 2024, while international sales grew to 60% and 73% of net income, respectively, suggesting that the anticipated benefits of expanding overseas have not materialized.

Interestingly, Bestman does not only produce its own brand of medical devices; it also resells devices bought from other manufacturers, with its proprietary brand sales trailing far behind those of external brandsDuring 2024, sales of Bestman’s proprietary devices plummeted by 24.2%, whereas reselling of purchased medical devices experienced a growth of 21.8%.

However, from a profitability perspective, Bestman’s gross margin slipped sharply from 46% in fiscal 2023 down to 33.1% in fiscal 2024, mainly due to the increased volume of lower-margin medical devices procured from third-party manufacturersAdditionally, the decline in sales of ultrasonic Doppler devices, driven by reduced hospital demand, negatively impacted profitability.

Regarding operational expenses, Bestman managed to reduce its management expenses from $1.2542 million to $1.1295 million in 2024, reflecting a decrease of 9.9%. Sales and marketing costs saw a remarkable decline as well, dropping by 12.5% to $485,200 from $554,500, while research and development costs saw a slight increase of 2.6% to $424,600.

Despite these efforts to cut costs and enhance efficiency, Bestman still finds itself in a precarious financial situationAs of June 30, 2024, the company reported cash and cash equivalents of approximately $222,900, with net cash used in operating activities totaling $864,700, insufficient to support substantial annual losses exceeding over a million dollars.

Further exacerbating matters, Bestman’s accounts receivable balance stood at $1,494,800, compared to $1,230,200 in the previous year, with total assets of about $3.44 million juxtaposed against current liabilities that totaled $3.4438 million, and a staggering total debt of over $8.462 million

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This glaring imbalance suggests potential liquidity risks for the company.

Fierce market competition and uncertain overseas prospects.

In examining industry growth potential and the competitive landscape, it is evident that Bestman faces a dual-edged sword of opportunities and challenges.

The company has successfully tapped into overseas markets, particularly in Africa, where the demand for medical devices remains substantialThe continent is heavily reliant on imports, which make up approximately 90% of its medical device marketAccording to a report by Frost & Sullivan, the African medical device market grew from $4.6 billion in 2015 to $6.1 billion in 2020, yielding a compound annual growth rate of 5.7%. It is projected to reach $8.5 billion by 2025, indicating the potential for a significant boost in healthcare spending and access to medical services for more people in Africa.

Moreover, the demand for ultrasonic equipment among hospitals and health examination centers at various levels in China is on the riseFactors such as favorable healthcare reform policies, the integration of ultrasonic diagnostics into clinical departments, and continuous technological innovations are all sweeping through the industry and creating new market space.

Bestman has captured a certain market share in the ultrasound vascular Doppler detectors and intravenous blood warming devicesThe sustained growth in both the Chinese and African markets might pave the way for further expansion for the company.

However, assessing the competitive landscape and internal strengths shows that Bestman certainly has its share of challenges to navigate.

On one hand, the current medical device industry is marked by intense competition, with various companies merging to create new entities with greater market clout

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