Interpretation of new US stocks | Continuous losses combined with high debt, Bersman's "burden" in the US future is unclear?

Continuous losses, the eighth update of the IPO listing document, the year is now 2025, but the road to listing for medical device manufacturer Bestman Precision Instruments Limited (BSME.US, hereinafter referred to as "Bestman") still seems unclear. It is understood that as a domestic medical equipment manufacturer and retailer, Bestman Precision Instruments has a history dating back to 2001, mainly producing medical devices and selling them domestically and internationally. However, since Bestman secretly submitted its document to the US SEC on February 28, 2022, nearly three years have passed. Will there be any new changes for Bestman in the coming years? Loss dilemma difficult to resolve, urgent need for IPO "blood infusion" According to the prospectus, Bestman Precision Instruments operates through two entities in China, Shenzhen Bestman and Nanjing Yonglei. Shenzhen Bestman mainly produces medical devices and sells them domestically and internationally; Nanjing Yongle mainly exports medical devices, selling those produced by Shenzhen Bestman. Over the past 20 years, Bestman in Shenzhen has provided over 567,000 Class I and Class II medical devices to hospitals, pharmacies, medical equipment companies, and individual customers. Its main products include a series of Doppler ultrasound blood flow detectors, a series of Doppler fetal heart sound monitors, a series of infusion warmers, a series of fetal/mother monitors, a series of syringe destructors, enteral nutrition pumps, insulin refrigerators, vein finders, breast self-examination devices, medical infrared thermometers, ultrasonic beauty devices, intelligent sterilization carts, etc. In addition to the domestic market, the company's products are also exported to 98 countries and regions in Europe, the Americas, Oceania, Africa, the Middle East, and Southeast Asia through cooperation with 1,646 export distributors. The overseas market accounts for a significant portion of Bestman's revenue. According to the prospectus, in the past fiscal years of 2023 and 2024 (as of June 30 each year), Bestman's revenue was $3.3193 million and $3.2804 million, respectively, with corresponding net losses of $704,900 and $1.0434 million, respectively. While revenue declined, net losses were also increasing. Among them, domestic sales accounted for 40% and 27% respectively, while international sales accounted for 60% and 73% of its total net revenue. It seems that going global has not brought dividends to Bestman. It is worth noting that Bestman not only manufactures and sells medical devices under its own brand but also resells medical devices purchased from other manufacturers. Sales of its own branded products are much lower than those of other branded products. Sales revenue of its own brand decreased by 24.2% in the fiscal year 2024, while sales of resold purchased medical devices increased by 21.8%. However, from a profitability perspective, Bestman's gross profit margin decreased rapidly from 46.0% in fiscal year 2023 to 33.1% in fiscal year 2024, mainly due to an increase in the volume of medical devices purchased from third-party manufacturers and resold, whose profit margins are usually lower, affecting the company's overall gross profit margin negatively; and a decrease in sales of Doppler ultrasound devices, which affected profitability due to reduced hospital procurement demand. In terms of expenses, in fiscal year 2024, compared to the same period of the previous year, the company's administrative expenses decreased from $1.2542 million to $1.1295 million, a decrease of 9.9%, while the decline in sales and marketing expenses was more pronounced, decreasing from $554,500 to $485,200, a decrease of 12.5%. Only research and development expenses increased slightly by 2.6% to $424,600 compared to the same period of the previous year. Despite the clear implication of "cutting costs and increasing efficiency," it seems difficult to resolve Bestman's current financial dilemma: as of June 30, 2024, the company's cash and cash equivalents were approximately $222,900, and the net cash used in operating activities was $864,700, making it difficult to support the company's annual million-dollar losses for a year. In addition, as of June 30, 2024, Bestman's accounts receivable balance was $1.4948 million, compared to approximately $1.2302 million in the same period of the previous year, while in the fiscal year 2024, the company's total assets were approximately $3.44 million, but its total current liabilities were as high as $3.4438 million, and total liabilities were as high as $8.462 million, indicating a "debt outweighing assets" situation that suggests the company may face liquidity risks. Fierce market competition, uncertain prospects for going global Combining industry development potential and competitive landscape, it is clear that for Bestman, there are both "opportunities and challenges". In terms of regional sales, Bestman has already tapped into overseas markets, with a focus on the African market. The African medical device market still has considerable market potential. Africa's medical devices are heavily dependent on imports, accounting for about 90% of the entire medical device market. According to Frost & Sullivan's report, the African medical device market grew from $4.6 billion in 2015 to $6.1 billion in 2020, with a compound annual growth rate of 5.7%. It is expected to reach $8.5 billion by 2025. With increasing health expenditures in the African region and the expansion of national insurance programs, more African people may have access to medical services. In addition, the demand for ultrasound equipment in hospitals and medical centers at all levels in China is increasing, and industry policies favoring the medical industry and the gradual entry of ultrasound diagnosis and treatment from ultrasound departments into clinical departments, as well as continuous technological innovation in product types, are driving the rapid development and continuous expansion of the domestic ultrasound equipment market, opening up new market opportunities. For Bestman, the company has a certain market share in the market for Doppler ultrasound testing equipment and infusion warmers, and with the continued growth of the Chinese and African markets, the company's business is expected to further expand in the future. However, considering the competitive landscape of the industry and the company's competitive strength, it is clear that Bestman faces "challenges" in its continuous development. On one hand, the current medical device industry is highly competitive, and many medical device companies are merging to gain a larger market share.A new company that is poised to increase its market influence. With the consolidation of the medical device industry, competition among industry participants to provide goods and services will become more intense. At the same time, as more medical device companies seek to outsource more of their product design, prototyping, and manufacturing, Besman will also face competitive pressure from new entrants and well-established companies with more resources.On the other hand, in negotiating with downstream customers, Besman does not seem to have a significant advantage. In the prospectus, Besman mentioned that the company relies on a few major customers who have not signed long-term contracts. In the 2024 fiscal year, the top three customers accounted for 24%, 17%, and 10% respectively. As the company has not signed long-term agreements with its customers, transactions rely only on short orders to record any loss or reduction in orders from major customers, which will have a negative impact on the company's performance. In conclusion, from a fundamental perspective, how Besman "turns losses into profits" is the primary issue to be addressed before its IPO. In addition, its small scale, high debt, and high receivables characteristics make it difficult to see any potential for business turnaround other than financing in the United States. Furthermore, with significant competition pressure and high customer concentration, Besman clearly has a long way to go in attracting investors' interest.