20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION 

WASHINGTON, D.C. 20549 

FORM 20-F

(Mark One)

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015

OR

¨	TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
¨	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	Date of event requiring this shell company report __________

For the transition period from __________ to __________

Commission file number: 001-34661

DEHAIER MEDICAL SYSTEMS LIMITED

(Exact name of Registrant as specified in its charter)

British Virgin Islands

(Jurisdiction of incorporation or organization)

Room 501, 83 Fuxing Road

Haidian District, Beijing 100856

People’s Republic of China

(Address of principal executive offices)

Huili (Alisa) Li, Chief Financial Officer

Telephone: +86 010-51660080

Facsimile: +86 010-68416311

Dehaier Medical Systems Limited

Room 501, 83 Fuxing Road

Haidian District, Beijing 100856

People’s Republic of China

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:  

Title of each class	Name of each exchange on which registered
Common shares, par value $0.002731 per share	NASDAQ Capital Market

Securities registered or to be registered pursuant to Section 12(g) of the Act:  None.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:  None.

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

As of December 31, 2015, there were 6,194,475 shares of the registrant’s Common Shares issued and outstanding. As of July 15, 2016, there were 6,821,889 Common Shares issued and outstanding.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.        Yes ¨ No x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.                                                                      Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                              Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).            Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act). (Check one): 

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

US GAAP x International Financial Reporting Standards as issued by the International Accounting Standards Board ¨ Other ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                            Yes ¨ No x

EXPLANATORY NOTE

This Annual Report on Form 20-F for the year ended December 31, 2015 includes consolidated financial statements for the years ended December 31, 2013, 2014 and 2015. The audited consolidated financial statements for the year ended December 31, 2014 are restated.

Restatement Background

On February 22, 2016, the Company’s management along with the Company’s Board of Directors agreed to focus the Company’s business interests on new mobile medical devices, and decided to discontinue their traditional medical device business interest. The traditional medical device line of business included assembly and sales of X-ray machines, anesthesia machines, monitoring devices, general medical products, and oxygen generators. The mobile medical device business will focus on the development of the Company’s remaining product line, inclusive of products such as the second generation ventilator, general medical products (such as laryngoscope), compressor products, sleep respiratory products, and wireless medical devices.

As part of their decision to discontinue its traditional medical device business, the Company reevaluated its prior beliefs and estimates about certain assets as of 2014. The Board of Directors concluded that the audited consolidated financial statements for the year ended December 31, 2014 included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2014, originally filed with the Securities and Exchange Commission on April 30, 2015, should no longer be relied upon due to an understatement of bad debt allowances for accounts receivable and other receivables, an overstatement of prepayments and carrying value of long-lived assets and an inadequate reserve on inventory. As a result, management determined that a fair presentation of the Company’s financial statements in light of the 2016 decision to classify traditional medical device operations as discontinued required the Company to increase bad debt allowances for accounts receivable and other receivables, to write down some prepayments, to place increased reserve on inventory due to obsolescence, and to write down the carrying value of long-lived assets to the fair value less disposal cost. These error corrections will be presented as restatements, in addition to presenting the traditional medical device business as a discontinued operation, as determined by the Company’s management and Board of Directors.

Impact of Restatement

The Company has reclassified the net loss attributable to DHRM of previously reported fiscal year 2014 by approximately $25.30 million, including an increased impairment and allowance accrued for the assets of discontinued operation by approximately $26.43 million to discontinued operations. The basic and diluted losses per share increased by $4.59 and $4.52, respectively, as compared to the previously reported amounts for fiscal year 2014.

TABLE OF CONTENTS

PART I		1
Item 1.	Identity of Directors, Senior Management and Advisers	1
Item 2.	Offer Statistics and Expected Timetable	1
Item 3.	Key Information	1
Item 4.	Information on the Company	16
Item 4A.	Unresolved Staff Comments	33
Item 5.	Operating and Financial Review and Prospects	33
Item 6.	Directors, Senior Management and Employees	49
Item 7.	Major Shareholder and Related Party Transactions	56
Item 8.	Financial Information	58
Item 9.	The Offer and Listing	59
Item 10.	Additional Information	60
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	67
Item 12.	Description of Securities Other than Equity Securities	68
PART II		69
Item 13.	Defaults, Dividend Arrearages and Delinquencies	69
Item 14.	Material Modifications to the Rights of Securities Holders and Use of Proceeds	69
Item 15.	Controls and Procedures	69
Item 15T.	Controls and Procedures	71
Item 16.	[Reserved]	71
Item 16A.	Audit Committee Financial Expert	71
Item 16B.	Code of Ethics	71
Item 16C.	Principal Accountant Fees and Services	71
Item 16D.	Exemptions from the Listing Standards for Audit Committees	72
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	72
Item 16F.	Change in Registrant’s Certifying Accountant.	72
Item 16G.	Corporate Governance.	73
Item 16H.	Mine Safety Disclosure.	73
PART III		74
Item 17.	Financial Statements	74
Item 18.	Financial Statements	74
Item 19.	Exhibits	74

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed in this report may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” and similar expressions are intended to identify such forward-looking statements. Our actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation, those discussed under “Item 3—Key Information—Risk Factors,” “Item 4—Information on the Company,” “Item 5—Operating and Financial Review and Prospects,” and elsewhere in this report, as well as factors which may be identified from time to time in our other filings with the Securities and Exchange Commission (the “SEC”) or in the documents where such forward-looking statements appear. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements.

The forward-looking statements contained in this report reflect our views and assumptions only as of the date this report is signed. Except as required by law, we assume no responsibility for updating any forward-looking statements.

PART I

Unless the context requires otherwise, references in this report to “Dehaier,” “we,” “us,” “our company,” and “our” refer to (i) Dehaier Medical Systems Limited, a British Virgin Islands company, (ii) Beijing Dehaier Medical Technology Company Limited, a PRC company (“BDL”), and (iii) Beijing Dehaier Technology Company Limited, a PRC company (“BTL”).

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable for annual reports on Form 20-F.

Item 2. Offer Statistics and Expected Timetable

Not applicable for annual reports on Form 20-F.

Item 3. Key Information

A. Selected Financial Data

The following table presents the selected consolidated financial information for our company. The selected consolidated statements of income data for the three years ended December 31, 2013, 2014 and 2015 and the consolidated balance sheet data as of December 31, 2014 and 2015 have been derived from our audited consolidated financial statements set forth in “Item 18 – Financial Statements”. The selected consolidated balance sheet data for the year ended December 31, 2013 have been derived from our audited consolidated balance sheet as of December 31, 2013, which is not included in this annual report. The selected consolidated statements of income data for the years ended December 31, 2011 and 2012 and the selected consolidated balance sheet data as of December 31, 2011 and 2012 have been derived from our audited consolidated financial statements for the years ended December 31, 2011 and 2012, which are not included in this annual report. Our historical results do not necessarily indicate results expected for any future periods. The selected consolidated financial data should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements and related notes and “Item 5. Operating and Financial Review and Prospects” below. Our audited consolidated financial statements are prepared and presented in accordance with Generally Accepted Accounting Principles in the United States of America, or U.S. GAAP.

1

	For the years ended
	December 31,
	2015			2014			2013			2012			2011
	US$			US$			US$			US$			US$
				(Restated)
Statement of Operations Data:
Revenue		1,321,543			2,774,241			7,402,473			13,698,228			15,022,564
Costs of revenue		(1,435,955	)		(1,782,407	)		(4,589,404	)		(8,531,858	)		(9,808,494	)
Gross profit (Loss)		(114,412	)		991,834			2,813,069			5,166,370			5,214,070
Service income		1,723,542			131,446			309,060			300,338			281,656
Service expenses		(1,378,829	)		(34,519	)		(54,761	)		(71,376	)		(113,861	)
General and administrative expense		(4,261,972	)		(1,945,226	)		(1,944,054	)		(2,599,367	)		(1,870,372	)
Provision for doubtful accounts		(8,544	)		(389,198	)		-			-			-
Selling expense		(3,046,408	)		(227,304	)		(519,016	)		(870,306)			(1,303,112	)
Operating (loss) income		(7,086,623	)		(1,472,967	)		604,298			1,925,659			2,208,381
Financial expenses		(194,685	)		(174,301	)		(164,074	)		(151,720	)		(86,712	)
Other income		19,553			83,762			-			23,872			34,965
Other expense		(2,770	)		(22,299	)		(468,676	)		(173	)		(1,425	)
Change in fair value of warrants liability		390,324			2,866,171			(346,691	)		(180,192	)		221,640
Income (loss) before provision for income tax and non-controlling interest		(6,874,201	)		1,280,366			(375,143	)		1,617,446			2,376,849
Provision for income tax (expense) benefit		11,978			(357,726	)		(522,279	)		(862,795	)		(656,297	)
Net income (loss) from continuing operations		(6,862,223	)		922,640			(897,422	)		754,651			1,720,552
Net income (loss) from discontinuing operations		(3,500,112	)		(25,956,512	)		2,900,748			2,461,701			1,404,999
Net income (loss)		(10,362,335	)		(25,033,872	)		2,003,326			3,216,352			3,125,551
Less: net income (loss) attributable to non-controlling interest		(139,205	)		(735,758	)		7,705			10,201			(22,431	)
Net income (loss) attributable to Dehaier Medical Systems Limited		(10,223,130	)		(24,298,114	)		1,995,621			3,206,151			3,103,120
Net income (loss) from continuing operations		(6,862,223	)		922,640			(897,422	)		754,651			1,720,552
Net income (loss) from discontinuing operations		(3,500,112	)		(25,956,512	)		2,900,748			2,461,701			1,404,999
Other comprehensive income (loss)
Foreign currency translation gain (loss)		(461,548	)		(576,891	)		1,028,124			398,686			1,174,044
Comprehensive income (loss)		(10,823,883	)		(25,610,763	)		3,031,450			3,615,038			4,299,595
-less comprehensive income (loss) attributable to the non-controlling interest		(189,670	)		(762,777	)		52,960			(27,173	)		85,442
Comprehensive income (loss) attributable to Dehaier Medical Systems Limited		(10,634,213	)		(24,847,986	)		2,978,490			3,587,865			4,214,153
Earnings (loss) per share
-Basic		(1.74	)		(4.41	)		0.43			0.70			0.69
-Diluted		(1.73	)		(4.34	)		0.43			0.70			0.69
Weighted average number of common shares used in computation
-Basic		5,862,647			5,510,076			4,625,195			4,578,151			4,514,329
-Diluted		5,896,534			5,597,169			4,676,127			4,601,907			4,514,329

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	December 31,
	2015		2014		2013		2012		2011
			(Restated)
	US$		US$		US$		US$		US$
Balance Sheet Data:
Cash and cash equivalents		624,724		1,727,763		2,592,945		3,505,330		3,694,486
Working capital		462,687		9,739,149		32,619,067		28,852,500		26,981,557
Total Current Assets		6,829,541		13,389,517		36,427,448		32,692,977		31,629,258
Total Assets		13,836,455		21,242,182		42,207,862		57,410,509		34,977,791
Total Current Liabilities		6,366,854		3,650,368		3,808,381		3,840,477		4,647,701
Non-controlling interest		867,826		1,057,496		1,820,273		1,439,906		1,412,733
Total Dehaier Medical Systems Limited shareholders' equity		6,439,039		15,981,258		35,858,351		32,628,390		28,820,888
Common shares		16,918		15,864		12,749		12,618		12,454
Total equity		7,306,865		17,038,754		37,678,624		34,068,296		30,233,621

Exchange Rate Information

Our business is primarily conducted in China and all of our revenues are denominated in RMB. However, periodic reports made to shareholders will include current period amounts translated into U.S. dollars using the then current exchange rates, for the convenience of the readers. The conversion of RMB into U.S. dollars in this annual financial report is based on the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all translations from RMB to U.S. dollars and from U.S. dollars to RMB in this annual financial report were made at a rate of RMB 6.4917 to US$1.00, the noon buying rate in effect as of December 31, 2015. We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all. The government of the People’s Republic of China (the “PRC”) imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. The Company does not currently engage in currency hedging transactions. The following table sets forth information concerning exchange rates between the RMB and the U.S. dollar for the periods indicated.

	Noon Buying Rate
Period	Period-End		Average (1)		Low		High
	(RMB per U.S. dollar)
2011		6.2939		6.4475		6.2939		6.6364
2012		6.2301		6.2990		6.2221		6.3879
2013		6.0537		6.0738		6.0537		6.0927
2014		6.2046		6.1886		6.2256		6.1490
2015		6.4907		6.2154		6.0775		6.4724
2016
January		6.6046		6.5668		6.5015		6.6046
February		6.5535		6.5486		6.5150		6.5844
March		6.4508		6.5054		6.4508		6.5551
April		6.4726		6.4772		6.4595		6.4987
May		6.5816		6.5278		6.4586		6.5824
June		6.6434		6.5889		6.5608		6.6478
July (through July 14)		6.6845		6.6766		6.6485		6.6766

Source: Federal Reserve Statistical Release

(1) Annual averages are calculated using the average of month-end rates of the relevant years. Monthly averages are calculated using the average of the daily rates during the relevant periods.

3

B. Capitalization and Indebtedness

Not applicable for annual reports on Form 20-F.

C. Reasons for the Offer and Use of Proceeds

Not applicable for annual reports on Form 20-F.

D. Risk Factors

Risks Related to Our Business

Our business is seasonal and revenues and operating results could fall below investor expectations during certain periods, which could cause the trading price of our common shares to decline.

Our revenues and operating results have fluctuated in the past and may continue to fluctuate significantly depending upon numerous factors. In particular, we generally experience an increase in revenues in the period from September through November. This increase is associated with hospital purchasing designed to extinguish governmental budgets prior to the fiscal year end. We believe that our first quarter performance will generally decline as a result of the lack of business conducted during the Chinese Lunar New Year Holiday. To the extent our financial performance fluctuates significantly, investors may lose confidence in our business and the price of our common shares could decrease.

We may fail to effectively develop and commercialize new products and services, which could materially and adversely affect our business, financial condition, results of operations and prospects.

The sleep respiratory market is developing rapidly and related technology trends are constantly evolving. This results in the frequent introduction of new products and services, short product life cycles and significant price competition. Consequently, our future success depends on our ability to anticipate technology development trends and identify, develop and commercialize in a timely and cost-effective manner the new and advanced products that our customers demand. New products contribute significantly to our revenues. Moreover, it may take an extended period of time for our new products to gain market acceptance, if at all. Furthermore, as the life cycle for a product matures, the average selling price generally decreases. In the future, we may be unable to offset the effect of declining average sales prices through increased sales volume and controlling product costs. Lastly, during a product’s life cycle, problems may arise regarding regulatory, intellectual property, product liability or other issues that may affect the product’s continued commercial viability.

We sell our products primarily to distributors, and our ability to add distributors will impact our revenue growth. Failure to maintain or expand our distribution network would materially and adversely affect our business.

We depend on sales to distributors for a significant majority of our revenues. Our distributors purchase all products ordered regardless of whether the products are ultimately sold. Products are not purchased by distributors on consignment, and distributors have no right to return unsold products. As our existing distributor agreements expire, we may be unable to renew such agreements on favorable terms or at all, and we do not own, employ or control these independent distributors. Furthermore, we actively manage our distribution network and regularly review the performance of each distributor. We may terminate agreements with distributors, without penalty, if we are not satisfied with their performance for any reason. We periodically terminate relationships with underperforming exclusive distributors. Our distributors may also terminate their relationship with us without penalty. When an exclusive distributor in a particular geographic area fails to meet our expectations, then we are economically incentivized to replace that distributor with a new distributor so that area can be served as well as possible. We occasionally terminate a relationship with a non-exclusive distributor and are more likely to simply appoint another one; however, we have found that in some instances we are better served to replace an underperforming non-exclusive distributor with an exclusive distributor. Additionally, we have found that even in cases where there may not be an economic incentive to terminate a non-exclusive distributor, having the ability to replace a distributor often motivates distributors to increase their efforts to meet our expectations. This policy may make us less attractive to some distributors. In addition, we compete for distributors with other leading medical device companies who may enter into long-term distribution agreements, effectively preventing many distributors from selling our products. As a result, a significant amount of time and resources must be devoted to maintaining and growing our distribution network. Any disruption in our distribution network could have negative effects on our ability to sell our products, which would in turn materially and adversely affect our business, financial condition and results of operations.

4

We sell products for some of our competitors, some of which compete with our branded products.

We serve as a distributor for other companies’ medical products and also sell medical products that we developed. While we rely on other suppliers’ products for some of our revenues, our self-developed products may, from time to time, compete with these suppliers’ products. Some of our suppliers may seek to restrict our ability sell competing products—either self-developed or developed by other third party suppliers—as a condition of serving as a distributor for their products. Where we are permitted to sell competing products, we may find that sales of a supplier’s products reduce demand for our self-developed products. Where our agreements with suppliers limit our ability to sell competing branded products, we may have to forego developing potentially profitable products. Any of these results could materially harm our business.

We rely on some of our competitors to supply component parts for our branded products.

We obtain some components from companies that are competitors in our market. We are not reliant on these competitors for such components and believe we could obtain these components from other suppliers. We do, however, provide detailed technical specifications to these competitors for use in producing components for our branded products. If these companies were to reverse-engineer or otherwise misappropriate such information, our business could be materially harmed.

Although we do not own or control our distributors, the actions of these distributors may affect our business operations or our reputation in the marketplace.

Our distributors are independent from us, and as such, our ability to effectively manage their activities is limited. Distributors could take any number of actions that could have material adverse effects on our business. If we fail to adequately manage our distribution network or if distributors do not comply with our distribution agreements, our corporate image could be tarnished among end users, disrupting our sales. Furthermore, we could be liable for actions taken by our distributors, including any violations of applicable law in connection with the marketing or sale of our products, including China’s anti-corruption laws. Recently, the PRC government has increased its anti-bribery efforts in the healthcare sector to reduce improper payments received by hospital administrators and doctors in connection with the purchase of pharmaceutical products and medical devices. Our distributors may violate these laws or otherwise engage in illegal practices with respect to their sales or marketing of our products. If our distributors violate these laws, we could be required to pay damages or fines, which could materially and adversely affect our financial condition and results of operations. In addition, our brand and reputation, our sales activities or the price of our shares could be adversely affected if our company becomes the target of any negative publicity as a result of actions taken by our distributors.

We plan to expand our healthcare and technical service products internationally and hope to become a leader in selected international markets. Such expansion can be difficult and time consuming, and if unsuccessful our future profits would be materially and adversely affected.

While we currently operate primarily in China, we envision competing in selected international markets with our healthcare and technical service products, such as medical air compressor. We intend to enter into markets in which we have limited or no experience and in which our brand may be less recognized. We plan to devote significant resources to marketing and promoting our brand internationally and attracting distributors in foreign markets. Success in international markets will depend on our ability to attract a sufficient number of distributors suitable for selling our branded products. Furthermore, in new markets we may fail to anticipate competitive conditions that are different from those in our existing markets. These competitive conditions may make it difficult or impossible for us to operate effectively in these markets.

5

Operation in international markets will also expose us to many other risks, including but not limited to:

· political instability;

· economic instability and recessions;

· changes in tariffs;

· difficulties of administering foreign operations generally;

· limited protection for intellectual property rights;

· obligations to comply with a wide variety of foreign laws and other regulatory requirements;

· financial condition, expertise and performance of international distributors;

· export license requirements;

· unauthorized re-export of our branded products;

· inability to purchase our distributed products from international suppliers at competitive prices;

· potentially adverse tax consequences; and

· inability to effectively enforce contractual or legal rights.

We are highly dependent on our key personnel such as key executives and research and development personnel.

We are highly dependent on the continued service of our key executives and other key personnel. In particular, we substantially rely on our chairman and chief executive officer Mr. Ping Chen to manage our business and operations. We also rely on key research and development personnel for the development of new products. In addition, we rely on customer service personnel for the installation and support of our products and on marketing and sales personnel, engineers and other personnel with technical and industry knowledge to market, sell, install and service our products. We have entered into standard two-year employment contracts with all of our officers and managers and other key personnel and two-year employment contracts with our other employees. These contracts prohibit our employees from engaging in any conduct or activity that would be competitive with our business during the course of their employment. Loss of any of our key personnel could severely disrupt our business. We may not be able to find suitable or qualified replacements, and will likely incur additional expenses in order to recruit and train any new personnel.

Competition for qualified management and key personnel in the medical technology field is intense and the pool of qualified candidates is limited. We not only compete with other medical device companies but also universities and other research institutions to attract and retain qualified personnel. This intense competition may force us to offer higher compensation and benefit packages in order to attract and retain the most qualified personnel. Our future success depends on our ability to attract and retain these individuals and failure to do so could result in severe disruptions to our business and growth.

Our business is subject to intense competition, which may reduce demand for our products and materially and adversely affect our business, financial condition, results of operations and prospects.

The medical device market is highly competitive, and we expect competition to intensify. Given the $585 billion stimulus initiative in China and its impact on healthcare, we expect the availability of healthcare to increase, as more hospitals and clinics are developed rurally.

We face direct competition from both domestic and international competitors across all product lines and price points. Our competitors also vary by product. Currently, in China our competitors include publicly traded and privately held multinational companies, such as Respironics Inc., ResMed Inc., and Covidien, as well as domestic Chinese companies such as Jiangsu Yuyue and Tianjin Oranger Technology. As we expand into international markets, we expect that our competitors will primarily be publicly traded and privately held multinational companies. We also expect to face competition in international sales from companies that have local operations in the markets in which we sell our products. Some of our larger competitors may have:

· greater financial and other resources;

· larger variety of products;

· more products that have received regulatory approvals;

6

· greater pricing flexibility;

· more extensive research and development and technical capabilities;

· patent portfolios that may present an obstacle to our conduct of business;

· greater knowledge of local market conditions where we seek to increase our international sales;

· stronger brand recognition; and

· larger sales and distribution networks.

As a result, we may be unable to offer products similar to, or more desirable than, those offered by our competitors, market our products as effectively as our competitors or otherwise respond successfully to competitive pressures. In addition, our competitors may be able to offer discounts on competing products as part of a “bundle” of non-competing products, systems and services that they sell to our customers, and we may not be able to profitably match those discounts. Our competitors may develop technologies and products that are more effective than those we currently offer or that render our products obsolete or uncompetitive. The timing of the introduction of competing products into the market could affect the market acceptance and market share of our products. As we expect demand for our products to increase along with the availability of healthcare, we must continue to focus on competitive pricing and innovation by being at the forefront of market trends and improving our product and service offerings. Our failure to compete successfully could materially and adversely affect our business, financial condition, results of operation and prospects.

Some of our internationally-based competitors may establish production or research and development facilities in China, while others may enter into cooperative business arrangements with Chinese manufacturers. If we are unable to develop competitive branded products, obtain regulatory approval or clearance and supply sufficient quantities to the market as quickly and effectively as our competitors, market acceptance of our branded products may be limited, which could result in decreased sales. In addition, we may not be able to maintain our branded product cost advantages.

We believe that corrupt practices in the medical device industry in China still occur. To increase sales, certain manufacturers or distributors of medical devices may pay kickbacks or provide other benefits to hospital personnel who make procurement decisions. Our company policy prohibits these practices by our direct sales personnel and our distribution agreements require our distributors to comply with applicable law. As a result, as competition intensifies in the medical device industry in China, we may lose sales, customers or contracts to competitors.

If we fail to accurately project demand for our products, we may encounter problems of inadequate supply or oversupply, which would materially and adversely affect our financial condition and results of operations, as well as damage our reputation and brand.

Our distributors typically order our products on a purchase order basis. We project demand for our products based on rolling projections from our distributors, our understanding of anticipated hospital procurement spending, and distributor inventory levels. Lack of significant order backlog and the varying sales and purchasing cycles of our distributors and other customers, however, make it difficult for us to forecast future demand accurately.

If we overestimate demand, we may purchase more distributed products or more unassembled parts or components for our branded products than we require. If we underestimate demand, our third party suppliers may have inadequate supply of distributed products or unassembled parts or product component inventories, which could interrupt the assembly process and delay shipments of our branded products, and could result in lost sales. In particular, we are seeking to reduce our procurement and inventory costs by matching our inventory closely with our projected product needs and by, from time to time, deferring our purchase of components in anticipation of supplier price reductions. As we seek to balance reduced inventory costs and assembly flexibility, we may fail to accurately forecast demand and coordinate our procurement and assembly to meet demand on a timely basis. Our inability to accurately predict our demand and to timely meet our demand could materially and adversely affect our financial conditions and results of operations as well as damage our reputation and corporate brand.

7

Failure to manage our growth could strain our management, operational and other resources, which could materially and adversely affect our business and prospects.

Our growth strategy includes building our brand, increasing market penetration of our existing products, developing new products, increasing our targeting of the sleep respiratory market in China, and increasing our exports. Pursuing these strategies has resulted in, and will continue to result in substantial demands on management resources. In particular, the management of our growth will require, among other things:

· continued enhancement of our research and development capabilities;

· information technology system enhancement;

· stringent cost controls and sufficient liquidity;

· strengthening of financial and management controls and information technology systems; and

· increased marketing, sales and support activities; and hiring and training of new personnel.

If we are not able to manage our growth successfully, our business and prospects would be materially and adversely affected.

If we fail to obtain or maintain applicable regulatory clearances or approvals for our products, or if such clearances or approvals are delayed, we will be unable to commercially distribute and market our products at all or in a timely manner, which could significantly disrupt our business and materially and adversely affect our sales and profitability.

The sale and marketing of our products are subject to regulation in China. For a significant portion of our sales, we need to obtain and renew licenses and registrations with the CFDA. The processes for obtaining regulatory clearances or approvals can be lengthy and expensive, and the results are unpredictable. In addition, the relevant regulatory authorities may introduce additional requirements or procedures that have the effect of delaying or prolonging the regulatory clearance or approval for our existing or new products. If we are unable to obtain clearances or approvals needed to market existing or new branded products, or obtain such clearances or approvals in a timely fashion, our business would be significantly disrupted, and our sales and profitability could be materially and adversely affected. Similarly, if the third parties from which we buy our distributed products fail to obtain such clearance, we would be unable to sell such distributed products, and our sales and profitability could be materially and adversely affected.

We generate a significant portion of our revenues from a small number of products, and a reduction in demand for any of these products could materially and adversely affect our financial condition and results of operations.

We derive a substantial percentage of our revenues from a small number of products. We expect a small number of our key products will continue to account for a significant portion of our net revenues for the foreseeable future. As a result, continued market acceptance and popularity of these products is critical to our success, and a reduction in demand due to, among other factors, the introduction of competing products by our competitors, the entry of new competitors, or end-users’ dissatisfaction with the quality of these products could materially and adversely affect our financial condition and results of operations.

If we fail to protect our intellectual property rights, it could harm our business and competitive position.

We rely on a combination of patent, copyright, trademark and trade secret laws and non-disclosure agreements and other methods to protect our intellectual property rights. The process of seeking patent protection can be lengthy and expensive, our patent applications may fail to result in patents being issued, and our existing and future patents may be insufficient to provide us with meaningful protection or commercial advantage. Our patents and patent applications may also be challenged, invalidated or circumvented.

We also rely on trade secret rights to protect our business through non-disclosure provisions in employment agreements with employees. If our employees breach their non-disclosure obligations, we may not have adequate remedies in China, and our trade secrets may become known to our competitors.

Implementation of PRC intellectual property-related laws has historically been lacking, primarily because of ambiguities in the PRC laws and enforcement difficulties. Accordingly, intellectual property rights and confidentiality protections in China may not be as effective as in the United States or other western countries. Furthermore, policing unauthorized use of proprietary technology is difficult and expensive, and we may need to resort to litigation to enforce or defend patents issued to us or to determine the enforceability, scope and validity of our proprietary rights or those of others. Such litigation and an adverse determination in any such litigation, if any, could result in substantial costs and diversion of resources and management attention, which could harm our business and competitive position.

8

We may be exposed to intellectual property infringement and other claims by third parties which, if successful, could disrupt our business and have a material adverse effect on our financial condition and results of operations.

Our success depends, in large part, on our ability to use and develop our technology and know-how without infringing third party intellectual property rights. If we sell our branded products internationally, and as litigation becomes more common in China, we face a higher risk of being the subject of claims for intellectual property infringement, invalidity or indemnification relating to other parties’ proprietary rights. Our current or potential competitors, many of which have substantial resources and have made substantial investments in competing technologies, may have or may obtain patents that will prevent, limit or interfere with our ability to make, use or sell our branded products in either China or other countries, including the United States and other countries in Asia. The validity and scope of claims relating to medical device technology patents involve complex scientific, legal and factual questions and analysis and, as a result, may be highly uncertain. In addition, the defense of intellectual property suits, including patent infringement suits, and related legal and administrative proceedings can be both costly and time consuming and may significantly divert the efforts and resources of our technical and management personnel. Furthermore, an adverse determination in any such litigation or proceedings to which we may become a party could cause us to:

· pay damage awards;

· seek licenses from third parties;

· pay ongoing royalties;

· redesign our branded products; or

· be restricted by injunctions.

Each of the foregoing could effectively prevent us from pursuing some or all of our business and result in our customers or potential customers deferring or limiting their purchase or use of our branded products, which could have a material adverse effect on our financial condition and results of operations.

We are subject to product liability exposure and have limited insurance coverage. Any product liability claims or potential safety-related regulatory actions could damage our reputation and materially and adversely affect our business, financial condition and results of operations.

The medical devices we assemble and sell can expose us to potential product liability claims if the use of these products causes or is alleged to have caused personal injuries or other adverse effects. Any product liability claim or regulatory action could be costly and time-consuming to defend. If successful, product liability claims may require us to pay substantial damages. We do not maintain product liability insurance to cover potential product liability arising from the use of our branded products because product liability insurance available in China offers only limited coverage compared to coverage offered in many other countries. As we expand our sales internationally and increase our exposure to these risks in many countries, we may be unable to obtain sufficient product liability insurance coverage on commercially reasonable terms, or at all. A product liability claim or potential safety-related regulatory action, with or without merit, could result in significant negative publicity and could materially and adversely affect the marketability of our branded products and our reputation, as well as our business, financial condition and results of operations.

Moreover, a material design, manufacturing or quality failure or defect in our branded products, other safety issues or heightened regulatory scrutiny could each warrant a product recall by us and result in increased product liability claims. Also, if these products are deemed by the authorities in the countries where we sell our branded products to fail to conform to product quality and safety requirements, we could be subject to regulatory action. In China, violation of PRC product quality and safety requirements may subject us to confiscation of related earnings, penalties, an order to cease sales of the violating product or to cease operations pending rectification. Furthermore, if the violation is determined to be serious, our business license to assemble or sell violating and other products could be suspended or revoked.

9

We may undertake acquisitions, which may have a material adverse effect on our ability to manage our business, and may end up being unsuccessful.

Our growth strategy may involve the acquisition of new technologies, businesses, products or services or the creation of strategic alliances in areas in which we do not currently operate. We do not have any understanding, commitment or agreement in place with regard to any such acquisitions at this time. These acquisitions could require that our management develop expertise in new areas, manage new business relationships and attract new types of customers. Furthermore, acquisitions may require significant attention from our management, and the diversion of our management’s attention and resources could have a material adverse effect on our ability to manage our business. We may also experience difficulties integrating acquisitions into our business and operations. Future acquisitions may also expose us to potential risks, including risks associated with:

· the integration of new operations, services and personnel;

· unforeseen or hidden liabilities;

· the diversion of resources from our existing businesses and technologies; our inability to generate sufficient revenue to offset the costs of acquisitions; and

· potential loss of, or harm to, relationships with employees or customers, any of which could significantly disrupt our ability to manage our business and materially and adversely affect our business, financial condition and results of operations.

In the event we are unable to complete acquisitions, we have reserved the right to reallocate such funds to our working capital. If this happens, we would have broad discretion over the ultimate us of such funds, and we could use such funds in ways with which investors might disagree.

We may need additional capital in the future, and we may be unable to obtain such capital in a timely manner or on acceptable terms, or at all.

In order for us to grow, remain competitive, develop new products, and expand our distribution network, we may require additional capital in the future. Our ability to obtain additional capital in the future is subject to a variety of uncertainties, including:

· our future financial condition, results of operations and cash flows;

· general market conditions for capital raising activities by medical device manufacturers and other related companies; and

· economic, political and other conditions in China and elsewhere.

We may be unable to obtain additional capital in a timely manner or on acceptable terms or at all. Furthermore, the terms and amount of any additional capital raised through issuances of equity securities may result in significant shareholder dilution.

If we experience a significant number of warranty claims, our costs could substantially increase and our reputation and brand could suffer.

We typically sell our branded products with warranty terms covering 12 months after purchase. Our branded product warranty requires us to repair all mechanical malfunctions and, if necessary, replace defective components. We accrue liability for potential warranty claims at the time of sale. If we experience an increase in warranty claims or if our repair and replacement costs associated with warranty claims increase significantly, we may have to accrue a greater liability for potential warranty claims. Moreover, an increase in the frequency of warranty claims could substantially increase our costs and harm our reputation and brand. Our business, financial condition, results of operations and prospects may suffer materially if we experience a significant increase in warranty claims on our branded products.

10

If our security measures are breached or fail, and unauthorized access is obtained to a client’s data, our services may be perceived as not being secure, clients may curtail or stop using our services, and we may incur significant liabilities

Our products and services involve the web-based storage and transmission of clients’ proprietary information and protected health information of patients. Because of the sensitivity of this information, security features of our software are very important. From time to time we may detect vulnerabilities in our systems, which, even if they do not result in a security breach, may reduce customer confidence and require substantial resources to address. If our security measures are breached or fail as a result of third-party action, employee error, malfeasance, insufficiency, defective design, or otherwise, someone may be able to obtain unauthorized access to client or patient data. As a result, our reputation could be damaged, our business may suffer, and we could face damages for contract breach, penalties for violation of applicable laws or regulations, and significant costs for remediation and efforts to prevent future occurrences. We rely upon our clients as users of our system for key activities to promote security of the system and the data within it, such as administration of client-side access credentialing and control of client-side display of data. On occasion, our clients have failed to perform these activities. Failure of clients to perform these activities may result in claims against us that this reliance was misplaced, which could expose us to significant expense and harm to our reputation. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventive measures. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose sales and clients. In addition, our clients may authorize or enable third parties to access their client data or the data of their patients on our systems. Because we do not control such access, we cannot ensure the complete propriety of that access or integrity or security of such data in our systems.

If our services fail to provide accurate and timely information, or if our content or any other element of any of our services is associated with faulty clinical decisions or treatment, we could have liability to clients, clinicians, or patients, which could adversely affect our results of operations.

Our products, software, content, and services are used to assist clinical decision-making and provide information about treatment plans. If our products, software, content, or services fail to provide accurate and timely information or are associated with faulty clinical decisions or treatment, then clients, clinicians, or their patients could assert claims against us that could result in substantial costs to us, harm our reputation in the industry, and cause demand for our services to decline.

The assertion of such claims and ensuing litigation, regardless of its outcome, could result in substantial cost to us, divert management’s attention from operations, damage our reputation, and decrease market acceptance of our products and services. We attempt to limit by contract our liability for damages and to require that our clients assume responsibility for medical care and approve key system rules, protocols, and data. Despite these precautions, the allocations of responsibility and limitations of liability set forth in our contracts may not be enforceable, be binding upon patients, or otherwise protect us from liability for damages.

Our proprietary software may contain errors or failures that are not detected until after the software is introduced or updates and new versions are released. It is challenging for us to test our software for all potential problems because it is difficult to simulate the wide variety of computing environments or treatment methodologies that our clients may deploy or rely upon. From time to time we have discovered defects or errors in our software, and such defects or errors can be expected to appear in the future. Defects and errors that are not timely detected and remedied could expose us to risk of liability to clients, clinicians, and patients and cause delays in introduction of new services, result in increased costs and diversion of development resources, require design modifications, or decrease market acceptance or client satisfaction with our services.

If any of these risks occur, they could materially adversely affect our business, financial condition, or results of operations.

11

We rely on Internet infrastructure, bandwidth providers, other third parties, and our own systems for providing services to our users, and any failure or interruption in the services provided by these third parties or our own systems could expose us to litigation and negatively impact our relationships with users, adversely affecting our brand and our business.

Our ability to deliver our Internet- and telecommunications-based services is dependent on the development and maintenance of the infrastructure of the Internet and other telecommunications services by third parties. This includes maintenance of a reliable network backbone with the necessary speed, data capacity, and security for providing reliable Internet access and services. Our services are designed to operate without interruption in accordance with our service level commitments. However, we have experienced and expect that we will experience interruptions and delays in services and availability from time to time. We rely on internal systems as well as third-party vendors, including data center, bandwidth, and telecommunications equipment providers, to provide our services. We do not maintain redundant systems or facilities for some of these services. In the event of a catastrophic event with respect to one or more of these systems or facilities, we may experience an extended period of system unavailability, which could negatively impact our relationship with users. Any disruption in the network access, telecommunications, or co-location services provided by these third-party providers or any failure of or by these third-party providers or our own systems to handle current or higher volume of use could significantly harm our business. We exercise limited control over these third-party vendors, which increases our vulnerability to problems with services they provide.

Any errors, failures, interruptions, or delays experienced in connection with these third-party technologies and information services or our own systems could negatively impact our relationships with users and adversely affect our business and could expose us to third-party liabilities. The reliability and performance of the Internet may be harmed by increased usage or by denial-of-service attacks. The Internet has experienced a variety of outages and other delays as a result of damages to portions of its infrastructure, and it could face outages and delays in the future. These outages and delays could reduce the level of Internet usage as well as the availability of the Internet to us for delivery of our Internet-based services.

Foreign Operational Risks

Adverse changes in economic and political policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could adversely affect our business.

Substantially all of our business operations are conducted in China. Accordingly, our results of operations, financial condition and prospects are subject to economic, political and legal developments in China. China’s economy differs from the economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources.

While the PRC economy has grown more rapidly in the past 30 years than the world economy as a whole, growth has been uneven across different regions and among various economic sectors of China. The PRC government has implemented various measures to encourage economic development and guide the allocation of resources. Some of these measures benefit the overall PRC economy, but may also have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us. Since early 2004, the PRC government has implemented certain measures to control the pace of economic growth. Such measures may cause a decrease in the level of economic activity in China, which in turn could adversely affect our results of operations and financial condition.

We may be subject to foreign exchange controls in the PRC.

Our PRC subsidiary and affiliates are subject to PRC rules and regulations on currency conversion. In the PRC, the State Administration for Foreign Exchange (“SAFE”) regulates the conversion of the RMB into foreign currencies. Currently, foreign investment enterprises (“FIEs”) are required to apply to SAFE for “Foreign Exchange Registration Certificate for FIEs.” BDL is a FIE. With such registration certifications (which need to be renewed annually), FIEs are allowed to open foreign currency accounts including the “recurrent account” and the “capital account.” Currently, conversion within the scope of the “recurrent account” can be effected without requiring the approval of SAFE. However, conversion of currency in the “capital account” (e.g. for capital items such as direct investments, loans, securities, etc.) are still subject to limitations and require approvals from, or registration with, SAFE and other relevant PRC governmental authorities.

12

If the investing public’s perception of smaller companies from China worsens, our share price may decrease and we may have difficulty accessing U.S. capital markets.

In recent months, a number of smaller companies from China have had the trading of their securities in the United States halted, delisted or otherwise affected for a variety of reasons. As a result, investors may be concerned about purchasing the securities of any smaller Chinese company. To the extent the investing community is reluctant to purchase such securities or discounts the value of the securities of companies that operate primarily or exclusively in China, our share price may also be adversely affected, regardless of whether there are specific concerns about our company. This could not only harm our share price but could also make it more difficult for us to conduct any future offering of our securities at a price that is acceptable to our company or at all.

We do not have business interruption, litigation or natural disaster insurance.

The insurance industry in China is still at an early stage of development. In particular PRC insurance companies offer limited business products. As a result, we do not have any business liability or disruption insurance coverage for our operations in China. Any business interruption, litigation or natural disaster may result in our business incurring substantial costs and the diversion of resources.

The Chinese enterprise income tax law will affect tax exemptions on the dividends we receive and increase the enterprise income tax rate applicable to us.

We are a holding company incorporated under the laws of the British Virgin Islands. We conduct substantially all of our business through our wholly owned Chinese subsidiaries and we derive all of our income from these subsidiaries. Prior to January 1, 2008, dividends derived by foreign legal persons from business operations in China were not subject to the Chinese enterprise income tax.

On March 16, 2007, the National People’s Congress of the PRC passed the PRC Enterprise Income Tax Law (the “EIT Law”), which took effect on January 1, 2008. Such tax exemptions ceased with the effectiveness of the EIT Law.

Under the EIT Law, if we are deemed to be a non-resident enterprise for Chinese tax purposes, a withholding tax at the rate of 10% would be applicable to any dividends paid by our Chinese subsidiaries to us. However, if we are deemed to have a “de facto management organization” in China, we would be classified as a resident enterprise for Chinese tax purposes and thus would be subject to an enterprise income tax rate of 25% on all of our income. At present, the Chinese tax authority has not issued any guidance on the application of the EIT Law and its implementing rules on non-Chinese enterprises or group enterprise controlled entities whose structures are like ours. As a result, it is unclear what factors will be used by the Chinese tax authorities to determine whether we are a “de facto management organization” in China. However, as substantially all members of our management team are located in China, we may be deemed to be a resident enterprise and therefore subject to an enterprise income tax rate of 25% on our worldwide income, with the possible exclusion of dividends received directly from another Chinese tax resident. As a result of such changes, our historical operating results will not be indicative of our operating results for future periods and the value of our shares may be adversely affected.

BDL may also be required to allocate a portion of its after-tax profits, as determined by its board of directors, to the general reserve, the staff welfare and bonus funds, and the enterprise expansion reserve, which may not be distributed to equity owners.

Pursuant to the Law of Chinese-Foreign Equity Joint Ventures, Chinese-foreign equity joint ventures are required to allocate a portion of their after-tax profits in accordance with their Articles of Association, to the general reserve, the staff welfare and bonus funds, and the enterprise expansion reserve. According to the Articles of Association of BDL, the amount of each reserve is determined by BDL’s board of directors. The general reserve is used to offset future extraordinary losses. The subsidiaries may, upon a resolution passed by the shareholders, convert the general reserve into capital. The employee welfare and bonus reserve is used for the collective welfare of the employees of the subsidiaries. The enterprise expansion reserve is used for the expansion of the subsidiaries’ operations and can be converted to capital subject to approval by the relevant authorities. These reserves represent appropriations of retained earnings determined according to PRC law.

13

As of the date of this prospectus, the amounts of these reserves have not yet been determined, and we have not committed to establishing such amounts at this time. Under current PRC laws, BDL is required to set aside reserve amounts, but has not yet done so. BDL has not done so because PRC authorities grant companies flexibility in making a determination. Chinese law requires such a determination to be made in accordance with the companies’ organizational documents and BDL’s organizational documents do not require the determination to be made within a particular timeframe. Although we have not yet been required by PRC authorities to make such determinations or set aside such reserves, PRC authorities may require BDL to rectify its noncompliance and we may be fined if we fail to do so after warning within the time period set in the warning.

PRC law requires allocation to the general reserve before distribution of the after-tax profits of foreign invested companies, which could prevent us from receiving the dividends from BDL.

PRC law requires that the after-tax profits of foreign invested companies be distributed after a portion of after-tax profits is allocated to the reserve; therefore if for any reason, the dividends from BDL cannot be repatriated to us or not in time, then it may detrimentally affect our cash flow and even cause us to become insolvent.

Governmental control of currency conversion may affect the value of your investment.

The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive the majority of our revenues in Renminbi. Under our current corporate structure, our income is derived from payments from BDL. Shortages in the availability of foreign currency may restrict the ability of BDL to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. However, approval from appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies. The PRC government may also at is discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.

Fluctuation of the Renminbi could materially affect our financial condition and results of operations.

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy has resulted in an appreciation of the Renminbi against the U.S. dollar. While the international reaction to the Renminbi revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of the Renminbi against the U.S. dollar. Any significant revaluation of Renminbi may materially and adversely affect our cash flows, revenues, earnings and financial position, and the value of, and any dividends payable on, our common shares in U.S. dollars. For example, an appreciation of Renminbi against the U.S. dollar would make any new Renminbi denominated investments or expenditures more costly to us, to the extent that we need to convert U.S. dollars into Renminbi for such purposes.

14

If PRC law were to phase out the preferential tax benefits currently being extended to certified high technology companies or if we were to fail to be certified to receive such a benefit, we would have to pay more taxes, which could have a material and adverse effect on our financial condition and results of operations.

Under PRC laws and regulations, a company may enjoy preferential tax benefits if it is certified as a high technology enterprise. As a certified high technology enterprise, we are subject to an enterprise income tax rate of 15% tax rate so long as we continue to be so certified. If the PRC law were to phase out preferential tax benefits currently granted to certified high technology enterprises or if we were to fail to be certified to receive such a benefit, we would be subject to the standard statutory tax rate, which currently is 25%.

If relations between the United States and China worsen, our share price may decrease and we may have difficulty accessing U.S. capital markets.

At various times during recent years, the United States and China have had disagreements over political and economic issues. Controversies may arise in the future between these two countries. Any political or trade controversies between the United States and China could adversely affect the market price of our common shares and our ability to access U.S. capital markets.

The PRC legal system embodies uncertainties that could limit the legal protections available to you and us.

The PRC legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have limited precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly increased the protections afforded to various forms of foreign investment in China. Our PRC operating subsidiary, BDL, is a foreign-invested enterprise and is subject to laws and regulations applicable to foreign investment in China as well as laws and regulations applicable to foreign-invested enterprises. These laws and regulations change frequently, and their interpretation and enforcement involve uncertainties. For example, we may have to resort to administrative and court proceedings to enforce the legal protections that we enjoy either by law or contract. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may also impede our ability to enforce the contracts we have entered into. As a result, these uncertainties could materially and adversely affect our business and operations.

Recent PRC regulations relating to offshore investment activities by PRC residents may increase the administrative burden we face and create regulatory uncertainties that could restrict our overseas and cross-border investment activity, and a failure by our shareholders who are PRC residents to make any required applications and filings pursuant to such regulations may prevent us from being able to distribute profits and could expose us and our PRC resident shareholders to liability under PRC law.

In October 2005, SAFE promulgated regulations that require PRC residents and PRC corporate entities to register with and obtain approvals from relevant PRC government authorities in connection with their direct or indirect offshore investment activities. These regulations apply to our shareholders who are PRC residents in connection with our prior and any future offshore acquisitions.

The October 2005 SAFE regulation required registration by March 31, 2006 of direct or indirect investments previously made by PRC residents in offshore companies prior to the implementation of the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-Raising and Reverse Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies on November 1, 2005. If a PRC shareholder with a direct or indirect stake in an offshore parent company fails to make the required SAFE registration, the PRC subsidiaries of such offshore parent company may be prohibited from making distributions of profit to the offshore parent and from paying the offshore parent proceeds from any reduction in capital, share transfer or liquidation in respect of the PRC subsidiaries. Furthermore, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for foreign exchange evasion.

We previously notified and urged our shareholders, and the shareholders of the offshore entities in our corporate group, who are PRC residents to make the necessary applications and filings, as required under this regulation. However, as these regulations are relatively new and there is uncertainty concerning their reconciliation with other approval requirements, it is unclear how they, and any future legislation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. While we believe that these shareholders submitted applications with local SAFE offices, some of our shareholders may not comply with our request to make or obtain any applicable registrations or approvals required by the regulation or other related legislation. The failure or inability of our PRC resident shareholders to obtain any required approvals or make any required registrations may subject us to fines and legal sanctions, prevent us from being able to make distributions or pay dividends, as a result of which our business operations and our ability to distribute profits to you could be materially and adversely affected.

15

Because our operations are located in China, information about our operations are not readily available from independent third-party sources.

Because the BDL is based in China, our shareholders may have greater difficulty in obtaining information about it on a timely basis than would shareholders of a U.S.-based company. BDL’s operations will continue to be conducted in China and shareholders may have difficulty in obtaining information about it from sources other than BDL itself. Information available from newspapers, trade journals, or local, regional or national regulatory agencies such as issuance of construction permits and contract awards for development projects will not be readily available to shareholders and, where available, will likely be available only in Chinese. Shareholders will be dependent upon management for reports of their progress, development, activities and expenditure of proceeds.

There are no related laws or regulations to wearable medical products now in China. If there are government regulations in the future, it may create risks and challenges with respect to our compliance efforts and our business strategies.

The health care industry is highly regulated and is subject to changing political, legislative, regulatory, and other influences. Existing and new laws and regulations affecting the health care industry could create unexpected liabilities for us, cause us to incur additional costs, and restrict our operations. Many health care laws are complex, and their application to specific services and relationships may not be clear. In particular, many existing health care laws and regulations, when enacted, did not anticipate the wearable medical products and services that we provide, and these laws and regulations may be applied to our business in ways that we do not anticipate. Our failure to accurately anticipate the application of these laws and regulations, or our other failure to comply, could create liability for us, result in adverse publicity, and negatively affect our business.

Item 4. Information on the Company

A. History and Development of the Company

Our founder, Mr. Ping Chen, founded Beijing Dehaier Technology Company Limited (“BTL”), a PRC company controlled by our chief executive officer, Mr. Ping Chen on July 5, 2001 to develop and distribute medical devices. He currently owns approximately 91% of BTL, and his wife and several former employees of Dehaier Medical Systems Limited own the remaining 9% of BTL. BTL leases some of our property to us and provides certain transportation and repair services to medical devices for which we are not obligated to perform warranty services, either because the warranty is expired or because the product was sold by another company. BTL served as the domestic partner to our joint venture pursuant to which we, a British Virgin Islands company, now own 100% of Beijing Dehaier Medical Technology Company Limited (“BDL”), a PRC company in the medical device business. At the time of the formation of the joint venture, foreign enterprises were not permitted to own such companies without PRC partners.

In 2003, in order to continue to grow our business, BTL engaged in a corporate restructuring and Series A venture capital financing. As a result of those actions, Dehaier, BDL and De-haier Medical Systems (Hong Kong) Limited (“DHK”) were established and a venture capital investor, De-haier Investment Holdings, Ltd., a British Virgin Islands company, became a shareholder in Dehaier. At the same time, Mr. Chen’s wholly-owned company, Chen Ping Ltd., became a shareholder in Dehaier, and we created the holding company structure that is currently in place.

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Dehaier was incorporated as an international business company under the International Business Companies Act, 1984, in the British Virgin Islands on July 22, 2003 under the name “De-Haier Medical Systems Limited”. We changed this name to “Dehaier Medical Systems Limited” on June 3, 2005. Dehaier is a holding company. Dehaier does not conduct business in China and instead relies on BDL to conduct business in China.

On September 24, 2003, we established BDL. BDL conducts substantially all of our operations in China and is responsible for generating substantially all of our revenues. BDL was formed as a joint venture between a Chinese entity, BTL, and a foreign invested enterprise, Dehaier, in order to allow foreign investments to be used to grow our business. Because BDL is engaged in an encouraged industry under the Foreign Investment Industrial Guidance Catalogue, it was allowed to have foreign investments and to be established as a Chinese-foreign equity joint-venture. This structure allowed BDL access to foreign capital that would not have been available outside this structure.

BDL has been focused on the development and distribution of medical devices since its inception and began developing its respiratory and oxygen homecare business in 2006.

Effective as of January 5, 2007, we completed a Series B venture capital financing with Crystal East Group Limited, a British Virgin Islands company. Crystal East Group Limited subsequently completed the transfer of its shares to its individual shareholder, Yijen Chen.

On April 22, 2010, we completed an initial public offering of 1,500,000 common shares. The offering was completed at an issuance price of $8.00 per share. Prior to the offering, the Company had 3,000,000 issued and outstanding shares, and after the offering, the Company had 4,500,000 issued and outstanding shares. The Company issued (a) to the placement agent in the initial public offering, warrants to purchase 150,000 common shares for an exercise price of $10.00 per share and (b) to the Company’s investor relations firm, warrants to purchase 7,500 common shares at an exercise price of $9.60 per share. Both the placement agent’s warrants and the investor relations firm’s warrants had a term of five years and have expired.

On February 21, 2014, we and certain institutional investors entered into a securities purchase agreement in connection with an offering (the “Offering”), pursuant to which we agreed to sell an aggregate of 734,700 common shares and warrants to initially purchase an aggregate of 220,410 common shares. The purchase price was $9.12 per common share, and the warrants are initially exercisable at $11.86 per share. The Offering closed on February 26, 2014, and the aggregate gross proceeds from the sale of the common shares, before deducting fees to the placement agent and other estimated offering expenses payable by us was approximately $6.7 million, not including any proceeds from warrant exercises. The warrants were exercisable immediately as of the date of issuance at an exercise price of $11.86 per common share and were to expire forty-two months from the date of issuance. On April 21, 2016, we entered warrant repurchase agreements with the holders of these warrants, pursuant to which we agreed to repurchase such warrants for cash payment equal to $3.80 per share underlying the warrants. We completed the repurchase of the warrants on June 2, 2016, and as of the date of this filing, all of such warrants have been cancelled.

On September 25, 2014, we registered 100,000 shares for reoffers and resales by our current Chief Executive Officers and a director, Ping Chen.

On December 1, 2015, our Board of Directors received a nonbinding indication of an intention to invest by Hangzhou Liaison Interactive Information Technology Co. Ltd., a publicly listed company on the Shenzhen Stock Exchange (“Liaison Interactive”). Liaison Interactive proposes to make an equity investment in our shares in an aggregate amount of US $20 million. On April 28, 2016, we entered into a definitive securities purchase agreement with Liaison Interactive to sell 11,111,111 of our common shares to Liaison Interactive for an aggregate purchase price of $20 million. The Purchase Price is US$1.80 per share, which represents a 35% premium to company’s closing price of $1.33 on April 27, 2016. We completed our first closing under this securities purchase agreement on June 2, 2016, pursuant to which we sold 620,414 common shares for aggregate purchase price of $1,116,744.

On January 14, 2016, we completed an acquisition of 0.8% equity interest of BDL from Beijing Dehaier Technology Co., Ltd. (“BTL”). The Company now holds 100% of the equity interest of BDL. This change reflects BTL’s reduced reliance on business with BDL in providing repair and maintenance services.

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On February 1, 2016, our Board of Directors directed us to set up a wholly owned subsidiary, Connection Wearable Health Technology (Beijing) Co., Ltd. (“CWHT”), in Beijing. We are conducting related procedures to establish CWHT.

On February 22, 2016, we discontinued part of our medical devices business, including assembly and sales of X-ray machines and anesthesia machines, monitoring devices, general medical products, and oxygen generators. Our Company will focus on the development of the remaining product line, such as the second generation Ventilator, General medical products (laryngoscope), Compressor, sleep respiratory business, Wireless Medical.

Our principal executive offices are located at Room 501, 83 Fuxing Road, Haidian District, Beijing 100856, People’s Republic of China.

On June 24, 2016, we signed a strategic cooperation agreement with Hongyuan Supply Chain Management Co., Ltd. to develop Dehaier’s new Internet medical technology business. Under the strategic cooperation agreement, we will leverage Hongyuan Supply Chain’s sales platform to reach Dehaier’s dealers and end users more efficiently, selling our wearable sleep apnea diagnostic system medical devices to Hongyuan Supply Chain for further downchain sale and distribution.

Relationship among Dehaier, BTL and BDL

BTL is a PRC company established on July 5, 2001. Dehaier is a BVI company established on July 22, 2003. Dehaier and BTL jointly established BDL on September 24, 2003 as a Chinese-foreign equity joint-venture under the PRC laws. Dehaier has been and is BDL’s foreign shareholder, and BTL has been and is BDL’s domestic shareholder since BDL was established. Currently, Dehaier owns 100% of BDL, and BTL no longer owns any equity interest of BDL. Under PRC laws, the shareholders of the equity joint-venture share the profits, risks and losses in proportion to their respective contributions of the equity joint-venture.

BTL leased its building to BDL from January 1, 2015 to December, 31 2015. The contract has been renewed from January 1, 2016 to December 31, 2016. At December 18, 2015, BTL’s building was pledged to a bank as collateral for short-term borrowings of RMB10,000,000 ($ 1,541,000). Pursuant to the terms of the agreement, the line of credit is secured by BTL’s building and guaranteed by BDL and an officer of the Company.

B. Business Overview

Our company develops and distributes medical devices, focusing primarily on sleep respiratory solutions to Obstructive Sleep Apnea Syndrome (“OSAS”) since 2010.

We design, develop and market our own branded medical products and medical components. Since we do not operate any fully scaled manufacturing facilities, we contract some of the medical components to outside manufacturers in China. Most of our branded products require light assembly by us before distribution.

We also distribute medical products designed and manufactured by other companies. We broaden our product portfolio through distribution agreements with international manufacturers, and most of the products we distribute are imported. Our distribution offerings are mostly medical equipment used in the operating room, the intensive care unit (“ICU”) and the emergency room.

While we sell our products primarily through distributors, we also make direct sales to hospitals, clinics and government health bureaus. We continue to further our market reach by introducing newer and more advanced product lines that address different end-user needs.

We continued to strategically reduce our sales of traditional medical equipment, and to shift our business to medical products and service based on mobile internet technology.

We expect to continue scaling down and discontinuing, as appropriate, our unprofitable medical device business, including assembly and sales of X-ray machines and anesthesia machines. We plan to maintain only a few currently-profitable businesses on sales of our patented products including medical air compressors and cardiopulmonary resuscitation (“CPR”) instruments in the future. Our corporate and business restructuring plan aims to concentrate our resources to develop the mobile health business, including wearable sleep respiratory business, as our major business.

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Operation Plan

Due to the influence of increasingly challenging markets and new competitors, Dehaier started its development of a sleep respiratory business in 2013. The sales of the traditional medical device business declined significantly during recent years. Since the sleep respiratory business is still at the developmental stage, the Company did not generate significant sales from its sleep respiratory operation in 2015. In order to try to keep the Company’s future continuing operation profitable, the Company plans to take the following efforts:

(a) Discontinue a few unprofitable lines among the traditional medical device business as discussed below to minimize losses,

(b) Obtain financial support from either the third parties or related parties, and

(c) On April 28, 2016, we entered into a Share Purchase Agreement with Hangzhou Liaison Interactive Information Technology Co. Ltd., a publicly listed company on the Shenzhen Stock Exchange. Liaison Interactive has agreed to purchase 11,111,111 restricted common shares of company for an aggregate of $20,000,000. The purchase price is $1.80 per share. On June 6, 2016, we sold 620,414 common shares to Liaison Interactive in first closing under the Share Purchase Agreement and used the collection to repurchase the warrants issued on February 21, 2014. Launch a restructuring plan to operate the Company more efficiently.

A. Discontinued unprofitable product lines in traditional medical devices

The traditional medical device business includes the product lines of Mobile C arm X-ray system, Anesthesia Machine, Color Doppler Imaging Machine, Monitoring Devices, General medical products (including laryngoscope and medical devices), Compressor, Oxygen generator, the first generation Ventilator, and cardiopulmonary resuscitation (CRP).

On February 25, 2016, the Board of Directors agreed to discontinue unprofitable product lines in its traditional medical device business operations. Specifically we plan to discontinue the business of Mobile C arm X-ray system, Anesthesia Machine, Oxygen generator, the first generation Ventilator and will continue the operation of general medical products (including laryngoscope and medical devices) and compressors. Therefore, the Company needs to write down the carrying value of the assets associated with the discontinued product lines of the traditional medical device operation to the fair value minus the disposal cost. Please see below for the revenue generated from the product lines to be continued and the revenue generated from the product lines to be discontinued.

	Product line	Revenue - 2015		Revenue - 2014		Discontinued or not
1	Mobile C arm X-ray system		224,448		4,311,206	YES
2	Anesthesia Machine		-		3,048,464	YES
3	The first generation ventilator		1,234		29,507	YES
4	The second generation Ventilator		-		-	No
5	Color Dopller Imaging Machine		-		1,286,587	YES
6	Monitoring Devices		41,995		-	YES
7	General medical products		20,844		111,200	YES
8	General medical products (laryngoscope)		276,586		348,899	No
9	Compressor		346,212		1,195,668	No
10	Oxygen generator		26,969		26,501	YES
11	Sleep respiratory business		76,544		1,229,674	No
12	Wireless Medical		38,959		-	No
13	Telemedicine		49,000		401,740	YES
14	Common products		583,242		-	No

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B. Liquidity and Going Concern Analysis

The sleep respiratory business is the focus of the company's future business. For the following reasons, Dehaier believes it can continue to operate as a going concern.

a. Dehaier has entered into a definitive securities purchase agreement with Hangzhou Liaison Interactive.

On April 28, 2016, the Company entered into a definitive securities purchase agreement with Hangzhou Liaison Interactive Information Technology Co. Ltd., a publicly listed company on the Shenzhen Stock Exchange (ticker:002280) pursuant to which the Liaison Interactive has agreed to purchase 11,111,111 restricted common shares of the Company for an aggregate of US$20,000,000. The Purchase Price is US$1.80 per share, which represents a 35% premium to company’s closing price of $1.33 on April 27, 2016. We already completed the first closing by selling 620,414 of these shares to Liaison Interactive under the SPA and expect to close the deal before September 30, 2016.

b. Loan agreement with Ping Chen

On December 2, 2015, the Company entered into a new interest-free loan agreement with Ping Chen, CEO in the amount of $3,120,000 (RMB 20,000,000) with no interest rate or maturity date. On December 18, 2015, the Company repaid a portion of the loan in the amount of $1,543,000 (RMB 10,000,000). The remaining portion of the loan will be repaid as agreed between the parties.

c. Loan agreement with Nanjing Bank Company Limited (Beijing Branch)

After using RMB10,000,000 of the above loan from Mr. Ping Chen to repay then-outstanding loans from Nanjing Bank Company Limited (Beijing Branch) (“NBCL”), on December 18, 2015, the Company entered into a new loan agreement with NBCL in the amount of RMB10,000,000 with a floating interest rate which will be 7.2% in 2016. The loan is due on December 18, 2016. Pursuant to the terms of the agreement, the line of credit is secured by BTL’s building and guaranteed by our CEO, Ping Chen.

d. Earnings forecasting for the next six years

The sleep respiratory business is the focus of the company's future business. Our forecast projection was mainly based on the financial results each month in 2015 as well as our company’s future plans and operational developments. The forecast projections are based on actual contracts that reflect the company’s operating activities, internal operating targets and budgets. Our forecasting revenue sources from our sleep respiratory business are from the sales of ventilators, three-level hospitals, private medical centers, and insurance companies. We believe the net income from the sleep respiratory business can sustain our future business development.

Based on the above analysis, the Company's management believes that the basis for the preparation of the 2015 annual financial statements based on the continuing operation assumption is reasonable.

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C. Restructuring Plan

According to the decision of the board of directors, DHRM recently completed the acquisition of BTL 0.8%. BDL will 100% owned by DHRM after the acquisition. At the same time, the board of directors of DHRM decided to establish a new mobile medical company owned 100% by DHRM. We expect the procedure will be completed in late July 2016. The main business of the new company will focus on the sleep respiratory business and wireless medical business. BDL will focus on the remaining traditional medical devices business.

Recent Operational Developments

· In January 2015, the Company’s sleep respiratory solution systems had been adopted by Ciming Aoya Hospital, a subsidiary of Ciming Health Checkup Management Group Co. Ltd. Established in 2004.

· In January 2015, the Company’s representatives participated in the Jiangxi Sleep and Health Forum (the “Jiangxi Sleep Forum”) to promote the Company’s wearable sleep respiratory products and solutions. The Company’s wearable sleep respiratory solution systems were featured at the Jiangxi Sleep Forum and gathered positive reviews from attending sleep experts from leading hospitals including the Departments of Neurology and Cardiology of the Second Affiliated Hospital of Nanchang University (SAHNU) and the Affiliated Hospital of Jiujiang College.

· In February 2015, the Company signed a strategic cooperation agreement with the Clinical Sleep Medicine Center of the Air Force General Hospital to cooperate on sleep-related clinical research studies, sleep disease diagnosis and treatment, technology and equipment clinical tests, as well as public education and a sleep disorder awareness campaign. Established in October 1956 in Beijing, the Air Force General Hospital is one of the leading hospitals in China and an early adopter of Dehaier’s wearable sleep respiratory solution systems as well.

· In May 2015, the Company’s sleep respiratory solution systems were adopted by Sonqao Health Checkup Institution (“Sonqao”), an emerging physical examination chain that provides comprehensive physical check-up and personalized health management services to over 200,000 patients annually through its three state-of-the-art physical examination centers in Beijing and Inner Mongolia. Pursuant to an agreement executed earlier in May 2015 between our third party distributor and Sonqao, Dehaier will provide its sleep respiratory solution systems, including related data transmission working stations, cloud-based diagnostic and analysis software, watch-sized sleep diagnostic and monitoring devices and disposable photo plethysmography (PPG) sensors, to meet the demand for obstructive sleep apnea (“OSAS”) diagnosis and treatment at Sonqao’s three physical examination centers.

· In September 2015, the Company showcased its wearable sleep respiratory product and solution at two premier sleep respiratory conferences, including: 1) the 4th National Sleep Respiratory Conference (the “NSRC”) which took place in Shanghai; and 2) the 2nd Sleep Medicine Annual Conference (the “SMAC”) which took place in Qingdao City, Shandong Province.

· In October 2015, the Company won a medical device distribution bid for a new rural healthcare construction project supported by China Development Bank Corp (“CDB”). According to the agreement, Dehaier will provide its proprietary C-arm X-Ray machine and defibrillator monitor to Dongsheng Hospital of Ordos, Inner Mongolia. The procurement project is funded by CDB, one of China’s three national policy banks. The Company was awarded a medical equipment procurement agreement from China’s Health & Anti-Poverty Program Committee (“HAPP Committee”). According to the agreement, Dehaier will provide anesthesia equipment systems, mobile C-Arm X-Ray machines and medical molecular sieve oxygen generators to hospitals that are financed by the HAPP.

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Our Products

Our proprietary and distributed products include two major categories: (i) medical devices (including supporting products) and (ii) sleep respiratory and mobile medicine (including Internet Medical and Sleep Diagnosis Products). Our medical devices proprietary and distributed products are mainly used in hospitals and clinics, while the sleep respiratory products are mainly for hospitals, sleep centers, physical examination centers and at-home use by individual.

Our Proprietary Products

Our management believes that our proprietary products, which are generally less expensive than products from foreign companies, tend to be more attractive to hospitals and healthcare facilities and other end-users for whom price is a significant factor in deciding whether to purchase our products. Our proprietary products include medical devices and related supporting/technical service products, and sleep respiratory products.

Medical Devices (Including Related Supporting Products)

• Ventilator Air Compressor. We provide two types of air compressors to support medical ventilators in surgery by supplying continuous airflow for the ventilator. Where a facility lacks a central pressured air supply system, our C250 and C280 air compressors provide a portable source of such pressured air. Our air compressors feature oil-less motors, large locking castors, high flow capacity, and spill-proof switches. We have designed our air compressors to be adaptable for use with any ventilator.

Sleep Respiratory and Oxygen Homecare Products

• Sleep Apnea Treatment Products. We have designed and expect to provide several products designed for obstructive sleep apnea (“OSA”) therapy. These products include our DHR CPAP C5( to be discontinued) , DHR Homecare CPAP, DHR Homecare APAP, DHR Homecare S and DHR Homecare ST. These products are all non-invasive therapy products that treat symptoms of sleep apnea. Our CPAP devices do not cure apnea but instead use air pressure to open customers’ airways to reduce snoring and apnea disturbances during sleep. Our automatic CPAP products provide air pressure at a customized, adjustable level, while our traditional CPAP products provide a constant level of air pressure.

Mobile Medicine (including Internet Medical and Sleep Diagnosis Products)

• Sleep Apnea Diagnostic Products. We have designed and expect to provide two types of screening and diagnosis products are portable sleep respiratory recording devices that can be used in a healthcare facility or in a patient’s home to assist physicians in determining whether the patient has obstructive sleep apnea requiring use of a CPAP device. We have obtained the CFDA for DHR998 in January 2014.

Research and Development of Our Proprietary Products

Our success to date has in part resulted from our strong research and development capabilities, which allow us to regularly introduce new and more advanced products at competitive prices. We increased our annual investment in research and development activities as a percentage of net revenues every year since 2003. Research and development costs from continuing operations were $1,918,446, $100,199 and $484,770 for the years ended December 31, 2015, 2014 and 2013, respectively. Research and development costs from discontinued operations were $580,216, $515,135 and $0 for the years ended December 31, 2015, 2014 and2013, respectively. Our research and development team consists of 7 engineers, representing 8% of our employees.

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Our project selection goals focus on projects that we believe are commercially feasible, can generate significant revenue and can be introduced into the market in the near-term. While our research and development department may conduct research into areas that are likely to lead to short-, medium- and long-range business opportunities for our company, we focus our development of products on those solutions we believe are most likely to generate significant near-term revenues. Thus, we would generally devote more resources to a solution expected to have an immediate financial return (for example, a ventilator) than to a project with a potentially greater overall payoff that is more distant and tenuous (for example, an artificial lung).

Our management seeks feedback from our distribution network to learn about needs for future products and improvements to existing products that our research and development department can seek to address. Once we identify a product opportunity, our sales and service, research and development, and assembly teams work closely together to determine potential market demand for a product and how it fits with our current design and assembly capabilities. We organize regular meetings in which our sales and service, research and development and assembly teams review progress and, if necessary, adjust the emphasis of our research and development projects.

If we deem a new product to be commercially feasible, our research and development team will work closely with our assembly team to move assembly forward. This integrated approach allows us to identify potential difficulties in commercializing our proprietary product or product improvement. Furthermore, it enables us to make adjustments as necessary and develop cost-efficient assembly processes prior to distribution. We believe these abilities can significantly shorten the time it takes to launch a commercialized product. In the last three years, we have developed and brought to market 5 new products, which we believe should appeal to a wide range of end-users.

We maintain a 5,400 square foot research and development center in our facility in Beijing, which allows us to compete for skilled research and development technicians and managers.

Principal Suppliers – Our Proprietary Products

We use the following principal suppliers to manufacture the components in the products we develop and assemble:

• Beijing Madsen medical equipment sales center

• Beijing Beyond Technology Development Co. Ltd

• Hunan Zhong Yi High-tech Development Co., LTD

• Deloit (ChangSha) Co. LTD.

• Beijing Hengtai Siyuan Technology Co. Ltd.

We believe the components provided by our suppliers are widely available and do not anticipate that we will be unable to obtain these components from other suppliers in the event our principal suppliers are unable or unwilling to supply us. We provide the technical specifications and files needed for our suppliers to manufacture components. We purchase the same components from a wide variety of suppliers.

Assembly of Our Proprietary Products

After our research and development team designs the technical specifications and computer models for our proprietary products, we typically work with an independent contractor to fabricate working prototypes before we commence with the production run of a product. We test prototypes to confirm that they operate as expected and with the quality we require. During the prototyping process, we apply for CFDA approval as necessary. Once both of these processes are completed, we commission a production run of components for assembly into our proprietary products.

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We depend on component and product manufacturing and logistical services provided by third parties. All of our proprietary products are manufactured in whole or in part by a variety of third-party manufacturers. While these arrangements may lower operating costs, they also reduce our direct control over production. It is uncertain what effect such diminished control will have on the quality or quantity of products or services, or on our flexibility to respond to changing conditions.

We maintain a 32,000 square foot product center in Changping Science Park in Beijing. This product center contains our research and development area and our assembly facilities. Final assembly of our products is currently performed in this facility by our 10 employees in assembly and by some of our external vendors. Currently, the supply and manufacture of many critical components is performed by sole-sourced third-party vendors in China.

Proprietary Rights for Our Proprietary Products

We are developing a portfolio of intellectual property rights in China to protect the technologies, inventions and improvements that we believe are significant to our business in China. We have four practical patents issued in China for ventilators. We have five design patents related to our CPAP devices (5). In addition, we obtained 7 software copyrights for our CPAP machines (5), air compressors (1) and CPR products (1). Moreover, we possess proprietary technology and know-how in assembly processes, design and engineering. We have not filed for any patent protection outside of China. To protect our brand name recognition, we have registered the brand name “Dehaier” for trademark protection in China. 

Our success in the medical equipment industry depends in substantial part on effective management of both intellectual property assets and infringement risks. In particular, we must be able to protect our own intellectual property as well as minimize the risk that any of our proprietary products may infringe upon the intellectual property rights of others.

We enter into agreements with all our employees involved in research and development, under which all intellectual property generated during their employment belongs to us, and they waive all relevant rights or claims to such intellectual property. All our employees involved in research and development are also bound by a confidentiality obligation and have agreed to disclose and assign to us all inventions conceived by them during their term of employment.

We believe that we have successfully established our brand in China. We have registered trademarks in China for the Dehaier name and logo used on our own-brand products. As part of our overall strategy to protect and enhance the value of our brand, we actively enforce our registered trademarks against any unauthorized use by a third party.

Our Distributed Products

Our management believes that our distributed products, which are generally more expensive than products from Chinese companies, tend to be more attractive to larger city hospitals and more affluent healthcare facilities and other end-users for whom perceived quality is a significant factor in deciding which products to purchase. While we believe that the quality of our proprietary products is also strong, we understand that some consumers in China associate more well-known international brands with higher quality than they associate with domestically produced brands.

We serve as a significant distributor in China for laryngoscopes from Timesco. We distribute medical devices and sleep respiratory products for these companies.

Medical Devices

• Laryngoscopes. We provide three lines of laryngoscopes developed by Timesco: the Optima, Optima XL and Eclipse lines. Laryngoscopes are flexible lighted tubes that are used to look at the inside of the larynx. Anesthesiologists make use of laryngoscopes to assist with intubation in surgery.

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Our Relationships with Suppliers of Our Distributed Products

While we develop, assemble, market and sell our proprietary products, we also serve as the distributor for a number of international companies looking to sell their brands of products in China. We are a distribution agent for some or all products marketed in China by Timesco (UK). In this capacity, we are responsible for sales, marketing and after-sale services of these products.

We sign agency agreements with the international supplier annually with the aim of settling marketing promotion modes, costs, product training and resolution of customer service issues. The agency agreement cover purchasing price, purchasing intervals, order quantity, transportation and type of payment, spare part supply and after-sale service terms. We negotiate renewal of the agency agreement as they expire to confirm ongoing distributor expectations.

We seek to enlarge the scope of products we are able to sell as agent for these companies and constantly try to identify competitive suppliers and products on the international market to assist them with marketing and selling their products in China.

Principal Suppliers – Our Distributed Products

In addition to the products we design, we distribute products designed and manufactured by the following companies:

• Hunan Zhong Yi High-tech Development Co., LTD

• Deloit (ChangSha) Co. LTD.

• Jian Fa (Beijing) Co., LTD

• Qingdao Feng Mai Trading Co., LTD.

• Beijing Hua Yu Hui Zhi technology Co., LTD

The exact products from these suppliers are available only from such suppliers; however, we believe that we will be able to obtain similar products from other suppliers in the event our principal suppliers are unable or unwilling to supply us.

Our Service Centers

We maintain a customer service center in Beijing for technical support and repair. We staff our customer service center with senior technical support engineers who provide preliminary support. Our engineers attempt to quickly diagnose and assist in repairing problems over the phone, or determine whether a service visit to the customer’s premises is necessary. In some instances, our engineers will provide on-site operating guidance and repair service. We periodically review customer calls to ensure that any issues raised by our customers are resolved to their satisfaction.

Customers

We have three categories of customers: (i) distributors, (ii) hospitals, physical examination centers, insurance companies and government agencies and (iii) individual consumers to whom we sell directly. Our customer base is widely dispersed on both a geographic and revenues basis.

Our distributors. Sales to our distributors make up the substantial majority of our revenues as over 80% of our sales are to distributors. Based on the expected use of products sold to distributors, we estimate that they sell approximately 58% of our products to hospitals, 22% to clinics and 10% to individuals. As a result, we estimate that approximately 60% of our products (on a revenue basis, rather than unit basis) are sold to hospitals, approximately 20% to clinics and approximately 20% to individuals. We have contractual distribution relationships with over 350 independent distributors. We do not own, employ or control these independent distributors.

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Hospital, physical examination centers, insurance companies and governmental agency customers.  Our hospital and governmental agency customers primarily include hospitals, private physical examination centers, life insurance companies as well as provincial level public health bureaus and population and family planning bureaus. We also refer to these customers as our “Key Accounts.” These customers typically place large volume orders that are awarded based on bids submitted by competing medical equipment companies through a state-owned bidding agent.

Individual consumers. We sell our products directly to consumers through our website platform.

Dependence on Major Customers. 

For the years ended December 31, 2015, 2014 and 2013, approximately 37%, 6% and 24% of the Company’s total revenues were received from two customers for continued operation. For the years ended December 31, 2015, 2014 and 2013, approximately 7%, 11% and 11% of the Company’s total revenues were received from two customers for discontinued operation. 

Dependence on Major Suppliers.

For the years ended December 31, 2015, 2014 and 2013, purchases from three suppliers for continued operation were approximately 67%, 28% and 42% of the total purchases for continuing and discontinued operations, respectively. For the years ended December 31, 2015, 2014 and 2013, purchases from three suppliers for discontinued operation were approximately 9%, 55% and 51% of total purchases, respectively.

Competition

The medical device industry is characterized by rapid product development, technological advances, intense competition and a strong emphasis on proprietary information. Across all product lines and product tiers, we face direct competition from both domestic and international competitors. We compete based on factors such as price, value, customer support, brand recognition, reputation, and product functionality, reliability and compatibility. Each of our proprietary products competes against functionally similar products from domestic and international companies.

Our competitors include publicly traded and privately held multinational companies, such as Respironics, Inc. and ResMed Inc., as well as domestic Chinese companies such as Beijing Aoji, Beijing Ya’ao, Jiangsu Yuyue, Zhejiang Longfei, Beijing Shenlu, Guangdong Pigeon, Beijing Huaputai and Tianjin Fufeng. We believe that we can continue to compete successfully in China because our established domestic distribution network and customer support and service network allows us significantly better access to China’s small and medium-sized hospitals. In addition, our strong investment in research and development, coupled with our low-cost operating model, allows us to compete effectively for sales to large hospitals.

We believe our competitive position in China varies depending on the product in question. While we are a much smaller company overall than, for example, General Electric, Siemens or Philips and are unable to offer the range or depth of products each of those companies offers, we believe our market position is favorable in several segments. The following charts provide our marketing department’s estimations of our primary competitors by product, both as to our proprietary products and as to our distributed products:

Proprietary Product	Primary Competitors in China	Dehaier’s Estimated Competitive Position*
C250 and C280 air compressors	Beijing Yi’an, Beijing Shenlu	Average
DHR 998* and diagnosis products	Foreign companies such as Respironics, ResMed, and Covidien	Greater than average
Timesco laryngoscope	Kirchner & Wilhelm (GER), WelchAllyn (USA)	Average

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*A “greater than average” position indicates Dehaier estimates its competitive position in the top third of all competitors. “Average” indicates Dehaier estimates its competitive position in the middle third of all competitors. “Smaller than average” indicates Dehaier estimates its competitive position in the bottom third of all competitors.

As we expand into international markets, our competitors will include publicly traded and privately held multinational companies such as Respironics and ResMed. These companies typically focus on the premium segments of the market. We believe we can successfully penetrate certain international markets by offering products of comparable quality at lower prices. We will also face competition in international sales from companies that have local operations in the markets in which we sell our proprietary products. We believe that we can compete successfully with these companies by offering high quality proprietary products at comparable prices.

Methods of Competition

China’s medical device market currently features a significant number of small distributors. We seek to distinguish our company from our competitors by being able to offer proprietary and distributed products that address the device needs of customers that may have very different needs.

For example, China is currently investing heavily in health care nationwide; however, money for healthcare is currently unevenly distributed. There are a number of large hospitals that have significant resources and a number of rural clinics that have extremely limited budgets. We are able to provide distributed products that reach the more affluent customers, as these customers frequently tend to ascribe more perceived value to products made by well-known foreign companies, such as Timesco. We are also able to supply our proprietary products to customers who tend to care less about perceived value and more about functionality.

We currently compete on three levels. First, we have well-established distribution channels and close relations with more than 350 dealers and distributors, reaching an estimated 900 hospitals. We maintain relationships with healthcare bureaus as well as other key accounts to actively participate in state-level contracted procurement projects. Second, our proprietary homecare medical products are designed to provide an all-in-one solution for end users. Third, we keep upgrading the service and products to end-users and satisfy market demands. We focus on maintaining a high quality to price ratio in our proprietary products. In addition, being a NASDAQ-listed company has helped to build our brand image and reputation with potential customers and business partners.

Seasonality

During the period from April to May, we generally experience an increase in revenues associated with our attendance at the China International Medical Equipment Fair, the largest exhibition of medical equipment, related products and services in Asia-Pacific region. This fair occurs in the spring each year. In addition, we generally experience an increase in revenues in the period from September through November. This increase is associated with hospital purchasing designed to extinguish governmental budgets prior to the fiscal year end. And our first quarter performance generally decline as a result of the lack of business conducted during the Chinese Lunar New Year Holiday.

Employees

As of December 31, 2015, we have 89 full-time employees, of which 10 are employed in assembly; 7 are in research and development; 26 are in general administration; and 46 are in marketing and sales. As required by PRC regulations, we participate in various employee benefit plans that are organized by municipal and provincial governments, including pension, work-related injury benefits, maternity insurance, and medical and unemployment benefit plans. We are required under PRC law to make contributions to the employee benefit plans at specified percentages of the salaries, bonuses, housing funds and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. We make contributions to employee benefits equal to 10% of employee salaries.

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Generally, we enter into a two-year standard employment contract with all of our officers, managers and other key employees and a one-year standard employment contract with all other employees. According to these employment contracts, all of our employees are prohibited from engaging in any activities that compete with our business during the period of their employment with us.

Under Chinese law, we may only terminate employment agreements without cause and without penalty by providing notice of non-renewal one month prior to the date on which the employment agreement is scheduled to expire. If we fail to provide this notice or if we wish to terminate an employment agreement in the absence of cause, then we are obligated to pay the employee one month’s salary for each year we have employed the employee. We are, however, permitted to terminate an employee for cause without penalty to our company, where the employee has committed a crime or the employee’s actions or inactions have resulted in a material adverse effect to us.

Regulations

Our products are medical devices and are subject to regulatory controls governing medical devices. As a distributor of medical equipment and supplies we are subject to regulation and oversight by different levels of the food and drug administration in China, in particular the CFDA. We are also subject to other PRC government laws and regulations. CFDA requirements include obtaining certifications, permits, compliance with clinical testing standards, assembly practices, quality standards, applicable industry standards and adverse event reporting, and advertising and packaging standards.

China’s Regulation of Medical Devices

Classification of Medical Devices

In China, medical devices are classified by the CFDA into three different categories, Class I, Class II and Class III, depending on the degree of risk associated with each medical device and the extent of control needed to ensure safety and effectiveness. Classification of a medical device is important because the class to which a medical device is assigned determines, among other things, whether a company needs to obtain a permit and the level of regulatory authority involved in obtaining such permit. Classification of a device also determines the types of registration required and the level of regulatory authority involved in effecting the product registration.

Class I devices require product certification and are those with low risk to the human body and are subject to “general controls.” Class I devices are regulated by the city level food and drug administration where the company is located. Class II devices are those with medium risk to the human body and are subject to “special controls.” Class II devices require product certification, usually through a quality system assessment, and are regulated by the provincial level food and drug administration where the company is located. Class III devices are those with high risk to the human body, such as life-sustaining, life-supporting or implantable devices. Class III devices also require product certification and are regulated by the CFDA under the strictest regulatory control.

The majority of our products are classified as Class II or Class III devices. Our anesthesia machines and ventilators are classified as Class III medical devices, while the remainder of our products is either classified as Class II or, in the case of our ventilator trolleys and sterilizers, not categorized devices.

Assembly Permit

A company must obtain a permit from the provincial level food and drug administration before commencing the assembly of Class II and Class III medical devices. No assembly permit is required for Class I devices, but the company must notify the provincial level food and drug administration where the company is located and file for record with it. An assembly permit, once obtained, is valid for five years and is renewable upon expiration.

We have a single assembly permit, which covers all products we assemble and is scheduled to expire on August 25, 2018. To renew an assembly permit, a company needs to submit to the provincial level food and drug administration an application to renew the permit, along with required information six months before the expiration date of the permit. If we are unable to renew the permit before it expires, we could lose our ability to assemble our medical devices until the situation is rectified.

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Distribution License

A manufacturer or distributor must obtain a distribution license in order to engage in sales and distribution of Class II and Class III medical devices in China. A distribution license is valid for five years and is renewable upon expiration. If we are unable to renew the permit before it expires, we could lose our ability to distribute medical devices until the situation is rectified.

Registration Requirement

Before a medical device can be manufactured for commercial distribution, a company must complete medical device registration by proving the safety and effectiveness of the medical device to the satisfaction of respective levels of the food and drug administration. In order to conduct a clinical trial on a Class II or Class III medical device, the CFDA requires companies to apply for and obtain in advance a favorable inspection result for the device from an inspection center jointly recognized by the CFDA and the Administration of Quality Supervision, Inspection and Quarantine. The application to the inspection center must be supported by appropriate data, such as animal and laboratory testing results. If the inspection center approves the application for clinical trial, and the respective levels of the food and drug administration approve the institutions that will conduct the clinical trials, the company may begin the clinical trial. A registration application for a Class II or Class III device must provide required pre-clinical and clinical trial data and information about the device and its components regarding, among other things, device design, production and labeling. The provincial level food and drug administration, within 60 days of receiving an application for the registration of a Class II device, and the CFDA, within 90 days of receiving an application for the registration of a Class III device, will notify the applicant whether the application for registration is approved. If approved, a registration certificate will be issued within ten days of written approval. If the food and drug administration requires supplemental information, the approval process may take much longer. The registration is valid for four years.

The CFDA may change its policies, adopt additional regulations, revise existing regulations or tighten enforcement, each of which could block or delay the approval process for a medical device.

The following table discloses the current registration expiration dates for the products we sell. It is the obligation of that produces the product to seek registration and any renewals. We are responsible for registering our proprietary products but must rely on the suppliers of other products to seek registration for those products. We will either cease to sell such product or seek comparable products from other suppliers in the event the registration is not renewed on expiration.

Medical Devices (Including Related Supporting Products) 

Product Type	Product Model	Registration Expiration
Ventilator Air Compressor	DHR280 Air Compressor for Ventilators	June 2018
Laryngoscope	Timesco Laryngoscope	April 2020

Respiratory Products

Product Type	Product Model	Registration Expiration
Sleep Apnea Treatment Products	CPAP C5	July 2016
Diagnostic Products	DHR 998	November 2017

* We applied to renew this application on December 4, 2015 and anticipate receiving the renewed registration in the near future. We will remain able to sell our CPAP C5 pending completion of the approval of this renewed application by the CFDA.

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Continuing CFDA Regulation

We are subject to continuing regulation by the CFDA. In the event of significant modification to an approved medical device, its labeling or its assembly process, a new premarket approval or premarket approval supplement may be required. Our products are subject to, among others, the following regulations:

• CFDA’s quality system regulations which require companies to create, implement and follow certain design, testing, control, documentation and other quality assurance procedures;

• medical device reporting regulations, which require that companies report to the CFDA certain types of adverse reaction and other events involving their products; and

• CFDA’s general prohibition against promoting products for unapproved uses.

Class II and III devices may also be subject to special controls applicable to them, such as supply purchase information, performance standards, quality inspection procedures and product testing devices which may not be required for Class I devices. We believe we are in compliance with the applicable CFDA guidelines, but we could be required to change our compliance activities or be subject to other special controls if the CFDA changes or modifies its existing regulations or adopts new requirements.

We are also subject to inspection and market surveillance by the CFDA to determine compliance with regulatory requirements. If the CFDA decides to enforce its regulations and rules, the agency can institute a wide variety of enforcement actions such as:

• fines, injunctions and civil penalties;

• recall or seizure of our products;

• the imposition of operating restrictions, partial suspension or complete shutdown of assembly; and

• criminal prosecution.

Other National and Provincial Level Laws and Regulations in China

Beyond those laws and regulations we consider material to our business, we are subject to evolving regulations under many other laws and regulations administered by governmental authorities at the national, provincial and city levels, some of which are, or may be, applicable to our business. Our hospital customers are also subject to a wide variety of laws and regulations that could affect the nature and scope of their relationships with us.

Laws regulating the conduct of business in our industry cover a broad array of subjects. We must comply with numerous additional state and local laws relating to matters such as safe working conditions, environmental protection and fire hazard control, which affect all companies doing business in China. We believe we are currently in compliance with these laws and regulations in all material respects. We may be required to incur significant costs to comply with these laws and regulations in the future. Unanticipated changes in existing regulatory requirements or adoption of new requirements could have a material adverse effect on our business, financial condition and results of operations.

Restriction on Foreign Ownership

The principal regulation governing foreign ownership of medical device businesses in the PRC is the 2015 Foreign Investment Industrial Guidance Catalogue (the “Catalogue”). The Catalogue classifies the various industries into four categories: encouraged, permitted, restricted and prohibited. As confirmed by the government authorities, BDL is engaged in an encouraged industry. Such a designation offers businesses distinct advantages. For example, businesses engaged in encouraged industries:

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• are not subject to restrictions on foreign investment, and, as such, foreign can own a majority in Sino-foreign joint ventures or establish wholly-owned foreign enterprises in the PRC;

• provided such company has total investment of less than $100 million, the company is subject to regional (not central) government examination and approval which are generally more efficient and less time-consuming; and

• may import certain equipment while enjoying a tariff and import-stage value-added tax exemption.

The National Development and Reform Commission and the Ministry of Commerce periodically jointly revise the Foreign Investment Industrial Guidance Catalogue. As such, there is a possibility that our company’s business may fall outside the scope of the definition of an encouraged industry in the future. Should this occur, we would no longer benefit from such designation.

Regulation of Foreign Currency Exchange

The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations (1996), as amended, and the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996). Under these regulations, Renminbi are freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for most capital account items, such as direct investment, loan, repatriation of investment and investment in securities outside China, unless the prior approval of SAFE or its local counterparts is obtained. In addition, any loans to an operating subsidiary in China that is a foreign invested enterprise, cannot, in the aggregate, exceed the difference between its respective approved total investment amount and its respective approved registered capital amount. Furthermore, any foreign loan must be registered with SAFE or its local counterparts for the loan to be effective. Any increase in the amount of the total investment and registered capital must be approved by the PRC Ministry of Commerce or its local counterpart. We may not be able to obtain these government approvals or registrations on a timely basis, if at all, which could result in a delay in the process of making these loans.

The dividends paid by the subsidiary to its shareholder are deemed shareholder income and are taxable in China. Pursuant to the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), foreign-invested enterprises in China may purchase or remit foreign exchange, subject to a cap approved by SAFE, for settlement of current account transactions without the approval of SAFE. Foreign exchange transactions under the capital account are still subject to limitations and require approvals from, or registration with, SAFE and other relevant PRC governmental authorities.

Regulation of Dividend Distribution

The principal regulations governing the distribution of dividends by foreign holding companies include the Foreign Investment Enterprise Law (1986), as amended, and the Administrative Rules under the Foreign Investment Enterprise Law (2001).

Under these regulations, foreign investment enterprises in China may pay dividends only out of their retained profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, foreign investment enterprises in China are required to allocate at least 10% of their respective retained profits each year, if any, to fund certain reserve funds unless these reserves have reached 50% of the registered capital of the enterprises. These reserves are not distributable as cash dividends.

Notice 75

On October 21, 2005, SAFE issued Notice 75, which became effective as of November 1, 2005. According to Notice 75, prior registration with the local SAFE branch is required for PRC residents to establish or to control an offshore company for the purposes of financing that offshore company with assets or equity interests in an onshore enterprise located in the PRC. An amendment to registration or filing with the local SAFE branch by such PRC resident is also required for the injection of equity interests or assets of an onshore enterprise in the offshore company or overseas funds raised by such offshore company, or any other material change involving a change in the capital of the offshore company.

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Moreover, Notice 75 applies retroactively. As a result, PRC residents who have established or acquired control of offshore companies that have made onshore investments in the PRC in the past are required to complete the relevant registration procedures with the local SAFE branch. Under the relevant rules, failure to comply with the registration procedures set forth in Notice 75 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including the increase of its registered capital, the payment of dividends and other distributions to its offshore parent or affiliate and capital inflow from the offshore entity, and may also subject relevant PRC residents to penalties under PRC foreign exchange administration regulations.

PRC residents who control our company are required to register with SAFE in connection with their investments in us. Such individuals completed this registration in 2007, and 2008, as amended. If we use our equity interest to purchase the assets or equity interest of a PRC company owned by PRC residents in the future, such PRC residents will be subject to the registration procedures described in Notice 75.

Trademark Rights

The PRC Trademark Law, adopted in 1982 and revised in 2001, with its implementation rules adopted in 2002, protects registered trademarks. The Trademark Office of the State Administration of Industry and Commerce (“SAIC”), handles trademark registrations and grants trademark registrations for a term of ten years.

Regulations on Offshore Parent Holding Companies’ Direct Investment in and Loans to Their PRC Subsidiaries

An offshore company may invest equity in a PRC company, which will become the PRC subsidiary of the offshore holding company after investment. Such equity investment is subject to a series of laws and regulations generally applicable to any foreign-invested enterprise in China, which include the Wholly Foreign Owned Enterprise Law, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Contractual Joint Venture Enterprise Law, all as amended from time to time, and their respective implementing rules; the Tentative Provisions on the Foreign Exchange Registration Administration of Foreign-Invested Enterprise; and the Notice on Certain Matters Relating to the Change of Registered Capital of Foreign-Invested Enterprises.

Under the aforesaid laws and regulations, the increase of the registered capital of a foreign-invested enterprise is subject to the prior approval by the original approval authority of its establishment. In addition, the increase of registered capital and total investment amount shall both be registered with SAIC and SAFE.

Shareholder loans made by offshore parent holding companies to their PRC subsidiaries are regarded as foreign debts in China for regulatory purpose, which is subject to a number of PRC laws and regulations, including the PRC Foreign Exchange Administration Regulations, the Interim Measures on Administration on Foreign Debts, the Tentative Provisions on the Statistics Monitoring of Foreign Debts and its implementation rules, and the Administration Rules on the Settlement, Sale and Payment of Foreign Exchange.

Under these regulations, the shareholder loans made by offshore parent holding companies to their PRC subsidiaries shall be registered with SAFE. Furthermore, the total amount of foreign debts that can be borrowed by such PRC subsidiaries, including any shareholder loans, shall not exceed the difference between the total investment amount and the registered capital amount of the PRC subsidiaries, both of which are subject to the governmental approval.

C. Organizational structure

BTL is a PRC company established on July 5, 2001. Dehaier is a BVI company established on July 22, 2003. Dehaier and BTL jointly established BDL on September 24, 2003 as a Chinese-foreign equity joint-venture under the PRC laws. Dehaier has been and is BDL’s shareholder, and BTL had been BDL’s domestic shareholder since BDL was established. Dehaier owned 99% of BDL, and BTL owned 1% of BDL before January 14, 2016; at that time, BTL transferred its interest in BDL to Dehaier. Under PRC laws, the shareholders of the equity joint-venture share the profits, risks and losses in proportion to their respective contributions of the equity joint-venture.

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D. Property, Plants and Equipment

We are headquartered and our principal executive offices are located in Beijing. We assemble and test all our branded products at our 32,000 square foot product facility at the Changping Science Park in Beijing.

Office	Address	Rental Term Expiration	Space
Principal Executive Office	Dehaier Medical Systems Limited	month to month	2,583 square feet
	Room 501, 83 Fuxing Road Haidian District, Beijing 100856
Product Center	45 Yong An Road, Science Park, Changping District, Beijing, 102200	December 31, 2016	32,000 square feet

At our principal executive office, material tangible assets consist of general office equipment. Our product center consists of office buildings, a manufacturing/assembly base, a warehouse and employee living quarters. In addition, we have assembly and testing machines at the product center. Our production facility secures a loan agreement with Nanjing Bank Company Limited (Beijing Branch) for approximately $1,541,000 (RMB10,000,000), entered on December 18, 2015. We do not have any current plans to expand our facilities or acquire or build new facilities.

Item 4A. Unresolved Staff Comments

Not applicable, as we are not an accelerated filer, large accelerated filer or well-known seasoned issuer.

Item 5. Operating and Financial Review and Prospects

A. Operating Results

The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this annual report. This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. See “Introduction — Forward-Looking Statements.” In evaluating our business, you should carefully consider the information provided under Item 3.D, “Key Information — Risk Factors.” We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.

Overview

Our Company’s business is divided into two parts: (i) medical devices (including supporting products such as operating room products, ventilators, medical emergency products and medical air compressor products); (ii) mobile medicine (including wearable sleep respiratory solution for Obstructive Sleep Apnea Syndrome (“OSAS”), hospital management and wireless solutions).

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Our revenues mainly come from medical products and mobile telemedicine. For the years ended December 31, 2015, 2014 and 2013, our total revenues from continuing operation amounted to approximately $1.32 million, $2.77 million and $7.40 million, respectively. Our revenues are subject to value added tax (“VAT”), sales returns and trade discounts. We deduct these amounts from our gross revenues to arrive at our total revenues. Our net loss attributable to the Company for the year ended December 31, 2015 and 2014 was approximately $(10.09) million and $(24.30) million. Our net income attributable to the Company for the year ended December 31, 2013 was approximately $2.00 million. The continued reduction of our revenues and net incomes attributable to the Company primarily due to the operation restructure under our Company’s strategical transformation from a traditional medical equipment distributor to a new mobile health products and service provider. We closed some traditional product lines with the diminishing profitability and focus on the newly developing market exploration of medical products and service based on technology of mobile internet, including comprehensive sleep respiratory solution for OSAS patient.

We discontinued, as appropriate, the unprofitable medical device businesses, including assembly and sales of X-ray machines, anesthesia machines, the first generation ventilator, monitoring devices, general medical products, oxygen therapy, oxygen generator and telemedicine. Only a few profitable businesses such as sales of its patented medical air compressors will continue. Our corporate and business restructuring plan aims to concentrate the Company’s resources to develop its mobile health business, including wearable sleep respiratory business, and to focus more on its major businesses. As a result of the above reclassification of continued and discontinued operation, we restated our operating results of the year 2014.

We believe these changes are crucial to improve our competitive advantages in the industry in the future. By reducing our reliance on our less profitable medical devices assembly and distribution businesses, we are able to leverage our resources to develop smart health products and services, which we see as a good development and focus for the future of our Company. Our long-term goal is to gradually decrease our production business, and focus instead on developing a complete mobile health operation platform.

Although our sleep respiratory business is still in its early stages, we anticipate that it can be a key growth driver for our Company in the foreseeable future.

During the year 2015, we have intensified our efforts to launch our wearable solutions and products for OSAS in public hospitals and private physical examination centers throughout China, which has developed our distribution channels. Steady progress has been made for our wearable diagnosis and analysis systems for OSAS in public hospitals and private physical examination centers throughout China.

We have continued to establish relationships with pilot hospitals to deliver our wearable solutions and products for OSAS, driving the market growth in the hospitals in the regions where the pilot hospitals located, which helped to push forward our strategic market expansion for public hospitals. So far, wearable diagnosis and analysis systems for OSAS have been successfully delivered to most of major hospitals throughout China. We aim to intensify usage of our system in those hospitals and other institutions where we have already successfully launched. Our target is to gradually promote our business from sleep centers, respiratory departments, and E.N.T. departments to other hospital departments with strong demand for sleep monitoring including those accommodating patients seeking care (inpatient and outpatient) for key chronic diseases, such as hypertension, heart disease, diabetes and strokes. According to the authoritative statistics, there are approximate 16 million patients seeking medication for hypertension, heart disease, diabetes and stroke in 800 3A grade Chinese public hospitals in 2013. Our primary objective is to provide these patients with sleep diagnostic services.

We have also targeted the private physical examination centers market. Our wearable OSAS diagnosis and analysis system has been successively launched in Ciming Aoya Hospital and Sonqao’s high-end physical examination center and multiple outpatient departments of Health 100 Group and IKang Healthcare Group in tier 1 cities. The number of customers for sleep diagnostic services has been growing and our products and services have been well appreciated. The above mentioned two private physical examination centers, Health 100 Group and IKang Healthcare Group, have 350 outpatient departments, and the number of customer is up to 11 million annually in the aggregate. We have currently covered most of their outpatient departments in Beijing and Shanghai.

In addition, our Company is exploring the feasibility of cooperating with commercial health insurance companies in the development of sleep respiratory solutions. We expect to work with insurance companies to launch health insurance program providing OSAS diagnosis and analysis for their insures. We will continue to focus on sleep health with our comprehensive OSAS solution system, aiming to become the leading domestic product and service provider in this market.

Although our revenues and net income attributable to the Company for 2015 were decreased comparing to 2014, mainly due to the transition of business strategies, we expect our sleep respiratory business to drive significant growth of our overall revenues in 2016.

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	For the years ended
	December 31,
	2015			2014			2013
				(Restated)
	US$			US$			US$
Revenue		1,321,543			2,774,241			7,402,473
Costs of revenue		(1,435,955	)		(1,782,407	)		(4,589,404	)
Gross profit (loss)		(114,412	)		991,834			2,813,069
Service incomes		1,723,542			131,446			309,060
Service expenses		(1,378,829	)		(34,519	)		(54,761	)
General and administrative expenses		(4,261,972	)		(1,945,226	)		(1,944,054	)
Provision for doubtful accounts		(8,544	)		(389,198	)		-
Selling expenses		(3,046,408	)		(227,304	)		(519,016	)
Operating income (loss)		(7,086,623	)		(1,472,967	)		604,298
Net income (loss) from continuing operations		(6,862,223	)		922,640			(897,422	)
Net income (loss) from discontinuing operations		(3,500,112	)		(25,956,512	)		2,900,748
Net income (loss)		(10,362,335	)		(25,033,872	)		2,003,326
Net income (loss) attributable to Dehaier Medical Systems Limited		(10,223,130	)		(24,298,114	)		1,995,621
Comprehensive income (loss) attributable to Dehaier Medical Systems Limited		(10,634,213	)		(24,847,986	)		2,935,404

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Factors Affecting Our Results of Operations – Generally

We believe the most significant factors that directly or indirectly affect our sales revenues and net incomes are:

• our ability to position our products in different market segments, including our recent efforts to sell our products to hospitals and other healthcare facilities nationwide;

• our ability to price our products at levels that provide favorable and acceptable margins amidst increasing pressure from our competitors who also seek better pricing strategy for their own benefit;

• new products introduced by us as well as our competitors. The introduction of new products by our competitors may lead to a decrease in sales and market share of our products, or force us to sell our products at reduced prices or margins;

• our ability to carry out our new business initiatives effectively. As we continue to invest heavily in research and development projects and new business lines, including our new entry to the sleep respiratory business, we may have difficulty in carrying out our strategy effectively due to factors that are beyond our control. As a result, we may not be able to achieve our goals or generate favorable financial results from these new business initiatives;

• our ability to attract and retain distributors and key customers;

• our ability to retain key employees, including our Chairman and Chief Executive Officer, Mr. Ping Chen, and our ability to build, expand, manage, and train our R&D engineers and sales representatives who we believe to play a vital role in our new business initiatives;

• our capability of gathering and analyzing market data, such as market capacity, new market trends, market share, and competitive landscape;

• our ability to establish, promote, and maintain the public relations image of our Company and product brands; and

• changes in macro-economic environment, both global and domestic, as well as healthcare-related government policies and legislation.

For a detailed discussion of some of the factors that may cause our net revenues to fluctuate, see Item 3.D, “Key Information — Risk Factors —Risks Related to Our Business”.

Revenues

Our total revenues are derived from our medical devices and sleep respiratory business. In 2015 fiscal year, our total revenues from continuing operations decreased by 52%, mainly due to the strategy shift. Along with the development of our Company’s business strategically transformation, we have redirected our operations from traditional medical devices business and unprofitable product lines to the research and development of sleep respiratory business as well as the establishment of sales channel.

We expect to allocate more resources to our sleep respiratory business as we further our restructuring effort. During 2015, revenues from the sleep respiratory business decreased as the technology of the sleep respiratory business need to be upgraded and optimized. Our management believes that sleep respiratory business will become an important growth driver for the Company in coming years. The Company plans to maintain only a few profitable businesses such as sales of its patented medical air compressors in the future.

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Medical Devices (Including Related Supporting Products) – Our Proprietary and Distributed Products

We derive revenues in our medical devices product line from the sale of medical ventilators, general hospital products and related supporting products (including laryngoscope) (previously defined as technical service products), medical compressor, sleep respiratory business and wireless medical. We continue to strategically reduce our sales of traditional medical devices, and to fully realize our business focus shift from traditional medical equipment distribution to the market exploration of medical products and service basing on technology of mobile internet, including delivering comprehensive sleep respiratory solution for OSAS patient care management, distributing laryngoscope, color dopller imaging machine and hospital Wi-Fi solutions.

We discontinued, as appropriate, the unprofitable medical device business, including assembly and sales of C-arm X-ray machines, anesthesia machines, the first generation ventilator, monitoring devices, general medical products, oxygen therapy, oxygen generator and telemedicine. We plans to maintain only a few profitable businesses on sales of its patented products including medical air compressors, the second generation ventilator and cardiopulmonary resuscitation (“CPR”) instruments.

Sleep Respiratory Products (Previously known as “Sleep Respiratory and Oxygen Homecare Products”)

We derive revenues in our sleep respiratory line from sales of CPAP devices. We anticipate that, on a percentage basis, revenues from sleep respiratory product line will increase more rapidly than total revenues in the near term as we introduce new and more advanced products. We expect to develop our market for sleep respiratory market in China and internationally through the use of distributors as well as through our direct sales platform. Though we are still in the early stage of sleep respiratory business, we strongly believe in the tremendous growth potential of this business in the coming years.

During the past year, the sleep respiratory business has achieved more progress in which we have continued to expand to public hospitals and physical examination centers. In 2016, management will be focusing on introducing more advanced products and penetrating the market for sleep respiratory business. We will broaden and differentiate our target markets by cooperating with different types of medical institutions and individual customers across China. We plan to expand our product portfolio through continued investment in research and development and pursuing attractive opportunities to acquire complementary products and technologies and strategic collaboration with partners. We will continue to pursue sustainable growth by enhancing our capability of delivering the systems to more medical institutions and by promoting application of sleep respiratory systems we delivered. We will also continue to focus on the development of the sleep respiratory systems in private physical examination chains and life insurance companies which we believe to have large quantities of potential customers for sleep diagnosis.

Mobile Medicine (Including Internet Medical and Sleep Diagnostic Products)

We derive revenues in our internet based medical and sleep diagnostic products and services line from sales of medical consumables used for sleep diagnosis, hospital wireless devices, healthcare management software and offering related services.

We continue to devote proactive efforts to develop the wearable OSAS solution systems by marketing and expanding OSAS diagnosis, CPAP products and post-treatment evaluation services in hospitals and private medical examination centers nationwide, leveraging our well-established distribution network resources. Our portable sleep diagnostics devices business recognized 6% of the total revenue for the year 2015.

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Operating Costs and Expenses

Our operating costs and expenses consist of cost of revenues, general and administrative expenses, provision for doubtful accounts and selling expenses.

Our total operating costs and expenses increased both as a percentage of our total revenues and in absolute amount for the year ended December 31, 2015 compared to the same period in 2014 due to the increased investment expenses and selling expenses on research and development of sleep respiratory business. The following table sets forth the components of our costs and expenses both in U.S. dollar amounts (in thousands) and as a percentage of total revenues for the years indicated.

	For the year ended December 31,
																Change					Change
	2015					2014					2013					2015 v. 2014					2014 v. 2013
						(Restated)
	USD					USD					USD					USD					USD
		(‘000)		%			(‘000)		%			(‘000)		%			(‘000)		%			(‘000)		%
Revenues		1,322		100.00			2,774		100.00			7,402		100.00			(1,452	)	(52.34	)		(4,628	)	(62.52	)
Cost of revenues		(1,436	)	(108.62	)		(1,782	)	(64.24	)		(4,589	)	(62.00	)		(346	)	(19.42	)		(2,807	)	(61.17	)
Gross profit (loss)		(114	)	(8.62	)		992		35.76			2,813		38.00			(1,106	)	(111.49	)		(1,821	)	(64.74	)
Service incomes		1,724		130.41			131		4.72			309		4.17			1,593		1,216.03			(178	)	(57.61	)
Service expenses		(1,379	)	(104.31	)		(35	)	(1.26	)		(55	)	(0.74	)		1,344		3,840.00			(20	)	(36.36	)
General and administrative expenses		(4,262	)	(322.39	)		(1,945	)	(70.12	)		(1,944	)	(26.26	)		2,317		119.13			1		0.05
Provision for doubtful accounts		(9	)	(0.68	)		(389	)	(14.02	)		-		-			(380	)	(97.69	)		389		100.00
Selling expenses		(3,046	)	(230.41	)		(227	)	(8.18	)		(519	)	(7.01	)		2,819		1,241.85			(292	)	(56.26	)
Operating income (loss)		(7,086	)	(536.01	)		(1,473	)	(53.10	)		604		8.16			(5,613	)	381.06			(2,077	)	(343.87	)
Net income (loss) from continuing operations		(6,862	)	(519.06	)		923		33.27			(898	)	(12.12	)		(7,785	)	(843.44	)		1,821		(202.78	)
Net income (loss) from discontinuing operations		(3,500	)	(264.75	)		(25,957	)	(935.72	)		2,901		39.19			22,457		(86.52	)		(28,858	)	(994.76	)
Net income (loss)		(10,362	)	(783.81	)		(25,034	)	(902.45	)		2,003		27.06			14,672		(58.61	)		(27,037	)	(1,349.83	)

Cost of Revenues

Cost of revenues primarily includes finished goods, parts for assembly, wages, handling charges, and other expenses associated with the assembly and distribution of product.

General and Administrative Expenses

General and administrative expenses primarily consist of salaries and benefits and related costs for our administrative personnel and management, stock-based compensation and expenses associated with our research and development, registration of patents and intellectual property rights in China and abroad, fees and expenses of our outside advisers, including legal, audit and register expenses, expenses associated with our administrative offices, and the depreciation of equipment used for administrative purposes.

We expect our general and administration expenses to increase in the near future as a result of further R&D expenditures and additional personnel costs to maintain the competitive advantage of our mobile health business. In addition, we expect to continue to incur significant general and administrative expenses in capital operation and maintaining investor relationships as a public company.

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Selling Expenses

Selling expenses consist primarily of salaries and related expenses for personnel engaged in sales, marketing and customer support functions, and costs associated with advertising and other marketing activities, and depreciation expenses related to equipment used for sales and marketing activities.

Along with our shifting growth strategies, we believe selling expenses will increase as we strengthen our distribution network, deepen our partnerships with customers and expand market share of our mobile telemedicine business which we believe will generate a significant portion of our revenue stream in the future.

Results of Operations

We believe that period-to-period comparisons of operating results should not be relied upon as indicative of future performance.

Fiscal Year Ended December 31, 2015 Compared to Fiscal Year Ended December 31, 2014.

Revenues

Our total revenues from the continuing operations decreased by 52.34% from $2.77 million for the fiscal year ended December 31, 2014 to $1.32 million for the fiscal year ended December 31, 2015. The decrease of revenues is mainly due to the influence of increasingly challenging markets, macroeconomic headwinds, increased competition and market saturation. Along with the development of the Company’s business shifting strategy, we have adjusted the sales strategy of traditional medical devices business, discontinued the unprofitable medical device business, maintained only a few profitable businesses on such as sales of its patented products including medical air compressors, the second generation ventilator and cardiopulmonary resuscitation (“CPR”) instruments in the future, and invested more resources in the research and development of sleep respiration business. In 2015, we have distributed our sleep respiratory detection device and PPG sensor to model public hospitals and private medical centers. The first product batch is currently in the free testing stage. We have achieved certain progress in its mobile medicine, which accounted for about 10% of total sales. Although our mobile medicine is still in its early stage, our management believes that our mobile medicine business will become an important growth driver for our Company in the coming years.

Cost of Revenues

Our cost of revenues from the continuing operations decreased by 19.42% from $1.78 million for the fiscal year ended December 31, 2014 to $1.44 million for the fiscal year ended December 31, 2015. The decrease in cost of revenues was mainly due to the decrease of revenues. The cost of revenue reduction is also due to the gradual reduction on parts of traditional medical device business and uncompetitive product sales due to strategic restructure.

Gross Profit (Loss)

Our gross profit from the continuing operations decreased from $0.99 million in 2014 to ($0.11) million in 2015 and gross margin decreased from 35.76% in 2014 to (8.66%) in 2015. In order to deal with the influence of increasingly challenging markets and new competitors, we shut down some traditional medical device production lines and the fixed costs allocated to the remaining production lines became higher.

Service income

Our service income increased from $0.13 million in 2014 to $1.72 million in 2015. The increase of the service income was mainly due to the after-sale repairing income and commission in this period.

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Service expense

Our service expense increased from $34,520 in 2014 to $1.38 million in 2015. The increase of the service expense was mainly due to the after-sale repairing expense in this period.

Operating Expenses

Our operating expenses from the continuing operations increased by 185.94% from $2.56 million for the fiscal year ended December 31, 2014 to $7.32 million for the fiscal year ended December 31, 2015. The increase of operating expenses was primarily due to the increase of general and administrative expenses and selling expenses,. We analyzed our operating expenses by general and administrative expenses, selling expenses and other expenses in the following parts.

Operating Expenses—General and Administrative Expenses

Our general and administration expenses from the continuing operation increased by 119.13% from $1.95 million for the fiscal year ended December 31, 2014 to $4.26 million for the fiscal year ended December 31, 2015. This increase was mainly due to the increase of investment on research and development activities of sleep respiratory business, the increase of professional service fees and the increase of external consultant fees. We expect our general and administrative expenses to decrease in the near future as a result of the accomplishment of the discontinued operations to maintain the competitive advantage of our respiratory sleep business.

Operating Expenses—Provision for Doubtful Accounts

Our provision for doubtful accounts from the continuing operation decreased by 97.69% from $389,000 for the fiscal year ended December 31, 2014 to $9,000 for the fiscal year ended December 31, 2015. This decrease was mainly due to advance to suppliers with aging more than two years cannot be recovered according to our provision for aging policy for the year ended December 31, 2014.

Operating Expenses—Selling Expense

Our selling expenses from continuing operations increased by 1,241.85% from $0.23 million for the fiscal year ended December 31, 2014 to $3.05 million for the fiscal year ended December 31, 2015. The increased in selling expenses was mainly because the Company invested more resource and energy in market development for sleep respiratory business, such as employ more sales staff, attending more medical device exhibitions, etc. Along with the Company’s business shifting strategy, we believe the selling expense will increase accordingly as we concentrate on market development for sleep respiratory business which will become a major revenue generator of our revenues in the future.

Operating Loss

As a result of the foregoing, we generated an operating loss of approximately $7.09 million in 2015, compared to operating loss of approximately $1.47 million in 2014. Operating loss increased by 382.31%, mainly because of the reduced revenues, and the increased general and administrative expenses and selling expenses.

Change in fair value of warrants liability

For the year ended December 31, 2015, the gain related to changes in the fair value of warrants liability relating to the warrants issued to investors and placement agents was $390,324, compared to a gain of $2,866,171 for the year ended December 31, 2014, a decrease of $2,475,846 from 2014. The gain on the changes in the fair value of warrants liability was due to the decrease in the price of our common stock underlying the warrants issued on February 21, 2014, which decreased from $9.12 on the issuance date to $2.26 on December 31, 2015. 

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Taxation

Our income tax benefit (expense) was approximately $11,980 in 2015, compared to approximately ($357,730) in 2014. Our income tax decreased $0.37 million primarily due to the decrease in taxable income in this period.

Net income (loss) from continuing operations

As a result of the foregoing, we had net loss from continuing operations of approximately $6.73 million in 2015, compared to approximately a net income from continuing operations of $0.92 million in 2014.

Net loss from discontinuing operations

We discontinued the unprofitable traditional medical device businesses to concentrate the Company’s resources to develop its mobile health business, including wearable sleep respiratory business, and to focus more on its major businesses. As a result of this strategy shifting, we had net loss from discontinuing operations of approximately $3.50 million in 2015, compared to approximately a net loss from discontinuing operations of $25.96 million in 2014.

Net loss

As a result of the foregoing, we had net loss of approximately $10.23 million in 2015, compared to approximately a net loss of $25.03 million in 2014. After deduction of non-controlling interest in loss, net loss attributable to the Company was approximately $10.09 million and $24.30 million in 2015 and 2014, respectively.

Fiscal Year Ended December 31, 2014 Compared to Fiscal Year Ended December 31, 2013.

Revenues

Our total revenues from the continuing operation decreased by 62.52% from $7.40 million for the fiscal year ended December 31, 2013 to $2.77 million for the fiscal year ended December 31, 2014. The decrease of revenues is mainly due to the influence of increasingly challenging markets, macroeconomic headwinds and increased competition. Along with the development of the Company’s business shifting strategy, the Company invested more resources in the research and development of mobile telemedicine, and adjusted the sales strategy of traditional medical devices business. In 2014, the Company made substantial progress in its mobile medicine business, which accounted for about 9% of total sales. Although our mobile medicine is still in its early stage, our management believes that its mobile medicine business will become an important growth driver for the Company in coming years.

Cost of Revenues

Our cost of revenues from the continuing operations decreased by 61.17% from $4.59 million for the fiscal year ended December 31, 2013 to $1.78 million for the fiscal year ended December 31, 2014. The decrease in cost of revenues was mainly due to the decrease of revenues. The cost of revenue reduction is due to the gradual reduction on parts of traditional medical device business and uncompetitive product sales due to strategic restructure.

Gross Profit

Our gross profit from the continuing operation decreased from $2.81 million in 2013 to $0.99 million in 2014 and gross margin decreased from 38.00% in 2013 to 35.76% in 2014. In order to deal with the influence of increasingly challenging markets and new competitors, our Company gradually reduced the parts of our traditional medical device business and decreased the sales of uncompetitive products due to strategic restructuring. Our mobile medicine is still in its early stage and this is a normal phenomenon in the process of our business shifting strategy and market strategy. Along with our mobile medicine business development, management believes the shift in the Company’s revenue mix away from traditional device sales resulted in increases in gross margin in the future.

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Service income

Our service income decreased from $0.31 million in 2013 to $0.13 million in 2014. The decrease of the service income was mainly due to the decrease of after-sale repairing income in this period.

Service expense

Our service expense decreased from $55,000 in 2013 to $35,000 in 2014. The decrease of the service expense was mainly due to the decrease of after-sale repairing expense in this period.

Operating Expenses

Our operating expenses from the continuing operations increased by 4.07% from $2.46 million for the fiscal year ended December 31, 2013 to $2.56 million for the fiscal year ended December 31, 2014. The slight increase of operating expenses was due to the increase of provision for doubtful accounts. We analyzed our operating expenses by general and administrative expenses, provision for doubtful accounts and selling expenses in the following parts.

Operating Expenses—General and Administrative Expenses

Our general and administration expenses from the continuing operations increased by 0.06% from $1.94 million for the fiscal year ended December 31, 2013 to $1.95 million for the fiscal year ended December 31, 2014. We expect our general and administration expenses to increase in the near future as a result of further R&D expenditures to maintain the competitive advantage of our respiratory sleep business.

Operating Expenses—Provision for doubtful accounts

Our provision for doubtful accounts from the continuing operations increased to $0.39 million for the fiscal year ended December 31, 2014. This increase was mainly due to the advance to suppliers cannot be recovered more than two years according to our provision for aging policy.

Operating Expenses—Selling Expense

Our selling expenses from the continuing operations decreased by 56.26% from $0.52 million for the fiscal year ended December 31, 2013 to $0.23 million for the fiscal year ended December 31, 2014. The reduction of selling expenses was mainly because the Company strengthened its cooperation with the Chinese government and focused on the key account business which incurred relatively less expense. The reduction in selling expense also resulted from the improvement in operating efficiency as we reduced the expenses of attending medical device exhibitions and we encouraged our sales staff to maintain business relationships with distributors and clients via telephone rather than in-person business meetings where possible. Along with the Company’s business shifting strategy, we believe the selling expense will increase accordingly as we concentrate on market development for sleep respiratory business which will become a major revenue generator of our revenues in the future.

Operating Income (Loss)

As a result of the foregoing, we generated an operating loss of approximately $1.47 million in 2014, compared to operating income of approximately $0.60 million in 2013. Operating income decreased by 343.75%, mainly because of the reduced revenues.

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Change in fair value of warrants liability

For the year ended December 31, 2014, the gain related to changes in the fair value of warrants liability relating to the warrants issued to investors and placement agents was $2,866,171, compared to a loss of $346,691 for the year ended December 31, 2013, an increase of $3,212,862 from 2013. The gain on the changes in the fair value of warrants liability was due to the decrease in the price of our common stock underlying the warrants issued on February 21, 2014, which decreased from $9.12 on the issuance date to $2.73 on December 31, 2014. 

Taxation

Our income tax expense was approximately $0.36 million in 2014, compared to income tax expense of approximately $0.52 million in 2013. Our income tax expense decreased primarily due to the decrease in our taxable income and reserve on deferred tax assets.

Net income (loss) from continuing operations

As a result of the foregoing, we had net income from continuing operations of approximately $0.92 million in 2014, compared to approximately a net loss from continuing operations of $0.90 million in 2013.

Net income (loss) from discontinuing operations

We discontinued the unprofitable traditional medical device businesses to concentrate the Company’s resources to develop its mobile health business, including wearable sleep respiratory business, and to focus more on its major businesses. As a result of this strategy shifting, we had net loss from discontinuing operations of approximately $25.96 million in 2014, compared to approximately a net income from discontinuing operations of $2.90 million in 2013.

Net Income (loss)

As a result of the foregoing, we had net loss of approximately $25.03 million in 2014, compared to approximately a net income of $2.00 million in 2013. After deduction of non-controlling interest in income, net loss attributable to Dehaier was approximately $24.30 million in 2014, and net income attributable to Dehaier was approximately $2.00 million in 2013.

B. Liquidity and Capital Resources

Cash Flows and Working Capital

As of December 31, 2015, we had $624,724 in cash and cash equivalents. As a result of decreased cash flow associated with investments in R&D for respiratory sleep business, market development activities, and the decreased cash flow from operating activities, net cash decreased from $ 1,727,763 at December 31, 2014. Recently we have made the financing plan and we believe that our currently available working capital of $462,687, and the loan from our main stockholder, should be adequate to meet our anticipated cash needs and sustain our current operations for at least 12 months. To the extent of the Company’s expansion of new business and products, we may need to rely on a variety of sources of funding, including but not limited to operating cash, and debt and/or equity financing.

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Operating Activities

Net cash used in operating activities was $2,344,815 for the year ended December 31, 2015 as compared to $4,137,353 provided by operating activities for the same period in 2014. The reasons for this change are mainly as follows:

(i)	Net loss from continuing operations was $6,862,223 in 2015, an increase net loss of approximately $7.78 million from net income of $0.92 million for the same period of 2014, as a result of the factors described above.
(ii)	Stock-based compensation expense incurred $1,055,744 in 2015, while in 2014, stock-based compensation expense incurred $1,408,421. The increase is mainly due to the implementation of the employee share-based incentive plan for our new business development.
(iii)	Accrued expenses and other current liabilities from continuing operations increased by $1,337,741 in 2015, compared with a decrease of $33,961 in 2014. The increase in 2015 is mainly due to the expense accrued for research and development of sleep respiratory business, marketing expense and other cost accrued our new products.
(iv)	Advance to suppliers-third party from continuing operations decreased by $1,005,042 in 2015, compared with a decrease of $3,751,434 in 2014. The decrease is mainly due to we discontinued part of traditional medical devices business.
(v)	Other receivables from continuing operations decreased by $1,605,521 in 2015, compared with an increase of $443,285 in 2014. The decrease in 2015 is mainly because of the decrease of contract deposits for large contracts of traditional medical devices business, due to our business strategy shifting.
(vi)	Net cash used in operating activities from discontinued operations was $851,315 in 2015 because of our Company’s business shifting strategy implemented in 2015.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2015 was $27,861, compared to $11,197,648 used in investing activities for the same period of 2014. The decreased cash used in investing activities in 2015 was mainly attributable to the discontinuing operation plan in this period, the decreased capital expenditures for sleep respiratory diagnosis and analysis system and equipment, and software copyrights and patents we acquired for the therapy products of sleep respiratory business.

Financing Activities

We repaid $4,810,770 of short-term bank loans, entered into two new banks loan agreements for $4,008,975 in the aggregate in 2015, as compared to $2.9 million proceeds from short-term bank loans and $2.9 million repayments of short-term bank loans in 2014. We repaid $1,603,590 of short-term loans due from Mr. Ping Chen, who was the major shareholder of our Company and the CEO, and entered into three loan agreements with Mr. Ping Chen for $3,867,859 in 2015. The net amount provided by financing activities was $1,498,724 in 2015, compared to $6,256,146 for the same period of 2014. The net cash proceeds received from issuance of common stock in February 2014, after deducting underwriter commissions and other associated fees, were $6,066,546.

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Contractual Obligations and Commercial Commitments

The following table sets forth our contractual obligations as of December 31, 2015:

	Payments due by period
Contractual obligations	Total		Less than 1 year		1-3 years		More than 3 years
Operating lease obligations	$	11,090	$	11,090		-		-
Short-term borrowings		1,541,000		1,541,000
Short-term borrowings-related party		2,175,892		2,175,892		-		-
Total	$	3,727,982	$	3,727,982		-		-

The leased properties are principally located in the PRC, and we use such properties for administration and warehouse facilities. The leases are renewable subject to negotiation.

Short-term borrowings represent short-term loans from one bank, which are due in December 2016.

Short-term borrowings - related party represent short-term loans from Chen Ping, the CEO of the Company, which are with no maturity date.

Capital Expenditures

We made capital expenditures of approximately $0.28 million, $2.05 million and $9,000 in 2015, 2014 and 2013, respectively, representing 2.11%, 74.00% and 0.12% of our total revenues, respectively. In 2015, we have distributed our sleep respiratory detection device and PPG sensor to model public hospitals and private medical centers.. As of December 31, 2014, our capital expenditures were used to purchase machinery for our assembly line and obtain software copyrights. In 2015, we have distributed our sleep respiratory detection device and PPG sensor to model public hospitals and private medical centers.

Critical Accounting Policies

Basis of Consolidation

The consolidated financial statements include the accounts of Dehaier, and its majority-owned and wholly-owned subsidiaries (collectively, the “Company”). All significant inter-company transactions and balances are eliminated in consolidation.

A group of shareholders, including the Chief Executive Officer, originally held more than 50% of the voting ownership interest of Dehaier, BDL and BTL. BTL is a variable interest entity (“VIE”), and BDL is the primary beneficiary. BTL owns a building that is pledged as collateral for BDL’s bank loans. In exchange, BDL loans money to BTL to finance its operations. BTL’s primary operation is to provide repairs and transportation services to BDL’s customers. Because of these arrangements, BDL is the primary beneficiary of BTL, as the entity that is most closely associated with BTL. Management makes ongoing reassessments of whether BDL is the primary beneficiary of BTL.

Use of Estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates are adjusted to reflect actual experience when necessary. Significant accounting estimates reflected in the Company's consolidated financial statements include revenue recognition, allowance for doubtful accounts, warranty obligation, warrants liability, stock-based compensation and useful lives of property and equipment. Actual results could differ from those estimates.

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Accounts Receivable

Accounts receivable are recorded at net realizable value. Accounts receivable terms typically are 60-180 days from the end of the month in which services are provided or goods are delivered. Our typical trade receivable terms vary based on the type of customer. We generally require 100% prepayment before delivering our products to individual clients. Our contract terms general require 10%-30% prepayment for our hospital and healthcare center clients, and the trade receivable term in contracts for those clients is generally between 60 and 90 days. Our contract terms general require 10% prepayment from our distributor clients, and the trade receivable term in contracts for those clients is generally between 60 and 180 days. With the exception of the prepayments we require in some cases, we generally do not require collateral or other security to support accounts receivable. An allowance, if required, is based on a combination of historical experience, aging analysis, and an evaluation of the collectability of specific accounts.

Fair Value of Financial Instruments

The carrying amounts reported in the consolidated financial statements for current assets and current liabilities approximate fair value due to the short-term nature of these financial instruments.

The Company follows the provisions of ASC 820-10, “Fair Value Measurements and Disclosures,” which establishes a single authoritative definition of fair value and a framework for measuring fair value and expands disclosure of fair value measurements for both financial and nonfinancial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flows) and the cost approach (cost to replace the service capacity of an asset or replacement cost). For purposes of ASC 820-10-15, nonfinancial assets and nonfinancial liabilities would include all assets and liabilities other than those meeting the definition of a financial asset or financial liability as defined in ASC 820-10-15-15-1A.

The Company adopted the provisions of ASC Topic 815 (formerly Emerging Issue Task Force 07-5), “Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entity’s Own Stock.” ASC Topic 815 provides a framework for determining whether an instrument is indexed to an entity’s own stock. ASC Topic 815 became effective for the Company this period when warrants were issued in connection with the Company’s initial public offering (“IPO”). Such warrants are indexed to the Company’s common shares, which is traded in US dollars. Since the Company’s functional currency is the RMB, such warrants are considered liabilities. The fair value of the warrant liabilities is measured each reporting period with the resulting change in fair value recorded in the statement of operations. An increase of the warrants liability due to a change in fair value would decrease net income and earnings per share. A decrease in warrants liability due to a change in fair value would increase net income and earnings per share of the Company.

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Revenue Recognition

The Company recognizes revenues when all the followings conditions have been satisfied:

· Persuasive evidence of an arrangement exists;

· Delivery and/or installation has occurred (e.g., risks and rewards of ownership has passed);

· The sales price is fixed or determinable; and

· Collectability is reasonably assured.

All revenues are based on firm customer orders with fixed terms and conditions. Because the products are assembled to the customers’ specification, there is no right of return. The Company does not provide its customers with price protection or cash rebates. For products which include software, the software is an off-the-shelf package and an integral part of the products being delivered. The Company does not provide any significant post-sale customer support services and does not provide customers with upgrades. The software is incidental to the product as a whole. For products that do not require installation, revenues are recognized when the products are delivered. For products that require installation, revenues are recognized when the installation is completed.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740-10, “Accounting for Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year; and, (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of available positive and negative evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken or expected to be taken on a tax return. Under ASC 740-10, a tax benefit from an uncertain tax position taken or expected to be taken may be recognized only if it is “more likely than not” that the position is sustainable upon examination, based on its technical merits. The tax benefit of a qualifying position under ASC 740-10 would equal the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all the relevant information. A liability (including interest and penalties, if applicable) is established in the financial statements to the extent a current benefit has been recognized on a tax return for matters that are considered contingent upon the outcome of an uncertain tax position. Related interest and penalties, if any, are included as components of income tax expense and income taxes payable. The Company had filed its 2008 and 2009 Value Added Tax (“VAT”) returns for some of its customers during the years ended December 31, 2013, 2014 and 2015. All the potential VAT liabilities on these VAT returns occurred in current period were also accrued as incurred and included in the accompanying consolidated financial statements.

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Stock-Based Compensation

The Company follows the provisions of ASC 718-10, “Compensation-Stock Compensation.” The Company has a share incentive plan which authorizes the issuance of up to 10% of the number of shares outstanding. Pursuant to the plan, the Company may issue options to purchase its common shares to employees and directors of the Company and its affiliates. The Company fair values share-based awards granted under the plan. Accordingly, compensation is measured on the grant date using appropriate valuation models.

C. Research and Development

Our success to date has in part resulted from our strong research and development capabilities, which allow us to regularly introduce new and more advanced products at competitive prices. We increased our annual investment in research and development activities as a percentage of net revenues every year since 2003. Research and development costs from the continuing operation were $1,918,446, $100,199 and $484,770 for the years ended December 31, 2015, 2014 and 2013, respectively. Research and development costs from the discontinuing operation were $580,216, $515,135 and $0 for the years ended December 31, 2015, 2014 and 2013, respectively. Our research and development team consists of 7 engineers, representing 8% of our employees as of April 30, 2016.

We maintain a 5,400 square foot research and development center in our facility in Beijing, which allows us to compete for skilled research and development technicians and managers. In addition, we are enhancing our research and development ability by cooperating with the research institutes of two top ranking Universities in China: Beijing University of Aeronautics & Astronautics and Beijing University of Technology and Science.

The information provided under Item 5.B, "Business Overview" details the Company’s research and development activities.

D. Trend Information

In 2011, the Chinese Ministry of Science and Technology announced a medical technology development policy under the “12th Five-Year Plan,” proposing to transfer business focus to the development of new drugs, medical equipment and advanced traditional Chinese medicine, and to the development of the emerging industries of biomedicine. The plan focuses on researching and developing the medium and high-level diagnostic and curative medical devices which are in high demand and widely used, actively promoting the development of cost-effective medical devices for use in primary health care institutions, enhancing the stability and reliability of medical services and products and researching and developing supplementary medical equipment which can be easily operated for family and self-healthcare. Under the 12th Five-Year Plan, China will proactively promote the reform of healthcare infrastructure system and offer safe, effective, convenient and low-cost medical services to its residents. As a result, management anticipates growth in the Chinese pharmaceutical market.

Current medical device purchases by individuals in China are much lower than they are in Europe and the U.S. It is estimated that 20% of individual expenditures on home medical care in China are for medical devices, compared to 50% of such expenditures in Europe and the U.S. As China’s population continues to age, management expects a rapid increase in demand for medical devices, and, as a result, growth in China’s medical device industry.

It is the initial stage of rapid growth of China’s home medical equipment market. As residents’ living standards and consumption structure change, the demand for healthcare services and self-care will substantially increase, creating growth opportunities for participants in the market.

In summary, as a vital component of China’s current health system reform, the medical device industry has been incorporated into the national strategic development plan. In 2016, we anticipate new opportunities, combined with favorable government policies, will position us for continued growth.

In spite of these new opportunities, we believe the landscape in China’s medical device industry is shifting, and we have taken steps to change focus accordingly. We have seen eroding profit margins on our traditional medical device sales, which we believe is due to a combination of increasingly available high technology and more transparent pricing models. As a result of our desires to reduce our reliance on the traditional medical device industry, we have seen reduced revenues from such efforts and have instead invested in our sleep respiratory products. We believe this industry is relatively immature in China and believe this status allows significant growth potential in the near term. We are, however, aware that as the market matures, we should expect to see more transparency in pricing and margin erosion as well.

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E. Off-Balance Sheet Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

F. Tabular Disclosure of Contractual Obligations

The following table sets forth our contractual obligations as of December 31, 2015:

	Payments Due By Period
	Less than								More than
	Total		1 Year		1-3 Years		3-5 Years		5 Years
Operating Lease Obligations	$	11,090	$	11,090	$	-	$	-	$	-
Total	$	11,090	$	11,090	$	-	$	-	$

Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

The following table sets forth our executive officers and directors, their ages and the positions held by them:

Name	Age	Position Held
Ping Chen(1)(2)	52	Chief Executive Officer and Chairman and Director
Huili (Alisa) Li(1)(3)	35	Chief Financial Officer and Director
Xiaoguang Shen(1)(3)(4)(5)(6)	43	Independent Director
Genhui Chen(1)(4)(5)(6)(7)	52	Independent Director
Mingwei Zhang(1)(4)(5)(6)(7)	63	Independent Director

(1)	The individual’s business address is c/o Room 501, 83 Fuxing Road, Haidian District, Beijing 100856 People’s Republic of China.
(2)	Class III director whose term expires in 2016.
(3)	Class II director whose term expires in 2018.
(4)	Member of audit committee.
(5)	Member of compensation committee.
(6)	Member of nominating committee.
(7)	Class I director whose term expires in 2017.

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Ping Chen. Mr. Chen has served as a director of our Company since 2003 and our Chief Executive Officer since 2000. Prior to his service as our Chief Executive Officer, from 1993 to 2000, Mr. Chen served as the CEO of Beijing Chengcheng Medical Electronic Equipment Co. Prior to 1993, Mr. Chen served as an engineer at the No. 2 Academy, Ministry of Aeronautics and Astronautics from 1987 to 1991 and moved up to the Head of the Civilian Products Division there from 1991 to 1993. Mr. Chen founded BTL in 2001 and has served as CEO since that time. Mr. Chen received his bachelor’s degree in 1984 from the National University of Defense Technology and his master’s degree in 1987 from the Ministry of Aeronautics and Astronautics. Mr. Chen has been chosen as a director because he is our CEO, the leader of our Company and a key experienced member of management.

Huili (Alisa) Li. Ms. Li has served as a director of our Company since 2013 and our Chief Financial Officer since April 2014.Ms. Li was our financial manager from 2013. She is familiar with US GAAP, PRC GAAP, IFRS and Sarbanes-Oxley Act compliance. Ms. Li previously worked as an auditor in the professional services department of Lehman Brown’s Beijing office from 2010 to 2013 and in the assurance department of the Beijing office of PricewaterhouseCoopers (PwC) from 2007 to 2009. Ms. Li earned a master’s degree in Technological Economy and Management from Beijing Information Science & Technology University in 2007, a bachelor’s degree in Business Administration from China University of Geosciences in 2004 and a second bachelor’s degree in Science & Technology English from Huazhong University of Science and Technology in 2014. Ms. Li has been chosen to serve as a director because of her experience with financial matters and her familiarity with our operations.

Xiaoguang Shen. Mr. Shen has served as an independent director of our Company since 2015. He is the general manager of the investment department of CP Pharmaceutical Group since 2003. Prior to joining CP Pharmaceutical Group, Mr. Shen provided sales services in several pharmaceutical companies since 1997, including Wyeth Pharmaceutical from 1998 to 2000. Mr. Shen earned his bachelor’s degrees from the department of Chinese medicine of Harbin University of Commerce in 1997 and his MBA degree from Central University of Finance and Economics in 2013. Mr. Shen has been chosen as a director because we believe we can benefit from his rich marketing, investment and management experience in the pharmaceutical industry. 

Genhui Chen. Dr. Chen has served as an independent director of our company since 2011. Dr. Chen is president of Beijing Wenfeng Medical Technology Ltd. (“BWMT”), a privately-held pharmaceutical research and development company focusing on novel cancer and dermatological products. Dr. Chen has over 15 years of experience, from1993 to 2008, in the pharmaceutical industry in the areas of clinical research, regulatory compliance, corporate development and management, for a variety of companies ranging from start-ups to public companies, both in Canada and in China. Prior to joining BWMT in 2010, Dr. Chen was a founder, president and chief executive officer of Welichem Biotech Inc., a Canadian pharmaceutical company listed on the TSX Venture Exchange since 2008. From 1999 until he founded Welichem Biotech Inc., Dr. Chen was a senior scientist at Terragen Discovery Inc., a subsidiary of Cubist Pharmaceuticals. Dr. Chen received his M.Sc. and Ph.D. degrees in biology from Simon Fraser University in Vancouver, Canada in 1988 and 1991, respectively. Dr. Chen has been chosen as a director because of his extensive experience in research and development, regulatory compliance, corporate development and management.

Mingwei Zhang. Mr. Zhang has served as an independent director of our company since 2012. Mr. Zhang has extensive knowledge and experience in accounting from the perspective as an academic and a practicing accountant. From September 2007 to October 2013, Mr. Zhang served as Chief Financial Officer and a Director of Sino-Global Shipping America, Ltd. (Nasdaq CM: SINO). From May 2001 until December 2007, Mr. Zhang was a partner in Baker Tilly China, an international public accounting firm. From July 1994 to June 2003, he served as a Lecturer at Monash University in Australia. Mr. Zhang received a Bachelor’s degree and a Master’s degree in Accounting from Tianjin University of Finance and Economics. He also received a Master’s degree in Commerce from the University of Newcastle. Mr. Zhang is a Certified Management Accountant in Australia. Mr. Zhang has been chosen as a director because of his financial experience. 

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B. Compensation

Executive Compensation

The following table shows the annual compensation paid by us for the year ended December 31, 2015 to Ping Chen, our principal executive officer, and Huili (Alisa) Li, our principal financial officer.  

Summary Executive Compensation Table

Name and principal position	Salary		Bonus		Option  Awards			All Other  Compensation			Total
Ping Chen,  Principal Executive Officer	$	29,249	$	-	$	-	(1)(2)(3)	$	683,648	(4)(5)	$	712,897
Huili (Alisa) Li,  Principal Financial Officer	$	21,167	$	-	$	32,599	(6)	$	-		$	53,766

(1) On December 29, 2011, 150,000 share options were awarded to Mr. Chen, which vest over a period of five years. The expiration date of the options is December 29, 2021. The options’ exercise price is the market price of our shares on December 29, 2011, the date the options were granted. The grant date fair value of the options is $1.222 per underlying share. These options granted in 2011 are not reflected in the Summary Executive Compensation Table. We have amortized $36,621 of such grant in the year ended December 31, 2015.

(2) On October 7, 2013, 94,000 share options were awarded to Mr. Chen, which vest over a period of five years. The expiration date of the options is October 7, 2023. The options’ exercise price is the market price of our shares on October 7, 2013, the date the options were granted. The grant date fair value of the options was $2.23 per underlying share. These options granted in 2013 are not reflected in the Summary Executive Compensation Table. We have amortized $42,116 of such grant in the year ended December 31, 2015.

(3) On August 20, 2014, 131,000 share options were awarded to Mr. Chen, which vest over a period of five years. The expiration date of the options is August 20, 2024. The options’ exercise price is the market price of our shares on August 20, 2014, the date the options were granted. The grant date fair value of the options was $5.15 per underlying share. These options granted in 2014 are not reflected in the Summary Executive Compensation Table. We have amortized $137,289 of such grant in the year ended December 31, 2015.

(4) On October 22, 2014, 100,000 ordinary shares were issued to Mr. Chen. The grant date fair value of the ordinary shares was $5.31 per share. These shares granted in 2014 are not reflected in the Summary Executive Compensation Table. We have amortized $442,500 of such grant in the year ended December 31, 2015.

(5) On July 30, 2015, 348,800 ordinary shares were issued to Mr. Chen. The grant date fair value of the ordinary shares was $1.96 per share. We have amortized $138,793 of such grant in the year ended December 31, 2015.

(6) On August 7, 2015, 20,000 share options were awarded to Ms. Li, which vest over a period of two years. The expiration date of the options is August 7, 2025. The options’ exercise price is the market price of our shares on August 7, 2015, the date the options were granted. The grant date fair value of the options was $1.63 per underlying share. Since no options were vested as of December 31, 2015, the amortized amount in the year ended December 31, 2015 was $6,511.

Director Compensation

All directors hold office until the next annual meeting of shareholders at which their respective class of directors is re-elected or until their successors have been duly elected and qualified. There are no family relationships among our directors or executive officers. Officers are elected by and serve at the discretion of the Board of Directors. We do not separately set aside any amounts for pensions, retirement or other benefits for our executive officers, other than pursuant to relevant statutory requirements. Employee directors do not receive any compensation for their services as directors. Non-employee directors are entitled to receive payment for serving as directors and may receive option grants from our company. For service on our Board of Directors, Mr. Zhang receives $4,000 per year, and Mr. Xiaoguang Shen and Mr. Genhui Chen receive $2,000 per meeting attended. The following table shows the annual compensation paid by us for the year ended December 31, 2015 to our directors.

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Summary Director Compensation Table 

Name	Fees earned or paid in cash		Stock-based Compensation		Total(1)
Ping Chen(2)		N/A		N/A		N/A
Yunxiang (Phil) Fan(3)	$	0	$	0	$	0
Huili (Alisa) Li(2)		N/A		N/A		N/A
Xiaoguang Shen(4)	$	0	$	16,300	$	16,300
Genhui Chen(5)	$	0	$	32,599	$	32,599
Mingwei Zhang(6)	$	4,000	$	32,599	$	32,599

(1)	With the exception of Mr. Ping Chen received common share awards, the other four directors received option awards in fiscal year 2015. As noted below, Mr. Ping Chen received such shares in his capacity as an officer, and all such grants are reflected in the Summary Executive Compensation Table.
(2)	Mr. Ping Chen and Ms. Li received compensation in their capacity as officers of our company and/or subsidiaries/affiliates but did not receive any compensation for serving as directors of our company.
(3)	Mr. Fan resigned as a director of our Company on November 24, 2015.
(4)	Mr. Xiaoguang Shen became a director of our Company on November 24, 2015. On August 7, 2015, Mr. Shen received a grant of options to purchase 10,000 shares from the company, of which 0% has vested as of December 31, 2015. The expiration date of the options is August 7, 2025. The options’ exercise price is the market price of our shares on the date the options were granted. The grant date fair value of the options was $1.63 per underlying share. We have amortized $3,255 of such grant in the year ended December 31, 2015.
(5)	Mr. Genhui Chen received a grant of options to purchase 20,000 shares on December 29, 2011 from the company, of which 80% of 20,000 have vested as of December 31, 2015. We have amortized $4,883 of such amount in the year ended December 31, 2015. Mr. Genhui Chen also received a grant of options to purchase 20,000 shares from the company on August 7, 2015, of which 0% has vested as of December 31, 2015. The expiration date of the options is August 7, 2025. The 2015 options’ exercise price is the market price of our shares on the date the options were granted. The grant date fair value of the 2015 options was $1.63 per underlying share. We have amortized $6,511 of such amount in the year ended December 31, 2015.
(6)	Mr. Mingwei Zhang received 11,975 common shares on June 16, 2014 from the company pursuant to the director compensation plan. We have amortized $0 of such amount in the year ended December 31, 2015. Mr. Mingwei Zhang received a grant of options to purchase 20,000 shares from the company on August 7, 2015, of which 0% has vested as of December 31, 2015. The expiration date of the options is August 7, 2025. The options’ exercise price is the market price of our shares on the date the options were granted. The grant date fair value of the options was $1.63 per underlying share. We have amortized $6,511 of such amount in the year ended December 31, 2015.

C. Board Practices

See information provided in response to Item 6.A. above as to the current directors and officers and the expiration of current director terms. In addition, the service agreements between us and the directors do not provide benefits upon termination of their services.

Board of Directors and Board Committees

Our board of directors currently consists of 5 directors. There are no family relationships between any of our executive officers and directors. The directors are divided into three classes. Class I directors shall face re-election at our annual general meeting of shareholders in 2017 and every three years thereafter. Class II directors shall face re-election at our annual general meeting of shareholders in 2018 and every three years thereafter. Class III directors shall face re-election at our annual general meeting of shareholders in 2016 and every three years thereafter.

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A director may vote in respect of any contract or transaction in which he is interested, provided, however that the nature of the interest of any director in any such contract or transaction shall be disclosed by him at or prior to its consideration and any vote on that matter. A general notice or disclosure to the directors or otherwise contained in the minutes of a meeting or a written resolution of the directors or any committee thereof of the nature of a director’s interest shall be sufficient disclosure and after such general notice it shall not be necessary to give special notice relating to any particular transaction. A director may be counted for a quorum upon a motion in respect of any contract or arrangement which he shall make with our company, or in which he is so interested and may vote on such motion. There are no membership qualifications for directors. Further, there are no share ownership qualifications for directors unless so fixed by us in a general meeting.

The Board of Directors maintains a majority of independent directors who are deemed to be independent under the definition of independence provided by NASDAQ Stock Market Rule 4200(a)(15). Messrs. Shen, Zhang and Genhui Chen are our independent directors.

Mr. Ping Chen currently holds both the positions of Chief Executive Officer and Chairman of the Board. These two positions have not been consolidated into one position; Mr. Chen simply holds both positions at this time. We do not have a lead independent director because of the foregoing reason and also because we believe our independent directors are encouraged to freely voice their opinions on a relatively small company board. We believe this leadership structure is appropriate because we are a smaller reporting company; as such we deem it appropriate to be able to benefit from the guidance of Mr. Chen as both our principal executive officer and Chairman of the Board.

Board Committees

Currently, three committees have been established under the board: the audit committee, the compensation committee and the nominating committee. The audit committee is responsible for overseeing the accounting and financial reporting processes of our company and audits of the financial statements of our company, including the appointment, compensation and oversight of the work of our independent auditors. The compensation committee of the board of directors reviews and makes recommendations to the board regarding our compensation policies for our officers and all forms of compensation, and also administers our incentive compensation plans and equity-based plans (but our board retains the authority to interpret those plans). The nominating committee of the board of directors is responsible for the assessment of the performance of the board, considering and making recommendations to the board with respect to the nominations or elections of directors and other governance issues. The nominating committee considers diversity of opinion and experience when nominating directors.

Duties of Directors

Under British Virgin Islands law, our directors have a duty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our third amended and restated memorandum and articles of association. We have the right to seek damages if a duty owed by our directors is breached. The functions and powers of our board of directors include, among others:

• appointing officers and determining the term of office of the officers;

• authorizing the payment of donations to religious, charitable, public or other bodies, clubs, funds or associations as deemed advisable;

• exercising the borrowing powers of the company and mortgaging the property of the company;

• executing checks, promissory notes and other negotiable instruments on behalf of the company; and

• maintaining or registering a register of mortgages, charges or other encumbrances of the company.

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Limitation of Director and Officer Liability

British Virgin Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the British Virgin Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime.

Under our third amended and restated memorandum and articles of association, we may indemnify our directors, officers and liquidators against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with civil, criminal, administrative or investigative proceedings to which they are party or are threatened to be made a party by reason of their acting as our director, officer or liquidator. To be entitled to indemnification, these persons must have acted honestly and in good faith with a view to the best interest of the company and, in the case of criminal proceedings, they must have had no reasonable cause to believe their conduct was unlawful.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for our directors or officers under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable as a matter of United States law.

Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities or commodities laws, any laws respecting financial institutions or insurance companies, any law or regulation prohibiting mail or wire fraud in connection with any business entity or been subject to any disciplinary sanctions or orders imposed by a stock, commodities or derivatives exchange or other self-regulatory organization, except for matters that were dismissed without sanction or settlement.

There are no other arrangements or understandings pursuant to which our directors are selected or nominated.

There are no family relationships among any of the persons named above, and there are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any such person was selected as a director or member of senior management.

D. Employees

As of December 31, 2015, we had 89 employees, all of whom were full-time employees and were based in China. We believe that our relations with our employees are good. We have never had a work stoppage, and our employees are not subject to a collective bargaining agreement. As of December 31, 2015, 2014 and 2013, we had 89, 107 and 104 employees, respectively.

			December 31,
	2015		2014		2013
Total		89		107		104
Mid and high level Manager		26		29		15
Sales		46		50		48
R&D and Customization		7		9		21
Assembly and Procurement		10		19		20

E. Share ownership

The following table sets forth information with respect to beneficial ownership of our common shares as of July 15, 2016 by:

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• Each of our directors and named executive officers; and

• All directors and named executive officers as a group.

The number and percentage of common shares beneficially owned are based on 6,821,889 common shares outstanding as of July 15, 2016. Information with respect to beneficial ownership has been furnished by each director and officer. Beneficial ownership is determined in accordance with the rules of the SEC and generally requires that such person have voting or investment power with respect to securities. In computing the number of common shares beneficially owned by a person listed below and the percentage ownership of such person, common shares underlying options, warrants or convertible securities held by each such person that are exercisable or convertible within 60 days of July 15, 2016 are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person. Except as otherwise indicated in the footnotes to this table, or as required by applicable community property laws, all persons listed have sole voting and investment power for all common shares shown as beneficially owned by them. Unless otherwise indicated in the footnotes, the address for each principal shareholder is in the care of BDL, Room 501, Jiuzhou Plaza, 83 Fuxing Road, Haidian District, Beijing 100856, People’s Republic of China.

Named Executive Officers and Directors	Amount of Beneficial  Ownership(1)			Percentage Ownership(2)
Ping Chen, CEO, Director		1,703,542	(3)		24.97	%
Genhui Chen		18,000	(4)		*
Mingwei Zhang		21,975	(5)		*
Xiaoguang Shen		5,000	(6)		*
Huili (Alisa) Li		10,000	(7)		*
All officers and directors as a group		1,758,517			25.78	%
Chen Ping Ltd.		1,104,742			16.19	%
Hangzhou Liaison Interactive Information Technology Co. Ltd.		620,414			9.09	%

* Less than 1%.

(1)	Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the common shares.
(2)	We have used 6,821,899 outstanding shares for all calculations in this table and have not increased the number of shares outstanding to account for such shares underlying such securities in calculating percentage ownership.
(3)	Represents (a) 1,104,742 shares owned by Chen Ping Ltd.; (b) vested options to purchase 60,000 shares for an exercise price of $1.45 per share that were granted on December 29, 2011; (c) vested options to purchase 37,600 shares for an exercise price of $2.30 per share that were granted on October 7, 2013; (d) vested options to purchase 52,400 shares for an exercise price of $5.31 per share that were granted on August 20, 2014; (e) 100,000 shares issued on August 20, 2014; and (f) 348,800 shares granted on December 3, 2015 that are subject to full or partial forfeiture in the event Mr. Chen does not remain an officer or director of our Company for two years after the date of grant. These numbers do not include (i) unvested options to purchase 30,000 shares for an exercise price of $1.45 per share that were granted on December 29, 2011; (ii) unvested options to purchase 56,400 shares for an exercise price of $2.30 per share that were granted on October 7, 2013; (iii) unvested options to purchase 78,600 shares for an exercise price of $5.31 per share that were granted on August 20, 2014; or (iv) unvested options to purchase 210,867 shares for an exercise price of $1.88 per share that were granted on March 21, 2016..
(4)	Represents (a) vested options to purchase 8,000 shares for an exercise price of $1.45 per share that were granted on December 29, 2011 and (b) vested options to purchase 10,000 shares for an exercise price of $1.64 per share that were granted on August 7, 2015. These numbers do not include (i) unvested options to purchase 4,000 shares for an exercise price of $1.45 per share that were granted on December 29, 2011; (ii) unvested options to purchase 10,000 shares for an exercise price of $1.64 per share that were granted on August 7, 2015; and (iii) unvested options to purchase 20,000 shares for an exercise price of $1.88 per share that were granted on March 21, 2016..

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(5)	Represents (a) 11,975 shares issued on June 16, 2014 and (b) vested options to purchase 10,000 shares for an exercise price of $1.64 per share that were granted on August 7, 2015. These numbers do not include (i) unvested options to purchase 10,000 shares for an exercise price of $1.64 per share that were granted on August 7, 2015; and (ii) unvested options to purchase 20,000 shares for an exercise price of $1.88 per share that were granted on March 21, 2016.
(6)	Represents vested options to purchase 5,000 shares for an exercise price of $1.64 per share that were granted on August 7, 2015. These numbers do not include (i) unvested options to purchase 5,000 shares for an exercise price of $1.64 per share that were granted on August 7, 2015; and (ii) unvested options to purchase 10,000 shares for an exercise price of $1.88 per share that were granted on March 21, 2016.
(7)	Represents (a) vested options to purchase 10,000 shares for an exercise price of $1.64 per share that were granted on August 7, 2015. These numbers do not include (i) unvested options to purchase 10,000 shares for an exercise price of $1.64 per share that were granted on August 7, 2015; and (ii) unvested options to purchase 30,000 shares for an exercise price of $1.88 per share that were granted on March 21, 2016.

Share Option Plan and Grants

In 2009, in connection with our initial public offering, we established a pool for share options for our employees (the “2009 Share Incentive Plan”). This pool contains options to purchase up to 450,000 of our common shares. The options will vest at a rate of 20% per year for five years and have an exercise price of the market price of our shares on the date the options are granted. As of the date of this report, we have issued all 450,000 options pursuant to our 2009 Share Incentive Plan.

In 2013, we established our 2013 Share Incentive Plan. This pool allows us to issue options, common shares and other securities exercisable or convertible into, in the aggregate, 462,000 of our common shares. As of the date of this report, we have issued 113,200 options pursuant to our 2013 Share Incentive Plan.

In 2014, we established our 2014 Share Incentive Plan. This pool allows us to issue options, common shares and other securities exercisable or convertible into, in the aggregate, 466,800 of our common shares. As of the date of this report, we have issued 366,800 options pursuant to our 2014 Share Incentive Plan.

In 2015, we established our 2015 Share Incentive Plan. This pool allows us to issue options, common shares and other securities exercisable or convertible into, in the aggregate, 580,867 of our common shares. As of the date of this report, we have issued 580,867 options pursuant to our 2015 Share Incentive Plan.

Item 7. Major Shareholder and Related Party Transactions

A. Major shareholders

The following table sets forth information with respect to beneficial ownership of our common shares as of July 15, 2016 by each person who is known by us to beneficially own 5% or more of our outstanding common shares. The number and percentage of common shares beneficially owned are based on 6,205,475 common shares outstanding as of July 15, 2016. Information with respect to beneficial ownership has been furnished by each director, officer or beneficial owner of 5% or more of our common shares. Beneficial ownership is determined in accordance with the rules of the SEC and generally requires that such person have voting or investment power with respect to securities. In computing the number of common shares beneficially owned by a person listed below and the percentage ownership of such person, common shares underlying options, warrants or convertible securities held by each such person that are exercisable or convertible within 60 days of July 15, 2016 are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person. Except as otherwise indicated in the footnotes to this table, or as required by applicable community property laws, all persons listed have sole voting and investment power for all common shares shown as beneficially owned by them. Unless otherwise indicated in the footnotes, the address for each principal shareholder is in the care of BDL, Room 501, Jiuzhou Plaza, 83 Fuxing Road, Haidian District, Beijing 100856, People’s Republic of China. During the past three years, our major shareholder, Ping Chen, has increased his shares of stock in the company by way of incentive grants of stock and options, and we have sold 620,414 shares to Hangzhou Liaison Interactive Information Technology Co. Ltd.. None of the major shareholders have special voting rights.

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Shareholder	Amount of Beneficial Ownership(1)			Percentage Ownership(2)
Ping Chen		1,703,542	(3)		24.97	%
Chen Ping Ltd.		1,104,742	(3)		16.19	%
Hangzhou Liaison Interactive Information Technology Co. Ltd.		620,414			9.09	%

(1)	Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the common shares.
(2)	The number of our common shares outstanding used in calculating the percentage for each listed person excludes the common shares underlying options held by such person.
(3)	Ping Chen has the sole power to direct the voting and disposition of the 1,104,742 shares held by Chen Ping Ltd. The number also includes 210,000 shares underlying options, which will have vested within 60 days hereof. The shares reflected for Chen Ping Ltd. include only shares held by such company and do not include shares underlying options or shares held by Ping Chen directly.

As of July 15, 2016, we had five shareholders of record, all of which were located outside of the United States and held an aggregate of 2,417,427 of our common shares, representing approximately 35.4% of our outstanding common shares, and one of which was located in the United States and held an aggregate of 64.6% of our common shares of our outstanding common shares. However, this U.S. shareholder of record is CEDE & CO., a nominee of The Depository Trust Company. Accordingly, we believe that the shares held by CEDE & CO. include common shares beneficially owned by both holders in the United States and non-U.S. beneficial owners.

B. Related party transactions

a. Purchase transactions

The Company entered into related party transactions in the fiscal years ended December 31, 2015 and 2014. The Company did not enter into any related party transactions in the fiscal years ended December 31, 2013. 

The Company’s related party transactions include purchases of property, plant and equipment. These transactions were consummated at fair market price and under similar terms as those with the Company's customers and suppliers.

During the years ended December 31, 2015 and 2014, the Company entered into related party transactions as shown below:

	December 31,
	2015		2014
			(restated)
	US$		US$
Deposits for purchase of property, plant and equipment - related party		-		1,498,627
Purchases from related party		88,614		1,142,845
Purchases of intangible assets from related party		-		325,400

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b.           Loan from related party–the director and CEO Ping Chen

On March 27, 2015, the Company entered into a new loan agreement with Chen Ping, who is major shareholder and the CEO of the Company, in the amount of $660,679 (RMB 4,120,000) with a floating interest rate which will be 6.96% in 2015.

On December 2, 2015, the Company entered into a new loan agreement with Mr. Chen Ping in the amount of $3,207,180 (RMB 20,000,000) with no floating interest rate and maturity date.

On December 18, 2015, the Company repaid part of the December 2, 2015 loan in the amount of $1,603,590 (RMB 10,000,000) to Chen Ping. The remaining will be repaid as agreed between the parties.

C. Interests of experts and counsel

Not applicable for annual reports on Form 20-F.

Item 8. Financial Information

We have appended consolidated financial statements filed as part of this annual report. See information provided in response to Item 18 below. Export sales do not constitute a material portion of our total sales.

Legal Proceedings

From time to time, we have been involved in litigation or other disputes. No pending or known to be contemplated legal or arbitration proceedings, including any relating to bankruptcy, receivership or similar proceedings or involving any third party, have or are anticipated to have any significant effect on our financial position or profitability. None of the directors or members of senior management of our Company or any of its subsidiaries or affiliate companies is engaged in any materials proceeding adverse to our Company or any of its subsidiaries or affiliate companies.

Dividend Policy

We have never declared or paid any cash dividends on our common shares. We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future. Any future determination relating to our dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including future earnings, capital requirements, financial conditions and future prospects and other factors the Board of Directors may deem relevant.

Under British Virgin Islands law, we may only pay dividends from surplus (the excess, if any, at the time of the determination of the total assets of our company over the sum of our liabilities, as shown in our books of account, plus our capital), and we must be solvent before and after the dividend payment in the sense that we will be able to satisfy our liabilities as they become due in the ordinary course of business; and the realizable value of assets of our company will not be less than the sum of our total liabilities, other than deferred taxes as shown on our books of account, and our capital.

If we determine to pay dividends on any of our common shares in the future, as a holding company, we will be dependent on receipt of funds from our majority-owned subsidiary, BDL. Payments of dividends by BDL to our company are subject to the requirement that foreign invested enterprises may only buy, sell and/or remit foreign currencies at those banks authorized to conduct foreign exchange business. Further, such remittances would require BDL to provide an application for remittance that includes, in addition to the application form, a foreign registration certificate, board resolution, capital verification report, audit report on profit and stock bonuses, and a tax certificate. There are no such similar foreign exchange restrictions in the British Virgin Islands.

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Significant Changes

Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.

Item 9. The Offer and Listing

A. Offer and listing details

Our common shares have been listed on the NASDAQ Capital Market since April 22, 2010 under the symbol “DHRM.” The table below shows, for the periods indicated the high and low market prices for our shares.

	Market Price Per Share
	High		Low
Yearly:
2011	$	7.74	$	1.40
2012	$	3.95	$	1.26
2013	$	4.85	$	1.80
2014	$	12.89	$	2.52
2015	$	4.29	$	1.22
Quarterly:
2014
First quarter	$	11.95	$	3.88
Second quarter	$	8.07	$	4.75
Third quarter	$	6.08	$	4.96
Fourth quarter	$	5.02	$	2.77
2015
First quarter	$	3.7609	$	2.4899
Second quarter	$	3.18	$	2.62
Third quarter	$	2.74	$	1.35
Fourth quarter	$	4.29	$	1.22
2016
First quarter	$	2.445	$	1.525
Second quarter	$	2.88	$	1.23
Monthly:
2016
January	$	2.445	$	1.525
February	$	2.16	$	1.60
March	$	1.90	$	1.66
April	$	2.88	$	1.23
May	$	2.17	$	1.37
June	$	1.8826	$	1.4423

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B. Plan of distribution

Not applicable for annual reports on Form 20-F.

C. Markets

Our common shares are listed on the NASDAQ Capital Market under the symbol “DHRM.”

D. Selling shareholders

Not applicable for annual reports on Form 20-F.

E. Dilution

Not applicable for annual reports on Form 20-F.

F. Expenses of the issue

Not applicable for annual reports on Form 20-F.

Item 10. Additional Information

A. Share capital

Not applicable for annual reports on Form 20-F.

B. Memorandum and articles of association

The information required by this item is incorporated by reference to the material headed “Description of Share Capital” in our Registration Statement on Form S-1, File no. 333-163041, filed with the SEC on November 12, 2009, as amended.

C. Material contracts

On April 21, 2016, the Company entered into warrant repurchase agreements (the “Warrant Repurchase Agreements”) with the holders (“Holders”) of certain warrants pursuant to which the Company agreed to repurchase from the Holders the Company’s outstanding warrant to purchase in aggregate 293,880 shares of the Company’s common shares, with an exercise price of $11.86 per share (the “Warrants”). The Warrants were issued on February 21, 2014 in connection with the Company’s registered direct offering of approximately $6.7 million of common shares and warrants.

On April 28, 2016, entered into a definitive securities purchase agreement (the "SPA") with Hangzhou Liaison Interactive Information Technology Co. Ltd. ("Liaison Interactive"), a publicly listed company on the Shenzhen Stock Exchange (Trading Ticker: 002280) pursuant to which Liaison Interactive agreed to purchase 11,111,111 restricted common shares of the Company (the "Shares") for an aggregate of US$20,000,000 (the "Purchase Price"). The Purchase Price is US$1.80 per share, which represents a 35% premium to Dehaier's closing price of $1.33 on April 27, 2016.

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In consideration of the payment by Liaison Interactive of the Purchase Price, Liaison Interactive and its designees will also receive warrants to purchase 1,000,000 restricted common shares of the Company at a purchase price of US$2.20 per share (the "Warrants"). The Warrants are exercisable by Liaison Interactive or its designees in whole or in part and are exercisable at any time after the Closing of the SPA.

The Shares issued to Liaison Interactive have not been and are not being registered under the 1933 Act, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder or (B) Liaison Interactive shall have delivered to the Company an opinion of counsel, in a form reasonably acceptable to the Company, to the effect that such Shares to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration. On June 6, 2016, the Company sold 620,414 of these shares to Liaison Interactive in a first closing under the SPA. On June 28, 2016, Dehaier entered into Amendment No. 1 to the SPA with Liaison Interactive. In accordance with Amendment No. 1 to SPA, the closing date is extended from June 30, 2016 to September 30, 2016.

D. Exchange controls

Foreign Currency Exchange

The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations (1996), as amended in 2007 and 2008, and the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996). Under these regulations, Renminbi are freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for most capital account items, such as direct investment, loan, repatriation of investment and investment in securities outside China, unless the prior approval of SAFE or its local counterparts is obtained. In addition, any loans to an operating subsidiary in China that is a foreign invested enterprise, cannot, in the aggregate, exceed the difference between its respective approved total investment amount and its respective approved registered capital amount. Furthermore, any foreign loan must be registered with SAFE or its local counterparts for the loan to be effective. Any increase in the amount of the total investment and registered capital must be approved by the PRC Ministry of Commerce or its local counterpart. We may not be able to obtain these government approvals or registrations on a timely basis, if at all, which could result in a delay in the process of making these loans.

The dividends paid by the subsidiary to its shareholder are deemed shareholder income and are taxable in China. Pursuant to the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), foreign-invested enterprises in China may purchase or remit foreign exchange, subject to a cap approved by SAFE, for settlement of current account transactions without the approval of SAFE. Foreign exchange transactions under the capital account are still subject to limitations and require approvals from, or registration with, SAFE and other relevant PRC governmental authorities.

Dividend Distribution 

The principal regulations governing the distribution of dividends by foreign holding companies include the Foreign Investment Enterprise Law (1986), as amended, and the Administrative Rules under the Foreign Investment Enterprise Law (2001).

Under these regulations, foreign investment enterprises in China may pay dividends only out of their retained profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, foreign investment enterprises in China are required to allocate at least 10% of their respective retained profits each year, if any, to fund certain reserve funds unless these reserves have reached 50% of the registered capital of the enterprises. These reserves are not distributable as cash dividends.

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Notice 75 

On October 21, 2005, SAFE issued Notice 75, which became effective as of November 1, 2005. According to Notice 75, prior registration with the local SAFE branch is required for PRC residents to establish or to control an offshore company for the purposes of financing that offshore company with assets or equity interests in an onshore enterprise located in the PRC. An amendment to registration or filing with the local SAFE branch by such PRC resident is also required for the injection of equity interests or assets of an onshore enterprise in the offshore company or overseas funds raised by such offshore company, or any other material change involving a change in the capital of the offshore company.

Moreover, Notice 75 applies retroactively. As a result, PRC residents who have established or acquired control of offshore companies that have made onshore investments in the PRC in the past are required to complete the relevant registration procedures with the local SAFE branch by March 31, 2006. Under the relevant rules, failure to comply with the registration procedures set forth in Notice 75 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including the increase of its registered capital, the payment of dividends and other distributions to its offshore parent or affiliate and capital inflow from the offshore entity, and may also subject relevant PRC residents to penalties under PRC foreign exchange administration regulations.

PRC residents who control our company are required to register with SAFE in connection with their investments in us. Such individuals completed this registration in 2007. If we use our equity interest to purchase the assets or equity interest of a PRC company owned by PRC residents in the future, such PRC residents will be subject to the registration procedures described in Notice 75.

New Mergers & Acquisitions Regulations and Overseas Listings

On August 8, 2006, six PRC regulatory agencies, including the Ministry of Commerce, the State Assets Supervision and Administration Commission, the State Administration for Taxation, the State Administration for Industry and Commerce, CSRC and SAFE, jointly issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the New M&A Rule, which became effective on September 8, 2006. This New M&A Rule, among other things, includes provisions that purport to require that an offshore special purpose vehicle formed for purposes of overseas listing of equity interests in PRC companies and controlled directly or indirectly by PRC companies or individuals obtain the approval of CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange.

On September 21, 2006, CSRC published on its official website procedures regarding its approval of overseas listings by special purpose vehicles. The CSRC approval procedures require the filing of a number of documents with the CSRC and it would take several months to complete the approval process. The application of this new PRC regulation remains unclear with no consensus currently existing among leading PRC law firms regarding the scope of the applicability of the CSRC approval requirement.

E. Taxation

British Virgin Islands Taxation

We are exempt from all provisions of the Income Tax Act of the British Virgin Islands, including with respect to all dividends, interests, rents, royalties, compensation and other amounts payable by or to persons who are not resident in the British Virgin Islands. Capital gains realized with respect to any of our shares, debt obligations or other securities by persons who are not resident in the British Virgin Islands are also exempt from all provisions of the Income Tax Act of the British Virgin Islands. No estate, inheritance tax succession or gift tax rate, duty, levy or other charge is payable by persons who are not resident in the British Virgin Islands with respect to any of our shares, debt obligations, or other securities. No stamp duty is payable in the British Virgin Islands in relation to a transfer of shares in a British Virgin Islands Business Company.

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United States Federal Income Taxation

The following is a summary of material United States federal income tax consequences under present law relating to the purchase, ownership, and disposition of our common shares. This description does not provide a complete analysis of all potential tax consequences. The information provided below is based on the Internal Revenue Code of 1986, as amended, or the Code, Treasury Regulations, proposed Treasury Regulations, Internal Revenue Service, or the IRS, published rulings and court decisions, all as of the date hereof. These authorities may change, possibly on a retroactive basis, or the IRS might interpret the existing authorities differently. In either case, the tax consequences of purchasing, owning or disposing of common shares could differ from those described below. We do not intend to obtain a ruling from the IRS with respect to the tax consequences of acquiring or holding the common shares.

This description is general in nature and does not discuss all aspects of U.S. federal income taxation that may be relevant to a particular investor in light of the investor’s particular circumstances, or to certain types of investors subject to special treatment under U.S. federal income tax laws, such as:

· banks or financial institutions;

· life insurance companies;

· tax-exempt organizations;

· dealers in securities or foreign currencies;

· traders in securities that elect to apply a mark-to-market method of accounting;

· persons holding common shares as part of a position in a “straddle” or as part of a “hedging,” “conversion” or “integrated” transaction for U.S. federal income tax purposes;

· persons subject to the alternative minimum tax provisions of the Code; and

· persons that have a “functional currency” other than the U.S. dollar.

This description generally applies to purchasers of our common shares as capital assets. This description does not consider the effect of any foreign, state, local or other tax laws that may be applicable to particular investors.

Investors considering the purchase of common shares should consult their own tax advisors regarding the application of the U.S. federal income tax laws to their particular situations and the consequences of U.S. federal estate or gift tax laws, foreign, state, or local laws, and tax treaties.

U.S. Holders

As used herein, the term “U.S. Holder” means a beneficial owner of common shares that is:

· a citizen or resident of the U.S. or someone treated as a U.S. citizen or resident for U.S. federal income tax purposes;

· a corporation or other entity taxable as a corporation for U.S. federal income tax purposes organized in or under the laws of the U.S. or any political subdivision thereof;

· an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

· a trust, if such trust validly elects to be treated as a U.S. person for U.S. federal income tax purposes, or if (a) a court within the U.S. can exercise primary supervision over its administration and (b) one or more U.S. persons have the authority to control all of the substantial decisions of such trust.

If a partnership (including for this purpose any entity treated as a partnership for U.S. tax purposes) is a beneficial owner of the common shares, the U.S. tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. A holder of the common shares that is a partnership and partners in such partnership should consult their individual tax advisors about the U.S. federal income tax consequences of holding and disposing of the common shares.

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If you are not a U.S. Holder, this subsection does not apply to you and you should refer to “Non-U.S. Holders” below.

Taxation of Dividends and Other Distributions on Common shares

Subject to the passive foreign investment company rules discussed below, all distributions to a U.S. Holder with respect to the common shares, other than certain pro rata distributions of our shares, will be includible in a U.S. Holder’s gross income as ordinary dividend income when received, but only to the extent that the distribution is paid out of our current or accumulated earnings and profits. For this purpose, earnings and profits will be computed under U.S. federal income tax principles. The dividends will not be eligible for the dividends-received deduction allowed to corporations. To the extent that the amount of the distribution exceeds our current and accumulated earnings and profits, it will be treated first as a tax-free return of the tax basis in the common shares, and to the extent the amount of the distribution exceeds the U.S. Holder’s tax basis, the excess will be taxed as capital gain. Any gain recognized by a non-corporate U.S. Holder on the sale or exchange of common shares generally will be subject to a maximum tax rate of 20%.

Dividends paid in Renminbi will be included in your income as a U.S. dollar amount based on the exchange rate in effect on the date that the U.S. Holder receives the dividend, regardless of whether the payment is in fact converted into U.S. dollars. If the U.S. Holder does not receive U.S. dollars on the date the dividend is distributed, the U.S. Holder will be required to include either gain or loss in income when the U.S. Holder later exchanges the Renminbi for U.S. dollars. The gain or loss will be equal to the difference between the U.S. dollar value of the amount that the U.S. Holder includes in income when the dividend is received and the amount that the U.S. Holder receives on the exchange of the Renminbi for U.S. dollars. The gain or loss generally will be ordinary income or loss from United States sources. If we distribute as a dividend non-cash property, the U.S. Holder will generally include in income an amount equal to the U.S. dollar equivalent of the fair market value of the property on the date that it is distributed.

Dividends will constitute foreign source income for foreign tax credit limitation purposes. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with respect to the common shares will be “passive income” or, in the case of certain U.S. Holders, “financial services income.” In particular circumstances, a U.S. Holder that:

· has held the common shares for less than a specified minimum period during which it is not protected from risk of loss,

· is obligated to make payments related to the dividends, or

· holds the common shares in arrangements in which the U.S. Holder’s expected economic profit, after non-U.S. taxes, is insubstantial will not be allowed a foreign tax credit for foreign taxes imposed on dividends paid on the common shares.

Distributions to a U.S. Holder of shares or rights to subscribe for shares that are received as part of a pro rata distribution to all our shareholders should not be subject to U.S. federal income tax. The basis of the new shares or rights so received will be determined by allocating the U.S. Holder’s tax basis in the common shares between the common shares and the new shares or rights received, based on their relative fair market values on the date of distribution. However, the basis of the new shares or rights will be zero if:

· the fair market value of the new shares or rights is less than 15.0% of the fair market value of the old common shares at the time of distribution; and

· the U.S. Holder does not make an election to determine the basis of the new shares by allocation as described above.

The U.S. Holder’s holding period in the new shares or rights will generally include the holding period of the old common shares on which the distribution was made.

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Taxation of Disposition of Common shares

Subject to the passive foreign investment company rules discussed below, a U.S. Holder will recognize taxable gain or loss on any sale or exchange of common shares equal to the difference between the amount realized (in U.S. dollars) for the common shares and the U.S. Holder’s tax basis (in U.S. dollars) in the common shares. The gain or loss will be capital gain or loss. Any gain or loss that you recognize will generally be treated as United States source income or loss, except that losses will be treated as foreign source losses to the extent you received dividends that were includible in the financial services income basket during the 24-month period prior to the sale. If the common shares are not stock in a passive foreign investment company with respect to a U.S. Holder in either the taxable year of the distribution or the preceding taxable year, the distribution otherwise constitutes qualified dividend income for United States federal income tax purposes, certain holding period and other requirements are met, and the distribution is received in a taxable year beginning prior to January 1, 2009, the distribution will be taxable to a non-corporate U.S. Holder at a maximum rate of 15%.

Passive Foreign Investment Company

We believe that we are not a passive foreign investment company for U.S. federal income tax purposes, but we cannot be certain whether we will be treated as a passive foreign investment company for any future taxable year. If we are a passive foreign investment company in any year in which a U.S. Holder holds common shares, the U.S. Holder generally will be subject to increased U.S. tax liabilities and reporting requirements on receipt of certain dividends or on a disposition of common shares, in that year and all subsequent years although a shareholder election to terminate such deemed passive foreign investment company status may be made in certain circumstances. U.S. Holders should consult their own tax advisors regarding our status as a passive foreign investment company, the consequences of an investment in a passive foreign investment company, and the consequences of making a shareholder election to terminate deemed passive foreign investment company status if we no longer meet the income or asset test for passive foreign investment company status in a subsequent taxable year.

A company is considered a passive foreign investment company for any taxable year if either:

· at least 75.0% of its gross income is passive income, or

· at least 50.0% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income.

We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25.0% (by value) of the stock of such corporation.

Our belief that we are not a passive foreign investment company is based on our estimate of the fair market value of our intangible assets, including goodwill, not reflected in our financial statements under US GAAP. In the future, in calculating the value of these intangible assets, we will value our total assets, in part, based on our total market value determined using the average of the quarterly selling prices of the common shares for the relevant year. We believe this valuation approach is reasonable. However, it is possible that the IRS will challenge the valuation of our intangible assets, which may result in our classification as a passive foreign investment company. In addition, if our actual acquisitions and capital expenditures do not match our projections, the likelihood that we are or will be classified as a passive foreign investment company may also increase.

A separate determination must be made each year as to whether we are a passive foreign investment company. As a result, our passive foreign investment company status may change.

If we are a passive foreign investment company for any taxable year during which a U.S. Holder holds common shares, the U.S. Holder will be subject to special tax rules with respect to:

· Any “excess distribution” that the U.S. Holder receives on common shares, and

· Any gain the U.S. Holder realizes from a sale or other disposition (including a pledge) of the common shares, unless the U.S. Holder makes a “mark-to-market” election as discussed below.

Distributions the U.S. Holder receives in a taxable year that are greater than 125% of the average annual distributions the U.S. Holder received during the shorter of the three preceding taxable years or the U.S. Holder’s holding period for the common shares will be treated as an excess distribution. Under these special tax rules:

· the excess distribution or gain will be allocated ratably over your holding period for the common shares,

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· the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a passive foreign investment company, will be treated as ordinary income, and

· the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses, and gains (but not losses) realized on the sale of the common shares cannot be treated as capital, even if the U.S. Holder holds the common shares as capital assets.

A U.S. shareholder of a passive foreign investment company may avoid taxation under the excess distribution rules discussed above by making a “qualified electing fund” election to include the U.S. Holder’s share of our income on a current basis. However, a U.S. Holder may make a qualified electing fund election only if the passive foreign investment company agrees to furnish the shareholder annually with certain tax information, and we do not presently intend to prepare or provide such information.

Alternatively, a U.S. Holder of “marketable stock” in a passive foreign investment company may make a mark-to-market election for stock of a passive foreign investment company to elect out of the excess distribution rules discussed above. If a U.S. Holder makes a mark-to-market election for the common shares, the U.S. Holder will include in income each year an amount equal to the excess, if any, of the fair market value of the common shares as of the close of your taxable year over the U.S. Holder’s adjusted basis in such common shares. A U.S. Holder is allowed a deduction for the excess, if any, of the adjusted basis of the common shares over their fair market value as of the close of the taxable year only to the extent of any net mark-to-market gains on the common shares included in the U.S. Holder’s income for prior taxable years. Amounts included in a U.S. Holder’s income under a mark-to-market election, as well as gain on the actual sale or other disposition of the common shares, are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the common shares, as well as to any loss realized on the actual sale or disposition of the common shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such common shares. A U.S. Holder’s basis in the common shares will be adjusted to reflect any such income or loss amounts. The tax rules that apply to distributions by corporations which are not passive foreign investment companies would apply to distributions by us.

The mark-to-market election is available only for stock which is regularly traded on a national securities exchange that is registered with the SEC or on NASDAQ, or an exchange or market that the U.S. Secretary of the Treasury determines has rules sufficient to ensure that the market price represents a legitimate and sound fair market value. The mark-to-market election would be available to a U.S. Holder unless our common shares are delisted from The NASDAQ Capital Market and do not subsequently become regularly traded on another qualified exchange or market.

A U.S. Holder who holds our common shares in any year in which we are a passive foreign investment company would be required to file IRS Form 8621 regarding distributions received on our common shares and any gain realized on the disposition of our common shares.

Non-U.S. Holders

A Non-U.S. Holder generally will not be subject to U.S. federal income tax on dividends paid by us with respect to our common shares unless the income is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States.

A Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain attributable to a sale or other disposition of our common shares unless such gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States or the Non-U.S. Holder is a natural person who is present in the United States for 183 days or more and certain other conditions exist.

Dividends and gains that are effectively connected with a Non-U.S. Holder’s conduct of a trade or business in the United States generally will be subject to tax in the same manner as they would be if the Non-U.S. Holder were a U.S. Holder, except that the passive foreign investment company rules will not apply. Effectively connected dividends and gains received by a corporate Non-U.S. Holder may also be subject to an additional branch profits tax at a 30.0% rate or a lower tax treaty rate.

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Information Reporting and Backup Withholding

In general, information reporting requirements will apply to dividends in respect of our common shares or the proceeds received on the sale, exchange or redemption of our common shares paid within the United States (and, in certain cases, outside the United States) to U.S. Holders other than certain exempt recipients, such as corporations, and backup withholding tax may apply to such amounts if the U.S. Holder fails to provide an accurate taxpayer identification number or to report interest and dividends required to be shown on its U.S. federal income tax returns. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as credit against the U.S. Holder’s U.S. federal income tax liability provided that the appropriate returns are filed.

A Non-U.S. Holder generally may eliminate the requirement for information reporting and backup withholding by providing certification of its foreign status to the payer, under penalties of perjury, on IRS Form W-8BEN.

F. Dividends and paying agents

Not applicable for annual reports on Form 20-F.

G. Statement by experts

Not applicable for annual reports on Form 20-F.

H. Documents on display

We are subject to the information requirements of the Exchange Act. In accordance with these requirements, the Company files reports and other information with the SEC. You may read and copy any materials filed with the SEC at the Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site at http://www.sec.gov that contains reports and other information regarding registrants that file electronically with the SEC.

I. Subsidiary Information

Not applicable.

Item 11. Quantitative and Qualitative Disclosures about Market Risk

Foreign Exchange Risk

All of our revenues and substantially all of our expenditures are denominated in Renminbi. Although exchange of the Renminbi for foreign currency is highly regulated in China, the value of the Renminbi against the value of the U.S. dollar may fluctuate and be affected by, among other things, changes in China’s political and economic conditions. Under the currency policy in effect in China today, the value of the Renminbi fluctuates within a narrow band against a basket of foreign currencies. China is currently under significant international pressures to liberalize its currency policy, and if such liberalization were to occur, the value of the Renminbi could appreciate or depreciate against the U.S. dollar, or any other currency.

We use U.S. dollars as the reporting currency for our financial statements. All transactions in currencies other than U.S. dollar during the year are re-measured at the exchange rates prevailing on the respective relevant dates of such transactions. Monetary assets and liabilities existing at the balance sheet date denominated in currencies other than U.S. dollar are re-measured at the exchange rates prevailing on such date. Exchange differences are recorded in our consolidated statement of operations.

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Fluctuations in exchange rates may affect our net revenues, costs, operating margins and net income. For example, in 2015, 3% of our net revenues were generated from sales denominated in currencies of U.S. dollar. The fluctuations in the exchange rates between the U.S. dollar and the Renminbi resulted in a decrease of $591 in operating income in 2015.

Fluctuations in exchange rates may also affect our balance sheet. For example, to the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount that we receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of paying dividends on our ordinary shares or for other business purposes, appreciation of the Renminbi against the U.S. dollar would have a positive effect on the corresponding U.S. dollar amount available to us.

The Renminbi’s exchange rate with the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Fluctuations in the value of the Renminbi may have a material adverse effect on your investment.” Any significant revaluation of the Renminbi may materially and adversely affect our cash flows, revenues, earnings and financial position, and the value of, and any dividends payable on, our share prices in U.S. dollars.

Our PRC subsidiaries have determined their functional currencies to be the Renminbi based on the criteria set forth under ASC 830, Foreign Currency Matters. We use the Renminbi as our reporting currency. We use the monthly average exchange rate for the year and the exchange rate at the balance sheet date to translate the operating results and financial position of our PRC subsidiaries, respectively. Translation differences are recorded in accumulated other comprehensive income, a component of shareholders’ equity. Transactions denominated in foreign currencies are remeasured into our functional currency at the exchange rates prevailing on the transaction dates. Foreign currency denominated financial assets and liabilities are remeasured at the balance sheet date exchange rate. Exchange gains and losses are included in the consolidated statements of income.

Interest Rate Risk

Our exposure to interest rate risk primarily relates to our interest income generated by our excess cash, which is mostly held in interest-bearing bank deposits and short-term investments as well as interest expenses under our short-term bank loans. Our future interest income from our cash deposited in bank and short-term bank loans may fall short of expectations due to changes in interest rates. Our future interest expense on our short-term borrowings may increase or decrease due to changes in market interest rates. As of December 31, 2015, our outstanding short-term borrowings were $3.7 million. The interest rate of our borrowings is a fixed interest.

Inflation

According to the National Bureau of Statistics of China, China’s overall national inflation rate, as represented by the general consumer price index, was approximately 3.3 % in 2012, 2.6% in 2013, 3.3% in 2014 and 3% in 2015. We have not in the past been materially affected by any such inflation, but we can provide no assurance that we will not be affected in the future.

Item 12. Description of Securities Other than Equity Securities

With the exception of Items 12.D.3 and 12.D.4, this Item 12 is not applicable for annual reports on Form 20-F. As to Items 12.D.3 and 12.D.4, this Item 12 is not applicable, as the Company does not have any American Depositary Shares.

68

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

We do not have any material defaults in the payment of principal, interest, or any installments under a sinking or purchase fund.

Item 14. Material Modifications to the Rights of Securities Holders and Use of Proceeds

Material Modifications to the Rights of Security Holders

We have not made any material modifications to the rights of our security holders. For a description of the rights of securities holders, see “Item 10. Additional Information — B. Memorandum and Articles of Association — Ordinary Shares”, which remain unchanged.

Use of Proceeds

Not applicable.

Item 15. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of December 31, 2015 (the “Evaluation Date”), the Company carried out an evaluation, under the supervision of and with the participation of management, including the Company’s chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on the foregoing, the chief executive officer and chief financial officer concluded that as of the Evaluation Date the company’s disclosure controls and procedures were not effective and designed to ensure that all material information required to be included in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decision regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that: 

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the recording of transactions of the Company’s assets;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. GAAP, and that the Company’s receipts and expenditures are being made only in accordance with the authorization of its management and directors; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

69

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to consolidated financial statement preparation and presentation and may not prevent or detect misstatements, Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of its internal control over financial reporting as of December 31, 2015. In making this assessment, management used the 2013 COSO framework set forth in the report entitled Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO.

The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Our management has implemented and tested our internal control over financial reporting based on these criteria and did not identify any significant deficiencies and material weaknesses as of December 31, 2015. However, based on the fact that we do not have any full-time accounting personnel who have U.S. GAAP experience, our management has considered this as a material weakness and determined that as of December 31, 2015, the internal control over financial reporting was not effective. This annual report does not include an attestation report of the Company’s registered public accounting firm because the Company is not an accelerated or large accelerated filer and does not otherwise elect to include such an attestation report.

In an effort to remedy this material weakness in the future, we intend to do the following:

(1) Develop a comprehensive training and development plan for our finance, accounting and internal audit personnel, including our Chief Financial Officer, Financial Manager, and others, in the principles and rules of U.S. GAAP, SEC reporting requirements and the application thereof.

(2) Design and implement a program to provide ongoing company-wide training regarding the Company's internal controls, with particular emphasis on our finance and accounting staff.

(3) Implement an internal review process over financial reporting to review all recent accounting pronouncements and to verify that the accounting treatment identified in such reports has been fully implemented and confirmed by our internal control department. In the future, we will continue to improve our ongoing review and supervision of our internal control over financial reporting.

(4) Hire an individual that possesses the requisite U.S. GAAP experience and education.

Despite the material weakness reported above, our management believes that our consolidated financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented. We have completed the transition from the 1992 COSO framework for internal controls to the 2013 COSO framework in 2015 and the 2013 COSO framework formalized the principles embedded in the original framework more explicitly incorporated business and operating environment changes over the past two decades, and which improved the framework’s ease of use and application.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) during the three or twelve months ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

70

Item 15T. Controls and Procedures

Not applicable.

Item 16. [Reserved]

Item 16A. Audit Committee Financial Expert

The Company’s Board of Directors has determined that Mr. Mingwei Zhang qualifies as an “audit committee financial expert” in accordance with applicable NASDAQ Capital Market standards. The Company’s Board of Directors has also determined that Mr. Zhang and the other members of the Audit Committee are all “independent” in accordance with the applicable NASDAQ Capital Market standards.

Item 16B. Code of Ethics

The Company has adopted a Code of Business Conduct and Ethics that applies to the Company’s employees, including its principal executive officer, principal financial officer, principal accounting officer, controller and persons performing similar functions. A copy of the Code of Business Conduct and Ethics was filed as an exhibit to our Registration Statement on Form S-1, File no. 333-163041, filed on November 12, 2009, as amended. In addition, the Company has posted this information on its website at www.dehaier.com.cn. The Company will provide any person a copy of its Code of Business Conduct and Ethics, without charge, upon request. Such request should be addressed to the Company at:

Room 501, Jiuzhou Plaza, 83 Fuxing Road

Haidian District, Beijing 100856

People’s Republic of China

Attention: Secretary

Item 16C. Principal Accountant Fees and Services

As noted in a current report on Form 6-K filed on June 17, 2016, our Audit Committee and Board of Directors appointed HHC and dismissed its prior principal accountant, Friedman LLP (“Friedman”). Friedman served as the Company’s independent registered public accounting firm for fiscal 2014 and through its dismissal. HHC was appointed by the Company to serve as its independent registered public accounting firm for fiscal 2015. Audit services provided by HHC for fiscal 2015 included the examination of the consolidated financial statements of the Company; and services related to periodic filings made with the SEC.

Fees Paid To Independent Registered Public Accounting Firm

Audit Fees

HHC’s fees for the annual audit of our financial statements were $240,000 for fiscal 2015 and $120,000 for fiscal 2014. Friedman’s fees for the annual audit of our financial statements were $180,035 for fiscal 2015 and $145,000 for fiscal 2014.

Audit-Related Fees

The Company has not paid HHC or Friedman for audit-related services in fiscal 2015 and 2014.

71

Tax Fees

The Company has not paid HHC or Friedman for tax services in fiscal 2015 and 2014.

All Other Fees

The Company has not paid HHC or Friedman for any other services in fiscal 2015 and 2014.

Audit Committee Pre-Approval Policies

Before HHC was engaged by the Company to render audit or non-audit services, the engagement was approved by the Company’s audit committee. All services rendered by HHC have been so approved.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Neither the Company nor any affiliated purchaser has purchased any shares or other units of any class of the Company’s equity securities registered by the Company pursuant to Section 12 of the Securities Exchange Act during the fiscal year ended December 31, 2015.

Item 16F. Change in Registrant’s Certifying Accountant.

On June 17, 2016, our Audit Committee and Board of Directors approved the appointment of HHC and the dismissal of Friedman. The decision was due to Friedman’s inability to commit to a timeline in which to complete the 2015 audit and to form an opinion based on the information provided to Friedman. Friedman’s report on the financial statements for the year ended December 31, 2014 did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope, or accounting principles. During the registrant's most recent fiscal year ended December 31, 2015 and preceding such dismissal, Friedman notified us that they had not received sufficient information to satisfy their audit procedures of the Company’s consolidated financial statements and, therefore, could not form an opinion due to the lack of such information. Friedman has advised us that we have not provided sufficient evidence to establish the timing and nature of write-offs and reserves related to certain accounts receivable, inventory, prepayments and other receivables, which, if investigated further, could impact the previously-issued audit report or the underlying financial statements for the year ended December 31, 2014. Other than as mentioned here, there were no disagreements with Friedman on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Friedman, would have caused it to make reference to the subject matter of the disagreements in connection with its report.

72

Item 16G. Corporate Governance.

Other than as described in this section, our corporate governance practices do not differ from those followed by domestic companies listed on the NASDAQ Capital Market. NASDAQ Listing Rule 5635 generally provides that shareholder approval is required of U.S. domestic companies listed on the NASDAQ Capital Market prior to issuance (or potential issuance) of securities (i) equaling 20% or more of the company’s common stock or voting power for less than the greater of market or book value or (ii) resulting in a change of control of the company. Notwithstanding this general requirement, NASDAQ Listing Rule 5615(a)(3)(A) permits foreign private issuers like the Company to follow their home country practice rather than these shareholder approval requirements. The British Virgin Islands does not require shareholder approval prior to either of the foregoing sorts of issuances. The Company, therefore, is not required to obtain such shareholder approval prior to entering into a transaction with the potential to issue securities as described above. The Board of Directors of the Company has elected to follow home BVI country rule as to such issuances and will not be required to seek shareholder approval prior to entering into such a transaction.

Item 16H. Mine Safety Disclosure.

Not applicable. 

73

PART III

Item 17. Financial Statements

See Item 18.

Item 18. Financial Statements

The consolidated financial statements of Dehaier Medical Systems Limited are included at the end of this annual report, beginning with page F-1.

Item 19. Exhibits

Exhibit
Number	Document
1.1	Third Amended and Restated Articles of Association of the Registrant(1)
1.2	Third Amended and Restated Memorandum of Association of the Registrant(1)
2.1	Specimen Share Certificate(1)
2.2	Form of Warrant to purchase Common Shares by the Company. (2)
4.1	2009 Share Incentive Plan(1)
4.2	2013 Share Incentive Plan(3)
4.3	2014 Share Incentive Plan(4)
4.4	Warrant Repurchase Agreement(5)
4.5	Share Purchase Agreement(6)
4.6	First Amendment to Share Purchase Agreement(6)
11.1	Code of Business Conduct and Ethics(1)
12.1	Certifications pursuant to Rule 13a-14(a) or 15(d)-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(7)
12.2	Certifications pursuant to Rule 13a-14(a) or 15(d)-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(7)
13.1	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(8)
13.2	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(8)
15.1	Audit Committee Charter(9)

74

101.INS	XBRL Instance Document(8)
101.SCH	XBRL Taxonomy Extension Schema Document(8)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document(8)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document(8)
101.LAB	XBRL Taxonomy Extension Label Linkbase Document(8)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document(8)

(1)	Incorporated by reference to the registrant’s registration statement on Form S-1, File no. 333-163041, filed on November 12, 2009, as amended.
(2)	Incorporated by reference to the registrant’s Form 6-K, File no. 001-34661, filed on February 21, 2014.
(3)	Incorporated by reference to the registrant’s Form 6-K, File no. 001-34661, filed on November 29, 2013.
(4)	Incorporated by reference to the registrant’s proxy statement for the registrant’s annual meeting of shareholders for the fiscal year ended December 31, 2013, File no. 001-34661, filed on July 1, 2014.
(5)	Incorporated by reference to the registrant’s Form 6-K, File no. 001-34661, filed on April 22, 2016.
(6)	Incorporated by reference to the registrant’s Form 6-K, File no. 001-34661, filed on June 30, 2016.
(7)	Filed herewith.
(8)	Furnished herewith.
(9)	Incorporated by reference to the registrant’s Form 10-K, File no. 001-34661, filed on March 31, 2010.

75

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the undersigned certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 20-F and has duly caused this Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 20-F to be signed on its behalf by the undersigned, thereunto duly authorized, in the People’s Republic of China, on the 15th day of July, 2016.

DEHAIER MEDICAL SYSTEMS LIMITED
By:	/s/ Ping Chen
Name:	Ping Chen
Title:	Chief Executive Officer
	Date:  July 15, 2016

76

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

INDEX TO FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS	PAGE
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2015 and 2014 (Restated)	F-3
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2015, 2014 (Restated) and 2013	F-4
Consolidated Statements of Equity for the Years Ended December 31, 2015, 2014 (Restated) and 2013	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014 (Restated) and 2013	F-6
Notes to the Consolidated Financial Statements	F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Directors of

Dehaier Medical Systems Limited and Affiliate

We have audited the accompanying consolidated balance sheets of Dehaier Medical Systems Limited and Affiliate (the "Company") as of December 31, 2015 and 2014, and the related consolidated statements of operations and comprehensive income (loss), stockholders' equity and cash flows for the years ended December 31, 2015 and 2014. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2015 and 2014 and the results of operations and their cash flows for the years ended December 31, 2015 and 2014, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements for the year ended December 31, 2014 have been restated to give effect to the correction of accounting errors (see Note 3).

/s/ HHC

Forest Hills, New York

July 15, 2016

F-2

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

CONSOLIDATED BALANCE SHEETS

	December 31,			December 31,
	2015			2014
	US$			US$
				(Restated)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		624,724			1,727,763
Accounts receivable, net		619,412			142,229
Other receivables, net		67,059			1,670,681
Advances to suppliers - third parties		598,095			1,603,566
Advance to supplier - related party		875,044			1,498,627
Inventories, net		3,975,114			4,083,338
Current assets held for discontinued operation		70,093			2,663,313
Total Current Assets		6,829,541			13,389,517
Property and equipment, net		2,249,185			2,694,167
Intangible assets, net		4,448,804			5,014,470
Long-term prepaid expenses		308,925			142,377
Other assets held for discontinued operation		-			1,651
Total Assets		13,836,455			21,242,182
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term borrowings		1,541,000			2,440,500
Short-term borrowings - related party		2,175,892			-
Accounts payable		275,551			67,094
Advances from customers		42,980			61,443
Accrued expenses and other current liabilities		1,798,354			460,613
Taxes payable		114,112			134,814
Warranty obligation		11,708			134,220
Current liabilities held for discontinued operation		407,257			351,684
Total Current Liabilities		6,366,854			3,650,368
OTHER LIABILITIES
Warrants liability		162,736			553,060
Total Liabilities		6,529,590			4,203,428
Commitments and Contingency
Equity
Common shares, $0.002731 par value, 18,307,038 shares authorized, 6,194,475 and 5,808,675 shares issued and outstanding at December 31, 2015 and 2014, respectively		16,918			15,864
Additional paid in capital		19,810,905			18,719,965
Retained earnings		(16,377,900	)		(6,154,770	)
Accumulated other comprehensive income		2,989,116			3,400,199
Total Dehaier Medical Systems Limited shareholders' equity		6,439,039			15,981,258
Non-controlling interest		867,826			1,057,496
Total equity		7,306,865			17,038,754
Total liabilities and equity		13,836,455			21,242,182

The accompanying notes are an integral part of these consolidated financial statements.

F-3

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

	For the Years Ended
	December 31,
	2015			2014			2013
	US$			US$			US$
				(Restated)
Revenues		1,321,543			2,774,241			7,402,473
Costs of revenue		(1,435,955	)		(1,782,407	)		(4,589,404	)
Gross profit (loss)		(114,412	)		991,834			2,813,069
Service incomes		1,723,542			131,446			309,060
Service expenses		(1,378,829	)		(34,519	)		(54,761	)
General and administrative expenses		(4,261,972	)		(1,945,226	)		(1,944,054	)
Provision for doubtful accounts		(8,544	)		(389,198	)		-
Selling expenses		(3,046,408	)		(227,304	)		(519,016	)
Operating income (loss)		(7,086,623	)		(1,472,967	)		604,298
Financial expenses		(194,685	)		(174,301	)		(164,074	)
Other incomes		19,553			83,762			-
Other expenses		(2,770	)		(22,299	)		(468,676	)
Change in fair value of warrants liability		390,324			2,866,171			(346,691	)
Income (loss) before provision for income tax and non-controlling interest		(6,874,201	)		1,280,366			(375,143	)
Provision for income tax (expense) benefit		11,978			(357,726	)		(522,279	)
Net income (loss) from continuing operations		(6,862,223	)		922,640			(897,422	)
Net income (loss) from discontinuing operations		(3,500,112	)		(25,956,512	)		2,900,748
Net Income (Loss)		(10,362,335	)		(25,033,872	)		2,003,326
Less: net income (loss) attributable to non-controlling interest		(139,205	)		(735,758	)		7,705
Net income (loss) attributable to Dehaier Medical Systems Limited		(10,223,130	)		(24,298,114	)		1,995,621
Net income (loss) from continuing operations		(6,862,223	)		922,640			(897,422	)
Net income (loss) from discontinuing operations		(3,500,112	)		(25,956,512	)		2,900,748
Other comprehensive income (loss)
Foreign currency translation gain (loss)		(461,548	)		(576,891	)		1,028,124
Comprehensive income (loss)		(10,823,883	)		(25,610,763	)		3,031,450
-less comprehensive income (loss) attributable to the non-controlling interest		(189,670	)		(762,777	)		52,960
Comprehensive income (loss) attributable to Dehaier Medical Systems Limited		(10,634,213	)		(24,847,986	)		2,978,490
Earnings (loss) per share
-Basic		(1.74	)		(4.41	)		0.43
-Diluted		(1.73	)		(4.34	)		0.43
Weighted average number of common shares used in computation
-Basic		5,862,647			5,510,076			4,625,195
-Diluted		5,896,534			5,597,169			4,676,127

The accompanying notes are an integral part of these consolidated financial statements.

F-4

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

CONSOLIDATED STATEMENTS OF EQUITY

	Common stock				Additional Paid-in Capital		Retained Earnings			Accumulated other comprehensive income			Non-controlling interest			Total
	Shares		US$		US$		US$			US$			US$			US$
Balance as of January 1, 2013	4,620,000		12,618		13,500,847		16,147,723			2,967,202			1,439,906			34,068,296
Issuance of 8,000 shares upon excise of share-based awards		8,000		22		11,578		-			-			-			11,600
Issuance of 94,000 options to employees		-		-		9,761		-			-			-			9,761
Issuance of 40,000 shares to non-employee		40,000		109		145,491		-			-			-			145,600
Additional paid in capital		-		-		-		-			-			327,407			327,407
Stock based compensation		-		-		84,510		-			-			-			84,510
Foreign currency translation gain		-		-		-		-			982,869			45,255			1,028,124
Net income		-		-		-		1,995,621			-			7,705			2,003,326
Balance as of December 31, 2013		4,668,000		12,749		13,752,187		18,143,344			3,950,071			1,820,273			37,678,624
Issuance of 134,000 shares upon excise of share-based awards		134,000		366		193,934		-			-			-			194,300
Issuance of 160,000 shares to non-employee		160,000		437		643,564		-			-			-			644,001
Issuance of 734,700 shares to investors		734,700		2,006		3,366,165		-			-			-			3,368,171
Issuance shares to employees, directors and officers		111,975		306		603,502		-			-			-			603,808
Stock based compensation		-		-		160,613		-			-			-			160,613
Foreign currency translation loss (Restated)		-		-		-		-			(549,872	)		(27,019	)		(576,891	)
Net loss (Restated)		-		-		-		(24,298,114	)					(735,758	)		(25,033,872	)
Balance as of December 31, 2014 (Restated)		5,808,675		15,864		18,719,965		(6,154,770	)		3,400,199			1,057,496			17,038,754
Issuance of 25,000 shares upon excise of share-based awards		25,000		68		36,182		-			-			-			36,250
Issuance of 12,000 shares to non-employee		12,000		33		32,307		-			-			-			32,340
Issuance of 348,800 shares to employee		348,800		953		665,255		-			-			-			666,208
Issuance of 349,000 options to employees		-		-		113,771		-			-			-			113,771
Stock based compensation		-		-		243,425		-			-			-			243,425
Foreign currency translation		-		-		-		-			(411,083	)		(50,465	)		(461,548	)
Net loss		-		-		-		(10,223,130	)		-			(139,205	)		(10,362,335	)
Balance as of December 31, 2015		6,194,475		16,918		19,810,905		(16,377,900	)		2,989,116			867,826			7,306,865

The accompanying notes are an integral part of these consolidated financial statements.

F-5

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the years ended
	December 31,
	2015			2014			2013
	US$			US$			US$
				(Restated)
Cash flows from operating activities
Net income (loss)		(10,362,335	)		(25,033,872	)		2,003,326
Net income (loss) from discontinued operations		(3,500,112	)		(25,956,512	)		2,900,748
Net income (loss) from continuing operations		(6,862,223	)		922,640			(897,422	)
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Stock-based compensation expense		1,055,744			1,408,421			239,871
Depreciation and amortization		619,207			269,595			216,369
Change in fair value of warrants liability		(390,324	)		(2,866,171	)		346,691
Change in deferred tax assets		-			125,676			(2,698	)
Provision for accounts receivable		10,014			35,900			-
Provision (benefit) for other receivables		(1,899	)		27,200			-
Provision for advances to suppliers - third parties		429			326,098			-
Change in warranty reserve		(120,105	)		(209,227	)		-
Provision for inventory obsolescence		16,203			142,207			-
Changes in assets and liabilities:
(Increase) Decrease in accounts receivable		(487,197	)		1,743,792			2,366,023
Decrease (Increase) in advances to suppliers - third parties		1,005,042			3,751,434
Decrease (Increase) in advance to supplier - related party		623,583			(1,498,627	)		(4,004,830	)
Decrease (Increase) in other receivables		1,605,521			(443,285	)		2,265,617
Decrease (Increase) in inventories		92,020			(3,676,810	)		(171,634	)
Decrease (Increase) in taxes receivable		-			372,935			(34,569	)
Increase in long-term prepaid expenses		(166,548	)		(142,377	)
Increase (Decrease) in accounts payable		208,457			(19,710	)		72,791
(Decrease) Increase in advances from customers		(18,463	)		(256,504	)		278,300
Increase (Decrease) in accrued expenses and other current liabilities		1,337,741			(33,961	)		85,926
(Decrease) Increase in taxes payable		(20,702	)		52,064			(325,464	)
Net cash (used in) provided by operating activities from continuing operations		(1,493,500	)		31,290			434,971
Net cash (used in) provided by operating activities from discontinued operations		(851,315	)		4,106,063			(635,421	)
Net cash (used in) provided by operating activities		(2,344,815	)		4,137,353			(200,450	)
Cash flows from investing activities
Capital expenditures and other additions		(27,861	)		(2,053,039	)		(8,536	)
Purchases of intangible assets		-			(3,353,353	)		-
Net cash used in investing activities from continuing operations		(27,861	)		(5,406,392	)		(8,536	)
Net cash used in investing activities from discontinued operations		-			(5,791,256	)		(1,122,085	)
Net cash used in investing activities		(27,861	)		(11,197,648	)		(1,130,621	)
Cash flows from financing activities
Proceeds from related party		3,867,859			-			-
Repayment of the loan from related party		(1,603,590	)		-			-
Proceeds from bank loan		4,008,975			2,944,000			2,503,747
Repayments of bank loan		(4,810,770	)		(2,948,700	)		(2,502,457	)
Capital contributed by non-controlling interest		-			-			329,576
Net proceeds from option exercises		36,250			194,300			-
Net proceeds from issuance of common stock		-			6,066,546			-
Net cash provided by financing activities		1,498,724			6,256,146			330,866
Effect of exchange rate fluctuations on cash and cash equivalents		(229,087	)		(61,033	)		87,820
Net decrease in cash and cash equivalents		(1,103,039	)		(865,182	)		(912,385	)
Cash and cash equivalents at beginning of year		1,727,763			2,592,945			3,505,330
Cash and cash equivalents at end of year		624,724			1,727,763			2,592,945
Supplemental cash flow information
Income tax paid		-			188,695			688,219
Interest paid		196,220			176,231			159,482
Uncollected option exercise proceeds recorded as other receivable		-			-			11,600

The accompanying notes are an integral part of these consolidated financial statements.

F-6

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

Dehaier Medical Systems Limited (“Dehaier” or the “Company”) was incorporated in the British Virgin Islands in 2003 as a limited liability company. Dehaier distributes and provides after-sale services for medical equipment in China mainly through its majority-owned subsidiary Beijing Dehaier Medical Technology Co. Limited (“BDL”) and its affiliate Beijing Dehaier Technology Limited (“BTL”). On November 9, 2011, Dehaier established a wholly-owned subsidiary in the United States, Breathcare LLC (“Breathcare”). Both BDL and BTL were incorporated in the People’s Republic of China (“PRC”). During the late 2015, BDL intended to discontinue part of its product lines among the traditional medical device business, which has been approved by the Board of Resolution on February 22, 2016. The results of operations of the discontinued traditional medical device business are reflected in the Company’s consolidated financial statements as discontinued operations. Dehaier, through its subsidiaries and affiliate, distributes branded, proprietary medical equipment, such as sleep apnea machines, ventilator air compressors, Color Dopller Imaging Machine and laryngoscope. Standard product registration, product certification and quality management system have been established; ISO13485 industry standard has also already been passed. It also has the distribution rights for a number of international medical equipment suppliers for products including ventilator, Color Dopller Imaging Machine, laryngoscope, sleep apnea machines and other medical equipment accessories.

On January 14, 2016, the Company completed an acquisition of 0.8% equity interest of BDL from Beijing Dehaier Technology Co., Ltd. (“BTL”). The Company now holds 100% of the equity interest of BDL. This change reflects BTL’s reduced reliance on business with BDL in providing repair and maintenance services.

On February 1, 2016, the Company set up a wholly owned subsidiary, Connection Wearable Health Technology (Beijing) Co., Ltd. (“CWHT”), in Beijing, for its future business development at the portable health device market. The relevant legal procedures to establish CWHT were completed on June 20, 2016.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Basis of Consolidation

The consolidated financial statements include the accounts of Dehaier and its majority-owned and wholly-owned subsidiaries (collectively, the “Company”). All inter-company transactions and balances are eliminated in consolidation.

A group of shareholders, including the Chief Executive Officer, originally held more than 50% of the voting ownership interest of Dehaier, BDL and BTL. BTL owns a building which is pledged as collateral for BDL’s bank loans. In exchange, BDL loans money to BTL to finance its operations. BTL’s primary operation is to provide repairs and transportation services to BDL’s customers. Because of these arrangements, BDL is the primary beneficiary of BTL, as the entity that is most closely associated with BTL. BTL is considered a variable interest entity (“VIE”) of BDL. Management makes ongoing reassessments of whether BDL is the primary beneficiary of BTL.

The accounts of BTL are consolidated in the accompanying financial statements pursuant to Accounting Standards Codification (“ASC”) 810-10, “Consolidation”. As a VIE, BTL’s revenues are included in the Company’s service income, and its income from operations is consolidated with the Company’s. Because of the arrangements, the Company had a pecuniary interest in BTL that requires consolidation of the Company’s and BTL’s financial statements.

On December 13, 2013, an additional capital of RMB 2,000,000 (approximately $327,400) was contributed to BTL by its shareholders.

The carrying amount and classification of BTL’s assets and liabilities included in the Consolidated Balance Sheets are as follows:

	December 31,
	2015			2014
	US$			US$
				(Restated)
Total current assets held for continuing operation		768,448			286,222
Total current assets held for discontinued operation		36,337			88,728
Total assets held for continuing operation		1,281,521			1,052,659
Total assets held for discontinued operation		36,337			88,728
Total current liabilities held for continuing operation		264,235			38,554
Total current liabilities held for discontinued operation		185,796			45,339
Total liabilities held for continuing operation		264,235			38,554
Total liabilities held for discontinued operation		185,796			45,339
Total revenue held for continuing operation		583,242			-
Total revenue held for discontinued operation		56,630			403,992
Net loss held for continuing operation		(163,353	)		(47,196	)
Net income (loss) held for discontinued operation		24,148			(688,562	)

F-7

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Reclassifications

Certain prior year balances were reclassified to conform to the current year's presentation with consideration of reflecting the Company’s traditional medical device business as discontinued operations. None of these reclassifications had an impact on reported financial position or cash flows for any of the periods presented.

Use of Estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates are adjusted to reflect actual experience when necessary. Significant accounting estimates reflected in the Company’s consolidated financial statements include revenue recognition, allowance for doubtful accounts, warranty obligation, warrants liability, stock-based compensation and useful lives of intangible assets, and property and equipment. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and highly liquid investments which are unrestricted as to withdrawal or use, and which have maturities of three months or less when purchased. The Company maintains uninsured cash and cash equivalents with various financial institutions mainly in the PRC and the United States.

Accounts Receivable, net

Accounts receivable are recorded at net realizable value. Accounts receivable terms typically are net 60-180 days from the end of the month in which the services were provided, or when goods were delivered. The Company generally does not require collateral or other security to support accounts receivable. An allowance, if required, is based on a combination of historical experience, aging analysis, and an evaluation of the collectability of specific accounts. Management considers that receivables over 1 year to be past due. Management has determined that an allowance of $80,163 and $74,476 from the continuing operations was appropriate at December 31, 2015 and 2014, respectively. Management has determined that an allowance of $8,833,017 and $12,464,175 from the discontinued operations was appropriate at December 31, 2015 and 2014, respectively.

Other Receivables, net

Other receivables primarily include advances to employees and deposits to service providers. Management regularly reviews aging of receivables and changes in payment trends and records a reserve when management believes collection of amounts due are at risk. Accounts considered uncollectible are written off after exhaustive efforts at collection. Management has determined that an allowance of $622,673 and $625,935 from the continuing operations was appropriate at December 31, 2015 and 2014. Management has determined that an allowance of $1,701,264 and $1,797,835 from the discontinued operations was appropriate at December 31, 2015 and 2014.

Advances to Suppliers, net

The Company, as is the common practice in the PRC, often makes advance payments to suppliers for unassembled parts. Advances to suppliers are reviewed periodically to determine whether their carrying value has become impaired. Management has determined that an allowance of advances to suppliers – third parties in the amount of $96,496 and $326,098 from the continuing operations was appropriate at December 31, 2015 and 2014. Management has determined that an allowance of advances to suppliers – third parties in the amount of $4,157,647 and $8,571,652 from the discontinued operations was appropriate at December 31, 2015 and 2014. As of December 31, 2015 and 2014, the Company has not experienced impairment losses on prepayment to related parties.

F-8

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair Value of Financial Instruments

The carrying amounts reported in the consolidated financial statements for current assets and current liabilities approximate fair value due to the short-term nature of these financial instruments.

The Company follows the provisions of ASC topic 815, “Derivatives and Hedging”. ASC topic 815 provides a framework for determining whether an instrument is indexed to an entity's own stock. Warrants are indexed to the Company's stock, which is traded in US dollars. Since the Company's functional currency is the RMB, such warrants are considered liabilities. The fair value of the warrants liability is measured each reporting period with the resulting change in fair value recorded in the consolidated statements of income and comprehensive income.

The accounting standards regarding fair value of financial instruments and related fair value measurements define fair value, and establish a three-level valuation hierarchy for disclosures of fair value.

The three levels are defined as follows:

· Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

· Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

· Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The fair value of the warrants was determined using the Black Scholes Model, with level 2 inputs (See Note 15).

If the sum of the expected undiscounted cash flows of the long-lived assets is less than the carrying amount of the long-lived assets, we recognize an impairment loss based on the excess of the carrying amount of the asset group over its fair value, generally based upon discounted cash flows or quoted market prices, with level 3 inputs. Management used historical selling prices and a discount rate of 6.5% based on the Company’s average borrowing rate to present value its future cash flows (See Note 8).

Inventories

Inventories are stated at the lower of cost or market and consist of assembled and unassembled parts relating to medical devices. The Company reviews its inventory annually for possible obsolete goods and to determine if any reserves are necessary. The reserve for obsolescence from the continuing operation was $34,089 and $35,992 at December 31, 2015 and 2014. The reserve for obsolescence from the discontinued operations was $967,363 and $1,065,196 at December 31, 2015 and 2014.

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated on a straight-line basis over the following estimated useful lives:

Leasehold improvements	Shorter of the useful lives or the lease term
Building and land use rights	20-40 years
Machinery and equipment	10-15 years
Furniture and office equipment	5 years
Motor vehicles	5 years

F-9

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Intangible Assets

Intangible assets are recorded at cost less accumulated amortization. Amortization is calculated on a straight-line basis over the following estimated useful lives:

Leasehold improvements	Shorter of the useful lives or the lease term
Software copyrights	20 years
Other software	5 years

Impairment of Long-Lived Assets

The Company reviews the long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. Due to the Company’s discontinued operation plan, the long-lived assets had been classified into continuing and discontinued assets according to the product lines. When these events occur, the Company compares the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the asset and eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of the asset, an impairment loss, equal to the excess of the carrying amount over the fair value of the asset, is recognized. Management has determined that the impairment existed at the balance sheet dates for the Company’s intangible assets in the amount of $1,495,353.07 and $1,578,806 from the discontinued operations at December 31, 2015 and 2014, respectively. Management has determined that the impairment existed at the balance sheet dates for the Company’s property and equipment in the amount of $1,050,869 and $1,977,848 from the discontinued operations as at December 31, 2015 and 2014, respectively.

Revenue Recognition

The Company recognizes revenues when all the followings conditions have been satisfied:

· Persuasive evidence of an arrangement exists;

· Delivery and/or installation have occurred (e.g., risks and rewards of ownership have passed);

· The sales price is fixed or determinable; and,

· Collectability is reasonably assured.

All revenues are based on firm customer orders with fixed terms and conditions. Because the products are assembled to the customers’ specification, there is no right of return. The Company does not provide its customers with price protection or cash rebates. For products that include software, the software is an off-the-shelf package and an integral part of the products being delivered. The Company does not provide any significant post-sale customer support services and does not provide customers with upgrades. The software is incidental to the product as a whole. For products that do not require installation, revenues are recognized when the products are delivered. For products that require installation, revenues are recognized when the installation is completed.

For all service incomes, the Company recognizes the revenues upon the completion of the repairs when the equipment has been returned to and accepted by the customers.

In the PRC, value added tax (VAT) of 17% of the invoice amount is collected in respect of the sales of goods on behalf of tax authorities. The VAT collected is not revenue of the Company; instead, the amount is recorded as a liability on the balance sheet until such VAT is paid to the authorities.

Cost of Revenues

Cost of revenues primarily includes wages to assemble parts and the costs of unassembled parts, handling charges, impairment loss, and other expenses associated with the assembly and distribution of products.

Service Income and Expense

Service income and expense represent activities related to repair services provided to the customers by BTL, and the commission fee from customers.

Foreign Currency Translation

The accounts of Dehaier, BDL, BTL and Breathcare are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The accompanying consolidated financial statements are presented in US dollars. Foreign currency transactions are translated into US dollars using fixed exchange rates in effect at the time of the transaction. Generally, foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated statements of income and comprehensive income. The foreign currency accounts of BDL and BTL are translated in accordance with ASC 830-10, “Foreign Currency Matters”. Assets and liabilities are translated at applicable exchange rates quoted by the People’s Bank of China at the balance sheet dates and revenues and expenses are translated at average exchange rates in effect during the periods. Because cash flows are translated based on the average translating rate, amounts related to assets and liabilities reported on the statement of cash flows will not necessary agree with changes in the corresponding balances on the balance sheets. Equity is translated at the historical rate of exchange at the date of capital contribution. Resulting translation adjustments are recorded as other comprehensive income (loss) and accumulated as a separate component of equity

F-10

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Warranty Costs

The Company provides for the estimated cost of product warranties at the time revenue is recognized. The Company's warranty obligation is affected by product failure rates and material usage and service delivery costs incurred in correcting product failure. Should actual product failure rates, material usage or service delivery costs differ from the Company's estimates, the Company may revise its estimated product warranty liability. The term of the product warranty is generally twelve months. The reserve for warranty costs from the continuing operations was $8,174 and $47,046 at December 31, 2015 and 2014, respectively. The reserve for warranty costs from the discontinuing operations was $3,534 and $87,174 at December 31, 2015 and 2014, respectively. Warranty expense from the continuing operations for the years ended December 31, 2015, 2014 and 2013 was $12,274, $2,728 and $25,447, respectively. Warranty expense from the discontinuing operations for the years ended December 31, 2015, 2014 and 2013 was $5,118, $14,268 and $32,515, respectively.

Research and Development Costs

Research and development costs relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. Research and development costs from the continuing operations were $1,918,446, $100,199 and $484,770 for the years ended December 31, 2015, 2014 and 2013, respectively. Research and development costs from the discontinuing operations were $580,216, $515,135 and $0 for the years ended December 31, 2015, 2014 and 2013, respectively.

Earnings per Share

The Company follows the provisions of ASC 260-10, “Earnings per Share”. Basic earnings per share is computed by dividing net income attributable to holders of common shares by the weighted average number of common shares outstanding during the years. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares. Common stock equivalents having an anti-dilutive effect on earnings per share are excluded from the calculation of diluted earnings per share.

Value Added Tax

The Company reports revenues, net of PRC’s value added tax, for all the periods presented in the consolidated statements of income and comprehensive income.

Stock-Based Compensation

The Company records stock-based compensation expense at fair value on the grant date and recognizes the expense over the employee’s requisite service period. The Company’s expected volatility assumption is based on the historical volatility of Company’s stock or the expected volatility of similar entities. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend is based on the Company’s current and expected dividend policy.

F-11

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740-10, “Accounting for Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year; and, (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of available positive and negative evidence. Based on management’s estimate, it is more likely than not that all of the deferred tax assets will not be realized. Therefore, valuation allowance has been provided in the amount of $605,837, $407,539 and $0 as of December 31, 2015, 2014 and 2013.

ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken or expected to be taken on a tax return. Under ASC 740-10, a tax benefit from an uncertain tax position taken or expected to be taken may be recognized only if it is “more likely than not” that the position is sustainable upon examination, based on its technical merits. The tax benefit of a qualifying position under ASC 740-10 would equal the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all the relevant information. A liability (including interest and penalties, if applicable) is established in the financial statements to the extent a current benefit has been recognized on a tax return for matters that are considered contingent upon the outcome of an uncertain tax position. Related interest and penalties, if any, are included as components of income tax expense and income taxes payable. The Company had filed its 2008 and 2009 Value Added Tax (“VAT”) returns for some of its customers during the years ended December 31, 2013, 2014 and 2015. All the potential VAT liabilities on these VAT returns occurred in current period were also accrued as incurred and included in the accompanying consolidated financial statements.

The implementation of ASC 740-10 resulted in no material liability for unrecognized tax benefits. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statements of income and comprehensive income. During the years ended December 31, 2015, 2014 and 2013, the Company did not incur any interest or penalties.

The Company recognizes tax benefits that satisfy a greater than 50% probability threshold and provides for the estimated impact of interest and penalties for such tax.

Liquidity and Going Concern

The sleep respiratory business is the focus of the company's future business. The following event indicates that Dehaier can continue to operate as a going concern.

a. Dehaier has entered into a definitive securities purchase agreement with Hangzhou Liaison Interactive.

On April 28, 2016, the Company entered into a definitive securities purchase agreement with Hangzhou Liaison Interactive Information Technology Co., Ltd. (“Hangzhou Liaison Interactive”), a publicly listed company on the Shenzhen Stock Exchange (ticker:002280) pursuant to which Hangzhou Liaison Interactive has agreed to purchase 11,111,111 restricted common shares of the Company for an aggregate of $20,000,000. The purchase price is $1.80 per share, which represents a 35% premium to company’s closing price of $1.33 on April 27, 2016. The Company already completed the first closing by selling 620,414 shares of these shares to Hangzhou Liaison Interactive under the SPA and expects to close the deal before September 30, 2016.

F-12

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

b. Loan agreement with Mr. Ping Chen

On December 2, 2015, the Company entered into a new interest-free loan agreement with Mr. Ping Chen, the CEO and major shareholder of the Company, in the amount of $3,120,000 (RMB 20,000,000) with no floating interest rate or maturity date. On December 18, 2015, the Company repaid half of the loan in the amount of $1,543,000 (RMB 10,000,000). The remaining portion of the loan will be repaid as agreed between the parties.

c. Loan agreement with Nanjing Bank Company Limited (Beijing Branch)

On December 18, 2015, the Company entered into a new loan agreement with Nanjing Bank Company Limited (Beijing Branch) in the amount of $1,541,000 (RMB 10,000,000) with a floating interest rate which will be 7.2% in 2016. The loan is due on December 18, 2016. Pursuant to the terms of the agreement, the line of credit is secured by BTL’s building and guaranteed by two shareholders of the Company.

d. Earnings forecasting for the future six years

The sleep respiratory business is the focus of the company's future business. Our forecast projection was mainly based on the financial results each month in 2015 as well as our company’s future plans and developments in the operation. The forecast projections are based on actual contracts that reflect the company’s operating activities, internal operating targets and budgets. Our forecasting revenue sources from our sleep respiratory business are from the sales of ventilator, three-level hospital, private medical center, insurance Company. We believe the net income from the sleep respiratory business can sustain our future business development.

Based on the above analysis, the Company's management believes that the basis for the preparation of the 2015 annual financial statements based on the continuing operation assumption is reasonable.

Recently Issued Accounting Standards

In January 2015, FASB issued ASU No. 2015-01, Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. This Update is issued as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to the users of financial statements. This Update eliminates from GAAP the concept of extraordinary items. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The effective date is the same for both public business entities and all other entities. The Company does not expect the adoption of ASU 2015-01 to have material impact on the Company’s consolidated financial statements.

In February 2015, FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. This Update focuses on the consolidation evaluation for reporting organizations that are required to evaluate consolidation of certain legal entities by reducing the number of consolidation models from four to two and is intended to improve current GAAP. The amendments in the ASU are effective beginning after December 15, 2016. We do not expect the adoption of ASU 2015-02 to have material impact on our consolidated financial statements.

In April 2015, FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments in the ASU are effective beginning after December 15, 2015. We do not expect the adoption of ASU 2015-03 to have material impact on our consolidated financial statements.

F-13

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In July 2015, the FASB issued ASU No. 2015-11, an amendment to Topic 330 for simplifying the measurement of inventory. The update requires that inventory be measured at the lower of cost and net realizable value where net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendment is intended to provide clarification on the measurement and disclosure of inventory in Topic 330 and not intended for those clarifications to result in any changes in practice. The ASU is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted for all entities and should be applied prospectively. The Company does not expect the adoption of ASU 2015-11 to have material impact on the Company’s consolidated financial statements.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers, to defer the effective date of ASC 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASC 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Management is evaluating the effect, if any, on the Company’s consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, to simplify the presentation of deferred income taxes. The update requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The update applies to all entities that present a classified statement of financial position. For public business entities, the ASU is effective for consolidated financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the ASU is effective for consolidated financial statements issued for annual periods beginning after December 15, 2017, and interim periods with annual periods beginning after December 15, 2018. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company has elected to early adopt the ASU, and its effects are reflected in the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The update requires equity investments (except those accounted for under the equity method or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. It eliminated the requirement for public entities to disclose the method(s) and significant assumptions used to estimate the fair value that is require to be disclosed for financial instruments measured at amortized cost on the balance sheet. For public entities, the ASU is effective for the fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management is evaluating the effect, if any, on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Amendments to the ASC 842 Leases. This update requires lessee to recognize the assets and liability (the lease liability) arising from operating leases on the balance sheet for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Within a twelve month or less lease term, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. If a lessee makes this election, it should recognize lease expense on a straight-line basis over the lease term. In transition, this update will be effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management is evaluating the effect, if any, on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-03, “Intangibles-Goodwill and Other (Topic 350); Business Combinations (Topic 805); Consolidation (Topic 810); Derivatives and Hedging (Topic 815): Effective Date and Transition Guidance”. The amendments in this ASU make the guidance in ASUs 2014-02, 2014-03, 2014-07, and 2014-18 effective immediately by removing their effective dates. The amendments also include transition provisions that provide that private companies are able to forgo a prefer ability assessment the first time they elect the accounting alternatives within the scope of this ASU. Any subsequent change to an accounting policy election requires justification that the change is preferable under Topic 250, Accounting Changes and Error Corrections. The amendments in this ASU also extend the transition guidance in ASUs 2014-02, 2014-03, 2014-07, and 2014-18 indefinitely. While this ASU extends transition guidance for Updates 2014-07 and 2014-18, there is no intention to change how transition is applied for those two ASUs. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

F-14

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In March, 2016, the FASB released ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to employee Share-Based Payment Accounting. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to significantly impact net income, EPS, and the statement of cash flows. Implementation and administration may present challenges for companies with significant share-based payment activities. The ASU is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. The Company is currently evaluating the impact of adoption on the consolidated financial statements.

In April 2016, the FASB issued ASU 2016- 10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”. The amendments add further guidance on identifying performance obligations and also to improve the operability and understandability of the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein. Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

In May 2016, the FASB issued ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting”, The amendments rescinds SEC paragraphs pursuant to two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force (EITF) meeting. Specifically, registrants should not rely on the following SEC Staff Observer comments upon adoption of Topic 606: 1) Revenue and Expense Recognition for Freight Services in Process, which is codified in paragraph 605-20-S99-2; 2) Accounting for Shipping and Handling Fees and Costs, which is codified in paragraph 605-45-S99-1; 3) Accounting for Consideration Given by a Vendor to a Customer (including Reseller of the Vendor's Products), which is codified in paragraph 605-50-S99-1; 4) Accounting for Gas-Balancing Arrangements (i.e., use of the "entitlements method"), which is codified in paragraph 932-10-S99-5, which is effective upon adoption of ASU 2014-09. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

In May 2016, the FASB issued ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients". The amendments, among other things: (1) clarify the objective of the collectability criterion for applying paragraph 606-10-25-7; (2) permit an entity to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price; (3) specify that the measurement date for noncash consideration is contract inception; (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations; (5) clarify that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application, and (6) clarify that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. The effective date of these amendments is at the same date that Topic 606 is effective. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

F-15

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. RESTATEMENT OF FINANCIAL STATEMENTS

On February 22, 2016, the Company’s management along with the Company’s Board of Directors agreed to focus the Company’s business interests on new mobile medical devices, and decided to discontinue their traditional medical device business interest. The traditional medical device line of business included assembly and sales of X-ray machines, anesthesia machines, monitoring devices, general medical products, and oxygen generators. The mobile medical device business will focus on the development of the Company’s remaining product line, inclusive of products such as the second generation ventilator, general medical products (such as laryngoscope), compressor products, sleep respiratory products, and wireless medical devices.

As part of their decision to discontinue its traditional medical device business, the Company reevaluated its prior beliefs and estimates about certain assets as of 2014. The Board of Directors concluded that the audited consolidated financial statements for the year ended December 31, 2014 included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2014, originally filed with the Securities and Exchange Commission on April 30, 2015, should no longer be relied upon due to an understatement of bad debt allowances for accounts receivable and other receivables, an overstatement of prepayments and carrying value of long-lived assets and an inadequate reserve on inventory. As a result, management determined that a fair presentation of the Company’s financial statements in light of the 2016 decision to classify traditional medical device operations as discontinued required the Company to increase bad debt allowances for accounts receivable and other receivables, to write down some prepayments, to place increased reserve on inventory due to obsolescence, and to write down the carrying value of long-lived assets to the fair value less disposal cost. These error corrections will be presented as restatements, in addition to presenting the traditional medical device business as a discontinued operation, as determined by the Company’s management and Board of Directors. The effects of the restatement were as follows:

	As of December 31,
	2014					2014
	As Previously Reported		Effect of Restatement			Restated
	US$		US$			US$
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		1,727,763		-			1,727,763
Accounts receivable, net		169,765		(27,536	)		142,229
Other receivables, net		1,693,466		(22,785	)		1,670,681
Advances to suppliers - third parties		1,929,663		(326,097	)		1,603,566
Advance to supplier - related party		-		1,498,627			1,498,627
Inventories, net		4,119,330		(35,992	)		4,083,338
Tax receivable		138,986		(138,986	)		-
Deferred tax asset		407,539		(407,539	)		-
Current assets held for discontinued operation		20,908,018		(18,244,705	)		2,663,313
Total Current Assets		31,094,530		(17,705,013	)		13,389,517
Deposits for purchase of property, plant and equipment-related party		1,498,627		(1,498,627	)		-
Property and equipment, net		2,694,167		-			2,694,167
Intangible assets, net		5,014,470		-			5,014,470
Long-term prepaid expenses		-		142,377			142,377
Other assets held for discontinued operation		6,643,480		(6,641,829	)		1,651
Total Assets		46,945,274		(25,703,092	)		21,242,182
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term borrowings		2,440,500		-			2,440,500
Accounts payable		67,094		-			67,094
Advances from customers		61,443		-			61,443
Accrued expenses and other current liabilities		477,387		(16,774	)		460,613
Taxes payable		134,814		-			134,814
Warranty obligation		134,220		-			134,220
Current liabilities held for discontinued operation		362,791		(11,107	)		351,684
Total Current Liabilities		3,678,249		(27,881	)		3,650,368
OTHER LIABILITIES
Warrants liability		553,060		-			553,060
Total Liabilities		4,231,309		(27,881	)		4,203,428
Commitments and Contingency
Equity
Common shares, $0.002731 par value, 18,307,038 shares authorized, 6,194,475 and 5,808,675 shares issued and outstanding at December 31, 2015 and 2014, respectively		15,864		-			15,864
Additional paid in capital		18,719,965		-			18,719,965
Retained earnings		19,142,337		(25,297,107	)		(6,154,770	)
Accumulated other comprehensive income		3,382,707		17,492			3,400,199
Total Dehaier Medical Systems Limited shareholders' equity		41,260,873		(25,279,615	)		15,981,258
Non-controlling interest		1,453,092		(395,596	)		1,057,496
Total equity		42,713,965		(25,675,211	)		17,038,754
Total liabilities and equity		46,945,274		(25,703,092	)		21,242,182

F-16

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. RESTATEMENT OF FINANCIAL STATEMENTS (CONTINUED)

	For the Years Ended
	December 31,
	2014						2014
	As Previously Reported			Effect of Restatement			Restated
	US$			US$			US$
Revenues		2,774,241			-			2,774,241
Costs of revenue		(1,746,399	)		(36,008	)		(1,782,407	)
Gross profit		1,027,842			(36,008	)		991,834
Service incomes		131,446			-			131,446
Service expenses		(34,519	)		-			(34,519	)
General and administrative expenses		(1,945,226	)		-			(1,945,226	)
Provision for doubtful accounts		(8,351	)		(380,847	)		(389,198	)
Selling expenses		(227,304	)		-			(227,304	)
Operating loss		(1,056,112	)		(416,855	)		(1,472,967	)
Financial expenses		(195,965	)		21,664			(174,301	)
Other incomes		83,762			-			83,762
Other expenses		-			(22,299	)		(22,299	)
Loss on disposal of equipment		(635	)		635			-
Change in fair value of warrants liability		2,866,171			-			2,866,171
Income before provision for income tax and non-controlling interest		1,697,221			(416,855	)		1,280,366
Provision for income tax (expense) benefit		49,991			(407,717	)		(357,726	)
Net income from continuing operations		1,747,212			(824,572	)		922,640
Net income (loss) from discontinuing operations		(1,088,208	)		(24,868,304	)		(25,956,512	)
Net Income (Loss)		659,004			(25,692,876	)		(25,033,872	)
Less: net loss attributable to non-controlling interest		(339,989	)		(395,769	)		(735,758	)
Net income (loss) attributable to Dehaier Medical Systems Limited		998,993			(25,297,107	)		(24,298,114	)
Net income from continuing operations		1,747,212			(824,572	)		922,640
Net income (loss) from discontinuing operations		(1,088,208	)		(24,868,304	)		(25,956,512	)
Other comprehensive income (loss)
Foreign currency translation loss		(592,421	)		15,530			(576,891	)
Comprehensive income (loss)		66,583			(25,677,346	)		(25,610,763	)
-less comprehensive loss attributable to the non-controlling interest		(340,194	)		(422,583	)		(762,777	)
Comprehensive income (loss) attributable to Dehaier Medical Systems Limited		406,777			(25,254,763	)		(24,847,986	)
Earnings (loss) per share
-Basic		0.18			(4.59	)		(4.41	)
-Diluted		0.18			(4.52	)		(4.34	)
Weighted average number of common shares used in computation
-Basic		5,510,076			-			5,510,076
-Diluted		5,597,169			-			5,597,169

F-17

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. RESTATEMENT OF FINANCIAL STATEMENTS (CONTINUED)

	For the years ended
	December 31,
	2014						2014
	As Previously Reported			Effect of Restatement			Restated
	US$			US$			US$
Cash flows from operating activities
Net income (loss)		659,004			(25,692,876	)		(25,033,872	)
Net income (loss) from discontinued operations		(1,088,208	)		(24,868,304	)		(25,956,512	)
Net income from continuing operations		1,747,212			(824,572	)		922,640
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Stock-based compensation expense		1,408,421			-			1,408,421
Depreciation and amortization		269,595			-			269,595
Change in fair value of warrants liability		(2,866,171	)		-			(2,866,171	)
Change in deferred tax assets		(282,041	)		407,717			125,676
Provision for accounts receivable		8,351			27,549			35,900
Provision for other receivables		-			27,200			27,200
Provision for advances to suppliers - third parties		-			326,098			326,098
Change in warranty reserve		(209,227	)		-			(209,227	)
Provision for inventory obsolescence		106,199			36,008			142,207
Changes in assets and liabilities:
(Increase) Decrease in accounts receivable		1,743,792			-			1,743,792
Decrease in advances to suppliers - third parties		3,751,434			-			3,751,434
Increase in advance to supplier - related party		(1,498,627	)		-			(1,498,627	)
Increase in other receivables		(443,285	)		-			(443,285	)
Increase in inventories		(3,676,810	)		-			(3,676,810	)
Decrease in taxes receivable		372,935			-			372,935
Increase in long-term prepaid expenses		(142,377	)		-			(142,377	)
Decrease in accounts payable		(19,710	)		-			(19,710	)
Decrease in advances from customers		(256,504	)		-			(256,504	)
Decrease in accrued expenses and other current liabilities		(33,961	)		-			(33,961	)
Increase in taxes payable		52,064			-			52,064
Net cash (used in) provided by operating activities from continuing operations		31,290			-			31,290
Net cash provided by operating activities from discontinued operations		4,106,063			-			4,106,063
Net cash provided by (used in) operating activities		4,137,353			-			4,137,353
Cash flows from investing activities
Capital expenditures and other additions		(2,053,039	)		-			(2,053,039	)
Purchases of intangible assets		(3,353,353	)		-			(3,353,353	)
Net cash used in investing activities from continuing operations		(5,406,392	)		-			(5,406,392	)
Net cash used in investing activities from discontinued operations		(5,791,256	)		-			(5,791,256	)
Net cash used in investing activities		(11,197,648	)		-			(11,197,648	)
Cash flows from financing activities
Proceeds from bank loan		2,944,000			-			2,944,000
Repayments of bank loan		(2,948,700	)		-			(2,948,700	)
Net proceeds from option exercises		194,300			-			194,300
Net proceeds from issuance of common stock		6,066,546			-			6,066,546
Net cash provided by financing activities		6,256,146			-			6,256,146
Effect of exchange rate fluctuations on cash and cash equivalents		(61,033	)		-			(61,033	)
Net decrease in cash and cash equivalents		(865,182	)		-			(865,182	)
Cash and cash equivalents at beginning of year		2,592,945			-			2,592,945
Cash and cash equivalents at end of year		1,727,763			-			1,727,763
Supplemental cash flow information
Income tax paid		188,695			-			188,695
Interest paid		176,231			-			176,231

F-18

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. ACCOUNTS RECEIVABLE, NET

Accounts receivable from the continuing operation consist of the following:

	December 31,
	2015			2014
	US$			US$
				(Restated)
Accounts receivable		9,569,468			13,425,508
Less: allowance for doubtful accounts		(8,913,180	)		(12,538,651	)
Net accounts receivable		656,288			886,857
Less: accounts receivable, net, held for discontinued operations		(36,876	)		(744,628	)
Accounts receivable, net, held for continuing operations		619,412			142,229

Movement of allowance for doubtful accounts is as follows:

	December 31,
	2015			2014
	US$			US$
				(Restated)
Beginning balance		12,538,651			935,865
Addition		164,039			11,621,912
Less: write-off		(3,247,077	)		-
Exchange rate effect		(542,433	)		(19,126	)
Ending balance		8,913,180			12,538,651
Less: balance held for discontinued operations		(8,833,017	)		(12,464,175	)
Ending balance held for continuing operations		80,163			74,476

F-19

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5. OTHER RECEIVABLES, NET

Other receivables from the continuing operations consist of the following:

	December 31,
	2015			2014
	US$			US$
				(Restated)
Contract deposits		1,700,339			1,814,105
Loan to third party		-			1,562,700
Advances to employees		9,234			16,842
Others		681,423			769,154
Other receivables		2,390,996			4,162,801
Less: allowance for doubtful accounts		(2,323,937	)		(2,423,770	)
Net other receivables		67,059			1,739,031
Less: other receivables, net, held for discontinued operations		-			(68,350	)
Other receivables, net, held for continuing operations		67,059			1,670,681

Movement of allowance for doubtful accounts is as follows:

	December 31,
	2015			2014
	US$			US$
				(Restated)
Beginning balance		2,423,770			598,747
Addition		151,376			1,825,820
Less: write-off		(157,208	)		-
Exchange rate effect		(94,001	)		(797	)
Ending balance		2,323,937			2,423,770
Less: balance held for discontinued operations		(1,701,264	)		(1,797,835	)
Ending balance held for continuing operations		622,673			625,935

6. ADVANCES TO SUPPLIERS – THIRD PARTIES, NET

Advance to suppliers – third parties from continuing operations consist of the following:

	December 31,
	2015			2014
	US$			US$
				(Restated)
Advances to suppliers - third parties		4,885,455			10,739,923
Less: allowance for doubtful accounts		(4,254,143	)		(8,897,750	)
Total advances to suppliers - third parties		631,312			1,842,173
Less: advances to suppliers - third parties held for discontinued operations		(33,217	)		(238,607	)
Advances to suppliers - third party held for continuing operations		598,095			1,603,566

F-20

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. ADVANCES TO SUPPLIERS – THIRD PARTIES, NET (CONTINUED)

Movement of allowance for doubtful accounts is as follows:

	December 31,
	2015			2014
	US$			US$
				(Restated)
Beginning balance		8,897,750			-
Addition		311,420			8,901,490
Less: write-off		(4,662,795	)		-
Exchange rate effect		(292,232	)		(3,740	)
Ending balance		4,254,143			8,897,750
Less: balance held for discontinued operations		(4,157,647	)		(8,571,652	)
Ending balance held for continuing operations		96,496			326,098

Advance to supplier – related party from continuing operations consists of the following:

	December 31,
	2015		2014
	US$		US$
Advance to supplier - related party	875,044		1,498,627
Less: allowance for doubtful accounts		-		-
Total advance to supplier - related party		875,044		1,498,627
Less: advance to supplier - related party held for discontinued operations		-		-
Advance to supplier - related party held for continuing operations		875,044		1,498,627

7. INVENTORIES

Inventories from the continuing operations consist of the following:

	December 31,
	2015			2014
	US$			US$
				(Restated)
Inventories		4,976,566			6,796,254
Less: provision for slow moving inventories		(1,001,452	)		(1,101,188	)
Net inventories		3,975,114			5,695,066
Less: inventories, net, held for discontinued operations		-			(1,611,728	)
Inventories, net, held for continuing operations		3,975,114			4,083,338

Movement of provision for slow moving inventories is as follows:

	December 31,
	2015			2014
	US$			US$
				(Restated)
Beginning balance		1,101,188			53,281
Addition		1,934,836			1,049,165
Less: write-off		(1,978,052	)		-
Exchange rate effect		(56,520	)		(1,258	)
Ending balance		1,001,452			1,101,188
Less: balance held for discontinued operations		(967,363	)		(1,065,196	)
Ending balance held for continuing operations		34,089			35,992

F-21

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

8. PROPERTY AND EQUIPMENT, NET

Property and equipment from continuing operations consist of the following:

	December 31,
	2015			2014
	US$			US$
				(Restated)
Buildings		1,311,422			1,384,609
Land use rights		299,570			316,289
Plant and machinery		2,936,103			5,114,148
Automobiles		147,720			193,930
Office and computer equipment		238,647			447,619
Total property and equipment		4,933,462			7,456,595
Less: Accumulated depreciation and amortization		(1,633,408	)		(2,782,929	)
Impairment of long-lived assets		(1,050,869	)		(1,977,848	)
Property and equipment, net		2,249,185			2,695,818
Less: property and equipment, net, held for discontinued operations		-			(1,651	)
Property and equipment, net, held for continuing operations		2,249,185			2,694,167

At December 31, 2015 and 2014, BTL’s building was pledged to a bank as collateral for the Company’s short-term borrowings of RMB 10,000,000 ($1,541,000) and RMB 15,000,000 ($2,440,500), respectively (see Note 9).

Depreciation and amortization expense from the continuing operations were $306,386, $165,532 and $116,017 for the years ended December 31, 2015, 2014 and 2013, respectively. Depreciation and amortization expense from the discontinuing operations were $0, $329,068 and $360,020 for the years ended December 31, 2015, 2014 and 2013, respectively. Impairment loss from the discontinuing operations was $0 and $1,978,711 for the years ended December 31, 2015 and 2014, respectively.

Land Use Rights

There is no private ownership of land in China. Land is owned by the government and the government grants land use rights for specified terms. The value of the Company’s land use rights is reported at the purchase price of RMB 1,944,000 in 2002.

F-22

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

9 INTANGIBLE ASSETS, NET

Intangible assets from continuing operations consist of the following:

	December 31,
	2015			2014
	US$			US$
				(Restated)
Software Copyright		3,754,861			3,964,412
Patent and others		2,847,940			3,006,878
Total intangible assets		6,602,801			6,971,290
Less: Accumulated and amortization		(658,644	)		(378,014	)
Impairment loss		(1,495,353	)		(1,578,806	)
Intangible assets, net		4,448,804			5,014,470
Less: intangible assets, net, held for discontinued operations		-			-
Intangible assets, net, held for continuing operations		4,448,804			5,014,470

Amortization expense from the continuing operations was $312,821, $104,063 and $100,352 for the years ended December 31, 2015, 2014 and 2013, respectively. Amortization expense from the discontinuing operations was $0, $47,610 and $43,501 for the years ended December 31, 2015, 2014 and 2013, respectively. Impairment loss from the discontinuing operations was $0 and $1,579,495 for the years ended December 31, 2015 and 2014, respectively. Annual future amortization expense at December 31 as follows:

	US$
2016		386,540
2017		383,447
2018		381,238
2019		381,238
2020		381,238
2021 and thereafter		2,535,103
		4,448,804

F-23

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10. SHORT-TERM BORROWINGS

The Company has a line of credit for $1,541,000 and 2,440,500 with Nanjing Bank Company Limited (Beijing Branch) to finance its working capital as of December 31, 2015 and 2014. The credit line bears interest at a floating interest rate which will be approximately 7.2% in 2016 and is renewed annually. Average interest rates for the years ended December 31, 2015, 2014 and 2013 were 7.20%, 7.50% and 6.30%, respectively. Pursuant to the terms of the agreement, the line of credit is secured by BTL’s building (see note 7) and guaranteed by BDL and two shareholders of the Company.

On January 28, 2015, the Company repaid the loan in the amount of $1,603,590 (RMB 10,000,000) with Nanjing Bank Company Limited (Beijing Branch). On March 7, 2015, the Company repaid the loan in the amount of $801,795 (RMB 5,000,000) with Nanjing Bank Company Limited (Beijing Branch).

On March 3, 2015, the Company entered into a new loan agreement with Nanjing Bank Company Limited (Beijing Branch) in the amount of $2,405,385 (RMB 15,000,000) with a floating interest rate which will be 7.811% in 2015. The loan is due on March 3, 2016 and had been early repaid on December 2, 2015. Pursuant to the terms of the agreement, the line of credit is secured by BTL’s building and guaranteed by two shareholders of the Company.

On March 27, 2015, the Company entered into a new loan agreement with Mr. Ping Chen, who is the CEO and a major shareholder of the Company, in the amount of $660,679 (RMB 4,120,000) with a floating interest rate which was 6.96% in 2015. The loan is due on March 27, 2016 and had been renewed with a new repayment date at March 27, 2017.

On December 2, 2015, the Company entered into a new loan agreement with Mr. Ping Chen in the amount of $3,207,180 (RMB 20,000,000) with no floating interest rate and maturity date. On December 18, 2015, the Company repaid half of the loan in the amount of $1,603,590 (RMB 10,000,000). The remaining will be repaid as agreed between the parties.

On December 18, 2015, the Company entered into a new loan agreement with Nanjing Bank Company Limited (Beijing Branch) in the amount of $1,603,590 (RMB 10,000,000) with a floating interest rate which will be 7.2% in 2016. The loan is due on December 18, 2016. Pursuant to the terms of the agreement, the line of credit is secured by BTL’s building and guaranteed by two shareholders of the Company.

Interest expense on short-term borrowings amounted to $196,220, $176,160 and $159,483 for the years ended December 31, 2015, 2014 and 2013, respectively.

11. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Other payables and other current liabilities from continuing operations consist of the following:

	December 31,
	2015			2014
	US$			US$
				(Restated)
Accrued salaries and social welfare		94,037			116,557
Accrued expenses		1,541,415			233,339
Reimbursed employee's expense		79,363			29,848
Deposits from customer		113,834			94,181
Others		155,501			32,031
Accrued expenses and other current liabilities		1,984,150			505,956
Less: Accrued expenses and other current liabilities from discontinued operations		(185,796	)		(45,343	)
Accrued expenses and other current liabilities from continuing operations		1,798,354			460,613

F-24

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. TAXES PAYABLE

Taxes payable consist of the following:

	December 31,
	2015		2014
	US$		US$
Value added tax		11,896		10,978
Enterprise income tax		97,299		114,881
Employee withholding taxes		3,727		3,759
City construction tax		595		2,598
Other levies		595		2,598
		114,112		134,814

13. NON-CONTROLLING INTEREST

Non-controlling interest consists of the following:

	December 31,
	2015			2014
	US$			US$
				(Restated)
Paid-in capital		713,787			713,787
Retained earnings (accumulated deficit)		(112,365	)		26,840
Accumulated other comprehensive income		266,404			316,869
		867,826			1,057,496

F-25

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14. COMMITMENTS AND CONTINGENCY

Leases

The lease commitments are for office premises which are classified as operating leases. These non-cancelable leases have lease terms expiring through October 2016. Approximate future minimum lease payments under these leases at December 31, 2015 are $11,090 for the twelve months ending December 31, 2016.

Rent expense for the years ended December 31, 2015, 2014 and 2013 was $111,552, $94,590 and $136,784, respectively.

Employment Contracts

Under the PRC labor law, all employees have signed employment contracts with the Company. Management employees have employment contracts with terms up to three years and non-management employees have a one year employment contract renewable on an annual basis.

Contingency

The Labor Contract Law of the People’s Republic of China requires employers to assure the liability of the severance payments if employees are terminated and have been working for the employers for at least two years prior to January 1, 2008. The Company has estimated its possible severance payments of approximately $462,015 and $457,842 as of December 31, 2015 and 2014, respectively, which have not been reflected in its consolidated financial statements, because it is more likely than not that this will not be paid or incurred.

15. EQUITY

Common Shares

On January 11, 2014, Dehaier issued 68,000 ordinary shares to individuals upon exercises of share-based awards.

On January 15, 2014, Dehaier issued 40,000 restricted common shares to independent consultants in connection with investment counseling and financial advisory services rendered for the Company. The fair value of the shares on the grant date based on the closing price was approximately $145,600.

On February 21, 2014, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain institutional investors for the sale of 734,700 common shares in a registered offering at the price of $9.12 per common share. The net cash proceeds received from the stock offering, after deducting underwriter commission and other associated fees, were approximately $6.1 million. In addition, the Company issued 220,410 warrants to the institutional investors aggregately. The warrants are exercisable immediately as of the date of issuance at an exercise price of $11.86 per common share and expire forty-two months from the date of issuance. The Company also issued warrants to purchase 73,470 ordinary shares to the placement agent (“Placement Agent Warrant”). The Placement Agent Warrants are on substantially the same terms as the warrants issued pursuant to the Purchase Agreement.

On April 24, 2014, Dehaier issued 40,000 restricted common shares to independent consultants in connection with investment counseling and financial advisory services rendered for the Company. The fair value of the shares on the grant date based on the closing price was approximately $145,600.

On April 8, 2014, Dehaier issued 62,000 ordinary shares to individuals upon exercises of share-based awards.

On May 29, 2014, Dehaier issued 4,000 ordinary shares to individuals upon exercises of share-based awards.

On August 16, 2014, Dehaier issued 11,975 ordinary shares to individuals for the Company’s incentive plan. The fair value of the shares on the grant date based on the closing price was approximately $72,808.

On August 20, 2014, Dehaier issued 131,000 options to employees for the Company’s incentive plan. The fair value of the options on the grant date based on the closing price was approximately $674,570.

On October 22, 2014, Dehaier issued 100,000 ordinary shares to employees for the Company’s incentive plan. The fair value of the shares on the grant date based on the closing price was approximately $531,000.

On October 22, 2014, Dehaier issued 80,000 ordinary shares to independent consultants in connection with investment counseling and financial advisory services rendered for the Company. The fair value of the shares on the grant date based on the closing price was approximately $352,800.

On January 20, 2015, Dehaier issued 25,000 ordinary shares to individuals upon exercises of share-based awards.

On February 26, 2015, Dehaier issued 12,000 ordinary shares to independent consultants in connection with investment relationship advisory services rendered for the Company. The fair value of the shares on the grant date based on the closing price was approximately $32,340.

On July 29, 2015, Dehaier issued 348,800 ordinary shares to employees for the Company’s incentive plan. The fair value of the shares on the grant date based on the closing price was approximately $666,208.

F-26

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15. EQUITY (CONTINUED)

Statutory Surplus Reserves

A PRC company is required to make appropriations to statutory surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations to the statutory surplus reserve is required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entity’s’ registered capital. 

The statutory surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of shares currently held by them, provided that the remaining statutory surplus reserve balance after such issue is not less than 25% of the registered capital.

Since Dehaier is a British Virgin Islands company, it will not be subject to the statutory surplus reserve provisions. BDL is a joint-venture company and the statutory surplus reserve provisions will be determined by its board of directors. As of December 31, 2015, BDL’s board of directors has not yet made such determination. Therefore, no amount was allocated to the statutory surplus reserve account.

BTL appropriated 10% of its net profits as statutory surplus reserve, which is included as part of the non-controlling interest in the equity section. For the years ended December 31, 2015, 2014 and 2013, statutory surplus reserve activity was as follows:

	December 31,
	2015		2014		2013
	US$		US$		US$
l   Balance – beginning of year		76,260		76,260		75,489
l   Addition to statutory reserves		-		-		771
l   Balance – end of year		76,260		76,260		76,260

Stock Option Plan

Under the employee stock option plan, the Company’s stock options expire five years from the date of grant. On December 29, 2011, the Company entered into five-year agreements with its employees and directors, pursuant to which, the Company issued an aggregate of 450,000 options at an exercise price of $1.45 per share. The options vest in equal annual installments over the five years of the agreements ending December 31, 2016. On October 7, 2013, pursuant to the Company’s Share Incentive Plan, the Company granted a non-statutory option to acquire 94,000 of the Company’s common shares at an exercise price of $2.30 per share to Chen Ping, the CEO of the Company. The options vest in equal annual installments over the five years of the agreement ending October 7, 2018. On August 20, 2014, pursuant to the Company’s Share Incentive Plan, the Company granted additional option to acquire 131,000 of the Company’s common shares at an exercise price of $5.31 per share to Chen Ping. The options vest in equal annual installments over the five years of the agreement ending August 20, 2019. On August 7, 2015, the Company entered into two-year agreements with its employees and directors, pursuant to which, the Company issued an aggregate of 349,000 options at an exercise price of $1.64 per share. The options vest in equal annual installments over the two years of the agreements ending August 7, 2017. As of December 31, 2015, 581,200 options have not been vested.

The Company valued the stock options using the Black-Scholes model with the following assumptions:

						Grant Date
Expected	Expected		Dividend		Risk Free	Fair Value
Terms (years)	Volatility		Yield		Interest Rate	Per share
5-5.75		126% - 228%		0%	0.73% - 1.65%	$1.22 - $5.15

F-27

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

15 EQUITY (CONTINUED)

Stock Option Plan (Continued)

The following is a summary of the option activity:

				Weighted average		Aggregate
Stock options	Shares			exercise price		intrinsic value
Outstanding as of December 31, 2013		442,000		$	1.63	$	994,160
Granted		131,000
Forfeited		(31,000	)
Exercised		(134,000	)
Outstanding as of December 31, 2014		408,000		$	2.89	$	(63,320	)
Granted		349,000
Forfeited		(12,000	)
Exercised		(25,000	)
Outstanding as of December 31, 2015		720,000		$	2.36	$	(68,670	)

Following is a summary of the status of options outstanding and exercisable at December 31, 2015:

Outstanding options						Exercisable options
Average exercise price		Number		Average remaining contractual life (years)		Average exercise price		Number		Average remaining contractual life (years)
$	1.45		146,000		1.00	$	1.45		87,000		1.00
$	2.3		94,000		2.77	$	2.3		37,600		2.77
$	5.31		131,000		3.64	$	5.31		26,200		3.64
$	1.64		349,000		1.60	$	1.64		-		1.6

For the years ended December 31, 2015, 2014 and 2013, the Company recognized $357,196, $160,613 and $94,271, respectively, as compensation expense under its stock option plan.

16. WARRANTS

On April 21, 2010, the Company issued to Anderson & Strudwick Incorporated (“A&S”) 150,000 warrants, as a portion of the placement commission for the IPO. On the same day, the Company granted a total of 7,500 warrants to Hawk Associates Inc. (“Hawk”), the Company’s investor relations consultancy. On January 10, 2012, the Company issued 100,000 warrants to FirsTrust Group, Inc., (“FirsTrust”), the Company’s financial advisor.

F-28

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

16. WARRANTS (CONTINUED)

In connection with the stock offering in February, 2014, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain institutional investors for the sale of 734,700 common shares in a registered offering at the price of $9.12 per common share. In addition, the Company issued 220,410 warrants to the institutional investors aggregately and issued 73,470 warrants to FT Global Capital, Inc. (“FT Global”), as a portion of the placement commission. These warrants will be exercisable immediately as of the date of issuance at an exercise price of $11.86 per common share and expire forty-two months from the date of issuance.

There were a total of 551,380 warrants issued and outstanding as of December 31, 2015. All the warrants issued to “A&S” have the right to purchase one share of common stock for an exercise price of $10.00 per share with a term of 5 years. All the warrants granted to Hawk have the right to purchase one share of common stock for an exercise price of $9.60 per share with a term of 5 years. All the warrants granted to FirsTrust have the right to purchase one share of common stock for an exercise price of $4.00 per share with a term of 5 years. All the warrants granted to the certain institutional investors have the right to purchase one share of common stock for an exercise price of $11.86 per share with a term of 3.5 years. All the warrants granted to FT Global Capital, Inc. have the right to purchase one share of common stock for an exercise price of $11.86 per share with a term of 3.5 years.

The fair value of the outstanding warrants at December 31, 2015 was calculated using the Black Scholes Model with the following assumptions:

Market price per share (USD/share)	2.2619
Exercise price (USD/share)	$4.00-$11.86
Risk free rate	0.66%-0.91%
Dividend yield	-
Expected term/Contractual life (years)	1.02-1.64
Expected volatility	94.85%-110.13%

F-29

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

16. WARRANTS (CONTINUED)

The following table sets forth by level within the fair value hierarchy of our financial assets and liabilities that was accounted for at fair value on a recurring basis as of December 31, 2015 and 2014:

	Carrying Value at		Fair Value Measurement at
	December 31,2015		December 31, 2015
			Level 1		Level 2		Level 3
Warrants liability	$	162,736	$	-	$	162,736	$	-

	Carrying Value at		Fair Value Measurement at
	December 31,2014		December 31, 2014
			Level 1		Level 2		Level 3
Warrants liability	$	553,060	$	-	$	553,060	$	-

The following is a reconciliation of the beginning and ending balances of warrants liability measured at fair value on a recurring basis using Level 2 inputs:

	December 31,
	2015			2014			2013
	US$			US$			US$
Beginning balance		553,060			720,857			374,166
Warrants issued		-			2,698,374			-
Fair value change of the issued warrants included in earnings		(390,324	)		(2,866,171	)		346,691
Ending balance		162,736			553,060			720,857

Following is a summary of the warrants activity:

			Weighted Average		Weighted Average Remaining
	Number		Exercise Price		Contractual Life
Outstanding as of December 31, 2013	257,500		$7.66		1.97
Granted		293,880
Forfeited		-
Exercised		-
Outstanding as of December 31, 2014		551,380	$	9.90		1.86
Granted		-
Forfeited		-
Exercised		-
Outstanding as of December 31, 2015		551,380	$	9.86		1.49

F-30

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

17. EARNINGS (LOSS) PER SHARE

The following is a reconciliation of the basic and diluted earnings (loss) per share computation for the years ended December 31, 2015, 2014 and 2013:

	Year ended
	December 31,
	2015			2014			2013
				(Restated)
Basic earnings (loss) per share
Net income (loss) available to the company’s common shareholders	$	(10,223,130	)	$	(24,298,114	)	$	1,995,621
Weighted average shares outstanding - Basic		5,862,647			5,510,076			4,625,195
Earnings (loss) per share - Basic	$	(1.74	)	$	(4.41	)	$	0.43
Diluted earnings (loss) per share
Net income (loss) available to the company’s common shareholders	$	(10,223,130	)	$	(24,298,114	)	$	1,995,621
Weighted average shares outstanding - Basic		5,862,647			5,510,076			4,625,195
Options and warrants		33,887			87,093			50,932
Weighted shares outstanding - Diluted		5,896,534			5,597,169			4,676,127
Earnings (loss) per share - Diluted	$	(1.73	)	$	(4.34	)	$	0.43

For the years ended December 31, 2015, 2014 and 2013, 33,887 shares of 732,000, 56,838 shares of 277,000, 50,932 shares of 348,000 stock options were exercisable and included in the diluted EPS calculation. As of December 31, 2015, 0 shares out of 551,380 warrants were included in diluted EPS calculation. As of December 31, 2014, 30,255 shares out of 551,380 warrants were included in diluted EPS calculation. As of December 31, 2013, none of warrants issued by the Company were included in diluted EPS calculation due to anti-dilution.

18. INCOME TAXES

British Virgin Islands

Dehaier is a tax-exempt company incorporated in the British Virgin Islands. BDL and BTL were incorporated in the PRC and are governed by the PRC laws.

F-31

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

18. INCOME TAXES (CONTINUED)

PRC

PRC enterprise income tax is calculated based on the Enterprise Income Tax Law (the “EIT Law”). Under the EIT Law, a unified enterprise income tax rate of 25% and unified tax deduction standards will be applied equally to both domestic-invested enterprises and foreign-invested enterprises.

Under the current PRC laws, PRC government grants a preferential income tax rate of 15% to government-certified high technology companies, and under the new standard the period of validity for the certification of high technology companies is three years. In 2009, 2012 and 2015, BDL updated its certification for “high technology” company. Therefore, BDL used a 15% income tax rate to calculate the income tax expense for the years ended December 31, 2015, 2014 and 2013.

The tax rate for BTL is 25% in 2015, 2014 and 2013.

Provision (benefit) for income taxes consists of:

	Year Ended December 31
	2015		2014			2013
	US$		US$			US$
			(Restated)
Current income taxes benefit (provision)		11,978		(233,884	)		(524,977	)
Deferred income taxes benefit (provision)				(123,842	)		2,698
Total benefit (provision) for income taxes		11,978		(357,726	)		(522,279	)

Deferred taxes assets

The Company periodically evaluates the likelihood of the realization of deferred tax assets, and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. The Company considers many factors when assessing the likelihood of future realization of the deferred tax assets, including its recent cumulative earnings experience, expectation of future income, the carry forward periods available for tax reporting purposes, and other relevant factors. Due to the Company’s strategic restructuring and the downscaled and discontinued part of our product lines, it is more likely that the Company will not realize 100% of the deferred tax assets. Management therefore decided to provide part of the valuation allowance for the deferred tax assets. The valuation allowance - as of December 31, 2015 and 2014 was $605,837 and $407,539. Temporary differences represent tax and book differences in various items, such as receivable allowances, inventory allowances, impairments on fixed assets and deferred lease income.

The following table reconciles the valuation allowance for the year ended December 31, 2015 and 2014, which consisted of the following:

	Year ended December 31,
	2015		2014
	US$		US$
			(Restated)
Beginning balance		407,539		-
Additions		198,298		407,539
Ending balance		605,837		407,539

United States

Breathcare is a limited liability company and, such as, is not subject to federal income tax, instead any income would be taxable to Breathcare’s sole owner. Moreover, as of December 31, 2015, 2014 and 2013, Breathcare was inactive and generated no revenue.

F-32

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

19. RELATED PARTY TRANSACTIONS AND BALANCE

For the year ended December 31, 2015, the Company purchased $565,208 of medical air compressor from HuNan Zhong Yi High-tech Development Co., Ltd. (“Zhong Yi”) which is partially owned by the CEO of the Company. As of December 31, 2015 and 2014, $875,044 and $1,498,627 was advanced to Zhong Yi for raw materials purchases, respectively.

On March 27, 2015, the Company entered into a new loan agreement with Mr. Ping Chen, who is the CEO and a major shareholder of the Company, in the amount of $660,679 (RMB 4,120,000) with a floating interest rate which will be 6.96% in 2016. The loan was due on March 27, 2016 and renewed the repayment date to March 27, 2017.

On December 2, 2015, the Company entered into a new loan agreement with Mr. Ping Chen in the amount of $3,207,180 (RMB 20,000,000) with no floating interest rate and maturity date. On December 18, 2015, the Company repaid half of the loan in the amount of $1,603,590 (RMB 10,000,000). The remaining will be repaid as agreed between the parties.

For the year ended December 31, 2014, the Company purchased $1,142,845 of sleep respiratory systems and $325,400 of telemedicine management system software from HuNan Zhong Yi High-tech Development Co., LTD which is partially owned by CEO. As of December 31, 2014 and 2013, $1,498,627 and nil was advanced to the related party for raw materials purchases, respectively.

20. SUBSIDY INCOME

For the year ended December 31, 2015, the Company has not received any subsidy income. For the year ended December 31, 2014, the Company received approximately $1,253 (RMB 7,700) from the local government in China as subsidy income.

21. CONCENTRATIONS

Major Customers

For the years ended December 31, 2015, 2014 and 2013, approximately 37%, 6% and 24% of the Company’s total revenues were received from two customers for continued operation. For the years ended December 31, 2015, 2014 and 2013, approximately 7%, 11% and 11% of the Company’s total revenues were received from two customers for discontinued operation.

Major Suppliers

For the years ended December 31, 2015, 2014 and 2013, purchases from three suppliers for continued operation were approximately 67%, 28% and 42% of the total purchase, respectively. For the years ended December 31, 2015, 2014 and 2013, purchases from three suppliers for discontinued operation were approximately 9%, 55% and 51% of the total purchase, respectively.

Revenues

For the years ended December 31, 2015, 2014 and 2013, the Company’s top three selling products accounted, in the aggregate, for approximately 72%, 74% and 67%, respectively, of its total net revenues.

F-33

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

21. CONCENTRATIONS (CONTINUED)

The following represents the revenues by product line, all derived from China:

	For the years ended
	December 31,
	2015			2014			2013
	US$			US$			US$
Products Line
Medical Devices		1,500,957			16,000,881			14,824,028
Respiratory and Oxygen Homecare		20,573			53,755			2,034,150
Mobile Medicine		164,503			1,631,413			-
Total Revenues		1,686,033			17,686,049			16,858,178
Less: revenues from discontinued operations		(364,490	)		(14,911,808	)		(9,455,705	)
Revenues from continuing operations		1,321,543			2,774,241			7,402,473

22. DISCONTINUED OPERATIONS

In accordance with ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. When all of the criteria to be classified as held for sale are met, including management, having the authority to approve the action, commits to a plan to sell the entity, the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as a component of net income (loss) separate from the net income (loss) of continuing operations in accordance with ASC 205-20-45.

Reconciliation of the Carrying Amounts of Major Classes of Assets and Liabilities of Discontinued Operations Classified as discontinued operations in the Consolidated Balance Sheets.

	December 31,
	2015		2014
	US$		US$
			(Restated)
ASSETS
CURRENT ASSETS:
Accounts receivable, net		36,876		744,628
Other receivables, net		-		68,350
Advances to suppliers – third parties		33,217		238,607
Inventories, net		-		1,611,728
Total Current Assets		70,093		2,663,313
Property and equipment, net		-		1,651
Total Assets		70,093		2,664,964
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable		146,029		204,047
Advances from customers		75,432		102,294
Accrued expenses and other current liabilities		185,796		45,343
Total Current Liabilities		407,257		351,684

F-34

DEHAIER MEDICAL SYSTEMS LIMITED AND AFFILIATE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

22. DISCONTINUED OPERATIONS (CONTINUED)

Reconciliation of the Carrying Amounts of Major Classes of Net Income (Loss) from Operations to be Disposed Classified as discontinued operations in the Consolidated Statements of Operations and Comprehensive Loss.

	For the Years Ended
	December 31,
	2015			2014			2013
	US$			US$			US$
				(Restated)
Revenues		364,490			14,911,808			9,455,705
Costs of revenue		(2,190,140	)		(13,162,235	)		(5,858,208	)
Gross profit (loss)		(1,825,650	)		1,749,573			3,597,497
Service incomes		84,774			233,819			-
Service expenses		(54,173	)		(10,845	)		-
General and administrative expenses		(693,881	)		(1,464,043	)		-
Provision for doubtful accounts		(618,290	)		(21,960,025	)		(33,556	)
Impairment loss for property and equipment		-			(1,978,711	)		-
Impairment loss for intangible assets		-			(1,579,495	)		-
Selling expenses		(392,892	)		(946,785	)		(663,193	)
Operating Income (loss)		(3,500,112	)		(25,956,512	)		2,900,748
Income (loss) before provision for income tax and non-controlling interest		(3,500,112	)		(25,956,512	)		2,900,748
Provision for income tax expense		-			-			-
Net income (loss) from discontinuing operations		(3,500,112	)		(25,956,512	)		2,900,748

23. SUBSEQUENT EVENTS

On June 24, 2016, we signed a strategic cooperation agreement with Hongyuan Supply Chain Management Co., Ltd. to develop Dehaier’s new Internet medical technology business. Under the strategic cooperation agreement, we will leverage Hongyuan Supply Chain’s sales platform to reach Dehaier’s dealers and end users more efficiently, selling our wearable sleep apnea diagnostic system medical devices to Hongyuan Supply Chain for further downchain sale and distribution.

On June 28, 2016, we entered into Amendment No.1 to Share Purchase Agreement dated on April 28, 2016 with Hangzhou Liaison Interactive Information Technology Co., Ltd. (“Hangzhou Liaison Interactive”), a publicly listed company on the Shenzhen Stock Exchange. As previously announced, the Company entered into an SPA with Hangzhou Liaison Interactive. On June 6, 2016, the Company sold 620,414 of these shares to Hangzhou Liaison Interactive in a first closing under the SPA. In accordance with Amendment No.1 to SPA, the closing date is extended from June 30, 2016 to September 30, 2016.

On April 21, 2016, we entered into warrant repurchase agreements with the holders of certain warrants pursuant to which the Company agreed to repurchase from the Holders the Company’s outstanding warrant to purchase in aggregate 293,880 shares of the Company’s common shares, with an exercise price of $11.86 per share (the “Warrants”). The Warrants were issued on February 21, 2014 in connection with the Company’s registered direct offering of approximately $6.7 million of common shares and warrants. Pursuant to the Warrant Purchase Agreements, the Company will pay an aggregate cash purchase price of $1,116,744 ($3.80 per share underlying the Warrants) to repurchase the Warrants.

On April 28, 2016, we entered into a definitive securities purchase agreement with Hangzhou Liaison Interactive pursuant to which Hangzhou Liaison Interactive has agreed to purchase 11,111,111 restricted common shares of the Company for an aggregate of $20,000,000. The purchase price is $1.80 per share, which represents a 35% premium to the Company’s closing price of $1.33 on April 27, 2016.

F-35

EX-12.1

Exhibit 12.1

Certification of Principal Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

and Securities and Exchange Commission Release 34-46427

I, Ping Chen, certify that:

(1) I have reviewed this Form 20-F of Dehaier Medical Systems Limited;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

(5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:     July 15, 2016	/s/ Ping Chen
	Ping Chen
	Chief Executive Officer (Principal Executive Officer)

EX-12.2

Exhibit 12.2

Certification of Principal Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

and Securities and Exchange Commission Release 34-46427

I, Huili (Alisa) Li, certify that:

(1) I have reviewed this Form 20-F of Dehaier Medical Systems Limited;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

(5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:     July 15, 2016	/s/ Huili (Alisa) Li
	Huili (Alisa) Li
	Chief Financial Officer (Principal Financial Officer)

EX-13.1

Exhibit 13.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Form 20-F report of Dehaier Medical Systems Limited for the period ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof and pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Ping Chen, certify that: 

(1) This report containing the financial statements fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the this period report fairly presents, in all material respects, the financial condition and results of operations of Dehaier Medical Systems Limited.

Date:     July 15, 2016	/s/ Ping Chen
	Ping Chen
	Chief Executive Officer (Principal Executive Officer)

EX-13.2

Exhibit 13.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Form 20-F report of Dehaier Medical Systems Limited for the period ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof and pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Huili (Alisa) Li, certify that: 

(1) This report containing the financial statements fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the this period report fairly presents, in all material respects, the financial condition and results of operations of Dehaier Medical Systems Limited.

Date:     July 15, 2016	/s/ Huili (Alisa) Li
	Huili (Alisa) Li
	Chief Financial Officer (Principal Financial Officer)

XML

Document And Entity Information - shares	12 Months Ended
	Dec. 31, 2015	Jul. 15, 2016
Document Information [Line Items]
Entity Registrant Name	Dehaier Medical Systems Ltd
Entity Central Index Key	0001474627
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Trading Symbol	DHRM
Entity Common Stock, Shares Outstanding		6,821,889
Document Type	20-F
Amendment Flag	false
Document Period End Date	Dec. 31, 2015
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2015
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes

XML

CONSOLIDATED BALANCE SHEETS - USD ($)	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
CURRENT ASSETS:
Cash and cash equivalents	$ 624,724	$ 1,727,763	$ 2,592,945	$ 3,505,330
Accounts receivable, net	619,412	142,229
Other receivables, net	67,059	1,670,681
Advances to suppliers - third parties	598,095	1,603,566
Advance to supplier - related party	875,044	1,498,627
Inventories, net	3,975,114	4,083,338
Current assets held for discontinued operation	70,093	2,663,313
Total Current Assets	6,829,541	13,389,517
Property and equipment, net	2,249,185	2,694,167
Intangible assets, net	4,448,804	5,014,470
Long-term prepaid expenses	308,925	142,377
Other assets held for discontinued operation	0	1,651
Total Assets	13,836,455	21,242,182
CURRENT LIABILITIES:
Short-term borrowings	1,541,000	2,440,500
Short-term borrowings -related party	2,175,892	0
Accounts payable	275,551	67,094
Advances from customers	42,980	61,443
Accrued expenses and other current liabilities	1,798,354	460,613
Taxes payable	114,112	134,814
Warranty obligation	11,708	134,220
Current liabilities held for discontinued operation	407,257	351,684
Total Current Liabilities	6,366,854	3,650,368
OTHER LIABILITIES
Warrants liability	162,736	553,060
Total Liabilities	6,529,590	4,203,428
Commitments and Contingency
Equity
Common shares, $0.002731 par value, 18,307,038 shares authorized, 6,194,475 and 5,808,675 shares issued and outstanding at December 31, 2015 and 2014, respectively	16,918	15,864
Additional paid in capital	19,810,905	18,719,965
Retained earnings	(16,377,900)	(6,154,770)
Accumulated other comprehensive income	2,989,116	3,400,199
Total Dehaier Medical Systems Limited shareholders' equity	6,439,039	15,981,258
Non-controlling interest	867,826	1,057,496
Total equity	7,306,865	17,038,754	$ 37,678,624	$ 34,068,296
Total liabilities and equity	$ 13,836,455	$ 21,242,182

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2015	Dec. 31, 2014
Common stock, par value (in dollars per share)	$ 0.002731	$ 0.002731
Common stock, shares authorized	18,307,038	18,307,038
Common Stock, Shares, Issued	6,194,475	5,808,675
Common stock, shares outstanding	6,194,475	5,808,675

XML

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Revenues	$ 1,321,543	$ 2,774,241	$ 7,402,473
Costs of revenue	(1,435,955)	(1,782,407)	(4,589,404)
Gross profit (loss)	(114,412)	991,834	2,813,069
Service incomes	1,723,542	131,446	309,060
Service expenses	(1,378,829)	(34,519)	(54,761)
General and administrative expenses	(4,261,972)	(1,945,226)	(1,944,054)
Provision for doubtful accounts	(8,544)	(389,198)	0
Selling expenses	(3,046,408)	(227,304)	(519,016)
Operating income (loss)	(7,086,623)	(1,472,967)	604,298
Financial expenses	(194,685)	(174,301)	(164,074)
Other incomes	19,553	83,762	0
Other expenses	(2,770)	(22,299)	(468,676)
Change in fair value of warrants liability	390,324	2,866,171	(346,691)
Income (loss) before provision for income tax and non-controlling interest	(6,874,201)	1,280,366	(375,143)
Provision for income tax (expense) benefit	11,978	(357,726)	(522,279)
Net income (loss) from continuing operations	(6,862,223)	922,640	(897,422)
Net income (loss) from discontinuing operations	(3,500,112)	(25,956,512)	2,900,748
Net Income (Loss)	(10,362,335)	(25,033,872)	2,003,326
Less: net income (loss) attributable to non-controlling interest	(139,205)	(735,758)	7,705
Net income (loss) attributable to Dehaier Medical Systems Limited	(10,223,130)	(24,298,114)	1,995,621
Net income (loss) from continuing operations	(6,862,223)	922,640	(897,422)
Net income (loss) from discontinuing operations	(3,500,112)	(25,956,512)	2,900,748
Other comprehensive income (loss)
Foreign currency translation gain (loss)	(461,548)	(576,891)	1,028,124
Comprehensive income (loss)	(10,823,883)	(25,610,763)	3,031,450
-less comprehensive income (loss) attributable to the non-controlling interest	(189,670)	(762,777)	52,960
Comprehensive income (loss) attributable to Dehaier Medical Systems Limited	$ (10,634,213)	$ (24,847,986)	$ 2,978,490
Earnings (loss) per share
-Basic	$ (1.74)	$ (4.41)	$ 0.43
-Diluted	$ (1.73)	$ (4.34)	$ 0.43
Weighted average number of common shares used in computation
-Basic	5,862,647	5,510,076	4,625,195
-Diluted	5,896,534	5,597,169	4,676,127

XML

CONSOLIDATED STATEMENTS OF EQUITY - USD ($)	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]	Noncontrolling Interest [Member]
Balance at Dec. 31, 2012	$ 34,068,296	$ 12,618	$ 13,500,847	$ 16,147,723	$ 2,967,202	$ 1,439,906
Balance (in shares) at Dec. 31, 2012		4,620,000
Issuance of 8,000shares upon excise of share-based awards	11,600	$ 22	11,578	0	0	0
Issuance of 8,000 shares upon excise of share-based awards (in shares)		8,000
Issuance of 94,000 options to employees	9,761	$ 0	9,761	0	0	0
Issuance of 94,000 options to employees (in shares)		0
Issuance of 40,000 shares to non-employee	145,600	$ 109	145,491	0	0	0
Issuance of 40,000 shares to non-employee (in shares)		40,000
Additional paid in capital	327,407	$ 0	0	0	0	327,407
Stock based Compensation	84,510	0	84,510	0	0	0
Foreign currency translation gain (loss)	1,028,124	0	0	0	982,869	45,255
Net income (Loss)	2,003,326	0	0	1,995,621	0	7,705
Balance at Dec. 31, 2013	37,678,624	$ 12,749	13,752,187	18,143,344	3,950,071	1,820,273
Balance (shares) at Dec. 31, 2013		4,668,000
Issuance of 134,000 shares upon excise of share-based awards	194,300	$ 366	193,934	0	0	0
Issuance of 134,000 shares upon excise of share-based awards (in shares)		134,000
Issuance of 160,000 shares to non-employee	644,001	$ 437	643,564	0	0	0
Issuance of 160,000 shares to non-employee (in shares)		160,000
Issuance of 734,700 shares to investors	3,368,171	$ 2,006	3,366,165	0	0	0
Issuance of 734,700 shares to investors (in shares)		734,700
Issuance shares to employees, directors and officers	603,808	$ 306	603,502	0	0	0
Issuance shares to employees, directors and officers (in shares)		111,975
Stock based Compensation	160,613	$ 0	160,613	0	0	0
Foreign currency translation gain (loss)	(576,891)	0	0	0	(549,872)	(27,019)
Net income (Loss)	(25,033,872)	0	0	(24,298,114)		(735,758)
Balance at Dec. 31, 2014	17,038,754	$ 15,864	18,719,965	(6,154,770)	3,400,199	1,057,496
Balance (shares) at Dec. 31, 2014		5,808,675
Issuance of 25,000 shares upon excise of share-based awards	36,250	$ 68	36,182	0	0	0
Issuance of 25,000 shares upon excise of share-based awards (in shares)		25,000
Issuance of 12,000 shares to non-employee	32,340	$ 33	32,307	0	0	0
Issuance of 12,000 shares to non-employee (in shares)		12,000
Issuance of 348,800 shares to employee	666,208	$ 953	665,255	0	0	0
Issuance of 348,800 shares to employee (in shares)		348,800
Issuance of 349,000 options to employees	113,771	$ 0	113,771	0	0	0
Issuance of 349,000 options to employees (in shares)		0
Stock based Compensation	243,425	$ 0	243,425	0	0	0
Foreign currency translation gain (loss)	(461,548)	0	0	0	(411,083)	(50,465)
Net income (Loss)	(10,362,335)	0	0	(10,223,130)	0	(139,205)
Balance at Dec. 31, 2015	$ 7,306,865	$ 16,918	$ 19,810,905	$ (16,377,900)	$ 2,989,116	$ 867,826
Balance (shares) at Dec. 31, 2015		6,194,475

XML

CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) - shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Issuance of options to employees (in shares)	349,000	94,000

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Cash flows from operating activities
Net income (loss)	$ (10,362,335)	$ (25,033,872)	$ 2,003,326
Net income (loss) from discontinued operations	(3,500,112)	(25,956,512)	2,900,748
Net income (loss) from continuing operations	(6,862,223)	922,640	(897,422)
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Stock-based compensation expense	1,055,744	1,408,421	239,871
Depreciation and amortization	619,207	269,595	216,369
Change in fair value of warrants liability	(390,324)	(2,866,171)	346,691
Change in deferred tax assets	0	125,676	(2,698)
Provision for accounts receivable	10,014	35,900	0
Provision (benefit) for other receivables	(1,899)	27,200	0
Provision for advances to suppliers - third parties	429	326,098	0
Change in warranty reserve	(120,105)	(209,227)	0
Provision for inventory obsolescence	16,203	142,207	0
Changes in assets and liabilities:
(Increase) Decrease in accounts receivable	(487,197)	1,743,792	2,366,023
Decrease (Increase) in advances to suppliers - third parties	1,005,042	3,751,434
Decrease (Increase) in advance to supplier - related party	623,583	(1,498,627)	(4,004,830)
Decrease (Increase) in other receivables	1,605,521	(443,285)	2,265,617
Decrease (Increase) in inventories	92,020	(3,676,810)	(171,634)
Decrease (Increase) in taxes receivable	0	372,935	(34,569)
Increase in long-term prepaid expenses	(166,548)	(142,377)
Increase (Decrease) in accounts payable	208,457	(19,710)	72,791
(Decrease) Increase in advances from customers	(18,463)	(256,504)	278,300
Increase (Decrease) in accrued expenses and other current liabilities	1,337,741	(33,961)	85,926
(Decrease) Increase in taxes payable	(20,702)	52,064	(325,464)
Net cash (used in) provided by operating activities from continuing operations	(1,493,500)	31,290	434,971
Net cash (used in) provided by operating activities from discontinued operations	(851,315)	4,106,063	(635,421)
Net cash (used in) provided by operating activities	(2,344,815)	4,137,353	(200,450)
Cash flows from investing activities
Capital expenditures and other additions	(27,861)	(2,053,039)	(8,536)
Purchases of intangible assets	0	(3,353,353)	0
Net cash used in investing activities from continuing operations	(27,861)	(5,406,392)	(8,536)
Net cash used in investing activities from discontinued operations	0	(5,791,256)	(1,122,085)
Net cash used in investing activities	(27,861)	(11,197,648)	(1,130,621)
Cash flows from financing activities
Proceeds from related party	3,867,859	0	0
Repayment of the loan from related party	(1,603,590)	0	0
Proceeds from bank loan	4,008,975	2,944,000	2,503,747
Repayments of bank loan	(4,810,770)	(2,948,700)	(2,502,457)
Capital contributed by non-controlling interest	0	0	329,576
Net proceeds from option exercises	36,250	194,300	0
Net proceeds from issuance of common stock	0	6,066,546	0
Net cash provided by financing activities	1,498,724	6,256,146	330,866
Effect of exchange rate fluctuations on cash and cash equivalents	(229,087)	(61,033)	87,820
Net decrease in cash and cash equivalents	(1,103,039)	(865,182)	(912,385)
Cash and cash equivalents at beginning of year	1,727,763	2,592,945	3,505,330
Cash and cash equivalents at end of year	624,724	1,727,763	2,592,945
Supplemental cash flow information
Income tax paid	0	188,695	688,219
Interest paid	196,220	176,231	159,482
Uncollected option exercise proceeds recorded as other receivable	$ 0	$ 0	$ 11,600

XML

ORGANIZATION AND PRINCIPAL ACTIVITIES

12 Months Ended

Dec. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations [Text Block]

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

Dehaier Medical Systems Limited (“Dehaier” or the “Company”) was incorporated in the British Virgin Islands in 2003 as a limited liability company. Dehaier distributes and provides after-sale services for medical equipment in China mainly through its majority-owned subsidiary Beijing Dehaier Medical Technology Co. Limited (“BDL”) and its affiliate Beijing Dehaier Technology Limited (“BTL”). On November 9, 2011, Dehaier established a wholly-owned subsidiary in the United States, Breathcare LLC (“Breathcare”). Both BDL and BTL were incorporated in the People’s Republic of China (“PRC”). During the late 2015, BDL intended to discontinue part of its product lines among the traditional medical device business, which has been approved by the Board of Resolution on February 22, 2016. The results of operations of the discontinued traditional medical device business are reflected in the Company’s consolidated financial statements as discontinued operations. Dehaier, through its subsidiaries and affiliate, distributes branded, proprietary medical equipment, such as sleep apnea machines, ventilator air compressors, Color Dopller Imaging Machine and laryngoscope. Standard product registration, product certification and quality management system have been established; ISO13485 industry standard has also already been passed. It also has the distribution rights for a number of international medical equipment suppliers for products including ventilator, Color Dopller Imaging Machine, laryngoscope, sleep apnea machines and other medical equipment accessories.

On January 14, 2016, the Company completed an acquisition of 0.8% equity interest of BDL from Beijing Dehaier Technology Co., Ltd. (“BTL”). The Company now holds 100% of the equity interest of BDL. This change reflects BTL’s reduced reliance on business with BDL in providing repair and maintenance services.

On February 1, 2016, the Company set up a wholly owned subsidiary, Connection Wearable Health Technology (Beijing) Co., Ltd. (“CWHT”), in Beijing, for its future business development at the portable health device market. The relevant legal procedures to establish CWHT were completed on June 20, 2016.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies [Text Block]

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Basis of Consolidation

The consolidated financial statements include the accounts of Dehaier and its majority-owned and wholly-owned subsidiaries (collectively, the “Company”). All inter-company transactions and balances are eliminated in consolidation.

A group of shareholders, including the Chief Executive Officer, originally held more than 50% of the voting ownership interest of Dehaier, BDL and BTL. BTL owns a building which is pledged as collateral for BDL’s bank loans. In exchange, BDL loans money to BTL to finance its operations. BTL’s primary operation is to provide repairs and transportation services to BDL’s customers. Because of these arrangements, BDL is the primary beneficiary of BTL, as the entity that is most closely associated with BTL. BTL is considered a variable interest entity (“VIE”) of BDL. Management makes ongoing reassessments of whether BDL is the primary beneficiary of BTL.

The accounts of BTL are consolidated in the accompanying financial statements pursuant to Accounting Standards Codification (“ASC”) 810-10, “Consolidation”. As a VIE, BTL’s revenues are included in the Company’s service income, and its income from operations is consolidated with the Company’s. Because of the arrangements, the Company had a pecuniary interest in BTL that requires consolidation of the Company’s and BTL’s financial statements.

On December 13, 2013, an additional capital of RMB  2,000,000 (approximately $327,400) was contributed to BTL by its shareholders.

 

The carrying amount and classification of BTL’s assets and liabilities included in the Consolidated Balance Sheets are as follows:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Total current assets held for continuing operation		768,448		286,222
Total current assets held for discontinued operation		36,337		88,728
Total assets held for continuing operation		1,281,521		1,052,659
Total assets held for discontinued operation		36,337		88,728
Total current liabilities held for continuing operation		264,235		38,554
Total current liabilities held for discontinued operation		185,796		45,339
Total liabilities held for continuing operation		264,235		38,554
Total liabilities held for discontinued operation		185,796		45,339
Total revenue held for continuing operation		583,242		-
Total revenue held for discontinued operation		56,630		403,992
Net loss held for continuing operation		(163,353)		(47,196)
Net income (loss) held for discontinued operation		24,148		(688,562)

Reclassifications

Certain prior year balances were reclassified to conform to the current year's presentation with consideration of reflecting the Company’s traditional medical device business as discontinued operations. None of these reclassifications had an impact on reported financial position or cash flows for any of the periods presented.

Use of Estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates are adjusted to reflect actual experience when necessary. Significant accounting estimates reflected in the Company’s consolidated financial statements include revenue recognition, allowance for doubtful accounts, warranty obligation, warrants liability, stock-based compensation and useful lives of intangible assets, and property and equipment. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and highly liquid investments which are unrestricted as to withdrawal or use, and which have maturities of three months or less when purchased. The Company maintains uninsured cash and cash equivalents with various financial institutions mainly in the PRC and the United States.

Accounts Receivable, net 

Accounts receivable are recorded at net realizable value. Accounts receivable terms typically are net 60-180 days from the end of the month in which the services were provided, or when goods were delivered. The Company generally does not require collateral or other security to support accounts receivable. An allowance, if required, is based on a combination of historical experience, aging analysis, and an evaluation of the collectability of specific accounts. Management considers that receivables over 1 year to be past due. Management has determined that an allowance of $80,163 and $74,476 from the continuing operations was appropriate at December 31, 2015 and 2014, respectively. Management has determined that an allowance of $8,833,017 and $12,464,175 from the discontinued operations was appropriate at December 31, 2015 and 2014, respectively.

Other Receivables, net

Other receivables primarily include advances to employees and deposits to service providers. Management regularly reviews aging of receivables and changes in payment trends and records a reserve when management believes collection of amounts due are at risk. Accounts considered uncollectible are written off after exhaustive efforts at collection. Management has determined that an allowance of $622,673 and $625,935 from the continuing operations was appropriate at December 31, 2015 and 2014. Management has determined that an allowance of $1,701,264 and $1,797,835 from the discontinued operations was appropriate at December 31, 2015 and 2014.

Advances to Suppliers, net

The Company, as is the common practice in the PRC, often makes advance payments to suppliers for unassembled parts. Advances to suppliers are reviewed periodically to determine whether their carrying value has become impaired. Management has determined that an allowance of advances to suppliers – third parties in the amount of $96,496 and $326,098 from the continuing operations was appropriate at December 31, 2015 and 2014. Management has determined that an allowance of advances to suppliers – third parties in the amount of $4,157,647 and $8,571,652 from the discontinued operations was appropriate at December 31, 2015 and 2014. As of December 31, 2015 and 2014, the Company has not experienced impairment losses on prepayment to related parties.

 

Fair Value of Financial Instruments

The carrying amounts reported in the consolidated financial statements for current assets and current liabilities approximate fair value due to the short-term nature of these financial instruments.

The Company follows the provisions of ASC topic 815, “Derivatives and Hedging”. ASC topic 815 provides a framework for determining whether an instrument is indexed to an entity's own stock. Warrants are indexed to the Company's stock, which is traded in US dollars. Since the Company's functional currency is the RMB, such warrants are considered liabilities. The fair value of the warrants liability is measured each reporting period with the resulting change in fair value recorded in the consolidated statements of income and comprehensive income.

The accounting standards regarding fair value of financial instruments and related fair value measurements define fair value, and establish a three-level valuation hierarchy for disclosures of fair value.

The three levels are defined as follows:

⋅ Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

⋅ Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

⋅ Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The fair value of the warrants was determined using the Black Scholes Model, with level 2 inputs (See Note 15).

If the sum of the expected undiscounted cash flows of the long-lived assets is less than the carrying amount of the long-lived assets, we recognize an impairment loss based on the excess of the carrying amount of the asset group over its fair value, generally based upon discounted cash flows or quoted market prices, with level 3 inputs. Management used historical selling prices and a discount rate of 6.5% based on the Company’s average borrowing rate to present value its future cash flows (See Note 8).

Inventories

Inventories are stated at the lower of cost or market and consist of assembled and unassembled parts relating to medical devices. The Company reviews its inventory annually for possible obsolete goods and to determine if any reserves are necessary. The reserve for obsolescence from the continuing operation was $34,089 and $35,992 at December 31, 2015 and 2014. The reserve for obsolescence from the discontinued operations was $967,363 and $1,065,196 at December 31, 2015 and 2014.

 

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated on a straight-line basis over the following estimated useful lives:

Leasehold improvements	Shorter of the useful lives or the lease term
Building and land use rights	20-40 years
Machinery and equipment	10-15 years
Furniture and office equipment	5 years
Motor vehicles	5 years

Intangible Assets

Intangible assets are recorded at cost less accumulated amortization. Amortization is calculated on a straight-line basis over the following estimated useful lives:

Leasehold improvements	Shorter of the useful lives or the lease term
Software copyrights	20 years
Other software	5 years

Impairment of Long-Lived Assets

The Company reviews the long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. Due to the Company’s discontinued operation plan, the long-lived assets had been classified into continuing and discontinued assets according to the product lines. When these events occur, the Company compares the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the asset and eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of the asset, an impairment loss, equal to the excess of the carrying amount over the fair value of the asset, is recognized. Management has determined that the impairment existed at the balance sheet dates for the Company’s intangible assets in the amount of $1,495,353.07 and $1,578,806 from the discontinued operations at December 31, 2015 and 2014, respectively. Management has determined that the impairment existed at the balance sheet dates for the Company’s property and equipment in the amount of $1,050,869 and $1,977,848 from the discontinued operations as at December 31, 2015 and 2014, respectively.

Revenue Recognition

The Company recognizes revenues when all the followings conditions have been satisfied:

⋅ Persuasive evidence of an arrangement exists;

⋅ Delivery and/or installation have occurred (e.g., risks and rewards of ownership have passed);

⋅ The sales price is fixed or determinable; and,

⋅ Collectability is reasonably assured.

All revenues are based on firm customer orders with fixed terms and conditions. Because the products are assembled to the customers’ specification, there is no right of return. The Company does not provide its customers with price protection or cash rebates. For products that include software, the software is an off-the-shelf package and an integral part of the products being delivered. The Company does not provide any significant post-sale customer support services and does not provide customers with upgrades. The software is incidental to the product as a whole. For products that do not require installation, revenues are recognized when the products are delivered. For products that require installation, revenues are recognized when the installation is completed.

For all service incomes, the Company recognizes the revenues upon the completion of the repairs when the equipment has been returned to and accepted by the customers.

In the PRC, value added tax (VAT) of 17% of the invoice amount is collected in respect of the sales of goods on behalf of tax authorities. The VAT collected is not revenue of the Company; instead, the amount is recorded as a liability on the balance sheet until such VAT is paid to the authorities.

 

Cost of Revenues

Cost of revenues primarily includes wages to assemble parts and the costs of unassembled parts, handling charges, impairment loss, and other expenses associated with the assembly and distribution of products.

Service Income and Expense

Service income and expense represent activities related to repair services provided to the customers by BTL, and the commission fee from customers.

Foreign Currency Translation

The accounts of Dehaier, BDL, BTL and Breathcare are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The accompanying consolidated financial statements are presented in US dollars. Foreign currency transactions are translated into US dollars using fixed exchange rates in effect at the time of the transaction. Generally, foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated statements of income and comprehensive income. The foreign currency accounts of BDL and BTL are translated in accordance with ASC 830-10, “Foreign Currency Matters”. Assets and liabilities are translated at applicable exchange rates quoted by the People’s Bank of China at the balance sheet dates and revenues and expenses are translated at average exchange rates in effect during the periods. Because cash flows are translated based on the average translating rate, amounts related to assets and liabilities reported on the statement of cash flows will not necessary agree with changes in the corresponding balances on the balance sheets. Equity is translated at the historical rate of exchange at the date of capital contribution. Resulting translation adjustments are recorded as other comprehensive income (loss) and accumulated as a separate component of equity

Warranty Costs

The Company provides for the estimated cost of product warranties at the time revenue is recognized. The Company's warranty obligation is affected by product failure rates and material usage and service delivery costs incurred in correcting product failure. Should actual product failure rates, material usage or service delivery costs differ from the Company's estimates, the Company may revise its estimated product warranty liability. The term of the product warranty is generally twelve months. The reserve for warranty costs from the continuing operations was $8,174 and $47,046 at December 31, 2015 and 2014, respectively. The reserve for warranty costs from the discontinuing operations was $3,534 and $87,174 at December 31, 2015 and 2014, respectively. Warranty expense from the continuing operations for the years ended December 31, 2015, 2014 and 2013 was $12,274, $2,728 and $25,447, respectively. Warranty expense from the discontinuing operations for the years ended December 31, 2015, 2014 and 2013 was $5,118, $14,268 and $32,515, respectively.

 

Research and Development Costs

Research and development costs relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. Research and development costs from the continuing operations were $1,918,446, $100,199 and $484,770 for the years ended December 31, 2015, 2014 and 2013, respectively. Research and development costs from the discontinuing operations were $580,216, $515,135 and $0 for the years ended December 31, 2015, 2014 and 2013, respectively.

Earnings per Share

The Company follows the provisions of ASC 260-10, “Earnings per Share”. Basic earnings per share is computed by dividing net income attributable to holders of common shares by the weighted average number of common shares outstanding during the years. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares. Common stock equivalents having an anti-dilutive effect on earnings per share are excluded from the calculation of diluted earnings per share.

Value Added Tax

The Company reports revenues, net of PRC’s value added tax, for all the periods presented in the consolidated statements of income and comprehensive income.

Stock-Based Compensation

The Company records stock-based compensation expense at fair value on the grant date and recognizes the expense over the employee’s requisite service period. The Company’s expected volatility assumption is based on the historical volatility of Company’s stock or the expected volatility of similar entities. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend is based on the Company’s current and expected dividend policy.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740-10, “Accounting for Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year; and, (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of available positive and negative evidence. Based on management’s estimate, it is more likely than not that all of the deferred tax assets will not be realized. Therefore, valuation allowance has been provided in the amount of $605,837, $407,539 and $0 as of December 31, 2015, 2014 and 2013.

ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken or expected to be taken on a tax return. Under ASC 740-10, a tax benefit from an uncertain tax position taken or expected to be taken may be recognized only if it is “more likely than not” that the position is sustainable upon examination, based on its technical merits. The tax benefit of a qualifying position under ASC 740-10 would equal the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all the relevant information. A liability (including interest and penalties, if applicable) is established in the financial statements to the extent a current benefit has been recognized on a tax return for matters that are considered contingent upon the outcome of an uncertain tax position. Related interest and penalties, if any, are included as components of income tax expense and income taxes payable. The Company had filed its 2008 and 2009 Value Added Tax (“VAT”) returns for some of its customers during the years ended December 31, 2013, 2014 and 2015. All the potential VAT liabilities on these VAT returns occurred in current period were also accrued as incurred and included in the accompanying consolidated financial statements.

The implementation of ASC 740-10 resulted in no material liability for unrecognized tax benefits. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statements of income and comprehensive income. During the years ended December 31, 2015, 2014 and 2013, the Company did not incur any interest or penalties.

The Company recognizes tax benefits that satisfy a greater than 50% probability threshold and provides for the estimated impact of interest and penalties for such tax.

Liquidity and Going Concern

The sleep respiratory business is the focus of the company's future business. The following event indicates that Dehaier can continue to operate as a going concern.

a. Dehaier has entered into a definitive securities purchase agreement with Hangzhou Liaison Interactive.

On April 28, 2016, the Company entered into a definitive securities purchase agreement with Hangzhou Liaison Interactive Information Technology Co., Ltd. (“Hangzhou Liaison Interactive”), a publicly listed company on the Shenzhen Stock Exchange (ticker:002280) pursuant to which Hangzhou Liaison Interactive has agreed to purchase 11,111,111 restricted common shares of the Company for an aggregate of $20,000,000. The purchase price is $1.80 per share, which represents a 35% premium to company’s closing price of $1.33 on April 27, 2016. The Company already completed the first closing by selling 620,414 shares of these shares to Hangzhou Liaison Interactive under the SPA and expects to close the deal before September 30, 2016.

b. Loan agreement with Mr. Ping Chen

On December 2, 2015, the Company entered into a new interest-free loan agreement with Mr. Ping Chen, the CEO and major shareholder of the Company, in the amount of $3,120,000 (RMB 20,000,000) with no floating interest rate or maturity date. On December 18, 2015, the Company repaid half of the loan in the amount of $1,543,000 (RMB  10,000,000). The remaining portion of the loan will be repaid as agreed between the parties.

c. Loan agreement with Nanjing Bank Company Limited (Beijing Branch)

On December 18, 2015, the Company entered into a new loan agreement with Nanjing Bank Company Limited (Beijing Branch) in the amount of $1,541,000 (RMB  10,000,000) with a floating interest rate which will be 7.2% in 2016. The loan is due on December 18, 2016. Pursuant to the terms of the agreement, the line of credit is secured by BTL’s building and guaranteed by two shareholders of the Company.

d. Earnings forecasting for the future six years

The sleep respiratory business is the focus of the company's future business. Our forecast projection was mainly based on the financial results each month in 2015 as well as our company’s future plans and developments in the operation. The forecast projections are based on actual contracts that reflect the company’s operating activities, internal operating targets and budgets. Our forecasting revenue sources from our sleep respiratory business are from the sales of ventilator, three-level hospital, private medical center, insurance Company. We believe the net income from the sleep respiratory business can sustain our future business development.

Based on the above analysis, the Company's management believes that the basis for the preparation of the 2015 annual financial statements based on the continuing operation assumption is reasonable.

Recently Issued Accounting Standards

In January 2015, FASB issued ASU No. 2015-01, Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. This Update is issued as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to the users of financial statements. This Update eliminates from GAAP the concept of extraordinary items. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The effective date is the same for both public business entities and all other entities. The Company does not expect the adoption of ASU 2015-01 to have material impact on the Company’s consolidated financial statements.

In February 2015, FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. This Update focuses on the consolidation evaluation for reporting organizations that are required to evaluate consolidation of certain legal entities by reducing the number of consolidation models from four to two and is intended to improve current GAAP. The amendments in the ASU are effective beginning after December 15, 2016. We do not expect the adoption of ASU 2015-02 to have material impact on our consolidated financial statements.

In April 2015, FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments in the ASU are effective beginning after December 15, 2015. We do not expect the adoption of ASU 2015-03 to have material impact on our consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, an amendment to Topic 330 for simplifying the measurement of inventory. The update requires that inventory be measured at the lower of cost and net realizable value where net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendment is intended to provide clarification on the measurement and disclosure of inventory in Topic 330 and not intended for those clarifications to result in any changes in practice. The ASU is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted for all entities and should be applied prospectively. The Company does not expect the adoption of ASU 2015-11 to have material impact on the Company’s consolidated financial statements.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers, to defer the effective date of ASC 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASC 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Management is evaluating the effect, if any, on the Company’s consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, to simplify the presentation of deferred income taxes. The update requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The update applies to all entities that present a classified statement of financial position. For public business entities, the ASU is effective for consolidated financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the ASU is effective for consolidated financial statements issued for annual periods beginning after December 15, 2017, and interim periods with annual periods beginning after December 15, 2018. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company has elected to early adopt the ASU, and its effects are reflected in the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The update requires equity investments (except those accounted for under the equity method or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. It eliminated the requirement for public entities to disclose the method(s) and significant assumptions used to estimate the fair value that is require to be disclosed for financial instruments measured at amortized cost on the balance sheet. For public entities, the ASU is effective for the fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management is evaluating the effect, if any, on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Amendments to the ASC 842 Leases. This update requires lessee to recognize the assets and liability (the lease liability) arising from operating leases on the balance sheet for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Within a twelve month or less lease term, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. If a lessee makes this election, it should recognize lease expense on a straight-line basis over the lease term. In transition, this update will be effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management is evaluating the effect, if any, on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-03, “Intangibles-Goodwill and Other (Topic 350); Business Combinations (Topic 805); Consolidation (Topic 810); Derivatives and Hedging (Topic 815): Effective Date and Transition Guidance”. The amendments in this ASU make the guidance in ASUs 2014-02, 2014-03, 2014-07, and 2014-18 effective immediately by removing their effective dates. The amendments also include transition provisions that provide that private companies are able to forgo a prefer ability assessment the first time they elect the accounting alternatives within the scope of this ASU. Any subsequent change to an accounting policy election requires justification that the change is preferable under Topic 250, Accounting Changes and Error Corrections. The amendments in this ASU also extend the transition guidance in ASUs 2014-02, 2014-03, 2014-07, and 2014-18 indefinitely. While this ASU extends transition guidance for Updates 2014-07 and 2014-18, there is no intention to change how transition is applied for those two ASUs. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

In March, 2016, the FASB released ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to employee Share-Based Payment Accounting. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to significantly impact net income, EPS, and the statement of cash flows. Implementation and administration may present challenges for companies with significant share-based payment activities. The ASU is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. The Company is currently evaluating the impact of adoption on the consolidated financial statements. 

In April 2016, the FASB issued ASU 2016- 10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”. The amendments add further guidance on identifying performance obligations and also to improve the operability and understandability of the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein. Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

In May 2016, the FASB issued ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting”, The amendments rescinds SEC paragraphs pursuant to two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force (EITF) meeting. Specifically, registrants should not rely on the following SEC Staff Observer comments upon adoption of Topic 606: 1) Revenue and Expense Recognition for Freight Services in Process, which is codified in paragraph 605-20-S99-2; 2) Accounting for Shipping and Handling Fees and Costs, which is codified in paragraph 605-45-S99-1; 3) Accounting for Consideration Given by a Vendor to a Customer (including Reseller of the Vendor's Products), which is codified in paragraph 605-50-S99-1; 4) Accounting for Gas-Balancing Arrangements (i.e., use of the "entitlements method"), which is codified in paragraph 932-10-S99-5, which is effective upon adoption of ASU 2014-09. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

In May 2016, the FASB issued ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients". The amendments, among other things: (1) clarify the objective of the collectability criterion for applying paragraph 606-10-25-7; (2) permit an entity to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price; (3) specify that the measurement date for noncash consideration is contract inception; (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations; (5) clarify that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application, and (6) clarify that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. The effective date of these amendments is at the same date that Topic 606 is effective. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

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RESTATEMENT OF FINANCIAL STATEMENTS

12 Months Ended

Dec. 31, 2015

Accounting Changes and Error Corrections [Abstract]

Accounting Changes and Error Corrections [Text Block]

3. RESTATEMENT OF FINANCIAL STATEMENTS

On February 22, 2016, the Company’s management along with the Company’s Board of Directors agreed to focus the Company’s business interests on new mobile medical devices, and decided to discontinue their traditional medical device business interest. The traditional medical device line of business included assembly and sales of X-ray machines, anesthesia machines, monitoring devices, general medical products, and oxygen generators. The mobile medical device business will focus on the development of the Company’s remaining product line, inclusive of products such as the second generation ventilator, general medical products (such as laryngoscope), compressor products, sleep respiratory products, and wireless medical devices.

As part of their decision to discontinue its traditional medical device business, the Company reevaluated its prior beliefs and estimates about certain assets as of 2014. The Board of Directors concluded that the audited consolidated financial statements for the year ended December 31, 2014 included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2014, originally filed with the Securities and Exchange Commission on April 30, 2015, should no longer be relied upon due to an understatement of bad debt allowances for accounts receivable and other receivables, an overstatement of prepayments and carrying value of long-lived assets and an inadequate reserve on inventory. As a result, management determined that a fair presentation of the Company’s financial statements in light of the 2016 decision to classify traditional medical device operations as discontinued required the Company to increase bad debt allowances for accounts receivable and other receivables, to write down some prepayments, to place increased reserve on inventory due to obsolescence, and to write down the carrying value of long-lived assets to the fair value less disposal cost. These error corrections will be presented as restatements, in addition to presenting the traditional medical device business as a discontinued operation, as determined by the Company’s management and Board of Directors. The effects of the restatement were as follows:

	As of December 31,
	2014				2014
	As Previously Reported		Effect of Restatement		Restated
	US$			US$	US$
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		1,727,763		-		1,727,763
Accounts receivable, net		169,765		(27,536)		142,229
Other receivables, net		1,693,466		(22,785)		1,670,681
Advances to suppliers - third parties		1,929,663		(326,097)		1,603,566
Advance to supplier - related party		-		1,498,627		1,498,627
Inventories, net		4,119,330		(35,992)		4,083,338
Tax receivable		138,986		(138,986)		-
Deferred tax asset		407,539		(407,539)		-
Current assets held for discontinued operation		20,908,018		(18,244,705)		2,663,313
Total Current Assets		31,094,530		(17,705,013)		13,389,517
Deposits for purchase of property, plant and equipment-related party		1,498,627		(1,498,627)		-
Property and equipment, net		2,694,167		-		2,694,167
Intangible assets, net		5,014,470		-		5,014,470
Long-term prepaid expenses		-		142,377		142,377
Other assets held for discontinued operation		6,643,480		(6,641,829)		1,651
Total Assets		46,945,274		(25,703,092)		21,242,182
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term borrowings		2,440,500		-		2,440,500
Accounts payable		67,094		-		67,094
Advances from customers		61,443		-		61,443
Accrued expenses and other current liabilities		477,387		(16,774)		460,613
Taxes payable		134,814		-		134,814
Warranty obligation		134,220		-		134,220
Current liabilities held for discontinued operation		362,791		(11,107)		351,684
Total Current Liabilities		3,678,249		(27,881)		3,650,368
OTHER LIABILITIES
Warrants liability		553,060		-		553,060
Total Liabilities		4,231,309		(27,881)		4,203,428
Commitments and Contingency
Equity
Common shares, $0.002731 par value, 18,307,038 shares authorized, 6,194,475 and 5,808,675 shares issued and outstanding at December 31, 2015 and 2014, respectively		15,864		-		15,864
Additional paid in capital		18,719,965		-		18,719,965
Retained earnings		19,142,337		(25,297,107)		(6,154,770)
Accumulated other comprehensive income		3,382,707		17,492		3,400,199
Total Dehaier Medical Systems Limited shareholders' equity		41,260,873		(25,279,615)		15,981,258
Non-controlling interest		1,453,092		(395,596)		1,057,496
Total equity		42,713,965		(25,675,211)		17,038,754
Total liabilities and equity		46,945,274		(25,703,092)		21,242,182

	For the Years Ended
	December 31,
	2014				2014
	As Previously Reported		Effect of Restatement		Restated
	US$		US$		US$
Revenues		2,774,241		-		2,774,241
Costs of revenue		(1,746,399)		(36,008)		(1,782,407)
Gross profit		1,027,842		(36,008)		991,834
Service incomes		131,446		-		131,446
Service expenses		(34,519)		-		(34,519)
General and administrative expenses		(1,945,226)		-		(1,945,226)
Provision for doubtful accounts		(8,351)		(380,847)		(389,198)
Selling expenses		(227,304)		-		(227,304)
Operating loss		(1,056,112)		(416,855)		(1,472,967)
Financial expenses		(195,965)		21,664		(174,301)
Other incomes		83,762		-		83,762
Other expenses		-		(22,299)		(22,299)
Loss on disposal of equipment		(635)		635		-
Change in fair value of warrants liability		2,866,171		-		2,866,171
Income before provision for income tax and non-controlling interest		1,697,221		(416,855)		1,280,366
Provision for income tax (expense) benefit		49,991		(407,717)		(357,726)
Net income from continuing operations		1,747,212		(824,572)		922,640
Net income (loss) from discontinuing operations		(1,088,208)		(24,868,304)		(25,956,512)
Net Income (Loss)		659,004		(25,692,876)		(25,033,872)
Less: net loss attributable to non-controlling interest		(339,989)		(395,769)		(735,758)
Net income (loss) attributable to Dehaier Medical Systems Limited		998,993		(25,297,107)		(24,298,114)
Net income from continuing operations		1,747,212		(824,572)		922,640
Net income (loss) from discontinuing operations		(1,088,208)		(24,868,304)		(25,956,512)
Other comprehensive income (loss)
Foreign currency translation loss		(592,421)		15,530		(576,891)
Comprehensive income (loss)		66,583		(25,677,346)		(25,610,763)
-less comprehensive loss attributable to the non-controlling interest		(340,194)		(422,583)		(762,777)
Comprehensive income (loss) attributable to Dehaier Medical Systems Limited		406,777		(25,254,763)		(24,847,986)
Earnings (loss) per share
-Basic		0.18		(4.59)		(4.41)
-Diluted		0.18		(4.52)		(4.34)
Weighted average number of common shares used in computation
-Basic		5,510,076		-		5,510,076
-Diluted		5,597,169		-		5,597,169

	For the years ended
	December 31,
	2014				2014
	As Previously Reported		Effect of Restatement		Restated
	US$		US$		US$
Cash flows from operating activities
Net income (loss)		659,004		(25,692,876)		(25,033,872)
Net income (loss) from discontinued operations		(1,088,208)		(24,868,304)		(25,956,512)
Net income from continuing operations		1,747,212		(824,572)		922,640
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Stock-based compensation expense		1,408,421		-		1,408,421
Depreciation and amortization		269,595		-		269,595
Change in fair value of warrants liability		(2,866,171)		-		(2,866,171)
Change in deferred tax assets		(282,041)		407,717		125,676
Provision for accounts receivable		8,351		27,549		35,900
Provision for other receivables		-		27,200		27,200
Provision for advances to suppliers - third parties		-		326,098		326,098
Change in warranty reserve		(209,227)		-		(209,227)
Provision for inventory obsolescence		106,199		36,008		142,207
Changes in assets and liabilities:
(Increase) Decrease in accounts receivable		1,743,792		-		1,743,792
Decrease in advances to suppliers - third parties		3,751,434		-		3,751,434
Increase in advance to supplier - related party		(1,498,627)		-		(1,498,627)
Increase in other receivables		(443,285)		-		(443,285)
Increase in inventories		(3,676,810)		-		(3,676,810)
Decrease in taxes receivable		372,935		-		372,935
Increase in long-term prepaid expenses		(142,377)		-		(142,377)
Decrease in accounts payable		(19,710)		-		(19,710)
Decrease in advances from customers		(256,504)		-		(256,504)
Decrease in accrued expenses and other current liabilities		(33,961)		-		(33,961)
Increase in taxes payable		52,064		-		52,064
Net cash (used in) provided by operating activities from continuing operations		31,290		-		31,290
Net cash provided by operating activities from discontinued operations		4,106,063		-		4,106,063
Net cash provided by (used in) operating activities		4,137,353		-		4,137,353
Cash flows from investing activities
Capital expenditures and other additions		(2,053,039)		-		(2,053,039)
Purchases of intangible assets		(3,353,353)		-		(3,353,353)
Net cash used in investing activities from continuing operations		(5,406,392)		-		(5,406,392)
Net cash used in investing activities from discontinued operations		(5,791,256)		-		(5,791,256)
Net cash used in investing activities		(11,197,648)		-		(11,197,648)
Cash flows from financing activities
Proceeds from bank loan		2,944,000		-		2,944,000
Repayments of bank loan		(2,948,700)		-		(2,948,700)
Net proceeds from option exercises		194,300		-		194,300
Net proceeds from issuance of common stock		6,066,546		-		6,066,546
Net cash provided by financing activities		6,256,146		-		6,256,146
Effect of exchange rate fluctuations on cash and cash equivalents		(61,033)		-		(61,033)
Net decrease in cash and cash equivalents		(865,182)		-		(865,182)
Cash and cash equivalents at beginning of year		2,592,945		-		2,592,945
Cash and cash equivalents at end of year		1,727,763		-		1,727,763
Supplemental cash flow information
Income tax paid		188,695		-		188,695
Interest paid		176,231		-		176,231

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ACCOUNTS RECEIVABLE, NET

12 Months Ended

Dec. 31, 2015

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

4. ACCOUNTS RECEIVABLE, NET

Accounts receivable from the continuing operation consist of the following:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Accounts receivable		9,569,468		13,425,508
Less: allowance for doubtful accounts		(8,913,180)		(12,538,651)
Net accounts receivable		656,288		886,857
Less: accounts receivable, net, held for discontinued operations		(36,876)		(744,628)
Accounts receivable, net, held for continuing operations		619,412		142,229

Movement of allowance for doubtful accounts is as follows:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Beginning balance		12,538,651		935,865
Addition		164,039		11,621,912
Less: write-off		(3,247,077)		-
Exchange rate effect		(542,433)		(19,126)
Ending balance		8,913,180		12,538,651
Less: balance held for discontinued operations		(8,833,017)		(12,464,175)
Ending balance held for continuing operations		80,163		74,476

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OTHER RECEIVABLES, NET

12 Months Ended

Dec. 31, 2015

Other Receivables, Net, Current [Abstract]

Other Receivables [Text Block]

5. OTHER RECEIVABLES, NET

Other receivables from the continuing operations consist of the following:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Contract deposits		1,700,339		1,814,105
Loan to third party		-		1,562,700
Advances to employees		9,234		16,842
Others		681,423		769,154
Other receivables		2,390,996		4,162,801
Less: allowance for doubtful accounts		(2,323,937)		(2,423,770)
Net other receivables		67,059		1,739,031
Less: other receivables, net, held for discontinued operations		-		(68,350)
Other receivables, net, held for continuing operations		67,059		1,670,681

Movement of allowance for doubtful accounts is as follows:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Beginning balance		2,423,770		598,747
Addition		151,376		1,825,820
Less: write-off		(157,208)		-
Exchange rate effect		(94,001)		(797)
Ending balance		2,323,937		2,423,770
Less: balance held for discontinued operations		(1,701,264)		(1,797,835)
Ending balance held for continuing operations		622,673		625,935

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ADVANCES TO SUPPLIERS - THIRD PARTIES, NET

12 Months Ended

Dec. 31, 2015

Advance To Suppliers [Abstract]

Advance To Suppliers [Text Block]

6. ADVANCES TO SUPPLIERS – THIRD PARTIES, NET

Advance to suppliers – third parties from continuing operations consist of the following:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Advances to suppliers - third parties		4,885,455		10,739,923
Less: allowance for doubtful accounts		(4,254,143)		(8,897,750)
Total advances to suppliers - third parties		631,312		1,842,173
Less: advances to suppliers - third parties held for discontinued operations		(33,217)		(238,607)
Advances to suppliers - third party held for continuing operations		598,095		1,603,566

Movement of allowance for doubtful accounts is as follows:

	December 31,
	2015		2014
		US$	US$
			(Restated)
Beginning balance		8,897,750		-
Addition		311,420		8,901,490
Less: write-off		(4,662,795)		-
Exchange rate effect		(292,232)		(3,740)
Ending balance		4,254,143		8,897,750
Less: balance held for discontinued operations		(4,157,647)		(8,571,652)
Ending balance held for continuing operations		96,496		326,098

Advance to supplier – related party from continuing operations consists of the following:

	December 31,
	2015		2014
	US$		US$
Advance to supplier - related party		875,044		1,498,627
Less: allowance for doubtful accounts		-		-
Total advance to supplier - related party		875,044		1,498,627
Less: advance to supplier - related party held for discontinued operations		-		-
Advance to supplier - related party held for continuing operations		875,044		1,498,627

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INVENTORIES

12 Months Ended

Dec. 31, 2015

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

7. INVENTORIES

Inventories from the continuing operations consist of the following:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Inventories		4,976,566		6,796,254
Less: provision for slow moving inventories		(1,001,452)		(1,101,188)
Net inventories		3,975,114		5,695,066
Less: inventories, net, held for discontinued operations		-		(1,611,728)
Inventories, net, held for continuing operations		3,975,114		4,083,338

Movement of provision for slow moving inventories is as follows:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Beginning balance		1,101,188		53,281
Addition		1,934,836		1,049,165
Less: write-off		(1,978,052)		-
Exchange rate effect		(56,520)		(1,258)
Ending balance		1,001,452		1,101,188
Less: balance held for discontinued operations		(967,363)		(1,065,196)
Ending balance held for continuing operations		34,089		35,992

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PROPERTY AND EQUIPMENT, NET

12 Months Ended

Dec. 31, 2015

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

8. PROPERTY AND EQUIPMENT, NET

 

Property and equipment from continuing operations consist of the following: 

	December 31,
	2015		2014
	US$		US$
			(Restated)
Buildings		1,311,422		1,384,609
Land use rights		299,570		316,289
Plant and machinery		2,936,103		5,114,148
Automobiles		147,720		193,930
Office and computer equipment		238,647		447,619
Total property and equipment		4,933,462		7,456,595
Less: Accumulated depreciation and amortization		(1,633,408)		(2,782,929)
Impairment of long-lived assets		(1,050,869)		(1,977,848)
Property and equipment, net		2,249,185		2,695,818
Less: property and equipment, net, held for discontinued operations		-		(1,651)
Property and equipment, net, held for continuing operations		2,249,185		2,694,167

At December 31, 2015 and 2014, BTL’s building was pledged to a bank as collateral for the Company’s short-term borrowings of RMB  10,000,000 ($1,541,000) and RMB  15,000,000 ($ 2,440,500 ), respectively (see Note 9).

 

Depreciation and amortization expense from the continuing operations were $306,386, $165,532 and $116,017 for the years ended December 31, 2015, 2014 and 2013, respectively. Depreciation and amortization expense from the discontinuing operations were $0, $329,068 and $360,020 for the years ended December 31, 2015, 2014 and 2013, respectively. Impairment loss from the discontinuing operations was $0 and $1,978,711 for the years ended December 31, 2015 and 2014, respectively. 

Land Use Rights

There is no private ownership of land in China. Land is owned by the government and the government grants land use rights for specified terms. The value of the Company’s land use rights is reported at the purchase price of RMB  1,944,000 in 2002.

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INTANGIBLE ASSETS, NET

12 Months Ended

Dec. 31, 2015

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Intangible Assets Disclosure [Text Block]

9 INTANGIBLE ASSETS, NET

 

Intangible assets from continuing operations consist of the following:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Software Copyright		3,754,861		3,964,412
Patent and others		2,847,940		3,006,878
Total intangible assets		6,602,801		6,971,290
Less:   Accumulated and amortization		(658,644)		(378,014)
Impairment loss		(1,495,353)		(1,578,806)
Intangible assets, net		4,448,804		5,014,470
Less: intangible assets, net, held for discontinued operations		-		-
Intangible assets, net, held for continuing operations		4,448,804		5,014,470

Amortization expense from the continuing operations was $312,821, $104,063 and $100,352 for the years ended December 31, 2015, 2014 and 2013, respectively. Amortization expense from the discontinuing operations was $0, $47,610 and $43,501 for the years ended December 31, 2015, 2014 and 2013, respectively. Impairment loss from the discontinuing operations was $0 and $1,579,495 for the years ended December 31, 2015 and 2014, respectively. Annual future amortization expense at December 31 as follows:

	US$
2016		386,540
2017		383,447
2018		381,238
2019		381,238
2020		381,238
2021 and thereafter		2,535,103
		4,448,804

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SHORT-TERM BORROWINGS

12 Months Ended

Dec. 31, 2015

Short-Term Debt [Abstract]

Short-term Debt [Text Block]

10. SHORT-TERM BORROWINGS

The Company has a line of credit for $1,541,000 and 2,440,500 with Nanjing Bank Company Limited (Beijing Branch) to finance its working capital as of December 31, 2015 and 2014. The credit line bears interest at a floating interest rate which will be approximately 7.2% in 2016 and is renewed annually. Average interest rates for the years ended December 31, 2015, 2014 and 2013 were 7.20%, 7.50% and 6.30%, respectively. Pursuant to the terms of the agreement, the line of credit is secured by BTL’s building (see note 7) and guaranteed by BDL and two shareholders of the Company.

On January 28, 2015, the Company repaid the loan in the amount of $1,603,590 (RMB  10,000,000) with Nanjing Bank Company Limited (Beijing Branch). On March 7, 2015, the Company repaid the loan in the amount of $801,795 (RMB  5,000,000) with Nanjing Bank Company Limited (Beijing Branch).

On March 3, 2015, the Company entered into a new loan agreement with Nanjing Bank Company Limited (Beijing Branch) in the amount of $2,405,385 (RMB  15,000,000) with a floating interest rate which will be 7.811% in 2015. The loan is due on March 3, 2016 and had been early repaid on December 2, 2015. Pursuant to the terms of the agreement, the line of credit is secured by BTL’s building and guaranteed by two shareholders of the Company.

On March 27, 2015, the Company entered into a new loan agreement with Mr. Ping Chen, who is the CEO and a major shareholder of the Company, in the amount of $660,679 (RMB  4,120,000) with a floating interest rate which was 6.96% in 2015. The loan is due on March 27, 2016 and had been renewed with a new repayment date at March 27, 2017. 

On December 2, 2015, the Company entered into a new loan agreement with Mr. Ping Chen in the amount of $3,207,180 (RMB  20,000,000) with no floating interest rate and maturity date.

On December 18, 2015, the Company repaid half of the loan in the amount of $1,603,590 (RMB  10,000,000). The remaining will be repaid as agreed between the parties. On December 18, 2015, the Company entered into a new loan agreement with Nanjing Bank Company Limited (Beijing Branch) in the amount of $1,603,590 (RMB  10,000,000) with a floating interest rate which will be 7.2% in 2016. The loan is due on December 18, 2016. Pursuant to the terms of the agreement, the line of credit is secured by BTL’s building and guaranteed by two shareholders of the Company.

Interest expense on short-term borrowings amounted to $196,220, $176,160 and $159,483 for the years ended December 31, 2015, 2014 and 2013, respectively.

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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

12 Months Ended

Dec. 31, 2015

Payables and Accruals [Abstract]

Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Current [Text Block]

11. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

Other payables and other current liabilities from continuing operations consist of the following:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Accrued salaries and social welfare		94,037		116,557
Accrued expenses		1,541,415		233,339
Reimbursed employee's expense		79,363		29,848
Deposits from customer		113,834		94,181
Others		155,501		32,031
Accrued expenses and other current liabilities		1,984,150		505,956
Less: Accrued expenses and other current liabilities from discontinued operations		(185,796)		(45,343)
Accrued expenses and other current liabilities from continuing operations		1,798,354		460,613

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TAXES PAYABLE

12 Months Ended

Dec. 31, 2015

Taxes Payable, Current [Abstract]

Taxes Payable Current [Text Block]

12. TAXES PAYABLE

 

Taxes payable consist of the following:

	December 31,
	2015		2014
	US$		US$
Value added tax		11,896		10,978
Enterprise income tax		97,299		114,881
Employee withholding taxes		3,727		3,759
City construction tax		595		2,598
Other levies		595		2,598
		114,112		134,814

XML

NON-CONTROLLING INTEREST

12 Months Ended

Dec. 31, 2015

Noncontrolling Interest [Abstract]

Noncontrolling Interest Disclosure [Text Block]

13. NON-CONTROLLING INTEREST

 

Non-controlling interest consists of the following:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Paid-in capital		713,787		713,787
Retained earnings (accumulated deficit)		(112,365)		26,840
Accumulated other comprehensive income		266,404		316,869
		867,826		1,057,496

XML

COMMITMENTS AND CONTINGENCY

12 Months Ended

Dec. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

14. COMMITMENTS AND CONTINGENCY

 

  Leases

The lease commitments are for office premises which are classified as operating leases. These non-cancelable leases have lease terms expiring through October 2016. Approximate future minimum lease payments under these leases at December 31, 2015 are $11,090 for the twelve months ending December 31, 2016.

Rent expense for the years ended December 31, 2015, 2014 and 2013 was $111,552, $94,590 and $136,784, respectively.

Employment Contracts

Under the PRC labor law, all employees have signed employment contracts with the Company. Management employees have employment contracts with terms up to three years and non-management employees have a one year employment contract renewable on an annual basis.

Contingency

The Labor Contract Law of the People’s Republic of China requires employers to assure the liability of the severance payments if employees are terminated and have been working for the employers for at least two years prior to January 1, 2008. The Company has estimated its possible severance payments of approximately $462,015 and $457,842 as of December 31, 2015 and 2014, respectively, which have not been reflected in its consolidated financial statements, because it is more likely than not that this will not be paid or incurred.

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EQUITY

12 Months Ended

Dec. 31, 2015

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

15. EQUITY

Common Shares

On January 11, 2014, Dehaier issued 68,000 ordinary shares to individuals upon exercises of share-based awards.

On January 15, 2014, Dehaier issued 40,000 restricted common shares to independent consultants in connection with investment counseling and financial advisory services rendered for the Company. The fair value of the shares on the grant date based on the closing price was approximately $145,600.

On February 21, 2014, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain institutional investors for the sale of 734,700 common shares in a registered offering at the price of $9.12 per common share. The net cash proceeds received from the stock offering, after deducting underwriter commission and other associated fees, were approximately $6.1 million. In addition, the Company issued 220,410 warrants to the institutional investors aggregately. The warrants are exercisable immediately as of the date of issuance at an exercise price of $11.86 per common share and expire forty-two months from the date of issuance. The Company also issued warrants to purchase 73,470 ordinary shares to the placement agent (“Placement Agent Warrant”). The Placement Agent Warrants are on substantially the same terms as the warrants issued pursuant to the Purchase Agreement.

On April 24, 2014, Dehaier issued 40,000 restricted common shares to independent consultants in connection with investment counseling and financial advisory services rendered for the Company. The fair value of the shares on the grant date based on the closing price was approximately $145,600.

On April 8, 2014, Dehaier issued 62,000 ordinary shares to individuals upon exercises of share-based awards.

On May 29, 2014, Dehaier issued 4,000 ordinary shares to individuals upon exercises of share-based awards.

On August 16, 2014, Dehaier issued 11,975 ordinary shares to individuals for the Company’s incentive plan. The fair value of the shares on the grant date based on the closing price was approximately $72,808.

On August 20, 2014, Dehaier issued 131,000 options to employees for the Company’s incentive plan. The fair value of the options on the grant date based on the closing price was approximately $674,570.

On October 22, 2014, Dehaier issued 100,000 ordinary shares to employees for the Company’s incentive plan. The fair value of the shares on the grant date based on the closing price was approximately $531,000.

On October 22, 2014, Dehaier issued 80,000 ordinary shares to independent consultants in connection with investment counseling and financial advisory services rendered for the Company. The fair value of the shares on the grant date based on the closing price was approximately $352,800.

On January 20, 2015, Dehaier issued 25,000 ordinary shares to individuals upon exercises of share-based awards.

On February 26, 2015, Dehaier issued 12,000 ordinary shares to independent consultants in connection with investment relationship advisory services rendered for the Company. The fair value of the shares on the grant date based on the closing price was approximately $32,340.

On July 29, 2015, Dehaier issued 348,800 ordinary shares to employees for the Company’s incentive plan. The fair value of the shares on the grant date based on the closing price was approximately $666,208.

Statutory Surplus Reserves

A PRC company is required to make appropriations to statutory surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations to the statutory surplus reserve is required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entity’s’ registered capital. 

The statutory surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of shares currently held by them, provided that the remaining statutory surplus reserve balance after such issue is not less than 25% of the registered capital.

Since Dehaier is a British Virgin Islands company, it will not be subject to the statutory surplus reserve provisions. BDL is a joint-venture company and the statutory surplus reserve provisions will be determined by its board of directors. As of December 31, 2015, BDL’s board of directors has not yet made such determination. Therefore, no amount was allocated to the statutory surplus reserve account.

BTL appropriated 10% of its net profits as statutory surplus reserve, which is included as part of the non-controlling interest in the equity section. For the years ended December 31, 2015, 2014 and 2013, statutory surplus reserve activity was as follows:

	December 31,
	2015		2014		2013
	US$		US$		US$
l    Balance – beginning of year		76,260		76,260		75,489
l    Addition to statutory reserves		-		-		771
l    Balance – end of year		76,260		76,260		76,260

Stock Option Plan

Under the employee stock option plan, the Company’s stock options expire five years from the date of grant. On December 29, 2011, the Company entered into five-year agreements with its employees and directors, pursuant to which, the Company issued an aggregate of 450,000 options at an exercise price of $1.45 per share. The options vest in equal annual installments over the five years of the agreements ending December 31, 2016. On October 7, 2013, pursuant to the Company’s Share Incentive Plan, the Company granted a non-statutory option to acquire 94,000 of the Company’s common shares at an exercise price of $2.30 per share to Chen Ping, the CEO of the Company. The options vest in equal annual installments over the five years of the agreement ending October 7, 2018. On August 20, 2014, pursuant to the Company’s Share Incentive Plan, the Company granted additional option to acquire 131,000 of the Company’s common shares at an exercise price of $5.31 per share to Chen Ping. The options vest in equal annual installments over the five years of the agreement ending August 20, 2019. On August 7, 2015, the Company entered into two-year agreements with its employees and directors, pursuant to which, the Company issued an aggregate of 349,000 options at an exercise price of $1.64 per share. The options vest in equal annual installments over the two years of the agreements ending August 7, 2017. As of December 31, 2015, 581,200 options have not been vested.

The Company valued the stock options using the Black-Scholes model with the following assumptions:

						Grant Date
Expected	Expected		Dividend		Risk Free	Fair Value
Terms (years)	Volatility		Yield		Interest Rate	Per share
5-5.75		126% - 228%		0%	0.73% - 1.65%	$1.22 - $5.15

The following is a summary of the option activity:

				Weighted average		Aggregate
Stock options	Shares			exercise price		intrinsic value
Outstanding as of December 31, 2013		442,000		$	1.63	$	994,160
Granted		131,000
Forfeited		(31,000	)
Exercised		(134,000	)
Outstanding as of December 31, 2014		408,000		$	2.89	$	(63,320	)
Granted		349,000
Forfeited		(12,000	)
Exercised		(25,000	)
Outstanding as of December 31, 2015		720,000		$	2.36	$	(68,670	)

Following is a summary of the status of options outstanding and exercisable at December 31, 2015:

Outstanding options						Exercisable options
Average exercise price		Number		Average remaining contractual life (years)		Average exercise price		Number		Average remaining contractual life (years)
$	1.45		146,000		1.00	$	1.45		87,000		1.00
$	2.3		94,000		2.77	$	2.3		37,600		2.77
$	5.31		131,000		3.64	$	5.31		26,200		3.64
$	1.64		349,000		1.60	$	1.64		-		1.6

For the years ended December 31, 2015, 2014 and 2013, the Company recognized $357,196, $160,613 and $94,271, respectively, as compensation expense under its stock option plan.

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WARRANTS

12 Months Ended

Dec. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

16. WARRANTS

 

On April 21, 2010, the Company issued to Anderson & Strudwick Incorporated (“A&S”) 150,000 warrants, as a portion of the placement commission for the IPO. On the same day, the Company granted a total of 7,500 warrants to Hawk Associates Inc. (“Hawk”), the Company’s investor relations consultancy. On January 10, 2012, the Company issued 100,000 warrants to FirsTrust Group, Inc., (“FirsTrust”), the Company’s financial advisor.

In connection with the stock offering in February, 2014, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain institutional investors for the sale of 734,700 common shares in a registered offering at the price of $9.12 per common share. In addition, the Company issued 220,410 warrants to the institutional investors aggregately and issued 73,470 warrants to FT Global Capital, Inc. (“FT Global”), as a portion of the placement commission. These warrants will be exercisable immediately as of the date of issuance at an exercise price of $11.86 per common share and expire forty-two months from the date of issuance.

There were a total of 551,380 warrants issued and outstanding as of December 31, 2015. All the warrants issued to “A&S” have the right to purchase one share of common stock for an exercise price of $10.00 per share with a term of 5 years. All the warrants granted to Hawk have the right to purchase one share of common stock for an exercise price of $9.60 per share with a term of 5 years. All the warrants granted to FirsTrust have the right to purchase one share of common stock for an exercise price of $4.00 per share with a term of 5 years. All the warrants granted to the certain institutional investors have the right to purchase one share of common stock for an exercise price of $11.86 per share with a term of 3.5 years. All the warrants granted to FT Global Capital, Inc. have the right to purchase one share of common stock for an exercise price of $11.86 per share with a term of 3.5 years.

 

The fair value of the outstanding warrants at December 31, 2015 was calculated using the Black Scholes Model with the following assumptions:

Market price per share (USD/share)	2.2619
Exercise price (USD/share)	$4.00-$11.86
Risk free rate	0.66%-0.91%
Dividend yield	-
Expected term/Contractual life (years)	1.02-1.64
Expected volatility	94.85%-110.13%

The following table sets forth by level within the fair value hierarchy of our financial assets and liabilities that was accounted for at fair value on a recurring basis as of December 31, 2015 and 2014:

	Carrying Value at		Fair Value Measurement at
	December 31, 2015		December 31, 2015
			Level 1		Level 2		Level 3
Warrants liability	$	162,736	$	-	$	162,736	$	-

	Carrying Value at		Fair Value Measurement at
	December 31, 2014		December 31, 2014
			Level 1		Level 2		Level 3
Warrants liability	$	553,060	$	-	$	553,060	$	-

The following is a reconciliation of the beginning and ending balances of warrants liability measured at fair value on a recurring basis using Level 2 inputs:

	December 31,
	2015		2014		2013
		US$	US$		US$
Beginning balance		553,060		720,857		374,166
Warrants issued		-		2,698,374		-
Fair value change of the issued warrants included in earnings		(390,324)		(2,866,171)		346,691
Ending balance		162,736		553,060		720,857

Following is a summary of the warrants activity:

			Weighted Average		Weighted Average Remaining
	Number		Exercise Price		Contractual Life
Outstanding as of December 31, 2013		257,500	$	7.66		1.97
Granted		293,880
Forfeited		-
Exercised		-
Outstanding as of December 31, 2014		551,380	$	9.90		1.86
Granted		-
Forfeited		-
Exercised		-
Outstanding as of December 31, 2015		551,380	$	9.86		1.49

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EARNINGS (LOSS) PER SHARE

12 Months Ended

Dec. 31, 2015

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

17. EARNINGS (LOSS) PER SHARE

 

The following is a reconciliation of the basic and diluted earnings (loss) per share computation for the years ended December 31, 2015, 2014 and 2013:

	Year ended
	December 31,
	2015		2014		2013
			(Restated)
Basic earnings (loss) per share
Net income (loss) available to the company’s common shareholders	$	(10,223,130)	$	(24,298,114)	$	1,995,621
Weighted average shares outstanding - Basic		5,862,647		5,510,076		4,625,195
Earnings (loss) per share - Basic	$	(1.74)	$	(4.41)	$	0.43
Diluted earnings (loss) per share
Net income (loss) available to the company’s common shareholders	$	(10,223,130)	$	(24,298,114)	$	1,995,621
Weighted average shares outstanding - Basic		5,862,647		5,510,076		4,625,195
Options and warrants		33,887		87,093		50,932
Weighted shares outstanding - Diluted		5,896,534		5,597,169		4,676,127
Earnings (loss) per share - Diluted	$	(1.73)	$	(4.34)	$	0.43

For the years ended December 31, 2015, 2014 and 2013, 33,887 shares of 732,000, 56,838 shares of 277,000, 50,932 shares of 348,000 stock options were exercisable and included in the diluted EPS calculation. As of December 31, 2015, 0 shares out of 551,380 warrants were included in diluted EPS calculation. As of December 31, 2014, 30,255 shares out of 551,380 warrants were included in diluted EPS calculation. As of December 31, 2013, none of warrants issued by the Company were included in diluted EPS calculation due to anti-dilution.

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INCOME TAXES

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

18. INCOME TAXES

 

British Virgin Islands

Dehaier is a tax-exempt company incorporated in the British Virgin Islands. BDL and BTL were incorporated in the PRC and are governed by the PRC laws.

PRC

PRC enterprise income tax is calculated based on the Enterprise Income Tax Law (the “EIT Law”). Under the EIT Law, a unified enterprise income tax rate of 25% and unified tax deduction standards will be applied equally to both domestic-invested enterprises and foreign-invested enterprises.

Under the current PRC laws, PRC government grants a preferential income tax rate of 15% to government-certified high technology companies, and under the new standard the period of validity for the certification of high technology companies is three years. In 2009, 2012 and 2015, BDL updated its certification for “high technology” company. Therefore, BDL used a 15% income tax rate to calculate the income tax expense for the years ended December 31, 2015, 2014 and 2013.

The tax rate for BTL is 25% in 2015, 2014 and 2013.

 

Provision (benefit) for income taxes consists of:

	Year Ended December 31
	2015		2014		2013
	US$		US$		US$
			(Restated)
Current income taxes benefit (provision)		11,978		(233,884)		(524,977)
Deferred income taxes benefit (provision)				(123,842)		2,698
Total benefit (provision) for income taxes		11,978		(357,726)		(522,279)

Deferred taxes assets

The Company periodically evaluates the likelihood of the realization of deferred tax assets, and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. The Company considers many factors when assessing the likelihood of future realization of the deferred tax assets, including its recent cumulative earnings experience, expectation of future income, the carry forward periods available for tax reporting purposes, and other relevant factors. Due to the Company’s strategic restructuring and the downscaled and discontinued part of our product lines, it is more likely that the Company will not realize 100% of the deferred tax assets. Management therefore decided to provide part of the valuation allowance for the deferred tax assets. The valuation allowance - as of December 31, 2015 and 2014 was $605,837 and $407,539. Temporary differences represent tax and book differences in various items, such as receivable allowances, inventory allowances, impairments on fixed assets and deferred lease income.

The following table reconciles the valuation allowance for the year ended December 31, 2015 and 2014, which consisted of the following:

	Year ended December 31,
	2015		2014
	US$		US$
			(Restated)
Beginning balance		407,539		-
Additions		198,298		407,539
Ending balance		605,837		407,539

 

United States

Breathcare is a limited liability company and, such as, is not subject to federal income tax, instead any income would be taxable to Breathcare’s sole owner. Moreover, as of December 31, 2015, 2014 and 2013, Breathcare was inactive and generated no revenue.

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RELATED PARTY TRANSACTIONS AND BALANCE

12 Months Ended

Dec. 31, 2015

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

19. RELATED PARTY TRANSACTIONS AND BALANCE

For the year ended December 31, 2015, the Company purchased $565,208 of medical air compressor from HuNan Zhong Yi High-tech Development Co., Ltd. (“Zhong Yi”) which is partially owned by the CEO of the Company. As of December 31, 2015 and 2014, $875,044 and $1,498,627 was advanced to Zhong Yi for raw materials purchases, respectively.

On March 27, 2015, the Company entered into a new loan agreement with Mr. Ping Chen, who is the CEO and a major shareholder of the Company, in the amount of $660,679 (RMB 4,120,000) with a floating interest rate which will be 6.96% in 2016. The loan was due on March 27, 2016 and renewed the repayment date to March 27, 2017.

On December 2, 2015, the Company entered into a new loan agreement with Mr. Ping Chen in the amount of $3,207,180 (RMB 20,000,000) with no floating interest rate and maturity date. On December 18, 2015, the Company repaid half of the loan in the amount of $1,603,590 (RMB 10,000,000). The remaining will be repaid as agreed between the parties.

For the year ended December 31, 2014, the Company purchased $1,142,845 of sleep respiratory systems and $325,400 of telemedicine management system software from HuNan Zhong Yi High-tech Development Co., LTD which is partially owned by CEO. As of December 31, 2014 and 2013, $1,498,627 and nil was advanced to the related party for raw materials purchases, respectively.

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SUBSIDY INCOME

12 Months Ended

Dec. 31, 2015

Disclosure of Subsidy Income [Abstract]

Disclosure of Subsidy Income [Text Block]

20. SUBSIDY INCOME

For the year ended December 31, 2015, the Company has not received any subsidy income. For the year ended December 31, 2014, the Company received approximately $1,253 (RMB 7,700) from the local government in China as subsidy income.

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CONCENTRATIONS

12 Months Ended

Dec. 31, 2015

Risks and Uncertainties [Abstract]

Concentration Risk Disclosure [Text Block]

21. CONCENTRATIONS

 

Major Customers

For the years ended December 31, 2015, 2014 and 2013, approximately 37%, 6% and 24% of the Company’s total revenues were received from two customers for continued operation. For the years ended December 31, 2015, 2014 and 2013, approximately 7%, 11% and 11% of the Company’s total revenues were received from two customers for discontinued operation.

Major Suppliers

For the years ended December 31, 2015, 2014 and 2013, purchases from three suppliers for continued operation were approximately 67%,  28% and 42% of the total purchase, respectively. For the years ended December 31, 2015, 2014 and 2013, purchases from three suppliers for discontinued operation were approximately 9%, 55% and 51% of the total purchase, respectively.

Revenues

For the years ended December 31, 2015, 2014 and 2013, the Company’s top three selling products accounted, in the aggregate, for approximately 72%, 74% and 67%, respectively, of its total net revenues.

The following represents the revenues by product line, all derived from China:

	For the years ended
	December 31,
	2015		2014		2013
	US$		US$		US$
Products Line
Medical Devices		1,500,957		16,000,881		14,824,028
Respiratory and Oxygen Homecare		20,573		53,755		2,034,150
Mobile Medicine		164,503		1,631,413		-
Total Revenues		1,686,033		17,686,049		16,858,178
Less: revenues from discontinued operations		(364,490)		(14,911,808)		(9,455,705)
Revenues from continuing operations		1,321,543		2,774,241		7,402,473

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DISCONTINUED OPERATIONS

12 Months Ended

Dec. 31, 2015

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

22. DISCONTINUED OPERATIONS

 

In accordance with ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. When all of the criteria to be classified as held for sale are met, including management, having the authority to approve the action, commits to a plan to sell the entity, the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as a component of net income (loss) separate from the net income (loss) of continuing operations in accordance with ASC 205-20-45.

Reconciliation of the Carrying Amounts of Major Classes of Assets and Liabilities of Discontinued Operations Classified as discontinued operations in the Consolidated Balance Sheets.

	December 31,
	2015		2014
	US$		US$
			(Restated)
ASSETS
CURRENT ASSETS:
Accounts receivable, net		36,876		744,628
Other receivables, net		-		68,350
Advances to suppliers – third parties		33,217		238,607
Inventories, net		-		1,611,728
Total Current Assets		70,093		2,663,313
Property and equipment, net		-		1,651
Total Assets		70,093		2,664,964
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable		146,029		204,047
Advances from customers		75,432		102,294
Accrued expenses and other current liabilities		185,796		45,343
Total Current Liabilities		407,257		351,684

Reconciliation of the Carrying Amounts of Major Classes of Net Income (Loss) from Operations to be Disposed Classified as discontinued operations in the Consolidated Statements of Operations and Comprehensive Loss.

 

	For the Years Ended
	December 31,
	2015		2014		2013
	US$		US$		US$
			(Restated)
Revenues		364,490		14,911,808		9,455,705
Costs of revenue		(2,190,140)		(13,162,235)		(5,858,208)
Gross profit (loss)		(1,825,650)		1,749,573		3,597,497
Service incomes		84,774		233,819		-
Service expenses		(54,173)		(10,845)		-
General and administrative expenses		(693,881)		(1,464,043)		-
Provision for doubtful accounts		(618,290)		(21,960,025)		(33,556)
Impairment loss for property and equipment		-		(1,978,711)		-
Impairment loss for intangible assets		-		(1,579,495)		-
Selling expenses		(392,892)		(946,785)		(663,193)
Operating Income (loss)		(3,500,112)		(25,956,512)		2,900,748
Income (loss) before provision for income tax and non-controlling interest		(3,500,112)		(25,956,512)		2,900,748
Provision for income tax expense		-		-		-
Net income (loss) from discontinuing operations		(3,500,112)		(25,956,512)		2,900,748

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2015

Subsequent Events [Abstract]

Subsequent Events [Text Block]

23. SUBSEQUENT EVENTS

On June 24, 2016, we signed a strategic cooperation agreement with Hongyuan Supply Chain Management Co., Ltd. to develop Dehaier’s new Internet medical technology business. Under the strategic cooperation agreement, we will leverage Hongyuan Supply Chain’s sales platform to reach Dehaier’s dealers and end users more efficiently, selling our wearable sleep apnea diagnostic system medical devices to Hongyuan Supply Chain for further downchain sale and distribution.

On June 28, 2016, we entered into Amendment No.1 to Share Purchase Agreement dated on April 28, 2016 with Hangzhou Liaison Interactive Information Technology Co., Ltd. (“Hangzhou Liaison Interactive”), a publicly listed company on the Shenzhen Stock Exchange. As previously announced, the Company entered into an SPA with Hangzhou Liaison Interactive. On June 6, 2016, the Company sold 620,414 of these shares to Hangzhou Liaison Interactive in a first closing under the SPA. In accordance with Amendment No.1 to SPA, the closing date is extended from June 30, 2016 to September 30, 2016.

On April 21, 2016, we entered into warrant repurchase agreements with the holders of certain warrants pursuant to which the Company agreed to repurchase from the Holders the Company’s outstanding warrant to purchase in aggregate 293,880 shares of the Company’s common shares, with an exercise price of $11.86 per share (the “Warrants”). The Warrants were issued on February 21, 2014 in connection with the Company’s registered direct offering of approximately $6.7 million of common shares and warrants. Pursuant to the Warrant Purchase Agreements, the Company will pay an aggregate cash purchase price of $1,116,744 ($3.80 per share underlying the Warrants) to repurchase the Warrants.

On April 28, 2016, we entered into a definitive securities purchase agreement with Hangzhou Liaison Interactive pursuant to which Hangzhou Liaison Interactive has agreed to purchase 11,111,111 restricted common shares of the Company for an aggregate of $20,000,000. The purchase price is $1.80 per share, which represents a 35% premium to the Company’s closing price of $1.33 on April 27, 2016.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Consolidation, Policy [Policy Text Block]

Basis of Consolidation

The consolidated financial statements include the accounts of Dehaier and its majority-owned and wholly-owned subsidiaries (collectively, the “Company”). All inter-company transactions and balances are eliminated in consolidation.

A group of shareholders, including the Chief Executive Officer, originally held more than 50% of the voting ownership interest of Dehaier, BDL and BTL. BTL owns a building which is pledged as collateral for BDL’s bank loans. In exchange, BDL loans money to BTL to finance its operations. BTL’s primary operation is to provide repairs and transportation services to BDL’s customers. Because of these arrangements, BDL is the primary beneficiary of BTL, as the entity that is most closely associated with BTL. BTL is considered a variable interest entity (“VIE”) of BDL. Management makes ongoing reassessments of whether BDL is the primary beneficiary of BTL.

The accounts of BTL are consolidated in the accompanying financial statements pursuant to Accounting Standards Codification (“ASC”) 810-10, “Consolidation”. As a VIE, BTL’s revenues are included in the Company’s service income, and its income from operations is consolidated with the Company’s. Because of the arrangements, the Company had a pecuniary interest in BTL that requires consolidation of the Company’s and BTL’s financial statements.

On December 13, 2013, an additional capital of RMB  2,000,000 (approximately $327,400) was contributed to BTL by its shareholders.

 

The carrying amount and classification of BTL’s assets and liabilities included in the Consolidated Balance Sheets are as follows:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Total current assets held for continuing operation		768,448		286,222
Total current assets held for discontinued operation		36,337		88,728
Total assets held for continuing operation		1,281,521		1,052,659
Total assets held for discontinued operation		36,337		88,728
Total current liabilities held for continuing operation		264,235		38,554
Total current liabilities held for discontinued operation		185,796		45,339
Total liabilities held for continuing operation		264,235		38,554
Total liabilities held for discontinued operation		185,796		45,339
Total revenue held for continuing operation		583,242		-
Total revenue held for discontinued operation		56,630		403,992
Net loss held for continuing operation		(163,353)		(47,196)
Net income (loss) held for discontinued operation		24,148		(688,562)

Reclassification, Policy [Policy Text Block]

Reclassifications

Certain prior year balances were reclassified to conform to the current year's presentation with consideration of reflecting the Company’s traditional medical device business as discontinued operations. None of these reclassifications had an impact on reported financial position or cash flows for any of the periods presented.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates are adjusted to reflect actual experience when necessary. Significant accounting estimates reflected in the Company’s consolidated financial statements include revenue recognition, allowance for doubtful accounts, warranty obligation, warrants liability, stock-based compensation and useful lives of intangible assets, and property and equipment. Actual results could differ from those estimates.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and highly liquid investments which are unrestricted as to withdrawal or use, and which have maturities of three months or less when purchased. The Company maintains uninsured cash and cash equivalents with various financial institutions mainly in the PRC and the United States.

Trade and Other Accounts Receivable, Policy [Policy Text Block]

Accounts Receivable, net 

Accounts receivable are recorded at net realizable value. Accounts receivable terms typically are net 60-180 days from the end of the month in which the services were provided, or when goods were delivered. The Company generally does not require collateral or other security to support accounts receivable. An allowance, if required, is based on a combination of historical experience, aging analysis, and an evaluation of the collectability of specific accounts. Management considers that receivables over 1 year to be past due. Management has determined that an allowance of $80,163 and $74,476 from the continuing operations was appropriate at December 31, 2015 and 2014, respectively. Management has determined that an allowance of $8,833,017 and $12,464,175 from the discontinued operations was appropriate at December 31, 2015 and 2014, respectively.

Other Receivables Net [Policy Text Block]

Other Receivables, net

Other receivables primarily include advances to employees and deposits to service providers. Management regularly reviews aging of receivables and changes in payment trends and records a reserve when management believes collection of amounts due are at risk. Accounts considered uncollectible are written off after exhaustive efforts at collection. Management has determined that an allowance of $622,673 and $625,935 from the continuing operations was appropriate at December 31, 2015 and 2014. Management has determined that an allowance of $1,701,264 and $1,797,835 from the discontinued operations was appropriate at December 31, 2015 and 2014.

Advances to Suppliers and Advances from Customers [Policy Text Block]

Advances to Suppliers, net

The Company, as is the common practice in the PRC, often makes advance payments to suppliers for unassembled parts. Advances to suppliers are reviewed periodically to determine whether their carrying value has become impaired. Management has determined that an allowance of advances to suppliers – third parties in the amount of $96,496 and $326,098 from the continuing operations was appropriate at December 31, 2015 and 2014. Management has determined that an allowance of advances to suppliers – third parties in the amount of $4,157,647 and $8,571,652 from the discontinued operations was appropriate at December 31, 2015 and 2014. As of December 31, 2015 and 2014, the Company has not experienced impairment losses on prepayment to related parties.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

The carrying amounts reported in the consolidated financial statements for current assets and current liabilities approximate fair value due to the short-term nature of these financial instruments.

The Company follows the provisions of ASC topic 815, “Derivatives and Hedging”. ASC topic 815 provides a framework for determining whether an instrument is indexed to an entity's own stock. Warrants are indexed to the Company's stock, which is traded in US dollars. Since the Company's functional currency is the RMB, such warrants are considered liabilities. The fair value of the warrants liability is measured each reporting period with the resulting change in fair value recorded in the consolidated statements of income and comprehensive income.

The accounting standards regarding fair value of financial instruments and related fair value measurements define fair value, and establish a three-level valuation hierarchy for disclosures of fair value.

The three levels are defined as follows:

⋅ Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

⋅ Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

⋅ Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The fair value of the warrants was determined using the Black Scholes Model, with level 2 inputs (See Note 15).

If the sum of the expected undiscounted cash flows of the long-lived assets is less than the carrying amount of the long-lived assets, we recognize an impairment loss based on the excess of the carrying amount of the asset group over its fair value, generally based upon discounted cash flows or quoted market prices, with level 3 inputs. Management used historical selling prices and a discount rate of 6.5% based on the Company’s average borrowing rate to present value its future cash flows (See Note 8).

Inventory, Policy [Policy Text Block]

Inventories

Inventories are stated at the lower of cost or market and consist of assembled and unassembled parts relating to medical devices. The Company reviews its inventory annually for possible obsolete goods and to determine if any reserves are necessary. The reserve for obsolescence from the continuing operation was $34,089 and $35,992 at December 31, 2015 and 2014. The reserve for obsolescence from the discontinued operations was $967,363 and $1,065,196 at December 31, 2015 and 2014.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated on a straight-line basis over the following estimated useful lives:

Leasehold improvements	Shorter of the useful lives or the lease term
Building and land use rights	20-40 years
Machinery and equipment	10-15 years
Furniture and office equipment	5 years
Motor vehicles	5 years

Goodwill and Intangible Assets, Policy [Policy Text Block]

Intangible Assets

Intangible assets are recorded at cost less accumulated amortization. Amortization is calculated on a straight-line basis over the following estimated useful lives:

Leasehold improvements	Shorter of the useful lives or the lease term
Software copyrights	20 years
Other software	5 years

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Impairment of Long-Lived Assets

The Company reviews the long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. Due to the Company’s discontinued operation plan, the long-lived assets had been classified into continuing and discontinued assets according to the product lines. When these events occur, the Company compares the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the asset and eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of the asset, an impairment loss, equal to the excess of the carrying amount over the fair value of the asset, is recognized. Management has determined that the impairment existed at the balance sheet dates for the Company’s intangible assets in the amount of $1,495,353.07 and $1,578,806 from the discontinued operations at December 31, 2015 and 2014, respectively. Management has determined that the impairment existed at the balance sheet dates for the Company’s property and equipment in the amount of $1,050,869 and $1,977,848 from the discontinued operations as at December 31, 2015 and 2014, respectively.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company recognizes revenues when all the followings conditions have been satisfied:

⋅ Persuasive evidence of an arrangement exists;

⋅ Delivery and/or installation have occurred (e.g., risks and rewards of ownership have passed);

⋅ The sales price is fixed or determinable; and,

⋅ Collectability is reasonably assured.

All revenues are based on firm customer orders with fixed terms and conditions. Because the products are assembled to the customers’ specification, there is no right of return. The Company does not provide its customers with price protection or cash rebates. For products that include software, the software is an off-the-shelf package and an integral part of the products being delivered. The Company does not provide any significant post-sale customer support services and does not provide customers with upgrades. The software is incidental to the product as a whole. For products that do not require installation, revenues are recognized when the products are delivered. For products that require installation, revenues are recognized when the installation is completed.

For all service incomes, the Company recognizes the revenues upon the completion of the repairs when the equipment has been returned to and accepted by the customers.

In the PRC, value added tax (VAT) of 17% of the invoice amount is collected in respect of the sales of goods on behalf of tax authorities. The VAT collected is not revenue of the Company; instead, the amount is recorded as a liability on the balance sheet until such VAT is paid to the authorities.

Cost of Sales, Policy [Policy Text Block]

Cost of Revenues

Cost of revenues primarily includes wages to assemble parts and the costs of unassembled parts, handling charges, impairment loss, and other expenses associated with the assembly and distribution of products.

Service Income and Expense [Policy Text Block]

Service Income and Expense

Service income and expense represent activities related to repair services provided to the customers by BTL, and the commission fee from customers.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency Translation

The accounts of Dehaier, BDL, BTL and Breathcare are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The accompanying consolidated financial statements are presented in US dollars. Foreign currency transactions are translated into US dollars using fixed exchange rates in effect at the time of the transaction. Generally, foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated statements of income and comprehensive income. The foreign currency accounts of BDL and BTL are translated in accordance with ASC 830-10, “Foreign Currency Matters”. Assets and liabilities are translated at applicable exchange rates quoted by the People’s Bank of China at the balance sheet dates and revenues and expenses are translated at average exchange rates in effect during the periods. Because cash flows are translated based on the average translating rate, amounts related to assets and liabilities reported on the statement of cash flows will not necessary agree with changes in the corresponding balances on the balance sheets. Equity is translated at the historical rate of exchange at the date of capital contribution. Resulting translation adjustments are recorded as other comprehensive income (loss) and accumulated as a separate component of equity

Warranty Costs [Policy Text Block]

Warranty Costs

The Company provides for the estimated cost of product warranties at the time revenue is recognized. The Company's warranty obligation is affected by product failure rates and material usage and service delivery costs incurred in correcting product failure. Should actual product failure rates, material usage or service delivery costs differ from the Company's estimates, the Company may revise its estimated product warranty liability. The term of the product warranty is generally twelve months. The reserve for warranty costs from the continuing operations was $8,174 and $47,046 at December 31, 2015 and 2014, respectively. The reserve for warranty costs from the discontinuing operations was $3,534 and $87,174 at December 31, 2015 and 2014, respectively. Warranty expense from the continuing operations for the years ended December 31, 2015, 2014 and 2013 was $12,274, $2,728 and $25,447, respectively. Warranty expense from the discontinuing operations for the years ended December 31, 2015, 2014 and 2013 was $5,118, $14,268 and $32,515, respectively.

Research and Development Expense, Policy [Policy Text Block]

Research and Development Costs

Research and development costs relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. Research and development costs from the continuing operations were $1,918,446, $100,199 and $484,770 for the years ended December 31, 2015, 2014 and 2013, respectively. Research and development costs from the discontinuing operations were $580,216, $515,135 and $0 for the years ended December 31, 2015, 2014 and 2013, respectively.

Earnings Per Share, Policy [Policy Text Block]

Earnings per Share

The Company follows the provisions of ASC 260-10, “Earnings per Share”. Basic earnings per share is computed by dividing net income attributable to holders of common shares by the weighted average number of common shares outstanding during the years. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares. Common stock equivalents having an anti-dilutive effect on earnings per share are excluded from the calculation of diluted earnings per share.

Value Added Tax [Policy Text Block]

Value Added Tax

The Company reports revenues, net of PRC’s value added tax, for all the periods presented in the consolidated statements of income and comprehensive income.

Compensation Related Costs, Policy [Policy Text Block]

Stock-Based Compensation

The Company records stock-based compensation expense at fair value on the grant date and recognizes the expense over the employee’s requisite service period. The Company’s expected volatility assumption is based on the historical volatility of Company’s stock or the expected volatility of similar entities. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend is based on the Company’s current and expected dividend policy.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740-10, “Accounting for Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year; and, (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of available positive and negative evidence. Based on management’s estimate, it is more likely than not that all of the deferred tax assets will not be realized. Therefore, valuation allowance has been provided in the amount of $605,837, $407,539 and $0 as of December 31, 2015, 2014 and 2013.

ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken or expected to be taken on a tax return. Under ASC 740-10, a tax benefit from an uncertain tax position taken or expected to be taken may be recognized only if it is “more likely than not” that the position is sustainable upon examination, based on its technical merits. The tax benefit of a qualifying position under ASC 740-10 would equal the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all the relevant information. A liability (including interest and penalties, if applicable) is established in the financial statements to the extent a current benefit has been recognized on a tax return for matters that are considered contingent upon the outcome of an uncertain tax position. Related interest and penalties, if any, are included as components of income tax expense and income taxes payable. The Company had filed its 2008 and 2009 Value Added Tax (“VAT”) returns for some of its customers during the years ended December 31, 2013, 2014 and 2015. All the potential VAT liabilities on these VAT returns occurred in current period were also accrued as incurred and included in the accompanying consolidated financial statements.

The implementation of ASC 740-10 resulted in no material liability for unrecognized tax benefits. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statements of income and comprehensive income. During the years ended December 31, 2015, 2014 and 2013, the Company did not incur any interest or penalties.

The Company recognizes tax benefits that satisfy a greater than 50% probability threshold and provides for the estimated impact of interest and penalties for such tax.

Liquidity And Going Concern Disclosure Policy [Policy Text Block]

Liquidity and Going Concern

The sleep respiratory business is the focus of the company's future business. The following event indicates that Dehaier can continue to operate as a going concern.

a. Dehaier has entered into a definitive securities purchase agreement with Hangzhou Liaison Interactive.

On April 28, 2016, the Company entered into a definitive securities purchase agreement with Hangzhou Liaison Interactive Information Technology Co., Ltd. (“Hangzhou Liaison Interactive”), a publicly listed company on the Shenzhen Stock Exchange (ticker:002280) pursuant to which Hangzhou Liaison Interactive has agreed to purchase 11,111,111 restricted common shares of the Company for an aggregate of $20,000,000. The purchase price is $1.80 per share, which represents a 35% premium to company’s closing price of $1.33 on April 27, 2016. The Company already completed the first closing by selling 620,414 shares of these shares to Hangzhou Liaison Interactive under the SPA and expects to close the deal before September 30, 2016.

b. Loan agreement with Mr. Ping Chen

On December 2, 2015, the Company entered into a new interest-free loan agreement with Mr. Ping Chen, the CEO and major shareholder of the Company, in the amount of $3,120,000 (RMB 20,000,000) with no floating interest rate or maturity date. On December 18, 2015, the Company repaid half of the loan in the amount of $1,543,000 (RMB  10,000,000). The remaining portion of the loan will be repaid as agreed between the parties.

c. Loan agreement with Nanjing Bank Company Limited (Beijing Branch)

On December 18, 2015, the Company entered into a new loan agreement with Nanjing Bank Company Limited (Beijing Branch) in the amount of $1,541,000 (RMB  10,000,000) with a floating interest rate which will be 7.2% in 2016. The loan is due on December 18, 2016. Pursuant to the terms of the agreement, the line of credit is secured by BTL’s building and guaranteed by two shareholders of the Company.

d. Earnings forecasting for the future six years

The sleep respiratory business is the focus of the company's future business. Our forecast projection was mainly based on the financial results each month in 2015 as well as our company’s future plans and developments in the operation. The forecast projections are based on actual contracts that reflect the company’s operating activities, internal operating targets and budgets. Our forecasting revenue sources from our sleep respiratory business are from the sales of ventilator, three-level hospital, private medical center, insurance Company. We believe the net income from the sleep respiratory business can sustain our future business development.

Based on the above analysis, the Company's management believes that the basis for the preparation of the 2015 annual financial statements based on the continuing operation assumption is reasonable.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued Accounting Standards

In January 2015, FASB issued ASU No. 2015-01, Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. This Update is issued as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to the users of financial statements. This Update eliminates from GAAP the concept of extraordinary items. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The effective date is the same for both public business entities and all other entities. The Company does not expect the adoption of ASU 2015-01 to have material impact on the Company’s consolidated financial statements.

In February 2015, FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. This Update focuses on the consolidation evaluation for reporting organizations that are required to evaluate consolidation of certain legal entities by reducing the number of consolidation models from four to two and is intended to improve current GAAP. The amendments in the ASU are effective beginning after December 15, 2016. We do not expect the adoption of ASU 2015-02 to have material impact on our consolidated financial statements.

In April 2015, FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments in the ASU are effective beginning after December 15, 2015. We do not expect the adoption of ASU 2015-03 to have material impact on our consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, an amendment to Topic 330 for simplifying the measurement of inventory. The update requires that inventory be measured at the lower of cost and net realizable value where net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendment is intended to provide clarification on the measurement and disclosure of inventory in Topic 330 and not intended for those clarifications to result in any changes in practice. The ASU is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted for all entities and should be applied prospectively. The Company does not expect the adoption of ASU 2015-11 to have material impact on the Company’s consolidated financial statements.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers, to defer the effective date of ASC 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASC 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Management is evaluating the effect, if any, on the Company’s consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, to simplify the presentation of deferred income taxes. The update requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The update applies to all entities that present a classified statement of financial position. For public business entities, the ASU is effective for consolidated financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the ASU is effective for consolidated financial statements issued for annual periods beginning after December 15, 2017, and interim periods with annual periods beginning after December 15, 2018. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company has elected to early adopt the ASU, and its effects are reflected in the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The update requires equity investments (except those accounted for under the equity method or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. It eliminated the requirement for public entities to disclose the method(s) and significant assumptions used to estimate the fair value that is require to be disclosed for financial instruments measured at amortized cost on the balance sheet. For public entities, the ASU is effective for the fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management is evaluating the effect, if any, on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Amendments to the ASC 842 Leases. This update requires lessee to recognize the assets and liability (the lease liability) arising from operating leases on the balance sheet for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Within a twelve month or less lease term, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. If a lessee makes this election, it should recognize lease expense on a straight-line basis over the lease term. In transition, this update will be effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management is evaluating the effect, if any, on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-03, “Intangibles-Goodwill and Other (Topic 350); Business Combinations (Topic 805); Consolidation (Topic 810); Derivatives and Hedging (Topic 815): Effective Date and Transition Guidance”. The amendments in this ASU make the guidance in ASUs 2014-02, 2014-03, 2014-07, and 2014-18 effective immediately by removing their effective dates. The amendments also include transition provisions that provide that private companies are able to forgo a prefer ability assessment the first time they elect the accounting alternatives within the scope of this ASU. Any subsequent change to an accounting policy election requires justification that the change is preferable under Topic 250, Accounting Changes and Error Corrections. The amendments in this ASU also extend the transition guidance in ASUs 2014-02, 2014-03, 2014-07, and 2014-18 indefinitely. While this ASU extends transition guidance for Updates 2014-07 and 2014-18, there is no intention to change how transition is applied for those two ASUs. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

In March, 2016, the FASB released ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to employee Share-Based Payment Accounting. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to significantly impact net income, EPS, and the statement of cash flows. Implementation and administration may present challenges for companies with significant share-based payment activities. The ASU is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. The Company is currently evaluating the impact of adoption on the consolidated financial statements. 

In April 2016, the FASB issued ASU 2016- 10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”. The amendments add further guidance on identifying performance obligations and also to improve the operability and understandability of the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein. Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

In May 2016, the FASB issued ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting”, The amendments rescinds SEC paragraphs pursuant to two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force (EITF) meeting. Specifically, registrants should not rely on the following SEC Staff Observer comments upon adoption of Topic 606: 1) Revenue and Expense Recognition for Freight Services in Process, which is codified in paragraph 605-20-S99-2; 2) Accounting for Shipping and Handling Fees and Costs, which is codified in paragraph 605-45-S99-1; 3) Accounting for Consideration Given by a Vendor to a Customer (including Reseller of the Vendor's Products), which is codified in paragraph 605-50-S99-1; 4) Accounting for Gas-Balancing Arrangements (i.e., use of the "entitlements method"), which is codified in paragraph 932-10-S99-5, which is effective upon adoption of ASU 2014-09. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

In May 2016, the FASB issued ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients". The amendments, among other things: (1) clarify the objective of the collectability criterion for applying paragraph 606-10-25-7; (2) permit an entity to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price; (3) specify that the measurement date for noncash consideration is contract inception; (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations; (5) clarify that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application, and (6) clarify that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. The effective date of these amendments is at the same date that Topic 606 is effective. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Schedule of Carrying Amount of Assets and Liability [Table Text Block]

The carrying amount and classification of BTL’s assets and liabilities included in the Consolidated Balance Sheets are as follows:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Total current assets held for continuing operation		768,448		286,222
Total current assets held for discontinued operation		36,337		88,728
Total assets held for continuing operation		1,281,521		1,052,659
Total assets held for discontinued operation		36,337		88,728
Total current liabilities held for continuing operation		264,235		38,554
Total current liabilities held for discontinued operation		185,796		45,339
Total liabilities held for continuing operation		264,235		38,554
Total liabilities held for discontinued operation		185,796		45,339
Total revenue held for continuing operation		583,242		-
Total revenue held for discontinued operation		56,630		403,992
Net loss held for continuing operation		(163,353)		(47,196)
Net income (loss) held for discontinued operation		24,148		(688,562)

Estimated Useful Life Of Property And Equipment [Table Text Block]

Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated on a straight-line basis over the following estimated useful lives:

Leasehold improvements	Shorter of the useful lives or the lease term
Building and land use rights	20-40 years
Machinery and equipment	10-15 years
Furniture and office equipment	5 years
Motor vehicles	5 years

Estimated Useful Life of Intangible Assets [Table Text Block]

Intangible assets are recorded at cost less accumulated amortization. Amortization is calculated on a straight-line basis over the following estimated useful lives:

Leasehold improvements	Shorter of the useful lives or the lease term
Software copyrights	20 years
Other software	5 years

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RESTATEMENT OF FINANCIAL STATEMENTS (Tables)

12 Months Ended

Dec. 31, 2015

Accounting Changes and Error Corrections [Abstract]

Schedule of Error Corrections and Prior Period Adjustments [Table Text Block]

On February 22, 2016, the Company’s management along with the Company’s Board of Directors agreed to focus the Company’s business interests on new mobile medical devices, and decided to discontinue their traditional medical device business interest. The traditional medical device line of business included assembly and sales of X-ray machines, anesthesia machines, monitoring devices, general medical products, and oxygen generators. The mobile medical device business will focus on the development of the Company’s remaining product line, inclusive of products such as the second generation ventilator, general medical products (such as laryngoscope), compressor products, sleep respiratory products, and wireless medical devices.

As part of their decision to discontinue its traditional medical device business, the Company reevaluated its prior beliefs and estimates about certain assets as of 2014. The Board of Directors concluded that the audited consolidated financial statements for the year ended December 31, 2014 included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2014, originally filed with the Securities and Exchange Commission on April 30, 2015, should no longer be relied upon due to an understatement of bad debt allowances for accounts receivable and other receivables, an overstatement of prepayments and carrying value of long-lived assets and an inadequate reserve on inventory. As a result, management determined that a fair presentation of the Company’s financial statements in light of the 2016 decision to classify traditional medical device operations as discontinued required the Company to increase bad debt allowances for accounts receivable and other receivables, to write down some prepayments, to place increased reserve on inventory due to obsolescence, and to write down the carrying value of long-lived assets to the fair value less disposal cost. These error corrections will be presented as restatements, in addition to presenting the traditional medical device business as a discontinued operation, as determined by the Company’s management and Board of Directors. The effects of the restatement were as follows:

	As of December 31,
	2014				2014
	As Previously Reported		Effect of Restatement		Restated
	US$			US$	US$
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		1,727,763		-		1,727,763
Accounts receivable, net		169,765		(27,536)		142,229
Other receivables, net		1,693,466		(22,785)		1,670,681
Advances to suppliers - third parties		1,929,663		(326,097)		1,603,566
Advance to supplier - related party		-		1,498,627		1,498,627
Inventories, net		4,119,330		(35,992)		4,083,338
Tax receivable		138,986		(138,986)		-
Deferred tax asset		407,539		(407,539)		-
Current assets held for discontinued operation		20,908,018		(18,244,705)		2,663,313
Total Current Assets		31,094,530		(17,705,013)		13,389,517
Deposits for purchase of property, plant and equipment-related party		1,498,627		(1,498,627)		-
Property and equipment, net		2,694,167		-		2,694,167
Intangible assets, net		5,014,470		-		5,014,470
Long-term prepaid expenses		-		142,377		142,377
Other assets held for discontinued operation		6,643,480		(6,641,829)		1,651
Total Assets		46,945,274		(25,703,092)		21,242,182
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term borrowings		2,440,500		-		2,440,500
Accounts payable		67,094		-		67,094
Advances from customers		61,443		-		61,443
Accrued expenses and other current liabilities		477,387		(16,774)		460,613
Taxes payable		134,814		-		134,814
Warranty obligation		134,220		-		134,220
Current liabilities held for discontinued operation		362,791		(11,107)		351,684
Total Current Liabilities		3,678,249		(27,881)		3,650,368
OTHER LIABILITIES
Warrants liability		553,060		-		553,060
Total Liabilities		4,231,309		(27,881)		4,203,428
Commitments and Contingency
Equity
Common shares, $0.002731 par value, 18,307,038 shares authorized, 6,194,475 and 5,808,675 shares issued and outstanding at December 31, 2015 and 2014, respectively		15,864		-		15,864
Additional paid in capital		18,719,965		-		18,719,965
Retained earnings		19,142,337		(25,297,107)		(6,154,770)
Accumulated other comprehensive income		3,382,707		17,492		3,400,199
Total Dehaier Medical Systems Limited shareholders' equity		41,260,873		(25,279,615)		15,981,258
Non-controlling interest		1,453,092		(395,596)		1,057,496
Total equity		42,713,965		(25,675,211)		17,038,754
Total liabilities and equity		46,945,274		(25,703,092)		21,242,182

	For the Years Ended
	December 31,
	2014				2014
	As Previously Reported		Effect of Restatement		Restated
	US$		US$		US$
Revenues		2,774,241		-		2,774,241
Costs of revenue		(1,746,399)		(36,008)		(1,782,407)
Gross profit		1,027,842		(36,008)		991,834
Service incomes		131,446		-		131,446
Service expenses		(34,519)		-		(34,519)
General and administrative expenses		(1,945,226)		-		(1,945,226)
Provision for doubtful accounts		(8,351)		(380,847)		(389,198)
Selling expenses		(227,304)		-		(227,304)
Operating loss		(1,056,112)		(416,855)		(1,472,967)
Financial expenses		(195,965)		21,664		(174,301)
Other incomes		83,762		-		83,762
Other expenses		-		(22,299)		(22,299)
Loss on disposal of equipment		(635)		635		-
Change in fair value of warrants liability		2,866,171		-		2,866,171
Income before provision for income tax and non-controlling interest		1,697,221		(416,855)		1,280,366
Provision for income tax (expense) benefit		49,991		(407,717)		(357,726)
Net income from continuing operations		1,747,212		(824,572)		922,640
Net income (loss) from discontinuing operations		(1,088,208)		(24,868,304)		(25,956,512)
Net Income (Loss)		659,004		(25,692,876)		(25,033,872)
Less: net loss attributable to non-controlling interest		(339,989)		(395,769)		(735,758)
Net income (loss) attributable to Dehaier Medical Systems Limited		998,993		(25,297,107)		(24,298,114)
Net income from continuing operations		1,747,212		(824,572)		922,640
Net income (loss) from discontinuing operations		(1,088,208)		(24,868,304)		(25,956,512)
Other comprehensive income (loss)
Foreign currency translation loss		(592,421)		15,530		(576,891)
Comprehensive income (loss)		66,583		(25,677,346)		(25,610,763)
-less comprehensive loss attributable to the non-controlling interest		(340,194)		(422,583)		(762,777)
Comprehensive income (loss) attributable to Dehaier Medical Systems Limited		406,777		(25,254,763)		(24,847,986)
Earnings (loss) per share
-Basic		0.18		(4.59)		(4.41)
-Diluted		0.18		(4.52)		(4.34)
Weighted average number of common shares used in computation
-Basic		5,510,076		-		5,510,076
-Diluted		5,597,169		-		5,597,169

	For the years ended
	December 31,
	2014				2014
	As Previously Reported		Effect of Restatement		Restated
	US$		US$		US$
Cash flows from operating activities
Net income (loss)		659,004		(25,692,876)		(25,033,872)
Net income (loss) from discontinued operations		(1,088,208)		(24,868,304)		(25,956,512)
Net income from continuing operations		1,747,212		(824,572)		922,640
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Stock-based compensation expense		1,408,421		-		1,408,421
Depreciation and amortization		269,595		-		269,595
Change in fair value of warrants liability		(2,866,171)		-		(2,866,171)
Change in deferred tax assets		(282,041)		407,717		125,676
Provision for accounts receivable		8,351		27,549		35,900
Provision for other receivables		-		27,200		27,200
Provision for advances to suppliers - third parties		-		326,098		326,098
Change in warranty reserve		(209,227)		-		(209,227)
Provision for inventory obsolescence		106,199		36,008		142,207
Changes in assets and liabilities:
(Increase) Decrease in accounts receivable		1,743,792		-		1,743,792
Decrease in advances to suppliers - third parties		3,751,434		-		3,751,434
Increase in advance to supplier - related party		(1,498,627)		-		(1,498,627)
Increase in other receivables		(443,285)		-		(443,285)
Increase in inventories		(3,676,810)		-		(3,676,810)
Decrease in taxes receivable		372,935		-		372,935
Increase in long-term prepaid expenses		(142,377)		-		(142,377)
Decrease in accounts payable		(19,710)		-		(19,710)
Decrease in advances from customers		(256,504)		-		(256,504)
Decrease in accrued expenses and other current liabilities		(33,961)		-		(33,961)
Increase in taxes payable		52,064		-		52,064
Net cash (used in) provided by operating activities from continuing operations		31,290		-		31,290
Net cash provided by operating activities from discontinued operations		4,106,063		-		4,106,063
Net cash provided by (used in) operating activities		4,137,353		-		4,137,353
Cash flows from investing activities
Capital expenditures and other additions		(2,053,039)		-		(2,053,039)
Purchases of intangible assets		(3,353,353)		-		(3,353,353)
Net cash used in investing activities from continuing operations		(5,406,392)		-		(5,406,392)
Net cash used in investing activities from discontinued operations		(5,791,256)		-		(5,791,256)
Net cash used in investing activities		(11,197,648)		-		(11,197,648)
Cash flows from financing activities
Proceeds from bank loan		2,944,000		-		2,944,000
Repayments of bank loan		(2,948,700)		-		(2,948,700)
Net proceeds from option exercises		194,300		-		194,300
Net proceeds from issuance of common stock		6,066,546		-		6,066,546
Net cash provided by financing activities		6,256,146		-		6,256,146
Effect of exchange rate fluctuations on cash and cash equivalents		(61,033)		-		(61,033)
Net decrease in cash and cash equivalents		(865,182)		-		(865,182)
Cash and cash equivalents at beginning of year		2,592,945		-		2,592,945
Cash and cash equivalents at end of year		1,727,763		-		1,727,763
Supplemental cash flow information
Income tax paid		188,695		-		188,695
Interest paid		176,231		-		176,231

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ACCOUNTS RECEIVABLE, NET (Tables)

12 Months Ended

Dec. 31, 2015

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

Accounts receivable from the continuing operation consist of the following:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Accounts receivable		9,569,468		13,425,508
Less: allowance for doubtful accounts		(8,913,180)		(12,538,651)
Net accounts receivable		656,288		886,857
Less: accounts receivable, net, held for discontinued operations		(36,876)		(744,628)
Accounts receivable, net, held for continuing operations		619,412		142,229

Allowance for Credit Losses on Financing Receivables [Table Text Block]

Movement of allowance for doubtful accounts is as follows:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Beginning balance		12,538,651		935,865
Addition		164,039		11,621,912
Less: write-off		(3,247,077)		-
Exchange rate effect		(542,433)		(19,126)
Ending balance		8,913,180		12,538,651
Less: balance held for discontinued operations		(8,833,017)		(12,464,175)
Ending balance held for continuing operations		80,163		74,476

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OTHER RECEIVABLES, NET (Tables)

12 Months Ended

Dec. 31, 2015

Other Receivables, Net, Current [Abstract]

Schedule Of Other Receivables [Table Text Block]

Other receivables from the continuing operations consist of the following:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Contract deposits		1,700,339		1,814,105
Loan to third party		-		1,562,700
Advances to employees		9,234		16,842
Others		681,423		769,154
Other receivables		2,390,996		4,162,801
Less: allowance for doubtful accounts		(2,323,937)		(2,423,770)
Net other receivables		67,059		1,739,031
Less: other receivables, net, held for discontinued operations		-		(68,350)
Other receivables, net, held for continuing operations		67,059		1,670,681

Allowance For Doubtful Other Receivables [Table Text Block]

Movement of allowance for doubtful accounts is as follows:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Beginning balance		2,423,770		598,747
Addition		151,376		1,825,820
Less: write-off		(157,208)		-
Exchange rate effect		(94,001)		(797)
Ending balance		2,323,937		2,423,770
Less: balance held for discontinued operations		(1,701,264)		(1,797,835)
Ending balance held for continuing operations		622,673		625,935

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ADVANCES TO SUPPLIERS - THIRD PARTIES, NET (Tables)

12 Months Ended

Dec. 31, 2015

Advance To Suppliers [Abstract]

Schedule Of Advance To Supplies [Table Text Block]

Advance to suppliers – third parties from continuing operations consist of the following:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Advances to suppliers - third parties		4,885,455		10,739,923
Less: allowance for doubtful accounts		(4,254,143)		(8,897,750)
Total advances to suppliers - third parties		631,312		1,842,173
Less: advances to suppliers - third parties held for discontinued operations		(33,217)		(238,607)
Advances to suppliers - third party held for continuing operations		598,095		1,603,566

Allowance For Doubtful Accounts In Advance To Suppliers Third Party [Table Text Block]

Movement of allowance for doubtful accounts is as follows:

	December 31,
	2015		2014
		US$	US$
			(Restated)
Beginning balance		8,897,750		-
Addition		311,420		8,901,490
Less: write-off		(4,662,795)		-
Exchange rate effect		(292,232)		(3,740)
Ending balance		4,254,143		8,897,750
Less: balance held for discontinued operations		(4,157,647)		(8,571,652)
Ending balance held for continuing operations		96,496		326,098

Schedule of Related Party Transactions [Table Text Block]

Advance to supplier – related party from continuing operations consists of the following:

	December 31,
	2015		2014
	US$		US$
Advance to supplier - related party		875,044		1,498,627
Less: allowance for doubtful accounts		-		-
Total advance to supplier - related party		875,044		1,498,627
Less: advance to supplier - related party held for discontinued operations		-		-
Advance to supplier - related party held for continuing operations		875,044		1,498,627

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INVENTORIES (Tables)

12 Months Ended

Dec. 31, 2015

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

Inventories from the continuing operations consist of the following:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Inventories		4,976,566		6,796,254
Less: provision for slow moving inventories		(1,001,452)		(1,101,188)
Net inventories		3,975,114		5,695,066
Less: inventories, net, held for discontinued operations		-		(1,611,728)
Inventories, net, held for continuing operations		3,975,114		4,083,338

Allowance For Doubtful Inventory [Table Text Block]

Movement of provision for slow moving inventories is as follows:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Beginning balance		1,101,188		53,281
Addition		1,934,836		1,049,165
Less: write-off		(1,978,052)		-
Exchange rate effect		(56,520)		(1,258)
Ending balance		1,001,452		1,101,188
Less: balance held for discontinued operations		(967,363)		(1,065,196)
Ending balance held for continuing operations		34,089		35,992

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PROPERTY AND EQUIPMENT, NET (Tables)

12 Months Ended

Dec. 31, 2015

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

Property and equipment from continuing operations consist of the following: 

	December 31,
	2015		2014
	US$		US$
			(Restated)
Buildings		1,311,422		1,384,609
Land use rights		299,570		316,289
Plant and machinery		2,936,103		5,114,148
Automobiles		147,720		193,930
Office and computer equipment		238,647		447,619
Total property and equipment		4,933,462		7,456,595
Less: Accumulated depreciation and amortization		(1,633,408)		(2,782,929)
Impairment of long-lived assets		(1,050,869)		(1,977,848)
Property and equipment, net		2,249,185		2,695,818
Less: property and equipment, net, held for discontinued operations		-		(1,651)
Property and equipment, net, held for continuing operations		2,249,185		2,694,167

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INTANGIBLE ASSETS, NET (Tables)

12 Months Ended

Dec. 31, 2015

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Intangible Assets Net (Excluding Goodwill) [Table Text Block]

Intangible assets from continuing operations consist of the following:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Software Copyright		3,754,861		3,964,412
Patent and others		2,847,940		3,006,878
Total intangible assets		6,602,801		6,971,290
Less:   Accumulated and amortization		(658,644)		(378,014)
Impairment loss		(1,495,353)		(1,578,806)
Intangible assets, net		4,448,804		5,014,470
Less: intangible assets, net, held for discontinued operations		-		-
Intangible assets, net, held for continuing operations		4,448,804		5,014,470

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Annual future amortization expense at December 31 as follows:

	US$
2016		386,540
2017		383,447
2018		381,238
2019		381,238
2020		381,238
2021 and thereafter		2,535,103
		4,448,804

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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2015

Payables and Accruals [Abstract]

Schedule of Accounts Payable and Accrued Liabilities [Table Text Block]

Other payables and other current liabilities from continuing operations consist of the following:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Accrued salaries and social welfare		94,037		116,557
Accrued expenses		1,541,415		233,339
Reimbursed employee's expense		79,363		29,848
Deposits from customer		113,834		94,181
Others		155,501		32,031
Accrued expenses and other current liabilities		1,984,150		505,956
Less: Accrued expenses and other current liabilities from discontinued operations		(185,796)		(45,343)
Accrued expenses and other current liabilities from continuing operations		1,798,354		460,613

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TAXES PAYABLE (Tables)

12 Months Ended

Dec. 31, 2015

Taxes Payable, Current [Abstract]

Schedule Of Tax Payable [Table Text Block]

Taxes payable consist of the following:

	December 31,
	2015		2014
	US$		US$
Value added tax		11,896		10,978
Enterprise income tax		97,299		114,881
Employee withholding taxes		3,727		3,759
City construction tax		595		2,598
Other levies		595		2,598
		114,112		134,814

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NON-CONTROLLING INTEREST (Tables)

12 Months Ended

Dec. 31, 2015

Noncontrolling Interest [Abstract]

Minority Interest [Table Text Block]

Non-controlling interest consists of the following:

	December 31,
	2015		2014
	US$		US$
			(Restated)
Paid-in capital		713,787		713,787
Retained earnings (accumulated deficit)		(112,365)		26,840
Accumulated other comprehensive income		266,404		316,869
		867,826		1,057,496

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EQUITY (Tables)

12 Months Ended

Dec. 31, 2015

Stockholders' Equity Note [Abstract]

Schedule of Statutory Surplus Reserve Activity [Table Text Block]

For the years ended December 31, 2015, 2014 and 2013, statutory surplus reserve activity was as follows:

	December 31,
	2015		2014		2013
	US$		US$		US$
l    Balance – beginning of year		76,260		76,260		75,489
l    Addition to statutory reserves		-		-		771
l    Balance – end of year		76,260		76,260		76,260

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The Company valued the stock options using the Black-Scholes model with the following assumptions:

							Grant Date
Expected	Expected		Dividend		Risk Free		Fair Value
Terms (years)	Volatility		Yield		Interest Rate		Per share
5-5.75		126% - 228%		0%		0.73% - 1.65%		$1.22 - $5.15

Disclosure of Share-based Compensation Arrangements by Share-based Payment Award [Table Text Block]

The following is a summary of the option activity:

			Weighted average		Aggregate
Stock options	Shares		exercise price		intrinsic value
Outstanding as of December 31, 2013		442,000	$	1.63	$	994,160
Granted		131,000
Forfeited		(31,000)
Exercised		(134,000)
Outstanding as of December 31, 2014		408,000	$	2.89	$	(63,320)
Granted		349,000
Forfeited		(12,000)
Exercised		(25,000)
Outstanding as of December 31, 2015		720,000	$	2.36	$	(68,670)

Schedule of Share-based Compensation Shares Authorized Under Stock Option Plans by Exercise Price Range [Table Text Block]

Following is a summary of the status of options outstanding and exercisable at December 31, 2015:

Outstanding options						Exercisable options
Average exercise price		Number		Average remaining contractual life (years)		Average exercise price		Number		Average remaining contractual life (years)
$	1.45		146,000		1.00	$	1.45		87,000	1.00
$	2.3		94,000		2.77	$	2.3		37,600	2.77
$	5.31		131,000		3.64	$	5.31		26,200	3.64
$	1.64		349,000		1.60	$	1.64		-	1.6

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WARRANTS (Tables)

12 Months Ended

Dec. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Warrants [Table Text Block]

The fair value of the outstanding warrants at December 31, 2015 was calculated using the Black Scholes Model with the following assumptions:

Market price per share (USD/share)	2.2619
Exercise price (USD/share)	$4.00-$11.86
Risk free rate	0.66%-0.91%
Dividend yield	-
Expected term/Contractual life (years)	1.02-1.64
Expected volatility	94.85%-110.13%

Fair Value, by Balance Sheet Grouping [Table Text Block]

The following table sets forth by level within the fair value hierarchy of our financial assets and liabilities that was accounted for at fair value on a recurring basis as of December 31, 2015 and 2014:

	Carrying Value at		Fair Value Measurement at
	December 31, 2015		December 31, 2015
			Level 1		Level 2		Level 3
Warrants liability	$	162,736	$	-	$	162,736	$	-

	Carrying Value at		Fair Value Measurement at
	December 31, 2014		December 31, 2014
			Level 1		Level 2		Level 3
Warrants liability	$	553,060	$	-	$	553,060	$	-

Schedule of Warrant Activity [Table Text Block]

The following is a reconciliation of the beginning and ending balances of warrants liability measured at fair value on a recurring basis using Level 2 inputs:

	December 31,
	2015		2014		2013
		US$	US$		US$
Beginning balance		553,060		720,857		374,166
Warrants issued		-		2,698,374		-
Fair value change of the issued warrants included in earnings		(390,324)		(2,866,171)		346,691
Ending balance		162,736		553,060		720,857

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

Following is a summary of the warrants activity:

			Weighted Average		Weighted Average Remaining
	Number		Exercise Price		Contractual Life
Outstanding as of December 31, 2013		257,500	$	7.66		1.97
Granted		293,880
Forfeited		-
Exercised		-
Outstanding as of December 31, 2014		551,380	$	9.90		1.86
Granted		-
Forfeited		-
Exercised		-
Outstanding as of December 31, 2015		551,380	$	9.86		1.49

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EARNINGS (LOSS) PER SHARE (Tables)

12 Months Ended

Dec. 31, 2015

Earnings Per Share [Abstract]

Schedule of Earnings Per Share Reconciliation [Table Text Block]

The following is a reconciliation of the basic and diluted earnings (loss) per share computation for the years ended December 31, 2015, 2014 and 2013:

	Year ended
	December 31,
	2015		2014		2013
			(Restated)
Basic earnings (loss) per share
Net income (loss) available to the company’s common shareholders	$	(10,223,130)	$	(24,298,114)	$	1,995,621
Weighted average shares outstanding - Basic		5,862,647		5,510,076		4,625,195
Earnings (loss) per share - Basic	$	(1.74)	$	(4.41)	$	0.43
Diluted earnings (loss) per share
Net income (loss) available to the company’s common shareholders	$	(10,223,130)	$	(24,298,114)	$	1,995,621
Weighted average shares outstanding - Basic		5,862,647		5,510,076		4,625,195
Options and warrants		33,887		87,093		50,932
Weighted shares outstanding - Diluted		5,896,534		5,597,169		4,676,127
Earnings (loss) per share - Diluted	$	(1.73)	$	(4.34)	$	0.43

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

Provision (benefit) for income taxes consists of:

	Year Ended December 31
	2015		2014		2013
	US$		US$		US$
			(Restated)
Current income taxes benefit (provision)		11,978		(233,884)		(524,977)
Deferred income taxes benefit (provision)				(123,842)		2,698
Total benefit (provision) for income taxes		11,978		(357,726)		(522,279)

Summary of Valuation Allowance [Table Text Block]

The following table reconciles the valuation allowance for the year ended December 31, 2015 and 2014, which consisted of the following:

	Year ended December 31,
	2015		2014
	US$		US$
			(Restated)
Beginning balance		407,539		-
Additions		198,298		407,539
Ending balance		605,837		407,539

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CONCENTRATIONS (Tables)

12 Months Ended

Dec. 31, 2015

Risks and Uncertainties [Abstract]

Schedule of Revenue by Major Customers by Reporting Segments [Table Text Block]

The following represents the revenues by product line, all derived from China:

	For the years ended
	December 31,
	2015		2014		2013
	US$		US$		US$
Products Line
Medical Devices		1,500,957		16,000,881		14,824,028
Respiratory and Oxygen Homecare		20,573		53,755		2,034,150
Mobile Medicine		164,503		1,631,413		-
Total Revenues		1,686,033		17,686,049		16,858,178
Less: revenues from discontinued operations		(364,490)		(14,911,808)		(9,455,705)
Revenues from continuing operations		1,321,543		2,774,241		7,402,473

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DISCONTINUED OPERATIONS (Tables)

12 Months Ended

Dec. 31, 2015

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations [Table Text Block]

Reconciliation of the Carrying Amounts of Major Classes of Assets and Liabilities of Discontinued Operations Classified as discontinued operations in the Consolidated Balance Sheets.

	December 31,
	2015		2014
	US$		US$
			(Restated)
ASSETS
CURRENT ASSETS:
Accounts receivable, net		36,876		744,628
Other receivables, net		-		68,350
Advances to suppliers – third parties		33,217		238,607
Inventories, net		-		1,611,728
Total Current Assets		70,093		2,663,313
Property and equipment, net		-		1,651
Total Assets		70,093		2,664,964
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable		146,029		204,047
Advances from customers		75,432		102,294
Accrued expenses and other current liabilities		185,796		45,343
Total Current Liabilities		407,257		351,684

Reconciliation of the Carrying Amounts of Major Classes of Net Income (Loss) from Operations to be Disposed Classified as discontinued operations in the Consolidated Statements of Operations and Comprehensive Loss.

 

	For the Years Ended
	December 31,
	2015		2014		2013
	US$		US$		US$
			(Restated)
Revenues		364,490		14,911,808		9,455,705
Costs of revenue		(2,190,140)		(13,162,235)		(5,858,208)
Gross profit (loss)		(1,825,650)		1,749,573		3,597,497
Service incomes		84,774		233,819		-
Service expenses		(54,173)		(10,845)		-
General and administrative expenses		(693,881)		(1,464,043)		-
Provision for doubtful accounts		(618,290)		(21,960,025)		(33,556)
Impairment loss for property and equipment		-		(1,978,711)		-
Impairment loss for intangible assets		-		(1,579,495)		-
Selling expenses		(392,892)		(946,785)		(663,193)
Operating Income (loss)		(3,500,112)		(25,956,512)		2,900,748
Income (loss) before provision for income tax and non-controlling interest		(3,500,112)		(25,956,512)		2,900,748
Provision for income tax expense		-		-		-
Net income (loss) from discontinuing operations		(3,500,112)		(25,956,512)		2,900,748

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ORGANIZATION AND PRINCIPAL ACTIVITIES (Details Textual) - Beijing Dehaier Technology Co., Ltd [Member] - Subsequent Event [Member]	Jan. 14, 2016
Business Acquisition, Percentage of Voting Interests Acquired	0.80%
Sale of Stock, Percentage of Ownership after Transaction	100.00%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Accounting Policies [Line Items]
Total current assets	$ 6,829,541	$ 13,389,517
Total assets	13,836,455	21,242,182
Total current liabilities	6,366,854	3,650,368
Total liabilities	6,529,590	4,203,428
Revenues	1,321,543	2,774,241	$ 7,402,473
Net Income (Loss)	(10,223,130)	(24,298,114)	$ 1,995,621
Continuing Operation [Member]
Accounting Policies [Line Items]
Total current assets	768,448	286,222
Total assets	1,281,521	1,052,659
Total current liabilities	264,235	38,554
Total liabilities	264,235	38,554
Revenues	583,242	0
Net Income (Loss)	(163,353)	(47,196)
Discontinued Operation [Member]
Accounting Policies [Line Items]
Total current assets	36,337	88,728
Total assets	36,337	88,728
Total current liabilities	185,796	45,339
Total liabilities	185,796	45,339
Revenues	56,630	403,992
Net Income (Loss)	$ 24,148	$ (688,562)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1)	12 Months Ended
	Dec. 31, 2015
Leasehold Improvements [Member]
Accounting Policies [Line Items]
Property, Plant and Equipment, Estimated Useful Lives	Shorter of the useful lives or the lease term
Building and land use rights [Member] | Minimum [Member]
Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	20 years
Building and land use rights [Member] | Maximum [Member]
Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	40 years
Machinery and Equipment [Member] | Minimum [Member]
Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	10 years
Machinery and Equipment [Member] | Maximum [Member]
Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	15 years
Furniture and Office Equipment [Member]
Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	5 years
Motor Vehicles [Member]
Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	5 years

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2)	12 Months Ended
	Dec. 31, 2015
Leasehold Improvements [Member]
Accounting Policies [Line Items]
Impaired Intangible Asset, Description	Shorter of the useful lives or the lease term
Software Copyrights [Member]
Accounting Policies [Line Items]
Finite-Lived Intangible Asset, Useful Life	20 years
Other Software [Member]
Accounting Policies [Line Items]
Finite-Lived Intangible Asset, Useful Life	5 years

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Textual)	1 Months Ended					12 Months Ended
	Apr. 28, 2016 USD ($) $ / shares shares	Dec. 31, 2015 USD ($)	Dec. 31, 2015 CNY (¥)	Dec. 18, 2015 USD ($)	Mar. 03, 2015 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)	Dec. 18, 2015 CNY (¥)	Mar. 03, 2015 CNY (¥)	Dec. 13, 2013 USD ($)	Dec. 13, 2013 CNY (¥)
Accounting Policies [Line Items]
Accounts Receivables, Prior Considered Past Due						1 year
Allowance for Doubtful Accounts Receivable, Current		$ 8,913,180				$ 8,913,180	$ 12,538,651	$ 935,865
Advances to Suppliers		$ 598,095				$ 598,095	1,603,566
Value Added Tax Payable, Percentage		17.00%				17.00%
Product Warranty Accrual, Current		$ 11,708				$ 11,708	134,220
Additional Amount Contributed By Shareholders											$ 327,400
Voting Ownership Interest Percentage		50.00%				50.00%
Impairment of Long-Lived Assets Held-for-use						$ (1,050,869)	(1,977,848)
Deferred Tax Assets, Valuation Allowance, Current		$ 605,837				605,837	407,539	0
Proceeds from Related Party Debt						3,867,859	0	0
Repayments of Related Party Debt						1,603,590	0	$ 0
Line Of Credit, Current		1,541,000				$ 1,541,000	$ 2,440,500
Line Of Credit Facility, Interest Rate During Period						7.20%	7.50%	6.30%
Scenario, Forecast [Member]
Accounting Policies [Line Items]
Shares Issued, Price Per Share | $ / shares	$ 1.80
Share Price | $ / shares	$ 1.33
Stock Issued During Period, Shares, New Issues | shares	620,414
Chief Executive Officer [Member]
Accounting Policies [Line Items]
Proceeds from Related Party Debt		3,120,000	¥ 20,000,000
Repayments of Related Party Debt		1,543,000	¥ 10,000,000
Subsequent Event [Member]
Accounting Policies [Line Items]
Number Of Shares Agreed To Issue Under Agreement | shares	11,111,111
Value Of Shares Agreed To Issue Under Agreement	$ 20,000,000
Premium Percentage On Closing Price	35.00%
Continuing Operations [Member]
Accounting Policies [Line Items]
Allowance for Doubtful Accounts Receivable, Current		80,163				$ 80,163	$ 74,476
Advances to Suppliers		96,496				96,496	326,098
Inventory Valuation Reserves		34,089				34,089	35,992
Product Warranty Accrual, Current		8,174				8,174	47,046
Product Warranty Expense						12,274	2,728	$ 25,447
Research and Development Expense, Total						1,918,446	100,199	484,770
Discontinued Operations [Member]
Accounting Policies [Line Items]
Allowance for Doubtful Accounts Receivable, Current		(8,833,017)				(8,833,017)	(12,464,175)
Advances to Suppliers		4,157,647				4,157,647	8,571,652
Inventory Valuation Reserves		967,363				967,363	1,065,196
Product Warranty Accrual, Current		3,534				3,534	87,174
Product Warranty Expense						5,118	14,268	32,515
Research and Development Expense, Total						580,216	515,135	$ 0
Impairment of Intangible Assets, Finite-lived						1,495,353.07	1,578,806
Impairment of Long-Lived Assets Held-for-use						1,050,869	1,977,848
Other Receivables [Member] | Continuing Operations [Member]
Accounting Policies [Line Items]
Allowance for Doubtful Accounts Receivable, Current		622,673				622,673	625,935
Other Receivables [Member] | Discontinued Operations [Member]
Accounting Policies [Line Items]
Allowance for Doubtful Accounts Receivable, Current		$ 1,701,264				$ 1,701,264	$ 1,797,835
BTL [Member]
Accounting Policies [Line Items]
Additional Amount Contributed By Shareholders | ¥												¥ 2,000,000
Nanjing Bank Company Limited [Member]
Accounting Policies [Line Items]
Line Of Credit, Current				$ 1,541,000	$ 2,405,385				¥ 10,000,000	¥ 15,000,000
Line Of Credit Facility, Interest Rate During Period				7.20%	7.811%
Line Of Credit Facility, Expiration Date				Dec. 18, 2016	Mar. 03, 2016
Minimum [Member]
Accounting Policies [Line Items]
Accounts Receivable Term						60 days
Maximum [Member]
Accounting Policies [Line Items]
Accounts Receivable Term						180 days

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RESTATEMENT OF FINANCIAL STATEMENTS (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
CURRENT ASSETS:
Cash and cash equivalents	$ 624,724	$ 1,727,763	$ 2,592,945	$ 3,505,330
Accounts receivable, net	619,412	142,229
Other receivables, net	67,059	1,670,681
Advances to suppliers - third parties	598,095	1,603,566
Advance to supplier - related party	875,044	1,498,627
Inventories, net	3,975,114	4,083,338
Tax receivable		0
Deferred tax asset		0
Current assets held for discontinued operation	70,093	2,663,313
Total Current Assets	6,829,541	13,389,517
Deposits for purchase of property, plant and equipment-related party		0
Property and equipment, net	2,249,185	2,694,167
Intangible assets, net	4,448,804	5,014,470
Long-term prepaid expenses	308,925	142,377
Other assets held for discontinued operation	0	1,651
Total Assets	13,836,455	21,242,182
CURRENT LIABILITIES:
Short-term borrowings	1,541,000	2,440,500
Accounts payable	275,551	67,094
Advances from customers	42,980	61,443
Accrued expenses and other current liabilities	1,798,354	460,613
Taxes payable	114,112	134,814
Warranty obligation	11,708	134,220
Current liabilities held for discontinued operation	407,257	351,684
Total Current Liabilities	6,366,854	3,650,368
OTHER LIABILITIES
Warrants liability	162,736	553,060
Total Liabilities	6,529,590	4,203,428
Commitments and Contingency
Equity
Common shares, $0.002731 par value, 18,307,038 shares authorized, 6,194,475 and 5,808,675 shares issued and outstanding at December 31, 2015 and 2014, respectively	16,918	15,864
Additional paid in capital	19,810,905	18,719,965
Retained earnings	(16,377,900)	(6,154,770)
Accumulated other comprehensive income	2,989,116	3,400,199
Total Dehaier Medical Systems Limited shareholders' equity	6,439,039	15,981,258
Non-controlling interest	867,826	1,057,496
Total equity	7,306,865	17,038,754	37,678,624	$ 34,068,296
Total liabilities and equity	$ 13,836,455	21,242,182
Scenario, Previously Reported [Member]
CURRENT ASSETS:
Cash and cash equivalents		1,727,763	2,592,945
Accounts receivable, net		169,765
Other receivables, net		1,693,466
Advances to suppliers - third parties		1,929,663
Advance to supplier - related party		0
Inventories, net		4,119,330
Tax receivable		138,986
Deferred tax asset		407,539
Current assets held for discontinued operation		20,908,018
Total Current Assets		31,094,530
Deposits for purchase of property, plant and equipment-related party		1,498,627
Property and equipment, net		2,694,167
Intangible assets, net		5,014,470
Long-term prepaid expenses		0
Other assets held for discontinued operation		6,643,480
Total Assets		46,945,274
CURRENT LIABILITIES:
Short-term borrowings		2,440,500
Accounts payable		67,094
Advances from customers		61,443
Accrued expenses and other current liabilities		477,387
Taxes payable		134,814
Warranty obligation		134,220
Current liabilities held for discontinued operation		362,791
Total Current Liabilities		3,678,249
OTHER LIABILITIES
Warrants liability		553,060
Total Liabilities		4,231,309
Commitments and Contingency
Equity
Common shares, $0.002731 par value, 18,307,038 shares authorized, 6,194,475 and 5,808,675 shares issued and outstanding at December 31, 2015 and 2014, respectively		15,864
Additional paid in capital		18,719,965
Retained earnings		19,142,337
Accumulated other comprehensive income		3,382,707
Total Dehaier Medical Systems Limited shareholders' equity		41,260,873
Non-controlling interest		1,453,092
Total equity		42,713,965
Total liabilities and equity		46,945,274
Restatement Adjustment [Member]
CURRENT ASSETS:
Cash and cash equivalents		0	$ 0
Accounts receivable, net		(27,536)
Other receivables, net		(22,785)
Advances to suppliers - third parties		(326,097)
Advance to supplier - related party		1,498,627
Inventories, net		(35,992)
Tax receivable		(138,986)
Deferred tax asset		(407,539)
Current assets held for discontinued operation		(18,244,705)
Total Current Assets		(17,705,013)
Deposits for purchase of property, plant and equipment-related party		(1,498,627)
Property and equipment, net		0
Intangible assets, net		0
Long-term prepaid expenses		142,377
Other assets held for discontinued operation		(6,641,829)
Total Assets		(25,703,092)
CURRENT LIABILITIES:
Short-term borrowings		0
Accounts payable		0
Advances from customers		0
Accrued expenses and other current liabilities		(16,774)
Taxes payable		0
Warranty obligation		0
Current liabilities held for discontinued operation		(11,107)
Total Current Liabilities		(27,881)
OTHER LIABILITIES
Warrants liability		0
Total Liabilities		(27,881)
Commitments and Contingency
Equity
Common shares, $0.002731 par value, 18,307,038 shares authorized, 6,194,475 and 5,808,675 shares issued and outstanding at December 31, 2015 and 2014, respectively		0
Additional paid in capital		0
Retained earnings		(25,297,107)
Accumulated other comprehensive income		17,492
Total Dehaier Medical Systems Limited shareholders' equity		(25,279,615)
Non-controlling interest		(395,596)
Total equity		(25,675,211)
Total liabilities and equity		$ (25,703,092)

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RESTATEMENT OF FINANCIAL STATEMENTS (Details) (Parenthetical) - $ / shares	Dec. 31, 2015	Dec. 31, 2014
Schedule of Error Corrections and Prior Period Adjustments [Line Items]
Common Stock, Par or Stated Value Per Share	$ 0.002731	$ 0.002731
Common Stock, Shares Authorized	18,307,038	18,307,038
Common Stock, Shares, Issued	6,194,475	5,808,675
Common Stock, Shares, Outstanding	6,194,475	5,808,675

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RESTATEMENT OF FINANCIAL STATEMENTS (Details 1) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Schedule of Error Corrections and Prior Period Adjustments [Line Items]
Revenues	$ 1,321,543	$ 2,774,241	$ 7,402,473
Costs of revenue	(1,435,955)	(1,782,407)	(4,589,404)
Gross profit	(114,412)	991,834	2,813,069
Service incomes	1,723,542	131,446	309,060
Service expenses	(1,378,829)	(34,519)	(54,761)
General and administrative expenses	(4,261,972)	(1,945,226)	(1,944,054)
Provision for doubtful accounts	(8,544)	(389,198)	0
Selling expenses	(3,046,408)	(227,304)	(519,016)
Operating loss	(7,086,623)	(1,472,967)	604,298
Financial expenses	(194,685)	(174,301)	(164,074)
Other incomes	19,553	83,762	0
Other expenses	(2,770)	(22,299)	(468,676)
Loss on disposal of equipment		0
Change in fair value of warrants liability	390,324	2,866,171	(346,691)
Income before provision for income tax and non-controlling interest	(6,874,201)	1,280,366	(375,143)
Provision for income tax (expense) benefit	11,978	(357,726)	(522,279)
Net income from continuing operations	(6,862,223)	922,640	(897,422)
Net income (loss) from discontinuing operations	(3,500,112)	(25,956,512)	2,900,748
Net Income (Loss)	(10,362,335)	(25,033,872)	2,003,326
Less: net loss attributable to non-controlling interest	(139,205)	(735,758)	7,705
Net income (loss) attributable to Dehaier Medical Systems Limited	(10,223,130)	(24,298,114)	1,995,621
Net income from continuing operations	(6,862,223)	922,640	(897,422)
Net income (loss) from discontinuing operations	(3,500,112)	(25,956,512)	2,900,748
Other comprehensive income (loss)
Foreign currency translation loss	(461,548)	(576,891)	1,028,124
Comprehensive income (loss)	(10,823,883)	(25,610,763)	3,031,450
-less comprehensive loss attributable to the non-controlling interest	(189,670)	(762,777)	52,960
Comprehensive income (loss) attributable to Dehaier Medical Systems Limited	$ (10,634,213)	$ (24,847,986)	$ 2,978,490
Earnings (loss) per share
-Basic	$ (1.74)	$ (4.41)	$ 0.43
-Diluted	$ (1.73)	$ (4.34)	$ 0.43
Weighted average number of common shares used in computation
-Basic	5,862,647	5,510,076	4,625,195
-Diluted	5,896,534	5,597,169	4,676,127
Scenario, Previously Reported [Member]
Schedule of Error Corrections and Prior Period Adjustments [Line Items]
Revenues		$ 2,774,241
Costs of revenue		(1,746,399)
Gross profit		1,027,842
Service incomes		131,446
Service expenses		(34,519)
General and administrative expenses		(1,945,226)
Provision for doubtful accounts		(8,351)
Selling expenses		(227,304)
Operating loss		(1,056,112)
Financial expenses		(195,965)
Other incomes		83,762
Other expenses		0
Loss on disposal of equipment		(635)
Change in fair value of warrants liability		2,866,171
Income before provision for income tax and non-controlling interest		1,697,221
Provision for income tax (expense) benefit		49,991
Net income from continuing operations		1,747,212
Net income (loss) from discontinuing operations		(1,088,208)
Net Income (Loss)		659,004
Less: net loss attributable to non-controlling interest		(339,989)
Net income (loss) attributable to Dehaier Medical Systems Limited		998,993
Net income from continuing operations		1,747,212
Net income (loss) from discontinuing operations		(1,088,208)
Other comprehensive income (loss)
Foreign currency translation loss		(592,421)
Comprehensive income (loss)		66,583
-less comprehensive loss attributable to the non-controlling interest		(340,194)
Comprehensive income (loss) attributable to Dehaier Medical Systems Limited		$ 406,777
Earnings (loss) per share
-Basic		$ 0.18
-Diluted		$ 0.18
Weighted average number of common shares used in computation
-Basic		5,510,076
-Diluted		5,597,169
Restatement Adjustment [Member]
Schedule of Error Corrections and Prior Period Adjustments [Line Items]
Revenues		$ 0
Costs of revenue		(36,008)
Gross profit		(36,008)
Service incomes		0
Service expenses		0
General and administrative expenses		0
Provision for doubtful accounts		(380,847)
Selling expenses		0
Operating loss		(416,855)
Financial expenses		21,664
Other incomes		0
Other expenses		(22,299)
Loss on disposal of equipment		635
Change in fair value of warrants liability		0
Income before provision for income tax and non-controlling interest		(416,855)
Provision for income tax (expense) benefit		(407,717)
Net income from continuing operations		(824,572)
Net income (loss) from discontinuing operations		(24,868,304)
Net Income (Loss)		(25,692,876)
Less: net loss attributable to non-controlling interest		(395,769)
Net income (loss) attributable to Dehaier Medical Systems Limited		(25,297,107)
Net income from continuing operations		(824,572)
Net income (loss) from discontinuing operations		(24,868,304)
Other comprehensive income (loss)
Foreign currency translation loss		15,530
Comprehensive income (loss)		(25,677,346)
-less comprehensive loss attributable to the non-controlling interest		(422,583)
Comprehensive income (loss) attributable to Dehaier Medical Systems Limited		$ (25,254,763)
Earnings (loss) per share
-Basic		$ (4.59)
-Diluted		$ (4.52)
Weighted average number of common shares used in computation
-Basic		0
-Diluted		0

XML

RESTATEMENT OF FINANCIAL STATEMENTS (Details 2) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Cash flows from operating activities
Net income (loss)	$ (10,362,335)	$ (25,033,872)	$ 2,003,326
Net income (loss) from discontinued operations	(3,500,112)	(25,956,512)	2,900,748
Net income from continuing operations	6,862,223	(922,640)	897,422
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Stock-based compensation expense	1,055,744	1,408,421	239,871
Depreciation and amortization	619,207	269,595	216,369
Change in fair value of warrants liability	(390,324)	(2,866,171)	346,691
Change in deferred tax assets	0	125,676	(2,698)
Provision for accounts receivable	10,014	35,900	0
Provision for other receivables	(1,899)	27,200	0
Provision for advances to suppliers - third parties	429	326,098	0
Change in warranty reserve	(120,105)	(209,227)	0
Provision for inventory obsolescence	16,203	142,207	0
Changes in assets and liabilities:
(Increase) Decrease in accounts receivable	(487,197)	1,743,792	2,366,023
Decrease in advances to suppliers - third parties	1,005,042	3,751,434
Increase in advance to supplier - related party	623,583	(1,498,627)	(4,004,830)
Increase in other receivables	1,605,521	(443,285)	2,265,617
Increase in inventories	92,020	(3,676,810)	(171,634)
Decrease in taxes receivable	0	372,935	(34,569)
Increase in long-term prepaid expenses	(166,548)	(142,377)
Decrease in accounts payable	208,457	(19,710)	72,791
Decrease in advances from customers	(18,463)	(256,504)	278,300
Decrease in accrued expenses and other current liabilities	1,337,741	(33,961)	85,926
Increase in taxes payable	(20,702)	52,064	(325,464)
Net cash (used in) provided by operating activities from continuing operations	(1,493,500)	31,290	434,971
Net cash provided by operating activities from discontinued operations	(851,315)	4,106,063	(635,421)
Net cash provided by (used in) operating activities	(2,344,815)	4,137,353	(200,450)
Cash flows from investing activities
Capital expenditures and other additions	(27,861)	(2,053,039)	(8,536)
Purchases of intangible assets	0	(3,353,353)	0
Net cash used in investing activities from continuing operations	(27,861)	(5,406,392)	(8,536)
Net cash used in investing activities from discontinued operations	0	(5,791,256)	(1,122,085)
Net cash used in investing activities	(27,861)	(11,197,648)	(1,130,621)
Cash flows from financing activities
Proceeds from bank loan	4,008,975	2,944,000	2,503,747
Repayments of bank loan	(4,810,770)	(2,948,700)	(2,502,457)
Net proceeds from option exercises	36,250	194,300	0
Net proceeds from issuance of common stock	0	6,066,546	0
Net cash provided by financing activities	1,498,724	6,256,146	330,866
Effect of exchange rate fluctuations on cash and cash equivalents	(229,087)	(61,033)	87,820
Net decrease in cash and cash equivalents	(1,103,039)	(865,182)	(912,385)
Cash and cash equivalents at beginning of year	1,727,763	2,592,945	3,505,330
Cash and cash equivalents at end of year	624,724	1,727,763	2,592,945
Supplemental Cash Flow Information [Abstract]
Income tax paid	0	188,695	688,219
Interest paid	196,220	176,231	159,482
Scenario, Previously Reported [Member]
Cash flows from operating activities
Net income (loss)		659,004
Net income (loss) from discontinued operations		(1,088,208)
Net income from continuing operations		(1,747,212)
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Stock-based compensation expense		1,408,421
Depreciation and amortization		269,595
Change in fair value of warrants liability		(2,866,171)
Change in deferred tax assets		(282,041)
Provision for accounts receivable		8,351
Provision for other receivables		0
Provision for advances to suppliers - third parties		0
Change in warranty reserve		(209,227)
Provision for inventory obsolescence		106,199
Changes in assets and liabilities:
(Increase) Decrease in accounts receivable		1,743,792
Decrease in advances to suppliers - third parties		3,751,434
Increase in advance to supplier - related party		(1,498,627)
Increase in other receivables		(443,285)
Increase in inventories		(3,676,810)
Decrease in taxes receivable		372,935
Increase in long-term prepaid expenses		(142,377)
Decrease in accounts payable		(19,710)
Decrease in advances from customers		(256,504)
Decrease in accrued expenses and other current liabilities		(33,961)
Increase in taxes payable		52,064
Net cash (used in) provided by operating activities from continuing operations		31,290
Net cash provided by operating activities from discontinued operations		4,106,063
Net cash provided by (used in) operating activities		4,137,353
Cash flows from investing activities
Capital expenditures and other additions		(2,053,039)
Purchases of intangible assets		(3,353,353)
Net cash used in investing activities from continuing operations		(5,406,392)
Net cash used in investing activities from discontinued operations		(5,791,256)
Net cash used in investing activities		(11,197,648)
Cash flows from financing activities
Proceeds from bank loan		2,944,000
Repayments of bank loan		(2,948,700)
Net proceeds from option exercises		194,300
Net proceeds from issuance of common stock		6,066,546
Net cash provided by financing activities		6,256,146
Effect of exchange rate fluctuations on cash and cash equivalents		(61,033)
Net decrease in cash and cash equivalents		(865,182)
Cash and cash equivalents at beginning of year	1,727,763	2,592,945
Cash and cash equivalents at end of year		1,727,763	2,592,945
Supplemental Cash Flow Information [Abstract]
Income tax paid		188,695
Interest paid		176,231
Restatement Adjustment [Member]
Cash flows from operating activities
Net income (loss)		(25,692,876)
Net income (loss) from discontinued operations		(24,868,304)
Net income from continuing operations		824,572
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Stock-based compensation expense		0
Change in fair value of warrants liability		0
Change in deferred tax assets		407,717
Provision for accounts receivable		27,549
Provision for other receivables		27,200
Provision for advances to suppliers - third parties		326,098
Change in warranty reserve		0
Provision for inventory obsolescence		36,008
Changes in assets and liabilities:
(Increase) Decrease in accounts receivable		0
Decrease in advances to suppliers - third parties		0
Increase in advance to supplier - related party		0
Increase in other receivables		0
Increase in inventories		0
Decrease in taxes receivable		0
Increase in long-term prepaid expenses		0
Decrease in accounts payable		0
Decrease in advances from customers		0
Decrease in accrued expenses and other current liabilities		0
Increase in taxes payable		0
Net cash (used in) provided by operating activities from continuing operations		0
Net cash provided by operating activities from discontinued operations		0
Net cash provided by (used in) operating activities		0
Cash flows from investing activities
Capital expenditures and other additions		0
Purchases of intangible assets		0
Net cash used in investing activities from continuing operations		0
Net cash used in investing activities from discontinued operations		0
Net cash used in investing activities		0
Cash flows from financing activities
Proceeds from bank loan		0
Repayments of bank loan		0
Net proceeds from option exercises		0
Net proceeds from issuance of common stock		0
Net cash provided by financing activities		0
Effect of exchange rate fluctuations on cash and cash equivalents		0
Net decrease in cash and cash equivalents		0
Cash and cash equivalents at beginning of year	$ 0	0
Cash and cash equivalents at end of year		0	$ 0
Supplemental Cash Flow Information [Abstract]
Income tax paid		0
Interest paid		$ 0

XML

ACCOUNTS RECEIVABLE, NET (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable	$ 9,569,468	$ 13,425,508
Less: allowance for doubtful accounts	(8,913,180)	(12,538,651)	$ (935,865)
Net accounts receivable	656,288	886,857
Less: accounts receivable, net, held for discontinued operations	(36,876)	(744,628)
Accounts receivable, net, held for continuing operations	$ 619,412	$ 142,229

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ACCOUNTS RECEIVABLE, NET (Details 1) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	$ 12,538,651	$ 935,865
Addition	164,039	11,621,912
Less: write-off	(3,247,077)	0
Exchange rate effect	(542,433)	(19,126)
Ending balance	8,913,180	12,538,651
Discontinued Operations [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	(12,464,175)
Ending balance	(8,833,017)	(12,464,175)
Continuing Operations [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	74,476
Ending balance	$ 80,163	$ 74,476

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OTHER RECEIVABLES, NET (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Other Receivables [Line Items]
Contract deposits	$ 1,700,339	$ 1,814,105
Loan to third party	0	1,562,700
Advances to employees	9,234	16,842
Others	681,423	769,154
Other receivables	2,390,996	4,162,801
Less: allowance for doubtful accounts	(2,323,937)	(2,423,770)	$ (598,747)
Net other receivables	67,059	1,739,031
Less: other receivables, net, held for discontinued operations	0	(68,350)
Other receivables, net, held for continuing operations	$ 67,059	$ 1,670,681

XML

OTHER RECEIVABLES, NET (Details 1) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Other Receivables [Line Items]
Beginning balance	$ 2,423,770	$ 598,747
Addition	151,376	1,825,820
Less: write-off	(157,208)	0
Exchange rate effect	(94,001)	(797)
Ending balance	2,323,937	2,423,770
Discontinued Operations [Member]
Other Receivables [Line Items]
Beginning balance	(1,797,835)
Ending balance	(1,701,264)	(1,797,835)
Continuing Operations [Member]
Other Receivables [Line Items]
Beginning balance	625,935
Ending balance	$ 622,673	$ 625,935

XML

ADVANCES TO SUPPLIERS - THIRD PARTIES, NET (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Schedule Of Advance To Suppliers [Line Items]
Advances to suppliers - third parties	$ 4,885,455	$ 10,739,923
Less: allowance for doubtful accounts	(4,254,143)	(8,897,750)
Total advances to suppliers - third parties	631,312	1,842,173
Less: advances to suppliers - third parties held for discontinued operations	(33,217)	(238,607)
Advances to suppliers - third party held for continuing operations	$ 598,095	$ 1,603,566

XML

ADVANCES TO SUPPLIERS - THIRD PARTIES, NET (Details 1) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Schedule Of Advance To Suppliers [Line Items]
Beginning balance	$ 8,897,750	$ 0
Addition	311,420	8,901,490
Less: write-off	(4,662,795)	0
Exchange rate effect	(292,232)	(3,740)
Ending balance	4,254,143	8,897,750
Discontinued Operations [Member]
Schedule Of Advance To Suppliers [Line Items]
Beginning balance	(8,571,652)
Ending balance	(4,157,647)	(8,571,652)
Continuing Operations [Member]
Schedule Of Advance To Suppliers [Line Items]
Beginning balance	326,098
Ending balance	$ 96,496	$ 326,098

XML

ADVANCES TO SUPPLIERS - THIRD PARTIES, NET (Details 2) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Related Party Transaction [Line Items]
Advance to supplier - related party	$ 875,044	$ 1,498,627
Less: allowance for doubtful accounts	0	0
Total advance to supplier - related party	875,044	1,498,627
Less: advance to supplier - related party held for discontinued operations	0	0
Advance to supplier - related party held for continuing operations	$ 875,044	$ 1,498,627

XML

INVENTORIES (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Inventory [Line Items]
Inventories	$ 4,976,566	$ 6,796,254
Less: provision for slow moving inventories	(1,001,452)	(1,101,188)	$ (53,281)
Net inventories	3,975,114	5,695,066
Less: inventories, net, held for discontinued operations	0	(1,611,728)
Inventories, net, held for continuing operations	$ 3,975,114	$ 4,083,338

XML

INVENTORIES (Details 1) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Inventory [Line Items]
Beginning balance	$ 1,101,188	$ 53,281
Addition	1,934,836	1,049,165
Less: write-off	(1,978,052)	0
Exchange rate effect	(56,520)	(1,258)
Ending balance	1,001,452	1,101,188
Discontinued Operations [Member]
Inventory [Line Items]
Beginning balance	(1,065,196)
Ending balance	(967,363)	(1,065,196)
Continuing Operations [Member]
Inventory [Line Items]
Beginning balance	35,992
Ending balance	$ 34,089	$ 35,992

XML

PROPERTY AND EQUIPMENT, NET (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Buildings	$ 1,311,422	$ 1,384,609
Land use rights	299,570	316,289
Plant and machinery	2,936,103	5,114,148
Automobiles	147,720	193,930
Office and computer equipment	238,647	447,619
Total property and equipment	4,933,462	7,456,595
Less: Accumulated depreciation and amortization	(1,633,408)	(2,782,929)
Impairment of long-lived assets	(1,050,869)	(1,977,848)
Property and equipment, net	2,249,185	2,694,167
Continuing Operations [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, net	2,249,185	2,694,167
Discontinued Operations [Member]
Property, Plant and Equipment [Line Items]
Impairment of long-lived assets	1,050,869	1,977,848
Property and equipment, net	$ 0	$ (1,651)

XML

PROPERTY AND EQUIPMENT, NET (Details Textual)	12 Months Ended
	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)	Dec. 31, 2015 CNY (¥)	Dec. 31, 2014 CNY (¥)	Dec. 31, 2002 CNY (¥)
Property, Plant and Equipment [Line Items]
Short-term borrowings	$ 1,541,000	$ 2,440,500
Land Use Rights Purchase Price | ¥						¥ 1,944,000
Disposal Group Including Discontinued Operations Impairment Loss For Intangible Assets	0	1,579,495	$ 0
Continuing Operations [Member]
Property, Plant and Equipment [Line Items]
Depreciation and amortization	306,386	165,532	116,017
Discontinued Operations [Member]
Property, Plant and Equipment [Line Items]
Depreciation and amortization	0	329,068	$ 360,020
Disposal Group Including Discontinued Operations Impairment Loss For Intangible Assets	0	1,978,711
BTL [Member]
Property, Plant and Equipment [Line Items]
Short-term borrowings	$ 1,541,000	$ 2,440,500		¥ 10,000,000	¥ 15,000,000

XML

INTANGIBLE ASSETS, NET (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Software Copyright	$ 3,754,861	$ 3,964,412
Patent and others	2,847,940	3,006,878
Total intangible assets	6,602,801	6,971,290
Less: Accumulated and amortization	(658,644)	(378,014)
Impairment loss	(1,495,353)	(1,578,806)
Intangible assets, net	4,448,804	5,014,470
Continuing Operations [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, net	4,448,804	5,014,470
Discontinued Operations [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, net	$ 0	$ 0

XML

INTANGIBLE ASSETS, NET (Details 1)	Dec. 31, 2015 USD ($)
Finite-Lived Intangible Assets [Line Items]
2016	$ 386,540
2017	383,447
2018	381,238
2019	381,238
2020	381,238
2021 and thereafter	2,535,103
Finite-Lived Intangible Assets, Net, Total	$ 4,448,804

XML

INTANGIBLE ASSETS, NET (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
INTANGIBLE ASSETS, NET [Line Items]
Disposal Group Including Discontinued Operations Impairment Loss For Intangible Assets	$ 0	$ 1,579,495	$ 0
Continuing Operations [Member]
INTANGIBLE ASSETS, NET [Line Items]
Amortization of Intangible Assets	312,821	104,063	100,352
Discontinued Operations [Member]
INTANGIBLE ASSETS, NET [Line Items]
Amortization of Intangible Assets	0	47,610	$ 43,501
Disposal Group Including Discontinued Operations Impairment Loss For Intangible Assets	$ 0	$ 1,978,711

XML

SHORT-TERM BORROWINGS (Details Textual)	1 Months Ended								12 Months Ended
	Dec. 18, 2015 USD ($)	Dec. 18, 2015 CNY (¥)	Mar. 27, 2015 USD ($)	Mar. 07, 2015 USD ($)	Mar. 07, 2015 CNY (¥)	Mar. 03, 2015 USD ($)	Jan. 28, 2015 USD ($)	Jan. 28, 2015 CNY (¥)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)	Dec. 18, 2015 CNY (¥)	Dec. 02, 2015 USD ($)	Dec. 02, 2015 CNY (¥)	Mar. 27, 2015 CNY (¥)	Mar. 03, 2015 CNY (¥)
Line of Credit Facility [Line Items]
Line of Credit Facility, Interest Rate During Period									7.20%	7.50%	6.30%
Short-term borrowings									$ 1,541,000	$ 2,440,500
Interest Expense, Short-term Borrowings									196,220	176,160	$ 159,483
Notes Payable, Related Parties, Current									2,175,892	0
Line Of Credit, Current									1,541,000	2,440,500
Chen Ping [Member]
Line of Credit Facility [Line Items]
Notes Payable, Related Parties, Current			$ 660,679												¥ 4,120,000
Notes Payable, Related Parties													$ 3,207,180	¥ 20,000,000
Debt Instrument, Interest Rate, Effective Percentage			6.96%												6.96%
Debt Instrument, Maturity Date			Mar. 27, 2016
Nanjing Bank Company Limited [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Interest Rate During Period	7.20%	7.20%				7.811%
Short-term borrowings	$ 1,541,000					$ 2,405,385						¥ 10,000,000				¥ 15,000,000
Line of Credit Facility, Expiration Date	Dec. 18, 2016	Dec. 18, 2016				Mar. 03, 2016
Repayments of Short-term Debt	$ 1,603,590	¥ 10,000,000		$ 801,795	¥ 5,000,000		$ 1,603,590	¥ 10,000,000
Line Of Credit, Current	$ 1,541,000					$ 2,405,385						¥ 10,000,000				¥ 15,000,000
Commercial Bank of China Limited [Member]
Line of Credit Facility [Line Items]
Long-term Line of Credit									$ 1,541,000
Short-term borrowings										2,440,500
Line Of Credit, Current										$ 2,440,500

XML

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Accrued Expenses And Other Current Liabilities [Line Items]
Accrued salaries and social welfare	$ 94,037	$ 116,557
Accrued expenses	1,541,415	233,339
Reimbursed employee's expense	79,363	29,848
Deposits from customer	113,834	94,181
Others	155,501	32,031
Accrued expenses and other current liabilities	1,984,150	505,956
Less: Accrued expenses and other current liabilities from discontinued operations	(185,796)	(45,343)
Accrued expenses and other current liabilities from continuing operations	$ 1,798,354	$ 460,613

XML

TAXES PAYABLE (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Taxes Payable [Line Items]
Taxes payable	$ 114,112	$ 134,814
Value added tax [Member]
Taxes Payable [Line Items]
Taxes payable	11,896	10,978
Enterprise income tax [Member]
Taxes Payable [Line Items]
Taxes payable	97,299	114,881
Employee withholding taxes [Member]
Taxes Payable [Line Items]
Taxes payable	3,727	3,759
City construction tax [Member]
Taxes Payable [Line Items]
Taxes payable	595	2,598
Other levies [Member]
Taxes Payable [Line Items]
Taxes payable	$ 595	$ 2,598

XML

NON-CONTROLLING INTEREST (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Noncontrolling Interest [Line Items]
Paid-in capital	$ 713,787	$ 713,787
Retained earnings (accumulated deficit)	(112,365)	26,840
Accumulated other comprehensive income	266,404	316,869
Non-controlling interest	$ 867,826	$ 1,057,496

XML

COMMITMENTS AND CONTINGENCY (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2012
Other Commitments [Line Items]
Operating Leases, Future Minimum Payments Due, Current	$ 11,090
Operating Leases, Rent Expense	$ 111,552	$ 94,590	$ 136,784
Contingency, Description	The Labor Contract Law of the Peoples Republic of China requires employers to assure the liability of the severance payments if employees are terminated and have been working for the employers for at least two years prior to January 1, 2008.
Expected Severance Cost	$ 462,015	$ 457,842
Management Employees [Member]
Other Commitments [Line Items]
Employment Contracts Terms	3 years
Non Management Employees [Member]
Other Commitments [Line Items]
Employment Contracts Terms	1 year

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EQUITY (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Option Indexed to Issuers Equity [Line Items]
• Balance - beginning of year	$ 76,260	$ 76,260	$ 75,489
• Addition to statutory reserves	0	0	771
• Balance - end of year	$ 76,260	$ 76,260	$ 76,260

XML

EQUITY (Details 1) - Employee Stock Option [Member]	12 Months Ended
	Dec. 31, 2015 $ / shares
Option Indexed to Issuers Equity [Line Items]
Options Dividend Yield	0.00%
Minimum [Member]
Option Indexed to Issuers Equity [Line Items]
Options Expected Terms (years)	5 years
Options Expected Volatility	126.00%
Options Risk Free Interest Rate	0.73%
Options Grant Date Fair Value (in dollars per share)	$ 1.22
Maximum [Member]
Option Indexed to Issuers Equity [Line Items]
Options Expected Terms (years)	5 years 9 months
Options Expected Volatility	228.00%
Options Risk Free Interest Rate	1.65%
Options Grant Date Fair Value (in dollars per share)	$ 5.15

XML

EQUITY (Details 2) - Employee Stock Option [Member] - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Option Indexed to Issuers Equity [Line Items]
Option, Outstanding, Beginning Balance (in shares)	408,000	442,000
Option, Granted (in shares)	349,000	131,000
Option, Forfeited (in shares)	(12,000)	(31,000)
Option, Exercised (in shares)	(25,000)	(134,000)
Option, Outstanding, Ending Balance (in shares)	720,000	408,000
Options, Weighted Average Exercise Price, Beginning Balance (in dollars per share)	$ 2.89	$ 1.63
Options, Weighted Average Exercise Price, Ending Balance (in dollars per share)	$ 2.36	$ 2.89
Options, Aggregate Intrinsic Value, Beginning Balance (in dollars)	$ (63,320)	$ 994,160
Options, Aggregate Intrinsic Value, Ending Balance (in dollars)	$ (68,670)	$ (63,320)

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EQUITY (Details 3)	12 Months Ended
	Dec. 31, 2015 $ / shares shares
Stock Option One [Member]
Option Indexed to Issuers Equity [Line Items]
Outstanding options, Average Exercise price (in dollars per share) | $ / shares	$ 1.45
Outstanding options, Number (in shares) | shares	146,000
Outstanding options, Average remaining contractual life (in years)	1 year
Exercisable options, Average Exercise price (in dollars per share) | $ / shares	$ 1.45
Exercisable options, Number (in shares) | shares	87,000
Exercisable options, Average remaining contractual life (in years)	1 year
Stock Option Two [Member]
Option Indexed to Issuers Equity [Line Items]
Outstanding options, Average Exercise price (in dollars per share) | $ / shares	$ 2.3
Outstanding options, Number (in shares) | shares	94,000
Outstanding options, Average remaining contractual life (in years)	2 years 9 months 7 days
Exercisable options, Average Exercise price (in dollars per share) | $ / shares	$ 2.3
Exercisable options, Number (in shares) | shares	37,600
Exercisable options, Average remaining contractual life (in years)	2 years 9 months 7 days
Stock Option Three [Member]
Option Indexed to Issuers Equity [Line Items]
Outstanding options, Average Exercise price (in dollars per share) | $ / shares	$ 5.31
Outstanding options, Number (in shares) | shares	131,000
Outstanding options, Average remaining contractual life (in years)	3 years 7 months 20 days
Exercisable options, Average Exercise price (in dollars per share) | $ / shares	$ 5.31
Exercisable options, Number (in shares) | shares	26,200
Exercisable options, Average remaining contractual life (in years)	3 years 7 months 20 days
Stock Option Four [Member]
Option Indexed to Issuers Equity [Line Items]
Outstanding options, Average Exercise price (in dollars per share) | $ / shares	$ 1.64
Outstanding options, Number (in shares) | shares	349,000
Outstanding options, Average remaining contractual life (in years)	1 year 7 months 6 days
Exercisable options, Average Exercise price (in dollars per share) | $ / shares	$ 1.64
Exercisable options, Number (in shares) | shares	0
Exercisable options, Average remaining contractual life (in years)	1 year 7 months 6 days

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EQUITY (Details Textual) - USD ($)	1 Months Ended	12 Months Ended
	Feb. 21, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Aug. 07, 2015	Jul. 29, 2015	Feb. 26, 2015	Jan. 20, 2015	Oct. 22, 2014	Aug. 20, 2014	Aug. 16, 2014	May 29, 2014	Apr. 24, 2014	Apr. 08, 2014	Jan. 15, 2014	Jan. 11, 2014	Oct. 07, 2013	Dec. 29, 2011
Option Indexed to Issuers Equity [Line Items]
Statutory Surplus Reserve, Minimum, Percentage		10.00%
Statutory Surplus Reserve, Maximum, Percentage		50.00%
Statutory Surplus Reserve, Required Minimum, Percentage		25.00%
Statutory Surplus Reserve, Appropriations		10.00%
Share-based Compensation Shares Issued Under Stock Option Plans Exercise Price Range Number of Issued Options					349,000	348,800			100,000	131,000	11,975						94,000	450,000
Share-based Compensation Shares Issued Under Stock Option Plans Exercise Price Range Issued Options Weighted Average Exercise Price (in dollars per share)					$ 1.64					$ 5.31							$ 2.30	$ 1.45
Share-based Compensation Arrangement by Share-based Payment Award Equity Instruments Options Nonvested Number		581,200
Share Based Compensation Shares Issued Under Stock Option Plans Exercise Price Range Value						$ 666,208			$ 531,000	$ 674,570	$ 72,808
Share based compensation shares issued on exercise of options								25,000				4,000		62,000		68,000
Security Purchase Agreement [Member]
Option Indexed to Issuers Equity [Line Items]
Warrants issued during period	220,410
Sale of Stock, Number of Shares Issued in Transaction	734,700
Sale of Stock, Price Per Share	$ 9.12
Sale of Stock, Consideration Received Per Transaction	$ 6,100,000
Investment Warrants, Exercise Price	$ 11.86
Security Purchase Agreement [Member] | Placement Agent Warrant [Member]
Option Indexed to Issuers Equity [Line Items]
Stock and Warrants Issued During Period, Value, Preferred Stock and Warrants	$ 73,470
Employee Stock Option [Member]
Option Indexed to Issuers Equity [Line Items]
Allocated Share-based Compensation Expense		$ 357,196	$ 160,613	$ 94,271
Investment Counseling And Financial Advisory Services [Member]
Option Indexed to Issuers Equity [Line Items]
Unregistered Common Stock Share Issued													40,000		40,000
Unregistered Common Stocks Fair Value Issued (in dollars)													$ 145,600		$ 145,600
Share-based Compensation Shares Issued Under Stock Option Plans Exercise Price Range Number of Issued Options									80,000
Share Based Compensation Shares Issued Under Stock Option Plans Exercise Price Range Value									$ 352,800
Investment Relationship Advisory Services [Member]
Option Indexed to Issuers Equity [Line Items]
Share-based Compensation Shares Issued Under Stock Option Plans Exercise Price Range Number of Issued Options							12,000
Share Based Compensation Shares Issued Under Stock Option Plans Exercise Price Range Value							$ 32,340

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WARRANTS (Details) - Warrant [Member]	12 Months Ended
	Dec. 31, 2015 $ / shares
Warrants [Line Items]
Market price per share (USD/share)	$ 2.2619
Dividend yield	0.00%
Minimum [Member]
Warrants [Line Items]
Exercise price (USD/share)	$ 4.00
Risk free rate	0.66%
Expected term/Contractual life (years)	1 year 7 days
Expected volatility	94.85%
Maximum [Member]
Warrants [Line Items]
Exercise price (USD/share)	$ 11.86
Risk free rate	0.91%
Expected term/Contractual life (years)	1 year 7 months 20 days
Expected volatility	110.13%

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WARRANTS (Details 1) - USD ($)	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Warrants [Line Items]
Warrants liability, Carrying Value	$ 162,736	$ 553,060
Fair Value, Inputs, Level 1 [Member]
Warrants [Line Items]
Warrants liability, Fair Value Measurement	0	0
Fair Value, Inputs, Level 2 [Member]
Warrants [Line Items]
Warrants liability, Fair Value Measurement	162,736	553,060	$ 720,857	$ 374,166
Fair Value, Inputs, Level 3 [Member]
Warrants [Line Items]
Warrants liability, Fair Value Measurement	$ 0	$ 0

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WARRANTS (Details 2) - Fair Value, Inputs, Level 2 [Member] - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Warrants [Line Items]
Beginning balance	$ 553,060	$ 720,857	$ 374,166
Warrants issued	0	2,698,374	0
Fair value change of the issued warrants included in earnings	(390,324)	(2,866,171)	346,691
Ending balance	$ 162,736	$ 553,060	$ 720,857

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WARRANTS (Details 3) - Warrant [Member] - $ / shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Warrants [Line Items]
Option, Outstanding, Beginning Balance (in shares)	551,380	257,500
Option, Granted (in shares)	0	293,880
Option, Forfeited (in shares)	0	0
Option, Exercised (in shares)	0	0
Option, Outstanding, Ending Balance (in shares)	551,380	551,380	257,500
Options, Weighted Average Exercise Price, Beginning Balance (in dollars per share)	$ 9.90	$ 7.66
Options, Weighted Average Exercise Price, Ending Balance (in dollars per share)	$ 9.86	$ 9.90	$ 7.66
Options Weighted Average Remaining Contractual Life (years)	1 year 5 months 26 days	1 year 10 months 10 days	1 year 11 months 19 days

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WARRANTS (Details Textual) - $ / shares	12 Months Ended
	Dec. 31, 2015	Jan. 10, 2012	Apr. 21, 2010
Warrants [Line Items]
Class of Warrant or Right, Outstanding	551,380
Institutional Investors [Member]
Warrants [Line Items]
Warrants Issued for Services	220,410
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Exercise Price (in dollars per share)	$ 11.86
Stock Issued During Period, Shares, New Issues	734,700
Share Price	$ 9.12
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 11.86
Warrant Expiration Term	3 years 6 months
FT Global Capital [Member]
Warrants [Line Items]
Warrants Issued for Services	73,470
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 11.86
Warrant Expiration Term	3 years 6 months
Hawk Associates Inc [Member]
Warrants [Line Items]
Warrants Issued for Services			7,500
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 9.60
Warrant Expiration Term	5 years
Anderson Strudwick Incorporated [Member]
Warrants [Line Items]
Warrants Issued for Services			150,000
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 10.00
Warrant Expiration Term	5 years
Firs Trust Group, Inc [Member]
Warrants [Line Items]
Warrants Issued for Services		100,000
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 4.00
Warrant Expiration Term	5 years

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EARNINGS (LOSS) PER SHARE (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Basic earnings (loss) per share
Net income (loss) available to the company's common shareholders	$ (10,223,130)	$ (24,298,114)	$ 1,995,621
Weighted average shares outstanding - Basic (in shares)	5,862,647	5,510,076	4,625,195
Earnings (loss) per share - Basic (in dollars per share)	$ (1.74)	$ (4.41)	$ 0.43
Diluted earnings (loss) per share
Net income (loss) available to the company's common shareholders	$ (10,223,130)	$ (24,298,114)	$ 1,995,621
Weighted average shares outstanding - Basic (in shares)	5,862,647	5,510,076	4,625,195
Options and warrants (in shares)	33,887	87,093	50,932
Weighted shares outstanding - Diluted (in shares)	5,896,534	5,597,169	4,676,127
Earnings (loss) per share - Diluted (in dollars per share)	$ (1.73)	$ (4.34)	$ 0.43

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EARNINGS (LOSS) PER SHARE (Details Textual) - shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Weighted Average Number Diluted Shares Outstanding Adjustment, Total	33,887	87,093	50,932
Warrant [Member]
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Weighted Average Number Diluted Shares Outstanding Adjustment, Total	0	30,255
Outstanding Options (In Shares)	551,380	551,380
Employee Stock Option [Member]
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Weighted Average Number Diluted Shares Outstanding Adjustment, Total	33,887	56,838	50,932
Outstanding Options (In Shares)	732,000	277,000	348,000

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INCOME TAXES (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Tax Disclosure [Line Items]
Current income taxes benefit (provision)	$ 11,978	$ (233,884)	$ (524,977)
Deferred income taxes benefit (provision)	0	(123,842)	2,698
Total benefit (provision) for income taxes	$ 11,978	$ (357,726)	$ (522,279)

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INCOME TAXES (Details 1) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Line Items]
Beginning balance	$ 407,539	$ 0
Additions	198,298	407,539
Ending balance	$ 605,837	$ 407,539

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INCOME TAXES (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Tax Disclosure [Line Items]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate	25.00%	25.00%	25.00%
Effective Income Tax Rate Reconciliation, State and Local Income Taxes	15.00%	15.00%	15.00%
Deferred Tax Assets, Valuation Allowance	$ 605,837	$ 407,539
China [Member]
Income Tax Disclosure [Line Items]
Effective Unified Enterprise Income Tax Rate	25.00%
Effective Preferential Income Tax Rate	15.00%

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RELATED PARTY TRANSACTIONS AND BALANCE (Details Textual)	1 Months Ended			12 Months Ended
	Dec. 18, 2015 USD ($)	Dec. 18, 2015 CNY (¥)	Mar. 27, 2015 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)	Dec. 02, 2015 USD ($)	Dec. 02, 2015 CNY (¥)	Mar. 27, 2015 CNY (¥)
Related Party Transaction [Line Items]
Property, Plant and Equipment, Net, Total				$ 2,249,185	$ 2,694,167
Notes Payable, Related Parties, Current				2,175,892	0
Repayments of Related Party Debt				1,603,590	0	$ 0
HuNan Zhong Yi High-tech Development Co, LTD [Member]
Related Party Transaction [Line Items]
Advances on Inventory Purchases				875,044	1,498,627	$ 0
Ping Chen [Member]
Related Party Transaction [Line Items]
Notes Payable, Related Parties, Current			$ 660,679				$ 3,207,180	¥ 20,000,000	¥ 4,120,000
Debt Instrument, Interest Rate, Effective Percentage			6.96%						6.96%
Debt Instrument Renewed Maturity Date			Mar. 27, 2017
Debt Instrument, Maturity Date			Mar. 27, 2016
Repayments of Related Party Debt	$ 1,603,590	¥ 10,000,000
Sleep respiratory system [Member]
Related Party Transaction [Line Items]
Property, Plant and Equipment, Additions					1,142,845
Medical Air Compressor [Member]
Related Party Transaction [Line Items]
Property, Plant and Equipment, Net, Total				$ 565,208
Telemedicine Management System Software [Member]
Related Party Transaction [Line Items]
Property, Plant and Equipment, Additions					$ 325,400

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SUBSIDY INCOME (Details Textual) - 12 months ended Dec. 31, 2014	USD ($)	CNY (¥)
Schedule Of Subsidy Income [Line Items]
Other Income	$ 1,253	¥ 7,700

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CONCENTRATIONS (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Concentration Risk [Line Items]
Total Revenues	$ 1,686,033	$ 17,686,049	$ 16,858,178
Less: revenues from discontinued operations	(364,490)	(14,911,808)	(9,455,705)
Revenues from continuing operations	1,321,543	2,774,241	7,402,473
Medical Devices [Member]
Concentration Risk [Line Items]
Total Revenues	1,500,957	16,000,881	14,824,028
Respiratory and Oxygen Homecare [Member]
Concentration Risk [Line Items]
Total Revenues	20,573	53,755	2,034,150
Mobile medicine [Member]
Concentration Risk [Line Items]
Total Revenues	$ 164,503	$ 1,631,413	$ 0

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CONCENTRATIONS (Details Textual)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | Continuing Operations [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	37.00%	6.00%	24.00%
Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | Discontinued Operations [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	7.00%	11.00%	11.00%
Supplier Concentration Risk [Member] | Cost of Goods, Total [Member] | Continuing Operations [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	67.00%	28.00%	42.00%
Supplier Concentration Risk [Member] | Cost of Goods, Total [Member] | Discontinued Operations [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	9.00%	55.00%	51.00%
Product Concentration Risk [Member] | Sales Revenue, Net [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	72.00%	74.00%	67.00%

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DISCONTINUED OPERATIONS (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
CURRENT ASSETS:
Accounts receivable, net	$ 36,876	$ 744,628
Other receivables, net	0	68,350
Advances to suppliers - third parties	33,217	238,607
Inventories, net	0	1,611,728
Total Current Assets	70,093	2,663,313
Property and equipment, net	0	1,651
Total Assets	70,093	2,664,964
CURRENT LIABILITIES:
Accounts payable	146,029	204,047
Advances from customers	75,432	102,294
Accrued expenses and other current liabilities	185,796	45,343
Total Current Liabilities	$ 407,257	$ 351,684

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DISCONTINUED OPERATIONS (Details 1) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Revenues	$ 364,490	$ 14,911,808	$ 9,455,705
Costs of revenue	(2,190,140)	(13,162,235)	(5,858,208)
Gross profit (loss)	(1,825,650)	1,749,573	3,597,497
Service incomes	84,774	233,819	0
Service expenses	(54,173)	(10,845)	0
General and administrative expenses	(693,881)	(1,464,043)	0
Provision for doubtful accounts	(618,290)	(21,960,025)	(33,556)
Impairment loss for property and equipment	0	(1,978,711)	0
Impairment loss for intangible assets	0	(1,579,495)	0
Selling expenses	(392,892)	(946,785)	(663,193)
Operating Income (loss)	(3,500,112)	(25,956,512)	2,900,748
Income (loss) before provision for income tax and non-controlling interest	(3,500,112)	(25,956,512)	2,900,748
Provision for income tax expense	0	0	0
Net income (loss) from discontinuing operations	$ (3,500,112)	$ (25,956,512)	$ 2,900,748

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SUBSEQUENT EVENTS (Details Textual) - USD ($)		1 Months Ended
	Jun. 06, 2016	Apr. 28, 2016	Apr. 21, 2016	Feb. 21, 2014	Dec. 31, 2015
Scenario, Forecast [Member]
Subsequent Event [Line Items]
Stock Issued During Period, Shares, New Issues		620,414
Shares Issued, Price Per Share		$ 1.80
Share Price		$ 1.33
Warrant [Member]
Subsequent Event [Line Items]
Proceeds from Issuance Initial Public Offering				$ 6,700,000
Share Price					$ 2.2619
Warrant [Member] | Scenario, Forecast [Member]
Subsequent Event [Line Items]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights			293,880
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 11.86
Stock Repurchased During Period, Value			$ 1,116,744
Accelerated Share Repurchases, Final Price Paid Per Share			$ 3.80
Subsequent Event [Member]
Subsequent Event [Line Items]
Number Of Shares Agreed To Issue Under Agreement		11,111,111
Value Of Shares Agreed To Issue Under Agreement		$ 20,000,000
Premium Percentage On Closing Price		35.00%
Hangzhou Liaison Interactive Information Technology Co Ltd [Member] | Scenario, Forecast [Member]
Subsequent Event [Line Items]
Stock Issued During Period, Shares, New Issues	620,414
Shares Issued, Price Per Share		$ 1.80
Share Price		$ 1.33
Hangzhou Liaison Interactive Information Technology Co Ltd [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Number Of Shares Agreed To Issue Under Agreement		11,111,111
Value Of Shares Agreed To Issue Under Agreement		$ 20,000,000
Premium Percentage On Closing Price		35.00%