SecProbe.io

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

         DIVISION OF
CORPORATION FINANCE
Mail Stop 3030         January 28, 2010   CT Corporation System 111 Eighth Avenue New York, New York 10011
Re: Dehaier Medical Systems Limited
 Amendment No. 2 to Registra tion Statement on Form S-1
Filed January 19, 2010
 File No. 333-163041

Ladies and Gentlemen:

We have reviewed your filing and your response dated January 19, 2010 and have
the following comments.  Where indicated, we  think you should revise your document in
response to these comments.  If you disagree, we will consider your explanation as to why our comment is inapplicable or a revisi on is unnecessary.  Please be as detailed as
necessary in your explanation.  In some of our comments, we may ask you to provide us with information so we may better understand your disclosure.  Af ter reviewing this
information, we may raise additional comments.
Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure  requirements and to  enhance the overall
disclosure in your filing.  We look forward to  working with you in these respects.  We
welcome any questions you may have about our comments or any other aspect of our review.  Feel free to call us at the telephone numbers listed at the end of this letter.
 General

1. Refer to the websites http://www.dehaier.com.cn/dhrweb/abouten.aspx  and
www.chinadhr.com .  While you have indicated in your response to prior comment
21 that you were not established in 1991 and in your response to prior comment
30 that you do not manufacture any products  or components, we are unable to
reconcile your responses to prior comments 21 and 30 with the information which appears on the websites.  Specifically:

CT Corporation System
As agent for Dehaier Medical Systems Limited
January 28, 2010 Page 2
• the former website states that De haier Medical was established in 1991
and provides a developmental history from 1991-2005; and
• the latter website states that you have  a manufacturing center in Nanjing.

Please reconcile and make revisions to the registration statement, as appropriate.

2. Please confirm that you have described all material recent developments since September 30, 2009 in the registration statemen t.  If not, please revise to include a
brief discussion.
 Prospectus Cover Page

3. Revise the final sentence on the second- to-last paragraph on the cover page to
clarify that you will issue placement agent warrants to purchase up to 10% of the
aggregate number of common shares so ld in the offering.  Make conforming
changes throughout the registration statem ent where similar language appears.
 Our Company, page 1

4. You disclose that you sell your products pr imarily to distributors and hospitals.
Please revise to clarify, as stated on pa ge 68, that over 90% of your sales are to
distributors and that only 1% of  your sales are to hospitals.
 5. We note that you refer to SFDA approval in your discussion of branded products.
Revise the Summary to define the term SFDA at first usage and to explain its
function. Make similar re visions, as appropriate.

6. We note your disclosure in the first ri sk factor on page 13 that you seek to
terminate contractual relationships  with any distributors that are
“underperforming.”  Your disclosure is  unclear as to why you would terminate
relationships with your customers (i.e., your distributors).  Revise  to describe your
economic incentive, if any, for terminating distributors.  For in stance, are certain
products purchased on consignment and retu rned if not sold?  Please explain.

7. We reissue prior comment 5, in part.  Please note that the prior comment does not request separate discussions of the deve lopment, assembly and marketing of each
of your products. Rather, the summary shoul d provide a concise discussion of the
infrastructure, such as facilities, contractual arrangements and/or human resources, which enables you to complete these functions. Your current disclosure
briefly describes on page 3 your distri bution network, but does not similarly
discuss the assembly and marketing capabi lities that you reference in the first
paragraph of the Summary.  Please revise accordingly.

CT Corporation System
As agent for Dehaier Medical Systems Limited
January 28, 2010 Page 3   Our Structure, page 7

8. We note your response to prior comment 10 and reissue the comment, in part.
Specifically, we note your continued refere nce to “substantial financial support.”
The meaning of this reference remains unclear. Are you referring to support other
than the loans to finance operations that  are described in the second and third
sentence of footnote (7)?  Please revise this section as necessary to clarify and
provide all of the information require d by Item 404 of Regulation S-K under the
heading “Related Party Transactions” on page 82.
 9. Please tell us the basis for the statemen t included in footnote (7) that you do not
receive any of the income that BTL receives for providing such services.  Since BTL is consolidated as a variable interest entity, it appears that you do consolidate
the income within your financial statements.  Please clarify.

10. We note that 14% of BTL is owned by Mr. Chen’s wife and other employees.
Please revise footnote (7) accordingly.
 Make-Good Escrow, page 9

11. Revise to clarify whether the escrow agreement has been executed (or if it has not, when it will be executed) and when th e shares will be placed into escrow.
Additionally, please clarify your statement that the Make-Good Shares will be redeemed “without any additional  consideration.” [ Emphasis added ].  Do you
mean that the shares will be cancelled or forfeited without any consideration?
Clarify.
 We sell products for some of our competitors… page 13

12. We note that you state that you have de veloped and are curre ntly seeking SFDA
approval for branded sleep apnea treatmen t products.  We also note that ResMed
may claim that these products compet e with the ResMed S6 and MAP MiniPAP
and may seek to terminate your distribution agreement with them on that basis.  Please revise to disclose, to the extent material, the percentage of revenue which
is attributable to the ResMed distribution agreement.
 BDL is also required to allocate…, page 24

13. We note your response to prior comment  16.  It is unclear whether you are
currently required by PRC law to set aside reserve amounts.  When you state that
PRC authorities have not required you to  make a determination regarding your
reserve amounts, do you mean  that you are not in compliance with an applicable
law but have not received a warning for fa ilure to comply or, alternatively, that

CT Corporation System
As agent for Dehaier Medical Systems Limited
January 28, 2010 Page 4
the law regarding reserve amounts is at present entirely inap plicable?  Please
explain. Additionally, please clarify the connection between the requirement that you allocate a portion of after-tax profits to these reserves and the last paragraph
of this risk factor.
 If our financial conditio n deteriorates.., page 27

14. We note your response to prior comment 17.  You are not presently listed on the
NASDAQ Capital Market.  In  addition, it appears possible that you will not
receive certification from NASDAQ be fore an investor makes his or her
investment decision (i.e., before his or  her funds are placed into escrow).
Therefore, the suggestion that you are assu red of listing in your  current financial
condition is not appropriate and should be  removed.  Additionally, the heading of
the risk factor suggests that the offeri ng may close even if  the initial listing
standards are not met.  If approval of your application for listing on the NASDAQ Capital Market is a condition to the closing of the offering, revise here, under “The Offering” on page 8 a nd elsewhere as applicable.
 British Virgin Islands companies may not be able…, page 30

15. In this risk factor you state that it is “ unlikely” that that a British Virgin Islands
court would recognize or enforce a U.S judgment. However, on page 99 you state
that you have been advised by counsel that it “would not be automatically
enforceable.”  These statements appear to  convey differing levels of probability.
Please revise to reconcile.
 Principal Suppliers – Our Branded Products, page 63

16. Please revise to clarify your statement that you limit the ability of Friend of
Health to sell finished products to Chuz hou.   Please describe the scope of these
limitations.

17. We note that you have disclosed in formation regarding your production
agreements with Friend of Health.  In addition, please provide a similar discussion
regarding your relationships with the suppliers of components for your branded
products generally.  For example, and w ithout limitation, please  describe whether
you provide technical specifi cations and files needed  for your suppliers to
manufacture components, whether you purchase the same components from
different suppliers, and whether you provide  separately outsourced core parts to
other suppliers to incorpor ate into various components.  Also, please disclose the
information contained in the second paragr aph of your response to prior comment
30.

CT Corporation System
As agent for Dehaier Medical Systems Limited
January 28, 2010 Page 5  Our Strategies, page 66

18. We note your response to prior comment  25. While we acknowledge that you
have not completed your market research regarding the cost of opening CEC’s in
provincial cities, please disclose the co st of the recently established CEC in
Beijing.  In addition, please revise, where appropriate, to clarify the types of
customers you will target using the CECs.  For example, please clarify whether the existing CEC is being, and future CE Cs will be, used to market towards
distributors, hospitals, and/or individuals.
 Concentration of Receivables, page 68

19. We note your response to prior comments 26 and 27.  However, your disclosure
remains unclear in several respects. Please revise as follows:
• to disclose whether the lo ss of any of the four customers referenced in this
section would materially affect your business.  If so, please identify the
customer(s) and file any material agreement(s) with the customer(s). Refer to Item 601(b)(10)(ii)(B) of Regulation S-K;
• to clarify whether this section discus ses the same four customers for each
period presented;
• to clarify the percentage of receivabl es that are attributable to each
specific customer at each period; and
• to clarify whether Poverty Aid Offi ce is one of the four customers
referenced in this section.
 Competition – Generally, page 68

20. We note your response to prior comment 28. Please revise to remove statements
which imply that you have already expande d into international markets.  For
example, we note statements such as “we face direct competition both
domestically in China and internationally” and “[f]or domestic sales, our competitors include…”

21. We note the far-right column of the table.  The references to “average”, “greater
than average” and “smaller than average” ar e not clear.  Please revise the table or
provide an appropriate key to explain what these terms are intended to convey
about your competitive position. For example,  it is unclear what a “greater than
average” competitive position would be.  In addition, please provide cross-references to the risk factor disclosure  provided in response to prior comment 29.
 Tax Matters Applicable To U.S. Holders…, page 94

22. Please note that for each tax opinion requi red by Item 601(b)(8), you must file an
Exhibit 8 opinion.  If you elect to file a short-form opinion, be advised that the

CT Corporation System
As agent for Dehaier Medical Systems Limited
January 28, 2010 Page 6
opinion must expressly state that the applicable discus sion in the prospectus is
counsel’s opinion. Note that  your opinions must be valid as of the date of
effectiveness.
 Consolidated Financial Statements

Consolidated Statements of Operations, page F-4

23. In response to our prior comment 40, we see that you now include service income
and expenses within operating income.  We  note the disclosure on page 7 and F-8
that BTL’s revenues/sales are included in  the company’s total revenues/sales.
Since BTL’s revenues consist of providing repairs and transportation services to the customers of BDL (service income), pl ease reconcile this disclosure with the
current classification of service income on the statement of operations.

24. Regarding your response to prior comment 41, please revise to also disclose your revenue recognition policy fo r service income.
 Note 2.  Summary of Significant Accounting Policies

Basis of Consolidation, page F-7

25. We have the following comments regarding your response to prior comment 42
regarding the consolidation of BTL as a variable interest entity:

• We see your analysis of why BD L and BTL are under common control;
however it remains unclear how these entities are under common control.
Please tell us if the common share holders are immediat e family members
as described in paragraph 3(b) of EITF 02-5.  Alternatively, discuss if
there is any contemporaneous written evidence of an agreement to vote a majority of the entities’ shares in co ncert, as discussed in paragraph 3(c)
of the EITF.   In addition, please re vise to also include Dehaier in your
common control analysis.

• We reference the statement that you ha ve concluded that Dehaier is the
primary beneficiary.  If Dehaier,  BDL and BTL are all under common
control, please tell us why BDL is not  the primary beneficiary of BTL by
reference to FASB ASC 810-10-25-44 whic h states that for related parties,
the primary beneficiary is the entity that is most closely associated with
the variable interest entity.  It appears that the principa l activities (e.g., the
lease, debt collateral, loans, etc.) are between BDL and BTL.

• If Dehaier, BDL and BTL are not unde r common control, please provide
us with your analysis under FASB ASC 810 as to why Dehaier is the
primary beneficiary and should consolidated BTL.

CT Corporation System
As agent for Dehaier Medical Systems Limited
January 28, 2010 Page 7
26. Please revise to disclose how you initially  consolidated BTL within Dehaier,
similar to your response to prior comment 43.
 Exhibits

27. We note your responses to prior comments 46 and 48 and reissue the comments. It still appears that certain material agreements, including, without limitation, the
loan agreements between BTL and BDL, ha ve not been filed.  Also, be advised
that you are required to file complete copies of your material agreements,
including all schedules, attachments and a nnexes.  As the staff requires sufficient
time to review these agreements, you are strongly encouraged to file complete
copies of all material agreemen ts with your next amendment.

28. While we note your response to prior comment 47, the agreements filed as Exhibits 10.6 and 10.7 are stil l titled as summary transl ations.  Please file full
English translations.

As appropriate, please amend your regist ration statement in response to these
comments.  You may wish to provide us with marked copies of the amendment to expedite our review.  Please furnish a cove r letter with your amendment that keys your
responses to our comments and provides any requested information.  Detailed cover
letters greatly facilitate our review.  Please understand that we may have additional comments after reviewing your amendmen t and responses to our comments.
 We urge all persons who are responsible for the accuracy and adequacy of the
disclosure in the filing to be certain that the filing includes all in formation required under
the Securities Act of 1933 and that they have  provided all information investors require
for an informed investment decision.  Since the compan