Dehaier Medical Chairman and CEO Issues Letter to Shareholders

BEIJING, April 25, 2011 /PRNewswire-Asia-FirstCall/ -- Dehaier Medical Systems Ltd. (Nasdaq: DHRM) ("Dehaier" or the "Company"), an emerging leader in the development, assembly, marketing and sale of medical devices and homecare medical products in China, today released the following letter to shareholders from Mr. Ping Chen, Dehaier's Chairman and Chief Executive Officer:

To Our Shareholders, Partners and Friends:

Last week marked the first anniversary of Dehaier's initial public offering and the listing of our shares on the NASDAQ. The year that has passed since our IPO was one of growth and execution, strategically, operationally and financially. Our success in the last year is thanks to the continued advancement of both our medical devices and homecare products.

In 2010, we expanded our distribution business product portfolio by partnering with third party medical device manufacturers, and strengthened our brand through increased domestic marketing. We believe that these efforts will position us well to gain additional share as China's healthcare market continues to mature.

Our solid financial results reflect the strong demand in China for medical devices and the overall health of our business.  In 2010, our revenue of $19.6 million represented a year-over-year increase of 58%.  Our gross profit grew by 57% year-over-year to $7.6 million. Dehaier's net income increased by 70% year-over-year to $4.5 million, or $1.09 per diluted share. Our homecare business was particularly strong, with $4.5 million in sales. Our triple digit revenue growth for the full year in our homecare business resulted in greater balance within our revenue mix, which meets one of our longer-term sales objectives of achieving a nearly equal split between homecare and medical devices.

During the last 12 months, we have accomplished a number of important milestones that give us a great deal of confidence in our ability to build on our record 2010 results with an even stronger 2011.  

Product Portfolio Growth for Distinct End Markets

Our performance in 2010 was the result of strong growth in both our branded and third party medical devices, as well as the continued emergence of our homecare products. The breadth of our product portfolio allows us to address the needs of two fast-growing segments of the market, each with unique but significant growth catalysts.

The professional medical device market, where we offer both branded and third-party products such as anesthesia machines, C-arm X-ray equipment and respiratory therapy equipment, is experiencing tremendous growth as a result of China's New Medical Reform Plan and 12th Five Year Plan, both of which provide for significant government capital investments to improve the quality and availability of healthcare nationwide. The goal of these programs and investments is to give Chinese citizens greater, more cost effective access to high-quality, professional care, regardless of location or financial resources.

Our products and the third party products we distribute are becoming more widely adopted by hospitals, health centers and clinics thanks in part to increased government funding. In order to build our position in this market, we focused throughout 2010 on expanding our network of dealers and distributors and relationships with medical centers. These efforts increased awareness of the products we offer, both directly and as a distributor.

The continued growth of our footprint in the Chinese market has brought Dehaier attention from leading global medical device manufacturers, and in 2010 we expanded our third party device portfolio through exclusive distribution agreements for HEYER Medical's respiratory products and two of Welch Allyn's patient monitors, the Propaq® CS and the Atlas™.

In addition to the growth of our third party distribution portfolio, we won a $2 million medical device distribution bid for a new rural healthcare construction project supported by China Development Bank Corp, through which we will collaborate with Philips Medical Systems, Olympus Corporation of Japan and others to supply newly-built medical facilities with state-of-the-art equipment. This equipment will be used to provide the rural population with a higher standard of care through improved facilities and technology.

While the professional medical device market is substantial, we believe the greatest untapped potential, both domestically and internationally, lies with our homecare products, and we are keenly focused on the ongoing expansion of this line of products. Our full-year homecare product sales increased by over 300% compared with 2009, and continued growing as a percentage of our total sales.

We believe the homecare market will remain strong for the foreseeable future and are committed to capturing greater market share as it continues to mature. In addition to leveraging our strong dealer, distributor and hospital network, where we have built a great deal of brand equity as a result of our professional medical devices, we are employing non-traditional marketing tools to reach out directly to potential homecare customers.

During 2010, we opened 12 Customer Experience Centers (CECs), which provide patients and medical professionals a convenient way to experience our products and services in a safe, comfortable environment, designed to reduce the stress associated with beginning such treatments. These CECs have been popular with potential customers, and we plan to open an additional 20 Centers by the end of 2011, giving Dehaier a direct presence in many of China's key geographic areas.

Market Dynamics and Strategic Growth

The healthcare market in China is poised for significant growth as a result of increasing government investment in improving the quality and availability of healthcare in China to fall more closely in line with healthcare in other developed nations. In addition, a growing percentage of Chinese citizens' personal wealth is being spent on health and wellness-related initiatives. We believe that Dehaier is positioned to capitalize the growth of China's emerging healthcare industry and, more importantly, its nascent medical device and homecare market.

While a favorable market is necessary for sustained growth, the market alone will not be enough to propel Dehaier to the next level of success. We have a multi-faceted growth strategy that we are constantly reviewing and refining in an effort to capture additional market share, continue building brand equity and expand our business, both domestically and internationally, with the ultimate goal of increasing shareholder value. Going forward, our primary strategic focus will be on:

• Building our brand domestically as both a manufacturer and a trusted partner by leveraging our relationships with healthcare professionals, agents and distributors, and expansion of our CEC concept as a sales and marketing tool for both consumers and medical professionals.
• Expanding our product portfolio through innovative R&D. We are currently targeting the introduction of four to eight new products for the domestic market this year, with a primary focus on additions to our oxygen and respiratory homecare offering.
• Diversifying our base of third party distributed products by expanding relationships with existing partners and establishing partnerships with additional device manufacturers.
• International expansion into the US and Europe, where several of our homecare products are currently under review by the Food and Drug Administration (FDA) in the US and Conformite Europeenne (CE) in the European Union.

Looking Ahead

Given our efforts and accomplishments to date, attractive markets, financial growth and clear growth strategy, we are optimistic about Dehaier Medical's continued success throughout 2011 and well into the future.

The overall healthcare market in China has grown significantly in recent years, with increasing awareness of health issues creating demand for improved infrastructure and higher levels of medical care in both urban and rural areas. We believe our cooperation with China Development Bank on rural medical care will generate more opportunities to grow our presence and build our reputation, particularly in the country's underdeveloped areas, where the need for products such as ours is greatest.

Additionally, last week, we announced a strategic cooperation agreement with Taiyo Nippon Sanso Shenwei (Shanghai) and Beijing Orient, two major medical gas providers in the global and Chinese market, to develop home oxygen therapy service in Beijing. We believe this cooperation will further solidify our market position in product and service offering.

We expect these initiatives, coupled with the successful execution of our growth strategy, will drive continued financial and operational growth, and enhance value for shareholders. On behalf of the entire Dehaier family, thank you for sharing in our success to date and being a partner in our future.

Best Regards,

About Dehaier Medical Systems Ltd.

Dehaier Medical Systems is an emerging leader in the development, assembly, marketing and sale of medical products in China, including respiratory and oxygen homecare medical products. The company develops and assembles its own branded medical devices and homecare medical products from third-party components. The company also distributes products designed and manufactured by other companies, including medical devices from IMD (Italy), Welch Allyn (USA), HEYER (Germany), Timesco (UK), ResMed (Australia), eVent Medical (US), JMS (Japan) and eVent. Dehaier's technology is based on two patents, six pending patents, and proprietary technology. More information may be found at http://www.chinadhr.com.

Forward-looking Statements

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

SOURCE Dehaier Medical Systems Ltd.

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