UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q


(Mark
One)





x
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
the quarterly period ended March 31, 2009





 ̈
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
  ACT





For the
transition period from ________________ to _______________





333-140545


(Commission
file number)





DEER
CONSUMER PRODUCTS, INC


(Exact
name of registrant as specified in its charter)





Nevada
                    
                    20-5526104(State
      or other jurisdiction
                    
                    (IRS
      Employerof
      incorporation or organization)
                    
                    Identification
      No.)





Area
2, 1/F, Building M-6,


Central
High-Tech Industrial Park,


Nanshan,
Shenzhen, China


(Address
of principal executive offices)





011-86-755-8602-8285


(Issuer’s telephone
number)





N/A


(Former
name, former address and former fiscal year, if changed since last
report)





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 is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large
      accelerated filer  ̈
              Accelerated
      filer  ̈Non-accelerated
      filer  ̈
              Smaller
      reporting company x


(Do not
check if a smaller reporting company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes            ̈      No           x




As
of  May 10, 2009 there were 10,751,558shares of
common stock were outstanding.





DEER
CONSUMER PRODUCTS, INC. AND SUBSIDIARIES


Index





PageNumberPART
      I.
                                                FINANCIAL
      INFORMATIONItem
      1.
                                                Financial
      StatementsConsolidated
      Balance Sheets as of March 31, 2009 (unaudited) and December 31,
      2008
                                                2Consolidated
      Statements of Income and Other Comprehensive Income for the three months
      ended March 31, 2009 and 2008 (unaudited)
                                                3Consolidated
      Statements of Cash Flows for the three months ended March 31, 2009 and
      2008 (unaudited)
                                                4Notes
      to Consolidated Financial Statements (unaudited)
                                                5Item
      2.
                                                Management’s
      Discussion and Analysis or Plan of Operations
                                                17Item
      3.
                                                Quantitative
      and Qualitative Disclosures About Market Risk
                                                22Item
      4T.
                                                Controls
      and Procedures
                                                22PART
      II.
                                                OTHER
      INFORMATION
                                                23Item
      1.
                                                Legal
      Proceedings
                                                23Item
      1A.
                                                Risk
      Factors
                                                23Item
      2.
                                                Unregistered
      Sales of Equity Securities and Use of Proceeds
                                                23Item
      3.
                                                Defaults
      Upon Senior Securities
                                                23Item
      4.
                                                Submission
      of Matters to a Vote of Security Holders
                                                23Item
      5.
                                                Other
      Information
                                                23Item
      6.
                                                Exhibits
                                                23SIGNATURES
                                                24


1


DEER
CONSUMER PRODUCTS, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


AS
OF MARCH 31, 2009 AND DECEMBER 31, 2008





March
      31,
                                    
                                    
                                    December
      31,2009
                                    
                                    
                                    2008(unaudited)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                                    
                                    $
                                    2,535,237
                                    
                                    
                                    $
                                    2,782,026Restricted
      cash
                                    
                                    
                                    145,107
                                    
                                    
                                    
                                    200,099Accounts
      receivable, net
                                    
                                    
                                    9,321,509
                                    
                                    
                                    
                                    8,560,465Advances
      to suppliers
                                    
                                    
                                    5,046,123
                                    
                                    
                                    
                                    5,015,479Other
      receivables
                                    
                                    
                                    283,474
                                    
                                    
                                    
                                    489,286Short
      term investments
                                    
                                    
                                    -
                                    
                                    
                                    
                                    29,340Due
      from related party
                                    
                                    
                                    -
                                    
                                    
                                    
                                    331,267Inventories
                                    
                                    
                                    5,733,808
                                    
                                    
                                    
                                    7,680,851Other
      current assets
                                    
                                    
                                    84,305
                                    
                                    
                                    
                                    13,342Total
      current assets
                                    
                                    
                                    23,149,563
                                    
                                    
                                    
                                    25,102,155PROPERTY
      AND EQUIPMENT, net
                                    
                                    
                                    10,926,340
                                    
                                    
                                    
                                    11,291,202CONSTRUCTION
      IN PROGRESS
                                    
                                    
                                    1,481,706
                                    
                                    
                                    
                                    892,897INTANGIBLE
      ASSETS, net
                                    
                                    
                                    401,217
                                    
                                    
                                    
                                    404,125OTHER
      ASSETS
                                    
                                    
                                    34,738
                                    
                                    
                                    
                                    39,689TOTAL
      ASSETS
                                    
                                    $
                                    35,993,564
                                    
                                    
                                    $
                                    37,730,068LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT
      LIABILITIES:Accounts
      payable
                                    
                                    $
                                    6,728,848
                                    
                                    
                                    $
                                    8,968,088Other
      payables
                                    
                                    
                                    579,017
                                    
                                    
                                    
                                    760,632Unearned
      revenue
                                    
                                    
                                    1,877,261
                                    
                                    
                                    
                                    3,305,966Accrued
      payroll
                                    
                                    
                                    186,776
                                    
                                    
                                    
                                    168,282Short
      term loans
                                    
                                    
                                    2,783,500
                                    
                                    
                                    
                                    3,552,841Advances
      from related party
                                    
                                    
                                    -
                                    
                                    
                                    
                                    274,805Notes
      payable
                                    
                                    
                                    4,569,809
                                    
                                    
                                    
                                    3,155,348Tax
      and welfare payable
                                    
                                    
                                    1,981,608
                                    
                                    
                                    
                                    1,533,013Total
      current liabilities
                                    
                                    
                                    18,706,819
                                    
                                    
                                    
                                    21,718,975LONG-TERM
      LOAN
                                    
                                    
                                    732,500
                                    
                                    
                                    
                                    733,500TOTAL
      LIABILITIES
                                    
                                    
                                    19,439,319
                                    
                                    
                                    
                                    22,452,475STOCKHOLDERS'
      EQUITY:Common
      Stock, $0.001 par value; 75,000,000 shares authorized; 10,231,558 and 9,826,123 shares issued and
      oustandingas of March
      31, 2009 and December 31, 2008, respectively
                                    
                                    
                                    10,232
                                    
                                    
                                    
                                    9,826Additional
      paid-in capital
                                    
                                    
                                    9,978,901
                                    
                                    
                                    
                                    9,339,197Development
      funds
                                    
                                    
                                    582,018
                                    
                                    
                                    
                                    542,701Statutory
      reserve
                                    
                                    
                                    1,164,038
                                    
                                    
                                    
                                    1,085,403Other
      comprehensive income
                                    
                                    
                                    2,325,366
                                    
                                    
                                    
                                    2,345,698Retained
      earnings
                                    
                                    
                                    2,493,690
                                    
                                    
                                    
                                    1,954,768Total
      stockholders' equity
                                    
                                    
                                    16,554,245
                                    
                                    
                                    
                                    15,277,593TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                                    
                                    $
                                    35,993,564
                                    
                                    
                                    $
                                    37,730,068





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


2





DEER
CONSUMER PRODUCTS, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008





2009
                                  
                                  
                                  2008(unaudited)
                                  
                                  
                                  (unaudited)Net
      Revenue
                                  
                                  $
                                  6,872,216
                                  
                                  
                                  $
                                  9,099,169Cost
      of Revenue
                                  
                                  
                                  5,212,704
                                  
                                  
                                  
                                  6,978,152Gross
      profit
                                  
                                  
                                  1,659,512
                                  
                                  
                                  
                                  2,121,017Operating
      expensesSelling
      expenses
                                  
                                  
                                  183,342
                                  
                                  
                                  
                                  438,668General
      and administrative expenses
                                  
                                  
                                  371,581
                                  
                                  
                                  
                                  555,880Total
      operating expenses
                                  
                                  
                                  554,923
                                  
                                  
                                  
                                  994,548Income
      from operations
                                  
                                  
                                  1,104,589
                                  
                                  
                                  
                                  1,126,469Non-operating
      income (expense):Financing
      costs
                                  
                                  
                                  (54,826
                                  )
                                  
                                  
                                  (87,151
                                  )Interest
      income
                                  
                                  
                                  1,619
                                  
                                  
                                  
                                  3,384Interest
      expense
                                  
                                  
                                  (60,005
                                  )
                                  
                                  
                                  (20,495
                                  )Other
      income (expense)
                                  
                                  
                                  (1,881
                                  )
                                  
                                  
                                  33,098Foreign
      exchange gain (loss)
                                  
                                  
                                  (70,506
                                  )
                                  
                                  
                                  71,607Total
      non-operating income (expense)
                                  
                                  
                                  (185,599
                                  )
                                  
                                  
                                  443Income
      before income tax
                                  
                                  
                                  918,990
                                  
                                  
                                  
                                  1,126,912Income
      tax
                                  
                                  
                                  262,116
                                  
                                  
                                  
                                  311,366Net
      income
                                  
                                  
                                  656,874
                                  
                                  
                                  
                                  815,546Other
      comprehensive incomeForeign
      currency translation gain (loss)
                                  
                                  
                                  (20,332
                                  )
                                  
                                  
                                  578,950Comprehensive
      Income
                                  
                                  $
                                  636,542
                                  
                                  
                                  $
                                  1,394,496Weighted
      average shares outstanding :Basic
                                  
                                  
                                  9,999,478
                                  
                                  
                                  
                                  7,847,853Diluted
                                  
                                  
                                  10,005,017
                                  
                                  
                                  
                                  7,847,853Earnings
      per share:Basic
                                  
                                  $
                                  0.07
                                  
                                  
                                  $
                                  0.10Diluted
                                  
                                  $
                                  0.07
                                  
                                  
                                  $
                                  0.10





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


3





DEER CONSUMER PRODUCTS, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008





2009
                                
                                
                                2008(unaudited)
                                
                                
                                (unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                                
                                $
                                656,874
                                
                                
                                $
                                815,546Adjustments
      to reconcile net income to net cash used in operating
      activities:Depreciation
                                
                                
                                349,492
                                
                                
                                
                                281,029Amortization
                                
                                
                                2,357
                                
                                
                                
                                4,552(Increase)
      / decrease in assets:Accounts
      receivable
                                
                                
                                (573,464
                                )
                                
                                
                                (371,447
                                )Other
      receivable
                                
                                
                                252,241
                                
                                
                                
                                41,415Inventories
                                
                                
                                1,936,703
                                
                                
                                
                                (469,320
                                )Due
      from related party
                                
                                
                                -
                                
                                
                                
                                (1,312,024
                                )Advances
      to suppliers
                                
                                
                                (37,484
                                )
                                
                                
                                357,923Tax
      rebate receivable
                                
                                
                                -
                                
                                
                                
                                586,845Other
      assets
                                
                                
                                10,392
                                
                                
                                
                                (8,332
                                )Increase
      / (decrease) in current liabilities:Accounts
      payable
                                
                                
                                (2,273,406
                                )
                                
                                
                                (162,089
                                )Unearned
      revenue
                                
                                
                                (1,541,804
                                )
                                
                                
                                128,445Other
      payables
                                
                                
                                (183,644
                                )
                                
                                
                                (373,056
                                )Due
      to related party
                                
                                
                                -
                                
                                
                                
                                (441,253
                                )Accrued
      payroll
                                
                                
                                18,724
                                
                                
                                
                                19,103Tax
      and welfare payable
                                
                                
                                450,715
                                
                                
                                
                                (44,971
                                )Net
      cash used in operating activities
                                
                                
                                (932,304
                                )
                                
                                
                                (947,634
                                )CASH
      FLOWS FROM INVESTING ACTIVITIESAcquisition
      of property and equipment
                                
                                
                                -
                                
                                
                                
                                (80,254
                                )Construction
      in process
                                
                                
                                (590,067
                                )
                                
                                
                                (187,423
                                )Changes
      in restricted cash
                                
                                
                                54,723
                                
                                
                                
                                6,075Proceeds
      from short-term investments
                                
                                
                                29,302
                                
                                
                                
                                139,729Net
      cash used in investing activities
                                
                                
                                (506,042
                                )
                                
                                
                                (121,873
                                )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from issuance of notes payable
                                
                                
                                1,418,859
                                
                                
                                
                                540,640Proceeds
      from issuance of short term loans
                                
                                
                                -
                                
                                
                                
                                149,479Proceeds
      from sale of common stock
                                
                                
                                625,500
                                
                                
                                
                                -Offering
      costs paid
                                
                                
                                (84,515
                                )
                                
                                
                                -Payment
      on notes short term loans
                                
                                
                                (764,550
                                )Change
      in advance to related party, net
                                
                                
                                
                                
                                
                                
                                (58,298
                                )Net
      cash provided by financing activities
                                
                                
                                1,195,294
                                
                                
                                
                                631,821Effect
      of exchange rate changes on cash and cash equivalents
                                
                                
                                (3,737
                                )
                                
                                
                                -NET
      DECREASE IN CASH & CASH EQUIVALENTS
                                
                                
                                (246,789
                                )
                                
                                
                                (437,686
                                )CASH
      & CASH EQUIVALENTS, BEGINNING BALANCE
                                
                                
                                2,782,026
                                
                                
                                
                                1,511,545CASH
      & CASH EQUIVALENTS, ENDING BALANCE
                                
                                $
                                2,535,237
                                
                                
                                $
                                1,073,859SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Interest
      paid
                                
                                $
                                57,370
                                
                                
                                $
                                20,407Income
      taxes paid
                                
                                $
                                -
                                
                                
                                $
                                58,975





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


4


Deer
Consumer Products, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Three Months Ended March 31, 2009 and 2008


(unaudited)





Note
1 - Organization and Basis of Presentation





The
unaudited consolidated financial statements have been prepared by Deer Consumer
Products, Inc.  pursuant to the rules and regulations of the
Securities Exchange Commission (“SEC”).  The information furnished
herein reflects all adjustments (consisting of normal recurring accruals and
adjustments) which are, in the opinion of management, necessary to fairly
present the operating results for the respective periods. Certain information
and footnote disclosures normally present in annual consolidated financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been omitted pursuant to such rules and
regulations.  These consolidated financial statements should be read
in conjunction with the audited consolidated financial statements and footnotes
included in the Company’s Annual Report on Form 10-K.  The results for
the three months ended March 31, 2009 are not necessarily indicative of the
results to be expected for the full year ending December 31, 2009.





Organization and Line of
Business





Deer
Consumer Products, Inc., formerly known as Tag Events Corp., (hereinafter
referred to as the “Company” or “Deer”) was incorporated in the State of Nevada
on July 18, 2006.





On
September 3, 2008, the Company entered into a share exchange agreement and plan
of reorganization with Deer International Group Limited (“Deer International”),
a company incorporated under the laws of British Virgin Islands (“BVI”) on
December 3, 2007 and acquired 100% of the shares of Winder Electrical Company,
Ltd. (“Winder”) on March 11, 2008.  Winder has a 100% owned
subsidiary, Delta International, Ltd., (“Delta”).  Winder and Delta
were formed and incorporated in the Guangdong Province of the PRC on July 20,
2001 and February 23, 2006, respectively.





Pursuant
to the share exchange agreement, the Company acquired from Deer International
50,000 ordinary shares, consisting of all of its issued and outstanding capital
stock, in exchange for the issuance of 7,847,853 shares of the Company’s common
stock.  Concurrently with the closing of the transactions contemplated
by the share exchange agreement and as a condition thereof, the Company entered
into an agreement with Crescent Liu, its former Director and Chief Executive
Officer, pursuant to which he returned 2,586,957 shares of the Company’s common
stock to the Company for cancellation. Mr. Liu was not compensated for the
cancellation of his shares of the Company’s common stock. Upon completion of the
foregoing transactions, the Company had 9,826,113 shares of common stock issued
and outstanding.    In connection with the above transaction
the Company changed its name to Deer Consumer Products, Inc. on September 3,
2008.





The
exchange of shares with Deer International was accounted for as a reverse
acquisition under the purchase method of accounting since Deer International
obtained control of the Company. Accordingly, the merger of the Deer
International into the Company was recorded as a recapitalization of Deer
International, Deer International being treated as the continuing entity. The
historical financial statements presented are the consolidated financial
statements of Deer International. The share exchange agreement has been treated
as a recapitalization and not as a business combination; therefore, no pro forma
information is disclosed. At the date of this transaction, the net liabilities
of the legal acquirer were $0.





The
Company is engaged in manufacture, marketing, distribution and sale of home and
kitchen electric appliances (blenders, food processors, choppers, juicers,
etc.).  The Company manufactures its products out of YangJiang, China
and operates corporate functions in Nanshan, Shenzhen, China.


5


Deer
Consumer Products, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Three Months Ended March 31, 2009 and 2008


(unaudited)





Stock
Split





On April
24, 2009, the Company effected a 1 for 2.3 reverse stock split of its common
stock. All share information for common shares was retroactively restated for
this reverse stock split.





Basis of
Presentation





The
accompanying consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiary, Deer International, and its 100%
wholly-owned subsidiary Winder and Winder’s wholly-owned subsidiary Delta. All
significant inter-company accounts and transactions have been eliminated in
consolidation.





The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America
(“US GAAP”).  The Company’s Chinese subsidiaries functional currency
is the Chinese Yuan Renminbi (RMB); however the accompanying consolidated
financial statements have been translated and presented in United States Dollars
($).





Foreign Currency
Translation





The
accounts of the Company’s Chinese subsidiaries are maintained in the Chinese
Yuan Renminbi (RMB) and the accounts of the U.S. parent company are maintained
in the U.S. Dollar (USD).   The accounts of the Chinese
subsidiaries were translated into USD in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation," with the
RMB as the functional currency for the Chinese subsidiaries. According to the
Statement, all assets and liabilities were translated at the exchange rate on
the balance sheet date, stockholders’ equity are translated at the historical
rates and statement of operations items are translated at the weighted average
exchange rate for the period. The resulting translation adjustments are reported
under other comprehensive income in accordance with SFAS No. 130, "Reporting
Comprehensive Income”.





Note
2 – Summary of Significant Accounting Policies





Use of
Estimates





The
preparation of financial statements in conformity with US GAAP 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 date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.  Areas that require estimates and assumptions include
valuation of accounts receivable and inventory, determination of useful lives of
property and equipment, estimation of certain liabilities and sales
returns.





Cash and Cash
Equivalents





Cash and
cash equivalents include cash in hand and cash in time deposits, certificates of
deposit and all highly liquid debt instruments with original maturities of three
months or less.


6


Deer
Consumer Products, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Three Months Ended March 31, 2009 and 2008


(unaudited)





Restricted
Cash





Restricted
cash consists of monies restricted by the Company’s lender and monies restricted
under a letter of credit and a bank acceptance.  As of March 31, 2009
and December 31, 2008, total restricted cash was $145,107 (interest rate
of  0.36% per annum) and $200,099 (interest rate of 0.36% per annum),
respectively.





Accounts
Receivable





The
Company maintains reserves for potential credit losses on accounts receivable.
Management reviews the composition of accounts receivable and analyzes
historical bad debts, customer concentrations, customer credit worthiness,
current economic trends and changes in customer payment patterns to evaluate the
adequacy of these reserves. As of March 31, 2009, approximately 83% of our
accounts receivable was from overseas customers.  The Company
maintains export insurance that covers losses arising from customers’ rejection
of its products, political risk, losses arising from business credit and other
credit risks including bankruptcy, insolvency and delay in payment.





Investments





The
Company purchased various stocks during 2007 and in 2008 the Company was
required to purchase an equity fund for a bank loan requirement.  The
investments are trading securities that were bought and held principally for the
purpose of selling them in the near term and are reported at fair value, with
unrealized gains and losses included in earnings.  All of these stocks
were sold during the three months ended March 31, 2009.





Advances to
Suppliers





The
Company makes advances to certain vendors for purchase of its material. The
advances to suppliers are interest free and unsecured.





Inventories





Inventories
are valued at the lower of cost (determined on a weighted average basis) or
market. The Company compares the cost of inventories with the market value and
allowance is made for writing down the inventories to their market value, if
lower.





Property &
Equipment





Property
and equipment are stated at cost. Expenditures for maintenance and repairs are
charged to earnings as incurred; additions, renewals and betterments are
capitalized. When property and equipment are retired or otherwise disposed of,
the related cost and accumulated depreciation are removed from the respective
accounts, and any gain or loss is included in operations. Depreciation of
property and equipment is provided using the straight-line method for
substantially all assets with estimated lives as follows:





Buildings
                      5-20
      yearsEquipment
                      5-10
      yearsVehicles
                      5
      yearsOffice
      equipment
                      5-10
      years


7


Deer
Consumer Products, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Three Months Ended March 31, 2009 and 2008


(unaudited)





At March
31, 2009 and December 31, 2008, the following are the details of the property
and equipment:





March 31, 2009
                
                
                December 31, 2008Building
                
                $
                1,887,340
                
                
                $
                1,889,916Equipment
                
                
                14,222,457
                
                
                
                14,232,539Vehicle
                
                
                34,687
                
                
                
                34,735Office
      Equipment
                
                
                418,567
                
                
                
                430,177Total
                
                
                16,563,051
                
                
                
                16,587,367Less
      accumulated depreciation
                
                
                (5,636,711
                )
                
                
                (5,296,165
                )$
                10,926,340
                
                
                $
                11,291,202





Long-Lived
Assets





The
Company applies the provisions of SFAS No. 144, “Accounting for the Impairment
or Disposal of Long-Lived Assets” (“SFAS 144”), which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of,” and the accounting and reporting
provisions of APB Opinion No. 30, “Reporting the Results of Operations for a
Disposal of a Segment of a Business.” The Company periodically evaluates the
carrying value of long-lived assets to be held and used in accordance with SFAS
144. SFAS 144 requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets’ carrying amounts. In that event, a loss is recognized based on the
amount by which the carrying amount exceeds the fair market value of the
long-lived assets. Loss on long-lived assets to be disposed of is determined in
a similar manner, except that fair market values are reduced for the cost of
disposal. Based on its review, the Company believes that, as of March 31, 2009
there were no significant impairments of its long-lived assets.





Intangible
Assets





Intangible
assets consist of rights to use land and computer software. The Company
evaluates intangible assets for impairment, at least on an annual basis and
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable from its estimated future cash flows. Recoverability of
intangible assets is measured by comparing their net book value to the related
projected undiscounted cash flows from these assets, considering a number of
factors including past operating results, budgets, economic projections, market
trends and product development cycles. If the net book value of the asset
exceeds the related undiscounted cash flows, the asset is considered impaired,
and a second test is performed to measure the amount of impairment
loss.





Net
intangible assets at March 31, 2009 and December 31, 2008 are as
follows:


8


Deer
Consumer Products, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Three Months Ended March 31, 2009 and 2008


(unaudited)





March 31, 2009
                
                
                December 31, 2008Right
      to use land
                
                $
                449,721
                
                
                $
                450,335Computer
      software
                
                
                76,801
                
                
                
                76,906Total
                
                
                526,522
                
                
                
                527,241Less
      Accumulated amortization
                
                
                (125,305
                )
                
                
                (123,116
                )Intangibles,
      net
                
                $
                401,217
                
                
                $
                404,125





Pursuant
to the People's Republic of China's (“PRC”) governmental regulations, the
Government owns all land. The Company recognized the amounts paid for the
acquisition of rights to use land as intangible asset. The Company amortizes
rights over the period of the right, which ranges from 45 to 50 years and
computer software is amortized over 1-2 years.





Fair Value of Financial
Instruments





SFAS No.
107, Disclosures about fair value of financial instruments, requires the Company
disclose estimated fair values of financial instruments. The carrying amounts
reported in the statements of financial position for current assets and current
liabilities qualifying as financial instruments are a reasonable estimate of
fair value.





On
January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements. SFAS
No. 157 defines fair value, establishes a three-level valuation hierarchy for
disclosures of fair value measurement and enhances disclosures requirements for
fair value measures. The carrying amounts reported in the balance sheets for
receivables and current liabilities each qualify as financial instruments and
are a reasonable estimate of fair value because of the short period of time
between the origination of such instruments and their expected realization and
their current market rate of interest.  The three levels are defined
as follow:


·
              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.





As of
March 31, 2009, the Company did not identify any assets and liabilities that are
required to be presented on the balance sheet at fair value.





Concentration of Credit
Risk





Cash
includes cash on hand and demand deposits in accounts maintained within China.
Certain financial instruments, which subject the Company to concentration
of credit risk, consist of cash. Balances at financial institutions within China
are not covered by insurance.  The Company has not experienced any
losses in such accounts.


9


Deer
Consumer Products, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Three Months Ended March 31, 2009 and 2008


(unaudited)





Revenue
Recognition





The
Company’s revenue recognition policies are in compliance with SEC Staff
Accounting Bulletin (SAB) 104. Sales revenue is recognized at the date of
shipment to customers when a formal arrangement exists, the price is fixed or
determinable, the delivery is completed, no other significant obligations of the
Company exist and collectability is reasonably assured. Payments received before
all of the relevant criteria for revenue recognition are satisfied are recorded
as unearned revenue.





Unearned
Revenue





The
Company has recorded payments for goods before all relevant criteria for revenue
recognition are satisfied under unearned revenue.





Advertising
Costs





The
Company expenses the cost of advertising as incurred or, as appropriate, the
first time the advertising takes place.  Advertising costs for the
three months ended March 31, 2009 and 2008 was $5,025 and $25,204,
respectively.





Income
Taxes





The
Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each period end based on
enacted tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.





When tax
returns are filed, it is highly certain that some positions taken would be
sustained upon examination by the taxing authorities, while others are subject
to uncertainty about the merits of the position taken or the amount of the
position that would be ultimately sustained.  The benefit of a tax
position is recognized in the financial statements in the period during which,
based on all available evidence, management believes it is more likely than not
that the position will be sustained upon examination, including the resolution
of appeals or litigation processes, if any.  Tax positions taken are
not offset or aggregated with other positions.  Tax positions that
meet the more-likely-than-not recognition threshold are measured as the largest
amount of tax benefit that is more than 50 percent likely of being realized upon
settlement with the applicable taxing authority. The portion of the benefits
associated with tax positions taken that exceeds the amount measured as
described above is reflected as a liability for unrecognized tax benefits in the
accompanying balance sheets along with any associated interest and penalties
that would be payable to the taxing authorities upon
examination.  Interest associated with unrecognized tax benefits are
classified as interest expense and penalties are classified in selling, general
and administrative expenses in the statements of income.


10


Deer
Consumer Products, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Three Months Ended March 31, 2009 and 2008


(unaudited)





Foreign Currency
Transactions and Comprehensive Income





Accounting
principles generally require that recognized revenue, expenses, gains and losses
be included in net income. Certain statements, however, require entities to
report specific changes in assets and liabilities, such as gain or loss on
foreign currency translation, as a separate component of the equity section of
the balance sheet. Such items, along with net income, are components of
comprehensive income.  The  functional currency of the
Company’s Chinese subsidiaries is Chinese Renminbi. Translation gains of
$2,325,366 and $2,345,698 at March 31, 2009 and December 31, 2008, respectively,
are classified as an item of other comprehensive income in the stockholders’
equity section of the consolidated balance sheet. During the three months ended
March 31, 2009 and 2008, other comprehensive income in the consolidated
statements of income and other comprehensive income included translation gains
(loss) of $(20,332) and $578,950, respectively.





Currency
Hedging





The
Company has entered into a forward exchange agreement with the Bank of China,
whereby the Company agreed to sell US dollars to the Bank of China at a certain
contractual rates. Since the contractual rate at which the Company sells US
dollars to the Bank of China was greater than the exchange rate on the date of
each exchange transaction, the Company recognized foreign exchange gains
(losses) of $(70,506) and $71,607 for the three months ended March 31, 2009 and
2008, respectively.  At March 31, 2009, the Company has outstanding
forward exchange contracts to sell $5,062,374 at exchange rates ranging from RMB
7.1772 to RMB 7.406.   The fair value of the contracts was
approximately $13,000.





Basic and Diluted Earnings
Per Share





Earnings
per share is calculated in accordance with SFAS No. 128, “Earnings Per Share”.
SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB
15).  Net earnings per share for all periods presented has been
restated to reflect the adoption of SFAS No. 128.  Basic earnings per
share is based upon the weighted average number of common shares outstanding.
Diluted earnings per share is based on the assumption that all dilutive
convertible shares and stock options were converted or exercised. Dilution is
computed by applying the treasury stock method. Under this method, options and
warrants are assumed to be exercised at the beginning of the period (or at the
time of issuance, if later), and as if funds obtained thereby were used to
purchase common stock at the average market price during the
period.





The
following is a reconciliation of the number of shares (denominator) used in the
basic and diluted earnings per share computations for the three months ended
March 31, 2008 and 2008:





2009
                
                
                2008Per Share
                
                
                
                
                
                Per ShareShares
                
                
                Amount
                
                
                Shares
                
                
                AmountBasic  earnings
      per share
                
                
                9,999,478
                
                
                $
                0.07
                
                
                
                7,847,853
                
                
                $
                0.10Effect
      of dilutive stock options
                
                
                5,539
                
                
                
                -
                
                
                
                -
                
                
                
                -Diluted
      earnings per share
                
                
                10,005,017
                
                
                $
                0.07
                
                
                
                7,847,853
                
                
                $
                0.10





Statement of Cash
Flows





In
accordance with SFAS No. 95, “Statement of Cash Flows,” cash flows from the
Company’s operations are calculated based upon the local currencies. As a
result, amounts related to assets and liabilities reported on the statement of
cash flows will not necessarily agree with changes in the corresponding balances
on the balance sheet.


11


Deer
Consumer Products, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Three Months Ended March 31, 2009 and 2008


(unaudited)





Registration Rights
Agreement





The
Company accounts for payment arrangements under registration rights agreement in
accordance with FASB Staff Position EITF 00-19-2, which requires that the
contingent obligation to make future payments or otherwise transfer
consideration under a registration payment arrangement, whether issued as a
separate agreement or included as a provision of a financial instrument or other
agreement, be separately recognized and measured in accordance with SFAS No. 5,
Accounting for Contingencies.





Recent
Pronouncements





In
April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair
Values When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly.”  This FSP provides guidance on (1) estimating the fair value
of an asset or liability when the volume and level of activity for the asset or
liability have significantly declined and (2) identifying transactions that
are not orderly. The FSP also amends certain disclosure provisions of SFAS
No. 157 to require, among other things, disclosures in interim periods of
the inputs and valuation techniques used to measure fair value. This
pronouncement is effective prospectively beginning April 1, 2009. The
Company is currently evaluating the impact of this standard, but would not
expect it to have a material impact on the Company’s consolidated results of
operations or financial condition.




In
April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2,
“Recognition and Presentation of Other-Than-Temporary Impairments” (FSP 115-2).
This FSP modifies the requirements for recognizing other-than-temporarily
impaired debt securities and changes the existing impairment model for such
securities. The FSP also requires additional disclosures for both annual and
interim periods with respect to both debt and equity securities. Under the FSP,
impairment of debt securities will be considered other-than-temporary if an
entity (1) intends to sell the security, (2) more likely than not will
be required to sell the security before recovering its cost, or (3) does
not expect to recover the security’s entire amortized cost basis (even if the
entity does not intend to sell). The FSP further indicates that, depending on
which of the above factor(s) causes the impairment to be considered
other-than-temporary, (1) the entire shortfall of the security’s fair value
versus its amortized cost basis or (2) only the credit loss portion would
be recognized in earnings while the remaining shortfall (if any) would be
recorded in other comprehensive income. FSP 115-2 requires entities to initially
apply the provisions of the standard to previously other-than-temporarily
impaired debt securities existing as of the date of initial adoption by making a
cumulative-effect adjustment to the opening balance of retained earnings in the
period of adoption. The cumulative-effect adjustment potentially reclassifies
the noncredit portion of a previously other-than-temporarily impaired debt
security held as of the date of initial adoption from retained earnings to
accumulated other comprehensive income. This pronouncement is effective
April 1, 2009. The Company does not believe this standard will have a
material impact on the Company’s consolidated results of operations or financial
condition.




In
April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments.” This FSP essentially
expands the disclosure about fair value of financial instruments that were
previously required only annually to also be required for interim period
reporting. In addition, the FSP requires certain additional disclosures
regarding the methods and significant assumptions used to estimate the fair
value of financial instruments. These additional disclosures will be required
beginning with the quarter ending June 30, 2009. The Company is currently
evaluating the requirements of these additional disclosures.


12


Deer
Consumer Products, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Three Months Ended March 31, 2009 and 2008


(unaudited)





Note
3 – Inventory





Inventory
as of March 31, 2009 and December 31, 2008 consisted of the
following:





March 31,
                    2009
                  
                  
                  December 31,
                    2008Raw
      material
                  
                  $
                  3,485,785
                  
                  
                  $
                  3,960,022Work
      in process
                  
                  
                  1,265,321
                  
                  
                  
                  1,326,719Finished
      goods
                  
                  
                  982,702
                  
                  
                  
                  2,394,110Total
                  
                  $
                  5,733,808
                  
                  
                  $
                  7,680,851





Note
4 – Short Term Loans





Short
term loans at March 31, 2009 and December 31, 2008 are follows:





March 31,
                              2009
                            
                            
                            December 31,
                              2008Short
      term bank loans with the Bank of China.  As of December 31,
      2008, the term of the loan was 5 months, with an interest of
      5.990%.  The loans are collateralized by buildings and land use
      rights.
                            
                            $
                            -
                            
                            
                            
                            487,544Short
      term loans with Agricultural Bank of China.    This
      loan due on June 20, 2009 and accrues interest of 8.21%.  The
      loan is collateralized by equipment.
                            
                            
                            2,783,500
                            
                            
                            
                            3,065,297$
                            2,783,500
                            
                            
                            $
                            3,552,841





Note
5 – Notes Payable





Notes
payable at March 31, 2009 and December 31, 2008 consist of multiple banker's
acceptance notes from the Bank of China. The terms of the notes range from 0-3
months, with no interest rate on the notes. The Company deposits 10% of the
notes’ par value with the bank, refundable when the notes paid.  Notes
payable at March 31, 2009 and December 31, 2008 amounted to $4,569,809 and
$3,155,348, respectively.


13


Deer
Consumer Products, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Three Months Ended March 31, 2009 and 2008


(unaudited)





Note
6 – Long-Term Loan





On
November 14, 2008, the Company entered into a long-term loan agreement with an
unrelated party.  The loan was for $732,500 at 8.10%, due on October
20, 2010 and secured by certain fixed assets of the Company.





Note
7 – Stockholders’ Equity





Common
Stock





On March
31, 2009, the Company completed a closing of a private placement offering of
Units (as defined below)  pursuant to which the Company sold 405,445
Units at $1.84  per Unit for gross proceeds of
$746,000.  Each "Unit" consists of one share of the Company’s common
stock and a three year warrant to purchase 15% of one share of common stock at
$3.45 per share. The total warrants issued to investors were
60,828.  The Company also issued warrants to purchase 40,545 shares of
common stock to the placement agents.  The Company also issued a
Registration Rights Agreement requires that the Company file a registration
statement covering shares of common stock issued and the shares issuable upon
exercise of the warrants. The Company is required to file the registration
statement with the SEC within 60 days of the closing of the
offering.  The registration statement must be declared effective by
the SEC within 180 days of the final closing of the offering. Subject to certain
grace periods, the registration statement must remain effective and available
for use until the purchasers can sell all of the securities covered by the
registration statement without restriction pursuant to Rule 144. If the Company
fails to meet the filing or effectiveness requirements of the registration
statement, it is required to pay liquidated damages of 1% of the aggregate
purchase price paid by such purchaser for any registerable securities then held
by such purchaser on the date of such failure and on each anniversary of the
date of such failure until such failure is cured. As of May 15, 2009, the
registration statement has not been filed.





Warrants





Following
is a summary of the warrant activity:








Options
                      outstanding
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price
                    
                    
                    Weighted
                      average
                      remaining
                      contractual life
                    
                    
                    Aggregate
                      Intrinsic ValueOutstanding,
      December 31, 2008
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    
                    
                    $
                    -Granted
                    
                    
                    101,373
                    
                    
                    $
                    3.45Forfeited
                    
                    
                    -
                    
                    
                    
                    -Exercised
                    
                    
                    -
                    
                    
                    
                    -Outstanding,
      March 31, 2009
                    
                    
                    101,373
                    
                    
                    $
                    3.45
                    
                    
                    
                    2.89
                    
                    
                    $
                    50,680Exercisable,
      March 31, 2009
                    
                    
                    101,373
                    
                    
                    $
                    3.45
                    
                    
                    
                    2.89
                    
                    
                    $
                    50,680





The
exercise price for all the warrants outstanding at March 31, 2009 is
$3.45.


14


Deer
Consumer Products, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Three Months Ended March 31, 2009 and 2008


(unaudited)





Note
8 - Employee Welfare Plan





The total
expense for the employee common welfare was $4,536 and $37,560 for the three
months ended March 31, 2009 and 2008, respectively.  The Chinese
government abolished the 14% welfare plan policy at the beginning of
2007.  The Company is not required to establish welfare and common
welfare reserves.





Note
9 - Statutory Reserve and Development Fund





As
stipulated by the Company Law of the PRC, net income after taxation can only be
distributed as dividends after appropriation has been made for the
following:





i.
            Making
      up cumulative prior years’ losses, if
any;





ii.
            Allocations
      to the “Statutory surplus reserve” of at least 10% of income after tax, as
      determined under PRC accounting rules and regulations, until the fund
      amounts to 50% of the Company’s registered
  capital;





iii.
            Allocations
      of 5-10% of income after tax, as determined under PRC accounting rules and
      regulations, to the Company’s “Statutory common welfare fund” (“SCWF”),
      which is established for the purpose of providing employee facilities and
      other collective benefits to the Company’s employees;
  and





iv.
            Allocations
      to the discretionary surplus reserve, if approved in the stockholders’
      general meeting.  The Company allocates 5% of income after tax
      as development fund. The fund is for enlarging its business and increasing
      capital.





Pursuant
to the new Corporate Law effective on January 1, 2006, there is now only one
"Statutory surplus reserve" requirement. The reserve is 10 percent of income
after tax, not to exceed 50 percent of registered capital.





The
Company appropriated $78,635 and $93,410, and $39,317 and $46,705 as reserve for
the statutory surplus reserve and development fund for the three months ended
March 31, 2009 and 2008, respectively.





Note
10 - Related Party Transactions





There
were no related party transactions during the three months ended March 31, 2009.
As of March 31, 2009, the entity previously reported as a related party was
no longer considered to be related party due to ownership changes within that
entity.


15


Deer
Consumer Products, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Three Months Ended March 31, 2009 and 2008


(unaudited)





Note
11 – Subsequent Event





On May 1,
2009, the Company completed a private placement offering of 520,000 Units at
$1.84 per Unit for gross proceeds of $956,800 to two non-US
investors.  Each Unit consisted of one share of the Company’s common
stock and a three year warrant to purchase 15% of one share of common stock, or
an aggregate of 78,000 shares of common stock, at a $3.45 per
share.  The investors received registration rights identical to that
described in Note 7.


16


CAUTIONARY
STATEMENT FOR FORWARD-LOOKING STATEMENTS





This
Quarterly Report on Form 10-Q  includes forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.  We
have based these forward-looking statements on our current expectations and
projections about future events.  These forward-looking statements are
subject to known and unknown risks, uncertainties and assumptions about us that
may cause our actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity, performance
or achievements expressed or implied by such forward-looking
statements.  In some cases, you can identify forward-looking
statements by terminology such as “may,” “will,” “should,” “could,” “would,”
“expect,” “plan,” anticipate,” believe,” estimate,” continue,” or the negative
of such terms or other similar expressions.  Factors that might cause
or contribute to such a discrepancy include, but are not limited to, those
listed under the heading “Risk Factors” and those listed  in our other
Securities and Exchange Commission filings.  The following discussion
should be read in conjunction with our Financial Statements and related Notes
thereto included elsewhere in this report. Throughout this Quarterly Report we
will refer to Deer Consumer Products, Inc.  as "Deer," the "Company,"
"we," "us," and "our."





Item
2.  Management’s Discussion and Analysis or Plan of
Operations





Overview





On
September 3, 2008, we entered into a share exchange agreement and plan of
reorganization with Deer International Group Limited (“Deer International”), a
company incorporated under the laws of British Virgin Islands (“BVI”) on
December 3, 2007 and holder of 100% of the shares of Winder Electrical Company,
Ltd. (“Winder”) since March 11, 2008.  Winder has a 100% owned
subsidiary, Delta International, Ltd., (“Delta”).  Winder and Delta
were formed and incorporated in the Guangdong Province of the PRC on July 20,
2001 and February 23, 2006, respectively.





Pursuant
to the share exchange agreement, we acquired from Deer International 50,000
ordinary shares, consisting of all of its issued and outstanding capital stock,
in exchange for 7,847,853 shares of our common stock.  Concurrently
with the closing of the transactions contemplated by the share exchange
agreement and as a condition thereof, we entered into an agreement with Crescent
Liu, our former Director and Chief Executive Officer, pursuant to which he
returned 2,586,957 shares of our common stock for cancellation. Mr. Liu was not
compensated for the cancellation of his shares of our common stock. Upon
completion of the foregoing transactions, we had 9,826,113 shares of common
stock issued and outstanding.  In connection with the above
transaction we changed our name to Deer Consumer Products, Inc. on September 3,
2008.





The
exchange of shares with Deer International was accounted for as a reverse
acquisition under the purchase method of accounting since Deer International
obtained control of our company. Accordingly, the merger of the Deer
International into us was recorded as a recapitalization of Deer International,
Deer International being treated as the continuing entity. The historical
financial statements presented are the consolidated financial statements of Deer
International. The share exchange agreement has been treated as a
recapitalization and not as a business combination; therefore, no pro forma
information is disclosed. At the date of this transaction, the net liabilities
of the legal acquirer were $0.


17


We are
engaged in the manufacture, marketing, distribution and sale of home and kitchen
electric appliances (blenders, food processors, choppers, juicers,
etc.).  The Company manufactures its products out of YangJiang, China
and operates corporate functions in Nanshan, Shenzhen, China.





We
operate through our two wholly-owned subsidiaries, Winder Electric Co. Ltd.
(“Winder”), which is a wholly-owned foreign enterprise (“WOFE”) and responsible
for research, production and delivery of goods, and Delta International Limited
(“Delta”), which is a wholly owned subsidiary of Winder and primarily
responsible for sales. We have traditionally acted as both an original equipment
manufacturer (“OEM”) and original design manufacturer (“ODM”) for international
markets.





Critical
Accounting Policies





In
presenting our financial statements in conformity with accounting principles
generally accepted in the United States (“US GAAP”), we are required to make
estimates and assumptions that affect the amounts reported therein. Several of
the estimates and assumptions we are required to make relate to matters that are
inherently uncertain as they pertain to future events. However, events that are
outside of our control cannot be predicted and, as such, they cannot be
contemplated in evaluating such estimates and assumptions. If there is a
significant unfavorable change to current conditions, it will likely result in a
material adverse impact to our results of operations, financial position and in
liquidity. We believe that the estimates and assumptions we used when preparing
our financial statements were the most appropriate at that time. Presented below
are those accounting policies that we believe require subjective and complex
judgments that could potentially affect reported results.





Use of Estimates. Our
discussion and analysis of our financial condition and results of operations are
based upon our financial statements, which have been prepared in accordance with
US GAAP. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosures of contingent assets and
liabilities. On an ongoing basis, we evaluate our estimates, including those
related to impairment of long-lived assets, and allowance for doubtful accounts.
We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions; however,
we believe that our estimates, including those for the above-described items,
are reasonable.





Areas
that require estimates and assumptions include valuation of accounts receivable
and inventory, determination of useful lives of property and equipment,
estimation of certain liabilities and sales returns.





Accounts Receivable. We
maintain reserves for potential credit losses on accounts receivable. Management
reviews the composition of accounts receivable and analyzes historical bad
debts, customer concentrations, customer credit worthiness, current economic
trends and changes in customer payment patterns to evaluate the adequacy of
these reserves.





Advances to Suppliers. We
make advances to certain vendors for purchase of its material. The advances to
suppliers are interest free and unsecured.





Inventory . Inventory is
valued at the lower of cost (determined on a weighted average basis) or market.
We compare the cost of inventories with the market value and allowance is made
for writing down the inventories to their market value, if
lower.


18


Long-Lived Assets. We apply
the provisions of Statement of Financial Accounting Standards No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”),
which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,”
and the accounting and reporting provisions of APB Opinion No. 30, “Reporting
the Results of Operations for a Disposal of a Segment of a Business.” We
periodically evaluate the carrying value of long-lived assets to be held and
used in accordance with SFAS 144. SFAS 144 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets’ carrying amounts. In that event, a loss is
recognized based on the amount by which the carrying amount exceeds the fair
market value of the long-lived assets. Loss on long-lived assets to be disposed
of is determined in a similar manner, except that fair market values are reduced
for the cost of disposal. Based on our review, we believe that to date there
were no significant impairments of its long-lived assets.





Property and equipment:
Property and equipment are stated at cost. Expenditures for maintenance and
repairs are charged to earnings as incurred; additions, renewals and betterments
are capitalized. When property and equipment are retired or otherwise disposed
of, the related cost and accumulated depreciation are removed from the
respective accounts, and any gain or loss is included in operations.
Depreciation of property and equipment is provided using the straight-line
method. For substantially all assets with estimated lives as
follows:





Buildings
                5-20
      yearsEquipment
                5-10
      yearsVehicles
                5
      yearsOffice
      equipment
                5-10
      years





Revenue Recognition. Our
revenue recognition policies are in compliance with SEC Staff Accounting
Bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to
customers when a formal arrangement exists, the price is fixed or determinable,
the delivery is completed, no other significant obligations exist and
collectability is reasonably assured. Payments received before all of the
relevant criteria for revenue recognition are satisfied are recorded as unearned
revenue.





Foreign Currency Transactions and
Comprehensive Income. Accounting principles generally require that
recognized revenue, expenses, gains and losses be included in net income.
Certain statements, however, require entities to report specific changes in
assets and liabilities, such as gain or loss on foreign currency translation, as
a separate component of the equity section of the balance sheet. Such items,
along with net income, are components of comprehensive income. The functional
currency of the Company is Chinese Renminbi. The unit of Renminbi is in Yuan.
Translation gains are classified as an item of other comprehensive income in the
stockholders’ equity section of the balance sheet. Other comprehensive income in
the statements of income and other comprehensive income includes translation
gains recognized each period.





Currency
Hedging.  We entered into a forward exchange agreement with the
Bank of China, whereby we have agreed to sell US dollars to the Bank of China at
a certain contractual rates. Since the contractual rate at which we sell US
dollars to the Bank of China was greater than the exchange rate on the date of
each exchange transaction, we have recognized foreign exchange
gains.





Results of
Operations





Three
Months Ended March 31, 2009 Compared to the Three Months Ended March 31,
2008:


19


Three Months
                                  Ended
                                  March 31, 2009
                                
                                
                                Three Months
                                  Ended
                                  March 31,2008
                                
                                
                                $ Change
                                
                                
                                % ChangeRevenues
                                
                                $
                                6,872,216
                                
                                
                                $
                                9,099,169
                                
                                
                                $
                                (2,226,953
                                )
                                
                                
                                (24.5
                                )%Cost
      of Revenue
                                
                                
                                5,212,704
                                
                                
                                
                                6,978,152
                                
                                
                                
                                (1,765,448
                                )
                                
                                
                                (25.3
                                )%Gross
      Profits
                                
                                
                                1,659,512
                                
                                
                                
                                2,121,017
                                
                                
                                
                                (461,505
                                )
                                
                                
                                (21.8
                                )%Selling,
      General and Administrative Expenses
                                
                                
                                554,923
                                
                                
                                
                                994,548
                                
                                
                                
                                (439,625
                                )
                                
                                
                                (44.2
                                )%Interest
      Expense and Financing Costs (net)
                                
                                
                                113,212
                                
                                
                                
                                104,262
                                
                                
                                
                                8,950
                                
                                
                                
                                7.9
                                %Other
      Income (Expense)
                                
                                
                                (1,881
                                )
                                
                                
                                33,098
                                
                                
                                
                                (34,979
                                )
                                
                                
                                (105.7
                                )%Foreign
      exchange gain (loss)
                                
                                
                                (70,506
                                )
                                
                                
                                71,607
                                
                                
                                
                                (142,113
                                )
                                
                                
                                (198.5
                                )%Income
      Tax Expense
                                
                                
                                262,116
                                
                                
                                
                                311,366
                                
                                
                                
                                (49,250
                                )
                                
                                
                                (15.8
                                )%Net
      Income
                                
                                
                                656,874
                                
                                
                                
                                815,546
                                
                                
                                
                                (158,672
                                )
                                
                                
                                (19.5
                                )%





Revenues





Our
revenue for the three months ended March 31, 2009 was $6,872,216 a decrease of
$2,226,953 or 24.5% from $9,099,169 for the three months ended March 31,
2008.  The decrease in revenues was due to a decrease in sales of our
core products due to the overall downturn in the world economy.





Cost
of Revenue





Our cost
of revenue for the three months ended March 31, 2009 decreased by $1,765,448 or
25.3% from $6,978,152 for the three months ended March 31, 2008 to $5,212,704
for the three months ended March 31, 2009.  The decreased cost in 2009
was due to the decrease in sales.





Gross
Profit





Our gross
margin for the three months ended March 31, 2009 was 24.2% compared to 23.3% for
same period in 2008. The increase in gross margin can be attributed to success
in controlling variable costs such as the design of new products and improving
our sales order selection capability to fit market needs.





Selling,
General and Administrative Expenses





Selling,
general and administrative expenses for the three months ended March 31, 2009
decreased by $439,625 or 44.2%, from $994,548 for the three months ended March
31, 2008 to $554,923 for the three months ended March 31, 2009.  Selling
expenses for the three months ended March 31, 2009 decreased by 58.2% or
$255,326 in comparison to the same period in 2008.  General and
administrative expenses for the three months ended March 31,
2009 decreased by 33.2% or $184,299 in comparison to the same period
in 2008.  Operating expenses include overhead expenses such as rent,
management and staff salaries, general insurance, marketing, accounting, legal
and offices expenses.  We have scaled and consolidated back our
operations thus reducing selling, general and administrative expenses to
withstand the effect of global financial crisis. Also we have contracted our
Delta subsidiary beginning in 2009 whereby all Delta operations have been run
through our Winder subsidiary.





Interest
and Financing Costs (net)





Interest
and financing costs for the three months ended March 31, 2009 was $113,212
compared to $104,262 for the three months ended March 31, 2008 an increase of
$8,950 or 7.9%. The change is principally due to increased
borrowings.


20


Other
Income (Expense)





Other
income (expense) for the three months ended March 31, 2009 was $(1,881), a
decrease of $34,979 or 105.7%, from $33,098 for the three months ended March 31,
2008. The decrease is due to a reduction in government subsidy
income.





Foreign
Exchange Gain (loss)





Foreign
exchange gain (loss) for the three months ended March 31, 2009 was $(70,506), a
decrease of $142,113 or 198.5%, from $71,607 for the three months ended March
31, 2008. The decrease is due to the fluctuation in exchange rates between the
RMB and US dollar.





Income
Tax Expense





Our
effective tax rate for the three months ended March 31, 2009 was 33.3% as
opposed to 27.6% for the three months ended March 31, 2008.





Off-Balance
Sheet Arrangements





There
were no off-balance sheet arrangements during the three months ended March 31,
2009 that have, or are reasonably likely to have, a current or future affect on
our financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to our
interests.





Liquidity
and Capital Resources





On March
31, 2009, we completed a closing of a private placement offering of Units (as
defined below) pursuant to which we sold an aggregate of 405,445 Units at
an offering price of $1.84 per Unit for aggregate gross proceeds of
$746,000.  Each "Unit" consists of one share of our common stock and a
three year warrant to purchase 15% of one share of common stock at an exercise
price of $3.45 per share. The total warrants issued to investors were
60,828.  We also issued warrants to purchase 40,545 shares of common
stock to the placement agents.





On May 1,
2009, we completed a closing of a private placement offering of 520,000 Units at
an offering price of $1.84 per Unit for aggregate gross proceeds of
$956,800 to two non-US investors.  Each Unit consisted of one share of
our common stock and a three year warrant to purchase 15% of one share of common
stock, or an aggregate of 78,000 shares of common stock, at an exercise price of
$3.45 per share.





Cash
Flows





At March
31, 2009, we had $2,535,237 in cash and cash equivalents on hand.  Our
principal demands for liquidity are to increase capacity, inventory purchase,
sales distribution, and general corporate purposes.  We anticipate
that the amount of cash we have on hand as of the date of this report as well as
the cash that we will generate from operations will satisfy these
requirements.





Net cash
flows used by operating activities for the three months ended March 31, 2009 was
$932,304 compared to $947,634 for the three months ended March 31, 2008. This
change in cash flows from operating activities from quarter to quarter was not
significant.





We used
$506,042 in investing activities during the three months ended March 31, 2009
for construction in process.


21


Cash
provided from financing activities in the three months ended March 31,
2009 was $1,195,294 which included proceeds from a notes payable and sale
of shares of common stock, offset by payment on short-term loans.





Assets





As of
March 31, 2009, our accounts receivable increased by $561,754 compared with the
balance as of December 31, 2008. The increase in accounts receivable on three
months ended March 31, 2009 was due primarily to slower
collections.  We intend to continue our efforts to maintain accounts
receivable at reasonable levels in relation to our sales.  Inventory
decreased by $1,947,043 from the balance at December 31, 2008.





Liabilities





Our
accounts payable decreased by $2,173,454 during the three months ended March 31,
2009 and other payables decreased by $181,615 for the same period. Unearned
revenues (payments received before all the relevant criteria for revenue
recognition are satisfied) decreased by $1,546,206 and short-term loans
decreased by $769,341 over the same period.  Notes payable and tax and
welfare payable increased by $1,414,461 and $448,595, respectively, due to the
receipt of proceeds from new loans entered into during the three months ended
March 31, 2009.





We intend
to meet our liquidity requirements, including capital expenditures related to
the purchase of equipment, purchase of raw materials, and the expansion of our
business, through cash flow provided by operations and funds raised through
private placement offerings of our securities, if and when the Company
determines such offerings are required.





We
maintain export insurance that covers losses arising from customers’ rejection
of our products, political risk, losses arising from business credit and other
credit risks including bankruptcy, insolvency and delay in payment.





The
majority of our revenues and expenses were denominated primarily in RMB, the
currency of the PRC.





There is
no assurance that exchange rates between the RMB and the USD will remain stable.
We do engage in currency hedging. Inflation has not had a material impact on our
business.





Item
3. Quantitative
and Qualitative Disclosures About Market Risk





Not
required.





Item
4T. Controls and Procedures




An
evaluation was conducted under the supervision and with the participation of the
Company’s management, including the Chief Executive Officer (“CEO”), its
principal executive officer, and Chief Financial Officer (“CFO”), its principal
financial officer, of the effectiveness of the design and operation of the
Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and
Rule 15d-15(e) of the Exchange Act) as of March 31, 2009. Based on that
evaluation, the CEO and CFO concluded that the Company’s disclosure controls and
procedures were effective as of such date to ensure that information required to
be disclosed in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.


22


There was
no change in the Company’s internal control over financial reporting that
occurred during the Company’s most recently completed fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.





Part
II.     OTHER INFORMATION





Item
1.     Legal Proceedings





From time
to time, we may become involved in various lawsuits and legal proceedings, which
arise in the ordinary course of business.  However, litigation is
subject to inherent uncertainties, and an adverse result in these or other
matters may arise from time to time that may have an adverse affect on our
business, financial conditions, or operating results.  We are
currently not aware of any such legal proceedings or claims that will have,
individually or in the aggregate, a material adverse affect on our business,
financial condition or operating results




Item
1A.  Risk Factors





There
have been no material changes from the disclosure provided in Part 1, Item 1A of
our Annual Report on Form 10-K for the year ended December 31, 2008, as
amended.





Item
2.     Unregistered Sales of Equity Securities and Use of
Proceeds





None.





Item
3.     Defaults Upon Senior Securities





None.





Item
4.     Submission of Matters to a Vote of Security
Holders





None.





Item
5.     Other Information





None.





Item
6.     Exhibits








Exhibit Number
                        Description of Exhibit31.1
                        Certification
      of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
      promulgated under the Securities and Exchange Act of 1934, as
      amended.31.2
                        Certification
      of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a),
      promulgated under the Securities and Exchange Act of 1934, as
      amended.32.1
                        Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 (Chief Executive
  Officer).32.2
                        Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 (Chief Financial
  Officer).


23


SIGNATURES





In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.








Deer
      Consumer Products, IncMay
      15, 2009
                  By:
                  /s/ Ying HeYing
      He
                    Chairman
      & Chief Executive Officer
                    (Principal
      Executive Officer)May
      15, 2009
                  By:
                  /s/ Yuehua XiaYuehua
      Xia
                    
                    Chief
      Financial Officer
                    (Principal
      Financial and Accounting
Officer)


24