item 14 principal accountant fees services principal accountants dale matheson carrhilton labonte chartered accountants rendered invoices us fiscal periods indicated following fees services fiscal year ended fiscal year ended september 2006 september 30 2007 audit fees 5000 auditrelated fees nil tax fees nil fees nil audit fees consist fees related professional services rendered connection audit annual financial statements review financial statements included quarterly reports form 10qsb policy preapprove audit permissible nonaudit services performed independent accountants services may include audit services auditrelated services tax services audit committees policy preapproval generally provided particular services categories services including planned services project based services routine consultations addition may also preapprove particular services casebycase basis approved services independent accountants provided us past two fiscal years signatures pursuant requirements section 13 15 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tag events corp artiom balykin artiom balykin president ceo treasurer secretary director date november 29 2007 accordance securities exchange act report signed following persons behalf registrant capacities dates indicated artiom balykin artiom balykin president ceo treasurer secretary director date november 29 2007 item 14 principal accounting fees services audit committee selected gkm independent registered certified public accounting firm audit books accounts company subsidiaries fiscal year ending december 31 2011 gkm served independent accountant since september 3 2008 following table presents aggregate fees billed professional services rendered gkm years ended december 31 2011 2010 table “audit fees” fees billed services provided related audit annual financial statements quarterly reviews interim financial statements services normally provided independent accountant connection statutory regulatory filings engagements fiscal periods “auditrelated fees” fees included audit fees billed independent accountant assurance related services reasonably related performance audit review financial statements “tax fees” fees billed independent accountant professional services rendered tax compliance tax advice tax planning “all fees” fees billed independent accountant products services included foregoing categories audit committee’s preapproval policy audit committee preapproves audit permissible nonaudit services provided independent accountants services may include audit services auditrelated services tax services audit committee adopted written policy preapproval services provided independent accountants policy audit committee generally preapproves services one year preapproval detailed particular service category services subject specific budget addition audit committee may also preapprove particular services casebycase basis proposed service independent accountant required provide detailed backup documentation time approval audit committee may delegate preapproval authority one members member must report decisions audit committee next scheduled meeting part iv item 15 item 14 principal accountant fees services audit fees firm goldman parks kurland mohidin llp “gpkm” selected board directors independent registered certified public accounting firm audit books accounts company subsidiaries fiscal year ending december 31 2008 firm served independent public accountants company since april 14 2008 prior september 3 2008 engaged dale matheson carr hilton labonte llp dmchl independent accountants aggregate fees billed gpkm professional services rendered audit annual financial statements year ended december 31 2008 reviews financial statements included quarterly reports form 10q fiscal year 107500 aggregate fees billed dmchl reviews financial statements included quarterly reports form 10q fiscal year 2008 5000 audit related fees incurred fees auditors 0 audit related fees fiscal year ended 2007 fiscal year ended december 31 2008 audit related fees 0 tax fees incurred fees auditors tax compliance tax advice tax compliance services fiscal year ended december 31 2007 fiscal year ended december 31 2008 board directors formal audit committee however entire board directors companys defacto audit committee board directors discussed auditors relationships may impact objectivity independence satisfied auditors independence board also discussed management internal auditors independent auditors quality adequacy companys internal controls policy board directors acting audit committee preapprove services performed independent accountants item 15 item 14 exhibits financial statement schedules financial statements see index consolidated financial statements page form 10k financial statement schedules applicable exhibits annual report form 10k set forth exhibit index attached hereto deer consumer products inc subsidiaries consolidated financial statements years ended december 31 2009 2008 contents report independent registered public accounting firm board directors stockholders deer consumer products inc audited accompanying consolidated balance sheets deer consumer products inc subsidiaries december 31 2009 2008 related consolidated statements income comprehensive income stockholders equity cash flows years ended december 31 2009 2008 consolidated financial statements responsibility companys management responsibility express opinion consolidated financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether consolidated financial statements free material misstatement company required engaged perform audit internal control financial reporting audits included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness company’s internal control financial reporting accordingly express opinion audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall consolidated financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects consolidated financial position deer consumer products inc subsidiaries december 31 2009 2008 consolidated results operations consolidated cash flows years ended december 31 2009 2008 conformity us generally accepted accounting principles goldman parks kurland mohidin llp encino california february 28 2010 deer consumer products inc subsidiaries consolidated balance sheets december 31 2009 2008 accompanying notes integral part consolidated financial statements deer consumer products inc subsidiaries consolidated statements income comprehensive income years ended december 31 2009 2008 accompanying notes integral part consolidated financial statements deer consumer products inc subsidiaries consolidated statement stockholders equity years ended december 31 2009 2008 accompanying notes integral part consolidated financial statements deer consumer products inc subsidiaries consolidated statements cash flows years ended december 31 2009 2008 accompanying notes integral part consolidated financial statements deer consumer products inc subsidiaries notes consolidated financial statements december 31 2009 2008 note 1 organization basis presentation organization line business deer consumer products inc formerly known tag events corp hereinafter referred “company” “deer” incorporated state nevada july 18 2006 september 3 2008 company entered share exchange agreement plan reorganization deer international group limited “deer international” company incorporated laws british virgin islands “bvi” december 3 2007 acquired 100 shares winder electric group ltd “winder” march 11 2008 winder 100 owned subsidiary delta international limited “delta” winder delta formed incorporated guangdong province prc july 20 2001 february 23 2006 respectively pursuant share exchange agreement company acquired deer international 50000 ordinary shares consisting issued outstanding capital stock exchange 15695706 shares company’s common stock concurrently closing transactions contemplated share exchange agreement condition thereof company entered agreement crescent liu former director chief executive officer pursuant returned 5173914 shares company’s common stock company cancellation mr liu compensated cancellation shares company’s common stock upon completion foregoing transactions company 19652226 shares common stock issued outstanding connection transaction company changed name deer consumer products inc september 3 2008 exchange shares deer international recorded reverse acquisition purchase method accounting deer international obtained control company accordingly merger deer international company recorded recapitalization deer international deer international treated continuing entity historical financial statements presented consolidated financial statements deer international share exchange agreement treated recapitalization business combination therefore pro forma information disclosed date transaction net liabilities legal acquirer 0 company engaged manufacture marketing distribution sale small home kitchen electric appliances blenders food processors choppers juicers etc company manufactures products yangjiang china corporate functions nanshan shenzhen china stock split april 24 2009 company effected 1 23 reverse stock split common stock october 2 2009 company effected 2 1 forward stock split common stock share information common shares retroactively restated stock splits basis presentation accompanying consolidated financial statements include accounts company whollyowned subsidiary deer international 100 whollyowned subsidiary winder’s whollyowned subsidiary delta significant intercompany accounts transactions eliminated consolidation accompanying consolidated financial statements prepared conformity accounting principles generally accepted united states america “us gaap” company’s chinese subsidiaries functional currency chinese yuan renminbi rmb however accompanying consolidated financial statements translated presented united states dollars “” “usd” deer consumer products inc subsidiaries notes consolidated financial statements december 31 2009 2008 foreign currency translation accounts company’s chinese subsidiaries maintained rmb accounts us parent company maintained usd accounts chinese subsidiaries translated usd accordance accounting standards codification “asc” topic 830 “foreign currency matters” rmb functional currency chinese subsidiaries according topic 830 assets liabilities translated exchange rate balance sheet date stockholders’ equity translated historical rates statement income items translated weighted average exchange rate period resulting translation adjustments reported comprehensive income accordance asc topic 220 “comprehensive income” gains losses resulting translations foreign currency transactions balances reflected statements income note 2 summary significant accounting policies use estimates preparation financial statements conformity us gaap requires management make estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting period actual results could differ estimates areas require estimates assumptions include valuation accounts receivable inventory determination useful lives property equipment estimation certain liabilities sales returns cash equivalents cash equivalents include cash hand cash time deposits certificates deposit highly liquid debt instruments original maturities three months less restricted cash restricted cash consists monies restricted company’s lender monies restricted letter credit bank acceptance december 31 2009 2008 total restricted cash 35701 200099 interest rate 036 december 31 2009 2008 respectively accounts receivable company maintains reserves potential credit losses accounts receivable management reviews composition accounts receivable analyzes historical bad debts customer concentrations customer credit worthiness current economic trends changes customer payment patterns evaluate adequacy reserves december 31 2009 2008 approximately 46 79 respectively accounts receivable overseas customers company maintains substantial amount export insurance covers losses arising customers’ rejection products political risk losses arising business credit risks including bankruptcy insolvency delay payment investments company purchased various stocks 2007 2008 company required purchase equity fund bank loan investments trading securities bought held principally purpose selling near term reported fair value unrealized gains losses included earnings stocks sold year ended december 31 2009 advances suppliers company makes advances certain vendors purchase material advances interest free unsecured deer consumer products inc subsidiaries notes consolidated financial statements december 31 2009 2008 inventories valued lower cost determined weighted average basis market company compares cost inventories market value allowance made writing inventories market value lower property equipment property equipment stated cost expenditures maintenance repairs charged earnings incurred additions renewals betterments capitalized property equipment retired otherwise disposed related cost accumulated depreciation removed respective accounts gain loss included operations depreciation property equipment provided using straightline method substantially assets estimated lives follows buildings 520 years equipment 510 years vehicles years office equipment 510 years following details property equipment december 31 2009 2008 depreciation expense years ended december 31 2009 2008 1439751 1199578 respectively construction progress construction progress consists costs related companys construction new plant office building power distribution station company expects expend additional 1500000 finish current projects longlived assets company applies provisions asc topic 360 “property plant equipment” addresses financial accounting reporting impairment disposal longlived assets asc 360 requires impairment losses recorded longlived assets used operations indicators impairment present undiscounted cash flows estimated generated assets less assets’ carrying amounts event loss recognized based amount carrying amount exceeds fair value longlived assets loss longlived assets disposed determined similar manner except fair values reduced cost disposal based review company believes december 31 2009 2008 significant impairment longlived assets intangible assets intangible assets consist rights use land computer software company evaluates intangible assets impairment least annual basis whenever events changes circumstances indicate carrying value may recoverable estimated future cash flows recoverability intangible assets measured comparing net book value related projected undiscounted cash flows assets considering number factors including past operating results budgets economic projections market trends product development cycles net book value asset exceeds related undiscounted cash flows asset considered impaired second test performed measure amount impairment loss deer consumer products inc subsidiaries notes consolidated financial statements december 31 2009 2008 following details intangible assets december 31 2009 2008 pursuant peoples republic chinas “prc” governmental regulations government owns land company recognized amounts paid rights use land intangible asset company amortizes rights respective periods range 45 50 years computer software amortized 12 years amortization expense years ended december 31 2009 2008 9435 18723 respectively following table summarizes amortization next 5 years fair value financial instruments certain company’s financial instruments including cash equivalents restricted cash accounts receivable accounts payable accrued liabilities shortterm loans notes payable carrying amounts approximate fair values due short maturities asc topic 820 “fair value measurements disclosures” requires disclosure fair value financial instruments held company asc topic 825 “financial instruments” defines fair value establishes threelevel valuation hierarchy disclosures fair value measurement enhances disclosure requirements fair value measures carrying amounts reported consolidated balance sheets receivables current liabilities qualify financial instruments reasonable estimate fair values short period time origination instruments expected realization current market rate interest three levels valuation hierarchy defined follows § level 1 inputs valuation methodology quoted prices identical assets liabilities active markets § level 2 inputs valuation methodology include quoted prices similar assets liabilities active markets inputs observable asset liability either directly indirectly substantially full term financial instrument § level 3 inputs valuation methodology unobservable significant fair value measurement company analyzes financial instruments features liabilities equity asc 480 “distinguishing liabilities equity” asc 815 deer consumer products inc subsidiaries notes consolidated financial statements december 31 2009 2008 december 31 2009 company identify assets liabilities required presented balance sheet fair value concentration credit risk cash includes cash hand demand deposits accounts maintained within china certain financial instruments subject company concentration credit risk consist cash balances financial institutions within china covered insurance company experienced losses accounts revenue recognition company’s revenue recognition policies compliance sec staff accounting bulletin sab 104 sales revenue recognized date shipment customers formal arrangement exists price fixed determinable delivery completed significant obligations company exist collectability reasonably assured payments received relevant criteria revenue recognition satisfied recorded unearned revenue unearned revenue company records payments goods relevant criteria revenue recognition satisfied unearned revenue advertising costs company expenses cost advertising incurred appropriate first time advertising takes place advertising costs years ended december 31 2009 2008 significant research development company expenses research development costs incurred research development costs years ended december 31 2009 2008 602550 585000 repectively income taxes company accounts income taxes accordance asc topic 740 “income taxes” asc 740 requires company use asset liability method accounting income taxes whereby deferred tax assets recognized deductible temporary differences deferred tax liabilities recognized taxable temporary differences temporary differences reported amounts assets liabilities tax bases deferred tax assets reduced valuation allowance opinion management likely portion deferred tax assets realized deferred tax assets liabilities adjusted effects changes tax laws rates date enactment asc 740 tax position recognized benefit “more likely not” tax position would sustained tax examination tax examination presumed occur amount recognized largest amount tax benefit greater 50 likely realized examination tax positions meeting “more likely not” test tax benefit recorded adoption effect company’s consolidated financial statements foreign currency transactions comprehensive income us gaap requires recognized revenue expenses gains losses included net income certain statements however require entities report specific changes assets liabilities gain loss foreign currency translation separate component equity section balance sheet items along net income components comprehensive income functional currency company’s chinese subsidiaries chinese rmb translation gains 2335412 2345698 december 31 2009 2008 respectively classified item comprehensive income stockholders’ equity section consolidated balance sheets deer consumer products inc subsidiaries notes consolidated financial statements december 31 2009 2008 currency hedging company entered forward exchange agreement bank china whereby company agreed sell us dollars bank china certain rates since contractual rate company sells us dollars bank china greater exchange rate date exchange transaction company recognized foreign exchange gains 138284 959943 years ended december 31 2009 2008 respectively december 31 2009 company outstanding forward exchange contracts basic diluted earnings per share earnings per share calculated accordance asc topic 260 “earnings per share” basic earnings per share based upon weighted average number common shares outstanding diluted earnings per share based assumption dilutive convertible shares stock options converted exercised dilution computed applying treasury stock method options warrants assumed exercised beginning period time issuance later funds obtained thereby used purchase common stock average market price period following reconciliation number shares denominator used basic diluted earnings per share computations statement cash flows accordance asc topic 230 “statement cash flows” cash flows company’s operations calculated based upon local currencies using average translation rates result amounts related assets liabilities reported consolidated statements cash flows necessarily agree changes corresponding balances consolidated balance sheets registration rights agreement company accounts payment arrangements registration rights agreement accordance asc topic 825 “financial instruments” requires contingent obligation make future payments otherwise transfer consideration registration payment arrangement whether issued separate agreement included provision financial instrument agreement separately recognized measured accordance asc topic 450 “contingencies” recent pronouncements july 1 2009 company adopted accounting standards update “asu” 200901 “topic 105 generally accepted accounting principles amendments based statement financial accounting standards 168 fasb accounting standards codification™ hierarchy generally accepted accounting principles” “asu 200901” asu 200901 redefines authoritative gaap nongovernmental entities comprised fasb accounting standards codification™ “codification” sec registrants guidance issued sec codification reorganization compilation thenexisting authoritative gaap nongovernmental entities except guidance issued sec codification amended effect nonsec changes authoritative gaap adoption asu 200901 changed referencing convention gaap notes consolidated financial statements deer consumer products inc subsidiaries notes consolidated financial statements december 31 2009 2008 october 2009 fasb issued asu regarding accounting ownshare lending arrangements contemplation convertible debt issuance financing asu requires date issuance shares sharelending arrangement entered contemplation convertible debt offering financing shares issued shall measured fair value recognized issuance cost offset additional paidin capital loaned shares excluded basic diluted earnings per share unless default sharelending arrangement occurs time loaned shares would included basic diluted earningspershare calculation asu effective fiscal years beginning december 15 2009 interim periods within fiscal years arrangements outstanding beginning fiscal years company currently evaluating impact asu consolidated financial statements december 15 2009 fasb issued asu 201006 fair value measurements disclosures topic 820 “improving disclosures fair value measurements” asu requires new disclosures clarifies existing disclosure requirements fair value measurement set forth codification subtopic 82010 fasb’s objective improve disclosures thus increase transparency financial reporting adoption asu material impact company’s consolidated financial statements note 3 inventories consisted following december 31 2009 2008 note 4 short term loans short term loans consisted following december 31 2008 note 5 notes payable notes payable december 31 2009 2008 consist multiple bankers’ acceptances bank china terms notes range 36 months interest rate company deposits 10 notes’ par value bank china refundable notes repaid deer consumer products inc subsidiaries notes consolidated financial statements december 31 2009 2008 note 6 longterm loan november 14 2008 company entered longterm loan unrelated party loan 733500 810 due october 20 2010 secured certain property equipment loan repaid october 2009 note 7 stockholders’ equity common stock december 20 2008 50hz related party owned two shareholders deer international transferred intangible asset company settlement related party receivable asset’s historical costs could corroborated supporting documentation recorded zero company settlement related party receivable considered deemed dividend 3134979 majority shareholders company 100 50hz march 31 2009 company completed private placement units pursuant company sold 810690 units 092 per unit aggregate gross proceeds 746000 unit consisted one share company common stock threeyear warrant purchase 15 one share common stock 173 per share total warrants issued investors 121660 company also issued warrants purchase 81090 shares common stock placement agents may 2009 company completed two private placements units pursuant company sold 2100000 units 092 per unit aggregate gross proceeds 1932000 unit consisted one share company common stock threeyear warrant purchase 15 one share common stock 173 per share total warrants issued investors 315000 company also issued warrants purchase 210000 shares common stock placement agents company also issued registration rights agreement requiring company file registration statement covering shares common stock issued shares issuable upon exercise warrants company required file registration statement sec within 60 days closing offering registration statement must declared effective sec within 180 days final closing offering subject certain grace periods registration statement must remain effective available use purchasers sell securities covered registration statement without restriction pursuant rule 144 company fails meet filing effectiveness requirements registration statement required pay liquidated damages 1 aggregate purchase price paid purchaser registerable securities held purchaser date failure anniversary date failure cured june 3 2009 registration statement register mentioned shares underlying exercise warrants declared effective september 21 2009 company completed private placement offering 3000000 units offering price 500 per unit aggregate offering price 15000000 nonus investors unit consisted one share companys common stock par value 001 per share threeyear warrant purchase 30 one share company’s common stock aggregate 900000 shares common stock exercise price 500 per share nonus advisor company received fees 9 gross proceeds warrants purchase 300000 shares common stock terms nonus investors addition company paid additional 3 advisory fee connection private placement offering investors received registration rights company issued shares pursuant exemption registration regulation promulgated securities act 1933 amended december 17 2009 company completed public offering 6900000 shares company’s common stock public offering price 1100 per share gross proceeds 75900000 company paid commissions fees associated offering 9931296 deer consumer products inc subsidiaries notes consolidated financial statements december 31 2009 2008 stock options following summary option activity assumptions used calculating fair value options granted using blackscholes optionpricing model options granted year ended december 31 2009 exercise price options outstanding december 31 2009 follows options granted year ended december 31 2009 exercise price equaled stock price date grant weightedaverage fair value options 592 weightedaverage exercise price options 1096 options granted year ended december 31 2009 exercise price less stock price date grant exercise price greater stock price date grant december 31 2009 compensation costs related nonvested options 436016 expensed fourth quarter 2011 warrants following summary warrant activity deer consumer products inc subsidiaries notes consolidated financial statements december 31 2009 2008 exercise price warrants outstanding december 31 2009 follows note 8 employee welfare plan total expense employee common welfare 51160 59147 year ended december 31 2009 2008 respectively chinese government abolished 14 welfare plan policy 2007 company required establish welfare common welfare reserves note 9 statutory reserve development fund stipulated company law prc net income tax distributed dividends appropriation made following making cumulative prior years’ losses ii allocations “statutory surplus reserve” least 10 income tax determined prc accounting rules regulations fund amounts 50 company’s registered capital iii allocations 510 income tax determined prc accounting rules regulations company’s “statutory common welfare fund” “scwf” established purpose providing employee facilities collective benefits company’s employees iv allocations discretionary surplus reserve approved stockholders’ general meeting company allocates 5 income tax development fund enlarging business increasing capital pursuant new corporate law effective january 1 2006 one statutory surplus reserve requirement reserve 10 percent income tax exceed 50 percent registered capital company appropriated 1286315 643158 398939 199469 reserve statutory surplus reserve development fund years ended december 31 2009 2008 respectively note 10 taxes local prc income tax pursuant tax laws china general enterprises subject income tax effective rate 25 reconciliation tax us federal statutory rate provision income tax recorded financial statements years ended december 31 2009 2008 follows deer consumer products inc subsidiaries notes consolidated financial statements december 31 2009 2008 effect change tax status recorded accordance asc topic 74010 states effect change tax status computed date change included tax provision continuing operations management believes local tax authorities would waived past taxes change company’s subsidiary’s tax status foreign pretax earnings approximated 15100000 year ended december 31 2009 pretax earnings foreign subsidiary subject us taxation effectively repatriated company provides income taxes undistributed earnings nonus subsidiaries except extent earnings indefinitely invested outside united states december 31 2009 approximately 13000000 accumulated undistributed earnings nonus subsidiaries indefinitely invested existing us federal income tax rate additional taxes 1175000 would provided earnings remitted currently note 11 related party transactions due related party 331267 december 31 2008 company collects portion sales collection company controlled former shareholder current related party due related party represents account receivables company parties considered related parties common ownership company’s ceo advances related party 274805 december 31 2008 advances shareholder related party noninterest bearing payable receivable demand related party transactions year ended december 31 2009 december 31 2009 certain entity previously reported related party longer considered related due ownership changes within entity note 12 geographical sales geographical distribution sales follows signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report form 10k signed behalf undersigned thereunto duly authorized deer consumer products inc date march 2 2010 ying chief executive officer principal executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated signature title date ying chairman chief executive officer march 2 2010 ying principal executive officer zongshu nie chief financial officer march 2 2010 zongshu nie principal financial accounting officer edward hua director march 2 2010 edward hua arnold staloff director march 2 2010 arnold staloff qi hua xu director march 2 2010 qi hua xu exhibit index item 14 principal accounting fees services audit committee selected gkm independent registered certified public accounting firm audit books accounts company subsidiaries fiscal year ending december 31 2010 gkm served independent accountant since september 3 2008 following table presents aggregate fees billed professional services rendered gkm years ended december 31 2010 2009 table “audit fees” fees billed services provided related audit annual financial statements quarterly reviews interim financial statements services normally provided independent accountant connection statutory regulatory filings engagements fiscal periods “auditrelated fees” fees included audit fees billed independent accountant assurance related services reasonably related performance audit review financial statements “tax fees” fees billed independent accountant professional services rendered tax compliance tax advice tax planning “all fees” fees billed independent accountant products services included foregoing categories audit committee’s preapproval policy audit committee’s policy approve advance types amounts audit auditrelated tax services provided independent accountants situations possible obtain full audit committee approval audit committee delegated authority chairman audit committee grant preapproval auditing auditrelated tax services preapproved decisions chairman required reviewed audit committee next scheduled meeting part iv item 15 item 7 financial statements tag events corp development stage company financial statements september 30 2007 report independent registered public accounting firm balance sheets statements operations statement stockholders deficit statements cash flows notes financial statements report independent registered public accounting firm stockholders board directors tag events corp audited accompanying balance sheets oftag events corp development stage company september 30 2007 2006 related statements operations cash flows year ended september 30 2007 period july 18 2006 inceptionto september 30 2006 financial statements arethe responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement company required engaged perform audit internal control financial reporting audit included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness companys internal control financial reporting accordingly express opinion audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements present fairly material respects financial position tag events corp september 30 2007 2006 results operations cash flows year ended september 30 2007 period july 18 2006 inception september 30 2006 conformity accounting principles generally accepted united states america accompanying financial statements prepared assuming company continue going concern discussed note 1 financial statements company generated revenues since inception incurred losses developing business losses anticipated company requires additional funds meet obligations costs operations factors raise substantial doubt companys ability continue going concern managements plans regard described note 1 financial statements include adjustments might result outcome uncertainty dale matheson carrhilton labonte llp chartered accountants vancouver canada november 4 2007 see accompanying notes item 8 item 7 management’s discussion analysis financial condition results operations safe harbor declaration comments made throughout annual report read conjunction financial statements notes thereto financial information appearing elsewhere document addition historical information following discussion parts document contain certain forwardlooking information used discussion words “believes” “anticipates” “expects” similar expressions intended identify forwardlooking statements subject certain risks uncertainties could cause actual results differ materially projected results due number factors beyond control undertake publicly update revise forwardlooking statements even experience future changes show indicated results events realized readers cautioned place undue reliance forwardlooking statements speak date hereof readers also urged carefully review consider discussions regarding various factors affect business described section elsewhere report overview engaged manufacture marketing distribution sale small home kitchen electric appliances develop promote manufacture sell broad range stylish safe easy use products including blenders juicers soy milk makers designed make today’s lifestyles simpler healthier currently manufacture products yangjiang china corporate functions nanshan shenzhen china september 3 2008 entered consummated series agreements resulted acquisition ordinary shares deer international corporation organized laws british virgin islands december 3 2007 parent wholly owned subsidiary winder since march 11 2008 delta wholly owned subsidiary winder delta incorporated guangdong province prc july 20 2001 february 23 2006 respectively pursuant share exchange agreement acquired deer international 50000 ordinary shares consisting issued outstanding capital stock 15695706 shares common stock concurrently closing transactions contemplated share exchange agreement condition thereof entered agreement crescent liu former director chief executive officer pursuant returned 5173914 shares common stock cancellation mr liu compensated cancellation shares common stock upon completion foregoing transactions 19652226 shares common stock issued outstanding connection transaction changed name deer consumer products inc september 3 2008 accounting purposes exchange shares deer international concurrent transactions described treated reverse acquisition recapitalization deer international deer international treated continuing entity deer international shareholders owned majority outstanding common stock transactions exercise significant influence operating financial policies consolidated entity operate wholly owned subsidiaries china us holding company deer consumer products inc owns 100 deer international group ltd bvi entity owns three wholly foreign owned enterprises winder deer technology anhui co ltd anlin technology anhui co ltd delta transferred material former operations winder 2009 100 owned winder currently engaged marketing operations winder located guangdong province engaged research production delivery goods deer technology anlin technology incorporated anhui province april 30 2010 deer technology anlin technology also engaged manufacture sale household electric appliances formed purpose establishing production distribution facilities located wuhu area anhui province wholly owned foreign enterprises winder deer technology anlin technology authorized respective business licenses operate electrical appliance manufacturing business delta transferred material former operations winder 2009 improve company’s operating efficiency currently delta conducts marketing operations company april 30 2010 incorporated deer technology anlin technology anhui province december 31 2011 invested 398 million deer technology 102 million anlin technology deer technology anlin technology engaged manufacture sale household electric appliances formed purpose establishing new factory located wuhu area anhui province 2010 company paid approximately 35 million purchase two parcels land wuhu area anhui province purchase price paid company land use rights anhui province determined public bidding process prc government case acquisitions land use rights prc typically bidder wins land auction public notification stating bidder’s name size land price paid available public prc government’s ministry land resources website bidder makes full payment land official land use rights certificate granted prc government bases price land use rights number factors including land’s location size condition proposed use need improvement degree surface leveling close proximity utilities logistics availability land local market financial position bidder competitive bidding positions bidders general market conditions local government policies time land auction prices land use rights vary significantly based factors traditionally acted odm oem export market recent years aggressively expanded sales deer brand 德尔 appliances china domestic market continue target china domestic market expanding production manufacturing facilities building new factory wuhu area central china wuhu located banks yangtze river within hours shanghai nanjing china’s populous economically developed regions central location improve ability deliver products customers located throughout china new factory increase production capacity 40 distribution center allow us target neighboring population 400 million continue grow business china domestic market completed construction fencing sewage system water pipes gas utilities factory’s main entrance leveling land last quarter 2011 plan complete construction certain workshops warehouse 2012 pace construction determined pace company’s china domestic market expansion current factory located yangjiang guangdong province south china operate full capacity plan use facilities primarily fulfilling export orders whereas anticipate using new facilities anhui fulfill china domestic orders two facilities 1000 miles apart management anticipates needing additional capacity new facilities anhui next years additional capacity brought line incrementally accordance domestic expansion strategy critical accounting policies presented accounting policies believe require subjective complex judgments could potentially affect reported results use estimates discussion analysis financial condition results operations based upon financial statements prepared accordance accounting principles generally accepted united states “us gaap” preparation financial statements requires us make estimates judgments affect reported amounts assets liabilities revenues expenses related disclosures contingent assets liabilities ongoing basis evaluate estimates including related impairment longlived assets allowance doubtful accounts base estimates historical experience various assumptions believe reasonable circumstances results form basis making judgments carrying value assets liabilities readily apparent sources actual results may differ estimates different assumptions conditions however believe estimates including abovedescribed items reasonable areas require estimates assumptions include valuation accounts receivable inventory determination useful lives property equipment estimation certain liabilities sales returns accounts receivable maintain reserves potential credit losses accounts receivable management reviews composition accounts receivable analyzes historical bad debts customer concentrations customer credit worthiness current economic trends changes customer payment patterns evaluate adequacy reserves longlived assets periodically assess potential impairments longlived assets perform impairment review whenever events changes circumstances indicate carrying value may fully recoverable factors considered include limited significant underperformance relative expected historical projected future operating results significant changes manner use acquired assets strategy overall business significant negative industry economic trends determine carrying value longlived asset may recoverable based upon existence one indicators impairment estimate future undiscounted cash flows expected result use asset eventual disposition sum expected future undiscounted cash flows eventual disposition less carrying amount asset recognize impairment loss impairment loss reflected amount carrying amount asset exceeds fair market value asset based fair market value available discounted cash flows date impairment longlived assets revenue recognition revenue recognition policies compliance sec staff accounting bulletin sab 104 sales revenue recognized date shipment customers price fixed determinable significant obligations exist collectability reasonably assured payments received relevant criteria revenue recognition satisfied recorded unearned revenue recent accounting pronouncements september 2011 fasb issued asu 201108 testing goodwill impairment asu 201108 allow companies assess qualitative factors determine morelikelythannot goodwill might impaired whether necessary perform twostep goodwill impairment test required current accounting standards asu 201108 effective annual interim goodwill impairment tests performed annual reporting period beginning december 15 2011 early adoption permitted company currently evaluating guidance expect adoption material impact consolidated financial statements june 2011 fasb issued asu 201105 comprehensive income presentation comprehensive income asu 201105 require companies present components net income comprehensive income either one continuous statement two consecutive statements asu 201105 eliminates option present components comprehensive income part statement changes stockholders equity asu 201105 change items must reported comprehensive income items measured must reclassified net income asu 201105 effective first interim annual periods beginning december 15 2011 december 2011 fasb issued asu 201112 deferral effective date amendments presentation reclassifications items accumulated comprehensive income accounting standards update 201105 company believes adoption guidance concerns disclosure material impact consolidated financial statements may 2011 financial accounting standards board fasb issued accounting standards update asu 201104 fair value measurement amendments achieve common fair value measurement disclosure requirements us gaap ifrss asu 201104 changes wording used describe requirements generally accepted accounting principles united states us gaap measuring fair value disclosing information fair value measurements order improve consistency application description fair value us gaap international financial reporting standards ifrs asu 201104 clarifies concepts highest best use valuation premise fair value measurement relevant measuring fair value nonfinancial assets relevant measuring fair value financial assets liabilities addition asu 201104 expanded disclosures unobservable inputs level 3 fair value measurements requiring quantitative information disclosed related 1 valuation processes used 2 sensitivity fair value measurement changes unobservable inputs interrelationships unobservable inputs 3 use nonfinancial asset way differs assets highest best use asu 201104 effective first interim annual reporting period beginning december 15 2011 early adoption prohibited company currently evaluating future impact new accounting update consolidated financial statements results operations year ended december 31 2011 compared year ended december 31 2010 revenues year ended december 31 2011 2267 million increase 509 million 29 1758 million 2010 increase revenues resulted continued sales expansion china domestic market addition average selling price products increased 26 compared 2010 conforming strategy maintaining healthy profit margins across product lines increased china domestic market sales 1535 million 2011 769 million 2010 100 increase products currently available 4000 stores december 31 2011 customers include suning together whollyowned subsidiary song qiao prominent national electric appliance retail chain china 1000 stores sell products private label arrangement gome another prominent national electronic appliance retail chain china approximately 1400 stores 2011 also increased sales reed sea company internet sales operator china owns 100 networked sales channels one largest customers also added retail locations channels regional electric appliance retailers wholesalers department stores increased product sales internet portals hotels restaurants via reward programs large banks telecommunication firms postal offices china results pace plan capture fast growth experienced china domestic small appliance market sales south america 154 million 2011 93 million 38 decrease 2010 believe decrease sales south america mainly due continued weak economic growth emerging markets continent sales asia excluding sales china 332 million 2011 88 million 36 increase 2010 believe increase sales asia reflect continued efforts obtain new orders international customers participation exhibitions canton fair largest import export trade fair china maintaining contacts current international customers sales europe 78 million 2011 101 million 56 decrease 2010 sales middle east 106 million 2011 108 million 51 decrease 2010 sales africa 17 million 2011 04 million 19 decrease 2010 believe decrease sales regions mainly due weak consumer demand result continued effects worldwide financial crisis regions management’s strategy focus china domestic sales offer higher profit margins believe effects crisis fade demand products increase regions also plan continue sales marketing efforts internationally find new customers meet profit margin requirements sales us 46 million 2011 40 million 46 decrease 2010 time turned away orders meet profit margin requirements economic recovery us slower anticipated expected us customers placed orders based slow recovery commenced sales new customer leading franchiser us started shipments customer april 2011 expect us revenues recover 2012 economic recovery progresses continue engage new large us customers meet profit margin requirements cost revenue include expenses either cost revenue selling general administrative expenses based upon natural classification expenses cost revenue includes expenses associated acquisition inspection manufacturing receiving materials use manufacturing process costs include inbound freight charges purchasing receiving costs inspection costs warehousing costs internal transfer costs well depreciation amortization wages benefits costs incurred directly indirectly support manufacturing process cost revenue 2011 1575 million increase 323 million 26 1252 million 2010 increased cost revenue 2011 due primarily increase sales cost revenue percentage revenue decreased nearly 2 due increased domestic sales higher margins export sales gross profit gross profit 692 million 2011 compared 506 million 2010 increase 37 gross margin 31 2011 compared 29 2010 increase 2 increase gross profit attributable higher gross margins china domestic market experienced significant growth sales compared gross margins export market products generally sell higher prices retail wholesale china gross margin line comparable companies specializing small household kitchen appliances china domestic market addition continued improve efficiency manufacturing operations inhouse production motors primary components products providing benefits economies scale operating expenses selling general administrative expenses “sga” includes expenses associated distribution products sales efforts including commissions payable instore promotional staff administration costs incurred support manufacturing process record distribution costs associated sale inventory component sga expenses consolidated statements income expenses include warehousing costs outbound freight charges insurance costs associated distribution personnel sga expenses 2011 210 million increase 73 million 53 137 million 2010 selling expenses 2011 increased 71 million 71 comparison 2010 due increase sales associated selling expenses include advertising expand market share increase brand awareness help generate significant increase sales expected direct advertising expenses remained minimal 2011 hire factory representatives instore promoters promote products directly consumers retail locations believe direct instore promotion approach standard practice small household appliances industry china highly effective marketing consumers unique chinese retail environment compared traditional mass media advertising channels cause significant television mass media advertising expense without target customer interaction instore promoters market products exclusively directly instore customer traffic according survey 2010 china small electronics market research report approximately 60 chinese consumers surveyed purchased small household appliances introduced product instore promoters 2011 salary expense increased 33 million 96 compared 2010 due hiring additional employees work instore promoters china domestic market increased bonus expense payable instore promoters due increased sales general administrative expenses 2011 increased 01 million 3 slight increase attributable increase sales expansion business interest financing costs income net interest financing costs income net 2011 net gain 140859 decrease 194896 58 net gain 335755 2010 change due principally interest income decreasing 484527 2010 243876 2011 cash position decreased due expenses incurred expand production capacity preparation future expansion business fulfill general working capital needs income net income net 2011 1068569 compared 67263 2010 increase 1001306 increase due mainly grants rewards totaling 1080448 received various prc governments 2011 foreign exchange transaction gain loss foreign exchange transaction loss 2011 518843 compared foreign exchange transaction loss 1253707 2010 decrease 734864 decrease due principally foreign exchange rate fluctuations decreased international sales 2011 income tax expense effective tax rate 2011 186 compared 157 2010 prc government granted us special tax rate effective 2009 winder high tech enterprise status special tax benefit lasted three years december 31 2011 renewed 2014 year ended december 31 2010 compared year ended december 31 2009 revenues 2010 1758 million increase 945 million 116 813 million 2009 increase revenues result expansion sales china domestic market increasing market share asian south american middle east european markets average selling price products increased 587 compared 2009 increased china domestic market sales 769 million 2010 143 million 2009 437 increase beginning latter half 2009 increased sales products suning private label arrangement together whollyowned subsidiary song qiao prominent national electric appliance retail chain china 1000 stores first quarter 2010 began ramping sales brand name products gome another prominent national electronic appliance retail chain china approximately 1400 stores addition many retail locations across china also added retail locations channels regional electric appliance retailers department stores increased product sales internet portals hotels restaurants via reward programs large banks telecommunication firms postal offices china addition introduced new product lines 2010 humidifiers dehumidifiers bringing current product offerings approximately 250 different product varieties 189 2009 results pace management’s plan capture fast growth experienced china domestic small appliance market sales south america 247 million 2010 124 million 1004 increase 2009 sales asia 245 million 2010 151 million 1624 increase 2009 believe increase sales south america asia due largely growth economies regions led increase consumers’ disposable income well sales marketing efforts sales europe 178 million 2010 63 million 548 increase 2009 sales middle east 214 million 2010 104 million 938 increase 2009 sales gains europe middle east due largely attainment increased market share time sales us 85 million 2010 137 million 617 decrease 2009 economic recovery us slower anticipated period us customers placed orders expected based slow recovery financial crisis believe many smaller suppliers limited capital resources went business leading consolidation industry addition noticed buyers increasingly favored companies financial strength higher quality products sufficient plant capacity track record prompt delivery buyers placed greater emphasis able source quality supplies without delays interruptions utilized market opportunity add new accounts increase sales volume existing customers cost revenue include expenses either cost revenue selling general administrative expenses based upon natural classification expenses cost revenue includes expenses associated acquisition inspection manufacturing receiving materials use manufacturing process costs include inbound freight charges purchasing receiving costs inspection costs warehousing costs internal transfer costs well depreciation amortization wages benefits costs incurred directly indirectly support manufacturing process cost revenue 2010 1253 million increase 641 million 105 612 million 2009 increased cost revenue 2010 due increase sales gross profit gross margin 2010 29 compared 25 2009 increase gross margin 2010 compared 2009 due increased sales china domestic market offers higher margins gross margin higher china domestic market branded products sold directly agents domestic retail locations continued improve efficiency manufacturing operations inhouse production motors primary components used products thereby providing benefits economies scale due increased sales volume operating expenses sga expenses 2010 137 million increase 78 million 1312 59 million 2009 selling expenses 2010 increased 1577 56 million comparison 2009 due significant increase revenue associated selling costs include advertising expand market share increase brand awareness help generate significant increase revenue general administrative expenses 2010 increased 917 22 million comparison 2009 due hiring additional employees support growth increase research development improve product quality introduction new products trade shows support marketing efforts interest financing costs income net interest financing costs net 2010 net gain 335755 increase 586675 2338 net loss 250920 2009 change due principally interest income increasing 94986 2009 484527 2010 interest expense 2010 compared 122299 2009 financial expense also decreased 223607 2009 148772 2010 income net income 2010 67263 compared 364418 2009 decrease 297155 decrease due mainly grant received 2009 326334 compared 54134 received 2010 prc government high tech enterprise status hiring large number local workers foreign exchange gain loss foreign exchange loss 2010 125 million compared foreign exchange gain 01 million 2009 decrease 135 million change due principally foreign exchange rate fluctuations increased international sales 2010 income tax expense effective tax rate 2010 157 compared 146 2009 prc government granted us special tax rate effective 2009 high tech enterprise status special tax benefit lasted three years december 31 2011 renewed 2014 offbalance sheet arrangements offbalance sheet arrangements december 31 2011 reasonably likely current future effect financial condition revenues expenses results operations liquidity capital expenditures capital resources material interests liquidity capital resources december 17 2009 completed underwritten public offering led william blair company bmo capital markets 6900000 shares common stock 1100 per share including overallotment gross proceeds 75900000 2010 certain warrant holders exercised warrants purchase 1759114 shares common stock resulted gross proceeds 6964510 may 2010 announced 20 million share buyback program purchased 798300 shares common stock open market 2010 6945950 returned shares treasury cancelation may purchase additional shares common stock time open market pursuant buyback program cash flows december 31 2011 1396 million cash equivalents hand principal demands liquidity help increase sales china adding capacity purchasing inventory sales distribution infrastructure general corporate purposes anticipate amount cash hand december 31 2011 well cash generate operations satisfy requirements december 31 2011 current assets 956 million current liabilities 190 million working capital 905 million current ratio 5761 following summary cash provided used indicated types activities year ended december 31 2011 2010 net cash flows provided operating activities year ended december 31 2011 60 million compared net cash provided operating activities 111 million 2010 decreased cash inflows operating activities despite significant improvement accounts receivable attributed principally large decrease current liabilities including payments accounts payable taxes payable notes payable payables increased inventory 36 million increase inventory within expectations consistent strategy anticipate continued sales increases china domestic market net cash flows used investing activities year ended december 31 2011 222 million compared net cash used 574 million 2010 decrease cash outflow investing activities 2011 principally return 105 million deposit land use rights receive 332 million purchase property equipment payments construction progress new building workshop net cash flows used financing activities year ended december 31 2011 50 million compared 03 million period 2010 increase cash outflows financing activities attributed principally dividends paid totaling 50 million compared 2010 period paid 03 million offering costs received 69 million exercise warrants paid approximately 70 million purchase treasury shares december 31 2010 3396 million cash equivalents hand current assets 832 million current liabilities 4491 million working capital 722 million current ratio 2611 december 31 2010 following summary cash provided used indicated types activities years ended december 31 2010 2009 net cash flows provided operating activities 2010 111 million compared cash provided operating activities 04 million 2009 cash flows operating activities attributed principally net income generated 2010 increase accounts payables tax payable bank acceptance outstanding offset increase accounts receivable advances suppliers increase account receivable within expectations continued increase sales rapidly china domestic market typically longer receivable requirements strongest quarters seasonally third fourth quarters common consumer products industry china higher margins china domestic market typically require payment terms long seven eight months date shipment historically experienced significant bad debts customers therefore believe current receivables manageable within expectations used 574 million investing activities 2010 principally purchase land use rights intangible assets new production manufacturing facility located wuhu area central china purchase fixed assets 101 million 2010 cash used financing activities 2010 03 million included proceeds exercise warrants 696 million offset 320000 payment offering costs purchase treasury shares 695 million sell products china domestic market broad range distribution outlets including regional national wholesalers third party distributors standard terms accounts receivable several large established china domestic retailers 180 days close billing cycle 30 45 days products delivered terms customary large established china domestic retailers historically experienced late payments bad debts terms retailers term accounts receivable domestic customers 30 90 days close billing cycle sell products overseas customers export markets letters credit prepaid arrangements certain short credit terms direct customer purchase orders export salesrelated account receivables typically less three months depending customer shipment schedules historically experienced significant bad debts export sales 2011 accounts receivable turnover 619 annualized basis sales outstanding 59 days 2010 accounts receivable turnover 504 annualized basis sales outstanding 72 days experienced significant improvements accounts receivable collection 2011 compared 2010 continue focus expansion china domestic markets sales china domestic market continue represent larger percentage total revenue anticipate accounts receivable remain line standard industry practice relating accounts receivable china could seven months pending litigation march 28 2011 filed suit supreme court state new york captioned deer consumer products inc v alfred little et al index 6508232011 certain blogger “alfred little” website seekingalphacom others claims action allege publishing false defamatory statements defendants part scheme manipulate depress market common stock claiming compensatory punitive damages totaling least 11 million including claims attorneys’ fees equitable remedies including disgorgement illicit trading profits received defendants connection alleged market manipulation scheme august 29 2011 obtained court order allowing us effect service summons complaint upon defendant alfred little via email related notice effected service alfred little pursuant order september 29 2011 alfred little filed motions dismiss complaint lack personal jurisdiction permission appear anonymously party litigation addition august 31 2011 court granted defendant seekingalphacom’s motion dismiss claim ground federal statute communications decency act 47 usc § 230 precluded claim seekingalphacom september 29 2011 filed notice appeal decision decide go appeal must file brief “perfecting” appeal later june 29 2012 january 27 2012 court denied part alfred little’s motion dismiss complaint lack personal jurisdiction permitted us conduct discovery issue personal jurisdiction confidentiality agreement reached parties court also requested alfred little submit court evidence corroborating allegations potential risks physical harm camera review february 17 2012 parties reached confidentiality agreement february 23 2012 camera review evidence presented alfred little court permitted alfred little proceed anonymously court decides jurisdictional issue redirected parties proceed jurisdictional discovery pursuant previously ordered confidentiality agreement commenced discovery jurisdictional issue april 29 2011 purported securities class action lawsuit behalf purchasers common stock march 31 2009 march 21 2011 james rose v deer consumer products inc et al filed us certain current former officers directors united states district court central district california court yet certified class action status complaint alleges violations section 10b rule 10b5 exchange act well case individual defendants section 20a control person provisions exchange act factual assertions complaint based expressly published statements issue alfred little suit described consist primarily allegations defendants made materially false misleading public statements concerning financial condition 2010 2009 complaint seeks unspecified damages relief relating purported inflation price common stock class period consolidated amended complaint filed september 6 2011 essentially allegations filed motion dismiss lawsuit motion fully briefed taken submission court strongly deny allegations complaint believe lawsuit frivolous without merit contest vigorously plan pursue legal remedies available us complaint withdrawn entirety item 7a item 7 management’s discussion analysis financial condition results operations cautionary statement forwardlooking statements annual report form 10k includes forwardlooking statements within meaning section 27a securities act 1933 amended section 21e securities exchange act 1934 amended based forwardlooking statements current expectations projections future events forwardlooking statements subject known unknown risks uncertainties assumptions us may cause actual results levels activity performance achievements materially different future results levels activity performance achievements expressed implied forwardlooking statements cases identify forwardlooking statements terminology “may” “will” “should” “could” “would” “expect” “plan” anticipate” believe” estimate” continue” negative terms similar expressions factors might cause contribute discrepancy include limited listed heading “risk factors” listed securities exchange commission filings following discussion read conjunction financial statements related notes thereto included elsewhere report throughout quarterly report refer deer consumer product inc deer company us item 7 management’s discussion analysis financial condition results operations overview september 3 2008 entered share exchange agreement plan reorganization deer international group limited “deer international” company incorporated laws british virgin islands “bvi” december 3 2007 holder 100 shares winder electrical company ltd “winder” since march 11 2008 winder 100 owned subsidiary delta international ltd “delta” winder delta formed incorporated guangdong province prc july 20 2001 february 23 2006 respectively pursuant share exchange agreement acquired deer international 50000 ordinary shares consisting issued outstanding capital stock exchange issuance aggregate 18050000 shares common stock concurrently closing transactions contemplated share exchange agreement condition thereof entered agreement crescent liu former director chief executive officer pursuant returned 5950000 shares common stock cancellation mr liu compensated way cancellation shares common stock upon completion foregoing transactions aggregate 22600000 shares common stock issued outstanding connection transaction changed name deer consumer products inc september 3 2008 exchange shares deer international accounted reverse acquisition purchase method accounting since deer international obtained control company accordingly merger deer international us recorded recapitalization deer international deer international treated continuing entity historical financial statements presented consolidated financial statements deer international share exchange agreement treated recapitalization business combination therefore pro forma information disclosed date transaction net liabilities legal acquirer 0 result reverse merger transactions described historical financial statements presented deer international operating entities engaged manufacture marketing distribution sale home kitchen electrical appliances blenders food processors choppers juicers etc company manufactures products yangjiang china operates corporate functions nanshan shenzhen china operate two whollyowned subsidiaries winder electric co ltd “winder” whollyowned foreign enterprise “wofe” responsible research production delivery goods delta international limited “delta” wholly owned subsidiary winder primarily responsible sales traditionally acted original equipment manufacturer “oem” original design manufacturer “odm” international markets 90 95 sales made overseas 2007 2008 north america europe accounted approximately 34 18 2008 respectively critical accounting policies presenting financial statements conformity accounting principles generally accepted united states required make estimates assumptions affect amounts reported therein several estimates assumptions required make relate matters inherently uncertain pertain future events however events outside control cannot predicted cannot contemplated evaluating estimates assumptions significant unfavorable change current conditions likely result material adverse impact results operations financial position liquidity believe estimates assumptions used preparing financial statements appropriate time presented accounting policies believe require subjective complex judgments could potentially affect reported results use estimates discussion analysis financial condition results operations based upon financial statements prepared accordance accounting principles generally accepted united states america preparation financial statements requires us make estimates judgments affect reported amounts assets liabilities revenues expenses related disclosures contingent assets liabilities ongoing basis evaluate estimates including related impairment longlived assets allowance doubtful accounts base estimates historical experience various assumptions believe reasonable circumstances results form basis making judgments carrying value assets liabilities readily apparent sources actual results may differ estimates different assumptions conditions however believe estimates including abovedescribed items reasonable areas require estimates assumptions include valuation accounts receivable inventory determination useful lives property equipment estimation certain liabilities sales returns accounts receivable maintain reserves potential credit losses accounts receivable management reviews composition accounts receivable analyzes historical bad debts customer concentrations customer credit worthiness current economic trends changes customer payment patterns evaluate adequacy reserves advances suppliers make advances certain vendors purchase material advances suppliers interest free unsecured inventory valued lower cost determined weighted average basis market compare cost inventories market value allowance made writing inventories market value lower longlived assets apply provisions statement financial accounting standards 144 “accounting impairment disposal longlived assets” “sfas 144” addresses financial accounting reporting impairment disposal longlived assets supersedes sfas 121 “accounting impairment longlived assets longlived assets disposed of” accounting reporting provisions apb opinion 30 “reporting results operations disposal segment business” periodically evaluate carrying value longlived assets held used accordance sfas 144 sfas 144 requires impairment losses recorded longlived assets used operations indicators impairment present undiscounted cash flows estimated generated assets less assets’ carrying amounts event loss recognized based amount carrying amount exceeds fair market value longlived assets loss longlived assets disposed determined similar manner except fair market values reduced cost disposal based review believe date significant impairments longlived assets property equipment property equipment stated cost expenditures maintenance repairs charged earnings incurred additions renewals betterments capitalized property equipment retired otherwise disposed related cost accumulated depreciation removed respective accounts gain loss included operations depreciation property equipment provided using straightline method substantially assets estimated lives follows revenue recognition revenue recognition policies compliance staff accounting bulletin sab 104 sales revenue recognized date shipment customers formal arrangement exists price fixed determinable delivery completed significant obligations exist collectability reasonably assured payments received relevant criteria revenue recognition satisfied recorded unearned revenue foreign currency transactions comprehensive income accounting principles generally require recognized revenue expenses gains losses included net income certain statements however require entities report specific changes assets liabilities gain loss foreign currency translation separate component equity section balance sheet items along net income components comprehensive income functional currency company chinese renminbi unit renminbi yuan translation gains classified item comprehensive income stockholders’ equity section balance sheet comprehensive income statements income comprehensive income includes translation gains recognized period currency hedging entered forward exchange agreement bank china whereby agreed sell us dollars bank china certain contractual rates since contractual rate sells us dollars bank china greater exchange rate date exchange transaction recognized foreign exchange gains results operations year ended december 31 2008 compared year ended december 31 2007 revenues revenue year ended december 31 2008 43784935 increase 10308676 308 33476259 year ended december 31 2007 increase revenues due increase sales core products blenders juice extractors cost revenue cost revenue year ended december 31 2008 increased 7876010 300 26249009 year ended december 31 2007 34125019 year ended december 31 2008 increased costs 2008 due increases sales gross profit gross margin year ended december 31 2008 221 compared 216 2007 increase gross margin attributed success controlling variable costs design new products improving sales order selection capability fit market needs selling general administrative expenses selling general administrative expenses year ended december 31 2008 increased 2115073 640 3306507 year ended december 31 2007 5421580 year ended december 31 2008 selling expenses year ended december 31 2008 increased 880 1336464 comparison period 2007 due hiring new sales company exporting services addition commenced domestic sales brand name products china internationally incurred start costs including establishing “deer” brand name creating distribution network marketing deer brand name products general administrative expenses year ended december 31 2008 increased 435 778609 comparison period 2007 increase operating expenses reflects additional expenses incurred result increased sales cost publicly held company operating expenses include overhead expenses rent management staff salaries general insurance marketing accounting legal offices expenses interest financing cost interest financing costs year ended december 31 2008 558663 compared 114555 year ended december 31 2007 increase 444108 3877 change principally due increase principal amount short term loans notes payable outstanding foreign exchange gain foreign exchange gain year ended december 31 2008 959943 increase 869236 9583 90707 year ended december 31 2007 increase due favorable foreign exchange transactions company experienced 2008 income tax expense effective tax rate year ended december 31 2008 280 opposed 152 year ended december 31 2007 effective tax rate 2007 152 due one subsidiaries paying taxes 50 normal rate due tax break given chinese government companies hightech industry 2008 two subsidiaries incurred net losses increased effective tax rate 280 2008 statutory income tax rate china 25 offbalance sheet arrangements offbalance sheet arrangements year ended december 31 2008 reasonably likely current future affect financial condition revenues expenses results operations liquidity capital expenditures capital resources material interests liquidity capital resources cash flows november 30 2007 decided increase paidin capital 2923688 board meeting new capital retained earnings distributable shareholders december 31 2008 2782026 cash equivalents hand principal demands liquidity increase capacity inventory purchase sales distribution general corporate purposes anticipate amount cash hand date report well cash generate operations satisfy requirements net cash flows provided operating activities year ended december 31 2008 3037556 compared 432890 year ended december 31 2007 change cash flows operating activities due mainly increases accounts payable unearned revenue offset increase accounts receivable inventories advances suppliers used 3838893 investing activities year ended december 31 2008 acquisition property equipment increase construction process cash provided financing activities year ended december 31 2008 1945584 included proceeds short term loan short term notes payable advances related party offset payment shareholder repayment notes payable increase loan note balances principally due increase accounts receivable accounts receivables collected obligations paid assets december 31 2008 accounts receivable increased 5069230 compared balance december 31 2007 increase accounts receivable year ended december 31 2008 due primarily increased sales intend continue efforts maintain accounts receivable reasonable levels relation sales inventory increased 3527547 period advances suppliers increased 2198146 experienced decrease due shareholder shortterm investments restricted cash 1383124 107307 250286 respectively year ended december 31 2008 liabilities accounts payable payables increased 6489032 195812 respectively year ended december 31 2008 unearned revenues payments received relevant criteria revenue recognition satisfied increased 3236375 tax welfare payable increased 636408 period shortterm loans notes payable short longterm increased 1861410 728789 respectively due receipt proceeds new loans entered year ended december 31 2008 balances due related parties shareholders reduced 990792 intend meet liquidity requirements including capital expenditures related purchase equipment purchase raw materials expansion business cash flow provided operations maintain export insurance covers losses arising customers’ rejection products political risk losses arising business credit risks including bankruptcy insolvency delay payment majority revenues expenses denominated primarily rmb currency prc assurance exchange rates rmb usd remain stable engage currency hedging inflation material impact business recent developments february 6 2009 received 508500 placement units securities consisting shares common stock par value 001 per share stock purchase warrants 15 warrant coverage private placement exempt registration securities act private placement extended march 31 2009 intended proceeds private placement used primarily working capital total 625000 units unit representing one share common stock three year common stock purchase warrant amount 15 units purchased sold end business february 6 2009 unit priced 80 508500 total received fees 9 securities placed payable cash ii number common stock purchase warrants equal 10 number units placed paid participating selected dealers stock purchase warrants term three years exercisable one share common stock initial exercise price 150 securities offered private placement registered securities act state securities laws unless registered may sold united states except pursuant exemption transaction subject registration requirements securities act applicable state securities laws item 7a item 7 financial statements supplementary data financial statements together report thereon deer consumer products inc appear separate section report beginning page item 8 item 7 management’s discussion analysis financial condition results operations safe harbor declaration comments made throughout annual report read conjunction financial statements notes thereto financial information appearing elsewhere document addition historical information following discussion parts document contain certain forwardlooking information used discussion words “believes” “anticipates” “expects” similar expressions intended identify forwardlooking statements subject certain risks uncertainties could cause actual results differ materially projected results due number factors beyond control undertake publicly update revise forwardlooking statements even experience future changes show indicated results events realized readers cautioned place undue reliance forwardlooking statements speak date hereof readers also urged carefully review consider discussions regarding various factors affect business described section elsewhere report overview september 3 2008 entered consummated series agreements resulted acquisition ordinary shares deer international corporation organized laws british virgin islands december 3 2007 parent wholly owned subsidiary winder since march 11 2008 delta wholly owned subsidiary winder delta incorporated guangdong province people’s republic china “prc” july 20 2001 february 23 2006 respectively pursuant share exchange agreement acquired deer international 50000 ordinary shares consisting issued outstanding capital stock 15695706 shares common stock concurrently closing transactions contemplated share exchange agreement condition thereof entered agreement crescent liu former director chief executive officer pursuant returned 5173914 shares common stock cancellation mr liu compensated cancellation shares common stock upon completion foregoing transactions 19652226 shares common stock issued outstanding connection transaction changed name deer consumer products inc september 3 2008 exchange shares deer international recorded reverse acquisition purchase method accounting deer international obtained control company accordingly merger deer international us recorded recapitalization deer international deer international treated continuing entity historical financial statements presented consolidated financial statements deer international share exchange agreement treated recapitalization business combination therefore pro forma information disclosed date transaction net liabilities legal acquirer 0 engaged manufacture marketing distribution sale small home kitchen electric appliances develop promote manufacture sell broad range stylish safe easy use products including blenders juicers soy milk makers designed make today’s lifestyles simpler healthier manufacture products yangjiang china corporate functions nanshan shenzhen china operate two wholly owned subsidiaries winder wofe responsible research production delivery goods delta transferred material former operations winder traditionally acted odm oem export market april 30 2010 incorporated deer technology anlin technology anhui province invested 298 million deer technology 102 million anlin technology deer technology anlin technology engaged manufacture sale household electric appliances formed purpose establishing new factory located wuhu area anhui province 2010 deer technology paid approximately 27 million anlin technology paid approximately 10 million secure land use rights anhui province continue target china domestic market expanding production manufacturing facilities building new factory wuhu area central china wuhu located banks yangtze river within hours shanghai nanjing china’s populous economically developed regions central location improve ability deliver products customers located throughout china new factory increase production capacity 40 distribution center allow us target neighboring population 400 million continue grow business china domestic market anticipate new factory completed 2011 critical accounting policies presenting financial statements conformity accounting principles generally accepted united states “us gaap” required make estimates assumptions affect amounts reported therein several estimates assumptions required make relate matters inherently uncertain pertain future events however events outside control cannot predicted cannot contemplated evaluating estimates assumptions significant unfavorable change current conditions likely result material adverse impact results operations financial position liquidity believe estimates assumptions used preparing financial statements appropriate time presented accounting policies believe require subjective complex judgments could potentially affect reported results use estimates discussion analysis financial condition results operations based upon financial statements prepared accordance us gaap preparation financial statements requires us make estimates judgments affect reported amounts assets liabilities revenues expenses related disclosures contingent assets liabilities ongoing basis evaluate estimates including related impairment longlived assets allowance doubtful accounts base estimates historical experience various assumptions believe reasonable circumstances results form basis making judgments carrying value assets liabilities readily apparent sources actual results may differ estimates different assumptions conditions however believe estimates including abovedescribed items reasonable areas require estimates assumptions include valuation accounts receivable inventory determination useful lives property equipment estimation certain liabilities sales returns accounts receivable maintain reserves potential credit losses accounts receivable management reviews composition accounts receivable analyzes historical bad debts customer concentrations customer credit worthiness current economic trends changes customer payment patterns evaluate adequacy reserves advances suppliers make advances certain vendors purchase material advances suppliers interestfree unsecured inventory valued lower cost determined weighted average basis market compare cost inventories market value allowance made write inventories market value lower longlived assets periodically assess potential impairments longlived assets perform impairment review whenever events changes circumstances indicate carrying value may fully recoverable factors considered include limited significant underperformance relative expected historical projected future operating results significant changes manner use acquired assets strategy overall business significant negative industry economic trends determine carrying value longlived asset may recoverable based upon existence one indicators impairment estimate future undiscounted cash flows expected result use asset eventual disposition sum expected future undiscounted cash flows eventual disposition less carrying amount asset recognize impairment loss impairment loss reflected amount carrying amount asset exceeds fair market value asset based fair market value available discounted cash flows date impairment longlived assets property equipment property equipment stated cost expenditures maintenance repairs expensed incurred additions renewals betterments capitalized property equipment retired otherwise disposed related cost accumulated depreciation removed respective accounts gain loss included operations depreciation property equipment provided using straightline method substantially assets estimated lives follows buildings 520 years equipment 510 years vehicles 5 years office equipment 510 years revenue recognition revenue recognition policies compliance sec staff accounting bulletin sab 104 sales revenue recognized date shipment customers significant obligations exist collectability reasonably assured payments received relevant criteria revenue recognition satisfied recorded unearned revenue foreign currency transactions comprehensive income us gaap generally requires recognized revenue expenses gains losses included net income certain statements however require entities report specific changes assets liabilities gain loss foreign currency translation separate component equity section balance sheet items along net income components comprehensive income functional currency chinese renminbi unit renminbi yuan translation gains classified item comprehensive income stockholders’ equity section balance sheet comprehensive income statements income comprehensive income includes translation gains recognized period currency hedging time may enter forward exchange agreements bank china whereby agree sell us dollars bank china certain rates december 31 2010 outstanding forward exchange contracts recent accounting pronouncements july 1 2009 adopted accounting standards update “asu” 200901 “topic 105 generally accepted accounting principles amendments based statement financial accounting standards 168 fasb accounting standards codification hierarchy generally accepted accounting principles” “asu 200901” asu 200901 redefines authoritative us gaap nongovernmental entities comprised fasb accounting standards codification “codification” sec registrants guidance issued sec codification reorganization compilation thenexisting authoritative us gaap nongovernmental entities except guidance issued sec codification amended effect nonsec changes authoritative us gaap adoption asu 200901 changed referencing convention us gaap notes consolidated financial statements february 25 2010 fasb issued asu 201009 subsequent events topic 855 “amendments certain recognition disclosure requirements” effective immediately amendments asu remove requirement sec filer disclose date subsequent events evaluated issued revised financial statements revised financial statements include financial statements revised result either correction error retrospective application us gaap fasb believes amendments remove potential conflicts sec’s literature adoption asu material impact consolidated financial statements march 5 2010 fasb issued asu 201011 derivatives hedging topic 815 “scope exception related embedded credit derivatives” asu clarifies guidance within derivative literature exempts certain credit related features analysis potential embedded derivatives requiring separate accounting asu specifies embedded credit derivative feature related transfer credit risk form subordination one financial instrument another subject bifurcation host contract asc 8151525 derivatives hedging embedded derivatives recognition embedded credit derivative features analyzed determine whether economic characteristics risks “clearly closely related” economic characteristics risks host contract whether bifurcation required asu effective us july 1 2010 adoption asu material impact consolidated financial statements april 2010 fasb codified consensus reached emerging issues task force issue 0809 “milestone method revenue recognition” fasb asu 201017 provides guidance defining milestone determining may appropriate apply milestone method revenue recognition research development transactions fasb asu 201017 effective fiscal years beginning june 15 2010 effective prospective basis milestones achieved adoption date expect asu material impact financial position results operations result adoption january 1 2011 results operations year ended december 31 2010 compared year ended december 31 2009 revenues revenue 2010 1758 million increase 945 million 1162 813 million 2009 increase revenues result expansion sales china domestic market increasing market share asian south american middle east european markets average selling prices products increased 587 compared average selling prices 2009 increased china domestic market sales 769 million 2010 143 million 2009 4372 increase products currently available approximately 3000 stores march 2011 beginning latter half 2009 increased sales products suning prominent national electric appliance retail chain china roughly 900 stores private label arrangement first quarter 2010 began ramping sales brand name products gome another prominent national electronic appliance retail chain china 1100 stores addition many retail locations across china also added retail locations channels regional electric appliance retailers department stores increased product sales internet portals hotels restaurants via reward programs large banks telecommunication firms postal offices china addition introduced new product lines 2010 humidifiers dehumidifiers bringing current product offerings approximately 250 different product varieties 189 2009 results pace management’s plan capture fast growth experienced china domestic small appliance market sales south america 247 million 2010 124 million 1004 increase 2009 sales asia 245 million 2010 151 million 1624 increase 2009 believe increase sales south america asia largely due emerging wealth regions experienced less impact recent financial crisis longer term optimistic south american asian markets gdp growth large populations sales europe 178 million 2010 63 million 548 increase 2009 sales middle east 214 million 2010 104 million 938 increase 2009 sales gains europe middle east largely due deer gaining market share following financial crisis sales us 85 million 2010 137 million 617 decrease 2009 economic recovery us slower anticipated us customers placed orders expected based slow recovery expect us revenues recover 2011 economic recovery progresses continue pursue new large us customers following financial crisis believe many smaller suppliers limited capital resources went business leading consolidation industry addition noticed buyers increasingly favored companies financial strength higher quality products sufficient plant capacity track record prompt delivery buyers placed greater emphasis able source quality supplies without delays interruptions utilized market opportunity add new accounts increase sales volume existing customers cost revenue cost revenue 2010 1253 million increase 641 million 1048 612 million 2009 increased cost revenue 2010 due increase sales gross profit gross margin 2010 288 compared 248 2009 increase gross margin 2010 compared 2009 due increased sales china domestic market higher margins gross margin higher china domestic market branded products sold directly agents domestic retail locations continue improve manufacturing efficiency inhouse production motors primary components products thereby benefiting economies scale due higher revenue volume operating expenses selling general administrative expenses 2010 137 million increase 78 million 1312 59 million 2009 selling expenses 2010 increased 1577 56 million comparison 2009 due significant increase revenue associated selling costs include advertising expand market increase brand awareness generate significant increase revenue general administrative expenses 2010 increased 917 22 million comparison 2009 due hiring additional employees growth increase research development improve product quality introduce new products trade shows support marketing efforts interest financing costs net interest financing costs net 2010 net gain 335755 increase 586675 2338 net loss 250920 2009 change due principally interest income increasing 94986 2009 484527 2010 interest expense 2010 compared 122299 2009 financial expense also decreased 223607 2009 148772 2010 income net income 2010 67263 compared 364418 2009 decrease 297155 decrease due mainly grant received 2009 326334 compared 54134 2010 prc government high tech enterprise status hiring large number local workers foreign exchange gain loss foreign exchange loss 2010 13 million compared foreign exchange gain 01 million 2009 decrease 14 million change due principally foreign exchange rate fluctuations income tax expense effective tax rate 2010 157 opposed 146 2009 prc government granted us special tax rate effective 2009 high tech enterprise status special tax benefit lasts three years december 31 2011 renewed prior expiration year ended december 31 2009 compared year ended december 31 2008 revenues revenue 2009 813 million increase 376 million 858 438 million 2008 increase revenues result expansion sales china domestic market increasing market shares us south american middle eastern european markets increased china domestic market sales 20 million 2008 143 million 2009 599 increase sales year 2009 increased sales products suning prominent national electric appliance retail chain china roughly 900 stores private label arrangement also added retail locations channels regional electric appliance retailers department stores increased product sales internet portals hotels restaurants via reward programs large chinese banks telecommunication firms postal offices results pace management’s plan capture fast growth experienced china domestic small appliance market sales us 222 million 2009 73 million 49 increase year sales south america 123 million 2009 60 million 96 increase year sales middle east 111 million 2009 41 million 60 increase year sales europe 115 million 2009 36 million 47 increase year increased sales us south america middle east europe largely due gaining market share following financial crisis believe many smaller suppliers limited capital resources gone business led consolidation industry addition noticed buyers increasingly favored companies financial strength higher quality products sufficient plant capacity track record prompt delivery buyers placed greater emphasis able source quality supplies without delays interruptions utilized market opportunity add new accounts increase sales volume existing customers portion expected revenue decrease due economic slowdown us europe revenues fourth quarter 2008 first quarter 2009 geographic areas lower expectations fourth quarter typically best quarter account much 40 annual sales due greater volume christmas us european market yet fourth quarter 2008 sales 117 million roughly 27 annual sales first quarter 2009 sales 69 million versus 91 million first quarter 2008 24 drop revenue revenues europe north america decreased financial crisis retailers reduced inventory levels however revenue also increased 2009 due increase retailers inventory levels commencing second quarter 2009 retailers realized inventories low relative consumer demand time many smaller competitors capital strength economies scale low cost production abilities went business us revenue increased 49 2009 largely attribute gain market share competitors 2009 demand products came back weak fourth quarter 2008 reduced expected 2008 results 2009 economic environment improved first quarter still weaker expected revenue increased 108 first quarter 2010 largely due improved demand continued gain market share experienced improved revenues compared weak first quarter 2009 cost revenue cost revenue 2009 612 million increase 271 million 7932 341 million 2008 increased cost revenue 2009 due increase sales gross profit gross margin 2009 248 compared 221 2008 increase gross margin 2009 compared 2008 due higher manufacturing efficiencies result higher revenue volume increased sales china domestic market higher margins selling general administrative expenses selling general administrative expenses 2009 59 million increase 05 million 95 54 million 2008 selling expenses 2009 increased 245 08 million comparison 2008 due associated selling costs incurred generate significant increase revenue general administrative expenses 2009 decreased 72 185773 comparison 2008 operating expenses include overhead expenses rent management staff salaries general insurance marketing accounting legal offices expenses scaled back consolidated operations thus reducing selling general administrative expenses withstand effect global financial crisis also contracted delta subsidiary beginning 2009 whereby delta operations run winder subsidiary result costcutting efforts able reduce operating expenses time increasing growth revenue interest financing costs net interest financing costs net 2009 250920 compared 544793 2008 decrease 293873 539 change due principally lower interest expense due lower borrowings 2009 higher interest income due excess cash invested interest bearing accounts income expense income 2009 364418 increase 324202 8062 40216 2008 increase income due increases grants received prc government high tech enterprise status hiring large number local workers foreign exchange gain foreign exchange gain 2009 138284 decrease 821659 856 959943 2008 entered forward exchange agreement bank china whereby agreed sell us dollars bank china certain rates since contractual rate sold us dollars bank china greater exchange rate date exchange transaction recognized foreign exchange gains december 31 2009 outstanding forward exchange contracts income tax expense effective tax rate 2009 15 opposed 28 2008 offbalance sheet arrangements offbalance sheet arrangements 2010 reasonably likely current future effect financial condition revenues expenses results operations liquidity capital expenditures capital resources material interests liquidity capital resources april 24 2009 effected 1for23 reverse stock split common stock october 2 2009 effected 2for1 forward stock split common stock share information common shares restated retroactively stock splits march 31 2009 completed closing private placement offering pursuant sold 810690 units unit consisting 1 share common stock 3year warrant purchase 15 1 share common stock 173 per share offering price 092 per unit gross proceeds 746000 issued warrants purchase 121660 shares common stock investors offering also issued warrants purchase 81090 shares common stock placement agents may 1 2009 completed closing private placement offering pursuant sold 1040000 units unit consisting 1 share common stock 3year warrant purchase 15 1 share common stock 173 per share offering price 092 per unit gross proceeds 956800 2 nonus investors issued warrants purchase 156000 shares common stock investors offering also issued warrants purchase 104000 shares common stock placement agents may 20 2009 completed closing private placement offering pursuant sold 1060000 units unit consisting 1 share common stock 3year warrant purchase 15 1 share common stock 173 per share offering price 092 per unit gross proceeds 975200 2 nonus investors issued warrants purchase 159000 shares common stock investors offering also issued warrants purchase 106000 shares common stock placement agents september 21 2009 completed private placement offering pursuant sold 3000000 units unit consisting 1 share common stock 3year warrant purchase 30 1 share common stock 500 per share offering price 500 per unit 15000000 nonus investors issued warrants purchase 900000 shares common stock investors offering nonus advisor us received fees 9 gross proceeds warrants purchase 300000 shares common stock terms warrants issued investors paid additional 3 advisory fee connection private placement offering december 17 2009 completed public offering 6900000 shares common stock public offering price 1100 per share 75900000 paid commissions fees associated offering 9931296 2009 also paid offering cost 320000 related offering 2010 certain warrant holders exercised warrants purchase 1759114 shares common stock resulted gross proceeds 6964510 also 2010 purchased 798300 shares common stock open market treasury shares 6945950 cash flows december 31 2010 3396 million cash equivalents hand principal demands liquidity increase sales china add capacity purchase inventory sales distribution general corporate purposes anticipate amount cash hand date report well cash generate operations satisfy requirements current assets 832 million current liabilities 4491 million working capital 722 million current ratio 2611 december 31 2010 following summary cash provided used indicated types activities years ended december 31 2010 2009 net cash flows provided operating activities 2010 111 million compared cash provided operating activities 04 million 2009 cash flows operating activities attributed principally net income generated 2010 increase accounts payables tax payable bank acceptance outstanding offset increase accounts receivable advances suppliers increase account receivable within expectations continue increase sales rapidly china domestic market longer receivable requirements strongest quarters seasonally third fourth quarters common consumer products industry china higher margin china domestic market typically requires payment terms long seven eight months date shipment historically experienced significant bad debts customers therefore believe current receivables manageable within expectations used 574 million investing activities 2010 principally purchase land use rights intangible assets new production manufacturing facility located wuhu area central china purchase fixed assets 101 million 2010 cash used financing activities 2010 03 million included proceeds exercise warrants 696 million offset 320000 payment offering costs purchase treasury shares 695 million following summary cash provided used indicated types activities years ended december 31 2009 2008 net cash flows provided operating activities 2009 038 million compared cash provided operating activities 304 million 2008 cash flows operating activities attributed principally net income generated 2009 december 31 2009 accounts receivable increased 8510316 compared balance december 31 2008 increase accounts receivable 2009 due primarily increased sales intend continue efforts maintain accounts receivable reasonable levels relation sales inventories increased 10380431 balance december 31 2008 due need increase inventory levels keep increase sales accounts payable increased 4087022 2009 compared balance december 31 2008 payables increased 300828 accrued payroll increased 980381 period unearned revenues payments received relevant criteria revenue recognition satisfied decreased 1586205 tax welfare payable decreased 670681 shortterm loans decreased 3552841 period notes payable increased 3057563 due receipt proceeds new loans entered 2009 used 411 million investing activities 2009 principally construction progress purchase fixed assets cash provided financing activities 2009 802 million mainly proceeds issuance common stock 936 million offset 124 million intend meet liquidity requirements including capital expenditures related purchase equipment purchase raw materials expansion business cash flow provided operations funds raised offerings securities determine offerings required maintain export insurance covers losses arising customer rejection products political risk losses arising business credit risks including bankruptcy insolvency delay payment majority revenues denominated us dollars expenses denominated primarily renminbi increase sales china expect significant component revenue denominated renminbi assurance exchange rates renminbi us dollar remain stable currently engage currency hedging inflation material impact business item 7a item 7a quantitative qualitative disclosures market risk operations china functional currency renminbi significant percentage sales made export market may denominated currencies renminbi 2011 approximately 32 revenues export market fluctuations exchange rate renminbi us dollar euro currencies could result exchange losses affect sales profitability may suffer financial losses transferring money received outside china country paying vendors services performed outside china moreover fluctuations exchange rate us dollar renminbi affect financial results reported us dollar terms without giving effect underlying change business financial condition results operations currently engage forward foreign exchange agreements hedging transactions effort reduce exposure foreign currency exchange risk hedging transactions may enter future may limited effectiveness may able successfully hedge exposure addition foreign currency exchange losses may magnified prc exchange control regulations restrict ability convert renminbi foreign currencies exposed price risk rising cost commodities certain raw materials including plastics derived petroleum stainless steel copper monitor commodities markets pricing trends changes engage hedging transactions protect raw material fluctuations instead attempt mitigate shortterm risks price swings purchasing raw materials advance item 8 item 7a quantitative qualitative disclosures market risk applicable item 8 item 7a quantitative qualitative disclosures market risk operations china functional currency renminbi majority sales currently made export market may denominated currencies renminbi 2010 approximately 57 revenues export market fluctuations exchange rate renminbi us dollar euro currencies could result exchange losses affect sales profitability may suffer financial losses transferring money received outside china country paying vendors services performed outside china moreover fluctuations exchange rate us dollar renminbi affect financial results reported us dollar terms without giving effect underlying change business financial condition results operations currently engage forward foreign exchange agreements hedging transactions effort reduce exposure foreign currency exchange risk hedging transactions may enter future may limited effectiveness may able successfully hedge exposure addition foreign currency exchange losses may magnified prc exchange control regulations restrict ability convert renminbi foreign currencies exposed price risk rising cost commodities certain raw materials including plastics derived petroleum stainless steel copper monitor commodities markets pricing trends changes engage hedging transactions protect raw material fluctuations instead attempt mitigate shortterm risks price swings purchasing raw materials advance item 8 item 8 changes disagreements accountants accounting financial disclosure none item 8a controls procedures evalution disclosure controls evaluated effectiveness disclosure controls procedures end 2007 fiscal year evaluation conducted participation chief executive officer principal accounting officer disclosure controls procedures designed ensure information required disclose reports file pursuant securities exchange act 1934 recorded processed summarized reported limitations effective controls management expect disclosure controls internal controls financial reporting prevent error fraud control system matter well conceived operated provide reasonable absolute assurance objectives control system met control system reflects limitations resources benefits control system must considered relative costs limitations also include realities judgments decisionmaking faulty breakdowns occur simple error mistake additionally controls circumvented individual acts persons collusion two people management override control design control system also based upon certain assumptions potential future conditions time controls may become inadequate changes conditions degree compliance policies procedures may deteriorate inherent limitations costeffective control system misstatements due error fraud may occur may detected conclusions based upon evaluation controls chief executive officer principal accounting officer concluded subject limitations noted disclosure controls effective providing reasonable assurance material information relating us made known management timely basis period reports prepared changes internal controls occurred quarter covered report materially affected reasonably likely materially affect internal controls part iii item 9 item 8 financial statements supplementary data financial statements together report thereon appear separate section annual report beginning page item 9 item 8 financial statements supplementary data financial statements together report thereon deer consumer products inc listed item 15 appear separate section report beginning pagebegin page document item 9 item 8 changes disagreements accountants accounting financial disclosure none item 8at controls procedures evaluation disclosure controls procedures evaluation conducted supervision participation company’s management including chief executive officer “ceo” principal executive officer chief financial officer “cfo” principal financial officer effectiveness design operation company’s disclosure controls procedures defined rule 13a15e rule 15d15e exchange act december 31 2009 based evaluation ceo cfo concluded company’s disclosure controls procedures effective date ensure information required disclosed reports files submits exchange act recorded processed summarized reported within time periods specified securities exchange commission rules forms disclosure controls procedures include without limitation controls procedures designed ensure information required disclosed company reports files submits exchange act accumulated communicated company’s management including principal executive principal financial officers persons performing similar functions appropriate allow timely decisions regarding required disclosure report management internal control financial reporting company’s management responsible establishing maintaining adequate internal control financial reporting defined rule 13a15f exchange act company’s internal control financial reporting process designed supervision company’s ceo cfo effected issuer’s board directors management personnel provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles includes policies procedures § pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company § provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company § provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition companys assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate therefore internal control financial reporting determined effective provides reasonable assurance regarding reliability financial reporting preparations financial statements external purposes accordance generally accepted accounting principles company carried evaluation effectiveness december 31 2009 design operation internal control financial reporting pursuant rule 13a15 exchange act conducted supervision participation company’s ceo cfo evaluation based criteria set forth committee sponsoring organizations treadway commission coso report entitled “internal controlintegrated framework” based upon evaluation company’s ceo cfo concluded company’s internal controls financial reporting effective december 31 2009 annual report form 10k required include attestation report company’s independent registered public accounting firm regarding internal control financial reporting management’s report subject attestation company’s independent registered public accounting firm pursuant temporary rules securities exchange commission permit company provide management’s report annual report changes internal control financial reporting changes internal control financial reporting defined rules 13a15f 15d15f exchange act year ended december 31 2009 materially affected reasonably likely materially affect internal control financial reporting item 8b information submission matters vote security holders company’s 2009 annual meeting stockholders held november 6 2009 following actions taken following directors elected serve 2010 annual meeting stockholders successors elected qualified proposal 2 ratify selection goldman parks kurland mohidin llp company’s independent registered public accounting firm 2009 fiscal year approved stockholders 8632995 shares voting favor proposal 471 shares abstaining proposal 3 approve company’s 2009 equity incentive plan approved stockholders 7949552 shares voting favor proposal 233706 shares voting proposal 5500 shares abstaining stockholder proposals 2010 annual meeting stockholders held may 28 2010 china time corporate offices area 2 1f building m6 central hightech industrial park nanshan shenzhen china commencing 1000 china time stockholder proposals must received corporate secretary later april 9 2010 china time order included proxy statement determination whether oppose inclusion proposal proxy statement proxy made casebycase basis accordance judgment rules regulations promulgated sec addition stockholder wishes present proposal 2010 annual meeting included proxy statement company notified prior april 9 2010 china time proxies solicited management 2010 annual meeting include discretionary authority vote proposal event properly brought meeting part iii item 9 item 8 financial statements supplementary data financial statements together report thereon appear separate section annual report beginning page item 9 item 15 exhibits financial statement schedules following documents filed part included annual report 1 financial statements listed index financial statements filed part annual report beginning page 2 exhibits listed exhibit index filed part annual report deer consumer products inc subsidiaries consolidated financial statements years ended december 31 2011 2010 2009 page report independent registered public accounting firm financial statements consolidated balance sheets december 31 2011 2010 consolidated statements income comprehensive income years ended december 31 2011 2010 2009 consolidated statements stockholders’ equity years ended december 31 2011 2010 2009 consolidated statements cash flows years ended december 31 2011 2010 2009 notes consolidated financial statements report independent registered public accounting firm board directors stockholders deer consumer products inc audited accompanying consolidated balance sheets deer consumer products inc “company” december 31 2011 2010 related consolidated statements income comprehensive income stockholders’ equity cash flows years ended december 31 2011 2010 2009 addition opinion financial statement schedule listed note 18 financial statements presents fairly material respects information set forth therein read conjunction related consolidated financial statements also audited deer consumer products inc’s internal control financial reporting december 31 2011 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso deer consumer products inc‘s management responsible financial statements maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying management’s report internal control responsibility express opinion financial statements opinion company’s internal control financial reporting based audits conducted audits accordance standards public company accounting oversight board united states standards required plan perform audits obtain reasonable assurance whether financial statements free material misstatement whether effective internal control financial reporting maintained material respects audits financial statements included examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management evaluating overall financial statement presentation audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinion company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate material weakness deficiency combination deficiencies internal control financial reporting reasonable possibility material misstatement companys annual interim financial statements prevented detected timely basis following material weaknesses identified · lack technical accounting expertise among financial staff regarding us gaap b requirements pcaob auditing standard 5 coso assessment internal control financial reporting material weaknesses considered determining nature timing extent audit tests applied audit 2011 consolidated financial statements company year ended december 31 2011 opinion consolidated financial statements referred present fairly material respects consolidated financial position deer consumer products inc december 31 2011 2010 consolidated results operations consolidated cash flows years ended december 31 2011 2010 2009 conformity accounting principles generally accepted united states america also opinion effect aforementioned material weaknesses achievement objectives internal control criteria deer consumer products inc maintained effective internal control financial reporting december 31 2011 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso opinion effectiveness internal control financial reporting affect opinion consolidated financial statements goldman kurland mohidin llp encino california march 28 2012 deer consumer products inc subsidiaries consolidated balance sheets december 31 2011 2010 accompanying notes integral part consolidated financial statements deer consumer products inc subsidiaries consolidated statements income comprehensive income years ended december 31 2011 2010 2009 accompanying notes integral part consolidated financial statements deer consumer products inc subsidiaries consolidated statement stockholders equity years ended december 31 2011 2010 2009 accompanying notes integral part consolidated financial statements deer consumer products inc subsidiaries consolidated statements cash flows years ended december 31 2011 2010 2009 accompanying notes integral part consolidated financial statements deer consumer products inc subsidiaries notes consolidated financial statements december 31 2011 2010 note 1 organization basis presentation organization line business deer consumer products inc formerly known tag events corp hereinafter referred “company” “deer” incorporated state nevada july 18 2006 september 3 2008 company entered share exchange agreement plan reorganization deer international group ltd “deer international” corporation organized laws british virgin islands december 3 2007 acquired 100 shares winder electric group ltd “winder” march 11 2008 winder 100 owned subsidiary delta international limited “delta” winder delta formed incorporated guangdong province people republic china “prc” july 20 2001 february 23 2006 respectively pursuant share exchange agreement company acquired deer international 50000 ordinary shares consisting issued outstanding capital stock 15695706 shares company’s common stock concurrently closing transactions contemplated share exchange agreement condition thereof company entered agreement crescent liu former director chief executive officer pursuant returned 5173914 shares company’s common stock company cancellation mr liu compensated cancellation shares company’s common stock upon completion foregoing transactions company 19652226 shares common stock issued outstanding connection transaction company changed name deer consumer products inc september 3 2008 exchange shares deer international recorded reverse acquisition purchase method accounting deer international obtained control company accordingly merger deer international company recorded recapitalization deer international deer international treated continuing entity historical financial statements presented consolidated financial statements deer international share exchange agreement treated recapitalization business combination therefore pro forma information disclosed date transaction net liabilities legal acquirer 0 company engaged manufacture marketing distribution sale small home kitchen electric appliances blenders food processors choppers juicers etc company manufactures products yangjiang china corporate functions nanshan shenzhen china note 2 summary significant accounting policies use estimates preparation financial statements conformity us gaap requires management make estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting period actual results could differ estimates areas require estimates assumptions include valuation accounts receivable inventory determination useful lives property equipment estimation certain liabilities sales returns cash equivalents cash equivalents include cash hand cash time deposits certificates deposit highly liquid debt instruments original maturities three months less restricted cash restricted cash consists monies restricted company’s lender monies restricted letters credit bank acceptances deer consumer products inc subsidiaries notes consolidated financial statements december 31 2011 2010 accounts receivable company maintains reserves potential credit losses accounts receivable management reviews composition accounts receivable analyzes historical bad debts customer concentrations customer credit worthiness current economic trends changes customer payment patterns evaluate adequacy reserves company incurred bad debts date company finds possibility company may incur bad debt company accrue appropriate allowance based aging accounts receivables company’s policy accrue full amount account receivables aging exceeds one year based historical collection activity company record bad debt allowance december 31 2011 2010 company sells products china domestic market range distribution outlets including regional national wholesalers third party distributors standard term payment accounts receivables several company’s large established china domestic retailer customers 180 days close billing cycle 30 45 days company’s products delivered customer accounts receivable term customary large established china domestic retailers historically company experienced late payments bad debts terms retailers term payment accounts receivable company’s china domestic customers 30 90 days close billing cycle company provides major customers payment terms based payment history amount purchased past upon strategic agreement company may company continues focus expanding sales china domestic market company’s sales china domestic market may represent larger percentage company’s total revenue company anticipates accounts receivable remain line standard industry practice relating accounts receivable china could seven months company sells products overseas customers export markets letters credit prepaid arrangements certain short credit terms direct customer purchase orders december 31 2011 december 31 2010 approximately 43 29 respectively accounts receivable overseas customers companys export salesrelated accounts receivable typically less three months depending customer shipment schedules historically company experienced significant bad debts export sales company also maintains substantial amount export insurance covers losses arising customers’ rejection products political risk losses arising business credit risks including bankruptcy insolvency delay payment company believes accounts receivable collected ordinary course business within seven months company established relationships many major customers addition company’s domestic customers typically pay according company’s payment terms company maintains insurance accounts receivable respect international customers table provides account receivable roll forward schedules three largest clientssuning gome reed sea song qiao whollyowned subsidiary suning vat receivables vat receivables vat rebates arise purchase raw materials vat receivables returned company offset vat payable company anticipates collecting vat receivables within one year company experience credit losses respect vat receivables owed company government company classifies vat receivables current asset reasonably expected realized sold consumed within one year within company’s normal operating cycle advances suppliers company makes advances certain vendors purchase material equipment advances interestfree unsecured inventories valued lower cost determined weighted average basis market company compares cost inventories market value allowance made write inventories market value lower deer consumer products inc subsidiaries notes consolidated financial statements december 31 2011 2010 notes receivable company sold goods customers received commercial notes bank acceptance lieu payments accounts receivable company discounted commercial notes bank endorsed commercial notes vendors payment obligations get cash third parties commercial notes maturity less six months december 31 2011 winder transferred commercial notes vendors lieu payment original remitters fail pay notes winder responsible making payment contingent liability rmb 26212 million 416 million winder december 31 2011 property equipment property equipment stated cost expenditures maintenance repairs charged earnings incurred additions renewals betterments capitalized property equipment retired otherwise disposed related cost accumulated depreciation removed respective accounts gain loss included operations depreciation property equipment provided using straightline method substantially assets estimated lives follows following details property equipment december 31 2011 2010 depreciation years ended december 31 2011 2010 2009 2265269 1490855 1439751 respectively construction progress construction progress consists costs construction workshops mold video monitoring installation winder construction work workshops installation video monitoring construction molds completed transferred property plant equipment december 31 2011 molds construction amounted 312 million december 31 2011 major additional costs incurred company completed final inspection workshop construction december 2011 put workshops operation product manufacturing construction progress also includes costs construction new plant office building power distribution station deer technology total estimated cost project 3623 million december 31 2011 construction progress 1802 million phase construction anticipated completed september 2012 longlived assets company applies provisions asc topic 360 “property plant equipment” addresses financial accounting reporting impairment disposal longlived assets asc 360 requires impairment losses recorded longlived assets used operations indicators impairment present undiscounted cash flows estimated generated assets less assets’ carrying amounts event loss recognized based amount carrying amount exceeds fair value longlived assets loss longlived assets disposed determined similar manner except fair values reduced cost disposal based review company believes december 31 2011 2010 significant impairment longlived assets deer consumer products inc subsidiaries notes consolidated financial statements december 31 2011 2010 intangible assets intangible assets consist rights use land computer software company evaluates intangible assets impairment least annually whenever events changes circumstances indicate carrying value may recoverable estimated future cash flows recoverability intangible assets measured comparing net book value related projected undiscounted cash flows assets considering number factors including past operating results budgets economic projections market trends product development cycles net book value asset exceeds related undiscounted cash flows asset considered impaired second test performed measure amount impairment loss following details intangible assets december 31 2011and 2010 pursuant prc regulations prc government owns land company recorded amounts paid land use rights intangible asset company amortizes rights respective periods range 45 50 years computer software amortized 1 2 years 2010 deer technology acquired land use rights two parcels land total 439640 square meters located east central china city wuhu anhui province purchase price land use rights two parcels land approximately 35 million price rmb 495 million 743000 per hectare including 4 prc government land transfer tax government charges use right first parcel land covering 289416 square meters purchased approximately rmb 149 million 2274 million land use right second parcel land covering 150224 square meters purchased rmb 7737 million 118 million company received land use right certificates prc government two parcels land deposit 105 million rmb 67901400 paid 2010 acquire land use right returned company first quarter 2011 failed win auction land company paid additional 43 million rmb 27934381 first quarter 2011 make payment full land use rights acquired december 2010 december 31 2010 company prepaid rmb 22300000 3367207 land use rights acquired december 2010 prepayment transferred intangible assets first quarter 2011 company received land use right certificate summary company’s land use right acquisitions follows deer consumer products inc subsidiaries notes consolidated financial statements december 31 2011 2010 addition december 31 2011 company prepaid rmb 534 million 08 million land use rights 60000 square meters land yangjiang city site use right phase iii total cost land use rights approximately rmb 213 million 33 million company required pay full 2012 regulatory deadlines commitments develop land amortization years ended december 31 2011 2010 2009 700347 150027 9435 respectively following table summarizes expected amortization next five years december 31 2011 fair value financial instruments certain company’s financial instruments including cash equivalents restricted cash accounts receivable accounts payable accrued liabilities shortterm loans notes payable carrying amounts approximate fair values due short maturities asc topic 820 “fair value measurements disclosures” requires disclosure fair value financial instruments held company asc topic 825 “financial instruments” defines fair value establishes threelevel valuation hierarchy disclosures fair value measurement enhances disclosure requirements fair value measures carrying amounts reported consolidated balance sheets receivables current liabilities qualify financial instruments reasonable estimate fair values short period time origination instruments expected realization current market rate interest three levels valuation hierarchy defined follows ● level 1 inputs valuation methodology quoted prices identical assets liabilities active markets ● level 2 inputs valuation methodology include quoted prices similar assets liabilities active markets inputs observable asset liability either directly indirectly substantially full term financial instrument ● level 3 inputs valuation methodology unobservable significant fair value measurement company analyzes financial instruments features liabilities equity asc topic 480 “distinguishing liabilities equity” asc topic 815 “derivatives hedging” december 31 2011 december 31 2010 company identify assets liabilities required presented balance sheet fair value concentration credit risk cash includes cash hand demand deposits accounts maintained within china certain financial instruments subject company concentration credit risk consist cash balances financial institutions within china covered insurance company experienced losses accounts revenue recognition company’s revenue recognition policies compliance sec staff accounting bulletin sab 104 codified fasb asc topic 480 deer consumer products inc subsidiaries notes consolidated financial statements december 31 2011 2010 sales revenue export customers recognized date shipment price fixed determinable significant obligations company exist collectability reasonably assured company records payments goods relevant criteria revenue recognition satisfied unearned revenue sales revenue domestic customers recognized fob destination price fixed determinable significant obligations company exist collectability reasonably assured company pays cost freight insurance risk loss passes customers receive goods company records payments goods relevant criteria revenue recognition satisfied unearned revenue sales revenue invoiced value goods net valueadded tax company’s products sold prc subject vat 17 gross sales price vat may offset vat paid company raw materials included cost producing company’s finished product company recorded vat payable vat receivable net payments financial statements vat tax return filed offsetting payables receivables sales purchases recorded net vat collected paid company acts agent government vat taxes affected income tax holiday sales returns allowances 0 year ended december 31 2011 2010 company provide right unconditional return price protection concessions customers cost revenue selling general administrative expenses company includes expenses either cost revenue selling general administrative expenses based upon natural classification expenses cost revenue includes expenses associated acquisition inspection manufacturing receiving materials use manufacturing process costs include inbound freight charges purchasing receiving costs inspection costs warehousing costs internal transfer costs well depreciation amortization wages benefits costs incurred directly indirectly support manufacturing process selling general administrative expenses includes expenses associated distribution products sales efforts including commissions payable store promotional staff administration costs incurred support manufacturing process company records distribution costs associated sale inventory component selling general administrative expenses statements consolidated income expenses include warehousing costs outbound freight charges insurance costs associated distribution personnel advance customers company records payments received customers advance future orders advance account orders normally delivered within reasonable period time based upon contract terms customers advertising costs company expenses cost advertising incurred appropriate first time advertising takes place advertising costs years ended december 31 2011 2010 2009 105954 222648 45361 respectively research development company expenses research development costs incurred research development costs years ended december 31 2011 2010 2009 188658 777783 602550 respectively research development costs included general administrative expenses subsidy income company awarded grants local government bureaus encourage development business general policy municipal governments prc local government bureaus commonly provide grants leading local companies order encourage greater economic development employment grants typically based certain standards reviewed periodically grants set forth awarded company based progress technological innovation building standardized plant factory exact amount grant uncertain local government makes final determination company records income grant received approved grants set forth made without conditions restrictions required repaid deer consumer products inc subsidiaries notes consolidated financial statements december 31 2011 2010 set forth grants recorded year end ended december 31 2011 subsidy income attributable grants specified received full could used without restriction stockbased compensation company records stockbased compensation accordance asc topic 718 505 “compensation stock compensation” asc 718 requires companies measure compensation cost stockbased employee compensation fair value grant date recognize expense employee’s requisite service period company recognizes statement operations grantdate fair value stock options equitybased compensation issued employees nonemployees 50000 options outstanding december 31 2011 income taxes company utilizes statement financial accounting standards sfas 109 “accounting income taxes” codified fasb asc topic 740 requires recognition deferred tax assets liabilities expected future tax consequences events included financial statements tax returns method deferred income taxes recognized tax consequences future years differences tax bases assets liabilities financial reporting amounts period end based enacted tax laws statutory tax rates applicable periods differences expected affect taxable income valuation allowances established necessary reduce deferred tax assets amount expected realized company follows fasb interpretation 48 “fin 48” accounting uncertainty income taxes codified fasb asc topic 740 tax returns filed likely positions taken would sustained upon examination taxing authorities others subject uncertainty merits position taken amount position would ultimately sustained benefit tax position recognized financial statements period based available evidence management believes likely position sustained upon examination including resolution appeals litigation processes tax positions taken offset aggregated positions tax positions meet morelikelythannot recognition threshold measured largest amount tax benefit 50 percent likely realized upon settlement applicable taxing authority portion benefits associated tax positions taken exceeds amount measured described reflected liability unrecognized tax benefits accompanying balance sheets along associated interest penalties would payable taxing authorities upon examination interest associated unrecognized tax benefits classified interest expense penalties classified selling general administrative expense statements income december 31 2011 2010 company taken significant uncertain tax position tax return 2010 prior years computing tax provision 2011 deer consumer products inc subsidiaries notes consolidated financial statements december 31 2011 2010 foreign currency transactions comprehensive income financial statements’ accounts company’s prc subsidiaries translated usd accordance sfas 52 “foreign currency translation” codified fasb asc topic 830 rmb company’s china subsidiaries’ functional currency according sfas 52 codified fasb asc topic 830 assets liabilities translated exchange rate balance sheet date stockholders’ equity translated historical rates statement operations items translated average exchange rate year resulting translation adjustments reported comprehensive income accordance sfas 130 “reporting comprehensive income” codified fasb asc topic 220 currency hedging company time may enter forward exchange agreements bank china whereby company agrees sell us dollars bank china certain rates december 31 2011and 2010 company outstanding forward exchange contracts basic diluted earnings per share earnings per share calculated accordance asc topic 260 “earnings per share” basic earnings per share based upon weighted average number common shares outstanding diluted earnings per share based assumption dilutive convertible shares stock options converted exercised dilution calculated applying treasury stock method options warrants assumed exercised beginning period time issuance later funds obtained thereby used purchase common stock average market price period following reconciliation number shares denominator used basic diluted earnings per share calculations statement cash flows accordance asc topic 230 “statement cash flows” cash flows company’s operations calculated based upon local currencies using average translation rates result amounts related assets liabilities reported consolidated statements cash flows necessarily agree changes corresponding balances consolidated balance sheets registration rights agreement company accounts payment arrangements registration rights agreement accordance asc topic 825 “financial instruments” requires contingent obligation make future payments otherwise transfer consideration registration payment arrangement whether issued separate agreement included provision financial instrument agreement recognized separately measured accordance asc topic 450 “contingencies” segment reporting sfas 131 “disclosures segments enterprise related information” codified fasb asc topic 280 requires use “management approach” model segment reporting management approach model based way companys management organizes segments within company making operating decisions assessing performance reportable segments based products services geography legal structure management structure manner management disaggregates company sfas 131 effect companys financial statements substantially companys operations conducted one industry segment companys assets located prc deer consumer products inc subsidiaries notes consolidated financial statements december 31 2011 2010 reclassifications company reclassified intangible assets deposit 806458 land use right december 31 2010 conform manner presentation current period recent pronouncements september 2011 fasb issued asu 201108 testing goodwill impairment asu 201108 allow companies assess qualitative factors determine morelikelythannot goodwill might impaired whether necessary perform twostep goodwill impairment test required current accounting standards asu 201108 effective annual interim goodwill impairment tests performed annual reporting period beginning december 15 2011 early adoption permitted company currently evaluating guidance expect adoption material impact consolidated financial statements june 2011 fasb issued asu 201105 comprehensive income presentation comprehensive income asu 201105 require companies present components net income comprehensive income either one continuous statement two consecutive statements asu 201105 eliminates option present components comprehensive income part statement changes stockholders equity asu 201105 change items must reported comprehensive income items measured must reclassified net income asu 201105 effective first interim annual periods beginning december 15 2011 december 2011 fasb issued asu 201112 deferral effective date amendments presentation reclassifications items accumulated comprehensive income accounting standards update 201105 company believes adoption guidance concerns disclosure material impact consolidated financial statements may 2011 financial accounting standards board fasb issued accounting standards update asu 201104 fair value measurement amendments achieve common fair value measurement disclosure requirements us gaap ifrss asu 201104 changes wording used describe requirements generally accepted accounting principles united states us gaap measuring fair value disclosing information fair value measurements order improve consistency application description fair value us gaap international financial reporting standards ifrs asu 201104 clarifies concepts highest best use valuation premise fair value measurement relevant measuring fair value nonfinancial assets relevant measuring fair value financial assets liabilities addition asu 201104 expanded disclosures unobservable inputs level 3 fair value measurements requiring quantitative information disclosed related 1 valuation processes used 2 sensitivity fair value measurement changes unobservable inputs interrelationships unobservable inputs 3 use nonfinancial asset way differs assets highest best use asu 201104 effective first interim annual reporting period beginning december 15 2011 early adoption prohibited company currently evaluating future impact new accounting update consolidated financial statements note 3 inventories consisted following december 31 2011 december 31 2010 deer consumer products inc subsidiaries notes consolidated financial statements december 31 2011 2010 note 4 payables accrued expenses payables accrued expenses consisted following december 31 2011and 2010 accrued expenses electricity freight fees payables government charges payable local construction management department payable employees’ education fund labor union fund etc note 5 notes payable notes payable december 31 2011 2010 multiple bankers’ acceptances bank china terms notes range 36 months bear interest pay bank 005 note balance acceptance fee company deposits certain percentage notes’ par value bank china refundable notes repaid accounted restricted cash accompanied consolidated financial statements note 6 dividend payable march 9 2011 company’s board directors “bod” declared first quarter dividend payable future earnings 005 per share paid april 14 2011 may 9 2011 company’s bod declared second quarter dividend 005 per share payable future earnings july 15 2011 shareholders record june 30 2011 august 9 2011 company’s bod declared third quarter dividend 005 per share payable future earnings october 15 2011 shareholders record september 30 2011 november 8 2011 company’s bod declared fourth quarter dividend 005 per share payable future earnings january 13 2012 shareholders record december 30 2011 dividend payable december 31 2011 1679628 paid january 10 2012 declaration payment future quarterly dividends made discretion bod note 7 stockholders’ equity march 31 2009 company completed private placement 810690 units unit consisting 1 share company’s common stock 3year warrant purchase 15 1 share company’s common stock 173 per share 092 per unit 746000 company issued warrants purchase 121660 shares common stock investors private placement company also issued warrants purchase 81090 shares common stock placement agents may 2009 company completed two private placements units consisting 1 share company’s common stock 3year warrant purchase 15 1 share company’s common stock 173 per share pursuant company sold 2100000 units 092 per unit 1932000 company issued warrants purchase 315000 shares common stock investors private placement company also issued warrants purchase 210000 shares common stock placement agents connection private placements described company issued registration rights agreement requiring company file registration statement covering shares common stock issued private placement shares common stock issuable upon exercise warrants issued private placement registration statement respect securities declared effective june 3 2009 posteffective amendment registration statement declared effective june 30 2010 subject certain grace periods registration statement must remain effective available use purchasers sell securities covered registration statement without restriction pursuant rule 144 company fails meet filing effectiveness requirements registration statement required pay liquidated damages 1 aggregate purchase price paid purchaser registerable securities held purchaser date failure anniversary date failure cured deer consumer products inc subsidiaries notes consolidated financial statements december 31 2011 2010 september 21 2009 company completed private placement offering 3000000 units unit consisting 1 share company’s common stock 3year warrant purchase 30 1 share company’s common stock 500 per share 500 per unit 15000000 nonus investors company issued warrants purchase 900000 shares common stock investors offering nonus advisor company received fees 9 gross proceeds warrants purchase 300000 shares company’s common stock terms investors company paid additional 3 advisory fee connection private placement offering investors received registration rights company issued shares pursuant exemption registration regulation promulgated securities act 1933 amended december 17 2009 company completed public offering 6900000 shares common stock 1100 per share 75900000 company paid commissions fees associated offering 9931296 company also paid offering cost 320000 related offering 2010 stock options following summary activity options independent director exercise price options outstanding december 31 2011 follows assumptions used calculating fair value options granted using blackscholes optionpricing model follows 2011 2010 2009 company recorded 102626 275698 333387 stock option expense respectively warrants end 2010 warrants exercised new warrants granted year ended december 31 2011 note 8 employee welfare plan expense employee common welfare 21773 112154 51160 years ended december 31 2011 2010 2009 respectively company required establish welfare common welfare reserves deer consumer products inc subsidiaries notes consolidated financial statements december 31 2011 2010 note 9 statutory reserve development fund stipulated company law prc net income taxation distributed dividends appropriation made following making cumulative prior years’ losses ii allocations “statutory surplus reserve” least 10 income tax determined prc accounting rules regulations fund amounts 50 company’s registered capital iii allocations 510 income tax determined prc accounting rules regulations company’s “statutory common welfare fund” established purpose providing employee facilities collective benefits company’s employees iv allocations discretionary surplus reserve approved stockholders’ general meeting company allocates 5 income tax development fund enlarging company’s business increasing capital pursuant new corporate law effective january 1 2006 one “statutory surplus reserve” requirement reserve 10 income tax exceed 50 registered capital company appropriated 3029967 3755921 1286315 reserve statutory surplus reserve 1514984 1877960 643158 reserve development fund 2011 2010 2009 respectively note 10 income tax company subject income taxes entity income arising derived tax jurisdiction entity domiciled deer us parent company incorporated us net operating losses nol income tax purposes year ended december 31 2011 us parent company utilized 100 nol dividend income received winder earnings repatriation deer international incorporated bvi income tax company domiciled bvi accordingly company’s consolidated financial statements present income tax provisions related bvi tax jurisdiction deer international domiciled local prc income tax pursuant tax laws china general enterprises subject income tax effective rate 25 winder enjoys 15 preferential income tax effective 2009 expiration december 31 2011 result status high tech enterprise winder received approval renewal 15 preferential income tax rate another three years 2011 following reconciliation tax us federal statutory rate provision income tax recorded consolidated financial statements years ended december 31 2011 2010 2009 effect change tax status recorded accordance asc topic 74010 states effect change tax status computed date change included tax provision continuing operations management believes local tax authorities would waived past taxes change tax status company’s subsidiary deer consumer products inc subsidiaries notes consolidated financial statements december 31 2011 2010 winder granted hightech enterprise status income tax expense year ended december 31 2011 2010 2009 would increased 5083249 3755779 1697000 respectively earnings per share would reduced 015 011 007 respectively foreign pretax earnings approximated 50954000 36874000 2011 2010 respectively pretax earnings foreign subsidiary subject us taxation effectively repatriated company provides income taxes undistributed earnings nonus subsidiaries except extent earnings invested indefinitely outside us december 31 2011 approximately 72653000 accumulated undistributed earnings nonus subsidiaries invested indefinitely existing us federal income tax rate additional taxes 13843000 would provided earnings remitted currently note 11 geographical sales geographical distribution sales follows note 12 operating risks company’s operations prc subject specific considerations significant risks typically associated companies north america western europe include risks associated among others political economic legal environments prc rules regulations regarding foreign currency exchange company’s results may adversely affected changes governmental policies respect laws regulations antiinflationary measures currency conversion remittance abroad rates methods taxation among things company’s sale purchase expense transactions denominated rmb company’s assets liabilities also denominated rmb freely convertible foreign currencies current prc law foreign exchange transactions required law carried authorized financial institutions remittances currencies rmb may require certain supporting documentation order effect remittance note 13 commitments winder registered capital 572 million december 31 2011 company contributed 367 million winder’s registered capital committed contribute additional 205 million april 2013 september 1 2010 company entered 2year lease expiring august 30 2012 show room panyu guangdong province monthly rent inclusive property management fees 5500 rmb 37000 company option renew lease upon expiration december 31 2011 company’s future minimum rental payments required operating lease 2012 follows deer consumer products inc subsidiaries notes consolidated financial statements december 31 2011 2010 note 14 major customers vendors year ended december 31 2011 three customers accounted approximately 38 13 11 sales respectively december 31 2011 total accounts receivable balance due three customers 14960215 year ended december 31 2011 supplier accounted 10 company’s raw material purchases year ended december 31 2010 two customers accounted 14 10 sales respectively december 31 2010 total receivable balance due customers 31975551 major customer 2009 year ended december 31 2010 one vendor accounted 12 company’s purchases raw materials december 31 2010 total payable vendor approximately 1464061 major vendor 2009 note 15 contingencies acquisition winder april 1 2008 deer international acquired 100 equity interest winder 50hz electric limited “50hz” time acquisition deer international offshore enterprise controlled company’s shareholders prc residents certain shareholders also owned controlled 50hz time acquisition made winder affiliated prc company shareholders october 2008 shareholders transferred ownership interests 50hz unrelated third party 50hz longer related party company transaction approved economic development bureau yangjiang hightech industry development zone “yangjiang hightech zone” acquisition 100 winder’s equity interests deer international april 1 2008 free consideration conditions applicable prc tax rules transaction related parties shall priced arm’s length basis tax authority right investigate related party transaction make adjustment finds price arm’s length basis prc tax authority would make adjustment applying deemed arm’s length price transaction given 50hz deer international certain related parties time winder acquisition possibility considerationfree transfer may challenged investigated prc tax authority deemed arm’s length price determined prc tax authority investigation higher original cost 50hz paid get 100 equity interest winder excess amount would subject additional prc income tax although company believes 50hz would responsible possible prc income tax company understands common practice prc tax authority enforce tax collection entity issue case would winder company may required pay possible prc income tax behalf 50hz according regulations acquisition winder might require approval ministry commence people’s republic china “mofcom” interpretation implementation regulations unclear approval mofcom required approval 50hz obtained yangjiang hightech zone may deemed incomplete transferee namely deer international may need obtain approval mofcom pending litigation march 28 2011 company filed suit supreme court state new york captioned deer consumer products inc v alfred little et al index 6508232011 certain blogger “alfred little” website seekingalphacom others company claims action allege publishing false defamatory statements defendants part scheme manipulate depress market common stock company claiming compensatory punitive damages totaling least 11 million including claims attorneys’ fees equitable remedies including disgorgement illicit trading profits received defendants connection alleged market manipulation scheme august 29 2011 company obtained court order allowing us effect service summons complaint upon defendant alfred little via email related notice effected service alfred little pursuant order september 29 2011 alfred little filed motions dismiss complaint lack personal jurisdiction permission appear anonymously party litigation addition august 31 2011 court granted defendant seekingalphacom’s motion dismiss claim ground federal statute communications decency act 47 usc § 230 precluded claim seekingalphacom september 29 2011 company filed notice appeal decision company decides go appeal must file brief “perfecting” appeal later june 29 2012 january 27 2012 court denied part alfred little’s motion dismiss complaint lack personal jurisdiction permitted company conduct discovery issue personal jurisdiction confidentiality agreement reached parties court also requested alfred little submit court evidence corroborating allegations potential risks physical harm camera review february 17 2012 parties reached confidentiality agreement february 23 2012 camera review evidence presented alfred little court permitted alfred little proceed anonymously court decides jurisdictional issue redirected parties proceed jurisdictional discovery pursuant previously ordered confidentiality agreement company commenced discovery jurisdictional issue deer consumer products inc subsidiaries notes consolidated financial statements december 31 2011 2010 april 29 2011 purported securities class action lawsuit behalf purchasers company’s common stock march 31 2009 march 21 2011 james rose v deer consumer products inc et al filed company certain current former officers directors united states district court central district california court yet certified class action status complaint alleges violations section 10b rule 10b5 exchange act well case individual defendants section 20a control person provisions exchange act factual assertions complaint based expressly published statements issue alfred little suit described consist primarily allegations defendants made materially false misleading public statements concerning company’s financial condition 2010 2009 complaint seeks unspecified damages relief relating purported inflation price company’s common stock class period consolidated amended complaint filed september 6 2011 essentially allegations company filed motion dismiss lawsuit motion fully briefed taken submission court company strongly denies allegations complaint company believes lawsuit frivolous without merit contest vigorously company plans pursue legal remedies available complaint withdrawn entirety note 16 condensed financial information us parent deer consumer products inc us holding company owns operating assets significant operations independent subsidiaries set forth condensed financial statements deer consumer products inc parent standalone unconsolidated basis december 31 2011 2010 years ended december 31 2011 2010 2009 condensed balance sheets deer consumer products inc subsidiaries notes consolidated financial statements december 31 2011 2010 condensed statements income condensed statements cash flows deer consumer products inc subsidiaries notes consolidated financial statements december 31 2011 2010 audited note 17 selected quarterly data unaudited note 18 valuation qualifying accounts allowance inventory allowance doubtful accounts receivable signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized deer consumer products inc registrant date march 29 2012 ying chief executive officer principal executive officer power attorney know persons presents person whose signature appears constitutes appoints ying attorneyinfact capacities sign amendments annual report form 10k file exhibits thereto documents connection therewith securities exchange commission hereby ratifying confirming said attorneyinfact substitute substitutes may cause done virtue hereof pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated signature title date ying chairman chief executive officer march 29 2012 ying principal executive officer zongshu nie chief financial officer director march 29 2012 zongshu nie principal financial accounting officer edward hua director march 29 2012 edward hua arnold staloff director march 29 2012 arnold staloff qi hua xu director march 29 2012 qi hua xu exhibit index exhibit description 21 share exchange agreement plan reorganization deer international group limited tag events corp dated september 3 2008 incorporated herein reference exhibit 21 company’s current report form 8k file 333140545 filed september 5 2008 22 return treasury agreement company crescent liu dated august 26 2008 incorporated herein reference exhibit 22 company’s current report form 8k file 333140545 filed september 5 2008 31 articles incorporation incorporated herein reference exhibit 31 company’s form sb2 file 333140545 filed february 8 2007 32 bylaws incorporated herein reference exhibit 32 company’s form sb2 file 333140545 filed february 8 2007 33 articles exchange deer international group limited tag events corp filed september 3 2008 incorporated herein reference exhibit 33 company’s current report form 8k file 333140545 filed september 5 2008 34 articles merger deer consumer products inc tag events corp amending articles incorporation filed secretary state nevada september 3 2008 incorporated herein reference exhibit 34 company’s current report form 8k file 333140545 filed september 5 2008 41 specimen stock certificate incorporated herein reference exhibit 41 company’s annual report form 10k year ended december 31 2008 file 333140545 filed march 31 2009 101 supplemental agreement winder electric group ltd ying fa’min shenzhen de mei long electric appliances co ltd shenzhen kafu industrial co ltd dated november 19 2009 incorporated herein reference exhibit 101 company’s current report form 8k file 00134407 filed november 20 2009 102 form prior patent transfer agreement winder electric group ltd ying fa’min shenzhen de mei long electric appliances co ltd shenzhen kafu industrial co ltd incorporated herein reference exhibit 102 company’s current report form 8k file 00134407 filed november 20 2009 103 form prior copyright trademark transfer agreement winder electric group ltd ying fa’min shenzhen de mei long electric appliances co ltd shenzhen kafu industrial co ltd incorporated herein reference exhibit 103 company’s current report form 8k file 00134407 filed november 20 2009 104 distribution agreement winder electric group ltd suning nanjing purchasing center dated december 1 2009 incorporated herein reference exhibit 104 company’s current report form 8k file 00134407 filed december 4 2009 105 form stock option agreement use stock options granted pursuant deer consumer products inc 2009 equity incentive plan incorporated herein reference exhibit 105 company’s current report form 8k file 00134407 filed december 24 2009 106 distribution agreement guangdong deer consumer products inc gome home appliance co ltd dated january 15 2010 incorporated herein reference exhibit 106 amendment 1 company’s current report form 8k file 00134407 filed april 30 2010 107 deer consumer products inc 2009 equity incentive plan incorporated herein reference company’s definitive proxy statement schedule 14a file 00134407 filed october 6 2009 108 lockup agreement achieve limited ying deer consumer products inc dated march 23 2010 incorporated herein reference exhibit 108 company’s current report form 8k file 00134407 filed march 29 2010 109 lockup agreement sino unity limited yu hai deng deer consumer products inc dated march 23 2010 incorporated herein reference exhibit 109 company’s current report form 8k file 00134407 filed march 29 2010 1010 lockup agreement true olympic limited zong zhu nie deer consumer products inc dated march 23 2010 incorporated herein reference exhibit 1010 company’s current report form 8k file 00134407 filed march 29 2010 1011 lockup agreement great scale holdings limited fa min deer consumer products inc dated march 23 2010 incorporated herein reference exhibit 1011 company’s current report form 8k file 00134407 filed march 29 2010 1012 lockup agreement new million holdings limited bao zhi li deer consumer products inc dated march 23 2010 incorporated herein reference exhibit 1012 company’s current report form 8k file 00134407 filed march 29 2010 1013 lockup agreement tiger castle limited jing wu chen deer consumer products inc dated march 23 2010 incorporated herein reference exhibit 1013 company’s current report form 8k file 00134407 filed march 29 2010 1014 lockup agreement sourceland limited yong mei wang deer consumer products inc dated march 23 2010 incorporated herein reference exhibit 1014 company’s current report form 8k file 00134407 filed march 29 2010 †21 subsidiaries deer consumer products inc †231 consent independent registered public accounting firm †241 power attorney included signature page annual report form 10k †311 certification principal executive officer pursuant exchange act rules 13a14a 15d14a adopted pursuant section 302 sarbanesoxley act 2002 †312 certification principal financial officer pursuant exchange act rules 13a14a 15d14a adopted pursuant section 302 sarbanesoxley act 2002 †321 certification pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 signed chief executive officer †322 certification pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 signed chief financial officer †101ins xbrl instance document †101sch xbrl taxonomy extension schema document †101cal xbrl taxonomy extension calculation linkbase document †101def xbrl taxonomy extension definition linkbase document †101lab xbrl taxonomy extension label linkbase document †101pre xbrl taxonomy extension presentation linkbase document † filed herewith item 15 exhibits financial statement schedules a1 financial statements see index consolidated financial statements page form 10k a2 financial statement schedules applicable b exhibits required item set forth exhibit index attached hereto c financial statement schedules applicable deer consumer products inc subsidiaries consolidated financial statements years ended december 31 2008 2007 contents report independent registered public accounting firm board directors stockholders deer consumer products inc audited accompanying consolidated balance sheets deer consumer products inc subsidiaries december 31 2008 2007 related consolidated statements income comprehensive income stockholders equity cash flows years ended december 31 2008 2007 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether consolidated financial statements free material misstatement company required engaged perform audit internal control financial reporting audits included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness company’s internal control financial reporting accordingly express opinion audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall consolidated financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects consolidated financial position deer consumer products inc subsidiaries december 31 2008 2007 consolidated results operations consolidated cash flows years ended december 31 2008 2007 conformity us generally accepted accounting principles goldman parks kurland mohidin llp encino california march 20 deer consumer products inc subsidiaries consolidated balance sheets december 31 2008 2007 accompanying notes integral part consolidated financial statements deer consumer products inc subsidiaries consolidated statements income comprehensive income years ended december 31 2008 accompanying notes integral part consolidated financial statements deer consumer products inc subsidiaries consolidated statement stockholders equity years ended december 31 2008 accompanying notes integral part consolidated financial statements deer consumer products inc subsidiaries consolidated statements cash flows years ended december 31 2008 2007 accompanying notes integral part consolidated financial statements deer consumer products inc subsidiaries notes consolidated financial statements december 31 2008 2007 note 1 organization basis presentation organization line business deer consumer products inc formerly known tag events corp hereinafter referred “company” “deer” incorporated state nevada july 18 2006 september 3 2008 company entered share exchange agreement plan reorganization deer international group limited “deer international” company incorporated laws british virgin islands “bvi” december 3 2007 acquired 100 shares winder electrical company ltd “winder” march 11 2008 winder 100 owned subsidiary delta international ltd “delta” winder delta formed incorporated guangdong province prc july 20 2001 february 23 2006 respectively pursuant share exchange agreement company acquired deer international 50000 ordinary shares consisting issued outstanding capital stock exchange issuance aggregate 18050000 shares company’s common stock concurrently closing transactions contemplated share exchange agreement condition thereof company entered agreement crescent liu former director chief executive officer pursuant returned 5950000 shares company’s common stock company cancellation mr liu compensated way cancellation shares company’s common stock upon completion foregoing transactions company aggregate 22600000 shares common stock issued outstanding connection transaction company changed name deer consumer products inc september 3 2008 exchange shares deer international accounted reverse acquisition purchase method accounting since deer international obtained control company accordingly merger deer international company recorded recapitalization deer international deer international treated continuing entity historical financial statements presented consolidated financial statements deer international share exchange agreement treated recapitalization business combination therefore pro forma information disclosed date transaction net liabilities legal acquirer 0 result reverse merger transactions described historical financial statements presented deer international operating entities company engaged manufacture marketing distribution sale household appliances blenders food processors choppers juicers etc company manufactures products yangjiang china operates corporate functions nanshan shenzhen china basis presentation accompanying consolidated financial statements include accounts deer international 100 whollyowned subsidiary winder’s whollyowned subsidiary delta significant intercompany accounts transactions eliminated consolidation accompanying consolidated financial statements prepared conformity accounting principles generally accepted united states america company’s functional currency chinese yuan renminbi rmb however accompanying consolidated financial statements translated presented united states dollars foreign currency translation accounts company maintained consolidated financial statements expressed chinese yuan renminbi rmb consolidated financial statements translated us dollars usd accordance statement financial accounting standards sfas 52 foreign currency translation rmb functional currency according statement assets liabilities translated exchange rate balance sheet date stockholders equity translated historical rates statement operations items translated weighted average exchange rate year resulting translation adjustments reported comprehensive income accordance sfas 130 reporting comprehensive income” deer consumer products inc subsidiaries notes consolidated financial statements december 31 2008 2007 note 2 summary significant accounting policies use estimates preparation financial statements conformity accounting principles generally accepted united states america requires management make estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting period actual results could differ materially estimates upon carrying values based cash equivalents cash equivalents include cash hand cash time deposits highly liquid investments original maturities three months less restricted cash restricted cash consists monies restricted company’s lender monies restricted letter credit bank acceptance december 31 2008 2007 total restricted cash amounted 200099 interest rate 036 per annum 450385 interest rate 072 per annum respectively accounts receivable company maintains reserves potential credit losses accounts receivable management reviews composition accounts receivable analyzes historical bad debts customer concentrations customer credit worthiness current economic trends changes customer payment patterns evaluate adequacy reserves investments company purchased various stocks 2007 2008 company required purchase equity fund bank loan requirement investments trading securities bought held principally purpose selling near term reported fair value unrealized gains losses included earnings advances suppliers company makes advances certain vendors purchase material advances suppliers interest free unsecured inventories valued lower cost determined weighted average basis market company compares cost inventories market value allowance made writing inventories market value lower property equipment property equipment stated cost expenditures maintenance repairs charged earnings incurred additions renewals betterments capitalized property equipment retired otherwise disposed related cost accumulated depreciation removed respective accounts gain loss included operations depreciation property equipment provided using straightline method substantially assets estimated lives follows deer consumer products inc subsidiaries notes consolidated financial statements december 31 2008 2007 buildings 520 years equipment 510 years vehicles years office equipment 510 years december 31 2008 2007 following details property equipment depreciation expense years ended december 31 2008 2007 1199578 795531 respectively longlived assets company applies provisions sfas 144 “accounting impairment disposal longlived assets” “sfas 144” addresses financial accounting reporting impairment disposal longlived assets supersedes sfas 121 “accounting impairment longlived assets longlived assets disposed of” accounting reporting provisions apb opinion 30 “reporting results operations disposal segment business” company periodically evaluates carrying value longlived assets held used accordance sfas 144 sfas 144 requires impairment losses recorded longlived assets used operations indicators impairment present undiscounted cash flows estimated generated assets less assets’ carrying amounts event loss recognized based amount carrying amount exceeds fair market value longlived assets loss longlived assets disposed determined similar manner except fair market values reduced cost disposal based review company believes september 30 2008 significant impairments longlived assets intangible assets intangible assets consist rights use land computer software company evaluates intangible assets impairment least annual basis whenever events changes circumstances indicate carrying value may recoverable estimated future cash flows recoverability intangible assets measured comparing net book value related projected undiscounted cash flows assets considering number factors including past operating results budgets economic projections market trends product development cycles net book value asset exceeds related undiscounted cash flows asset considered impaired second test performed measure amount impairment loss net intangible assets december 31 2008 2007 follows deer consumer products inc subsidiaries notes consolidated financial statements december 31 2008 2007 per peoples republic chinas “prc” governmental regulations government owns land company recognized amounts paid acquisition rights use land intangible asset company amortizing period company use land range 45 50 years computer software amortized 12 years amortization expense years ended december 31 2008 2007 18723 18509 respectively fair value financial instruments certain company’s financial instruments including cash equivalents restricted cash accounts receivable accounts payable accrued liabilities shortterm debt carrying amounts approximate fair value due short maturities addition company longterm debt financial institutions carrying amount longterm loan approximate fair value based current rates instruments similar characteristics january 1 2008 company adopted sfas 157 fair value measurements sfas 157 defines fair value establishes threelevel valuation hierarchy disclosures fair value measurement enhances disclosures requirements fair value measures carrying amounts reported balance sheets receivables current liabilities qualify financial instruments reasonable estimate fair value short period time origination instruments expected realization current market rate interest three levels defined follow · level 1 inputs valuation methodology quoted prices unadjusted identical assets liabilities active markets · level 2 inputs valuation methodology include quoted prices similar assets liabilities active markets inputs observable asset liability either directly indirectly substantially full term financial instrument · level 3 inputs valuation methodology unobservable significant fair value measurement december 31 2008 company identify assets liabilities required presented balance sheet fair value concentration credit risk cash includes cash hand demand deposits accounts maintained within china certain financial instruments subject company concentration credit risk consist cash balances financial institutions within china covered insurance company experienced losses accounts december 31 2008 2007 revenue recognition company’s revenue recognition policies accordance securities exchange commission “sec” staff accounting bulletin sab 104 sales revenue recognized date shipment customers formal arrangement exists price fixed determinable delivery completed significant obligations company exist collectability reasonably assured payments received relevant criteria revenue recognition satisfied recorded unearned revenue deer consumer products inc subsidiaries notes consolidated financial statements december 31 2008 2007 unearned revenue company recorded payments goods relevant criteria revenue recognition satisfied unearned revenue advertising costs company expenses cost advertising incurred appropriate first time advertising takes place advertising costs years ended december 31 2008 2007 111634 31821 respectively income taxes company utilizes sfas 109 “accounting income taxes” requires recognition deferred tax assets liabilities expected future tax consequences events included financial statements tax returns method deferred income taxes recognized tax consequences future years differences tax bases assets liabilities financial reporting amounts period end based enacted tax laws statutory tax rates applicable periods differences expected affect taxable income valuation allowances established necessary reduce deferred tax assets amount expected realized company adopted provisions fasb interpretation 48 accounting uncertainty income taxes january 1 2007 result implementation fin 48 company made comprehensive review portfolio tax positions accordance recognition standards established fin 48 result implementation interpretation 48 company recognized material adjustments liabilities stockholders’ equity tax returns filed highly certain positions taken would sustained upon examination taxing authorities others subject uncertainty merits position taken amount position would ultimately sustained benefit tax position recognized financial statements period based available evidence management believes likely position sustained upon examination including resolution appeals litigation processes tax positions taken offset aggregated positions tax positions meet morelikelythannot recognition threshold measured largest amount tax benefit 50 percent likely realized upon settlement applicable taxing authority portion benefits associated tax positions taken exceeds amount measured described reflected liability unrecognized tax benefits accompanying balance sheets along associated interest penalties would payable taxing authorities upon examination interest associated unrecognized tax benefits classified interest expense penalties classified selling general administrative expenses statements income adoption fin 48 material impact company’s financial statements foreign currency transactions comprehensive income accounting principles generally require recognized revenue expenses gains losses included net income certain statements however require entities report specific changes assets liabilities gain loss foreign currency translation separate component equity section balance sheet items along net income components comprehensive income functional currency company chinese renminbi unit renminbi yuan translation gains 2345697 1303732 december 31 2008 2007 respectively classified item comprehensive income stockholders’ equity section consolidated balance sheet years ended december 31 2008 2007 comprehensive income consolidated statements income comprehensive income included translation gains 1041965 822146 respectively currency hedging company entered forward exchange agreement bank china whereby company agreed sell us dollars bank china certain contractual rates since contractual rate company sells us dollars bank china greater exchange rate date exchange transaction company recognized foreign exchange gains 959943 90707 year ended december 31 2008 2007 respectively deer consumer products inc subsidiaries notes consolidated financial statements december 31 2008 2007 december 31 2008 company outstanding forward exchange contracts sell 8110770 exchange rates ranging rmb 71772 rmb 7406 fair value contracts approximately 13000 basic diluted earnings per share earnings per share calculated accordance sfas 128 “earnings per share” sfas 128 superseded accounting principles board opinion no15 apb 15 net earnings per share periods presented restated reflect adoption sfas 128 basic earnings per share based upon weighted average number common shares outstanding diluted earnings per share based assumption dilutive convertible shares stock options converted exercised dilution computed applying treasury stock method options warrants assumed exercised beginning period time issuance later funds obtained thereby used purchase common stock average market price period options warrants dilutive securities outstanding december 31 2008 2007 statement cash flows accordance sfas 95 “statement cash flows” cash flows company’s operations calculated based upon local currencies result amounts related assets liabilities reported statement cash flows necessarily agree changes corresponding balances balance sheet recent pronouncements february 2007 financial accounting standards board “fasb” issued sfas 159 “the fair value option financial assets financial liabilities“ sfas 159 permits entities choose measure many financial assets financial liabilities fair value unrealized gains losses items fair value option elected reported earnings sfas 159 effective fiscal years beginning november 15 2007 adoption sfas 159 material impact company’s financial position results operations june 2007 fasb issued fasb staff position eitf 073 “accounting nonrefundable advance payments goods services received use future research development activities” “fsp eitf 073” addresses whether nonrefundable advance payments goods services used rendered research development activities expensed advance payment made research development activity performed task force reached consensus nonrefundable advance payments goods services used rendered future research development activities deferred capitalized amounts recognized expense related goods delivered related services performed entities continue evaluate whether expect goods delivered services rendered entity expect goods delivered services rendered capitalized advance payment charged expense management believe pronouncement impact company’s financial statements december 2007 fasb issued sfas 141 revised 2007 “business combinations” sfas 141r changes reporting enterprise accounts acquisition business sfas 141r requires acquiring entity recognize assets acquired liabilities assumed transaction acquisitiondate fair value limited exceptions applies wider range transactions events sfas 141r effective fiscal years beginning december 15 2008 early adoption retrospective application prohibited pronouncement likely material impact business acquisitions made january 1 2009 december 2007 fasb issued sfas 160 “noncontrolling interests consolidated financial statements” amendment accounting research bulletin “arb” 51 sfas 160 clarifies noncontrolling interest subsidiary ownership interest consolidated entity reported equity consolidated financial statements sfas 160 changes way consolidated income statement presented thus requiring consolidated net income reported amounts include amounts attributable parent noncontrolling interest sfas 160 effective fiscal years interim periods within fiscal years beginning december 15 2008 based current conditions company expect adoption sfas 160 significant impact results operations financial position deer consumer products inc subsidiaries notes consolidated financial statements december 31 2008 2007 march 2008 fasb issued sfas 161 “disclosures derivative instruments hedging activities amendment fasb statement 133” sfas 161 changes disclosure requirements derivative instruments hedging activities entities required provide enhanced disclosures entity uses derivative instruments b derivative instruments related hedged items accounted sfas 133 related interpretations c derivative instruments related hedged items affect entity’s financial position financial performance cash flows company evaluated impact sfas 161 may results operations financial position may 2008 fasb issued sfas 162 “the hierarchy generally accepted accounting principles” sfas 162 identifies sources accounting principles framework selecting principles used preparation financial statements nongovernmental entities presented conformity generally accepted accounting principles gaap united states gaap hierarchy sfas 162 impact company’s financial statements may 2008 fasb issued sfas 163 “accounting financial guarantee insurance contracts interpretation fasb statement 60” scope sfas 163 limited financial guarantee insurance reinsurance contracts described statement issued enterprises included within scope statement 60 accordingly sfas 163 apply financial guarantee contracts issued enterprises excluded scope statement 60 insurance contracts seem similar financial guarantee insurance contracts issued insurance enterprises mortgage guaranty insurance credit insurance trade receivables sfas 163 also apply financial guarantee insurance contracts derivative instruments included within scope fasb statement 133 “accounting derivative instruments hedging activities” sfas 163 impact company’s financial statements note 3 inventories december 31 2008 2007 consisted following note 4 short term loans short term loans december 31 2008 2007 follows deer consumer products inc subsidiaries notes consolidated financial statements december 31 2008 2007 interest expense short term loans 310762 113356 years ended december 31 2008 2007 respectively note 5 notes payable notes payable december 31 2008 2007 consist multiple bankers acceptance notes bank china payable company’s vendors terms notes range 03 months interest rate notes company deposits 10 notes’ par value bank refundable notes paid notes payable december 31 2008 2007 amounted 3155348 3160059 respectively note 6 longterm loan november 14 2008 company entered longterm loan agreement unrelated party loan 733500 810 due october 20 2010 secured certain fixed assets company note 7 stockholders’ equity november 30 2007 company decided increase paidin capital 2923688 board meeting new capital retained earnings distributable shareholder december 20 2008 50hz related party owned two shareholders deer international transferred intangible asset patent company settlement related party receivable asset’s historical costs could corroborated supporting documentation recorded zero costs basis company settlement related party receivable 3314979 transfer intangible asset zero cost basis considered deemed dividend 3314979 majority shareholders company 100 50hz note 8 employee common welfare total expense employee common welfare 59147 2316 years ended december 31 2008 2007 respectively chinese government abolished 14 welfare plan policy beginning 2007 company required establish welfare common welfare reserves note 9 statutory reserve development fund stipulated company law prc net income taxation distributed dividends appropriation made following making cumulative prior years’ losses ii allocations “statutory surplus reserve” least 10 income tax determined prc accounting rules regulations fund amounts 50 company’s registered capital iii allocations 510 income tax determined prc accounting rules regulations company’s “statutory common welfare fund” “scwf” established purpose providing employee facilities collective benefits company’s employees deer consumer products inc subsidiaries notes consolidated financial statements december 31 2008 2007 iv allocations discretionary surplus reserve approved stockholders’ general meeting company allocates 5 income tax development fund enlarging business increasing capital pursuant new corporate law effective january 1 2006 one statutory surplus reserve requirement reserve 10 income tax exceed 50 registered capital company appropriated 398939 199469 348822 174411 reserve statutory surplus reserve development fund years ended december 31 2008 2007 respectively note 10 related party transactions due shareholder amounted 0 1383124 december 31 2008 2007 respectively due related party amounted 331267 0 december 31 2008 2007 respectively company collects portion sales collection company controlled former shareholder current related party due shareholder related party represents account receivables company parties considered related parties common ownership company’s ceo due shareholder amounted 0 756458 december 31 2008 2007 respectively due shareholder noninterest bearing payable receivable demand advance shareholder amounted 0 509139 december 31 2008 2007 respectively advances related party amounted 274805 0 december 31 2008 2007 respectively advances shareholder related party non interest bearing payable receivable demand purchases shareholders amounted 0 726744 years ended december 31 2008 2007 respectively note 11 taxes local prc income tax pursuant tax laws china general enterprises subject income tax effective rate 25 33 years ended december 31 2008 2007 respectively reconciliation tax united states federal statutory rate provision income tax recorded financial statements years ended december 31 2008 2007 follows company operates privileged economic zone entitles certain tax benefits tax holiday follows · winder electric exempt provincial tax 100 exemption federal tax january 1 2002 december 31 2003 50 exemption federal tax january 1 2004 december 31 2006 company exempt paying income taxes due operating privileged economic zone net income year ended december 31 2007 would lower approximately 717000 earnings per share would 015 2008 company receive favorable tax treatment note 12 geographical sales geographical distribution sales follows note 13 subsequent event february 6 2009 company received 508500 placement units securities consisting shares common stock par value 001 per share stock purchase warrants 15 warrant coverage private placement exempt registration securities act private placement extended march 31 2009 intended proceeds private placement used primarily working capital total 625000 units unit representing one share company’s common stock three year common stock purchase warrant amount 15 units purchased sold end business february 6 2009 unit priced 80 508500 total received fees 9 securities placed payable cash ii number common stock purchase warrants equal 10 number units placed paid participating selected dealers stock purchase warrants term three years exercisable one share common stock initial exercise price 150 securities offered private placement registered securities act state securities laws unless registered may sold united states except pursuant exemption transaction subject registration requirements securities act applicable state securities laws signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report form 10k signed behalf undersigned thereunto duly authorized deer consumer products inc date march 30 2009 ying chief executive officer principal executive officer pursuant requirements securities exchange act 1934 report form 10k signed following persons behalf registrant capacities dates indicated signature title date sying chairman board chief executive officer march 30 2009 ying yuehua xia chief financial officer treasurer march 30 2009 yuehua xia sman wai james chiu director march 30 2009 man wai james chiu exhibit index item 15 exhibits financial statement schedules following documents filed part included annual report 1 financial statements listed index financial statements filed part annual report beginning page 2 exhibits listed exhibit index filed part annual report deer consumer products inc subsidiaries consolidated financial statements years ended december 31 2010 2009 page report independent registered public accounting firm financial statements consolidated balance sheets december 31 2010 2009 consolidated statements income comprehensive income years ended december 31 2010 2009 2008 consolidated statements stockholders’ equity years ended december 31 2010 2009 2008 consolidated statements cash flows years ended december 31 2010 2009 2008 notes consolidated financial statements index report independent registered public accounting firm board directors stockholders deer consumer products inc audited accompanying consolidated balance sheets deer consumer products inc company december 31 2010 2009 related consolidated statements income stockholders’ equity comprehensive income cash flows years ended december 31 2010 2009 2008 addition opinion financial statement schedule listed note 18 financial statements presents fairly material respects information set forth therein read conjunction related consolidated financial statements also audited deer consumer products inc’s internal control financial reporting december 31 2010 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso deer consumer products inc’s management responsible financial statements maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying management’s report internal control responsibility express opinion financial statements opinion company’s internal control financial reporting based audits conducted audits accordance standards public company accounting oversight board united states standards required plan perform audits obtain reasonable assurance whether financial statements free material misstatement whether effective internal control financial reporting maintained material respects audits financial statements included examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management evaluating overall financial statement presentation audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinion company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate material weakness deficiency combination deficiencies internal control financial reporting reasonable possibility material misstatement companys annual interim financial statements prevented detected timely basis following material weaknesses identified · ineffective documentation testing information technology related controls financial reporting · lack technical accounting expertise among financial staff regarding requirements pcaob auditing standard 5 coso assessment internal control financial reporting material weaknesses considered determining nature timing extent audit tests applied audit 2010 consolidated financial statements company year ended december 31 2010 opinion consolidated financial statements referred present fairly material respects consolidated financial position deer consumer products inc december 31 2010 2009 consolidated results operations consolidated cash flows years ended december 31 2010 2009 2008 conformity accounting principles generally accepted united states america also opinion effect aforementioned material weaknesses achievement objectives internal control criteria deer consumer products inc maintained effective internal control financial reporting december 31 2010 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso opinion effectiveness internal control financial reporting affect opinion consolidated financial statements goldman kurland mohidin llp encino california march 9 2011 index deer consumer products inc subsidiaries consolidated balance sheets december 31 2010 2009 accompanying notes integral part consolidated financial statements index deer consumer products inc subsidiaries consolidated statements income comprehensive income years ended december 31 2010 2009 2008 accompanying notes integral part consolidated financial statements index deer consumer products inc subsidiaries consolidated statements stockholders equity years ended december 31 2010 2009 2008 accompanying notes integral part consolidated financial statements index deer consumer products inc subsidiaries consolidated statements cash flows years ended december 31 2010 2009 2008 accompanying notes integral part consolidated financial statements index deer consumer products inc subsidiaries notes consolidated financial statements december 31 2010 2009 note 1 organization basis presentation organization line business deer consumer products inc formerly known tag events corp hereinafter referred “company” “deer” incorporated state nevada july 18 2006 september 3 2008 company entered share exchange agreement plan reorganization deer international group ltd “deer international” corporation organized laws british virgin islands december 3 2007 acquired 100 shares winder electric group ltd “winder” march 11 2008 winder 100 owned subsidiary delta international limited “delta” winder delta formed incorporated guangdong province people republic china “prc” july 20 2001 february 23 2006 respectively pursuant share exchange agreement company acquired deer international 50000 ordinary shares consisting issued outstanding capital stock 15695706 shares company’s common stock concurrently closing transactions contemplated share exchange agreement condition thereof company entered agreement crescent liu former director chief executive officer pursuant returned 5173914 shares company’s common stock company cancellation mr liu compensated cancellation shares company’s common stock upon completion foregoing transactions company 19652226 shares common stock issued outstanding connection transaction company changed name deer consumer products inc september 3 2008 exchange shares deer international recorded reverse acquisition purchase method accounting deer international obtained control company accordingly merger deer international company recorded recapitalization deer international deer international treated continuing entity historical financial statements presented consolidated financial statements deer international share exchange agreement treated recapitalization business combination therefore pro forma information disclosed date transaction net liabilities legal acquirer 0 company engaged manufacture marketing distribution sale small home kitchen electric appliances blenders food processors choppers juicers etc company manufactures products yangjiang china corporate functions nanshan shenzhen china stock splits april 24 2009 company effected 1for23 reverse stock split common stock october 2 2009 company effected 2for1 forward stock split common stock share information common shares retroactively restated stock splits basis presentation accompanying consolidated financial statements include accounts company wholly owned subsidiary deer international deer international’s wholly owned subsidiary winder’s wholly owned subsidiaries delta deer technology anhui co ltd “deer technology” anlin technology anhui co ltd “anlin technology” significant intercompany accounts transactions eliminated consolidation deer technology incorporated april 30 2010 anhui province company invested 298 million deer technology anlin technology incorporated april 30 2010 anhui province company invested 102 million anlin technology accompanying consolidated financial statements prepared conformity accounting principles generally accepted united states america “us gaap” functional currency company’s china subsidiaries chinese yuan renminbi “rmb” however accompanying consolidated financial statements translated presented united states dollars “” “usd” index deer consumer products inc subsidiaries notes consolidated financial statements december 31 2010 2009 foreign currency translation accounts company’s china subsidiaries maintained rmb accounts us parent company maintained usd accounts china subsidiaries translated usd accordance accounting standards codification “asc” topic 830 “foreign currency matters” rmb functional currency china subsidiaries according topic 830 assets liabilities translated exchange rate respective balance sheet dates stockholders’ equity translated historical rates statement income items translated weighted average exchange rate period resulting translation adjustments reported comprehensive income accordance asc topic 220 “comprehensive income” gains losses resulting translations foreign currency transactions balances reflected statements income note 2 summary significant accounting policies use estimates preparation financial statements conformity us gaap requires management make estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting period actual results could differ estimates areas require estimates assumptions include valuation accounts receivable inventory determination useful lives property equipment estimation certain liabilities sales returns cash equivalents cash equivalents include cash hand cash time deposits certificates deposit highly liquid debt instruments original maturities three months less restricted cash restricted cash consists monies restricted company’s lender monies restricted letter credit bank acceptance accounts receivable company maintains reserves potential credit losses accounts receivable management reviews composition accounts receivable analyzes historical bad debts customer concentrations customer credit worthiness current economic trends changes customer payment patterns evaluate adequacy reserves december 31 2010 2009 approximately 29 46 respectively accounts receivable overseas customers company maintains substantial amount export insurance covers losses arising customers’ rejection products political risk losses arising business credit risks including bankruptcy insolvency delay payment investments company purchased various stocks 2007 2008 company required purchase equity fund bank loan investments trading securities bought held principally purpose selling near term reported fair value unrealized gains losses included earnings stocks sold 2009 advances suppliers company makes advances certain vendors purchase material equipment advances interestfree unsecured inventories valued lower cost determined weighted average basis market company compares cost inventories market value allowance made write inventories market value lower index deer consumer products inc subsidiaries notes consolidated financial statements december 31 2010 2009 property equipment property equipment stated cost expenditures maintenance repairs charged earnings incurred additions renewals betterments capitalized property equipment retired otherwise disposed related cost accumulated depreciation removed respective accounts gain loss included operations depreciation property equipment provided using straightline method substantially assets estimated lives follows buildings 520 years equipment 510 years vehicles 5 years office equipment 510 years following details property equipment december 31 2010 2009 depreciation 2010 2009 2008 1490855 1439751 1199578 respectively construction progress construction progress consists costs related companys construction new plant office building power distribution station balance december 31 2010 8913181 company committed pay additional rmb 10 million 15 million complete construction project expected completed 2011 longlived assets company applies provisions asc topic 360 “property plant equipment” addresses financial accounting reporting impairment disposal longlived assets asc 360 requires impairment losses recorded longlived assets used operations indicators impairment present undiscounted cash flows estimated generated assets less assets’ carrying amounts event loss recognized based amount carrying amount exceeds fair value longlived assets loss longlived assets disposed determined similar manner except fair values reduced cost disposal based review company believes december 31 2010 2009 significant impairment longlived assets intangible assets intangible assets consist rights use land computer software company evaluates intangible assets impairment least annually whenever events changes circumstances indicate carrying value may recoverable estimated future cash flows recoverability intangible assets measured comparing net book value related projected undiscounted cash flows assets considering number factors including past operating results budgets economic projections market trends product development cycles net book value asset exceeds related undiscounted cash flows asset considered impaired second test performed measure amount impairment loss index deer consumer products inc subsidiaries notes consolidated financial statements december 31 2010 2009 following details intangible assets december 31 2010 2009 pursuant prc regulations prc government owns land company recognized amounts paid rights use land intangible asset company amortizes rights respective periods range 45 50 years computer software amortized 1 2 years amortization 2010 2009 2008 150027 9435 18723 respectively following table summarizes expected amortization next 5 years december 31 2010 fair value financial instruments certain company’s financial instruments including cash equivalents restricted cash accounts receivable accounts payable accrued liabilities shortterm loans notes payable carrying amounts approximate fair values due short maturities asc topic 820 “fair value measurements disclosures” requires disclosure fair value financial instruments held company asc topic 825 “financial instruments” defines fair value establishes threelevel valuation hierarchy disclosures fair value measurement enhances disclosure requirements fair value measures carrying amounts reported consolidated balance sheets receivables current liabilities qualify financial instruments reasonable estimate fair values short period time origination instruments expected realization current market rate interest three levels valuation hierarchy defined follows § level 1 inputs valuation methodology quoted prices identical assets liabilities active markets § level 2 inputs valuation methodology include quoted prices similar assets liabilities active markets inputs observable asset liability either directly indirectly substantially full term financial instrument § level 3 inputs valuation methodology unobservable significant fair value measurement index deer consumer products inc subsidiaries notes consolidated financial statements december 31 2010 2009 company analyzes financial instruments features liabilities equity asc 480 “distinguishing liabilities equity” asc 815 december 31 2010 2009 company identify assets liabilities required presented balance sheet fair value concentration credit risk cash includes cash hand demand deposits accounts maintained within china certain financial instruments subject company concentration credit risk consist cash balances financial institutions within china covered insurance company experienced losses accounts revenue recognition company’s revenue recognition policies compliance sec staff accounting bulletin sab 104 codified fasb asc topic 480 sales revenue recognized date shipment customers significant obligations company exist collectability reasonably assured payments received relevant criteria revenue recognition satisfied recorded unearned revenue unearned revenue company records payments goods relevant criteria revenue recognition satisfied unearned revenue advertising costs company expenses cost advertising incurred appropriate first time advertising takes place advertising costs 2010 2009 2008 222648 45361 111507 respectively research development company expenses research development costs incurred research development costs 2010 2009 2008 777783 602550 585000 respectively included general administrative expenses subsidy income subsidy income represented grants local government recognition company’s promoting local economy expansion overseas markets grants without conditions restrictions required repaid stockbased compensation company records stockbased compensation accordance asc topic 718 “compensation stock compensation” asc 718 requires companies measure compensation cost stockbased employee compensation fair value grant date recognize expense employee’s requisite service period company recognizes statement operations grantdate fair value stock options equitybased compensation issued employees nonemployees 50000 options outstanding december 31 2010 income taxes company accounts income taxes accordance asc topic 740 “income taxes” asc 740 requires company use asset liability method accounting income taxes whereby deferred tax assets recognized deductible temporary differences deferred tax liabilities recognized taxable temporary differences temporary differences reported amounts assets liabilities tax bases deferred tax assets reduced valuation allowance opinion management likely portion deferred tax assets realized deferred tax assets liabilities adjusted effects changes tax laws rates date enactment index deer consumer products inc subsidiaries notes consolidated financial statements december 31 2010 2009 asc 740 tax position recognized benefit “more likely not” tax position would sustained tax examination tax examination presumed occur amount recognized largest amount tax benefit greater 50 likely realized examination tax positions meeting “more likely not” test tax benefit recorded adoption effect company’s consolidated financial statements foreign currency transactions comprehensive income us gaap requires recognized revenue expenses gains losses included net income certain statements however require entities report specific changes assets liabilities gain loss foreign currency translation separate component equity section balance sheet items along net income components comprehensive income functional currency company’s china subsidiaries rmb translation gains classified item comprehensive income stockholders’ equity section consolidated balance sheets currency hedging company time may enter forward exchange agreements bank china whereby company agrees sell us dollars bank china certain rates december 31 2010 company outstanding forward exchange contracts basic diluted earnings per share earnings per share calculated accordance asc topic 260 “earnings per share” basic earnings per share based upon weighted average number common shares outstanding diluted earnings per share based assumption dilutive convertible shares stock options converted exercised dilution computed applying treasury stock method options warrants assumed exercised beginning period time issuance later funds obtained thereby used purchase common stock average market price period following reconciliation number shares denominator used basic diluted earnings per share computations statement cash flows accordance asc topic 230 “statement cash flows” cash flows company’s operations calculated based upon local currencies using average translation rates result amounts related assets liabilities reported consolidated statements cash flows necessarily agree changes corresponding balances consolidated balance sheets registration rights agreement company accounts payment arrangements registration rights agreement accordance asc topic 825 “financial instruments” requires contingent obligation make future payments otherwise transfer consideration registration payment arrangement whether issued separate agreement included provision financial instrument agreement recognized separately measured accordance asc topic 450 “contingencies” reclassifications certain prior year amounts reclassified conform manner presentation current period index deer consumer products inc subsidiaries notes consolidated financial statements december 31 2010 2009 recent pronouncements july 1 2009 company adopted accounting standards update “asu” 200901 “topic 105 generally accepted accounting principles amendments based statement financial accounting standards 168 fasb accounting standards codification hierarchy generally accepted accounting principles” “asu 200901” asu 200901 redefines authoritative us gaap nongovernmental entities comprised fasb accounting standards codification “codification” sec registrants guidance issued sec codification reorganization compilation thenexisting authoritative us gaap nongovernmental entities except guidance issued sec codification amended effect nonsec changes authoritative us gaap adoption asu 200901 changed referencing convention us gaap notes consolidated financial statements february 25 2010 fasb issued asu 201009 subsequent events topic 855 “amendments certain recognition disclosure requirements” effective immediately amendments asu remove requirement sec filer disclose date subsequent events evaluated issued revised financial statements revised financial statements include financial statements revised result either correction error retrospective application us gaap fasb believes amendments remove potential conflicts sec’s literature adoption asu material impact company’s consolidated financial statements march 5 2010 fasb issued asu 201011 derivatives hedging topic 815 “scope exception related embedded credit derivatives” asu clarifies guidance within derivative literature exempts certain credit related features analysis potential embedded derivatives requiring separate accounting asu specifies embedded credit derivative feature related transfer credit risk form subordination one financial instrument another subject bifurcation host contract asc 8151525 derivatives hedging embedded derivatives recognition embedded credit derivative features analyzed determine whether economic characteristics risks “clearly closely related” economic characteristics risks host contract whether bifurcation required asu effective company july 1 2010 adoption asu material impact company’s consolidated financial statements april 2010 fasb codified consensus reached emerging issues task force issue 0809 “milestone method revenue recognition” fasb asu 201017 provides guidance defining milestone determining may appropriate apply milestone method revenue recognition research development transactions fasb asu 201017 effective fiscal years beginning june 15 2010 effective prospective basis milestones achieved adoption date company expect asu material impact financial position results operations result adoption january 1 2011 note 3 inventories consisted following december 31 2010 2009 note 4 payables accrued expenses payables accrued expenses consisted following december 31 2010 2009 accrued expenses represented accrued electricity freight fee payables represented government charges payable local construction management department payable employees’ education fund labor union fund funds index deer consumer products inc subsidiaries notes consolidated financial statements december 31 2010 2009 note 5 taxes payable taxes payable consisted following december 31 2010 2009 note 6 notes payable notes payable december 31 2010 2009 consist multiple bankers’ acceptances bank china terms notes range 36 months bear interest pays bank 005 note balance acceptance fee company deposits 16 notes’ par value bank china refundable notes repaid accounted restricted cash accompanied consolidated financial statements note 7 stockholders’ equity december 20 2008 50hz related party owned two shareholders deer international transferred intangible assets company settle related party receivable asset’s historical costs could corroborated supporting documentation recorded 0 company intangible assets consist patents trademarks used company settlement related party receivable considered dividend 3134979 majority shareholders company 100 50hz march 31 2009 company completed private placement 810690 units unit consisting 1 share company’s common stock 3year warrant purchase 15 1 share company’s common stock 173 per share 092 per unit 746000 company issued warrants purchase 121660 shares common stock investors private placement company also issued warrants purchase 81090 shares common stock placement agents may 2009 company completed two private placements units consisting 1 share company’s common stock 3year warrant purchase 15 1 share company’s common stock 173 per share pursuant company sold 2100000 units 092 per unit 1932000 company issued warrants purchase 315000 shares common stock investors private placement company also issued warrants purchase 210000 shares common stock placement agents connection private placements described company issued registration rights agreement requiring company file registration statement covering shares common stock issued private placement shares common stock issuable upon exercise warrants issued private placement company required file registration statement sec within 60 days closing offering registration statement must declared effective sec within 180 days final closing offering subject certain grace periods registration statement must remain effective available use purchasers sell securities covered registration statement without restriction pursuant rule 144 company fails meet filing effectiveness requirements registration statement required pay liquidated damages 1 aggregate purchase price paid purchaser registerable securities held purchaser date failure anniversary date failure cured june 3 2009 registration statement register abovementioned shares underlying exercise warrants declared effective june 30 2010 posteffective amendment registration statement declared effective september 21 2009 company completed private placement offering 3000000 units unit consisting 1 share company’s common stock 3year warrant purchase 30 1 share company’s common stock 500 per share offering price 500 per unit 15000000 nonus investors company issued warrants purchase 900000 shares common stock investors offering nonus advisor company received fees 9 gross proceeds warrants purchase 300000 shares company’s common stock terms investors company paid additional 3 advisory fee connection private placement offering investors received registration rights company issued shares pursuant exemption registration regulation promulgated securities act 1933 amended index deer consumer products inc subsidiaries notes consolidated financial statements december 31 2010 2009 december 17 2009 company completed public offering 6900000 shares common stock public offering price 1100 per share 75900000 company paid commissions fees associated offering 9931296 also paid offering cost 320000 related offering 2010 treasury stock quarter ended june 30 2010 company purchased 798300 shares common stock open market treasury shares 6945950 company accounted purchase treasury shares using cost method company retired 798300 shares purchased stock options following summary activity options independent directors exercise price options outstanding december 31 2010 follows assumptions used calculating fair value options granted using blackscholes optionpricing model follows index deer consumer products inc subsidiaries notes consolidated financial statements december 31 2010 2009 2010 2009 2008 company recorded 275698 333387 0 stock option expense options granted year ended december 31 2009 exercise price equaled stock price date grant weightedaverage fair value options 592 weightedaverage exercise price options 1096 options granted year ended december 31 2010 december 31 2010 compensation costs related nonvested options 102628 expensed fourth quarter 2011 warrants following summary warrant activity 2010 warrant holders exercised warrants purchase 1759118 shares company’s common stock resulted gross proceeds 6964510 company note 8 employee welfare plan expense employee common welfare 112154 51160 59147 2010 2009 2008 respectively prc government abolished 14 welfare plan policy 2007 company required establish welfare common welfare reserves note 9 statutory reserve development fund stipulated company law prc net income taxation distributed dividends appropriation made following making cumulative prior years’ losses ii allocations “statutory surplus reserve” least 10 income tax determined prc accounting rules regulations fund amounts 50 company’s registered capital iii allocations 510 income tax determined prc accounting rules regulations company’s “statutory common welfare fund” “scwf” established purpose providing employee facilities collective benefits company’s employees iv allocations discretionary surplus reserve approved stockholders’ general meeting company allocates 5 income tax development fund enlarging business increasing capital pursuant new corporate law effective january 1 2006 one statutory surplus reserve requirement reserve 10 percent income tax exceed 50 percent registered capital index deer consumer products inc subsidiaries notes consolidated financial statements december 31 2010 2009 company appropriated 3755921 1286315 398939 reserve statutory surplus reserve 1877960 643158 199469 reserve development fund 2010 2009 2008 respectively note 10 taxes company subject income taxes entity income arising derived tax jurisdiction entity domiciled deer us parent company incorporated us net operating losses nol income tax purposes deer net operating loss carry forwards income taxes 914682 december 31 2010 may available reduce future years’ taxable income nol carried forward 20 years year loss incurred management believes realization benefits losses remains uncertain due deer’s limited operating history continuing losses accordingly 100 deferred tax asset valuation allowance provided local prc income tax pursuant tax laws china general enterprises subject income tax effective rate 25 winder enjoys 15 preferential income tax effective 2009 expiration december 31 2011 result status high tech enterprise reconciliation tax us federal statutory rate provision income tax recorded financial statements years ended december 31 2010 2009 2008 follows effect change tax status recorded accordance asc topic 74010 states effect change tax status computed date change included tax provision continuing operations management believes local tax authorities would waived past taxes change tax status company’s subsidiary winder granted high tech enterprise status income tax expense year ended december 31 2010 would increased 3755779 earnings per share would reduced 011 foreign pretax earnings approximated 36874000 2010 pretax earnings foreign subsidiary subject us taxation effectively repatriated company provides income taxes undistributed earnings nonus subsidiaries except extent earnings invested indefinitely outside us december 31 2010 approximately 40565000 accumulated undistributed earnings nonus subsidiaries invested indefinitely existing us federal income tax rate additional taxes 7700000 would provided earnings remitted currently note 11 geographical sales geographical distribution sales follows index deer consumer products inc subsidiaries notes consolidated financial statements december 31 2010 2009 note 12 operating risks company’s operations prc subject specific considerations significant risks typically associated companies north america western europe include risks associated among others political economic legal environments foreign currency exchange company’s results may adversely affected changes governmental policies respect laws regulations antiinflationary measures currency conversion remittance abroad rates methods taxation among things company’s sales purchases expenses transactions denominated rmb company’s assets liabilities also denominated rmb freely convertible foreign currencies current prc law china foreign exchange transactions required law transacted authorized financial institutions remittances currencies rmb may require certain supporting documentation order affect remittance note 13 commitment september 1 2010 company entered 2year lease agreement expiring august 30 2012 factory building monthly rent including property management fees 5500 rmb 37000 company option renew lease upon expiration note 14 major customers vendors year ended december 31 2010 two customers accounted 13 10 sales december 31 2010 total receivable balance due customers approximately 31975551 major customer 2009 year ended december 31 2010 one vendor accounted 12 company’s purchases raw materials december 31 2010 total payable vendor approximately 1464061 major vendor 2009 note 15 contingency april 1 2008 deer international acquired 100 equity interest winder 50hz electric limited transaction approved economic development bureau yangjiang hightech industry development zone “yangjiang hitech zone” approval prc government agency higher authority may required time acquisition deer international offshore enterprise controlled company’s shareholders prc residents shareholders time owned controlled 50hz electric limited made winder affiliated prc company shareholders according regulations transaction might require approval mofcom interpretation implementation regulations unclear approval mofcom required approval 50hz electric limited obtained yangjiang hitech zone may deemed incomplete transferee namely deer international may need obtain approval mofcom acquisition 100 winder’s equity interests deer international april 1 2008 free considerations conditions applicable prc tax rules transaction related parties shall priced arm’s length basis tax authority right investigate related party transaction make adjustment finds price arm’s length basis prc tax authority would make adjustment applying deemed arm’s length price transaction given 50hz electric limited deer international certain related parties possibility considerationfree transfer may challenged investigated prc tax authority deemed arm’s length price determined prc tax authority investigation higher original cost 50hz electric limited paid get 100 equity interest winder excess amount would subject additional prc income tax although company believes 50hz electric limited shall responsible possible prc income tax company understands common practice prc tax authority enforce tax collection entity issue case would winder company may required pay possible prc income tax behalf 50hz electric limited index deer consumer products inc subsidiaries notes consolidated financial statements december 31 2010 2009 note 16 condensed financial information us parent deer consumer products inc holding company owns operating assets significant operations independent subsidiaries set forth condensed financial statements deer consumer products inc parent standalone unconsolidated basis december 31 2010 2009 years ended december 31 2010 2009 2008 deer consumer products inc balance sheets december 31 2010 2009 index deer consumer products inc subsidiaries notes consolidated financial statements december 31 2010 2009 deer consumer products inc statements income years ended december 31 2010 2009 2008 index deer consumer products inc subsidiaries notes consolidated financial statements december 31 2010 2009 deer consumer products inc statements cash flows years ended december 31 2010 2009 2008 index deer consumer products inc subsidiaries notes consolidated financial statements december 31 2010 2009 note 17 selected quarterly data unaudited note 18 valuation qualifying accounts allowance doubtful accounts note 19 subsequent events march 9 2011 company’s board directors declared quarterly dividend payable future earnings amount 005 per share payable april 14 2011 shareholders record march 31 2011 declaration payment future quarterly dividends made discretion board directors future earnings signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized deer consumer products inc registrant date march 10 2011 ying chief executive officer principal executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated signature title date ying chairman chief executive officer march 10 2011 ying principal executive officer zongshu nie chief financial officer director march 10 2011 zongshu nie principal financial accounting officer edward hua director march 10 2011 edward hua arnold staloff director march 10 2011 arnold staloff qi hua xu director march 10 2011 qi hua xu exhibit index exhibit description 21 share exchange agreement plan reorganization deer international group limited tag events corp dated september 3 2008 incorporated herein reference exhibit 21 company’s current report form 8k file 333140545 filed september 5 2008 22 return treasury agreement company crescent liu dated august 26 2008 incorporated herein reference exhibit 22 company’s current report form 8k file 333140545 filed september 5 2008 31 articles incorporation incorporated herein reference exhibit 31 company’s form sb2 file 333140545 filed february 8 2007 32 bylaws incorporated herein reference exhibit 32 company’s form sb2 file 333140545 filed february 8 2007 33 articles exchange deer international group limited tag events corp filed september 3 2008 incorporated herein reference exhibit 33 company’s current report form 8k file 333140545 filed september 5 2008 34 articles merger deer consumer products inc tag events corp amending articles incorporation filed secretary state nevada september 3 2008 incorporated herein reference exhibit 34 company’s current report form 8k file 333140545 filed september 5 2008 41 specimen stock certificate incorporated herein reference exhibit 41 company’s annual report form 10k year ended december 31 2008 file 333140545 filed march 31 2009 42 form warrant incorporated herein reference exhibit 101 company’s current report form 8k file 333140545 filed april 3 2009 43 form registration rights agreement incorporated herein reference exhibit 102 company’s current report form 8k file 333140545 filed april 3 2009 44 form warrant incorporated herein reference exhibit 103 company’s current report form 8k file 00134407 filed september 23 2009 45 form registration rights agreement incorporated herein reference exhibit 102 company’s current report form 8k file 00134407 filed september 23 2009 101 supplemental agreement winder electric group ltd ying fa’min shenzhen de mei long electric appliances co ltd shenzhen kafu industrial co ltd dated november 19 2009 incorporated herein reference exhibit 101 company’s current report form 8k file 00134407 filed november 20 2009 102 form prior patent transfer agreement winder electric group ltd ying fa’min shenzhen de mei long electric appliances co ltd shenzhen kafu industrial co ltd incorporated herein reference exhibit 102 company’s current report form 8k file 00134407 filed november 20 2009 103 form prior copyright trademark transfer agreement winder electric group ltd ying fa’min shenzhen de mei long electric appliances co ltd shenzhen kafu industrial co ltd incorporated herein reference exhibit 103 company’s current report form 8k file 00134407 filed november 20 2009 104 distribution agreement winder electric group ltd suning nanjing purchasing center dated december 1 2009 incorporated herein reference exhibit 104 company’s current report form 8k file 00134407 filed december 4 2009 105 form stock option agreement use stock options granted pursuant deer consumer products inc 2009 equity incentive plan incorporated herein reference exhibit 105 company’s current report form 8k file 00134407 filed december 24 2009 106 distribution agreement guangdong deer consumer products inc gome home appliance co ltd dated january 15 2010 incorporated herein reference exhibit 106 amendment 1 company’s current report form 8k file 00134407 filed april 30 2010 107 deer consumer products inc 2009 equity incentive plan incorporated herein reference company’s definitive proxy statement schedule 14a file 00134407 filed october 6 2009 108 lockup agreement achieve limited ying deer consumer products inc dated march 23 2010 incorporated herein reference exhibit 108 company’s current report form 8k file 00134407 filed march 29 2010 109 lockup agreement sino unity limited yu hai deng deer consumer products inc dated march 23 2010 incorporated herein reference exhibit 109 company’s current report form 8k file 00134407 filed march 29 2010 1010 lockup agreement true olympic limited zong zhu nie deer consumer products inc dated march 23 2010 incorporated herein reference exhibit 1010 company’s current report form 8k file 00134407 filed march 29 2010 1011 lockup agreement great scale holdings limited fa min deer consumer products inc dated march 23 2010 incorporated herein reference exhibit 1011 company’s current report form 8k file 00134407 filed march 29 2010 1012 lockup agreement new million holdings limited bao zhi li deer consumer products inc dated march 23 2010 incorporated herein reference exhibit 1012 company’s current report form 8k file 00134407 filed march 29 2010 1013 lockup agreement tiger castle limited jing wu chen deer consumer products inc dated march 23 2010 incorporated herein reference exhibit 1013 company’s current report form 8k file 00134407 filed march 29 2010 1014 lockup agreement sourceland limited yong mei wang deer consumer products inc dated march 23 2010 incorporated herein reference exhibit 1014 company’s current report form 8k file 00134407 filed march 29 2010 †21 subsidiaries deer consumer products inc †311 certification principal executive officer pursuant exchange act rules 13a14a 15d14a adopted pursuant section 302 sarbanesoxley act 2002 †312 certification principal financial officer pursuant exchange act rules 13a14a 15d14a adopted pursuant section 302 sarbanesoxley act 2002 †321 certification pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 signed chief executive officer †322 certification pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 signed chief financial officer 991 lockup agreement sino unity limited deer consumer products inc dated september 3 2008 incorporated herein reference exhibit 991 current report form 8k file 333140545 filed december 2 2008 992 lockup agreement true olympic limited deer consumer products inc dated september 3 2008 incorporated herein reference exhibit 992 current report form 8k file 333140545 filed december 2 2008 993 lockup agreement great scale holdings limited deer consumer products inc dated september 3 2008 incorporated herein reference exhibit 993 current report form 8k file 333140545 filed december 2 2008 994 lockup agreement new million holdings limited deer consumer products inc dated september 3 2008 incorporated herein reference exhibit 994 current report form 8k file 333140545 filed december 2 2008 995 lockup agreement tiger castle limited deer consumer products inc dated september 3 2008 incorporated herein reference exhibit 995 current report form 8k file 333140545 filed december 2 2008 996 lockup agreement achieve limited deer consumer products inc dated september 3 2008 incorporated herein reference exhibit 996 current report form 8k file 333140545 filed december 2 2008 997 lockup agreement sharp champion limited deer consumer products inc dated september 3 2008 incorporated herein reference exhibit 997 current report form 8k file 333140545 filed december 2 2008 998 lockup agreement sourceland limited deer consumer products inc dated september 3 2008 incorporated herein reference exhibit 998 current report form 8k file 333140545 filed december 2 2008 † filed herewith