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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-K

(Mark One)ý

ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934For the fiscal year ended December 31, 2010oro

TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                to


Commission File No. 001-33346



SUMMER INFANT, INC.

Delaware(State or other jurisdiction of
incorporation)

20-1994619(I.R.S. Employer
Identification No.)1275 Park East Drive, Woonsocket, Rhode Island(Address of Principal Executive Offices)

02895(Zip Code)


(401) 671-6550(Registrant's Telephone Number, Including Area Code)



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

Title of each class

Name of Exchange on which registeredCommon Stock, Par Value $.0001

Nasdaq Capital Market


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

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. YES o    NO ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. YES o    NO ý

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of "accelerated filer," large accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o (Do not check if a
smaller reporting company)

Smaller reporting company ý


Indicate
by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). YES o    NO ý

The aggregate market value of the voting and non-voting common equity held by non-affiliates, based on the closing price of the
registrant's Common Stock as reported on the Nasdaq Capital Market on June 30, 2010 of $6.55, was approximately $58,644,547. For purposes of this computation, all officers, directors, and 10%
beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed to be an admission that such officers, directors, or 10% beneficial owners are, in fact,
affiliates of the registrant.

The
number of shares outstanding of the registrant's common stock as of March 1, 2011 was 15,529,477 (excluding unvested restricted shares that have been issued to employees).



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INDEX TO FORM 10-K  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010



PAGEPART IITEM 1.

Business

1ITEM 1A.

Risk Factors

5ITEM 1B.

Unresolved Staff Comments

10ITEM 2.

Properties

10ITEM 3.

Legal Proceedings

10ITEM 4.

[Removed and Reserved.]

10PART IIITEM 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

11ITEM 6.

Selected Financial Data

11ITEM 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

12ITEM 7A.

Quantitative and Qualitative Disclosures About Market Risk

21ITEM 8.

Financial Statements and Supplementary Data

21ITEM 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

21ITEM 9A.

Controls and Procedures

21ITEM 9B.

Other Information

22PART IIIITEM 10.

Directors, Executive Officers of the Registrant and Corporate Governance

22ITEM 11.

Executive Compensation

22ITEM 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

23ITEM 13.

Certain Relationships and Related Transactions, and Director Independence

23ITEM 14.

Principal Accountant Fees and Services

23PART IVITEM 15.

Exhibits and Financial Statement Schedules

23SIGNATURES

24


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FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K contains, in addition to historical information, forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and include statements regarding our
"expectations," "anticipation," "intentions," "beliefs," or "strategies" regarding the future, whether or not those words are used. These statements include statements regarding our ability to grow
strategically, our position in the markets in which we compete, to increase product penetration, create new products, and meet our growth strategy, our ability to develop proprietary products, to grow
sales in the future, and to make and successfully integrate acquisitions, and our expectations regarding liquidity and capital resources in the future. Forward-looking statements are subject to a
number of factors and uncertainties, which could cause actual results to differ materially from those described in such statements. We caution investors that actual results or business conditions may
differ materially from those projected or suggested in forward-looking statements as a result of various factors including, but not limited to, the risk factors discussed in Item 1A. Risk
Factors below. All forward-looking statements included in this report are based on information available to us as of the filing date of this report, and we assume no obligation to update any such
forward-looking statements.

PART I

Item 1.    Business

Background

On March 6, 2007, under an Agreement and Plans of Reorganization, dated as of September 1, 2006, KBL Healthcare
Acquisition Corp. II ("KBL"), and its wholly owned subsidiary, SII Acquisition Corp. ("Acquisition Sub"), consummated a transaction by which (i) Summer Infant, Inc.
("SII") was merged with and into Acquisition Sub and (ii) all of the outstanding capital stock of each of Summer Infant Europe, Limited and Summer Infant Asia, Ltd. was acquired directly
by KBL. Effective upon closing, KBL changed its name to Summer Infant, Inc. and SII changed its name to Summer Infant (USA), Inc. On March 7, 2007, the securities of Summer
Infant, Inc. commenced listing on the Nasdaq Capital Market under the symbols SUMR (common stock), SUMRW (warrants) and SUMRU (units). On November 7, 2008, Summer Infant
(USA), Inc. created a wholly-owned subsidiary called Summer Infant Canada, Ltd. Summer Infant, Inc, ("we," "us", or the "Company") is now a holding company. operating through its
wholly-owned subsidiaries, Summer Infant (USA), Inc., Summer Infant Europe, Limited ("SIE"), Summer Infant Canada, Ltd. ("SIC") and Summer Infant Asia, Ltd. ("SIA"). The
consolidated financial statements of the Company included in this Annual Report include the accounts of its wholly-owned subsidiaries.

General

We are a designer, marketer, and distributor of branded juvenile health, safety and wellness products (for ages
0-3 years) which are sold principally to large North American and United Kingdom retailers. We currently market products in various product categories including nursery audio/video
monitors, safety gates, durable bath products, bed rails, nursery products, booster and potty seats, bouncers, travel accessories, high chairs, swings and nursery furniture. In the
past two years, the Company has completed several acquisitions and therefore added items such as cribs and baby gear. In North America our products are sold primarily to retailers including Babies R
Us, Target, KMart, Wal-Mart, Buy Buy Baby and Amazon.com.

Our
corporate headquarters is located is Woonsocket, Rhode Island. We maintain a sales, marketing and distribution office in England, which services the United Kingdom and other parts of
Europe. SIE's largest customers are Mothercare, Toys R Us, Argos, and Tesco. We maintain through SIA a product development, sales, engineering and quality assurance office.

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Strategy

Our strategy is to grow our sales through a variety of methods, including:



We
have been able to grow our annual revenues historically through a combination of all of the above factors. Each year, we have been able to expand the number of products in our main
distribution channel and number of mass merchant retailers, and have also added new customers each year. Therefore, even with limited new product introductions, we could grow our business by simply
selling more of our existing product line to existing customers.

In
the future, our growth strategy will be to continue to develop and sell new products to our existing customer base, sell new and existing products to new customers (or expand
relationships with existing customers) and to expand in the United Kingdom and in other geographic regions (including Japan, Mexico and Australia, among others). In addition, there are a number of
potential acquisition candidates that could be pursued to obtain new innovative products, new product categories, new retail customers or new sales territories. There are several hundred active
juvenile product companies, of which we estimate the majority have less than $10,000 in sales. In addition, there are various product categories that we do not currently compete in including feeding,
walkers, and car seats. We may look to develop our own products in these categories or attempt to gain entrance into these categories through acquisitions.

Products

We currently sell products in a number of different categories, including nursery audio/video monitors, safety gates, durable bath
products, bed rails, infant thermometers, related health and safety products, booster and potty seats, cribs, baby gear, bouncers and swaddling
blankets. Most of the products are sold under the Summer Infant brand name. The Company also has several licensing arrangements to sell products under different brands. No single product generated
more than 10% of sales for the year ended December 31, 2010. The majority of our products are sold under the Summer brand with certain products sold under Carters and Disney brands.

Product Development and Design

Our management believes that product development is a critical element of our strategy and success to date. Our product strategy is to
produce proprietary products that provide distinctive benefits, are visually appealing, provide convenience and will appeal to the mid-tier and upper-tier buyers. Our retail
customers are strategically motivated to buy innovative products. Our main product development efforts are located at our Rhode Island corporate office, but we also have development efforts in China,
Pennsylvania, and the United Kingdom.

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Suppliers and Manufacturing

Except for certain injection-molded bath tubs, potty seats and booster seats, which are manufactured in the U.S., substantially all of
our other products are manufactured in Asia (particularly China). We use many different suppliers and we own our molds. Therefore, we are not dependent on any one manufacturer. SIA provides us with a
local sourcing presence and the ability to oversee quality, electronic engineering and other issues that may arise during production. Generally, we are buying finished goods from manufacturers and
thus are not directly procuring any raw materials related to the ultimate manufacturing of the products. We have not had any significant disruption of supply to date as a result of raw material
shortages, but there is the possibility that shortages could occur in the future based on a variety of factors beyond our control.

Transportation
of Asia-made goods to our warehouses typically takes three to four weeks, depending on the location of the warehouse. We maintain our inventory at warehouses
located in the United States, Canada, Asia, and the United Kingdom. Most of our customers pick up their goods at regional warehouses. We also use UPS and other common carriers to arrange shipments to
customers who request such arrangements, primarily smaller retailers and specialty stores. In 2011, the East Coast distribution center will be consolidated into the west coast distribution center. We
anticipate
this will better enable us to service our customer as well as result in incremental cost savings operationally and through reduced distribution channel costs.

We
use several manufacturers in the U.S. for our injection molded products that account for between 10% and 15% of our annual sales.

Sales and Marketing

Our sales are primarily derived from the sale of juvenile health, safety and wellness products and are recognized upon transfer of
title of product to our customers. Our products are marketed and sold through several distribution channels including chain retailers, specialty retailers and direct to consumers.

Sales
are made utilizing standard credit terms of 30 to 60 days. We generally accept returns only for defective merchandise.

Competition

The juvenile health, safety and wellness industry has many participants, none of which have dominant market share, though certain
companies have disproportionate strength in certain segments. Our largest direct competitors are Dorel Industries (including Safety 1st and Cosco brands), Evenflo (Evenflo, Gerry, and Snugli
brands), Kid Brands, Inc., Fisher-Price (part of Mattel, Inc.), The First Years (a subsidiary of RC2 Corporation) and Graco (a subsidiary of Newell Rubbermaid). In addition, we compete
in certain of our product lines with a number of private companies, such as KidCo, Inc. and Munchkin.

The
primary methods of competition in the industry consist of product innovation, brand positioning, quality, price and other factors such as timely distribution. Our competitive
strengths include our experienced product development staff, our ability to develop new products, brand positioning, relationships with major retailers, and the quality and pricing of our products.

Intellectual Property

We rely on a combination of patents, licenses and trade secrets to protect our intellectual property. Our patents currently in effect
include various design features related to bedrails, infant seats, bouncers, and potty chairs, with several other patents pending for monitors, baby swings, and other

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items.
The patents expire at various times over the next 20 years. We also have license agreements relating to the use of patented technology owned by third parties in certain of our products.

Customers

Our top 7 customers together comprised over 75% of our sales in fiscal 2010. Some of these customers include Babies R Us/Toys R Us
(approximately 51%), Target, K-Mart, Buy Buy Baby, Amazon.com and Wal-Mart.

Seasonality

There are not significant variations in seasonal demand for our products. Sales to our retail customers are generally higher in the
time frame when retailers take initial shipments of new products. These orders usually incorporate enough product to fill each store plus additional amounts to be kept at the customer's distribution
center. The timing of these initial shipments varies by customer depending on when they finalize store layouts for the upcoming year, and whether there are any mid-year product
introductions.

Geographic Regions

In 2010, North America accounted for over 90% of our total net sales; the remaining sales were made in the United Kingdom and all other
geographies.

Regulatory Matters

We obtain all necessary regulatory agency approvals for each of our products. In the U.S., these approvals may include, among others,
one or more of the Consumer Product Safety Commission ("CPSC"), the American Society of Test Methods ("ASTM"), the Juvenile Products Manufacturing Association ("JPMA"), the Federal Communications
Commission ("FCC") and the Food and Drug Administration ("FDA"). We conduct our own internal testing, which utilizes a "foreseeable use and abuse" testing method and is designed to subject each
product to the "worst case scenario." Our products are also frequently tested by independent government certified labs.

Insurance

We carry a product liability insurance policy that provides us with $10,000 of liability coverage with a minimal deductible. We consult
with our insurers to ascertain appropriate liability coverage for our product mix. We anticipate increasing our insurance coverage in the future in line with our expanding sales and product breadth.

Employees

As of December 31, 2010, we employed a total of 218 full time people, 152 of whom work in the headquarters and distribution
centers in Rhode Island. Our employees are not covered by a collective bargaining agreement. We consider our employee relations to be good.

Available Information

We maintain our corporate website atwww.summerinfant.comand we make available, free of
charge, through this website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
those reports that we file with or furnish to the Securities and Exchange Commission ("SEC"), as soon as reasonably practicable after we electronically file that material with, or furnish it to, the
SEC. Our website also includes corporate governance information, including our Code of Ethics and our Board Committee Charters.

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Item 1A.    Risk Factors

If any of the events or circumstances described in the following risks actually occur, our business, financial condition or results of
operations could be materially adversely affected. In those cases, the trading price of our common stock could decline.

The concentration of our business with a base of retail customers that make no binding long-term commitments means that economic difficulties or changes in the
purchasing policies of our major customers could have a significant impact on our business.

A number of large, retail customers account for a majority of our sales. In fiscal 2010, Toys R Us generated 51% of our total sales.
Because of the concentration of our business with this customer and because we have no long term contracts with this customer, our success depends on our customers' willingness to continue to purchase
and provide shelf space for our products. An
adverse change in our relationship with any of our large customers or a change in the financial viability of any of these customers could adversely affect our results of operations and financial
condition.

Our ability to grow and compete will be harmed if we do not successfully satisfy consumer preferences, enhance existing products, develop and introduce new products, and
achieve market acceptance of those products.

Our business and operating results depend largely upon the appeal of our products. Consumer preferences, particularly among parents,
whom are often the end purchasers of our products, are constantly changing. Our success will largely depend on our ability to identify emerging trends in the health, safety and wellness marketplace,
and design products that address consumer demand and prove safe and cost effective. Our product offerings compete with those of many other companies, many of which are much larger and enjoy broader
brand recognition and significant distribution channel relationships, which means that our market position is always at risk. Our ability to maintain and increase our current market share will depend
upon our ability to anticipate changes in consumer preferences and satisfy these preferences, enhance existing products, develop and introduce new products and establish and grow distribution channels
for these products, and ultimately achieve market acceptance of these products.

We are dependent on key personnel, and our ability to grow and compete in our industry will be harmed if we do not retain the continued services of our key personnel, or we
fail to identify, hire, and retain additional qualified personnel.

We are dependent on the efforts of our management team, and the loss of services of members of our management team, each of whom has
substantial experience in the juvenile health, safety and wellness markets, could have an adverse effect on our business. If any members of management leave, their departure could have an adverse
effect on our operations and could adversely affect our ability to design new products and to maintain and grow the distribution channels for our products.

In
addition, if our operations continue to grow in a manner consistent with our historical growth rates, it will be necessary for us to attract and retain additional qualified personnel.
The market for qualified and talented product development personnel in the consumer goods market, and the juvenile health, safety and wellness products market specifically is intensely competitive. If
we are unable to attract or retain qualified personnel as needed, the growth of our operations could be slowed or hampered. However, we believe that our compensation including salary,
performance-based bonuses, and stock award programs provides incentives that are competitive within our industry.

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Intellectual property claims relating to our products could increase our costs and adversely affect our business.

We have, from time to time, received claims of alleged infringement of patents relating to certain of our products, and we may face
similar claims in the future. These claims relate to alleged patent infringement and are primarily the result of newly issued patents that were not in force when we initially brought the subject
products to market. The defense of intellectual property claims can be costly and time consuming, even in circumstances where the claim is without merit. We may be required to pay substantial damages
or settlement costs in order to resolve these types of claims. In addition, these claims could materially harm our brand name, reputation and operations.

We rely on foreign suppliers in Asia to manufacture the majority of our products, and any adverse change in our relationship with our suppliers could harm our business.

We rely on numerous third-party suppliers located in Asia for the manufacture of most of our products. While we believe that
alternative suppliers could be located if required, our product sourcing could be affected if any of these suppliers do not continue to manufacture our products in required quantities or at all, or
with the required levels of quality. We enter into purchase orders with our foreign suppliers and do not enter into any long term contracts. In addition, difficulties encountered by these suppliers,
such as fire, accident, natural disasters, outbreaks of contagious diseases, or political unrest, could halt or disrupt production at the affected locations, resulting in delay or cancellation of
orders. Any of these events could result in delayed deliveries by us of our products, causing reduced sales and harm to our reputation and brand name.

Increases in the cost of materials or labor used to manufacture our products could decrease our profitability and therefore negatively impact our business and financial
condition.

Because our products are manufactured by third-party suppliers, we do not directly purchase the materials used in the manufacture of
our products. However, the prices paid by us to these suppliers could increase if raw materials, labor, or other costs increase. If we cannot pass these increases along to our customers, our
profitability will be adversely affected.

Because we rely on foreign suppliers and we sell in foreign markets, we are subject to numerous risks associated with international business that could increase our costs or
disrupt the supply of our products, resulting in a negative impact on our business and financial condition.

Our international operations subject us to risks, including:



Any
of these events or circumstances could disrupt the supply of our products or increase our expenses.

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Product liability, product recalls, and other claims relating to the use of our products could increase our costs.

Because we sell infant and juvenile health, safety and wellness products to consumers, we face product liability risks relating to the
use of our products. We also must comply with a variety of product safety and product testing regulations. In particular, our products are subject to, among other statutes and regulations, the
Consumer Product Safety Act, the Federal Hazardous Substances Act ("FHSA") and the Consumer Product Safety Improvement Act ("CPSIA"), which empower the Consumer Product Safety Commission (the "CPSC"),
to take action against hazards presented by consumer products. With expanded authority under the CPSIA, the CPSC has and continues to adopt new regulations for safety and products testing that apply
to our products. These new regulations have or likely will significantly increase the regulatory requirements governing the manufacture and sale of children's products and increase the potential
penalties for noncompliance with applicable regulations. The CPSC has the authority to exclude from the market and recall certain consumer products that are found to be potentially hazardous. Consumer
product safety laws also exist in some states and cities within the United States and in Canada and Europe, as well as certain other countries. While we take the steps we believe are necessary to
comply with these laws and regulations, there can be no assurance that we will be in compliance in the future. If we fail to comply with these laws and regulations, or if we face product liability
claims, we may be subject to damage awards or settlement costs that exceed any available insurance coverage and we may incur significant costs in complying with recall requirements. Furthermore,
concerns about potential liability may lead us to recall voluntarily selected products. For instance, we recently undertook voluntary action to re-label our audio/video nursery monitors.
The financial impact of the voluntary program is not expected to be material. In addition, the CPSC issued a warning regarding sleep positioners during 2010 which resulted in the return of product by
retail customers; the Company incurred a charge of $712 related to this issue. Complying with existing or any such additional
regulations or requirements could impose increased costs on our business. Similarly, increased penalties for non-compliance could subject us to greater expense in the event any of our
products were found to not comply with such regulations.

Competition in our markets could reduce our net sales and profitability.

We operate in highly competitive markets. We compete with several large domestic and foreign companies and with other producers of
infant products. Many of our competitors have longer operating histories, greater brand recognition, and greater financial, technical, marketing and other resources than we have. In addition, we may
face competition from new participants in our markets because the infant and juvenile product industry has limited barriers to entry. We experience price competition for our products, competition for
shelf space at retailers and competition for licenses, all of which may increase in the future. If we cannot compete successfully in the future, our net sales and profitability will likely decline.

We may experience difficulties in identifying suitable acquisition targets and integrating strategic acquisitions.

As part of our growth strategy, we have made strategic acquisitions and intend to continue to pursue acquisitions that are consistent
with our mission and enable us to leverage our competitive strengths. While we continue to evaluate potential acquisitions, we may not be able to identify and successfully negotiate suitable
acquisitions, obtain financing for future acquisitions on satisfactory terms, obtain regulatory approval for certain acquisitions or otherwise complete acquisitions in the future. An inability to
identify future acquisitions could limit our future growth.

In
addition, the integration of operations of those companies we do acquire into our operations involves a number of risks, including:



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In
addition, any future acquisitions or investments may result in:



A material impairment in the carrying value of acquired goodwill or other intangible assets could negatively affect our consolidated operating results and net worth.

A portion of our assets is goodwill and other intangible assets, which are reviewed on an annual basis and whenever events and changes
in circumstances indicate that the carrying amount of an asset may not be recoverable. If the carrying value of these assets exceeds the current fair value, the asset is considered impaired and is
reduced to fair value, resulting in a non-cash charge to earnings during the period in which any impairment is determined. Events and conditions that could result in impairment include a sustained
drop in the market price of our common stock, increased competition or loss of market share, product innovation or obsolescence, or a decline of our business related to acquired companies. We cannot
accurately predict the amount and timing of any impairment of assets.

Our debt covenants may limit our ability to complete acquisitions, incur debt, make investments, sell assets, merge or complete other significant transactions.

Our loan agreements include provisions that place limitations on a number of our activities, including our ability
to:



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Our
credit agreement also contains a number of financial covenants. The restrictive covenants in our credit agreement may limit our ability to engage in acts that may be in our best
long-term interests. A breach of any of the restrictive covenants in our credit agreement could result in a default under our credit agreement. If a default occurs, the lenders under our
credit agreement may elect to declare all outstanding borrowings, together with accrued interest, to be immediately due and payable, to terminate any commitments they have to provide further
borrowers, and to exercise any other rights they have under the credit agreement or applicable law.

We could issue additional common stock, which might dilute the book value of our common stock.

Our board of directors has authority, without action or vote of our stockholders in most cases, to issue all or a part of our
authorized but unissued shares. These stock issuances could be made at a price that reflects a discount from the then-current trading price of our common stock. In addition, to raise
capital, we may need to issue securities that are convertible into or exchangeable for a significant amount of our common stock. These issuances would dilute current shareholders' ownership percentage
which would have the effect of reducing their influence on matters on which stockholders vote, and could dilute the book value of Summer Infant common stock. Stockholders may incur additional dilution
if holders of stock options, whether currently outstanding or subsequently granted, exercise their options, or if warrant holders exercise their warrants to purchase shares of Summer Infant common
stock.

As a "thinly-traded" stock, large sales can place downward pressure on our stock price.

Our common stock experiences periods when it could be considered "thinly traded." Finance transactions resulting in a large amount of
newly issued shares that become readily tradable, or other events that cause current stockholders to sell shares, could place downward pressure on the trading price of our stock. In addition, the lack
of a robust resale market may require a stockholder to sell a large number of shares in increments over time to mitigate any adverse impact of the sales on the market price of our stock.

Anti-takeover provisions in our organizational documents and Delaware law may limit the ability of our stockholders to control our policies and effect a change
of control of our company and may prevent attempts by our stockholders to replace or remove our current management, which may not be in your best interests.

There are provisions in our certificate of incorporation and bylaws that may discourage a third party from making a proposal to acquire
us, even if some of our stockholders might consider the proposal to be in their best interests, and may prevent attempts by our stockholders
to replace or remove our current management. These provisions include the following:



Additionally,
we are subject to Section 203 of the Delaware General Corporation Law, which, in general, imposes restrictions upon acquirers of 15% or more of our stock. Finally,
the board of

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directors
may in the future adopt other protective measures, such as a stockholder rights plan, which could delay, deter or prevent a change of control.

Item 1B.    Unresolved Staff Comments

None.

Item 2.    Properties

We are headquartered in a 52,000 square facility in Woonsocket, Rhode Island. We have a seven year lease on this facility, with an
option to extend for an additional five years. We also lease small offices in Pennsylvania, Arkansas, Canada, UK and Hong Kong.

We
maintain inventory at leased warehouses in California (approximately 442,000 square feet), Rhode Island (approximately 104,000 square feet), Canada (approximately 31,000 square feet),
Hong Kong (third party warehouse) and the UK (approximately 16,000 square feet). These leases expire at various times between 2011 and 2016.

Item 3.    Legal Proceedings

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are not aware of any such
proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, results of operations and financial condition.

Item 4.    [Removed and Reserved.]

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Price Range of Common Stock

On March 7, 2007, our common stock, warrants and units commenced listing on the Nasdaq Capital Market under the symbols "SUMR",
"SUMRW" and "SUMRU", respectively.

On
March 17, 2008, we announced that effective March 28, 2008, the units will be separated into its component securities, consisting of one share of common stock and two
warrants. As a result, beginning in March 2008, the units ceased trading. The warrants expired on April 20, 2009 and ceased trading in April 2009.

The
high and low closing prices for our common stock as reported on the Nasdaq Capital Market for the periods indicated below were as follows:

High

LowFiscal Year Ended December 31, 2009First Quarter

$
2.36

$
1.16Second Quarter

$
2.82

$
1.55Third Quarter

$
5.00

$
2.01Fourth Quarter

$
5.25

$
4.14Fiscal Year Ended December 31, 2010First Quarter

$
6.69

$
4.64Second Quarter

$
8.25

$
6.47Third Quarter

$
8.51

$
6.49Fourth Quarter

$
8.15

$
6.59


Holders of Common Stock

As of March 1, 2011, there were approximately 42 stockholders of record of our common stock. Because shares of our common stock
are held by depositaries, brokers and other nominees, the number of beneficial holders of our shares is substantially larger than the number of record holders.

Dividend Policy

There have been no cash dividends declared on our common stock since our company was formed. Dividends are declared at the sole
discretion of our Board of Directors. Our intention is not to declare cash dividends and retain all cash for our operations and future acquisitions.

Issuer Repurchases of Equity Securities

None.

Unregistered Sales of Equity Securities

None.

Item 6.    Selected Consolidated Financial Data

N/A

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations (dollar amounts in thousands, except share and per share  data)

The information contained in this section has been derived from our consolidated financial statements and should be read together with
our consolidated financial statements and related notes included elsewhere in this filing.

The
following discussion is intended to assist in the assessment of significant changes and trends related to our results of operations and financial condition. This discussion and
analysis should be read in conjunction with our consolidated financial statements and notes thereto included herein.

Company Overview

We are a designer, marketer, and distributor of branded juvenile health, safety and wellness products which are sold principally to
large North American and United Kingdom retailers. We currently market proprietary products in various product categories including nursery audio/video monitors, safety gates, durable bath products,
bed rails, infant thermometers, related health and safety products, booster and potty seats, cribs, baby gear, bouncers and swaddling blankets.

Our
business has grown organically in all of our markets. We derive our revenues from the sale of health, safety and wellness products for infants and toddlers. Our revenue is driven by
our ability to design and market desirable products, identify business opportunities and secure new and renew existing distribution channels. Our income from operations is derived from our ability to
generate revenue and collect cash in excess of labor and other costs of providing our products and selling, general and administrative costs.

Our
strategy is to grow our sales through a variety of methods, including:



We
have been able to grow our annual revenues historically through a combination of all of the above factors. Each year, we have been able to expand the number of products in our main
distribution channel and number of mass merchant retailers, and have also added new customers each year.
Therefore, even with limited new product introductions, we could grow our business by simply selling more of our existing product line to existing customers.

In
the future, our growth strategy will be to continue to develop and sell new products to our existing customer base, sell new and existing products to new customers (or expand
relationships with existing customers) and expand in the United Kingdom and in other geographic regions (including Japan, Mexico and Australia, among others). In addition, there are a number of
potential acquisition candidates that could be pursued to obtain new innovative products, new product categories, new retail customers or new sales territories. There are several hundred active
juvenile product companies, of which we estimate the majority have less than $10 million in sales. In addition, there are various product categories that we do not currently compete in,
including feeding and walkers. We may look to

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develop
our own products in these categories or attempt to gain entrance into these categories through acquisitions.

As
we continue to grow through internal initiatives and any future acquisitions, we will incur additional expenses. Two of the key areas in which those increased expenses will likely
occur are sales and product development. To grow sales, we will likely hire additional sales personnel to service new geographic territories, focus existing resources on specific parts of the United
States market and retain product line specialists to drive sales of new and existing products in specific areas in which we believe we can readily increase sales. Product development expenses will
increase as we develop new products in existing and new categories.

If
we were to acquire one or more companies as part of our growth strategy, we would face various challenges such as the integration of the acquired companies' product lines, employees,
marketing requirements and information systems. Ongoing infrastructure investment also may be required to support realized growth, including expenditures with respect to upgraded and expanded
information systems and enhancing our management team.

Sales

Our revenues are primarily derived from the sale of juvenile health, safety and wellness products and are recognized upon transfer of
title of product to our customers. Our products are marketed through several distribution channels including chain retailers, specialty retailers and on-line retailers.

A
number of large, retail customers account for a majority of our sales. One customer generated more than 10% of sales for the year ended December 31, 2010 Toys R Us (51% of
sales). Because of the concentration of our business with this customer and because we have no long term contracts with this customer, our success depends on our customers' willingness to purchase and
provide shelf space for our products.

Over
90% of sales are currently made to customers in North America, with the remaining sales primarily made to customers in the United Kingdom. Sales are made utilizing standard credit
terms of 30 to 60 days. We generally accept returns only for defective merchandise.

Cost of goods sold and other expenses

Our products are manufactured by third parties, with approximately 90% of the dollar value of products being manufactured in Asia and
the majority of the balance being manufactured in the U.S. Cost of goods sold primarily represents purchases of finished products from these third party manufacturers. The remainder of our cost of
goods sold includes duties on certain imported items, freight-in from suppliers and miscellaneous charges from contract manufacturers. Substantially all of our purchases are made in US
dollars; therefore, most of this activity is not subject to currency fluctuations. If our suppliers experience increased raw materials, labor or other costs and pass along those cost increases through
higher prices for finished goods, our cost of sales would increase, and to the extent we are unable to pass these price increases along to our customers, our gross margins would decrease.

Selling,
general and administrative expenses primarily consist of payroll, insurance, professional fees, royalties, freight out to customers, product development costs, advertising and
marketing expenses (including co-op advertising allowances as negotiated with certain customers) and sales commissions. Several of these items fluctuate with sales; some of these variable
costs are based on sales to particular customers and others are based on sales of particular products.

There
are no significant variations in seasonal demand for our products. Sales to our retail customers are generally higher in the time frame when retailers take initial shipments of new
products.

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These
orders usually incorporate enough product to fill each store plus additional amounts to be kept at the customer's distribution center. The timing of these initial shipments varies
by customer depending on when they finalize store layouts for the upcoming year, and whether there are any mid-year product introductions.

Summary of critical accounting policies and estimates

This summary of our critical accounting policies is presented to assist in understanding our consolidated financial statements. The
consolidated financial statements and notes are representations of our management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles
generally accepted in the United States of America and have been consistently applied in the preparation of the consolidated financial statements.

We
make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses. The accounting policies described
below are those we consider critical in preparing our financial statements. Some of these policies include significant estimates made by management using information available at the time the
estimates were made. However, these estimates could change materially if different information or assumptions were used.

Revenue recognition

We record revenue when all of the following occur: persuasive evidence of an arrangement exists, product delivery has occurred, the
sales price to the customer is fixed or determinable and collectability is reasonably assured. Sales are recorded net of provisions for returns and allowances, cash discounts and markdowns. We base
our estimates for discounts, returns and allowances on negotiated customer terms, historical experience. These estimates are subject to variability, as actual deductions taken by customers may be
different from the estimates recorded.

Sales
incentives or other consideration given by us to customers that are considered adjustments of the selling price of its products, such as markdowns, are reflected as reductions of
revenue. Sales incentives and other consideration that represent costs incurred by us for assets or services received, such as the appearance of our products in a customer's national circular ad, are
reflected as selling and marketing expenses in the accompanying statements of income.

Trade receivables

We carry our trade receivables at net realizable value. On a periodic basis, we evaluate our trade receivables and establish an
allowance for doubtful accounts based on a history of past bad debt, collections and current credit conditions. The allowance is adjusted based on actual write-offs that occur.

We
do not accrue interest on trade receivables. A receivable is considered past due if payments have not been received within the credit terms on the account, typically 60 days
for most customers.

We
will turn an account over for collection around 120 days past due. Accounts are considered uncollectible if no payments are received 60 to 90 days after they have been
turned over for collection.

Inventory Valuation

Inventory is comprised of finished goods and is stated at the lower of cost, inclusive of freight and duty, or market (net realizable
value) using the first-in, first-out (FIFO) method. Our warehousing costs are charged to expense as incurred. Inventory write-downs are recorded for damaged, obsolete or
slow-moving inventory. Management uses estimates to record write-downs based on its review of inventory by product category, including length of time on hand and estimates of future orders
for each

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product.
Changes in consumer preferences, as well as demand for products, customer buying patterns and inventory management could impact the inventory valuation.

Impairment of long-lived assets, goodwill and other intangible assets.

Long-lived assets have been reviewed for impairment based on accounting guidance which requires that an impairment loss be
recognized whenever the carrying
value of an asset exceeds the sum of the undiscounted cash flows expected to result from the use and eventful disposition of that asset, excluding future interest costs the entity would recognize as
an expense when incurred. Goodwill and other intangible assets that have indefinite useful lives are not amortized, but rather tested at least annually for impairment. Our management reviews for
indicators that might suggest an impairment loss could exist. Testing for impairment requires estimates of expected cash flows to be generated from the use of the assets. Various uncertainties,
including changes in consumer preference, deterioration in the political environment, continued adverse conditions in the capital markets or changes in general economic conditions, could impact the
expected cash flows to be generated by an asset or group of assets. Intangible assets that have finite useful lives are amortized over their useful lives.

Allowance for doubtful accounts.

The allowance for doubtful accounts represents adjustments to customer trade accounts receivable for amounts deemed uncollectible. The
allowance for doubtful accounts reduces gross trade receivables to their estimated net realizable value. The allowance is based on our assessment of the business environment, customers' financial
condition, historical trends, customer payment practices, receivable aging and customer disputes. We will continue to proactively review our credit risks and adjust customer terms to reflect the
current environment.

Income taxes

Income taxes are computed using the asset and liability method of accounting. Under the asset and liability method, a deferred tax
asset or liability is recognized for estimated future tax effects attributable to temporary differences and carryforwards. The measurement of deferred income tax assets is adjusted by a valuation
allowance, if necessary, to recognize future tax benefits only to the extent, based on available evidence, it is more likely than not that such benefits will be realized.

Previously,
the Company adopted the provisions of a new standard which provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax
positions recognized in the financial statements. Tax positions must meet a "more-likely-than-not" recognition threshold at the effective date to be recognized upon
adoption and in subsequent periods. Upon the adoption, and at December 31, 2010 and 2009, the Company did not have any uncertain tax positions. No interest and penalties related to uncertain
tax positions were accrued at December 31, 2010 and 2009.

The
tax years 2006 through 2009 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company expects no material changes to unrecognized tax
positions within the next twelve months.

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Results of Operations

The following table presents selected condensed consolidated financial information for Summer Infant, Inc. and its subsidiaries for the
years ended December 31, 2010 and 2009. The numbers in the table and text below are in thousands of U.S. dollars.

Year ended
December 31, 2010

Year Ended
December 31, 2009Net sales

$
194,485


100
%
$
153,481


100.0
%Cost of goods sold


124,994


64.2
%

98,233


64.0
%Gross Profit


69,491


35.7
%

55,248


36.0
%SG&A expenses(a)


54,445


28.0
%

40,520


26.4
%Interest, taxes and other expenses


8,459


4.3
%

9,074


5.9
%Net Income

$
6,587


3.8
%
$
5,654


3.7
%


(a)Excluding
depreciation, amortization, deal-related fees, and non-cash stock compensation expense.


Year ended December 31, 2010 compared with year ended December 31, 2009

Net sales increased 26.7% from $153,481 in the year ended December 31, 2009 to $194,485 for the year ended December 31,
2010. This increase was primarily attributable to increased distribution of existing products throughout our customer base, introduction of new products and international growth.

Gross
profit increased 25.8% from $55,248 for the year ended December 31, 2009 to $69,491 for the year ended December 31, 2010. This increase was primarily attributable to
the 26.7% increase in net sales. Gross profit percentage decreased to 35.7% of sales for the year ended December 31, 2010 from 36.0% in the prior year. Significant items negatively impacting
gross profit in 2010 included a $712 charge related to returns of sleep positioners, an $865 charge related to the discontinuance of the fashion bedding product line and a $297 charge related to the
re-labeling of video monitors.

Selling,
general and administrative expenses (see note (a) above) increased 34.4% from $40,520 for the year ended December 31, 2009 to $54,445 for the year ended
December 31, 2010. This increase was primarily attributable to increased variable costs such as co-op advertising allowances as a result of the significant increase in sales. In
addition, there were increased expenditures in product development, payroll, professional fees, and warehouse operations. Finally, significant items impacting this line item in 2010 included a $289
charge related to the closing of the fashion bedding office, a $448 charge related to severance of two former executives and a $668 charge related to the consolidation of distribution centers.

Liquidity and Capital Resources

We generally fund our operations and working capital needs through cash generated from operations and borrowings under our credit
facility.

Our
sales have increased significantly over the past several years. This sales growth has led to a substantial increase in working capital requirements, specifically accounts receivable
and inventory. The typical cash flow cycle is as follows:



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We
have traditionally been able to fund our increased working capital through lines of credit with banks.

The
majority of capital expenditures are for tools related to new product introductions. We receive indications from retailers generally around the middle of each year as to what
products the retailer will be taking into its product line for the upcoming year. Based on these indications, we will then acquire the tools required to build the products. In most cases the payments
for the tools are spread out over a three to four month period.

For
the year ended December 31, 2010, net cash used in operating activities totaled $8,861, which relate to increases in accounts receivable and inventory.

Net
cash used in investing activities was approximately $8,782 which primarily relates to capital expenditures and acquisitions.

Net
cash provided by financing activities was approximately $17,377 which relates to borrowings from our debt facilities to fund the working capital growth.

Based
primarily on the above factors, the net cash increase for the year ended December 31, 2010 was approximately $206, resulting in a cash balance of approximately $ 1,138 at
December 31, 2010.

We
believe that our cash on hand and current banking facilities are sufficient to fund our cash requirements for at least the next 12 months. However, unforeseen circumstances,
such as softness in the retail industry or deterioration in the business of a significant customer could create a situation where we cannot access all of the available lines of credit due to not
having sufficient assets or Adjusted EBITDA (as defined below) as required under our loan agreements. There is no assurance that we will meet all of our bank covenants in the future, or that our
lender will grant waivers if there are covenant violations. In addition, should we need to raise additional funds through additional debt or equity financings, any sale of additional debt or equity
securities may cause dilution to existing stockholders. If sufficient funds are not available or are not available on acceptable terms, our ability to address any unexpected changes in our operations
could be limited. Furthermore, there can be no assurance that we will be able to raise such funds if and when they are required. Failure to obtain future funding when needed or on acceptable terms
could materially adversely affect our results of operations.

Our
strategy for funding our business going forward is a combination of increased profitability, and if necessary, negotiation of increased borrowing lines as required with traditional
lenders.

On
August 2, 2010, we entered into a secured credit facility (the "Loan Agreement") with Bank of America, N.A., as Administrative Agent, and each of the financial institutions
that is a signatory to the Loan Agreement. The Loan Agreement provides for a $60,000 working capital revolving credit facility and a $10,000 "accordion" credit facility. The loan agreement matures on
June 30, 2012.

Summer
and its subsidiaries, Summer Infant (USA), Inc., Summer Infant Europe Limited, Summer Infant Asia Limited and Summer Infant Canada, Limited are the borrowers under the Loan
Agreement. This loan agreement replaced Summer's prior line of credit and is being used principally to fund growth opportunities and for working capital purposes.

Our
ability to borrow under the Loan Agreement is subject to its ongoing compliance with a number of financial and other covenants, including the following (i) that Summer and its
subsidiaries

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maintain
adjusted EBITDA of at least $15,000 on a trailing twelve month basis, which escalates to $17,000 by the end of the loan deal. (ii) that Summer and its subsidiaries maintain a ratio of
total funded debt to adjusted EBITDA of not greater than 3.25:1.00, and (iii) that Summer and its subsidiaries maintain a ratio of operating cash flow to debt service of not less than
1.50:1.00. Furthermore, if the ratio of total funded debt to adjusted EBITDA is greater than 3.25:1.00 for any fiscal year, the aggregate amount that may be borrowed under the Loan Agreement will be
determined by reference to a borrowing base.

These
credit facilities bear interest at a floating rate based on a spread over LIBOR ranging from 200 basis points to 250 basis points, depending upon the ratio of the Company's total
funded debt to adjusted EBITDA. The Company has also entered into various interest swap agreements which fixes the interest rates on a portion of the outstanding debt. As of December 31, 2010,
the rate on these credit facilities averaged 4.2%. In addition, these credit facilities have an unused line fee based on the unused amount of the credit facilities equal to 25 basis points.

The
Loan Agreement also contains customary events of default, including a cross default provision and a change of control provision. In the event of a default, all of the obligations of
the Company and its subsidiaries under the Loan Agreement may be declared immediately due and payable. For certain events of default relating to insolvency and receivership, all outstanding
obligations become due and payable.

As
of December 31, 2010, we had $51,500 outstanding of the total committed amount of $70,000. Availability under the credit facility was approximately $5,746 at
December 31, 2010.

We
were in compliance with all covenants as of December 31, 2010.

The
following table summarizes our significant contractual commitments at December 31, 2010:

Payment Due by PeriodContractual Obligations

Total

2011

2012

2013

2014 and
beyondLine of credit/acquisition facility

$
51,500

$
0

$
51,500

$Estimated future interest payments on line of credit


3,245


2,163


1,082Advances against international receivables


831


831Operating leases


6,076


1,364


1,167


971

$
2,574Capital leases and other liabilities


2,972


896


724


474


878Total contractual cash obligations

$
64,624

$
5,254

$
54,473

$
1,445

$
3,452


Estimated
future interest payments on our line of credit were based upon the interest rates in effect at December 31, 2010.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements during either of the years ended December 31, 2010 and 2009.

Non-GAAP Discussion

In addition to our reported results, which are prepared in accordance with generally accepted accounting principles ("GAAP"), we also
disclose non-GAAP measures of our performance, primarily relating to requirements under our credit facilities. Adjusted EBITDA, as defined below, is an important supplemental financial
measure of our performance that is not required by, or presented in accordance with, GAAP. As used herein, "Adjusted EBITDA" represents net income (loss) before income taxes, interest expense,
deal-related expenses, depreciation and amortization, and non-cash

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stock
option expense. We believe that the presentation of Adjusted EBITDA provides useful information regarding our results of operations because it assists in analyzing and benchmarking the
performance and value of our business. We believe that Adjusted EBITDA is useful to stockholders as a measure of comparative operating performance, as it is less susceptible to variances in actual
performance resulting from depreciation and amortization and more reflective of changes in pricing decisions, cost controls and other factors that affect operating performance.

Adjusted
EBITDA also is used by our management for multiple purposes, including:



Although
we use Adjusted EBITDA as a financial measure to assess the performance of our business, there are material limitations to using a measure such as Adjusted EBITDA, including the
difficulty associated with using it as the sole measure to compare the results of one company to another and the inability to analyze significant items that directly affect a company's net income
(loss) or operating income because it does not include certain material costs, such as interest and taxes, necessary to operate its business. In addition, our calculation of Adjusted EBITDA may not be
consistent with similarly titled measures of other companies and should be viewed in conjunction with measures that are computed in accordance with GAAP. Our management compensates for these
limitations in considering Adjusted EBITDA in conjunction with its analysis of other GAAP financial measures, such as net income.

The
following table presents a reconciliation of Adjusted EBITDA to net income, its most directly comparable GAAP financial measure, on a historical basis, for the periods presented:

Reconciliation of Income before interest to unaudited Adjusted EBITDA

Year Ended
December 31,2010

2009Income before interest

$
10,375

$
9,573Plus: depreciation and amortization


5,384


4,155Plus: deal-related expenses





215Plus: non-cash stock compensation expense


1,057


785Plus: other items(a)


1,509


Adjusted EBITDA, as defined

$
18,325

$
14,728


The
increase in Adjusted EBITDA for the past year has been primarily the result of the sales increase in 2010. Sales increased from $153,481 in 2009 to $194,485 in 2010. (a)For
the year ended December 31, 2010 "Adjusted EBITDA", as defined, includes the following items:
(1)$712
charge related to returns of sleep positioners; (2) $1,154 charge related to the discontinuance of fashion bedding; (3) $297 charge
related to re-labeling of video monitors; (4) $1,770 gain related to the settlement of an acquisition related liability; (5) $448 charge related to severance costs for two
former executives; (6) $668 charge related to the closing of two distribution centers. The net impact of these items is a charge of $1,509.


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Recently Issued Accounting Pronouncements

ASC
Update No. 2010-06

In
January 2010, the FASB issued ASC Update No. 2010-06, Fair Value Measurements and Disclosures (Topic 820)Improving
Disclosures about Fair Value Measurements. Update No. 2010-06 requires additional disclosure within the rollforward of activity for assets and liabilities measured at fair value on
a recurring basis, including transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy and the separate presentation of purchases, sales, issuances and
settlements of assets and liabilities within Level 3 of the fair value hierarchy. In addition, Update No. 2010-06 requires enhanced disclosures of the valuation techniques
and inputs used in the fair value measurements within Level 2 and Level 3. We adopted Update No. 2010-06 for our first quarter ended March 31, 2010, except for
the disclosure of purchases, sales, issuances and settlements of Level 3 measurements, for which disclosures will be required for our first quarter ending March 31, 2011. The adoption of
this guidance had no effect on our consolidated financial position or results of operations.

ASC
Update No. 2009-17

In
December 2009, the FASB issued ASC Update No. 2009-17, Consolidations (Topic 810)Improvements to Financial
Reporting by Enterprises Involved with Variable Interest Entities, which formally codifies FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R). Update
No. 2009-17 and Statement No. 167 amend Interpretation No. 46(R), Consolidation of Variable Interest Entities, to require that an enterprise perform an analysis to
determine whether the enterprise's variable interests give it a controlling financial interest in a variable interest entity (VIE). The analysis identifies the primary beneficiary of a VIE as the
enterprise that has both 1) the power to direct activities of a VIE that most significantly impact the entity's economic performance and 2) the obligation to absorb losses of the entity
or the right to receive benefits from the entity. Update No. 2009-17 eliminated the quantitative approach previously required for determining the primary beneficiary of a VIE and
requires ongoing reassessments of whether an enterprise is the primary beneficiary. We adopted Update No. 2009-17 for our first quarter ended March 31, 2010. The adoption of
this guidance had no effect on our consolidated financial position or results of operations.

ASC
Update No. 2009-13

In
October 2009, the FASB issued ASC Update No. 2009-13, Revenue Recognition (Topic 605)Multiple-Deliverable Revenue
Arrangements. The consensus in Update No. 2009-13 supersedes certain guidance in Topic 605 (formerly EITF Issue No. 00-21, Multiple-Element Arrangements). Update
No. 2009-13 provides principles and application guidance to determine whether multiple deliverables exist, how the individual deliverables should be separated and how to allocate
the revenue in the arrangement among those separate deliverables. Update No. 2009-13 also expands the disclosure requirements for multiple-deliverable revenue arrangements. We
adopted Update No. 2009-13 as of January 1, 2011. The adoption of this guidance had no effect on our consolidated financial position or results of operations.

ASC
Update No. 2010-29

In
December 2010, the FASB issued ASC Update No. 2010-29, Business Combinations (Topic 805)Disclosure of Supplementary
Pro Forma Information for Business Combinations. Update No. 2010-29 clarifies paragraph 805-10-50-2(h) to require public entities that
enter into business combinations that are material on an individual or aggregate basis to disclose pro forma information for such business combinations that occurred in the current reporting period,
including pro forma revenue and earnings of the combined entity as though the acquisition date had been as of the beginning of the comparable prior annual reporting period only. We are required to
adopt Update

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No. 2010-29
for material business combinations for which the acquisition date is on or after January 1, 2011.

Management
does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial
statements.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 8.    Financial Statements and Supplementary Data

The financial statements required by this item are attached to this Annual Report on Form 10-K beginning on
Page F-1.

Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A    Controls and Procedures

(a)    Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this
Annual report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure
controls and procedures as of December 31, 2010. Our principal executive officer and principal financial officer have concluded, based on their evaluation, that as of the end of the period
covered by this report, our disclosure controls and procedures were effective as of December 31, 2010.

(b)    Management's Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. As
defined in Rule 13a-15(f) under the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of , a company's principal executive
and principal financial officers and effected by a company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. It includes those policies and procedures that:



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Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

The
Company's management has used the criteria established in "Internal ControlIntegrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO") to evaluate the effectiveness of the Company's internal control over financial reporting. Management has selected the COSO framework for its evaluation as it is a control framework
recognized by the SEC and the Public Company Accounting Oversight Board, that is free from bias, permits reasonably consistent qualitative and quantitative measurement of the Company's internal
controls, is sufficiently complete so that relevant controls are not omitted, and is relevant to an evaluation of internal controls over financial reporting.

Management
of the Company conducted an evaluation of the effectiveness, as of December 31, 2010, of the Company's internal control over financial reporting based on the Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the "COSO Framework"). Based on its evaluation under the COSO Framework,
management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2010.

(c)   Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2010 that has materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.    Other Information

Not applicable.

PART III

Item 10.    Directors, Executive Officers and Corporate Governance

The information required by this Item will be contained in our definitive Proxy Statement to be filed with the SEC in connection with
our 2011 Annual Meeting of Stockholders (the "2011 Proxy Statement") under the captions "Election of Directors," "Board of Directors Meetings and Committees of the Board," "Executive Officers" and
"Section 16(a) Beneficial Ownership Reporting Compliance" and is incorporated herein by reference.

We
have adopted a Code of Ethics that applies to all our directors, officers and employees. The Code of Ethics is publicly available on our website at www.summerinfant.com. Amendments to the Code of
Ethics and any grant of a waiver from a provision of the Code of Ethics requiring disclosure under
applicable SEC and Nasdaq rules will be disclosed on our website.

Item 11.    Executive Compensation

The information required by this Item will be incorporated by reference from the information under the caption "Executive Compensation"
contained in our 2011 Proxy Statement.

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Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item will be incorporated by reference from the information under the caption "Ownership of Summer
Infant, Inc. Common Stock" contained in our 2011 Proxy Statement.

Equity Compensation Plan Information

The following table summarizes share information, as of December 31, 2010, for our equity compensation plans, including the 2006
Performance Equity Plan.

Plan Category

Number of
Common Shares to Be
Issued Upon Exercise
of Outstanding
Option Grants

Weighted Average
Exercise Price of
Outstanding GrantsStock option plans approved by stockholders


2,187,850

$
3.90Equity compensation plans not approved by stockholders





Total


2,187,850

$
3.90


In
addition, during 2009 and 2010, 357,000 restricted shares were granted to employees and board members; 87,250 shares vested in 2009 and were issued, 80,750 shares vested in 2010 and
were issued, 32,500 shares were cancelled, and 156,500 shares have not yet vested.

Item 13.    Certain Relationships and Related Transactions, and Director Independence

The information required by this item will be incorporated by reference from the information under the caption "Certain Relationships
and Related Transactions" contained in our 2011 Proxy Statement.

Item 14.    Principal Accountant Fees and Services

The information required by this item will be incorporated by reference from the information under the captions "Audit Fees",
"Audit-Related Fees," "Tax Fees," "All Other Fees" and "Pre-Approval Policies and Procedures" contained in our 2011 Proxy Statement.

PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a)
(1)    Financial Statements

The
list of consolidated financial statements and notes required by this Item 15 (a) (1) is set forth in the "Index to Financial Statements" on
page F-1 of this Annual Report.

(2)   Financial
Statement Schedules

All
schedules have been omitted because the required information is included in the financial statements or notes thereto.

(3)   Exhibits

The
exhibits listed in the "Index to Exhibits" immediately preceding the exhibits are filed as part of this Annual Report.

23

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Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized on the 22nd day of March 2011.

SUMMER INFANT, INC.By:

/s/ JASON MACARI Jason Macari Chief Executive Officer
(Principal Executive Officer)By:

/s/ JOSEPH DRISCOLL Joseph Driscoll Chief Financial Officer
(Principal Financial and Accounting Officer)


Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

Name

Title

Date/s/ JASON MACARI Jason Macari

Director and Chief Executive Officer (Principal Executive Officer)

March 22, 2011/s/ JOSEPH DRISCOLL Joseph Driscoll

Chief Financial Officer (Principal Financial and Accounting Officer)

March 22, 2011/s/ MARTIN FOGELMAN Martin Fogelman

Director

March 22, 2011/s/ ROBERT STEBENNE Robert Stebenne

Director

March 22, 2011/s/ RICHARD WENZ Richard Wenz

Director

March 22, 2011/s/ DERIAL SANDERS Derial Sanders

Director

March 22, 2011/s/ DAN ALMAGOR Dan Almagor

Director

March 22, 2011


24

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Table of Contents

Exhibits.

Index to Exhibits

Exhibit No.

Description2.1

Agreement and Plans of Reorganization dated as of September 1, 2006, by and among KBL Healthcare Acquisition Corp. II, and its wholly owned subsidiary, SII Acquisition Corp., Summer Infant, Inc. ("SII"), Summer
Infant Europe, Limited ("SIE") and Summer Infant Asia, Ltd. ("SIA" and, collectively, with SII and SIE, the "Targets") and the stockholders of the Targets(1)2.2

Purchase and Sale Agreement dated March 24, 2009 between Summer Infant (USA), Inc. and Faith Realty II, LLC(2)2.3

Lease Agreement dated March 24, 2009 between Summer Infant (USA), Inc. and Faith Realty II, LLC(2)3.1

Amended and Restated Certificate of Incorporation(3)3.2

Certificate of Amendment to Amended and Restated Certificate of Incorporation(4)3.3

Bylaws(3)4.1

Specimen Common Stock Certificate(3)10.1

Revolving Credit Agreement by and among Bank of America, N.A. and Summer Infant, Inc., et al, dated April 10, 2008(5)10.2

Amendment to Revolving Credit Agreement by and among Bank of America, N.A. and Summer Infant, Inc., et al, dated June 30, 2008.(6)10.3

Agreement and Plan of Merger by and among the Registrant, Summer (USA), Inc., Kiddo Acquisition, Inc., and Kiddopotamus & Company and certain of its stockholders, dated April 18, 2008(7)10.4

Registration Rights Agreement, dated as f April 18, 2008, by and among Summer Infant, Inc. and J. Chris Snedeker and Kristen Peterson Snedeker(7)10.5

Registration Rights Agreement by and among the Registrant, Jason Macari and Steven Gibree(1)10.6
**
2006 Performance Equity Plan(8)10.7

Distribution and License Agreement by and between The Blanket Factory Ltd. and Summer Infant, Inc. dated February 9, 2007(9)10.8
**
Employment Agreement by and between the Registrant and Jason Macari dated February 1, 2010(10)10.9
**
Side Letter between the Registrant and Joseph Driscoll dated February 1, 2010(10)10.10
**
Change of Control Agreement between the Registrant and Joseph Driscoll(10)10.11
**
Summer Infant, Inc, 2010 Employee Performance Incentive Plan(10)10.12
**
Side Letter between the Registrant and Steven Gibree dated February 5, 2010(11)10.13
**
Change of Control Agreement between the Registrant and Steven Gibree dated February 5, 2010(11)


25

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Table of Contents

Exhibit No.

Description10.14
**
Separation and Release Agreement, dated as of December 10, 2010, between the Registrant and Steven Gibree(12)10.15

Amended and Restated Credit Agreement, dated August 2, 2010, among the Registrant, Summer Infant (USA), Inc., Kiddopotamus & Company, Bank of America, N.A., as administrative agent, swing lender, and
L/C issuer, and RBS Citizens, National Association, as Collateral Agent, and other lenders thereto(13)10.16
***
Employment Offer Letter between the Registrant and Jeff Hale21.1

List of Subsidiaries(14)23.1
*
Consent of Independent Registered Public Accounting Firm23.2
*
Consent of Independent Registered Public Accounting Firm31.1
*
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
*
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
*
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)32.2
*
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)


*Filed
herewith**Management
contract or compensatory plan or arrangement(1)Incorporated
by reference to Annexes of the Registrant's Definitive Proxy Statement on Schedule 14A filed February 13, 2007(2)Incorporated
by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q/A filed August 18, 2009(3)Incorporated
by reference to Exhibits to the Registrant's Form 8-A filed March 6, 2007(4)Incorporated
by reference to Exhibits to the Registrant's Current Report on Form 8-K filed June 7, 2010.(5)Incorporated
by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q filed May 12, 2008(6)Incorporated
by reference to Exhibits to the Registrant's Annual Report on Form 10-K/A filed August 18, 2009(7)Incorporated
by reference to Exhibits to the Registrant's Current Report on Form 8-K filed April 24, 2008(8)Incorporated
by reference to Appendix A to the Registrant's Definitive Proxy on Schedule 14A filed on April 29, 2008(9)Incorporated
by reference to Exhibits to the Registrant's Current Report on Form 8-K filed March 12, 2007(10)Incorporated
by reference to Exhibits to the Registrant's Current Report on Form 8-K filed February 4, 2010


26

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Table of Contents

(11)Incorporated
by reference to Exhibits to the Registrant's Current Report on Form 8-K filed February 9, 2010(12)Incorporated
by reference to Exhibits to the Registrant's Current Report on Form 8-K filed December 13, 2010(13)Incorporated
by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q filed August 9, 2010(14)Incorporated
by reference to Exhibits to the Registrant's Annual Report on Form 10-K filed March 27, 2008


27

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Table of Contents

Summer Infant, Inc. And Subsidiaries  Index to Financial Statements



Reports of Independent Registered Public Accounting Firms

F-2Consolidated Balance Sheets

F-4Consolidated Statements of Income

F-5Consolidated Statements of Cash Flows

F-6Consolidated Statements of Stockholders' Equity

F-7Notes to Consolidated Financial Statements

F-8 - F-25


F-1

---





Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders
Summer Infant, Inc.

We
have audited the accompanying consolidated balance sheet of Summer Infant, Inc. and Subsidiaries as of December 31, 2010, and the related consolidated statements of
income, stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Company's controls over financial reporting.

Accordingly,
we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Summer Infant, Inc. and Subsidiaries as
of December 31, 2010, and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

/s/ McGladrey & Pullen, LLP McGladrey & Pullen, LLP
Boston, Massachusetts
March 22, 2011


F-2

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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders
Summer Infant, Inc.

We
have audited the accompanying consolidated balance sheet of Summer Infant, Inc. and Subsidiaries as of December 31, 2009, and the related consolidated statements of
income, stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company's controls over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Summer Infant, Inc. and Subsidiaries as
of December 31, 2009, and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Caturano and Company, P.C. Boston, Massachusetts
March 10, 2010


F-3

---





Table of Contents

Summer Infant, Inc. and Subsidiaries        Consolidated Balance Sheets

Note that all amounts presented in the table below are in thousands of U.S. dollars, except share amounts and par value per share.

December 31, 2010

December 31, 2009ASSETSCURRENT ASSETSCash and cash equivalents

$
1,138

$
932Trade receivables, net of allowance for doubtful accounts of $90 and $107 at December 31, 2010 and 2009, respectively


46,693


32,520Inventory, net


45,853


32,012Prepaids and other current assets


2,783


2,495Deferred tax assets


1,269


1,071TOTAL CURRENT ASSETS


97,736


69,030Property and equipment, net


14,958


11,486Goodwill


50,375


49,496Other intangible assets, net


14,745


15,704Other assets


181


237TOTAL ASSETS

$
177,995

$
145,953LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIESLine of credit and current portion of long-term debt


1,256


2,663Accounts payable and accrued expenses


35,651


29,966TOTAL CURRENT LIABILITIES


36,907


32,629Long-term debt, less current portion


51,963


31,780Other liabilities


4,579


6,957Deferred tax liabilities


8,085


5,607TOTAL LIABILITIES


101,534


76,973STOCKHOLDERS' EQUITYCommon Stock $.0001 par value, issued and outstanding 15,450,227 and 15,356,727 at December 31, 2010 and 2009, respectively


1


1Additional paid-in capital


56,431


55,342Retained earnings


20,490


13,903Accumulated other comprehensive loss


(461
)

(266
)TOTAL STOCKHOLDERS' EQUITY


76,461


68,980TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
177,995

$
145,953


See
notes to consolidated financial statements

F-4

---





Table of Contents

Summer Infant, Inc. and Subsidiaries        Consolidated Statements of Income

Note that all amounts presented in the table and the notes to the table below are in thousands of U.S. dollars, except share and per share amounts.

For the year endedDecember 31, 2010

December 31, 2009Net sales

$
194,485

$
153,481Cost of goods sold


124,994


98,233Gross profit


69,491


55,248Selling, general and administrative expenses


55,501


41,520Gain on settlement of acquisition related liability


(1,770
)

Depreciation and amortization


5,384


4,155Net operating income


10,376


9,573Interest expense, net


(1,734
)

(1,498
)Income before provision for income taxes


8,641


8,075Provision for income taxes


2,055


2,421NET INCOME

$
6,587

$
5,654Net income per share BASIC

$
0.43

$
0.37Weighted average shares outstanding BASIC


15,431,806


15,238,034Net income per share DILUTED

$
.40

$
0.36Weighted average shares outstanding DILUTED


16,408,594


15,735,577


See
notes to consolidated financial statements

F-5

---





Table of Contents

Summer Infant, Inc. and Subsidiaries        Consolidated Statements of Cash Flows

Note that all amounts presented in the attached table are in thousands of U.S. dollars.

For the year endedDecember 31, 2010

December 31, 2009Cash flows from operating activities:Net income

$
6,587

$
5,654Adjustments to reconcile net income to net cash (used in) provided by operating activities:Change in value of interest rate swap agreements


(476
)

(329
)Depreciation and amortization


5,384


4,155Stock-based compensation


1,057


785Deferred income taxes


2,279


192Changes in assets and liabilities, net of effects of acquisitionsIncrease in accounts receivable


(14,752
)

(2,523
)(Increase) decrease in inventory


(14,442
)

628Decrease (increase) in prepaids and other current assets


(331
)

(955
)Decrease in other assets


56


179Increase in accounts payable and accrued expenses


5,777


3,872Net cash provided by (used in) operating activities


(8,861
)

11,658Cash flows from investing activities:Acquisitions of property and equipment


(7,902
)

(3,861
)Acquisitions of other intangible assets





(146
)Acquisitions, net of cash acquired


(880
)

(1,830
)Net cash used in investing activities


(8,782
)

(5,837
)Cash flows from financing activities:Net borrowings (repayments) of debt


17,345


(9,784
)Issuance of common stock upon exercise of stock options


32Proceeds received from sale-leaseback of property





4,053Net cash provided by (used in) financing activities


17,377


(5,731
)Effect of exchange rate changes on cash and cash equivalents


472


(146
)Net increase in cash and cash equivalents


206


(56
)Cash and cash equivalents at beginning of year


932


988Cash and cash equivalents at end of year

$
1,138

$
932Supplemental disclosure of cash flow information:Cash paid during the year for interest

$
1,829

$
1,397Cash paid during the year for income taxes

$
2,069

$
2,025Non cash investing/financing activities:Issuance of common stock in conjunction with the acquisitions (see note 1) 2009

$


$
462Capital lease obligations incurred

$
713

$
407


See
notes to consolidated financial statements

F-6

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Table of Contents

Summer Infant, Inc. and Subsidiaries        Consolidated Statements of Stockholders' Equity        For the Years Ended December 31, 2010 and 2009

Note that all amounts presented in the attached table are in thousands of U.S. dollars.

Commons StockAdditional
Paid in
Capital

Retained
Earnings

Accumulated
Comprehensive
Income (Loss)

Comprehensive
Income

Total
Stockholders
EquityShares

AmountBalance at December 31, 2008 (restated)


15,055,802

$
1

$
54,095

$
8,249

$
(882
)



$
61,463Acquisition of Butterfly Living


213,675





462











462Issuance of common stock upon vesting of restricted shares


87,250Stock-based compensation








785











785Net income for the year











5,654





5,654Foreign currency translation adjustment














616


616Total comprehensive income
















$
6,270


6,270Balance at December 31, 2009


15,356,727

$
1

$
55,342

$
13,903

$
(266
)



$
68,980Issuance of common stock upon vesting of restricted shares


80,750Issuance of common stock upon exercise of stock options


12,750





32











32Stock-based compensation








1,057











1,057Net income for the year











6,587





6,587Foreign currency translation adjustment














(195
)

(195
)Total comprehensive income

















6,392


6,392Balance at December 31, 2010


15,450,227

$
1

$
56,431

$
20,490

$
(461
)



$
76,461


See
notes to consolidated financial statements

F-7

---





Table of Contents

SUMMER INFANT, INC. AND SUBSIDIAIRES        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Acquisition of Summer Infant, Inc. by KBL Healthcare Acquisition Corp. II

On March 6, 2007, under an Agreement and Plans of Reorganization, dated as of September 1, 2006 ("Acquisition
Agreement"), KBL Healthcare Acquisition Corp. II ("KBL"), and its wholly owned subsidiary, SII Acquisition Corp. ("Acquisition Sub"), consummated a transaction by which
(i) Summer Infant, Inc. ("SII") was merged with and into Acquisition Sub and (ii) all of the outstanding capital stock of each of Summer Infant Europe, Limited ("SIE") and Summer
Infant Asia, Ltd. ("SIA") was acquired directly by KBL. As used in this Report, the term "Company" means the registrant on a post-acquisition basis.

Effective
upon closing, the Company changed its name to Summer Infant, Inc. and SII changed its name to Summer Infant (USA), Inc. Thus, the Company is now a holding company
called Summer Infant, Inc. operating through its wholly-owned subsidiaries, Summer Infant (USA), Inc., Summer Infant Europe, Limited, and Summer Infant Asia, Ltd.

At
the closing of the acquisition, the Summer stockholders received from the Company an aggregate of $20,000 cash and 3,916,667 shares of Company common stock ("Transaction
Shares").

On
November 7, 2008, Summer Infant (USA), Inc. created a wholly-owned subsidiary called Summer Infant Canada, Ltd. ("SIC").

Company Overview

The Company is a designer, marketer, and distributor of branded juvenile health, safety and wellness products which are sold
principally to large North American and United Kingdom retailers. The Company currently markets proprietary products in various product categories including nursery audio/video monitors, safety gates,
durable bath products, bed rails, infant thermometers, related health and safety products, booster and potty seats, cribs, baby gear, bouncers and swaddling blankets.

Nature of Operations and Basis of Presentation and Principles of Consolidation

It is the Company's policy to prepare its financial statements on the accrual basis of accounting in conformity with accounting
principles generally accepted in the United States of America. The consolidated financial statements include the accounts of its wholly-owned subsidiaries.

All
significant intercompany accounts and transactions have been eliminated in the consolidation.

Revenue Recognition

The Company records revenue when all of the following occur: persuasive evidence of an arrangement exists, product delivery has
occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. Sales are recorded net of provisions for returns and allowances, customer discounts, and
other sales related discounts. The Company bases its estimates for discounts, returns and allowances on negotiated customer terms and historical experience. Customers do not have the right to return
products unless the products are defective. The Company records a reduction of sales for estimated future defective product deductions based on historical experience.

Sales
incentives or other consideration given by the Company to customers that are considered adjustments of the selling price of its products, such as markdowns, are reflected as
reductions of

F-8

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Table of Contents

SUMMER INFANT, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

revenue.
Sales incentives and other consideration that represent costs incurred by the Company for assets or services received, such as the appearance of the Company's products in a customer's
national circular ad, are reflected as selling and marketing expenses in the accompanying statements of income.

Cash and Cash Equivalents

For purposes of the statement of cash flows, cash and cash equivalents include money market accounts and investments with an original
maturity of three months or less. At times, the Company possesses cash balances in excess of federally-insured limits.

Trade Receivables

Trade receivables are reported at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts. The
Company estimates doubtful accounts based on historical bad debts, factors related to specific customers' ability to pay and current economic trends. The Company writes off accounts receivable against
the allowance when a balance is determined to be uncollectible.

Inventory

Inventory is comprised of finished goods and is stated at the lower of cost using the first-in, first-out
(FIFO) method, or market (net realizable value). The Company regularly reviews slow-moving and excess inventories, and writes down inventories to net realizable value if the ultimate
expected proceeds from the disposals of excess inventory are less than the carrying cost of the merchandise.

Property and Equipment

Property and equipment are recorded at cost. The Company owns the molds used in the production of its products by third party
manufacturers. Capitalized mold costs include costs incurred for the pre-production design and development of the molds.

Depreciation
is provided over the estimated useful lives of the respective assets using either straight-line or accelerated methods.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying
amount of a long-lived asset may not be recoverable. An asset is considered to be impaired when its carrying amount exceeds the sum of the undiscounted future net cash flows expected to
result from the use of the asset and its eventual disposition. Long-lived assets include property and equipment. The amount of impairment loss, if any, is charged by the Company to current
operations. For each of the years ended December 31, 2010 and 2009, no such impairment existed.

Goodwill and Other Intangible Assets

The Company accounts for Goodwill and Other Intangible Assets in accordance with accounting guidance that requires that goodwill and
intangible assets that have indefinite useful lives no longer be subject to amortization and be tested at least annually for impairment. Management evaluates the remaining useful life of an intangible
asset that is not being amortized each reporting period to

F-9

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Table of Contents

SUMMER INFANT, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

determine
whether events and circumstances continue to support an indefinite useful life. If an intangible asset that is not being amortized is subsequently determined to have a finite useful life, it
is amortized prospectively over its estimated remaining useful life. For the years ended December 31, 2010 and 2009, the Company has determined that no such impairment existed.

Fair Value Measurements

Effective January 1, 2008, the Company adopted ASC 820 Fair Value Measurements and Disclosures which establishes a new
framework for measuring fair value and expands related disclosures. Broadly, the framework requires fair value to be determined based on the exchange price that would be received for an asset or paid
to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The standard established a
three-level valuation hierarchy based upon observable and non-observable inputs.

Observable
inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. Preference is given to observable inputs. These two
types of inputs create the following fair value hierarchy:



The
Company maintains policies and procedures to value instruments using the best and most relevant data available. In addition, the Company utilizes risk management resources that
review valuation, including independent price validation.

The
Company has used derivatives to fix interest rates. As a matter of policy, the Company does not use derivatives for speculative purposes. This is a requirement in the Company's loan
agreement to mitigate interest rate risk.

F-10

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Table of Contents

SUMMER INFANT, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The
Company recognizes the fair value of interest rate swaps using Level 2 inputs.

Fair Values of Derivative Instruments

2010

2009Liability DerivativesBalance
Sheet
Location

Fair
Value

Change in
Fair Value
Gain/(Loss)

Balance
Sheet
Location

Fair
Value

Change in
Fair Value
Gain/(Loss)(In Thousands of Dollars)As of December 31Derivatives not designated as hedging instruments under Subtopic 815-20Interest rate contracts

Other liabilities

$
345

$
(476
)
Other liabilities

$
821

$
(329
)Total derivatives not designated as hedging instruments under Subtopic 815-20



$
345






$
821


The notional amounts under the interest rate swap agreements total $10,000, which is approximately 20% of the Company's total outstanding bank
debt at December 31, 2010.

The
Company's financial instruments include cash and cash equivalents, accounts and notes receivable, interest rate swaps, accounts payable, accrued expenses, and short and
long-term borrowings. Because of their short maturity, the carrying amounts of cash and cash equivalents, accounts and notes receivable, accounts payable, accrued expenses and
short-term borrowings approximate fair value. The carrying value of long-term borrowings approximates fair value, which is based on quoted market prices or on rates available
to the Company for debt with similar terms and maturities.

Income taxes

Income taxes are computed using the asset and liability method of accounting. Under the asset and liability method, a deferred tax
asset or liability is recognized for estimated future tax effects attributable to temporary differences and carryforwards. The measurement of deferred income tax assets is adjusted by a valuation
allowance, if necessary, to recognize future tax benefits only to the extent, based on available evidence, it is more likely than not that such benefits will be realized.

Previously,
the Company adopted the provisions of a new standard which provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax
positions recognized in the financial statements. Tax positions must meet a "more-likely-than-not" recognition threshold at the effective date to be recognized upon
adoption and in subsequent periods. Upon the adoption, and at December 31, 2010 and 2009, the Company did not have any uncertain tax positions. No interest and penalties related to uncertain
tax positions were accrued at December 31, 2010 and 2009.

F-11

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Table of Contents

SUMMER INFANT, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The
tax years 2006 through 2009 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company expects no material changes to unrecognized tax
positions within the next twelve months.

Translation of Foreign Currencies

The assets and liabilities of the Company's European, Canadian, and Asian operations have been translated into U.S. dollars at
year-end exchange rates. All assets and liabilities of the Company's foreign affiliates are translated into U.S. dollars at the exchange rate in effect at the end of the year and the
income and expense accounts of these affiliates have been translated at average rates prevailing during each respective year. Resulting translation adjustments are made to a separate component of
stockholders' equity within accumulated other comprehensive income (loss).

Shipping Costs

Shipping costs are included in selling expenses and amounted to approximately $3,260 and $2,566 for the years ended December 31,
2010 and 2009, respectively.

Advertising Costs

The Company charges advertising costs to expense as incurred. Advertising expense, which consists primarily of promotional and
cooperative advertising allowances provided to customers, was approximately $15,445 and $10,827 for the years ended December 31, 2010 and 2009, respectively.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Net Income Per Share

Basic earnings per share is calculated by dividing net income for the period by the weighted average number of common stock outstanding
during the period.

Diluted
earnings per share for the Company is computed by dividing net income by the sum of: the weighted-average number of shares of common stock outstanding during the period; the
dilutive impact (using the "treasury stock" method) of "in the money" stock options; and unvested restricted shares issued to employees. Options to purchase 28,000 and 957,600 shares of the Company's
common stock were not included in the calculation, due to the fact that these options were anti-dilutive for the years ended December 31, 2010 and 2009.

New Accounting Pronouncements

ASC Update No. 2010-06

In
January 2010, the FASB issued ASC Update No. 2010-06, Fair Value Measurements and Disclosures (Topic 820)Improving Disclosures about Fair Value
Measurements. Update No. 2010-06 requires additional disclosure within the rollforward of activity for assets and liabilities measured at fair

F-12

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Table of Contents

SUMMER INFANT, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

value
on a recurring basis, including transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy and the separate presentation of purchases, sales,
issuances and settlements of
assets and liabilities within Level 3 of the fair value hierarchy. In addition, Update No. 2010-06 requires enhanced disclosures of the valuation techniques and inputs used in the fair
value measurements within Level 2 and Level 3. We adopted Update No. 2010-06 for our first quarter ended March 31, 2010, except for the disclosure of purchases, sales,
issuances and settlements of Level 3 measurements, for which disclosures will be required for our first quarter ending March 31, 2011. The adoption of this guidance had no effect on our
consolidated financial position or results of operations.

ASC
Update No. 2009-17

In
December 2009, the FASB issued ASC Update No. 2009-17, Consolidations (Topic 810)Improvements to Financial Reporting by Enterprises Involved with
Variable Interest Entities, which formally codifies FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R). Update No. 2009-17 and Statement No. 167 amend
Interpretation No. 46(R), Consolidation of Variable Interest Entities, to require that an enterprise perform an analysis to determine whether the enterprise's variable interests give it a
controlling financial interest in a variable interest entity (VIE). The analysis identifies the primary beneficiary of a VIE as the enterprise that has both 1) the power to direct activities of
a VIE that most significantly impact the entity's economic performance and 2) the obligation to absorb losses of the entity or the right to receive benefits from the entity. Update
No. 2009-17 eliminated the quantitative approach previously required for determining the primary beneficiary of a VIE and requires ongoing reassessments of whether an enterprise is the primary
beneficiary. We adopted Update No. 2009-17 for our first quarter ended March 31, 2010. The adoption of this guidance had no effect on our consolidated financial position or results of
operations.

ASC
Update No. 2009-13

In
October 2009, the FASB issued ASC Update No. 2009-13, Revenue Recognition (Topic 605)Multiple Deliverable Revenue Arrangements. The consensus in
Update No. 2009-13 supersedes certain guidance in Topic 605 (formerly EITF Issue No. 00-21, Multiple-Element Arrangements). Update No. 2009-13 provides principles and
application guidance to determine whether multiple deliverables exist, how the individual deliverables should be separated and how to allocate the revenue in the arrangement among those separate
deliverables. Update No. 2009-13 also expands the disclosure requirements for multiple-deliverable revenue arrangements. We adopted Update No. 2009-13 as of January 1, 2011. The
adoption of this guidance had no effect on our consolidated financial position or results of operations.

ASC
Update No. 2010-29

In
December 2010, the FASB issued ASC Update No. 2010-29, Business Combinations (Topic 805)Disclosure of Supplementary Pro Forma Information for
Business Combinations. Update No. 2010-29 clarifies paragraph 805-10-50-2(h) to require public entities that enter into business combinations that are material on an individual or aggregate
basis to disclose pro forma information for such business combinations that occurred in the current reporting period,
including pro forma revenue and earnings of the combined entity as though the acquisition date had been as of the beginning of the comparable prior annual reporting period only. We are required to
adopt Update No. 2010-29 for material business combinations for which the acquisition date is on or after January 1, 2011.

Management
does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial
statements.

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Table of Contents

SUMMER INFANT, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. PROPERTY AND EQUIPMENT

Property and equipment, at cost, consist of the following:

December 31,Depreciation/
Amortization Period2010

2009(In Thousands)Computer-related

$
3,166

$
2,035

5 yearsTools and dies and Prototypes/molds


14,944


10,155

1 - 5 yearsBuilding


4,156


4,156

30 yearsOther


3,000


2,058

various25,266


18,404Less accumulated depreciation


10,308


6,918Property and Equipment, net

$
14,958

$
11,486


Property
and equipment includes amounts acquired under capital leases of approximately $1,628 and $915 at December 31, 2010 and 2009, respectively, with related accumulated
depreciation of approximately $394 and $241, respectively. Depreciation is included in general and administrative expenses in the accompanying consolidated statements of income. Total depreciation
expense was $4,425 and $3,579 for the years ended December 31, 2010 and 2009, respectively.

3. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill is tested for impairment on an annual basis and more frequently if facts and circumstances indicate goodwill carrying values
exceed estimated fair values. Because the Company has fully integrated its acquisitions, it has determined that it has only one reporting unit for purposes of testing for goodwill impairment. Based on
the impairment tests performed, there was no impairment of goodwill in 2010 or 2009.

The
change in goodwill during the years ended December 31, 2010 and December 31, 2009 was as follows:

(In Thousands)
2010

2009Balance at beginning of year

$
49,496

$
44,452Acquisitions and other adjustments


879


5,044Balance at end of year

$
50,375

$
49,496


F-14

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Table of Contents

SUMMER INFANT, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. GOODWILL AND INTANGIBLE ASSETS (Continued)

Intangible assets

Intangible assets consist of the following:

December 31,2010

2009(In Thousands)Brand names

$
10,900

$
10,900Patents and licenses


1,581


1,581Customer lists


2,355


2,355Other intangibles


1,886


1,99416,722


16,830Less:Accumulated amortization


(1,976
)

(1,126
)Intangible assets, net

$
14,745

$
15,704


The
amortization period for the intangible assets ranges from 5 to 10 years for those assets that have an estimated life; certain of the assets have indefinite lives (including
brand names and several significant customer relationships). Total of intangibles not subject to amortization amounted to $10,746 and $13,255 for the years ended December 31, 2010 and 2009,
respectively. There was no impairment of intangible assets in 2010 or 2009.

Amortization
expense amounted to $959 and $564 for the years ended December 31, 2010 and 2009, respectively. Estimated amortization expense for the next five years is as follows:

Year ending December 31,

(In Thousands)2011

$
9482012


7112013


6822014


3152015


1,344


4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

December 31,2010

2009(In Thousands)Accounts payable

$
20,122

$
17,900Customer advertising and allowances


4,703


3,134Accrued purchases of inventory


7,869


3,860Other (none in excess of 5% of current liabilities)


2,957


5,072Total

$
35,651

$
29,966


5. DEBT

Credit Facilities

On August 2, 2010, the Company entered into a secured credit facility (the "Loan Agreement") with Bank of America, N.A., as
Administrative Agent, and each of the financial institutions a signatory

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SUMMER INFANT, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. DEBT (Continued)

to
the Loan Agreement. The Loan Agreement provides for a $60,000 working capital revolving credit facility and a $10,000 "accordion" credit facility. This deal amended the previous loan agreement
which was capped at $46,000 of loan capacity. The amounts outstanding under the revolving credit facility are payable in full upon maturity. The credit facilities mature on June 30, 2012. The
amount outstanding on the credit facilities at December 31, 2010 was $51,500, and the amount of availability was approximately $5,746.

Aggregate
maturities of long term debt related to this note are as follows:

(In Thousands)Year ending December 31:

2011

$
02012


51,500Total

$
51,500


The
Company and its subsidiaries, Summer Infant (USA), Inc. Summer Infant Europe Limited, Summer Infant Asia Limited and Summer Infant Canada, Limited are the borrowers under this
Loan Agreement. This credit facility is secured by substantially all of the assets of the Company.

The
Company's ability to borrow under the Loan Agreement is subject to its ongoing compliance with a number of financial and other covenants, including the following: (i) that the
Company and its subsidiaries maintain EBITDA (as defined in the Loan Agreement) of at least $15,000 on a trailing twelve month basis, (ii) that the Company and its subsidiaries maintain a ratio
of total funded debt to EBITDA of not greater than 3.25:1.00, and (iii) that the Company and its subsidiaries maintain a ratio of operating cash flow to debt service of not less than 1.50:1.00.
Furthermore, if the Company's ratio of total funded debt to EBITDA is greater than 3.25:1.00 for any fiscal year, the aggregate amount that may be borrowed under the Loan Agreement will be determined
by reference to a borrowing base. The Company is in compliance with these and other covenants at December 31, 2010.

These
credit facilities bear interest at a floating rate based on a spread over LIBOR ranging from 200 basis points to 250 basis points, depending upon the ratio of the Company's total
funded debt to EBITDA. The previous loan agreement contained an interest rate spread of 150 to 200 basis points over LIBOR. The Company has also entered into various interest swap agreements which
fixes the interest rates on a portion of the outstanding debt. As of December 31, 2010, the rate on these credit facilities averaged 4.2%. In addition, these credit facilities have an unused
line fee based on the unused amount of the credit facilities equal to 25 basis points.

The
Loan Agreement also contains customary events of default, including a cross default provision and a change of control provision. In the event of a default, all of the obligations of
the Company and its subsidiaries under the loan Agreement may be declared immediately due and payable. For certain events of default relating to insolvency and receivership, all outstanding
obligations become due and payable.

During
2010, the Company also initiated an agreement to borrow against certain international receivables. Approximately $831 relating to this agreement is included in current portion of
long term debt at December 31, 2010.

Sale-Leaseback

On March 24, 2009 the Company entered into a definitive agreement with Faith Realty II, LLC, a Rhode Island limited
liability company ("Faith Realty") (the members of which are Jason Macari, the

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Table of Contents

SUMMER INFANT, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. DEBT (Continued)

current
Chairman of the board of Directors and Chief Executive Officer of the Company, and his spouse), pursuant to which Faith Realty purchased the corporate headquarters of the Company located at
1275 Park East Drive, Woonsocket, Rhode Island (the "Headquarters"), for $4,052 and subsequently leased the Headquarters back to Summer USA for an annual rent of $390 during the initial seven year
term of the lease, payable monthly and in advance. The lease will expire on the seventh anniversary of its commencement unless an option period is exercised by Summer USA. At that time, Summer USA
will have the opportunity to extend the lease for one additional period of five years. If Summer USA elects to extend the term of the lease for an additional five years, the annual rent for the first
two years of the extension term shall be equal to $429 and for the final three years of the extension term shall be equal to $468. In addition, during the first six months of the last lease year of
the initial term of the lease, Summer USA has the option to repurchase the Headquarters for $4,457 (110% of the initial sale price). With the majority of the proceeds of the sale of the headquarters
Summer USA paid off the construction loan relating to the Headquarters. Mr. Macari has given a personal guarantee to secure the Faith Realty debt on its mortgage; therefore, due to his
continuing involvement in the building transaction and the Company's option to repurchase the building, the transaction has been recorded as a financing lease, with no gain recognition. At
December 31, 2010, approximately $60 was included in accounts payable and accrued expenses, with the balance of approximately $3,724 included in other liabilities, in the accompanying
consolidated balance sheet. This obligation is reduced each month (along with a charge to interest expense) as the rent payment is made to Faith Realty.

On
February 25, 2009, the Company's board of Directors (with Mr. Macari abstaining from such action) approved the sale leaseback transaction. In connection therewith, the
board granted a potential waiver, to the extent necessary, if at all, of the conflict of interest provisions of the Company's Model code of Ethics, effective upon execution of definitive agreements
within the parameters approved by the Board. In connection with granting such potential waiver, the Board of Directors engaged independent counsel to review the sale leaseback transaction and an
independent appraiser to ascertain (i) the value of the Headquarters and (ii) the market rent for the Headquarters. In reaching its conclusion that the sale leaseback transaction is fair
to the Company, the Board of Directors considered a number of factors, including Summer USA's ability to repurchase the headquarters at 110% of the initial sale price at the end of the initial term.

In
addition, the Company's Audit Committee approved the sale leaseback transaction (as a related party transaction) and the potential waiver and recommended the matter to a vote of the
entire Board of Directors (which approved the transaction).

6. INCOME TAXES

The provision for income taxes is summarized as follows:

2010

2009(In Thousands)Current:Federal

$
(268
)
$
903Foreign


769


864State and Local


273


462Total Current


774


2,229Deferred (primarily federal)


1,281


192Total expense

$
2,055

$
2,421


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Table of Contents

SUMMER INFANT, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. INCOME TAXES (Continued)

The
tax effects of temporary differences that comprise the deferred tax liabilities and assets are as follows:

2010

2009(In Thousands)Assets (Liabilities)Deferred tax asset-current:Accounts receivable and inventory reserves

$
361

$
301Research and development credit carry-forward and other


908


770Net deferred tax asset-current


1,269


1,071Deferred tax (liability) asset-non-current:Intangible assets and other


(5,620
)

(4,227
)Property, plant and equipment


(2,465
)

(1,380
)Net deferred tax liability non-current:


(8,085
)

(5,607
)Net deferred income tax liability

$
(6,815
)
$
(4,536
)


The
following reconciles the provision for income taxes at the U.S. federal income tax statutory rate to the expense in the consolidated financial statements:

2010

2009(In Thousands)Tax expense at statutory rate

$
2,938

$
2,746State income taxes, net of U.S. federal income tax benefit


371


333Foreign income and tax credits


(1,461
)

(901
)Non-deductible expenses


216


256Other


(9
)

(11
)Total expense

$
2,055

$
2,421


The
Company has undistributed earnings from its foreign subsidiaries of approximately $7,240 at December 31, 2010 which is all considered to be permanently reinvested due to the
Company's plans to reinvest such earnings for future expansion in certain foreign jurisdictions. The amount of taxes attributable to the permanently reinvested undistributed earnings is not
practicably determinable.

Upon
the adoption, and at December 31, 2010 and 2009, the Company did not have any uncertain tax positions. No interest and penalties related to uncertain tax positions were
accrued at December 31, 2010 and 2009. The tax years 2006 through 2009 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company expects no
material changes to unrecognized tax positions within the next twelve months.

Also,
the 2009 deferred tax liability and goodwill were increased to reflect a reclassification relating to prior year acquisitions. The reclassification had no effect on the Company's
results of operations.

F-18

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Table of Contents

SUMMER INFANT, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. STOCK OPTIONS AND RESTRICTED SHARES

The Company has granted stock options and restricted shares under its 2006 Performance Equity Plan ("2006 Plan"). Under the 2006 Plan, awards may be granted to participants in the form
of Non-Qualified Stock Options, Incentive Stock Options, Restricted Stock, Deferred Stock, Stock Reload Options and other stock-based awards. Subject to the provisions of the plan, awards
may be granted to employees, officers, directors, advisors and consultants who are deemed to have rendered or are able to render significant services to the Company or its subsidiaries and who are
deemed to have contributed or to have the potential to contribute to our success. The Company accounts for options under the fair value recognition standard. The application of this standard resulted
in share-based compensation expense for the years ended December 31, 2010 and 2009 of $1,057 and
$785, respectively. Stock based compensation expense is included in selling, general and administrative expenses. There were no share-based payment arrangements capitalized as part of the cost of an
asset.

The
fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. Summer has
insufficient history by which to estimate the expected term of the options, but used an estimate for grants of "plain vanilla" stock options based on a formula prescribed by the SEC. Forfeitures are
estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Stock-based compensation expense recognized in the consolidated
financial statements in 2010 and 2009 is based on awards that are ultimately expected to vest.

The
following table summarizes the weighted average assumptions used for options granted during the year ended December 31, 2010 and 2009.

2010

2009Expected life (in years)


6.0


5.5Risk-free interest rate


1.18
%

2.49
%Volatility


55
%

35
%Dividend yield


0
%

0
%Forfeiture rate


10
%

10
%


The
weighted-average grant date fair value of options granted during the year ended December 31, 2010 was $3.19 per share which totals $603 for the 189,500 options granted during
such period. During the year ended December 31, 2009, the weighted-average grant date fair value of options granted was $0.73 per share which totaled $788 for the 1,079,000 options granted
during the year.

A
summary of the status of the Company's options as of December 31, 2010 and changes during the year then ended is presented below:

Number Of
Shares

Weighted-
Average
Exercise
PriceOutstanding at beginning of year


2,014,600

$
3.70Granted


189,500

$
5.93Exercised


(12,750
)
$
2.55Canceled


(3,500
)
$
4.77Outstanding at end of year


2,187,850

$
3.90Options exercisable at December 31, 2010


1,148,200

$
4.38


F-19

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Table of Contents

SUMMER INFANT, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. STOCK OPTIONS AND RESTRICTED SHARES (Continued)

The
intrinsic value of options exercised totaled $10 and $0 for the years ended December 31, 2010 and 2009, respectively.

The
following table summarizes information about stock options at December 31, 2010:

Options Outstanding

Options ExercisableYear Granted

Range of Exercise Prices

Number
Outstanding

Remaining
Contractual
Life (years)

Weighted
Average
Exercise
Price

Number
Exercisable

Weighted
Average
Exercise
Price2007

$5.20 - $5.25


935,600


6.5

$
5.22


816,700

$
5.222009

$2.14 - $4.33


1,064,250


8.2

$
2.37


331,500

$
2.282010

$5.36 - $7.79


188,000


9.5

$
5.94


0





The
aggregate intrinsic value of options outstanding and options exercisable at December 31, 2010 is $2,830 and $1,467, respectively.



Number of
Options

Grant Date
Fair Value

Remaining
Contractual
LifeNon-Vested options at December 31, 2009


1,431,800

$
0.94


8.0Options Granted


189,500


3.19


9.5Options Vested


(578,150
)

1.13


6.2Options forfeited


(3,500
)

2.02


9.0Non-Vested options at December 31, 2010


1,039,650


As
of December 31, 2010, there was approximately $966 of unrecognized compensation cost related to non-vested stock option awards, which is expected to be recognized
over a remaining weighted-average vesting period of 2 years. The total fair value of options vested during the year ended December 31, 2009 was $326.

Restricted
stock awards require no payment from the grantee. The related compensation cost of each award is calculated using the market price on the grant date and is expensed equally
over the vesting
period. A summary of restricted stock awards for the Company's stock incentive plan for the year ended December 31, 2010, is as follows:

Number of
Shares

Grant
Date
Fair ValueUnvested restricted stock awards as of December 31, 2009


242,250

$
2.17Granted


8,000


6.59Vested


(80,750
)

2.17Forfeited


(13,000
)

2.17Unvested restricted stock awards as of December 31, 2010


156,500

$
2.40


As
of December 31, 2010, there was approximately $375 of unrecognized compensation cost related to non-vested stock compensation arrangements granted under the
Company's stock incentive plan for restricted stock awards. That cost is expected to be recognized over the next three years. The

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Table of Contents

SUMMER INFANT, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. STOCK OPTIONS AND RESTRICTED SHARES (Continued)

Company
did not grant any restricted stock awards prior to 2009. See Subsequent Event footnote for additional information on restricted stock grants which occurred after December 31, 2010.

The
Company is authorized to issue up to 3,000,000 stock options and restricted shares under the 2006 Plan. As of December 31, 2010, there are 474,900 shares available to grant
under the 2006 Plan.

8. WARRANTS

The Company had 3,633,953 redeemable common stock purchase warrants (the "Warrants") outstanding at December 31, 2008. Each Warrant entitled the holder to purchase one share of
common stock at an exercise price of $5.00 per share. The Warrants expired in April 2009, and there are currently no warrants outstanding.

9. CAPITAL LEASE OBLIGATIONS

The Company leases certain equipment under capital leases which expire over the next several years.

The
leases require monthly payments of principal and interest, imputed at interest rates ranging from 3% to 19% per annum.

The
capital lease liability balance of approximately $844 and $509 is included in debt on the consolidated balance sheets as of December 31, 2010 and 2009, (of which approximately
$395 is included in long-term debt each year, and the balance is in current portion of long-term debt). The minimum future lease payments, including principal and interest, are
approximately $2,972 and $562, respectively.

Future Minimum Lease Payments

Total

2011

2012

2013

2014

2015
& BeyondCapital Lease Payments


2,972


896


724


474


390


488Interest


(1,177
)

(387
)

(309
)

(235
)

(165
)

(81
)Principal


1,795


509


415


239


225


407


10. PROFIT SHARING PLAN

Summer Infant (USA), Inc maintains a defined contribution salary deferral plan (the Plan) under Section 401(k) of the Internal Revenue Code. All employees who meet the Plan's
eligibility requirements can participate. Employees may elect to make contributions up to 25% of their compensation. In 2007, the Company adopted a matching plan which was funded throughout the year.
For the years ended December 31, 2010 and 2009, the Company recorded 401(k) matching expense of $200 and $163, respectively.

11. MAJOR CUSTOMERS

Sales to one customer comprised approximately 51% of sales for the years ended December 31, 2010 and December 31, 2009. Amounts due from the one customer in 2010 and 2009
comprised approximately 46% and 50% of trade receivables at December 31, 2010 and 2009, respectively.

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Table of Contents

SUMMER INFANT, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. COMMITMENTS AND CONTINGENCIES

Royalty Commitments

Summer Infant (USA), Inc has entered into various license agreements with third parties for the use of product designs and trade names
for the products manufactured by the Company. These agreements have termination dates through August, 2013. Royalty expense under these licensing agreements for the years ended December 31,
2010 and 2009 were approximately $2,139 and $910, respectively.

Customer Agreements

The Company enters into annual agreements with its customers in the normal course of business. These agreements define the terms of
product sales including in some instances cooperative advertising costs and product return privileges (for defective products only) or defective allowances (which are based upon historical
experience). These contracts are generally annual in nature and obligate the Company only as to products actually sold to the customer.

License Agreements and Lease Commitments

For lease agreements with escalation clauses the Company records the total rent to be paid under the lease on a straight-line basis
over the term of the lease, with the difference between the expense recognized and the cash paid recorded as a deferred rent liability included in accounts payable and accrued expenses on the balance
sheet for amounts to be recognized within twelve months and in other liabilities for amounts to be recognized after twelve months from the balance sheet date, in the consolidated balance sheets. Lease
incentives are recorded as deferred rent at the beginning of the lease term and recognized as a reduction of rent expense over the term of the lease.

Summer
USA leases an office under a four year agreement which requires monthly payments of approximately $4 through July 2012.

SIE
leases office space under a non-cancelable operating lease agreement. This lease is for a five-year term through April 2012, and requires monthly payments of
approximately $6. In addition, SIE is required to pay its proportionate share of property taxes.

Summer
Infant Canada, Ltd. entered into a five-year lease for office and warehouse space under a non-cancelable operating lease agreement expiring March
2013. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurance costs as defined in the agreement. Monthly payments for the initial year are
approximately $13 and escalate over the course of the lease term. Summer Infant Canada Ltd. has the option to renew this lease for one additional period of five years under the same terms and
conditions.

Summer
Infant (USA) Inc. entered into a 28 month lease in June of 2009 for office and warehouse space under a non-cancelable operating lease agreement. The
Company is obligated to pay certain common area maintenance charges including insurance and utilities. Monthly payments for the initial year are approximately $29 and escalate over the course of the
lease term.

Summer
Infant (USA) Inc. entered into a 72 month lease in September 2010 for warehouse space under a non-cancelable operating lease agreement. The
Company is obligated to pay certain common area maintenance charges including insurance and utilities. The initial lease term is 10 months of free

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Table of Contents

SUMMER INFANT, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. COMMITMENTS AND CONTINGENCIES (Continued)

rent
followed by 12 monthly payments approximately $64 and escalate over the course of the lease term.

During
December 2007, Summer (USA) entered into a three year lease for warehouse space under a non-cancelable operating lease agreement expiring in January 2011. Summer (USA)
is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurance costs, as defined in the agreement. Monthly payments for the initial year are approximately $70,
and escalate over the course of the lease term. Summer (USA) has the option to renew this lease for one additional period of three years under the same general terms and conditions. During November
2009, SIA entered into a two year office lease which requires monthly payments of $6 through October 2011. We will let this lease expire as in 2011, the East Coast distribution center will be
consolidated into the West Coast distribution center.

Approximate
future minimum rental payments due under these leases are as follows(a):

Year Ending

(In Thousands)December 31, 2011

$
1,364December 31, 2012


1,167December 31, 2013


971December 31, 2014


2,574Total

$
6,076


---

Rent
expense (excluding taxes, fees and other charges) for the year ended December 31, 2010 and 2009 totaled approximately $2,519 and $1,629, respectively.

Employment Contracts

In accordance with United Kingdom and EU law, SIE has employment contracts with all employees. In connection with these contracts, SIE
is required to fund the individual pension contributions of certain employees at varying rates from 5% to 10% of the employee' s annual salary, as part of their total compensation package. These
pension contributions are expensed as incurred. There are no termination benefit provisions in these contracts.

Litigation

The Company is involved in various claims and legal actions arising in the ordinary course of business. Management is of the opinion
that the ultimate outcome of these matters would not have a material adverse impact on the financial position of the Company or the results of its operations.

13. GEOGRAPHICAL INFORMATION

The Company distributes branded durable baby products throughout the United States, Canada, and the United Kingdom, and various other parts of the world.

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Table of Contents

SUMMER INFANT, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. GEOGRAPHICAL INFORMATION (Continued)

The
following is a table that presents net revenue by geographic area:

December 31,2010

2009(In Thousands)North America

$
180,664

$
144,433All Other


13,821


9,048$
194,485

$
153,481


The
following is a table that presents total assets by geographic area:

2010

2009(In Thousands)North America

$
170,002

$
141,220Europe


5,652


4,195Asia


2,341


538$
177,995

$
145,953


14. BUTTERFLY LIVING ACQUISITION

On July 17, 2009, the Company entered into an Asset Purchase Agreement (the "Acquisition Agreement") to acquire Butterfly Living, LLC ("Butterfly"), under which the Company
acquired certain assets and liabilities of Butterfly, an innovative manufacturer of infant cribs, headquartered in Pennsylvania.

The
Company accounted for the acquisition under new guidance effective January 1, 2009. This new guidance requires that all assets, liabilities, contingent considerations, and
contingencies of an acquired
business be recorded at fair value at the acquisition date. In addition, acquisition costs generally are expensed as incurred.

Total
purchase price recorded in connection with the acquisition was approximately $4,100, including approximately $3,600 representing the estimated fair value of contingent
earn-out consideration to be paid quarterly through 2013 based on the achievement of certain financial targets. The first payment was due in April 2010. Approximately $74 was paid in cash
upon closing.

The
estimated earn-out liability was calculated using a discount rate of 3.27% to discount the $4,000 potential future liability to its present value, then reduced for
certain closing adjustments to $3,600. Management concluded that the full potential earn out should be recorded at the time of acquisition (net of present value) based upon current sales generated by
Butterfly products as well as projections of future business. In the fourth quarter of 2010, the Company recorded a gain of $1,770 relating to a reduction in the estimated fair value of the
earn-out at December 31, 2010, resulting primarily from a forecasted decline in the earnings expected from specific products included in the earn-out. The related
earn-out was subsequently settled in February 2011 at an amount approximating the December 31, 2010 carrying value.

F-24

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Table of Contents

SUMMER INFANT, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. BUTTERFLY LIVING ACQUISITION (Continued)

The
following table summarizes the activity of the earn-out liability from the date of the acquisition:

(In Thousands)Initially recorded

$
3,569Payments and adjustments


(748
)Reduction of liability


(1,770
)Balance at December 31, 2010

$
1,051


The
Company funded the cash portion of the total net purchase price from cash on hand. The total stock consideration of $461 was deposited in escrow to secure the
post-closing indemnification obligations of the former Butterfly stockholders under the terms of the agreement.

The
following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition of Butterfly by the Company based on analysis of the
net tangible and intangible assets acquired:

(In Thousands)Inventory

$
1,147Other Intangible Assets


812Goodwill


4,599Accounts Payable and accrued liabilities assumed


(2,452
)Total purchase consideration

$
4,106


The
goodwill arising from the acquisition consists largely of synergies and economies of scale expected from selling Butterfly products through the Company's significant distribution
chain and to existing customers. The goodwill is expected to be fully deductible for tax purposes.

15. SUBSEQUENT EVENTS

In February 2011 the Company announced a voluntary consumer safety alert and awareness recall campaign aimed at educating consumers of potential safety issues associated with electric
cords in the nursery. As part of this campaign, the Company provided a safe installation guide and cord warning label to consumers free of charge. The financial impact of this program was limited to
supplying the guides and the labels to our retail customers, who performed the re-work at their own
retail stores for an agreed upon fee. Some retail customers shipped the impacted SKU's back to the Company for the re-work, and the Company also re-worked whatever product was
in its own inventory. For product that is being returned by retailers, the Company is re-working the product as it is received, and will be shipping it back to the retailers as quickly as
possible. The charge taken in the fourth quarter of 2010 was approximately $300.

In
February 2011, Company settled the earn-out liability with Butterfly for cash and stock totaling approximately $1,051; refer to Butterfly Living Acquisition
Note 14.

In
March 2011 the Board of Directors approved the 2010 bonus plan payout of $1,044, which consisted of the following: a) $210 in cash bonuses; b) $834 in restricted
stock grants, of which 50% had an immediate vesting and 50% will vest in one year. The cash bonuses and the vested portion of the restricted stock grants are part of SG&A expenses in the attached
Statement of Operations. The non-vested portion of the restricted stock grant will be expensed from March 2011 to March 2012.

F-25

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