Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)10-Q

Quarterly Report UnderPursuant to Section 13 or 15d

of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2009June 30, 2010

Summer Infant, Inc.

(Name of Registrant as Specified in Its Charter)

Commission file number 001-33346

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 last 90 days.  Yes x   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 whether the registrant is a large accelerated filer, an accelerated filer,  a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,�� “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

As of May 8, 2009,July 15, 2010, there were 15,392,78215,437,477 shares outstanding (including unvested restricted shares) of the registrant’s Common Stock, $.0001 par value per share.

Table of Contents

Summer Infant, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

Note that all dollar amounts presented in the attached table below are in thousands of US dollars except share amounts.dollars.

See notes to condensed consolidated financial statements.

5

Table of Contents

SUMMER INFANT, INC.  AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.                       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying interim condensed consolidated financial statements of Summer Infant, Inc. (the “Company”) are unaudited, but in the opinion of management, reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results for the interim periods. Accordingly, they do not include all information and notes required by generally accepted accounting principles for complete financial statements. The results of operations for interim periods are not necessarily indicative of results to be expected for the entire fiscal year or any other period. The balance sheet at December 31, 20082009 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These interim consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes for the year ended December 31, 20082009 filed on Form 10-K on March 25, 2009.10, 2010.

All significant intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements.

Income taxes.taxes

The provision for income taxes is based on the Company’s estimated annualized effective tax rate for the year.

Effective January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109.” FIN 48 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements in accordance with SFAS No. 109. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. Upon the adoption of FIN 48, the Company had no unrecognized tax benefits. During the first quarter of 2009, the Company recognized no adjustments for uncertain tax benefits.

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 such benefits will be realized.  The Company recognizes interest and penalties, if any, related to uncertain tax positions in selling, general and administrative expenses.  No interest and penalties related to uncertain tax positions were accrued at March 31,June 30, 2010 or 2009. The tax years 20052006 through 20082009 remain open to examination by the major taxing jurisdictions in which the Company operates.jurisdictions. The Company expects no material changes to unrecognized tax positions within the next twelve months.

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.

6

Table of Contents

2.                       DEBT

On April 10, 2008, the Company entered into two, new three-year secured credit facilities (the “Loan Agreement”) with Bank of America, N.A., as Administrative Agent, and each of the financial institutions that were a signatory to the Loan Agreement.  The Loan Agreement provides for a $36,000,000 working capital revolving credit facility and a $10,000,000 non-restoring acquisition credit facility.  The new credit facilities mature on June 30, 2011.  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.

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 a net worth of $50,000,000 plus the  sum of 50% of net income  earned in each fiscal year, (ii) that the Company and its subsidiaries maintain a ratio of total funded debt  to EBITDA of not greater than 3.50:1.00, and (iii) that the Company and  its subsidiaries maintain a ratio of operating cash flow  to debt service of not less than 1.25:1.00.  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.

These new credit facilities bear interest at a floating rate based on a spread over LIBOR ranging from 150 basis points to 200 basis points, depending upon the ratio of the Company’s total funded debt to EBITDA.  As of March 31, 2009,June 30, 2010, the blended interest rate for these credit facilities was 3.73%3.7%. In addition, these new credit facilities have an unused line fee based on the unused amount of the credit facilities equal to 25 basis points.  The total amount outstanding on these facilities at June 30, 2010 was $40,213,000.

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.

Subsequent to the end of the second quarter, on July 30, 2010 the Company entered into a new loan agreement led by Bank of America which includes a $60 million revolving credit facility, plus an “accordion” feature which would allow the Company to borrow up to $70 million in total.  This new loan agreement matures on June 30, 2012, and contains the same basic features as the previous Loan Agreement, except that the interest rate is now LIBOR plus 200 to 250 basis points, and the operating cash flow to debt service covenant is now 1.50:1.00.

During 2009, the Company initiated an agreement to borrow against certain international receivables.  Approximately $875,000 relating to this agreement is included in current portion of long-term debt at June 30, 2010.

3. FAIR VALUE MEASUREMENTS

Effective January 1, 2008, the Company adopted the new standard regarding fair value 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:

Level 1—Quoted prices for identical instruments in active markets.

Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3—Significant inputs to the valuation model are unobservable.

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. Management

7

Table of Contents

concludes there has been no material change in the company’s credit risk nor that of Bank of America and therefore the valuation of the liability is reasonable.

The Company uses 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.

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

As of June 30, 2010 the fair value of the swaps now reflects a liability of approximately $613,000, which is included in “other liabilities” on the accompanying balance sheet. The change in fair value of the swap liability is recorded in “interest expense-net”. The interest rate swaps are not accounted for as hedges.

The notional amounts under the interest rate swap agreements total approximately $20 million, which is approximately 50% of the Company’s total outstanding bank debt at June 30, 2010.

3.4.  DERIVATIVE INSTRUMENTS

The Company is exposed to interest rate risk primarily through its borrowing activities.  The Company’s long-term debt is a variable rate instrument.  The Company entered into three interest rate swap contracts under which the Company agreed to pay an amount equal to a specified fixed rate of interest times a notional principal amount, and to in turn receive an amount equal to a specified variable rate of interest times the same notional principal amount.

The Company uses 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.

The interest rate swap contracts require payment of a fixed rate of interest and the receipt of a variable rate of interest at the LIBOR one month index rate plus 150-200 basis points on a notional amount of indebtedness.

5.                       REAL ESTATE TRANSACTION

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 current Chairman of the board of Directors and President of the Company, and his spouse), pursuant to which Faith Realty will purchasepurchased the corporate headquarters of the Company located at 1275 Park East Drive, Woonsocket, Rhode Island (the “Headquarters”) and subsequently leaseleased the Headquarters back to Summer USA (collectively, the “Transactions”).  Pursuant to the terms of that certaina Purchase and Sale Agreement between Summer USA and Faith Realty, dated as of March 24, 2009, Faith Realty purchased the Headquarters for $4,052,500 and then leased the Headquarters back to Summer USA for an annual rent of $390,000 during the initial seven (7) year term of the lease, payable monthly and in advance.  The lease will expire on the seventh (7th) 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 (1) additional period of five (5) years.  If Summer USA elects to extend the term of the lease for an additional five (5) years, the annual rent for the first two (2) years of the extension term shall be equal to $429,000 and for the final three (3) years of the extension term shall be equal to $468,000.  In addition, during the first six (6) months of the last lease year of the initial term of the lease Summer USA has the option to repurchase the Headquarters for $4,457,750 (110% of the initial sale price).  The Transactions were consummated concurrently with the execution of the definitive agreements.  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 building will remainremains on the books of the Company and the transaction has been

9

Table of Contents

Company, the Board of Directors considered a number of factors, including Summer USA’s ability to repurchase the headquartersHeadquarters at 110% of the initial sale price at the end of the initial term.

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

4.6.                        COMMITMENTS AND CONTINGENCIES

Litigation

The Company is a party to routine litigation and administrative complaints incidental to its business.  Management does not believe that the resolution of any or all of such routine litigation and administrative complaints is likely to have a material adverse effect on the Company’s financial condition or results of operations.

5.7.                        STOCK OPTIONS AND RESTRICTED SHARES

Summer has granted stock options 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 us or our subsidiaries and who are deemed to have contributed or to have the potential to contribute to our success. IncentiveThe Company has issued both stock options may only be awardedand restricted shares to individuals who are our employees at the time of grant.and board members.

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS 123(R), using the modified prospective transition method.  The adoption of SFAS 123(R) resulted in share-basedShare-based compensation expense for the threesix months ended March 31,June 30, 2010 and 2009 and 2008 of approximately $365,000$339,000 and $90,000,$499,000, respectively.  ThereAs of June 30, 2010, there were 475,0002,141,600 stock options granted duringoutstanding, and 161,500 unvested restricted shares outstanding. During the three months ended March 31, 2009 at a fair value of $0.66 per option.  As of March 31, 2009, there were 1,452,600June 30, 2010 the Company did not grant any stock options outstanding.  In addition, there were 349,000 restricted shares issued to employees and directors in the three months ended March 31, 2009 at a fair value of $2.17 per share; 87,250 of these shares vested immediately.options.

The key assumptions used in the Black-Scholes Valuation were as follows:

There were no stock option or restricted shares issued during the three months ended March 31, 2008.

11

Table of Contents

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 carry-forwards. 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 such benefits will be realized.  The Company recognizes interest and penalties, if any, related to uncertain tax positions in selling, general and administrative expenses.  No interest and penalties related to uncertain tax positions were accrued at March 31,June 30, 2010 or 2009. The tax years 20052006 through 20082009 remain open to examination by the major taxing jurisdictions. The Company expects no material changes to unrecognized tax positions within the next twelve months.

Company Overview

Summer is a designer, marketer, and distributor of branded juvenile health, safety and wellness products which are sold principally to large North American and UK retailers.  Summer currently has more than 7080 proprietary products in various product categories including nursery audio/video monitors, safety gates, durable bath products, bed rails, infant thermometers and related health and safety products, booster and potty seats and bouncers.

Summer’sOur strategy is to grow its sales through a variety of methods, including:

·                  increasedIncreased product penetration (more products at each store);

·                  Increased store penetration (more stores within each retail customer);

·                  New products (at existing and new customers);

·                  New mass merchant retail customers;

·                  New distribution channels (food and drug chains, price clubs, home centers, and web-based retailers);

·                  New geographies (international expansion); and

·                  New product categories (for example, the soft goods division started in 2006).categories;

·                  AcquisitionsAcquisitions.

Summer hasWe have been able to grow itsour annual revenues by over $100,000,000 over the past six yearssignificantly through a combination of all of the above factors. Each year it haswe have been able to expand the number of products into its main distribution channel, mass merchant retailers, and has also added new customers each year. Therefore, even without new product introductions, Summer could grow its business by simply selling more of itsthe existing product line to existing customers.

For 20092010 and beyond, the growth strategy of Summer will be to continue to develop and sell new products to itsthe existing customer base, sell new and existing products to new customers (or expand relationships with existing customers), and to expand in the UK and in other geographic regions (including Japan, Mexico and Australia, among others).

Summer’sOur growth strategy has included acquisitions.

On March 31, 2008,  Summer acquired substantially all of the assets of Basic Comfort, Inc., a leading manufacturer and supplier of infant comfort and safety products, including infant sleep positioners, infant head supports and portable changing pads.

14

Table of Contents

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 Summer believes itwe believe we can readily increase sales. Product development expenses will increase as Summer develops new products in existing and new categories. As a result of its acquisition strategy, Summerwe will 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,

15

Table of Contents

(a)See non-GAAP discussion below regarding the computation of Adjusted EBITDA.

Three months ended March 31, 2009June 30, 2010 compared with three months ended March 31, 2008June 30, 2009

Net sales increased 22.6% from approximately $28,425,000$38,361,000 in the three months ended June 30, 2009 to $49,483,000 for the three months ended March 31, 2008 toJune 30, 2010, an increase of approximately $34,849,000 for the three months ended March 31, 2009.29%. This sales increase was primarily attributable to increased distribution of Summer’s products throughout Summer’s customer base, the acquisition of Basic Comfort and Kiddopotomus in 2008, andplus new product introductions.  Significant increasesIncreases were noted in large accounts such as Babies R Us, in addition to several other accounts which have been added overmost of the past few years, including Lowe’s and Wal-Mart.company’s significant customers.

Gross profit increased 17% from approximately $9,935,000$13,617,000 for the three months ended March 31, 2008June 30, 2009 to approximately $11,657,000$18,502,000 for the three months ended March 31, 2009.June 30, 2010.  The gross profit as a percentage of sales decreasedincreased to 33.4%37.4% from 35.0%35.5% in the prior year. The decreaseincrease as a percentage of sales is primarily due to increased costscost reductions achieved during the second half of finished goods from the Company’s vendors2009, in Asia and the US.  The increase in these costs is primarily dueaddition to increased raw material costs and labor.  The Company also sold approximately $1,000,000 of excess inventory at reduced prices in the three months ended March 31, 2009.a favorable product mix.

Selling, general and administrative expenses (excluding depreciation, amortization and non-cash stock compensation expense) increased from approximately $7,326,000$9,633,000 for the three months ended March 31, 2008June 30, 2009 to approximately $9,294,000$13,634,000 for the three months ended March 31, 2009.June 30, 2010. This increase was primarily attributable to increases in headcount, higher variable selling expenses due to the increase in sales, and costs associated with the opening of new distribution centers to support the increase in sales.  Selling, general and administrative expenses increased to 26.7%27.6% of net sales in the three months ended March 31, 2009June 30, 2010 from 25.8%25.1% of net sales in the three months ended March 31, 2008.  In response, the Company has reduced headcount by 10% in an effort to align the Company’s fixed cost structure to its current sales base.June 30, 2009.

Adjusted EBITDA decreased(as defined) increased from approximately $2,609,000$3,984,000 for the three months ended March 31, 2008June 30, 2009 to approximately $2,363,000$4,868,000 for the three months ended March 31, 2009, a decreaseJune 30, 2010, an increase of 9%approximately 22%. This decreaseincrease was primarily attributable to the lowerincreased sales and gross profit percentagedollars as described above.

Six months ended June 30, 2010 compared with six months ended June 30, 2009

Net sales increased from $73,210,000 in the six months ended June 30, 2009 to $93,599,000 for the six months ended June 30, 2010, a 28% increase. This sales increase was primarily attributable to increased distribution of Summer’s products throughout Summer’s customer base, plus new product introductions.  Increases were noted in most of the significant customers.

Gross profit increased from $25,274,000 for the six months ended June 30, 2009 to $35,431,000 or the six months ended June 30, 2010.  The gross profit as a percentage of sales increased to 37.9% from 34.5% in the prior year. The increase as a percentage of sales is due to cost reductions achieved during the second half of 2009, in addition to a favorable product mix.

Selling, general and administrative expenses increased from $18,927,000 for the six months ended June 30, 2009 to $26,280,000 or the six months ended June 30, 2010. This increase was primarily attributable to increases in headcount, higher variable selling expenses due to the increase in sales, and costs associated with the opening of new distribution centers to support the increase in sales.  Selling, general and administrative expenses increased to 28.1% of net sales in the six months ended June 30, 2010 from 25.8% of net sales in the six months ended June 30, 2009.

Adjusted EBITDA increased from $6,347,000 for the six months ended June 30, 2009 to equal to the $9,151,000 for the six months ended June 30, 2010, an increase of approximately 44%. This increase was primarily attributable to the increased sales and gross profit dollars as described above.

14

Table of Contents

Liquidity and Capital Resources

Summer generally funds its operations and working capital needs through cash generated from operations and borrowings under its secured credit facilities.

Summer’s sales have increased significantly over the past several years. For the year ended December 31, 2003, net sales were $17,600,000. For the year ended December 31, 2008, net sales exceeded $132,000,000. This sales growth has led to a substantial increase in working capital requirements, specifically trade receivables and inventory. The typical cash flow cycle is as follows:

·                  Inventory is purchased to meet expected demand plus a safety stock. Since the majority of Summer’s vendors are based in Asia, inventory takes from four to six weeks to arrive from Asia to the various distribution points Summer maintains in the US and the UK. Payment terms for these vendors average 60 days from the date the product ships from Asia, therefore Summer is generally paying for the product a short time after it is physically received in the US. The increased sales Summer has experienced result in increased levels of inventory, and therefore an increase in the amount of cash required to fund its inventory level.

·                  Sales to customers generally have payment terms of 30 to 60 days. The increased sales have resulted in an increase in the level of accounts receivable, and therefore have increased the amount of cash required to fund working capital.

Summer had traditionally been able to fund its increased working capital through asset-based lines of credit with banks. The lenders generally follow a borrowing base formula that allows advances based on the levels of accounts receivable and inventory.

17

Table of Contents

Summer and its subsidiaries.  These new credit facilities replace Summer’s prior line of credit, and are being used principally to fund growth opportunities and for working capital purposes.

Summer’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  Summer and its subsidiaries maintain a new worth of $50,000,000 plus the  sum of 50% of net income  earned in each fiscal year, (ii) that Summer and its subsidiaries maintain a ratio of total funded debt  to EBITDA of not greater than 3.50:1.00, and (iii) that Summer and  its subsidiaries maintain a ratio of operating cash flow  to debt service of not less than 1.25:1.00.  In addition,Furthermore, if Summer’s ratio of total funded debt to EBITDA is greater than 3.25:1.00 as of December 31, 2008, the total commitment amount under the working capital revolving credit facility will reduce by $4,000,000 on March 31, 2009.  Furthermore, if Summer’s ratio of total

18

Table of Contents

Reconciliation of unaudited Adjusted EBITDAto Net Income (in thousands of dollars)$000’s):

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

ITEM 4T.  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 Quarterly Report, weSummer carried out an evaluation, under the supervision and with the participation of ourthe Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as of March 31, 2009.June 30, 2010. Our principal executive officerChief Executive Officer and principal financial officerChief Financial Officer have concluded, based on their evaluation, that as of the end of the period covered by this report, ourCompany’s controls and procedures were effective as of March 31, 2009.June 30, 2010.

(b) Changes in Internal Control Over Financial Reporting

There was no change in ourSummer’s internal control over financial reporting that occurred during the period covered by this Quarterly Report that has materially affected, or is reasonably likely to materially affect, ourSummer’s internal control over financial reporting.

2018