Q2/2011 GROSS PROFIT MARGIN

Second quarter revenue was $45.1 million, an increase of $10.7 million or 31% from $34.5 million for the three months ended June 30, 2010. Approximately 65% of the sales in the second quarter were generated from China's domestic markets while approximately 35% were from export markets. The increase in revenues was a result of our expansion of sales in the China domestic market. We were also able to raise the average selling prices of our products during the quarter and maintained healthy profit margins across our product lines.

Our gross profit margin was approximately 29% for the three months ended June 30, 2011, which reflects blended profit margins between our higher margin China domestic sales and generally lower margins from export sales. Our gross profit margin is higher in the China domestic markets than export markets because products are generally sold at much higher prices on both the retail and wholesale levels in our industry in China. In addition, we continue to improve manufacturing efficiency through in-house production of key components of our products, thereby benefiting further from economies of scale as we also capture manufacture margins.

Q2/2011 OPERATING EXPENSES

SG&A expenses for the quarter were approximately $3.9 million, an increase of $1 million or 36% from $2.9 million for the same period of 2010, as expected, due to the hiring of additional direct sales staff and in-store product promoters to further our revenue growth in China. Our advertising costs remained minimal during the second quarter of 2011, as expected, because we use factory representatives and in-store promoters to promote our products directly to consumers at retail locations, which is a standard marketing practice in the small household appliances industry in China. The in-store promotion approach is highly effective in marketing products directly to consumers in the unique Chinese retail environment as compared to traditional mass media advertising channels that may incur significant advertising expenses without enhancing sales. According to a survey in the 2010 China Small Electronics Market Research Report, approximately 60% of Chinese consumers surveyed purchased small household appliances as a result of direct product introduction from in-store product promoters. Like other established domestic brands in China, our in-store promoters market our products exclusively and directly to in-store customer traffic.