SAN DIEGO, Aug. 10, 2017 /PRNewswire/ -- InfoSonics
Corporation (NASDAQ: IFON), the provider of verykool®
wireless handset solutions and tablets, today announced results for
its second quarter ended June 30, 2017.
As previously disclosed, on July 25,
2017, we entered into an Agreement and Plan of Merger
("Merger Agreement") with Cooltech Holding Corp. ("Cooltech"),
pursuant to which we will acquire Cooltech and Cooltech will become
a wholly-owned subsidiary of InfoSonics. The Merger Agreement
provides that we will issue an aggregate of 62.5 million
shares of our common stock in exchange for all of the outstanding
capital stock of Cooltech. Following the Merger, the former
stockholders of Cooltech will hold approximately 84% of our common
stock on a fully-diluted basis and we have agreed to cause three of
our directors to resign and to appoint three Cooltech nominees to
the Board of Directors, such that three of our four directors will
be nominees of Cooltech. The Merger and the transactions
contemplated thereby are subject to a number of customary closing
conditions, including approval of the Merger Agreement and the
Merger by our stockholders. Our stockholders will be asked to vote
on the adoption and approval of the Merger Agreement and the Merger
at a special meeting of stockholders to be called by us.
Net sales for the second quarter of 2017 amounted to
$5.3 million, which represented a
$6.8 million, or 56%, decrease
from $12.1 million for the second
quarter of 2016. The decrease reflects a lack of sales to
carrier customers in Central
America, a very soft quarter in Mexico and our exit late last year from the
U.S. market.
Gross profit in the 2017 second quarter was $605,000, a 48% decrease compared to $1,157,000 for the second quarter of 2016.
Our gross profit margin as a percent of sales in the 2017 second
quarter was 11.4%, an increase from 9.6% for the 2016 second
quarter. The reduction in gross profit in the current quarter
is a result of the low level of sales, which also made it difficult
to absorb fixed overhead costs. The reduced gross profit
margin in the prior year quarter was the result of discounts given
to liquidate aging inventory.
Operating expenses in the second quarter of 2017 were
$1,373,000, a 30% decrease compared
to $1,973,000 in the 2016 second
quarter. The decrease reflects expense reduction actions we
implemented during the second and third quarters of 2016. The
most significant decreases were in wages and benefits, product
certification and homologation, professional fees and
marketing. We also implemented additional expense reduction
actions during the current year quarter which we expect will
benefit future quarters.
The net loss for the 2017 second quarter was $812,000, $0.06 per
share, compared to net loss of $1,035,000, $0.07
per share, in the second quarter of 2016.
At June 30, 2017, we had
$1.1 million in cash, $8.8 million of net working capital and no
outstanding funded debt.
About InfoSonics Corporation
InfoSonics is a San Diego-based
manufacturer and provider of wireless handsets, tablets and related
products to carriers, distributors and retailers in Latin America under the verykool® brand.
The company is committed to delivering quality products with
innovative designs that appeal to consumers and offer exceptional
value. Additional information can be found on our corporate
website at www.infosonics.com and www.verykool.net.
Past performance in any period may not be indicative of future
results in the next period or the same period in a subsequent
year. We also experience seasonal revenue fluctuations that
can be significant from one quarter to another. Except for
the factual statements made herein, the information contained in
this news release consists of forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995
that involve risks, uncertainties and assumptions that are
difficult to predict. Words and expressions reflecting
optimism, satisfaction or disappointment with current prospects, as
well as words such as "believes," "hopes," "intends," "estimates,"
"expects," "projects," "plans," "anticipates" and variations
thereof, or the use of future tense, identify forward-looking
statements, but their absence does not mean that a statement is not
forward-looking. Such forward-looking statements are not guarantees
of performance and our actual results could differ materially from
those contained in such statements. Factors that could cause or
contribute to such differences include, without limitation: (1) the
pending Merger transaction and related PIPE stock sale may not
close and could expose us to significant expenses in connection
with the Merger; if the Merger does close, we will be subject to
substantially all the liabilities of Cooltech and will be faced
with the integration process, which could have a materially adverse
effect on our business; (2) the ability of the Company to
restore and maintain profitability; (3) our ability to
have access to adequate capital to fund operations, including the
availability of vendor credit and availability under the Company's
bank line of credit; (4) intense competition internationally,
including competition from alternative business models, such as
manufacturer-to-carrier sales, which may lead to reduced prices,
lower sales, lower gross margins, extended payment terms with
customers, increased capital investment and interest costs, bad
debt risks and product supply shortages; (5) our ability to
secure adequate supply of competitive products on a timely basis
and on commercially reasonable terms; (6) our ability to
successfully introduce new products into target markets, increase
sales and improve our gross margins despite intense competition;
(7) foreign exchange rate fluctuations, devaluation of a
foreign currency, adverse governmental controls or actions
including a possible protective import tariff on Chinese products
or weakening of U.S. trade relations with Mexico, political or economic instability, or
disruption of a foreign market, including, without limitation, the
imposition, creation, increase or modification of tariffs, taxes,
duties, levies and other charges and other related risks of our
international operations which could significantly increase selling
prices of our products to our customers and end-users and decrease
profitability; (8) the ability to attract new sources of
profitable business from expansion of products or services
including iOT devices, applications and cloud-based solutions, or
risks associated with entry into new markets, including
geographies, products and services; (9) an interruption or
failure of our information systems or subversion of access or other
system controls may result in a significant loss of business,
assets, or competitive information; (10) significant changes
in supplier terms and relationships or shortages in product supply,
including, but not limited to, those caused by recent and
continuing industry consolidation of component suppliers;
(11) loss of business from one or more significant customers;
(12) customer and geographical accounts receivable
concentration risk and other related risks; (13) rapid product
improvement and technological change resulting in inventory
obsolescence; (14) uncertain political and economic conditions
internationally, including terrorist or military actions;
(15) the loss of a key executive officer or other key
employees and the integration of new employees; (16) changes
in consumer demand for multimedia wireless handset products and
features; (17) our failure to adequately adapt to industry
changes and to manage potential growth and/or contractions;
(18) seasonal customer buying patterns; and (19) the
impact of any litigation for or against the Company, including
claims for infringement of intellectual property. Reference is also
made to other factors detailed from time to time in our periodic
reports filed with the Securities and Exchange Commission. These
forward-looking statements speak only as of the date of this
release and we undertake no obligation to publicly update any
forward-looking statements to reflect new information, events or
circumstances after the date of this release.
No Offer or Solicitation
This document does not
constitute an offer to sell or the solicitation of an offer to buy
any securities or a solicitation of any vote or approval nor shall
there be any sale of securities in any jurisdiction in which such
offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made except by
means of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933, as amended.
Additional Information and Where To Find It
The Merger
will be submitted to the stockholders of the Company for their
consideration. The Company will file with the SEC a Registration
Statement on Form S-4 that will include a proxy
statement/prospectus of the Company. INVESTORS AND SECURITY
HOLDERS OF THE COMPANY ARE URGED TO READ THE PROXY
STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT WILL BE
FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION. You may obtain copies of all documents filed
with the SEC regarding this transaction, free of charge, at the
SEC's website (www.sec.gov). In addition, investors and
stockholders will be able to obtain free copies of the proxy
statement/prospectus and other documents filed with the SEC by
InfoSonics free of charge by directing a request to Vernon A. LoForti, Vice President and Chief
Financial Officer, InfoSonics Corporation, 3636 Nobel Drive, Suite
325, San Diego, CA 92122,
vern.loforti@infosonics.com; Phone: 858-373-1675.
Participants in the Solicitation
The Company,
Cooltech, and certain of their respective directors, executive
officers and other members of management and employees, under SEC
rules may be deemed to be participants in the solicitation of
proxies from Company stockholders in connection with the proposed
transaction. Information regarding the interests of the persons who
may, under the rules of the SEC, be deemed participants in the
solicitation of Company stockholders in connection with the
proposed transaction will be set forth in the proxy
statement/prospectus when it is filed with the SEC. You can find
more detailed information about the Company's executive officers
and directors in its Annual Report on Form 10-K, filed with the SEC
on March 10, 2017 and amended on
April 27, 2017.
InfoSonics
Corporation and Subsidiaries
|
|
Consolidated
Statements of Operations and Comprehensive Loss
(Amounts in thousands, except per share data)
(unaudited)
|
|
|
|
For the Three
Months Ended
June
30,
|
|
For the Six Months
Ended
June
30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net
sales
|
|
$
|
5,297
|
|
$
|
12,126
|
|
$
|
11,518
|
|
$
|
21,536
|
Cost of
sales
|
|
|
4,692
|
|
|
10,969
|
|
|
10,591
|
|
|
19,201
|
Gross
profit
|
|
|
605
|
|
|
1,157
|
|
|
927
|
|
|
2,335
|
Selling, general
and administrative expenses
|
|
|
1,373
|
|
|
1,973
|
|
|
2,735
|
|
|
3,830
|
Operating
loss
|
|
|
(768)
|
|
|
(816)
|
|
|
(1,808)
|
|
|
(1,495)
|
Other
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest,
net
|
|
|
(44)
|
|
|
(63)
|
|
|
(93)
|
|
|
(119)
|
Other
expense
|
|
|
—
|
|
|
(156)
|
|
|
(12)
|
|
|
(321)
|
Loss before
provision for income taxes
|
|
|
(812)
|
|
|
(1,035)
|
|
|
(1,913)
|
|
|
(1,935)
|
Provision for
income taxes
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
(3)
|
Net
loss
|
|
$
|
(812)
|
|
$
|
(1,035)
|
|
$
|
(1,916)
|
|
$
|
(1,938)
|
Net loss per share
(basic and diluted)
|
|
$
|
(0.06)
|
|
$
|
(0.07)
|
|
$
|
(0.13)
|
|
$
|
(0.13)
|
Basic and diluted
weighted-average number of common shares outstanding
|
|
|
14,389
|
|
|
14,389
|
|
|
14,389
|
|
|
14,389
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(812)
|
|
$
|
(1,035)
|
|
$
|
(1,916)
|
|
$
|
(1,938)
|
Foreign currency
translation adjustments
|
|
|
176
|
|
|
(189)
|
|
|
496
|
|
|
(631)
|
Comprehensive
loss
|
|
$
|
(636)
|
|
$
|
(1,224)
|
|
$
|
(1,420)
|
|
$
|
(2,569)
|
InfoSonics
Corporation
|
|
Consolidated
Balance Sheets
(Amounts in thousands, except per share data)
|
|
|
|
June
30,
2017
|
|
December 31,
2016
|
|
|
(unaudited)
|
|
(audited)
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
1,104
|
|
$
|
2,200
|
Trade accounts
receivable, net of allowance for doubtful accounts of $116 and
$113, respectively
|
|
|
4,338
|
|
|
7,507
|
Other accounts
receivable
|
|
|
10
|
|
|
62
|
Inventory
|
|
|
5,747
|
|
|
4,071
|
Prepaid
assets
|
|
|
1,854
|
|
|
1,670
|
Total current
assets
|
|
|
13,053
|
|
|
15,510
|
Property and
equipment, net
|
|
|
440
|
|
|
132
|
Other
assets
|
|
|
43
|
|
|
384
|
Total
assets
|
|
$
|
13,536
|
|
$
|
16,026
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
3,155
|
|
$
|
3,839
|
Accrued
expenses
|
|
|
1,135
|
|
|
1,597
|
Total current
liabilities
|
|
|
4,290
|
|
|
5,436
|
Commitments and
Contingencies (Note 13)
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
Preferred stock,
$0.001 par value, 10,000 shares authorized (no shares issued and
outstanding)
|
|
|
—
|
|
|
—
|
Common stock, $0.001
par value, 40,000 shares authorized; 14,389 and 14,389 shares
issued and outstanding as of June 30, 2017 and December 31, 2016,
respectively
|
|
|
14
|
|
|
14
|
Additional paid-in
capital common stock
|
|
|
33,223
|
|
|
33,147
|
Accumulated other
comprehensive loss
|
|
|
(2,199)
|
|
|
(2,695)
|
Accumulated
deficit
|
|
|
(21,792)
|
|
|
(19,876)
|
Total stockholders'
equity
|
|
|
9,246
|
|
|
10,590
|
Total liabilities and
stockholders' equity
|
|
$
|
13,536
|
|
$
|
16,026
|
InfoSonics
Corporation
|
|
Consolidated
Statements of Cash Flows
(Amounts in thousands)
(unaudited)
|
|
|
|
For the Six Months
Ended
June
30,
|
|
|
2017
|
|
2016
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,916)
|
|
$
|
(1,938)
|
Adjustments to
reconcile net loss to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
Depreciation
|
|
|
74
|
|
|
43
|
Provision for obsolete
inventory
|
|
|
58
|
|
|
(98)
|
Provision for bad
debts
|
|
|
3
|
|
|
—
|
Stock-based
compensation
|
|
|
76
|
|
|
155
|
(Increase) decrease
in:
|
|
|
|
|
|
|
Trade accounts
receivable
|
|
|
3,166
|
|
|
1,453
|
Other accounts
receivable
|
|
|
52
|
|
|
25
|
Inventory
|
|
|
(1,734)
|
|
|
2,941
|
Prepaid
assets
|
|
|
(184)
|
|
|
(53)
|
Other
assets
|
|
|
1
|
|
|
(104)
|
Decrease
in:
|
|
|
|
|
|
|
Accounts
payable
|
|
|
(684)
|
|
|
(1,003)
|
Accrued
expenses
|
|
|
(462)
|
|
|
(569)
|
Net cash provided by
(used in) operating activities
|
|
|
(1,550)
|
|
|
852
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
Purchase of property
and equipment
|
|
|
(42)
|
|
|
(62)
|
Net cash used in
investing activities
|
|
|
(42)
|
|
|
(62)
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
Borrowings on line of
credit
|
|
|
—
|
|
|
938
|
Repayment on line of
credit
|
|
|
—
|
|
|
(938)
|
|
|
|
—
|
|
|
—
|
Effect of exchange
rate changes on cash
|
|
|
496
|
|
|
(631)
|
Net increase
(decrease) in cash and cash equivalents
|
|
|
(1,096)
|
|
|
159
|
Cash and cash
equivalents, beginning of period
|
|
|
2,200
|
|
|
2,647
|
Cash and cash
equivalents, end of period
|
|
$
|
1,104
|
|
$
|
2,806
|
Cash paid for
interest
|
|
$
|
121
|
|
$
|
122
|
Cash paid for
income taxes
|
|
$
|
5
|
|
$
|
—
|
|
|
|
|
|
|
|
Non-cash investing
activities:
|
|
|
|
|
|
|
Transfer of other
assets to property and equipment
|
|
$
|
340
|
|
$
|
—
|
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SOURCE InfoSonics Corporation