SAN DIEGO, Nov. 9, 2017 /PRNewswire/ -- InfoSonics
Corporation (NASDAQ: IFON), the provider of verykool®
wireless handset solutions and tablets, today announced results for
its third quarter ended September 30, 2017.
Net sales for the third quarter of 2017 amounted to $6.0 million, which represented a $3.0 million, or 33%, decrease from
$9.0 million for the third quarter of
2016. The decrease was primarily attributable to reduced
sales to a large retail customer who curtailed purchases during the
quarter from all vendors due to inflated inventories of
non-InfoSonics products. Sales to Central American customers
were also soft, partially offset by increased sales to U.S.-based
Latin American distributors.
Gross profit in the 2017 third quarter was $606,000, a 31% decrease compared to $884,000 for the third quarter of 2016. Our
gross profit margin as a percent of sales in the 2017 third quarter
was 10.1%, an increase from 9.8% for the 2016 third quarter.
The reduction in gross profit in the current quarter is a result of
the low level of sales, against fixed overhead costs, as well as a
higher level of promotional credits given to certain
customers. The reduced gross profit margin in the prior year
quarter was caused by a combination of price pressure and increased
costs from our China manufacturers
as the wireless industry underwent an unprecedented shakeup in its
supply chain during which a loss of capacity resulted in supply
shortages and rising prices.
Operating expenses in the third quarter of 2017 were
$2,320,000, a 31% increase compared
to $1,775,000 in the 2016 third
quarter. The increase was the result of expenses incurred in
connection with the pending Cooltech merger, which amounted to
$1,022,000 during the period.
Such expenses were substantially funded by $948,000 in net proceeds from the August 2, 2017 sale of shares of our common stock
to certain investors affiliated with Cooltech. The increase
in expenses was partially offset by reduced legal expenses after
settling all outstanding patent litigation in September 2016, and other expense reduction
actions we implemented over the last year. The most
significant offsetting decreases were in wages and benefits,
product certification and marketing.
The net loss for the 2017 third quarter was $1,761,000, $0.56
per share, compared to net loss of $945,000, $0.33 per
share, in the third quarter of 2016 (both periods adjusted for the
recent post-third quarter reverse stock split).
At September 30, 2017, we had
$453,000 in cash, $8.0 million of net working capital and no
outstanding funded debt.
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 12.5 million
shares (as adjusted for our 1-for-5 reverse stock split) of our
common stock in exchange for all of the outstanding capital stock
of Cooltech. Following the Merger and related transactions,
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 four Cooltech
nominees to the Board of Directors, such that four of our five
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.
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; (2) 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; (3) 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; (4) our
ability to source our verykool® handsets and
successfully introduce them into new markets; (5) our ability
to have access to adequate capital to fund operations; (6) our
ability to secure adequate supply of competitive products on a
timely basis and on commercially reasonable terms; (7) foreign
exchange rate fluctuations and/or devaluation of a foreign currency
(most notably the Mexican peso) and our ability to effectively
hedge for such fluctuations or devaluations, adverse governmental
controls or actions, 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 or risks
associated with entry into new markets or expanding in existing
markets, including geographies, products, services and big box
retailers; (9) an interruption or failure of our information
systems or subversion of access or other system controls, including
private information, 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;
(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) extended general economic downturn in world
markets; (15) uncertain political and economic conditions
internationally, including terrorist or military actions;
(16) the loss of a key executive officer or other key
employees and the integration of new employees; (17) changes
in consumer demand for multimedia wireless handset products and
features; (18) our failure to adequately adapt to industry
changes and to manage potential growth and/or contractions;
(19) seasonal buying patterns; (20) the resolution of any
litigation for or against the Company, including patents; and
(21) the ability of the Company to generate taxable income and
remain a viable business (as well as remaining listed on Nasdaq or
publicly traded otherwise) in future periods. These
forward-looking statements speak only as of the date of this report
and we undertake no obligation to publicly update any
forward-looking statements to reflect new or changing information,
events or circumstances after the date of this release. We have
instituted in the past, and continue to institute, changes to our
strategies, operations and processes to address risks and
uncertainties and to mitigate their impacts on our business,
results of operations and financial condition. However, no
assurances can be given that we will be successful in these
efforts. For a further discussion of significant risk factors to
consider, see "Risk Factors" below in this report and in
"Item 1A. Risk Factors" of our most recent Annual Report on
Form 10-K. In addition, other risks or uncertainties may be
detailed from time to time in our future SEC filings.
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. On September 19,
2017, the Company filed with the SEC a Registration
Statement on Form S-4 that included a proxy statement/prospectus of
the Company, and that was amended on October
31, 2017. INVESTORS AND SECURITY HOLDERS OF THE
COMPANY ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND ANY
OTHER RELEVANT DOCUMENTS THAT HAVE OR 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
September
30,
|
|
|
For the Nine
Months Ended
September
30,
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
Net
sales
|
$
|
6,008
|
|
|
$
|
8,989
|
|
|
$
|
17,526
|
|
|
$
|
30,525
|
Cost of
sales
|
|
5,402
|
|
|
|
8,105
|
|
|
|
15,993
|
|
|
|
27,306
|
Gross
profit
|
|
606
|
|
|
|
884
|
|
|
|
1,533
|
|
|
|
3,219
|
Selling, general
and administrative expenses
|
|
2,320
|
|
|
|
1,775
|
|
|
|
5,055
|
|
|
|
5,605
|
Operating
loss
|
|
(1,714)
|
|
|
|
(891)
|
|
|
|
(3,522)
|
|
|
|
(2,386)
|
Other
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest,
net
|
|
(45)
|
|
|
|
(54)
|
|
|
|
(138)
|
|
|
|
(173)
|
Other
expense
|
|
(2)
|
|
|
|
—
|
|
|
|
(14)
|
|
|
|
(321)
|
Loss before
provision for income taxes
|
|
(1,761)
|
|
|
|
(945)
|
|
|
|
(3,674)
|
|
|
|
(2,880)
|
Provision for
income taxes
|
|
—
|
|
|
|
—
|
|
|
|
(3)
|
|
|
|
(3)
|
Net
loss
|
$
|
(1,761)
|
|
|
$
|
(945)
|
|
|
$
|
(3,677)
|
|
|
$
|
(2,883)
|
Net loss per share
(basic and diluted)
|
$
|
(0.56)
|
|
|
$
|
(0.33)
|
|
|
$
|
(1.24)
|
|
|
$
|
(1.00)
|
Basic and diluted
weighted-average number of common shares outstanding
|
|
3,166
|
|
|
|
2,878
|
|
|
|
2,974
|
|
|
|
2,878
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
$
|
(1,761)
|
|
|
$
|
(945)
|
|
|
$
|
(3,677)
|
|
|
$
|
(2,883)
|
Foreign currency
translation adjustments
|
|
(52)
|
|
|
|
(220)
|
|
|
|
444
|
|
|
|
(851)
|
Comprehensive
loss
|
$
|
(1,813)
|
|
|
$
|
(1,165)
|
|
|
$
|
(3,233)
|
|
|
$
|
(3,734)
|
|
|
|
InfoSonics
Corporation
|
|
Consolidated
Balance Sheets
|
(Amounts in
thousands, except per share data)
|
|
|
September
30,
2017
|
|
|
December
31,
2016
|
|
(unaudited)
|
|
|
(audited)
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
453
|
|
|
$
|
2,200
|
Trade accounts
receivable, net of allowance for doubtful accounts of $115 and
$113, respectively
|
|
5,595
|
|
|
|
7,507
|
Other accounts
receivable
|
|
8
|
|
|
|
62
|
Inventory
|
|
4,918
|
|
|
|
4,071
|
Prepaid
assets
|
|
1,424
|
|
|
|
1,670
|
Total current
assets
|
|
12,398
|
|
|
|
15,510
|
Property and
equipment, net
|
|
390
|
|
|
|
132
|
Other
assets
|
|
51
|
|
|
|
384
|
Total
assets
|
$
|
12,839
|
|
|
$
|
16,026
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
$
|
2,871
|
|
|
$
|
3,839
|
Accrued
expenses
|
|
1,552
|
|
|
|
1,597
|
Total current
liabilities
|
|
4,423
|
|
|
|
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; 16,889 and 14,389 shares
issued and outstanding as of September 30, 2017 and December 31,
2016, respectively
|
|
17
|
|
|
|
14
|
Additional paid-in
capital common stock
|
|
34,203
|
|
|
|
33,147
|
Accumulated other
comprehensive loss
|
|
(2,251)
|
|
|
|
(2,695)
|
Accumulated
deficit
|
|
(23,553)
|
|
|
|
(19,876)
|
Total stockholders'
equity
|
|
8,416
|
|
|
|
10,590
|
Total liabilities and
stockholders' equity
|
$
|
12,839
|
|
|
$
|
16,026
|
|
|
|
InfoSonics
Corporation
|
|
Consolidated
Statements of Cash Flows
|
(Amounts in
thousands)
|
(unaudited)
|
|
|
For the Nine
Months Ended
September
30,
|
|
2017
|
|
|
2016
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Net loss
|
$
|
(3,677)
|
|
|
$
|
(2,883)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
Depreciation
|
|
122
|
|
|
|
65
|
Provision for obsolete
inventory
|
|
58
|
|
|
|
(98)
|
Provision for bad
debts
|
|
2
|
|
|
|
19
|
Loss on disposal of
fixed assets
|
|
2
|
|
|
|
—
|
Stock-based
compensation
|
|
111
|
|
|
|
225
|
(Increase) decrease
in:
|
|
|
|
|
|
|
Trade accounts
receivable
|
|
1,910
|
|
|
|
1,747
|
Other accounts
receivable
|
|
54
|
|
|
|
25
|
Inventory
|
|
(905)
|
|
|
|
2,009
|
Prepaid
assets
|
|
246
|
|
|
|
43
|
Other
assets
|
|
(7)
|
|
|
|
(183)
|
(Decrease) increase
in:
|
|
|
|
|
|
|
Accounts
payable
|
|
(968)
|
|
|
|
(1,668)
|
Accrued
expenses
|
|
(45)
|
|
|
|
14
|
Net cash used in
operating activities
|
|
(3,097)
|
|
|
|
(685)
|
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
|
|
—
|
|
|
|
1,578
|
Repayment on line of
credit
|
|
—
|
|
|
|
(938)
|
Sale of common
stock
|
|
948
|
|
|
|
—
|
Net cash provided by
financing activities
|
|
948
|
|
|
|
640
|
Effect of exchange
rate changes on cash
|
|
444
|
|
|
|
(851)
|
Net decrease in cash
and cash equivalents
|
|
(1,747)
|
|
|
|
(958)
|
Cash and cash
equivalents, beginning of period
|
|
2,200
|
|
|
|
2,647
|
Cash and cash
equivalents, end of period
|
$
|
453
|
|
|
$
|
1,689
|
Cash paid for
interest
|
$
|
165
|
|
|
$
|
185
|
Cash paid for
income taxes
|
$
|
5
|
|
|
$
|
—
|
|
|
|
|
|
|
|
Non-cash investing
activities:
|
|
|
|
|
|
|
Transfer of other
assets to property and equipment
|
$
|
340
|
|
|
$
|
—
|
View original
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SOURCE InfoSonics Corporation