8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 4, 2016

InfoSonics Corporation

(Exact name of registrant as specified in its charter)

Maryland	001-32217	33-0599368
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
	3636 Nobel Drive, Suite #325 San Diego, CA 92122
	(Address of principal executive offices)

Registrant’s telephone number, including area code: (858) 373-1600

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On August 4, 2016, InfoSonics Corporation (the “Company”) issued an earnings release announcing its financial results for the three and six months ended June 30, 2016 in the press release attached hereto as Exhibit 99.1 and incorporated herein by reference.

The information in this Item 2.02 is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description
99.1	Press Release of InfoSonics Corporation dated August 4, 2016.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	InfoSonics Corporation
	/s/ Vernon A. LoForti
	Vernon A. LoForti
Date: August 4, 2016	Vice President, Chief Financial Officer and Secretary

EX-99.1

Exhibit 99.1

PRESS RELEASE

InfoSonics Reports Second Quarter 2016 Results

SAN DIEGO, August 4, 2016 – InfoSonics Corporation (NASDAQ: IFON), the provider of verykool® wireless handset solutions and tablets, today announced results for its second quarter ended June 30, 2016.

“Although we were pleased with the 29% increase in sales for the quarter, the bottom line loss was a direct result of our concerted effort to reduce inventories, streamline operations and increase balance sheet liquidity,” said Joseph Ram, President and CEO of InfoSonics. “During the quarter we cut our inventory levels by 45% from last quarter and generated $3.1 million in cash as a result. Although it was costly, this inventory liquidation was part of our strategy to reposition our Company toward future integration of our products with iOT devices, applications and solutions. Over the past several quarters, we have been developing our own proprietary cloud-based solutions, applications and other products that can be monetized in the future by leveraging our installed customer base. We currently have over 400,000 users and devices registered in our system. Our goal is to create value beyond the pure sale of handsets and open opportunities for us to develop vertical solutions in areas such as health and lifestyle, sports, education and general smart connected devices. Our first offering in this strategy was launched shortly after the end of the quarter, with the introduction of our very first iOT device called the verykool Fit, with an associated free APP that can be downloaded from the Google Play Store.”

Commenting further, Mr. Ram noted, “Given the industry’s moderate growth expectations for mobile phone handsets, we plan to maintain these lower inventory levels to drive faster inventory turns and prepare for the future launch of integrated products. This will help shorten our cash-to-cash cycle and increase liquidity. We were pleased that during the quarter we also reduced accounts receivable by over $900,000 and brought our Days Sales Outstanding (“DSO”) level to the lowest point in over four years. As a consequence, we ended the quarter with $2.8 million in cash, an increase of almost $2.4 million from last quarter. Finally, we are retooling certain of our operations for greater focus and efficiency and took a number of cost cutting actions at the end of the quarter to reduce operating expenses in the second half of the year.”

We had net sales for the 2016 second quarter of $12.1 million, which represented a $1.2 million, or 11%, increase from $10.9 million for the second quarter of 2015. The increase was primarily attributable to a doubling of sales to big box retail customers in Mexico and almost triple the sales to carrier customers in Central America. These gains were partially offset by reduced sales to customers in South America and the United States. Unit shipments during the quarter grew by 30% versus the comparable period in 2015, while the average selling price per unit fell 13%, reflecting the deep price discounting used to liquidate inventories. For the six months ended June 30, 2016, our net sales were $21.5 million, which represented a $3.9 million, or 15%, decrease from $25.5 million for the comparable six month period of 2015.

Gross profit in the 2016 second quarter was $1.2 million, a 28% decrease compared to $1.6 million for the comparable period in 2015. Our gross profit margin as a percent of sales in the 2016 second quarter declined to 9.5% compared to 14.7% for the comparable period in 2015. The margin erosion reflects the price discounting discussed above. For the six months ended June 30, 2016, gross profit was $2.3 million, a 44% decrease from $4.2 million for the comparable period in 2015.

Operating expenses in the second quarter of 2016 were $2.0 million, an 11% decrease compared to $2.2 million in the 2015 first quarter. The most significant reduction was in marketing expenses, partially offset by employee termination benefits and increased legal fees and settlements. For the six months ended June 30, 2016, operating expenses were $3.8 million, a 7% reduction from $4.1 million in the comparable period of 2015.

Also in the second quarter of 2016, other expense of $156,000 consisted primarily of losses on forward exchange contracts to hedge currency exposure against the Mexican Peso. For the six months ended June 30, 2016, such losses aggregated $321,000. No such expense was incurred in the comparable periods of 2015.

The net loss for the second quarter of 2016 was $1,035,000, $0.07 per share, compared to a net loss of $678,000, $0.05 per share, in the second quarter of 2015. For the six months ended June 30, 2016, the net loss was $1,938,000, $0.13 per share, compared to a net loss of $146,000, $0.01 per share, in the comparable period of 2015.

At June 30, 2016, we had $2.8 million in cash, $11.4 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 consumers in the United States and 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) 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; (2) our ability to source new verykool^® handsets, including LTE models, at a sufficient pace and successfully introduce them into target markets; (3) extended general economic downturn in world markets; (4) inability to secure adequate supply of competitive products on a timely basis and on commercially reasonable terms; (5) the ability of the Company to maintain and improve its gross margins despite intense competition; (6) foreign exchange rate fluctuations, devaluation of a foreign currency, 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; (7) 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; (8) 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; (9) 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; (10) loss of business from one or more significant customers; (11) customer and geographical accounts receivable concentration risk and other related risks; (12) rapid product improvement and technological change resulting in inventory obsolescence; (13) uncertain political and economic conditions internationally, including terrorist or military actions; (14) the loss of a key executive officer or other key employees and the integration of new employees; (15) changes in consumer demand for multimedia wireless handset products and features; (16) our failure to adequately adapt to industry changes and to manage potential growth and/or contractions; (17) seasonal buying patterns; (18) the resolution of any litigation for or against the Company, including claims for infringement of intellectual property; (19) the ability of the Company to have access to adequate capital to fund its operations, including the availability of vendor credit and availability under the Company’s bank line of credit; and (20) the ability of the Company to generate taxable income in future periods. 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.

Contact:

Vernon A. LoForti

Chief Financial Officer

vern.loforti@infosonics.com

858-373-1675

###

InfoSonics Corporation

Consolidated Statements of Operations and Comprehensive Loss

(Amounts in thousands, except per share data)

(Unaudited)

	Three Months Ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Net sales	$	12,126		$	10,945		$	21,536		$	25,462
Cost of sales		10,969			9,337			19,201			21,300
Gross profit		1,157			1,608			2,335			4,162
Selling, general and administrative		1,973			2,205			3,830			4,101
Operating income (loss)		(816	)		(597	)		(1,495	)		61
Other income (expense):
Other income (expense), net		(156	)		—			(321	)		—
Interest, net		(63	)		(81	)		(119	)		(204	)
Loss before provision for income taxes		(1,035	)		(678	)		(1,935	)		(143	)
Provision for income taxes		—			—			(3	)		(3	)
Net loss	$	(1,035	)	$	(678	)	$	(1,938	)	$	(146	)
Net loss per share (basic and diluted)	$	(0.07	)	$	(0.05	)	$	(0.13	)	$	(0.01	)
Basic and diluted weighted-average number of common shares outstanding		14,389			14,381			14,389			14,371
Comprehensive loss:
Net loss	$	(1,035	)	$	(678	)	$	(1,938	)	$	(146	)
Foreign currency translation adjustments		(189	)		(168	)		(631	)		(289	)
Comprehensive loss	$	(1,224	)	$	(846	)	$	(2,569	)	$	(435	)

InfoSonics Corporation

Consolidated Balance Sheets

(Amounts in thousands, except per share data)

	June 30, 2016			December 31, 2015
	(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,806		$	2,647
Trade accounts receivable, net of allowance for doubtful accounts of $95 and $95, respectively		7,838			9,291
Other accounts receivable		71			96
Inventory		3,794			6,637
Prepaid assets		2,078			2,025
Total current assets		16,587			20,696
Property and equipment, net		175			156
Other assets		233			129
Total assets	$	16,995		$	20,981
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,395		$	4,398
Accrued expenses		1,774			2,343
Total current liabilities		5,169			6,741
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, 2016 and December 31, 2015, respectively		14			14
Additional paid-in capital		33,014			32,859
Accumulated other comprehensive loss		(2,223	)		(1,592	)
Accumulated deficit		(18,979	)		(17,041	)
Total stockholders’ equity		11,826			14,240
Total liabilities and stockholders’ equity	$	16,995		$	20,981

InfoSonics Corporation

Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

	Six Months Ended June 30,
	2016			2015
Cash flows from operating activities:
Net loss	$	(1,938	)	$	(146	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		43			48
Provision for obsolete inventory		(98	)		(120	)
Stock-based compensation expense		155			103
(Increase) decrease in:
Trade accounts receivable		1,453			6,694
Other accounts receivable		25			(1	)
Inventory		2,941			(854	)
Prepaid assets		(53	)		476
Other assets		(104	)		(23	)
Decrease in:
Accounts payable		(1,003	)		(1,876	)
Accrued expenses		(569	)		(164	)
Net cash provided by operating activities		852			4,137
Cash flows from investing activities:
Purchase of property and equipment		(62	)		(102	)
Net cash used in investing activities		(62	)		(102	)
Cash flows from financing activities:
Borrowings on line of credit		938			4,460
Repayments on line of credit		(938	)		(7,185	)
Cash received from exercise of stock options		—			24
Net cash used in financing activities		—			(2,701	)
Effect of exchange rate changes on cash		(631	)		(289	)
Net increase in cash and cash equivalents		159			1,045
Cash and cash equivalents, beginning of period		2,647			1,464
Cash and cash equivalents, end of period	$	2,806		$	2,509
Cash paid for interest	$	122		$	245
Cash paid for taxes	$	—		$	—