InfoSonics Reports First Quarter 2011 Results

SAN DIEGO, May 16, 2011 /PRNewswire/ -- InfoSonics Corporation (NASDAQ: IFON), a provider of wireless handset solutions serving Latin America and Asia Pacific, today announced results for its first quarter ended March 31, 2011.

"I am pleased with the progress we made during the first quarter and the energy level that is building in our branded business," said Joseph Ram, president and CEO of InfoSonics.  "Growth in sales of our branded products is key to our return to profitability and to a successful transition of our business from being primarily a distributor of wireless handsets in Latin America to being a developer, manufacturer and marketer of our proprietary handsets serving Latin America, Asia Pacific and other markets.  In this regard, our net sales of verykool® branded products during the first quarter grew 61% over the same quarter of the prior year.  Furthermore, in the coming weeks, we plan to announce a number of new products which will expand our product portfolio.  We are working to expand our network of distribution customers and network operators, and hope these new handsets will ignite their business."

Commenting further on the results and strategy, Mr. Ram noted, "As recently reported, we expect that the first quarter of 2011 represented the final quarter of significant revenues from our Samsung distribution business.  Starting in the second quarter of 2011, although we may have small amounts of distribution sales, we anticipate that our business will consist substantially of the development, manufacture and sale of our own proprietary line of verykool® wireless products. As our distribution revenues phase out and the mix of our business shifts primarily to verykool® products, we expect that our gross profit margin should increase.  We are also eliminating expenses associated with the distribution business, which should further decrease our sales break-even point.  We generated $1.3 million in cash from operations this quarter, and ended the quarter with $20.1 million of working capital that we believe is adequate to support us through this transitional period."

InfoSonics reported net sales for the first quarter of 2011 of $9.5 million, compared to $27.5 million for the first quarter of 2010.  The decrease in net sales was due to a $19.1 million reduction in the company's distribution sales caused by an Argentine import tariff, which increased the price of imported handsets by up to 30 percent.  This decrease was partially offset by a $1.1 million increase in net sales of the company's verykool branded products.

Gross margin in the first quarter of 2011 was 8.6 percent, compared to 5.2 percent in the first quarter of 2010.  The improvement in gross margin reflects a higher percentage of total sales derived from the company's verykool® product line which generate higher margins than our legacy distribution business.  Branded sales represented 32% of net sales in the first quarter of 2011 compared to only 7% in the same period of the prior year.

Operating expenses in the first quarter of 2011 were $1.8 million, compared to $2.0 million in the first quarter of 2010.  Selling, general and administrative expenses declined by 27% from $2.0 million in the first quarter of 2010 to $1.4 million in the first quarter of 2011, related mostly to reductions in variable expenses linked to the decline in the company's distribution sales.  This expense decline was partially offset by an increase of $337,000 in research and development expenses related to the company's China development subsidiary, which was established during the second quarter of 2010.

The net loss for the first quarter of 2011 was $894,000, or $0.06 per share, compared to a net loss of $567,000, or $0.04 per share, in the first quarter of 2010.

The company ended the first quarter of 2011 with $13.8 million in cash and cash equivalents.  This represented a $1.3 million increase from $12.5 million at the end of the fourth quarter of 2010.  At March 31, 2010, the company had $20.1 million of net working capital and no outstanding indebtedness.

About InfoSonics Corporation

InfoSonics is a provider of wireless handsets and related products to OEMs, carriers and distributors in Latin America and Asia Pacific.  The Company designs, develops, manufactures, markets, sells and provides after-sales support for its own proprietary line of products under the verykool® and other private label brands.   Additional information can be found on our corporate website at www.infosonics.com and www.verykool.net.

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) the ability of the Company's new China R&D group to develop new verykool® handsets and successfully introduce them into new emerging 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) 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; (6) the ability to attract new sources of profitable business from expansion of products or services or risks associated with entry into new markets, including geographies, products and services; (7) 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; (8) significant changes in supplier terms and relationships or shortages in product supply; (9) loss of business from one or more significant customers; (10) customer and geographical accounts receivable concentration risk and other related risks; (11) rapid product improvement and technological change resulting in inventory obsolescence; (12) uncertain political and economic conditions internationally, including terrorist or military actions; (13) the loss of a key executive officer or other key employees and the integration of new employees; (14) changes in consumer demand for multimedia wireless handset products and features; (15) our failure to adequately adapt to industry changes and to manage potential growth and/or contractions; (16) seasonal buying patterns; (17) the resolution of any litigation for or against the Company; (18) the ability of the Company to have access to adequate capital to fund its operations; and (19) 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.

SOURCE InfoSonics Corporation

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