InfoSonics® Reports Second Quarter 2009 Financial Results

InfoSonics Corporation (NASDAQ: IFON), one of the premier providers and distributors of wireless handsets and accessories serving Latin America, today announced results for the second quarter ended June 30, 2009.

“We are pleased to report solid operating results for our second quarter,” said Joseph Ram, President and Chief Executive Officer of InfoSonics Corporation. “Despite the global economic downturn, we are happy with the 45% sequential increase in revenues and our continued profitability. We experienced a rebound in sales in both South and Central America as we remained focused on our Samsung business in addition to our proprietary line of verykool® handsets.

“We remain diligent on managing our balance sheet so as to allow us to continue to navigate the current economic downturn. Looking forward, we will continue to expand our verykool® line-up geographically as well as with new products featuring the functionality desired by the consumers such as camera, music players, messaging and 3G speeds. The recent introduction and shipping of our i300 and i410 verykool® products is anticipated to contribute to our results in the coming quarters,” Mr. Ram concluded.

Second Quarter Results

Net sales in the second quarter of 2009 were $61.7 million, up 5% compared to $59.0 million in the second quarter of 2008, and up 45% compared to $42.6 million in the first quarter of 2009. South America sales, consisting of Argentina, Uruguay and Colombia, represented 91% of net sales or $56.1 million, compared to $45.5 million in the same quarter of last year, and $39.5 million in the first quarter of 2009. Central America sales represented 9% of net sales or $5.6 million, compared to $13.5 million in the second quarter of 2008, and $3.4 million in the first quarter of 2009. The second quarter of 2009 showed an increase in both Central and South America, as the products we sold gained market share and consumer demand and carrier inventories appeared to stabilize.

Approximately 713,000 units were shipped in the second quarter of 2009, compared to approximately 692,000 units in the second quarter of 2008, and approximately 518,000 in the first quarter of 2009. Average selling price per unit increased 10% year-over-year, primarily due to the demand for more feature-filled and higher priced units.

Gross profit for the second quarter of 2009 was $4.1 million, or 6.6% of net sales, as compared to $3.2 million, or 5.5% of net sales for the second quarter of 2008, the increase is due to a shift in product mix towards higher margin products.

Operating expenses for the second quarter of 2009 were $3.6 million, or 5.8% of net sales as compared to operating expenses of $3.2 million, or 5.5% of net sales in the second quarter of 2008, and a decrease from the 6.7% of net sales in the first quarter of 2009.

Operating income from continuing operations, before interest and taxes, for the quarter was $513,000 or $0.04 per diluted share, compared to income of $10,000 or $0.00 per share for the same quarter of 2008, and income of $478,000 or $0.03 per share in the first quarter of 2009.

Our discontinued operations incurred a net loss $167,000 during the quarter ended June 30, 2009, as compared to $2.1 million for the same period of 2008.

Net income for the second quarter of 2009 was $230,000 or $0.02 per share, compared to a net loss of $2.2 million or $0.15 per share in the same quarter of last year and net income of $247,000 or $0.02 per share in the first quarter of 2009.

During the second quarter, we completed the stock repurchase program that was initiated in December 2008; in total we repurchased approximately 827,000 shares at an average of $0.60 per share. InfoSonics ended the second quarter with quick assets (cash and accounts receivable) of $67.9 million and working capital (current assets minus current liabilities) of $25.7 million. At the end of the second quarter of 2009, InfoSonics had drawn down $31.5 million of its $45 million credit facility with Wells Fargo.

Six-Month Results

Net sales for the six months ended June 30, 2009 were $104.3 million, a decrease of 18% compared to $127 million for the six months ended June 30, 2008. Sales from South America represented 92% of net sales or $95.6 million, versus $92.3 million in for the first six months of 2008. Sales from Central America represented 8.4% of net sales or $8.7 million, versus $34.7 million for the first six months of 2008.

Gross profit for the first six months of 2009 increased 9% to $7.4 million, versus $6.8 million for the first six months of 2008. Gross margin was 7.1% for the first six months of 2009 as compared to 5.4% of total sales for the first six months of 2008.

Operating expenses for the first six months of 2009 were $6.4 million, a decrease of 7% as compared to operating expenses of $6.9 million for the same period of 2008.

Income from continuing operations for the first six months of 2009 was approximately $837,000 or $0.06 per diluted share, compared to loss from continuing operations of $481,000, or $0.03 per share for the same period a year ago.

Our discontinued operations incurred a net loss $360,000 during the six months ended June 30, 2009, as compared to $2.2 million for the six months ended 2008.

About InfoSonics Corporation

InfoSonics is one of the premier providers and distributors of wireless handsets and accessories serving Latin America. For the wireless telecommunications industry, InfoSonics provides flexible and cost effective solutions, including product assembly, purchasing, marketing, selling, warehousing, order assembly, programming, packing, shipping, and delivery. InfoSonics supports manufacturers in moving their products to agents, resellers, distributors, independent dealers, retailers and wireless network operators in Latin America. For additional information, please visit www.infosonics.com. www.verykool.net

Cautionary Statement for the Purpose of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995

The matters in this press release that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements about future revenues, sales levels, operating income and margins, wireless handset sales, stock-based compensation expense, gain (loss) in value of derivatives, cost synergies, operating efficiencies, profitability, market share, and rates of return, are based on current management expectations that involve certain risks and uncertainties. These risks and uncertainties, in whole or in part, could cause such expectations to fail to be achieved and have a material adverse effect on InfoSonics’ business, financial condition and results of operations, including, without limitation: (1) intense competition in Latin America and dependency on that region for sales; (2) competition from alternative business models, such as manufacturer-to-carrier sales, which may lead to reduced prices, lower sales or reduced sales growth, lower gross margins, extended payment terms with customers, increased capital investment and interest costs, bad debt risks and product supply shortages; (3) the ability of the Company to successfully introduce and sell its verykool® products and the related inventory risk of such products (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, and other related risks of our international operations; (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) the ability of the Company to generate taxable income in future periods in order to utilize and realize any quarterly tax benefits recorded (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; (10) termination of a supply or services agreement with a major supplier or product supply shortages; (11) extended general economic downturn; (12) loss of business from one or more significant customers; (13) customer and geographical accounts receivable concentration risk; (14) rapid product improvement and technological change resulting in inventory obsolescence; (15) the loss of a key executive officer or other key 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 buying patterns; (19) uncertain political and economic conditions internationally; (20) terrorist or military actions; (21) the impact, if any, of changes in SFAS 123R as it relates to stock options; and (22) the resolution of any litigation against the company. Our actual results could differ materially from those anticipated in our forward looking statements.

InfoSonics has instituted in the past and continues to institute changes to its strategies, operations and processes to address these risk factors and to mitigate their impact on InfoSonics’ results of operations and financial condition. However, no assurances can be given that InfoSonics will be successful in these efforts. For a further discussion of significant factors to consider in connection with forward-looking statements concerning InfoSonics, reference is made to Item 1A Risk Factors of InfoSonics’ Annual Report on Form 10-K for the year ended December 31, 2008; other risks or uncertainties may be detailed from time to time in InfoSonics’ future SEC filings. InfoSonics does not intend to update any forward-looking statements.

InfoSonics Corporation and Subsidiaries Consolidated Statements of Operations (unaudited)
		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2009				2008				2009				2008
Net sales		$	61,706,104			$	59,039,970			$	104,331,222			$	126,973,238
Cost of sales			57,633,965				55,814,413				96,904,462				120,158,895
Gross profit			4,072,139				3,225,557				7,426,760				6,814,343
Operating expenses			3,558,921				3,215,412				6,435,893				6,908,598
Operating income (loss) from continuing operations			513,218				10,145				990,867				(94,255	)
Other income (expense)
Other income			211				9,820				253				10,262
Interest (expense)			(109,300	)			(334,962	)			(137,178	)			(524,463	)
Income (loss) from continuing operations before benefit for income taxes			404,129				(314,997	)			853,942				(608,456	)
Benefit (provision) for income taxes			(7,100	)			159,527				(16,800	)			127,356
Income (loss) from continuing operations			397,029				(155,470	)			837,142				(481,100	)
Loss from discontinued operations, net of tax			(166,567	)			(2,077,743	)			(359,628	)			(2,165,293	)
Net income (loss)		$	230,462			$	(2,233,213	)		$	477,514			$	(2,646,393	)
Basic earnings (loss) per share
From continuing operations		$	0.03			$	(0.01	)		$	0.06			$	(0.03	)
From discontinued operations		$	(0.01	)		$	(0.14	)		$	(0.02	)		$	(0.15	)
Net income (loss)		$	0.02			$	(0.15	)		$	0.04			$	(0.18	)
Diluted earnings (loss) per share
From continuing operations		$	0.03			$	(0.01	)		$	0.06			$	(0.03	)
From discontinued operations		$	(0.01	)		$	(0.14	)		$	(0.02	)		$	(0.15	)
Net income (loss)		$	0.02			$	(0.15	)		$	0.04			$	(0.18	)
Basic weighted-average number of common shares outstanding			14,592,992				14,881,523				14,736,585				14,819,968
Diluted weighted-average number of common shares outstanding			14,785,901				14,881,523				14,851,457				14,819,968

InfoSonics Corporation and Subsidiaries Consolidated Balance Sheets
		June 30,				December 31,
		2009				2008
ASSETS		(unaudited)				(audited)
Current assets:
Cash and cash equivalents		$	15,522,939			$	24,714,753
Trade accounts receivable, net of allowance for doubtful accounts of $580,361 (unaudited) and $429,126			51,755,444				22,727,738
Other receivables			428,624				4,209,658
Inventory, net of reserves of $224,556 (unaudited) and $161,556			4,860,875				4,375,334
Prepaids			286,977				244,103
Assets of discontinued operations			3,026,348				3,264,817
Total current assets			75,881,207				59,536,403
Property and equipment, net			427,734				498,079
Intangible assets			504,000				504,000
Other assets			206,122				115,900
Total assets		$	77,019,063			$	60,654,382
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	9,853,335			$	10,982,306
Accrued expenses			7,483,364				7,304,090
Line of credit			31,476,001				14,273,978
Income taxes payable			39,300				24,100
Liabilities of discontinued operations			1,366,666				1,310,434
Total current liabilities			50,218,666				33,894,908
Total liabilities			50,218,666				33,894,908
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized (no shares issued and outstanding as of applicable period end)			—				—
Common stock, $0.001 par value, 40,000,000 shares authorized; 14,745,755 and 15,010,807 shares issued and 14,184,147 and 14,956,270 shares outstanding as of June 30, 2009 and December 31, 2008, respectively			14,184				14,956
Treasury stock, at cost, 561,608 and 54,537 shares as of June 30, 2009 and December 31, 2008, respectively			(434,381	)			(16,900	)
Additional paid-in capital			31,697,995				31,666,434
Accumulated other comprehensive loss			(10,324	)			(25,211	)
Accumulated deficit			(4,467,077	)			(4,879,805	)
Total stockholders’ equity			26,800,397				26,759,474
Total liabilities and stockholders’ equity		$	77,019,063			$	60,654,382