Simply Inc. (SIMPQ)

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Bull & Bear’s Digest: IFON can bolster its share price.

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Verykool smartphones
by InfoSonics

Thomas Rice: “In a world where cell phones are
becoming increasingly more popular,
InfoSonics Corp.
(IFON) provides wireless handsets, tablets
and accessories.

In 2013, 1.8 billion devices were
shipped (a 4.8% increase over 2012). And, DigiTimes
Research expects this upward trend to continue,
especially in the smartphone segment, which is
expected to grow 24% in 2014.

InfoSonics has a small niche in the mobile phone
universe, but has continued to grow despite the
vast competition. In 2006, the company introduced
verykool®
, a brand of entry-level, mid-tier and high-
end feature phones and Android-based smartphones.
Since shutting down the distribution of third party
products, including Samsung sales in Argentina, IFON
has focused entirely on growing its verykool line.
InfoSonics announced an in-house design center in
China in 2010 to compliment the design work done
by independent design houses and original design
manufacturers.
Currently, the company focuses on the development
of feature phones, providing basic mobile features, and
smartphones, running on mobile operating systems
and offering many features. While smartphone
growth is racing upward, accounting for 55% of the
mobile shipments in 2013, feature phones are still
in demand because of the higher costs associated
with smartphones.
Operating for the most part in Latin America,
InfoSonic’s largest customer base is quite price
sensitive. As a result, the company is expanding its
portfolio of affordable smartphones, replacing some
of its high-priced featured phones with low-priced
smartphones.
Beyond Latin America, the company is growing
its market share elsewhere in the world.

Over the past few years, the company has shipped products
to Western Europe, Russia, Singapore and other
Southeast Asian Countries and Africa.

Through a December 2013 distribution agreement with Ingram
Micro Mobility, IFON hopes to grow its U.S. sales.
According to InfoSonic’s second quarter financial
report, efforts to expand geographically are succeeding
from a revenue standpoint.

For the six months ended
June 30, 2014, revenues from South America were up
112%, Mexico, 249%, Europe, Middle East and Africa
7,441% and Asia Pacific, 367%. In fact, over the six
month period, only revenues from Central America
were down, falling just 9%.
As IFON continues designing new products,
replacing higher end feature phones, and expanding
geographically, the company’s market share should
continue to grow, especially in areas where price
sensitivity is high.
Financials
Financially, InfoSonics is in good standing. After
shutting down third part distribution, InfoSonics’
revenue dropped considerably. However, with the
focus on growing its own brand, the company’s
revenues have grown 9% from fiscal 2011 to fiscal
2013. And, for the first six months of 2014, sales were
up 37% year-over-year.

In addition to sales growth, IFON’s second
quarter 2014 marked its fourth consecutive quarter
of profitability. For the three month period ended
June 30, 2014, the company posted a $109,000 profit
compared to a $47,000 loss in the same period of 2013.
On its balance sheet, InfoSonics has a high total
current assets-to-liabilities ratio of 4.6-to-1, and
$16.5 million in working capital. Plus, the company
operates with no long-term debt.

Management
Joseph Ram founded InfoSonics in 1994 and
currently sits as the company’s president and
chief executive officer. He owns a substantial 30%
(4,348,750) of the company’s common stock.
Altogether, officers and directors of the company
own 31.5% (4,672,850) of the company’s shares.
Vernon A. LoForti is the second largest insider
shareholder, with 1.3% (192,500) of IFON’s shares.

Bottom Line
In a competitive mobile phone landscape,
InfoSonics has found a way to increase sales and
market share by offering both quality feature
and smartphones, ranging in price from $18.99 to
$249.91 (according to the company’s website). By
continuing to evolve its product offering and expand
its geographical presence,
InfoSonics can bolster its share price. IFON shares are currently trading at less than half of the company’s 52-week high.

Office: 3636 Nobel Dr. Ste. 325, San Diego,
CA 92122, Tel: [phone], Fax: [phone],
www.infosonics.com.”

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