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EX-99.1 - EX-99.1 - Simply, Inc.ifon-ex991_6.htm
EX-23.1 - EX-23.1 - Simply, Inc.ifon-ex231_10.htm
8-K/A - 8-K/A - Simply, Inc.ifon-8ka_20180521.htm

 

Exhibit 99.2

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

The unaudited pro forma condensed combined financial information presented below sets forth the financial position and results of operations of InfoSonics Corporation (“InfoSonics” or the “Company”) after giving effect to the Merger with Cooltech Holdings Corporation (“Cooltech”) and the following three related transactions (the “Transactions”):

 

a)

the August 2, 2017 equity offering by InfoSonics of 100,000 common shares and warrants pursuant to the Public Offering (already included in the historical financial statements of InfoSonics as of December 31, 2017);

 

b)

the private placement by InfoSonics of 175,000 common shares and warrants to be completed in connection with the Merger, pursuant to the Private Placement; and

 

c)

the private placement by InfoSonics of $1 million of three year 0% convertible notes and warrants pursuant to the Note Private Placement.

 

It should be noted that all share and per share amounts in this pro forma presentation have been adjusted for the two 1-for-5 reverse stock splits affected by the Company in October 2017 and March 2018.  The following unaudited pro forma condensed combined financial statements give effect to the Merger and related transactions and were prepared in accordance with the regulations of the SEC and generally accepted accounting principles in the United States. The unaudited pro forma condensed combined balance sheet as of December 31, 2017 is presented as if the then pending Merger and the Transactions occurred on December 31, 2017, and the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2017 are presented as if the Merger and the Transactions occurred on January 1, 2017. For accounting purposes, Cooltech is considered to be acquiring InfoSonics in the Merger. Cooltech was determined to be the “accounting acquirer” based upon the terms of the Merger Agreement and the three Securities Purchase Agreements which result in the following: (i) Cooltech stockholders will own 2,150,000 shares (reverse split adjusted) of InfoSonics Common Stock and warrants on approximately 389,000 additional shares, which together gives them approximately 82% of the common shares of the combined organization on a fully-diluted basis following the closing of the Merger, (ii) Cooltech directors will hold a majority of board seats in the combined organization and (iii) Cooltech management will hold all key positions in the management of the combined organization. Consequently, in accordance with the provisions of Accounting Standards Codification Topic 805, “Business Combinations” (“ASC 805”), the Merger will be accounted for as a reverse acquisition using the acquisition method of accounting.

 

The pro forma financial information is presented for informational purposes only and is not necessarily indicative of what the combined company’s financial position actually would have been had the Merger transactions been completed on date indicated or what the combined company's results of operations actually would have been had the Merger transactions been completed as of the beginning of the periods indicated. In addition, the pro forma financial statements do not purport to project the future financial position or operating results of the combined company. The pro forma financial statements include adjustments for events that are (1) directly attributable to the aforementioned transactions, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on the combined results. Certain of these adjustments are preliminary and may be revised. There can be no assurance that such revisions will not result in material changes to the information presented.

 

It should be noted that there have been no material transactions between InfoSonics and Cooltech during the periods presented in the unaudited pro forma condensed combined financial statements. In addition, these statements do not reflect any cost or growth synergies that the combined company may achieve as a result of the Merger, or the costs to combine the operations of InfoSonics and Cooltech or other structural changes.

 

The pro forma financial information has been derived from and should be read in conjunction with the following:

 

(a)

consolidated financial statements and related notes of InfoSonics, as filed with its Annual Report on Form 10-K for the year ended December 31, 2017; and

 

(b)

consolidated financial statements and related notes of Cooltech for the year ended December 31, 2017, as filed herewith on Form 8-K.


 


 

INFOSONICS CORPORATION

Unaudited Pro Forma Condensed Combined Balance Sheet

as of December 31, 2017

(in thousands)

 

 

Historical

 

 

Pro Forma Merger Adjustments

 

 

 

 

InfoSonics

 

 

Cooltech

 

 

Amount

 

Notes

Combined

Organization

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

612

 

 

$

346

 

 

$

2,750

 

A

$

3,708

 

Restricted cash

 

 

 

 

1,008

 

 

 

 

 

 

 

1,008

 

Trade accounts receivable, net

 

5,706

 

 

 

8,495

 

 

 

 

 

 

 

14,201

 

Other accounts receivable

 

 

 

 

3,361

 

 

 

 

 

 

 

3,361

 

Inventory

 

3,879

 

 

 

1,631

 

 

 

 

 

 

 

5,510

 

Due from related parties

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid assets

 

1,782

 

 

 

11

 

 

 

 

 

 

 

1,793

 

Total current assets

 

11,979

 

 

 

14,852

 

 

 

2,750

 

 

 

29,581

 

Property and equipment, net

 

350

 

 

 

391

 

 

 

 

 

 

 

741

 

Intangibles, net

 

 

 

 

1,135

 

 

 

 

 

 

 

1,135

 

Goodwill

 

 

 

 

5,936

 

 

 

243

 

D

 

6,179

 

Other assets

 

28

 

 

 

138

 

 

 

 

 

 

 

166

 

Total assets

$

12,357

 

 

$

22,452

 

 

$

2,993

 

 

$

37,802

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

$

3,762

 

 

$

10,841

 

 

 

 

 

 

$

14,603

 

Accrued expenses

 

1,490

 

 

 

1,276

 

 

$

1,436

 

B

 

4,252

 

 

 

 

 

 

 

 

 

 

 

50

 

C

 

 

 

Notes payable to related parties

 

 

 

 

441

 

 

 

 

 

 

 

441

 

Notes payable

 

 

 

 

3,374

 

 

 

 

 

 

 

3,374

 

Total current liabilities

 

5,252

 

 

 

15,932

 

 

 

1,486

 

 

 

22,670

 

Long-term notes payable to related parties

 

 

 

 

 

3,315

 

 

 

 

 

 

 

3,315

 

Long-term notes payable

 

 

 

 

5,540

 

 

 

729

 

A

 

6,269

 

Total liabilities

 

5,252

 

 

 

24,787

 

 

 

2,215

 

 

 

32,254

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

3

 

 

 

1

 

 

 

3

 

D

 

3

 

 

 

 

 

 

 

 

 

 

 

(3

)

E

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

F

 

 

 

Preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

Additional paid-in capital

 

34,243

 

 

 

7,578

 

 

 

2,021

 

A

 

15,509

 

 

 

 

 

 

 

 

 

 

 

7,930

 

D

 

 

 

 

 

 

 

 

 

 

 

 

 

(36,264

)

E

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

F

 

 

 

Accumulated other comprehensive loss

 

(2,595

)

 

 

(128

)

 

 

2,595

 

E

 

(128

)

Accumulated deficit

 

(24,546

)

 

 

(9,786

)

 

 

24,546

 

E

 

(9,836

)

 

 

 

 

 

 

 

 

 

 

(1,436

)

B

 

 

 

 

 

 

 

 

 

 

 

 

 

(50

)

C

 

 

 

 

 

 

 

 

 

 

 

 

 

1,436

 

E

 

 

 

Total stockholders’ equity

 

7,105

 

 

 

(2,335

)

 

 

778

 

 

 

5,548

 

Total liabilities and stockholders’ equity

$

12,357

 

 

$

22,452

 

 

$

2,993

 

 

$

37,802

 

 

- 2 -


 

INFOSONICS CORPORATION

Unaudited Pro Forma Condensed Combined Statement of Operations

(in thousands, except per share amounts)

 

 

For the Year Ended December 31, 2017

 

 

InfoSonics

 

 

Cooltech

 

 

Pro Forma

Merger

Adjustments

 

Notes

Combined

Organization

 

Net sales

$

23,386

 

 

$

13,615

 

 

 

 

 

 

$

37,001

 

Cost of sales

 

21,397

 

 

 

11,331

 

 

 

 

 

 

 

32,728

 

Gross profit

 

1,989

 

 

 

2,284

 

 

 

 

 

 

4,273

 

Selling, general and administrative expenses

 

6,461

 

 

 

8,998

 

 

 

 

 

 

 

15,459

 

Operating loss

 

(4,472

)

 

 

(6,714

)

 

 

 

 

 

(11,186

)

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest, net

 

(182

)

 

 

(1,013

)

 

 

 

 

 

 

(1,195

)

Other income (expense)

 

(13

)

 

 

187

 

 

 

 

 

 

 

174

 

Loss before provision for income taxes

 

(4,667

)

 

 

(7,540

)

 

 

 

 

 

(12,207

)

Provision for income taxes

 

(3

)

 

 

 

 

 

 

 

 

 

(3

)

Net loss

$

(4,670

)

 

$

(7,540

)

 

$

 

 

$

(12,210

)

Net loss per share (basic and diluted)

$

(1.52

)

 

$

(1.73

)

 

 

 

 

 

$

(6.22

)

Basic and diluted weighted-average number of common shares outstanding

 

3,077

 

 

 

4,358

 

 

 

(5,473

)

F

 

1,962

 

 

 

 

 

- 3 -


 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

1.

Basis of Presentation

The unaudited pro forma condensed combined balance sheet as of December 31, 2017 is presented as if the following four transactions occurred on December 31, 2017: (1) the Merger, (2) the Public Offering, (3) the Private Placement and (4) the Note Private Placement. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2017 assumes that the four transactions took place on January 1, 2017 and combines the historical results of InfoSonics and Cooltech.

 

2.

Merger Consideration

Because of the change of control that results from the Merger, it is considered to be a reverse merger and Cooltech is deemed to be acquiring InfoSonics for accounting purposes. In addition, because the Merger involves only the exchange of equity and Cooltech is a private company whose value is difficult to measure, the fair value of the equity of InfoSonics is used to measure consideration transferred because it has a quoted market price. The market price per share used for the pro forma presentation is $8.15 per share, the closing price of the Company’s stock on March 12, 2018, the date of the Merger closing. Using this price, the value of the Merger consideration amounts to approximately $7.9 million.

For further clarification, the Merger provides for the issuance by InfoSonics of 1,875,000 shares of its common stock in exchange for all of the outstanding stock of Cooltech. The Merger was preceded by the sale of 100,000 shares in the Public Offering. There were a total of 575,656 shares of InfoSonics common stock outstanding before the sale of shares in the Public Offering, resulting in 675,656 shares including the new shares outstanding before the Merger. Contingent on the Merger and receipt of approval from the Company’s stockholders, the Company also agreed to sell an additional 175,000 shares in the Private Placement to current shareholders of Cooltech.

As indicated in ASC 805-40-30-2, the Merger is a reverse acquisition in which Cooltech is the accounting acquirer and InfoSonics is the accounting acquiree. Consistent with this concept, Cooltech is not issuing consideration to acquire InfoSonics and InfoSonics is issuing its common stock to the owners of Cooltech as consideration in the Merger. The measurement of the consideration transferred by Cooltech for its interest in InfoSonics is based on the fair value of the equity interest that Cooltech would have had to issue to give the InfoSonics shareholders the same percentage equity interest in the combined company. As such, this consideration would be the fair value of 31.21% of the combined company calculated as 850,656 shares held by InfoSonics shareholders prior to the Merger divided by 2,725,558 shares outstanding after the Merger. Therefore, the fair value of the consideration to be given by Cooltech in the Merger is calculated by multiplying the 675,656 shares by the $8.15/per share price of InfoSonics common stock to yield $5.5 million and adding the $1.75 million value of the Private Placement and $676,000 representing the value of outstanding stock warrants and options.

 

 

3.

Pro Forma Adjustments

The unaudited pro forma condensed combined financial statements include pro forma adjustments to give effect to InfoSonics’ issuance of 175,000 shares in the Private Placement, the private placement by InfoSonics of $1 million of three-year 0% convertible notes in the Note Private Placement and the acquisition of the value of InfoSonics’ net assets by Cooltech. The pro forma adjustments are described below.

 

 

A.

To reflect the $1.75 million of proceeds from the Private Placement and the $1.0 million of proceeds from the Note Private Placement.

 

B.

To record InfoSonics’ estimated transaction costs, primarily legal, advisory and transactional fees and severance that were not incurred as of December 31, 2017.

 

C.

To record Cooltech’s estimated transaction costs, primarily legal fees that were not incurred as of December 31, 2017.

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D.

To record the fair value of the consideration transferred by Cooltech in connection with the Merger equivalent to the 675,676 shares of InfoSonics stock that will be outstanding at the time of the Merger (giving effect to both the Public Offering and the Private Placement) at $8.15 per share, the closing price of the Company’s stock on March 12, 2018, the date of the Merger closing.

 

E.

To reflect the elimination of InfoSonics’ historical common stock, accumulated deficit and accumulated other comprehensive loss, including the impact of the pro forma adjustments to InfoSonics’ current liabilities.

 

F.

To reflect shares issued from the Private Placement and the Merger, as well as the elimination of Cooltech shares.

 

G.

It should be noted that adjustments B and C are reflected in the pro forma condensed combined balance sheet only. The adjustments comprise the estimated transaction expenses incurred by InfoSonics and Cooltech. In accordance with the rules of the SEC contained in Regulation S-X Rule 11.02(b)(6), these adjustments are not reflected in the pro forma condensed combined statement of operations because they represent material “nonrecurring” charges or credits which result directly from the transaction and which will be included in the statement of operations of the combined entity within the 12 months following the transaction.

 

 

- 5 -