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iGo, Inc. 10-Q 2012

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.1
Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 0-30907

 

 

iGo, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   86-0843914

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification No.)

17800 N. Perimeter Dr., Suite 200,

Scottsdale, Arizona

  85255
(Address of Principal Executive Offices)   (Zip Code)

(480) 596-0061

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by a checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer   ¨    Accelerated Filer   ¨
Non-Accelerated Filer   ¨  (Do not check if a smaller reporting company)    Smaller Reporting Company   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

At May 4, 2012, there were 34,167,122 shares of the Registrant’s Common Stock, par value $0.01 per share outstanding.

 

 

 


Table of Contents

IGO, INC.

FORM 10-Q

TABLE OF CONTENTS

 

             PAGE NO.  

PART I

  FINANCIAL INFORMATION      1   
 

Item 1.

  Financial Statements:      1   
    Condensed Consolidated Balance Sheets      1   
    Condensed Consolidated Statements of Comprehensive Loss      2   
    Condensed Consolidated Statements of Cash Flows      3   
 

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      8   
 

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      16   
 

Item 4.

  Controls and Procedures      16   

PART II

  OTHER INFORMATION      18   
 

Item 1.

  Legal Proceedings      18   
 

Item 1A.

  Risk Factors      18   
 

Item 6.

  Exhibits      18   
  SIGNATURES      19   
  EXHIBIT INDEX      20   

Items 2, 3, 4 and 5 are not applicable.

 

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Table of Contents

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS:

IGO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(unaudited)

 

     March 31,
2012
    December 31,
2011
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 11,108      $ 10,290   

Short-term investments

     2,517        4,890   

Accounts receivable, net

     5,221        5,813   

Inventories

     9,957        11,177   

Prepaid expenses and other current assets

     395        540   
  

 

 

   

 

 

 

Total current assets

     29,198        32,710   

Property and equipment, net

     599        587   

Goodwill

     285        285   

Intangible assets, net

     2,898        3,116   

Long-term investments

     344        420   

Other assets

     158        160   
  

 

 

   

 

 

 

Total assets

   $ 33,482      $ 37,278   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Liabilities:

    

Accounts payable

   $ 2,629      $ 4,150   

Accrued expenses and other current liabilities

     1,413        956   

Deferred revenue

     825        1,305   
  

 

 

   

 

 

 

Total liabilities

     4,867        6,411   

Equity:

    

Common stock, $ .01 par value; authorized 90,000,000 shares; 33,877,610 and 33,741,609 shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively

     339        337   

Additional paid-in capital

     173,851        173,453   

Accumulated deficit

     (144,698     (141,910

Accumulated other comprehensive loss

     (877     (1,013
  

 

 

   

 

 

 

Total equity

     28,615        30,867   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 33,482      $ 37,278   
  

 

 

   

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

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Table of Contents

IGO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except per share amounts)

(unaudited)

 

     Three Months Ended
March 31,
 
     2012     2011  

Revenue

   $ 8,247      $ 9,228   

Cost of revenue

     6,802        6,369   
  

 

 

   

 

 

 

Gross profit

     1,445        2,859   
  

 

 

   

 

 

 

Operating expenses:

    

Sales and marketing

     1,568        2,037   

Research and development

     651        471   

General and administrative

     1,996        2,041   
  

 

 

   

 

 

 

Total operating expenses

     4,215        4,549   
  

 

 

   

 

 

 

Loss from operations

     (2,770     (1,690

Other income (expense):

    

Interest income, net

     5        21   

Other income (expense), net

     (23     30   
  

 

 

   

 

 

 

Net loss

     (2,788     (1,639

Basic and diluted net loss per common share

   $ (0.08   $ (0.05

Basic and diluted weighted average common shares outstanding

     33,767        33,026   

Other comprehensive loss:

    

Unrealized loss on available for sale investments

     (66     (5

Foreign currency translation adjustments

     202        133   
  

 

 

   

 

 

 

Total comprehensive loss

   $ (2,652   $ (1,511
  

 

 

   

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

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IGO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

 

     Three Months Ended
March 31,
 
     2012     2011  

Cash flows from operating activities:

    

Net loss.

   $ (2,788   $ (1,639

Adjustments to reconcile net loss to net cash used in operating activities:

    

Provision for doubtful accounts and sales returns and credits

     310        233   

Depreciation and amortization

     468        484   

Amortization of deferred compensation

     461        422   

Changes in operating assets and liabilities:

    

Accounts receivable

     283        4,037   

Inventories

     1,220        (1,862

Prepaid expenses and other assets

     19        (1,051

Accounts payable

     (1,521     (26

Accrued expenses and other current liabilities

     (84     (1,743
  

 

 

   

 

 

 

Net cash used in operating activities

     (1,632     (1,145
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchase of property and equipment

     (134     (136

Sale of short-term investments, net

     2,382        7,605   
  

 

 

   

 

 

 

Net cash provided by investing activities

     2,248        7,469   
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Net cash provided by financing activities

     —          —     
  

 

 

   

 

 

 

Effects of exchange rate changes on cash and cash equivalents

     202        133   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     818        6,457   

Cash and cash equivalents, beginning of period

     10,290        9,942   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 11,108      $ 16,399   
  

 

 

   

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

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IGO, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

(1) Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of iGo, Inc. and its wholly-owned subsidiaries, Mobility California, Inc., Mobility Idaho, Inc., iGo EMEA Limited, Mobility Texas, Inc., iGo Direct Corporation, Adapt Mobile Limited (“Adapt”) and Aerial7 Industries, Inc. (“Aerial7”) (collectively, “iGo” or the “Company”). All significant intercompany balances and transactions have been eliminated in the accompanying condensed consolidated financial statements.

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles, pursuant to rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, the accompanying condensed consolidated financial statements include normal recurring adjustments that are necessary for a fair presentation of the results for the interim periods presented. Certain information and footnote disclosures have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2011 included in the Company’s Form 10-K, filed with the SEC. The results of operations for the three months ended March 31, 2012 are not necessarily indicative of results to be expected for the full year or any other period.

The preparation of the condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make a number of estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to bad debt expense, sales returns and price protection, inventories, warranty obligations, impairment of long-lived assets and investments, and contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Recent Accounting Pronouncements

In June 2011, the FASB issued an amendment to the existing guidance on the presentation of comprehensive income. Under the amended guidance, entities have the option to present the components of net income and other comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Entities no longer have the option of presenting the components of other comprehensive income within the statement of changes in stockholders’ equity. For public entities, the amendment is effective on a retrospective basis for fiscal years, and interim periods within those years, beginning after December 15, 2011. Adoption of this amendment resulted in a change to the Company’s presentation of comprehensive income.

 

(2) Fair Value Measurement

As of March 31, 2012, the Company’s financial assets and financial liabilities that are measured at fair value on a recurring basis are comprised of overnight money market funds and investments in marketable securities.

The Company invests excess cash from its operating cash accounts in overnight money market funds and reflects these amounts within cash and cash equivalents on the condensed consolidated balance sheet at a net value of 1:1 for each dollar invested.

At March 31, 2012 and December 31, 2011, investments in marketable securities totaling $2,518,000 and $4,890,000, respectively, are classified as short-term investments on the condensed consolidated balance sheets. These investments are considered available-for-sale securities and are reported at fair value based on third-party broker statements, which qualifies as level 2 in the fair value hierarchy. At March 31, 2012, investments in marketable securities totaling $344,000 are classified as long-term investments on the condensed consolidated balance sheet. These investments are considered available-for-sale securities and are reported at fair value based on a quoted market price, which qualifies as level 1 in the fair value hierarchy. The unrealized gains and losses on available-for-sale securities are recorded in accumulated other comprehensive (loss) income. Realized gains and losses are included in interest income, net.

 

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Table of Contents
(3) Investments

Short-term

The Company has determined that all of its investments in short-term marketable securities should be classified as available-for-sale and reported at fair value.

The Company assesses its investments in marketable securities for other-than-temporary declines in value by considering various factors that include, among other things, any events that may affect the creditworthiness of a security’s issuer, the length of time the security has been in a loss position, and the Company’s ability and intent to hold the security until a forecasted recovery of fair value.

The Company generated net proceeds of $2,375,000 and $7,605,000 from the sale of short-term available-for-sale marketable securities during the three months ended March 31, 2012 and March 31, 2011, respectively.

As of March 31, 2012 and December 31, 2011, the amortized cost basis, unrealized holding gains, unrealized holding losses, and aggregate fair value by short-term major security-type investments were as follows (dollars in thousands):

 

     March 31, 2012      December 31, 2011  
     Amortized
Cost
     Net
Unrealized
Holding
Gains
(Losses)
     Aggregate
Fair Value
     Amortized
Cost
     Net
Unrealized
Holding
Gains
(Losses)
    Aggregate
Fair Value
 

U.S. corporate securities:

                

Corporate notes and bonds

   $ 400       $ —         $ 400       $ 2,785       $ (2   $ 2,783   

U.S. municipal funds

     2,107         10         2,117         2,105         2        2,107   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   $ 2,507       $ 10       $ 2,517       $ 4,890       $ —        $ 4,890   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Long-term

In June 2011, the Company made an investment in Pure Energy Visions Corporation, which is a shareholder in Pure Energy Solutions, the Company’s supplier of rechargeable batteries, in which the Company received 2,142,858 shares of Pure Energy Visions common stock at a price per share equal to $0.286, and an interest-free convertible secured debenture having a one-year repayment term that converts into an additional 2,142,858 shares of Pure Energy Visions common stock in lieu of repayment either upon the achievement of certain business goals or earlier at iGo’s discretion. The Company did not obtain control of Pure Energy Visions as a result of this investment.

The Company assesses its long-term investments for other-than-temporary declines in value by considering various factors that include, among other things, events that may affect the creditworthiness of a security’s issuer, the length of time the security has been in a loss position, and the Company’s ability and intent to hold the security until a forecasted recovery of fair value. At March 31, 2012 the Company’s investments in Pure Energy Visions had fair values significantly below their amortized cost, resulting in unrealized holding losses. Due to the short duration of the decline in value and the Company’s ability and intent to hold these securities until recovery, the Company does not consider the declines in value of the long-term investments to be other-than-temporary. However, any such losses will be evaluated on an ongoing basis and could result in other than temporary impairment charges in future periods.

 

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Table of Contents

As of March 31, 2012 and December 31, 2011, the amortized cost basis, unrealized holding gains, unrealized holding losses, and aggregate fair value by long-term major security-type investments were as follows (dollars in thousands):

 

     March 31, 2012      December 31, 2011  
     Amortized
Cost
     Net
Unrealized
Holding
Losses
    Aggregate
Fair Value
     Amortized
Cost
     Net
Unrealized
Holding
Gains
    Aggregate
Fair Value
 

Canadian corporate securities:

               

Common stock

   $ 613       $ (441   $ 172       $ 613       $ (403   $ 210   

Corporate debenture

     613         (441     172         613         (403     210   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
   $ 1,226       $ (882   $ 344       $ 1,226       $ (806   $ 420   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

(4) Intangible Assets

Intangible assets consist of the following at March 31, 2012 and December 31, 2011 (dollars in thousands):

 

            March 31, 2012      December 31, 2011  
     Average
Life
(Years)
     Gross
Intangible
Assets
     Accumulated
Amortization
    Net
Intangible
Assets
     Gross
Intangible
Assets
     Accumulated
Amortization
    Net
Intangible
Assets
 

Patents and trademarks

     3       $ 3,907       $ (3,130   $ 777       $ 3,780       $ (2,944   $ 836   

Non-compete agreements

     3         90         (47     43         90         (39     51   

Trade names

     8         612         (502     110         612         (473     139   

Customer intangibles

     5         830         (248     582         830         (207     623   

Proprietary process

     5         1,070         (275     795         1,070         (221     849   

Distribution rights

     5         375         (88     287         375         (69     306   

Technology license

     10         331         (27     304         331         (19     312   
     

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total intangible assets

      $ 7,215       $ (4,317   $ 2,898       $ 7,088       $ (3,972   $ 3,116   
     

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Aggregate amortization expense for identifiable intangible assets totaled $345,000 and $379,000 for the three months ended March 31, 2012 and 2011, respectively.

 

(5) Stock-based Compensation

Stock-based compensation expense includes compensation expense, recognized over the applicable requisite service periods for share-based awards. As of March 31, 2012, there were no fully-vested outstanding stock options and no non-vested outstanding stock options.

The following table summarizes information regarding restricted stock units for the three months ended March 31, 2012:

 

     Omnibus Plan      Inducement Grants  
     Number     Weighted
Average

Value  per
Share
     Number     Weighted
Average

Value  per
Share
 

Outstanding, December 31, 2011

     940,156      $ 2.51         824,999      $ 1.88   

Granted

     —          —           —          —     

Canceled

     —          —           —          —     

Released to common stock

     (51,940   $ 1.63         (84,054     1.29   

Released for settlement of taxes

     (25,063   $ 1.51         (40,946     1.29   
  

 

 

      

 

 

   

Outstanding, March 31, 2012

     863,153      $ 2.59         699,999      $ 1.99   
  

 

 

   

 

 

    

 

 

   

 

 

 

For the three months ended March 31, 2012 and 2011, the Company recorded in general and administrative expense pre-tax charges of $461,000 and $422,000 associated with the expensing of restricted stock unit awards activity.

As of March 31, 2012, there was $2,292,000 of total unrecognized compensation cost related to non-vested restricted stock units, which is expected to be recognized over a weighted average period of two years.

 

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As of March 31, 2012, all outstanding restricted stock units were non-vested.

 

(6) Net Loss per Share

The computation of basic and diluted net loss per share follows (in thousands, except per share amounts):

 

     Three Months Ended
March 31,
 
     2012     2011  

Numerator:

    

Net loss.

   $ (2,788   $ (1,639

Denominator:

    

Weighted average number of common shares outstanding

     33,767        33,026   
  

 

 

   

 

 

 

Basic net loss per share:

   $ (0.08   $ (0.05
  

 

 

   

 

 

 

Warrants not included in dilutive loss per share since anti-dilutive

     5        5   

All restricted stock units were excluded from the computation of diluted net loss per common share for each period presented because the inclusion of such items would be anti-dilutive based on the net loss reported.

 

(7) Product Lines, Concentration of Credit Risk and Significant Customers

The Company is engaged in the business of selling accessories for computers and mobile electronic devices. The Company has five product lines, consisting of Power, Batteries, Audio, Protection and Other Accessories. The Company’s chief operating decision maker (“CODM”) continues to evaluate revenues based on product lines and geographies. However, the CODM manages the Company’s operations as a single business segment, which consists of the development, marketing and sales of electronics accessories across all product lines.

The following tables summarize the Company’s revenues by product line, as well as its revenues by geography (dollars in thousands):

 

     Three Months Ended
March 31,
 
     2012      2011  

Power

   $ 6,517       $ 7,910   

Batteries

     658         147   

Audio

     778         771   

Protection

     129         149   

Other accessories

     165         251   
  

 

 

    

 

 

 

Total revenues

   $ 8,247       $ 9,228   
  

 

 

    

 

 

 

 

     Three Months Ended
March 31,
 
     2012      2011  

Americas

   $ 6,504       $ 6,843   

Europe

     1,480         1,823   

Asia Pacific

     263         562   
  

 

 

    

 

 

 
   $ 8,247       $ 9,228   
  

 

 

    

 

 

 

The majority of the Company’s assets are domiciled in the United States.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. The Company places its cash with high credit quality financial institutions and generally limits the amount of credit exposure to the amount of FDIC coverage. However, periodically during the year, the Company maintains cash in financial institutions in excess of the current FDIC insurance coverage limit of $250,000. The Company performs ongoing credit evaluations of its customers’ financial condition but does not typically require collateral to support customer receivables. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

 

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Two customers accounted for 24% and 16% of net sales for the three months ended March 31, 2012. Two customers accounted for 24% and 10% of net sales for the three months ended March 31, 2011.

Two customer’s accounts receivable balance accounted for 30% and 10% of net accounts receivable at March 31, 2012. One customer’s accounts receivable balance accounted for 19% of net accounts receivable at March 31, 2011.

Allowance for doubtful accounts was $299,000 and $311,000 at March 31, 2012 and December 31, 2011, respectively. Allowance for sales returns and price protection was $423,000 and $318,000 at March 31, 2012 and December 31, 2011, respectively.

 

(8) Contingencies

The Company procures its products primarily from supply sources based in Asia. Typically, the Company places purchase orders for completed products and takes ownership of the finished inventory upon completion and delivery from its supplier. Occasionally, the Company presents its suppliers with ‘Letters of Authorization’ for the suppliers to procure long-lead raw components to be used in the manufacture of the Company’s products. These Letters of Authorization indicate the Company’s commitment to utilize the long-lead raw components in production. As of June 30, 2007, based on a change in strategic direction, the Company determined it would not procure certain products for which it had outstanding Letters of Authorization with suppliers. The Company believes it is probable that it will be required to pay suppliers for certain Letter of Authorization commitments and has already partially settled some of these obligations. At March 31, 2012 and December 31, 2011, the Company had estimated, and recorded, a remaining liability for this contingency in the amount of $150,000.

From time to time, the Company is involved in legal proceedings arising in the ordinary course of its business. The Company is not currently a party to any litigation that the Company believes, if determined adversely to it, would have a material adverse effect on its financial condition, results of operations, or cash flows.

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The words “believe,” “expect,” “anticipate,” “estimate” and other similar statements of expectations identify forward-looking statements. Forward-looking statements in this report can be found in the “Business”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Financial Statements and Supplementary Data” sections as well as other sections of this report and include, without limitation, statements concerning our expectations regarding our anticipated revenue, costs, cash flows, gross profit, gross margins, operating efficiencies, and related expenses for 2012; expectation regarding our strategy, including but not limited to, our intentions to expand our line of cases, skins, screen protectors, audio products and introduce new accessories for mobile devices,, to protect our intellectual property position by filing for additional patents, to pursue opportunities to acquire businesses, products or technologies, and to expand the market availability of our products; our anticipated ability to broaden our distribution base, thus decreasing our dependence on sales to Walmart and RadioShack; beliefs relating to our competitive advantages and the market need for our products; the expected sources, availability and sufficiency of cash and liquidity; expected market and industry trends; expectations regarding the success of new product introductions; the anticipated strength, and ability to protect, our intellectual property portfolio;; our expectations about competition; trends in key operating metrics, including days outstanding in accounts receivable and inventory turns; the results of future tax audits and tax settlements; the realizability of our deferred tax asset and the outcome of uncertain tax positions; the recognition of unrecognized equity compensation cost; our initiatives, including plans for internal product development, sourcing products from third-parties, joint marketing ventures, product bundling, licensing opportunities, acquisitions of complementary and synergistic product families and companies, expanding our distribution beyond consumer retail by selling products into the enterprise, government and education channels and the resulting positive impact on our revenue and earnings of these initiatives; our intention to retain cash balances in the United Kingdom; the possible disposition of assets; future payments to suppliers for letters of authorization; the possibility that we may issue additional shares of stock or attempt to access a credit facility; our intention and ability to hold marketable securities to maturity; our intentions about employing hedging strategies; and our expectations regarding the outcome and anticipated impact of various legal proceedings in which we may be involved.

 

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These forward-looking statements are based largely on our management’s expectations and involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include those discussed in our Annual Report on Form 10-K for the year ended December 31, 2011 under the heading “Risk Factors” and those set forth in other sections of this report and in other reports that we file with the SEC. Additional factors that could cause actual results to differ materially from those expressed in these forward-looking statements include, among others, the following:

 

   

the sufficiency of our revenue to absorb expenses;

 

   

our ability to expand our revenue base and develop new products and product enhancements;

 

   

our dependence on large purchases from significant customers, namely Walmart;

 

   

our ability to expand and diversify our customer base;

 

   

our reliance upon Walmart and RadioShack, as well as other distributors and resellers;

 

   

increased focus by consumer electronics retailers on their own private label brands;

 

   

fluctuations in our operating results because of: increases in product costs from our suppliers, our suppliers’ ability to perform, the timing of new product and technology introductions and product enhancements relative to our competitors, market acceptance of our products, the size and timing of customer orders, our ability to effectively manage inventory levels, delay or failure to fulfill orders for our products on a timely basis, distribution of or changes in our revenue among distribution partners and retailers, our inability to accurately forecast our contract manufacturing needs, difficulties with new product production implementation or supply chain, product defects and other product quality problems, the degree and rate of growth in our markets and the accompanying demand for our products, our ability to expand our internal and external sales forces and build the required infrastructure to meet anticipated growth, and seasonality of sales;

 

   

our ability to manage our inventory levels;

 

   

decreasing sales prices on our products over their sales cycles;

 

   

our failure to integrate acquired businesses, products and technologies;

 

   

our reliance on and the risk relating to outsourced manufacturing fulfillment of our products, including potential increases in manufacturing costs;

 

   

our reliance on sole sources for key componets;

 

   

the negative impacts of product returns;

 

   

design and performance issues with our products;

 

   

liability claims;

 

   

our failure to expand or protect our proprietary rights and intellectual property;

 

   

intellectual property infringement claims against us;

 

   

our ability to hire and retain qualified personnel;

 

   

our ability to secure additional financing to meet our future capital needs;

 

   

increased competition and/or reduced demand in our industry;

 

   

our failure to comply with domestic and international laws and regulations;

 

   

economic conditions, political events, war, terrorism, public health issues, natural disasters and similar circumstances;

 

   

that our common stock could be delisted from the NASDAQ Global Market;

 

   

volatility in our stock price;

 

   

concentration of stock ownership among our executive officers and principal stockholders;

 

   

provisions in our certificate of incorporation, bylaws and Delaware law, as well as our stockholder rights plan, that could make a proposed acquisition of the Company more difficult; and

 

   

dilution resulting from potential future stock issuances.

In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this report will prove to be accurate. We undertake no obligation to publicly update or revise any forward-looking statements, or any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements.

iGo®, iGo Green®, Adapt Mobile®, and Aerial7® are registered trademarks of iGo, Inc. or its subsidiaries in the United States and other countries. Other names and brands may be claimed as the property of others.

 

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Overview

We are a provider of innovative accessories and power management solutions for the electronics industry. Our vision is to attach our products and technology to every mobile electronic device. Increased functionality and the ability to access and manage information remotely are driving the proliferation of mobile electronic devices and applications. The popularity of these devices is increasing due to reductions in size, weight and cost and improvements in functionality, storage capacity and reliability. Each of these devices needs to be powered and connected when in the home, the office, or on the road, and can be accessorized, representing opportunities for one or more of our products.

We design and develop products that make computers and mobile electronic devices more efficient and cost effective, thus enabling professionals and consumers higher utilization of their mobile devices and the ability to access information more readily. Our current product offering primarily consists of power, batteries, audio and protection solutions for mobile electronic devices, and we intend to continue to introduce new accessories for mobile electronic devices.

Power

The centerpiece of our power management solutions is our proprietary iGo Green® technology. Our first iGo Green products are laptop chargers and surge protectors that incorporate our new patented technology. Our iGo Green technology reduces energy consumption and almost completely eliminates standby power, or “Vampire Power.” We believe that this power-saving technology will help us achieve our long-term goal of establishing an industry standard for reduced power consumption when charging mobile electronic devices.

Batteries

Through our relationship with Pure Energy Solutions (“Pure Energy”), we are the exclusive marketer and distributor of Pure Energy’s patented rechargeable alkaline (RAMcell) batteries to retailers worldwide (excluding China) with non-exclusive distribution rights in Africa. RAMcell batteries are pre-charged and hold a charge for up to seven years. Approximately three billion single-use alkaline batteries are sold annually in the United States. RAMcell batteries provide users an environmentally friendly, cost-effective alternative to disposable alkaline batteries. We believe that RAMcell batteries and related battery chargers are complementary to our power-saving technology and contribute to lower levels of electronic waste.

Audio

As a result of our acquisition of Aerial7 Industries, Inc. (“Aerial7”), we now offer a line of earbuds and headphones. As mobile phones have recently evolved into smartphones and the introduction of new portable media devices, all of which are capable of playing music and video, many consumers utilize a variety of mobile electronic devices for both communication and entertainment purposes. Our audio products are uniquely designed to provide enhanced sound quality compared to competitive products at similar price points. Our line of audio products also offer consumers the ability to both communicate with others via an integrated microphone that can be used with a portable computer, mobile phone, computer or other portable media device as well the ability to listen to music or video from these devices. Similar to our protection products and in addition to the quality sound output delivered by our audio products, our line of audio products is also fashionably designed, allowing consumers to express their unique and personal style. Currently, these products are offered primarily through lifestyle and music retailers around the world, however we intend to expand our audio product offering and introduce these and similar products in consumer electronics retailers around the world as well.

Protection

As a result of our acquisition of Adapt Mobile Limited (“Adapt”), we now offer a line of skins, cases and screen protectors for mobile electronic devices. Consumers value the protection of their mobile electronic devices as they rely on them heavily in their daily lives to both connect with others and store important information. In addition, consumers often view these products as a way to express their personal fashion and style, similar to clothing and other accessories. Our line of protection products is designed to meet both of these consumer needs by providing the consumer with a high degree of protection, while simultaneously offering them a unique fashionable design that fits their personal style. Currently, we offer these products primarily in Europe, however we expect to expand our line of cases, skins, screen protectors and other similar products and introduce them in other markets throughout the world.

Our ability to execute successfully on our near and long-term objectives depends largely upon the general market acceptance of our power, protection and audio products, our ability to protect our unique proprietary rights, including notable our iGo Green technology, our ability to generate additional major customers, and general economic conditions. Additionally, we must execute on the customer relationships that we have developed and continue to design, develop, manufacture and market new and innovative technology and products that are embraced by these customers and the overall market.

 

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Critical Accounting Policies and Estimates

There were no changes in our critical accounting policies during the three months ended March 31, 2012 from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2011.

Results of Operations

The following table presents certain selected consolidated financial data for the periods indicated expressed as a percentage of total revenue:

 

     Three months ended
March 31,
 
     2012     2011  

Revenue

     100.0     100.0

Cost of revenue

     82.5     69.0
  

 

 

   

 

 

 

Gross profit

     17.5     31.0
  

 

 

   

 

 

 

Operating expenses:

    

Sales and marketing

     19.0     22.1

Research and development

     7.9     5.1

General and administrative

     24.2     22.1
  

 

 

   

 

 

 

Total operating expenses

     51.1     49.3
  

 

 

   

 

 

 

Loss from operations

     (33.6 )%      (18.3 )% 

Other income (expense):

    

Interest, net

     0.1     0.2

Other, net

     (0.3 )%      0.3
  

 

 

   

 

 

 

Net income (loss)

     (33.8 )%      (17.8 )% 
  

 

 

   

 

 

 

Comparison of Three Months Ended March 31, 2012 and 2011

Revenue. Revenue generally consists of sales of products, net of returns and allowances. To date, our revenues have come predominantly from laptop chargers. The following table summarizes the year-over-year comparison of our consolidated revenue for the periods indicated (dollars in thousands):

 

     Three Months
Ended

March  31,
2012
     Three Months
Ended

March  31,
2011
     Decrease
from same  period
in the prior year
    Percentage change
from the same period
in the prior year
 

Revenue

   $ 8,247       $ 9,228       $ (981     (10.6 %) 

Following is a breakdown of revenue by significant account for the three months ended March 31, 2012 and 2011 with the corresponding dollar and percent changes (dollars in thousands):

 

     For the three months ended March 31            
     2012   2011            
     Sales      % of Total Sales   Sales      % of Total Sales   $ Change     % Change  

Walmart

     2,019       24%     2,202       24%     (183     (8.3 )% 

RadioShack

     1,334       16%     505       5%     829        164.2

Belkin

     448       5%     899       10%     (451     (50.2 )% 

Office Depot

     178       2%     850       9%     (672     (79.1 )% 

All other customers

     4,268       53%     4,772       52%     (504     (10.6 )% 
  

 

 

    

 

 

 

 

    

 

 

 

 

   
     8,247       100%     9,228       100%     (981     (10.6 )% 
  

 

 

      

 

 

      

 

 

   

 

 

 

 

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The decrease in revenue for the three months ended March 31, 2012 as compared to the three months ended March 31, 2011 was primarily due to declines in sales volume of power products to Belkin and Office Depot combined with a decline in average selling price for power products to Walmart, partially offset by an increase in sales volume to RadioShack, as indicated in the table above. Sales to all other customers also declined as indicated in the table above. The decrease in revenue was also partially offset by an increase in sales of batteries of $511,000 to $658,000 for the three months ended March 31, 2012, compared to $147,000 for the three months ended March 31, 2011. We are working to continue to broaden our distribution base and expand sales of product categories other than power during 2012 with the goal of reducing our dependence on sales of power products to Walmart and RadioShack.

Cost of revenue, gross profit and gross margin. Cost of revenue generally consists of costs associated with components, outsourced manufacturing and in-house labor associated with assembly, testing, packaging, shipping and quality assurance, depreciation of equipment and indirect manufacturing costs. Gross profit is the difference between revenue and cost of revenue. Gross margin is gross profit stated as a percentage of revenue. The following table summarizes the year-over-year comparison of our cost of revenue, gross profit and gross margin for the periods indicated (dollars in thousands):

 

     Three Months
Ended

March  31,
2012
    Three Months
Ended

March  31,
2011
    Increase/(decrease)
from same period in
the prior year
    Percentage change from
the same period in the
prior year
 

Cost of revenue

   $ 6,802      $ 6,369      $ 433        6.8

Gross profit

   $ 1,445      $ 2,859      $ (1,414     (49.5 )% 

Gross margin

     17.5     31.0     (13.5 )%      NA   

Although revenue decreased for the three months ended March 31, 2012 compared to three months ended March 31, 2011, cost of revenue increased and gross profit decreased due primarily to the declines in average selling prices to Walmart and other customers. Labor and overhead expenses, which are mostly fixed, increased by $68,000 to $1.4 million, or 16.8% of revenue, for the three months ended March 31, 2012, compared to $1.3 million, or 14.3% of revenue, for the three months ended March 31, 2011. As a result, cost of revenue as a percentage of revenue increased to 82.5% for the three months ended March 31, 2012 from 69.0% for the three months ended March 31, 2011. We continue to see pricing pressure on our products, and as a result, we expect gross margins to remain the same or decline slightly in 2012 compared to 2011.

Sales and marketing. Sales and marketing expenses generally consist of salaries, commissions and other personnel-related costs of our sales, marketing and support personnel, advertising, public relations, promotions, printed media and travel. The following table summarizes the year-over-year comparison of our sales and marketing expenses for the periods indicated (dollars in thousands):

 

     Three Months
Ended

March  31,
2012
     Three Months
Ended

March  31,
2011
     Increase
from same  period
in the prior year
    Percentage change
from the same period
in the prior year
 

Sales and marketing

   $ 1,568       $ 2,037       $ (469     (23.0 %) 

The decrease in sales and marketing expenses primarily resulted from decreases of approximately $282,000 in personnel-related expenses and $220,000 in advertising, market research, public relations and website development expenses for the three months ended March 31, 2012, compared to the three months ended March 31, 2011, due to a reduction of personnel that occurred in August 2011 combined with our decision to reduce discretionary marketing expenditures. As a percentage of revenue, sales and marketing expenses decreased to 19.0% for the three months ended March 31, 2012 from 22.1% for the three months ended March 31, 2011.

Research and development. Research and development expenses consist primarily of salaries and personnel-related costs, outside consulting, lab costs and travel-related costs of our product development group. The following table summarizes the year-over-year comparison of our research and development expenses for the periods indicated (dollars in thousands):

 

     Three Months
Ended

March  31,
2012
     Three Months
Ended

March  31,
2011
     Increase from
same period
in the prior year
     Percentage change from
the same period in the
prior year
 

Research and development

   $ 651       $ 471       $ 180         38.2

 

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The increase in research and development expenses primarily resulted from the increases of approximately $75,000 in personnel-related expenses, along with increases of approximately $98,000 in engineering consulting and product certifications for the three months ended March 31, 2012 compared to the three months ended March 31, 2011. As a percentage of revenue, research and development expenses increased to 7.9% for the three months ended March 31, 2012 from 5.1% for the three months ended March 31, 2011. We anticipate increased research and development expenses in 2012 compared to 2011.

General and administrative. General and administrative expenses consist primarily of salaries and other personnel-related expenses of our finance, human resources, information systems, corporate development and other administrative personnel, as well as facilities, legal and other professional fees, depreciation and amortization and related expenses. The following table summarizes the year-over-year comparison of our general and administrative expenses for the periods indicated (dollars in thousands):

 

     Three Months
Ended

March  31,
2012
     Three Months
Ended

March  31,
2011
     Decrease
from same  period
in the prior year
    Percentage change
from the same period
in the prior year
 

General and administrative

   $ 1,996       $ 2,041       $ (45     (2.2 %) 

The decrease in general and administrative expenses primarily resulted from a decrease of $78,000 in bad debt expense, partially offset by an increase in equity compensation of $39,000 during the three months ended March 31, 2012 compared to the three months ended March 31, 2011. General and administrative expenses as a percentage of revenue increased to 24.2% for the three months ended March 31, 2012 from 22.1% for the three months ended March 31, 2011.

Interest income, net. Interest income, net decreased by $16,000 to $5,000 for the three months ended March 31, 2012 compared to $21,000 for the three months ended March 31, 2011. The decrease was primarily due to decreased short-term investment balances during 2012. At March 31, 2012, the average yield on our cash and short-term investments was approximately 0%.

Other income (expense), net.Other income (expense), net was $(23,000) for the three months ended March 31, 2012 compared to $30,000 for the three months ended March 31, 2011. The shift from other income for the three months ended March 31, 2011 to other expense for the three months ended March 31, 2012 was due to sales to customers outside of the United States denominated in foreign currency and fluctuations in those foreign currencies between invoicing and cash collection related to those sales.

Income taxes. No provision for income taxes was required for the three months ended March 31, 2012 or 2011. Based on historical operating losses and projections for future taxable income, it is more likely than not that we will not fully realize the benefits of the net operating loss carryforwards. We have not, therefore, recorded a tax benefit from our net operating loss carryforwards for either of the three months ended March 31, 2012 or March 31, 2011, which at March 31, 2012 totaled approximately $168 million.

Operating Outlook

We have historically generated the majority of our revenue from the sale of chargers for laptops, however, consumers are increasingly using smartphones and tablets as their primary mobile electronic devices. As a result of this shift, we have seen increased competition and a decline in demand for our power products with our traditional customer base. For example, during 2011, we faced increased competition from retail customers who began offering traditional power products under their own private-label brands, including most notably RadioShack. Although we have expanded our offering of products beyond our traditional power products to include a variety of accessories to support the increased utilization of smartphones and tablets, including audio, protection, and battery products, the revenue generated from the sales of these products has not yet offset the decline in revenue from historical sales of our traditional power products. Nevertheless, as a result of the diversification of our product offering combined with the continued sales of our traditional power products, we expect our total 2012 revenue to be more than our 2011 revenue.

 

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We expect to continue to introduce additional mobile electronics accessory products in the future as we execute on our vision to attach our products and technology to every mobile electronic device. In order to continue to grow our business and enhance shareholder value, we believe it is necessary to continue to expand our product portfolio. Moving forward, we intend to continue to explore a number of initiatives designed to broaden our product portfolio within the mobile electronics accessories space. We currently plan that the initiatives will consist of internal product development, sourcing products from third-parties, joint marketing ventures, product bundling, licensing opportunities, and acquisitions of complementary and synergistic product families and companies. We also have initiatives to expand our distribution beyond consumer retail with the intent to sell products into the enterprise, government and education channels. All of these initiatives are designed to leverage the inherent strengths of our business, most notably, our strong balance sheet, our compelling portfolio of intellectual property, and our established brand and relationships with major retailers. As we continue to execute on this vision, we believe we can improve our ability to drive higher levels of revenue and earnings, which will ultimately have a positive impact on value creation for our shareholders.

We continue to see increases in component costs from our primary Asian suppliers combined with pricing pressure from our customers, most notably from Walmart. However, we expect the cost and price pressures will be partially offset by expected increased operating efficiency as a result of anticipated increases in revenue. As a result, we expect gross margins to remain the same or decline slightly in 2012 compared to 2011. We expect operating expenses in 2012 to be consistent with 2011 operating expenses.

We anticipate increased research and development expenses in 2012 compared to 2011, primarily as a result of the continued development of our iGo Green technology, including expenses relating to the collaborative development of an integrated circuit with Texas Instruments based on our iGo Green technology. As a result of our planned product development efforts, we expect to further expand our intellectual property position by filing for additional patents in various countries around the world. A portion of these costs are recorded as research and development expense as incurred, and a portion are capitalized and amortized as general and administrative expense. We may also incur additional legal and related expenses associated with the defense and enforcement of our intellectual property portfolio, which could increase our general and administrative expenses.

Liquidity and Capital Resources

Cash and Cash Flow. Our available cash and cash equivalents are held in bank deposits and money market funds in the United States and in the United Kingdom. Our intent is that the cash balances in the United Kingdom will remain there for future growth and investments, and we will meet any liquidity requirements in the United States through ongoing cash flows, cash on hand, external financing, or both. We actively monitor the third-party depository institutions that hold our cash and cash equivalents. Our emphasis is primarily on safety of principal while secondarily maximizing yield on those funds. We diversify our cash and cash equivalents among counterparties to minimize exposure to any one of these entities. To date, we have experienced no material loss or lack of access to our invested cash or cash equivalents; however, we can provide no assurances that access to our invested cash and cash equivalents will not be impacted by adverse conditions in the financial markets.

At any point in time we have funds in our operating accounts that are with third-party financial institutions. These balances in the U.S. may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. While we monitor the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail or could be subject to other adverse conditions in the financial markets.

Our primary use of cash has been to fund operating losses, fund acquisitions, and fund working capital needs of our business, which we expect to continue through 2012. Some of our new suppliers of batteries, protection and audio products have been unwilling to extend trade credit to us on the same terms and conditions as our power product suppliers have historically done. As a result, we are required to pay for purchases of these products in advance of the related sale of these products, which has increased our use of cash to support the working capital required to effectively operate our business. Historically, our primary sources of liquidity have been funds provided by the sale of intellectual property assets. We cannot assure you that this source will be available to us in the future.

We currently do not maintain a credit facility with a bank, however, we may attempt to access to this source of financing at some point in the future.

 

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The following table sets forth for the period presented certain consolidated cash flow information (dollars in thousands):

 

     Three Months Ended March 31,  
     2012     2011  

Net cash used in operating activities

   $ (1,632   $ (1,145

Net cash provided by investing activities

     2,248        7,469   

Net cash provided by financing activities

     —          —     

Foreign currency exchange impact on cash flow

     202        133   
  

 

 

   

 

 

 

Increase in cash and cash equivalents

   $ 818      $ 6,457   
  

 

 

   

 

 

 

Cash and cash equivalents at beginning of period

   $ 10,290      $ 9,942   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 11,108      $ 16,399   
  

 

 

   

 

 

 

 

   

Net cash used in operating activities. Cash was used in our operating activities for the three months ended March 31, 2012 to fund operating losses and the working capital needs of our business, including inventory purchases. We expect to continue to use cash in operating activities through 2012 to support the anticipated growth of our business.

Our consolidated cash flow operating metrics are as follows:

 

     Quarter Ended
March  31,
 
     2012      2011  

Days outstanding in ending accounts receivable (“DSOs”)

     58         42   

Inventory turns

     2         3   

The increase in DSOs at March 31, 2012 compared to March 31, 2011 was primarily due to the increase in sales to RadioShack, which generally requires longer payment terms. We expect DSOs will increase in 2012 as our revenue base increases. The decrease in inventory turns was primarily due to the overall decline in revenue for the three months ended March 31, 2012 compared to the three months ended March 31, 2011. We expect to manage inventory during 2012 and we expect inventory turns for the remainder of 2012 to increase.

 

   

Net cash provided by investing activities. For the three months ended March 31, 2012, net cash was generated by investing activities primarily as a result of the sale of short-term investments.

 

   

Net cash provided by financing activities. We had no cash flows from financing activities during the first quarter of 2012 or 2011.

Investments. At March 31, 2012, our short-term investments in marketable securities included one corporate bond and one municipal mutual fund with a total fair value of approximately $2.5 million. Our long-term investments consisted of 2,142,858 shares of Pure Energy Visions common stock with a fair value per share equal to $0.08, plus an interest-free convertible secured debenture having a one-year repayment term that converts into an additional 2,142,858 shares of Pure Energy Visions common stock in lieu of repayment either upon the achievement of certain business goals or earlier at our discretion.

We believe we have the ability to hold all marketable securities to maturity. However, we may dispose of securities prior to their scheduled maturity due to changes in interest rates, prepayments, tax and credit considerations, liquidity or regulatory capital requirements, or other similar factors. As a result, we classify all marketable securities as available-for-sale. These securities are reported at fair value based on third-party broker statements, which represents level 2 in the fair value hierarchy, with unrealized gains and losses, reported in equity as a separate component of accumulated other comprehensive (loss) income.

 

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Contractual Obligations. In our day-to-day business activities, we incur certain commitments to make future payments under contracts such as operating leases and purchase orders. Maturities under these contracts are set forth in the following table as of March 31, 2011 (dollars in thousands):

 

     Payment due by period  
     2012      2013      2014      2015      2016      More than 5 years  

Operating lease obligations

   $ 341       $ 463       $ 83       $ —         $ —         $ —     

Inventory purchase obligations

     4,535         —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Totals

   $ 4,876       $ 463       $ 83       $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Off-Balance Sheet Arrangements. We have no off-balance sheet financing arrangements.

Acquisitions and Dispositions. In 2010 we acquired Adapt and Aerial7 to complement our product offerings and expand our revenue base. Our future strategy includes the possible acquisition of other businesses to continue to expand or complement our operations. The magnitude, timing and nature of any future acquisitions will depend on a number of factors, including the availability of suitable acquisition candidates, the negotiation of acceptable terms, our financial capabilities and general economic and business conditions. Financing of future acquisitions would result in the utilization of cash, incurrence of additional debt, issuance of additional equity securities or a combination of all of these. Our future strategy may also include the possible disposition of assets that are not considered integral to our business which would likely result in the generation of cash.

Net Operating Loss Carryforwards. As of March 31, 2012, we had approximately $168 million of federal, foreign and state net operating loss carryforwards which expire at various dates. The issuance of our common stock in the future for acquisitions, if any, coupled with prior sales of common stock could cause an annual limitation on the use of our net operating loss carryforwards pursuant to the change in ownership provisions of Section 382 of the Internal Revenue Code of 1986, as amended. This limitation is expected to have a material effect on the timing of our ability to use the net operating loss carryforwards in the future. Additionally, our ability to use the net operating loss carryforwards is dependent upon our future level of profitability, which cannot be determined.

Liquidity Outlook. Based on our projections, we believe that our existing cash, cash equivalents, and short-term investments will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months. If we require additional capital resources to grow our business internally or to acquire complementary technologies and businesses at any time in the future, we may seek to obtain debt financing or sell additional equity securities. The sale of additional equity securities would result in more dilution to our stockholders. In addition, additional capital resources may not be available to us in amounts or on terms that are acceptable to us.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain market risks in the ordinary course of our business. These risks result primarily from changes in foreign currency exchange rates and interest rates. In addition, our international operations are subject to risks related to differing economic conditions, changes in political climate, differing tax structures and other regulations and restrictions.

To date we have not utilized derivative financial instruments or derivative commodity instruments. We do not expect to employ these or other strategies to hedge market risk in the foreseeable future. We invest our cash in money market funds, which are subject to minimal credit and market risk. We believe that the market risks associated with these financial instruments are immaterial.

See “Liquidity and Capital Resources” for further discussion of our capital structure. Market risk, calculated as the potential change in fair value of our cash and cash equivalents and resulting from a hypothetical 1.0% (100 basis point) change in interest rates, was not material at March 31, 2012.

 

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures — We maintain disclosure controls and other procedures that are designed to ensure that information required to be disclosed in our filings with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” in Rule 13a-15(e) and 15d-15(e) promulgated under the Exchange Act. With the participation of the principal executive officer and principal financial officer, management conducted an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2012, and concluded that our disclosure controls and procedures were effective.

 

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Changes in Internal Control Over Financial Reporting — There was no change in our internal control over financial reporting during the quarter ended March 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

The Company assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. The Company regularly reviews contingencies to determine the adequacy of the accruals and related disclosures. The amount of ultimate loss may differ from these estimates. Although it is possible that the results of operations, liquidity, or financial position of the Company could be materially affected in any particular future reporting period by the unfavorable resolution of one or more of these contingencies, the Company currently believes that the ultimate outcome of these matters will not have a material adverse effect on the results of operations, liquidity or financial position of the Company.

 

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I. “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011, which could materially affect our business, financial condition or future results. There have been no material changes in our risk factors from the disclosure included in our Annual Report on Form 10-K. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

 

ITEM 6. EXHIBITS

The Exhibit Index and required Exhibits immediately following the Signatures to this Form 10-Q are filed as part of, or hereby incorporated by reference into, this Form 10-Q.

 

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IGO, INC. AND SUBSIDIARIES

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 thereunto duly authorized.

 

  IGO, INC.
Dated: May 9, 2012   By:  

/s/ Michael D. Heil

    Michael D. Heil
    President and Chief Executive Officer
    (Principal Executive Officer)
  By:  

/s/ Darryl S. Baker

    Darryl S. Baker
   

Vice President and Chief Financial Officer

and Authorized Officer of Registrant

    (Principal Financial Officer)

 

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EXHIBIT INDEX

 

Exhibit
Number

 

Description of Document

  3.1   Certificate of Incorporation of the Company (1)
  3.2   Articles of Amendment to the Certificate of Incorporation of the Company dated as of June 17, 1997 (2)
  3.3   Articles of Amendment to the Certificate of Incorporation of the Company dated as of September 10, 1997 (1)
  3.4   Articles of Amendment to the Certificate of Incorporation of the Company dated as of July 20, 1998 (1)
  3.5   Articles of Amendment to the Certificate of Incorporation of the Company dated as of February 3, 2000 (1)
  3.6   Articles of Amendment to the Certificate of Incorporation of the Company dated as of March 31, 2000 (2)
  3.7   Certificate of Designations, Preferences, Rights and Limitations of Series G Junior Participating Preferred Stock of the Company (3)
  3.8   Certificate of Ownership and Merger Merging iGo Merger Sub Inc. with and into Mobility Electronics, Inc. (4)
  3.9   Certificate of Elimination of Series C, Series D, Series E, and Series F Preferred Stock of the Company (4)
  3.10   Fourth Amended and Restated Bylaws of the Company (5)
10.1   Amended and Restated Employment Agreement by and between the Company and Seth Egorin.+(6)
10.2   Amended and Restated Employment Agreement by and between the Company and Phil Johnson.+(6)
10.3   Form of Stock Opton Agreement.+(6)
10.4   Amendment #1 to Employment Agreement by and between the Company and Michael D. Heil.+(6)
10.5   2012 Bonus Program.+(6)
10.6   2012 Compensation Information for Executive Officers.+(6)
10.7   Amendment #2 to Employment Agreement by and between the Company and Michael D. Heil.+(7)
31.1   Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2   Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1   Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101**   XBRL Instance Document
101**   XBRL Taxonomy Extension Schema Document
101**   XBRL Taxonomy Calculation Linkbase Document
101**   XBRL Taxonomy Label Linkbase Document
101**   XBRL Taxonomy Presentation Linkbase Document

 

** Pursuant to applicable securities laws and regulations, we are deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and are not subject to liability under any anti-fraud provisions of the federal securities laws as long as we have made a good faith attempt to comply with the submission requirements and promptly amend the interactive data files after becoming aware that the interactive data files fail to comply with the submission requirements. Users of this data are advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability.
* Filed/furnished herewith
+ Management or compensatory plan or agreement.

 

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(1) Previously filed as an exhibit to Registration Statement No. 333-30264 dated February 11, 2000.
(2) Previously filed as an exhibit to Amendment No. 2 to Registration Statement No. 333-30264 on Form S-1 dated May 4, 2000.
(3) Previously filed as an exhibit to Current Report on Form 8-K filed June 19, 2003.
(4) Previously filed as an exhibit to Current Report on Form 8-K dated May 21, 2008.
(5) Previously filed as an exhibit to Form 10-K for the period ended December 31, 2008.
(6) Previously filed as an exhibit to Current Report on Form 8-K filed April 13, 2012.
(7) Previously filed as an exhibit to Current Report on Form 8-K filed April 23, 2012.

 

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