iGo Inc Reports Operating Results (10-Q)

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Nov 05, 2009
iGo Inc (IGOI, Financial) filed Quarterly Report for the period ended 2009-09-30.

IGO INC. based in Scottsdale Arizona is a developer of universal power adapters for portable computers and mobile electronic devices (e.g. mobile phones PDAs digital cameras etc.) and creator of the patented iGo intelligent tip technology. iGo offers a full line of AC DC and combination AC/DC power adapters for portable computers and low-power mobile electronic devices. All of these adapters leverage iGo's intelligent tip technology which enables one power adapter to power/charge hundreds of brands and thousands of models of mobile electronic devices through the use of interchangeable tips. Igo Inc has a market cap of $44.1 million; its shares were traded at around $1.36 with and P/S ratio of 0.6.

Highlight of Business Operations:

High-Power Group. The decrease in High-Power Group revenue was primarily due to declines in sales to private label resellers. Overall sales of high-power products to private label resellers decreased by $7.3 million, or 88.7%, to $932,000 during the three months ended September 30, 2009 as compared to $8.2 million during the three months ended September 30, 2008. In March 2009, Targus notified us of its intent not to renew our distribution agreement, which expired by its terms in May 2009. Accordingly, we do not anticipate any significant additional orders for our power products from Targus beyond the third quarter of 2009. We expect revenue from sales of high-power products to continue to decline during 2009 due to the loss of the Targus account, although we are working to partially offset the decline in Targus revenue with sales to other retailers and distributors. The decline in sales of high power products to private label resellers was partially offset by an increase in sales of high power products to retailers and wireless carriers of $1.1 million during the three months ended September 30, 2009 compared to the three months ended September 30, 2008.

Connectivity Group. Connectivity Group revenue consisted of approximately $1.8 million in Missions sales of docking and expansion products for the three months ended September 30, 2009. Compared to the three months ended September 30, 2008, expansion and docking revenue decreased by $171,000.

The decrease in cost of revenue and the corresponding decrease in gross profit were due primarily to the decrease in revenue discussed above. The increase in gross margin was due primarily to an increase in average direct margin, which excludes labor and overhead costs, on high-power and low-power products to 43.2% for the three months ended September 30, 2009 compared to 36.1% for the three months ended September 30, 2008, primarily as a result of the decline in sales of high-power products to private label distributors which typically results in lower margins, combined with the increase in the mix of sales of low-power products in the wireless and retail channels. Labor and overhead costs, which are mostly fixed, decreased by $232,000 to $873,000 for the three months ended September 30, 2009, compared to $1.1 million for the three months ended September 30, 2008. Labor and overhead costs as a percentage of revenue increased to 6.3% for the three months ended September 30, 2009 from 5.5% for the three months ended September 30, 2008, As a result of these factors, cost of revenue as a percentage of revenue decreased to 63.1% for the three months ended September 30, 2009 from 69.4% for the three months ended September 30, 2008.

The decrease in general and administrative expenses primarily resulted from a decline of personnel-related expenses of $232,000 and non-cash equity compensation expense of $174,000 for the three months ended September 30, 2009. General and administrative expenses as a percentage of revenue increased to 14.2% for the three months ended September 30, 2009 from 11.9% for the three months ended September 30, 2008.

Interest income (expense), net. Interest income (expense), net decreased by $162,000 to $28,000 for the three months ended September 30, 2009 compared to $190,000 for the three months ended September 30, 2008. The decrease was primarily due to declining interest rates during 2008 and into 2009. At September 30, 2009, the average year-to-date yield on our cash and short-term investments was approximately 0.1%.

Other income (expense), net. Other income (expense), net of $131,000 for the three months ended September 30, 2009 was consistent compared to $136,000 for the three months ended September 30, 2008. Other income (expense), net represents primarily the recognition of gains from the collection of notes receivable that had previously been deferred in connection with the sale of the assets of our handheld software product line in 2004 and our handheld hardware product line in 2007.

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