INFOSONICS CORP (Form: 10-Q, Received: 05/14/2010 16:00:51)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10 - Q

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

For the quarterly period ended March 31, 2010

o 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 - 001-32217

InfoSonics Corporation

(Exact name of registrant as specified in its charter)

Maryland		33-0599368
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

4350 Executive Drive, Suite #100, San Diego, CA 92121

(Address of principal executive offices including zip code)

(858) 373-1600

(Registrant’s telephone number, including area code)

Not Applicable

(Former Name or Former Address, 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 Exchange Act 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o

Non-accelerated filer o		Smaller reporting company x
(Do not check if a smaller reporting company)

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

As of May 14, 2010, the Registrant had 14,184,146 shares outstanding of its $0.001 par value common stock.

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InfoSonics Corporation and Subsidiaries

Quarterly Report on Form 10-Q For The Three Months Ended March 31, 2010

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PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	2

·	Consolidated Balance Sheets at March 31, 2010 (unaudited) and December 31, 2009	2

·	Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009 (unaudited)	3

·	Consolidated Statements of Comprehensive Operations for the three months ended March 31, 2010 and 2009 (unaudited)	4

·	Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009 (unaudited)	5

·	Condensed Notes to Consolidated Financial Statements (unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18

Item 4.	Controls and Procedures	18

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	19

Item 1A.	Risk Factors	19

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21

Item 3.	Defaults Upon Senior Securities	21

Item 4.	Reserved	21

Item 5.	Other Information	21

Item 6.	Exhibits	21

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Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

InfoSonics Corporation and Subsidiaries

Consolidated Balance Sheets

	March 31, 2010			December 31, 2009
	(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	25,734,245		$	18,418,066
Accounts receivable, net of allowance for doubtful accounts of $184,814 (unaudited) and $589,720	19,195,460			41,914,231
Accounts receivable other	796,394			1,003,940
Inventory, net of reserves of $99,693 (unaudited) and $112,135	3,363,184			3,423,244
Prepaid assets	388,504			368,959
Assets of discontinued operations	923,453			879,896

Total current assets	50,401,240			66,008,336

Property and equipment, net	332,952			315,669
Other assets	58,520			97,768

Total assets	$	50,792,712		$	66,421,773

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	7,737,659		$	9,618,865
Accrued expenses	6,012,872			5,665,460
Line of credit	12,626,234			25,494,140
Income taxes payable	93,846			91,096
Liabilities of discontinued operations	63,136			724,366

Total current liabilities	26,533,747			41,593,927

Total liabilities	26,533,747			41,593,927

Commitments and Contingencies (Note 12)

Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized (no shares issued and outstanding as of applicable period end)	—			—
Common stock, $0.001 par value, 40,000,000 shares authorized; 14,184,146 shares issued and outstanding as of March 31, 2010 and December 31, 2009	14,184			14,184
Additional paid-in capital	31,738,360			31,727,090
Accumulated other comprehensive loss	(19,945		)	(6,944		)
Accumulated deficit	(7,473,634		)	(6,906,484		)

Total stockholders’ equity	24,258,965			24,827,846

Total liabilities and stockholders’ equity	$	50,792,712		$	66,421,773

Accompanying notes are an integral part of these financial statements.

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InfoSonics Corporation and Subsidiaries

Consolidated Statements of Operations

(unaudited)

	For the Three Months Ended March 31,
	2010			2009

Net sales	$	27,541,043		$	42,625,118
Cost of sales	26,099,608			39,270,497

Gross profit	1,441,435			3,354,621
Operating expenses	1,974,431			2,876,972

Operating income (loss) from continuing operations	(532,996		)	477,649

Other income (expense)
Other income (expense)	(405		)	42
Interest expense (net)	(23,331		)	(27,878		)

Income (loss) from continuing operations before provision for income taxes	(556,732		)	449,813
Provision for income taxes	4,350			9,700

Income (loss) from continuing operations	(561,082		)	440,113
Loss from discontinued operations, net of tax (Note 10)	(6,068		)	(193,061		)

Net income (loss)	$	(567,150	)	$	247,052

Basic earnings (loss) per share
From continuing operations	$	(0.04	)	$	0.03
From discontinued operations	$	0.00		$	(0.01	)
Net income (loss)	$	(0.04	)	$	0.02
Diluted earnings (loss) per share
From continuing operations	$	(0.04	)	$	0.03
From discontinued operations	$	0.00		$	(0.01	)
Net income (loss)	$	(0.04	)	$	0.02

Basic weighted-average number of common shares outstanding	14,184,146			14,881,774

Diluted weighted-average number of common shares outstanding	14,184,146			14,885,887

Accompanying notes are an integral part of these financial statements .

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InfoSonics Corporation and Subsidiaries

Consolidated Statements of Comprehensive Operations

(unaudited)

	For the Three Months Ended March 31,
	2010			2009

Net profit income (loss)	$	(567,150	)	$	247,052
Other comprehensive income (loss):
Foreign currency translation adjustments	(13,001		)	16,954
Comprehensive income (loss)	$	(580,151	)	$	264,006

Accompanying notes are an integral part of these financial statements.

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InfoSonics Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)

	For the Three Months Ended March 31,
	2010			2009
Cash flows from operating activities:
Net income (loss)	$	(567,150	)	$	247,052
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation	71,456			74,097
Provision for bad debt	(404,906		)	(5,079		)
Impairment on fixed assets	398			—
Provision for obsolete inventory	(12,442		)	—
Stock -based compensation expense	11,270			13,445
(Increase) decrease in
Accounts receivable	23,123,677			(14,014,159		)
Accounts receivable other	207,546			2,867,913
Inventory	72,502			376,592
Prepaids	(19,543		)	(364,814		)
Other assets	39,248			5,726
Increase (decrease) in
Accounts payable	(1,881,206		)	(8,303,771		)
Accrued expenses	347,412			(1,044,953		)
Income tax liabilities	2,750			8,030
Cash provided by (used in) continuing operations	20,991,012			(20,139,921		)
Cash provided by (used in) discontinued operations	(704,787		)	163,504
Net cash provided by (used in) operating activities	20,286,225			(19,976,417		)

Cash flows from investing activities:
Purchase of property and equipment	(89,139		)	(111,839		)
Net cash used in investing activities	(89,139		)	(111,839		)

Cash flows from financing activities:
Net Borrowings (Payments on) line of credit	(12,867,906		)	7,250,523
Cash paid for treasury stock	—			(36,557		)
Net cash provided by (used in) financing activities	(12,867,906		)	7,213,966

Effect of exchange rate changes on cash	13,001			16,032

Net increase (decrease) in cash and cash equivalents	7,316,179			(12,858,258		)

Cash and cash equivalents, beginning of period	18,418,066			24,714,753

Cash and cash equivalents, end of period	$	25,734,245		$	11,856,495
Cash paid for interest	23,331			27,885
Cash paid for taxes	—			—

Accompanying notes are an integral part of these financial statements.

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InfoSonics Corporation

Condensed Notes to Consolidated Financial Statements

(unaudited)

NOTE 1. Basis of Presentation

The accompanying unaudited consolidated financial statements and these condensed notes have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The preparation of financial statements requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results are likely to differ from those estimates, but management does not believe such differences will materially affect the financial position or results of operations of InfoSonics Corporation (the “Company”), although they may. These unaudited consolidated financial statements and condensed notes should be read in conjunction with the financial statements and notes as of and for the year ended December 31, 2009 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. These unaudited consolidated financial statements reflect all adjustments considered, in the opinion of the Company’s management, necessary to fairly present the results for the periods covered herein and such adjustments are considered of a normal recurring nature.

The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, Axcess Mobile LLC, InfoSonics Latin America, Inc., InfoSonics de Mexico S.A. de C.V., InfoSonics de Guatemala S.A., InfoSonics El Salvador S.A. de C.V., InfoSonics S.A., InfoSonics De Panama S.A, InfoSonics Colombia S.A., verykool Hong Kong Limited and verykool USA, Inc., all of which are wholly owned. Significant intercompany accounts and transactions have been eliminated in consolidation of these consolidated financial statements.

The unaudited consolidated balance sheet as of March 31, 2010, the unaudited consolidated statements of operations and the unaudited consolidated statements of comprehensive operations for the three months ended March 31, 2010 and the unaudited consolidated statement of cash flows for the three months ended March 31, 2010 are not necessarily indicative of the financial condition, operating results or cash flows that may be expected for the full fiscal year of 2010 or for any future period.

NOTE 2. Stock-Based Compensation

The Company has three equity incentive plans, the 2006 Equity Incentive Plan (“2006 Plan”), the 2003 Stock Option Plan (“2003 Plan”) and the 1998 Stock Option Plan (“1998 Plan”). Each of the plans has been approved by our stockholders. The 2006 Plan authorizes the grant of up to 1,000,000 shares for equity incentives. There are no options available for grant under the 2003 and the 1998 Plans.

As of March 31, 2010, options to purchase 273,500 shares, 12,444 shares and 400,000 shares were outstanding under the 2006 Plan, the 2003 Plan and the 1998 Plan, respectively. As of March 31, 2010, options to purchase 113,500 shares were forfeited under the 2006 Plan. The Company is also a party to non-plan option agreements with several non-employee directors.

The Company’s stock-based compensation is classified in the same expense line items as cash compensation. Information about stock-based compensation included in the unaudited results of operations for the three months ended March 31, 2010 and 2009 is as follows:

	For the Three Months Ended March 31, (unaudited)
	2010		2009

Officer compensation	$	4,004	$	—
Sales, general and administrative	7,266		13,445
Total stock option expense, included in total operating expenses	$	11,270	$	13,445

The Company’s stock options vest on an annual or a monthly basis. The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. Such amount may change as a result of additional grants, forfeitures, modifications in assumptions and other factors. Income tax effects of share-based payments are recognized in the financial statements for those awards which will normally result in tax deductions under existing tax law. During the three months ended March 31, 2010, we recorded an expense of $11,270 related to options previously granted. During

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the three months ended March 31, 2009, we recorded an expense of $13,445 related to options previously granted. Under current U.S. federal tax law, we receive a compensation expense deduction related to non-qualified stock options only when those options are exercised and vested shares are received. Accordingly, the financial statement recognition of compensation expense for non-qualified stock options creates a deductible temporary difference which results in a deferred tax asset and a corresponding deferred tax benefit in our consolidated statements of operations.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 2009 (there have been no grants in 2010): risk-free interest rate of 0.91% in 2009, based on the U.S. Treasury yields in effect at the time of grant; expected dividend yields of 0% as the Company has not, and does not intend to, declare dividends; and expected life of 3 to 6 years based upon the historical life of options. For grants in 2009, the expected volatility used ranged from 88% to 108%, based on the Company’s historical stock price fluctuations for a period matching the expected life of the options. As of March 31, 2010, there was $89,000 of total unrecognized compensation expense related to non-vested stock options. That expense is expected to be recognized over the remaining weighted-average period of 3.75 years.

A summary of option activity under all of the above plans as of March 31, 2010 and changes during the three months then ended is presented in the table below:

	Shares	Wtd. Avg. Exercise Price		Wtd. Avg. Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at December 31, 2009	1,282,444	$	1.65	3.25	—
Granted	—	$	—	—	—
Exercised	—	$	—	—	—
Forfeited	596,500	$	0.51	—	—
Outstanding at March 31, 2010	685,944	$	1.07	2.67	—
Vested and expected to vest	685,944	$	1.07	2.67	—
Exercisable at March 31, 2010	490,305	$	1.21	1.51	—

A summary of the status of the Company’s non-vested options at March 31, 2010 and changes during the three months ended March 31, 2010 is presented below:

	Shares	Weighted-average grant-date fair value
Non-vested at December 31, 2009	255,285	$	0.72
Granted	—	$	—
Vested	7,146	$	1.97
Forfeited	52,500	$	0.51
Non-vested at March 31, 2010	195,639	$	0.73

NOTE 3. Earnings Per Share

Basic earnings per share are computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per share is computed similarly to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential additional common shares that were dilutive had been issued. Common share equivalents are excluded from the computation if their effect is anti-dilutive. The Company’s common share equivalents consist of stock options and warrants.

Common shares from the potential exercise of certain options and warrants have been excluded from the computation of diluted earnings per share because their exercise prices are greater than the Company’s weighted-average stock price for the period. For the three months ended March 31, 2010 and 2009, the number of shares excluded was 503,038 and 1,600,944, respectively.

NOTE 4. Income Taxes

The Company made a comprehensive review of its portfolio of uncertain tax positions in accordance with applicable standards of the Financial Accounting Standards Board (“FASB”). In this regard, an uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. As a result of this review, the Company concluded that at this time there are no uncertain tax positions, and there has been no cumulative effect on retained earnings.

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The Company is subject to U.S. federal income tax as well as income tax in multiple states and foreign jurisdictions. For all major taxing jurisdictions, the tax years 2004 through 2008 remain open to examination. As of March 31, 2010, the Company does not expect any material changes to unrecognized tax positions within the next twelve months.

The Company recognizes the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences could materially impact the Company’s financial position or results of operations. For the three months ended March 31, 2010, deferred income tax assets and the corresponding valuation allowance increased by $224,200.

NOTE 5. Inventory

Inventory is stated at the lower of cost (first-in, first-out) or market and consists primarily of cellular phones and cellular phone accessories. The Company provides for the possible inability to sell its inventory by recording a reserve. As of March 31, 2010 and December 31, 2009, the inventory reserve was $99,693 and $112,135, respectively. From time to time, the Company has prepaid inventory as a result of payments for products which have not been received by the balance sheet date. As of March 31, 2010 and December 31, 2009, the prepaid inventory balance was $84,053 and $119,145, respectively, which are included in prepaid assets in the accompanying consolidated balance sheets. Inventory consists of the following:

	March 31, 2010 (unaudited)			December 31, 2009 (audited)
Finished goods	$	3,462,877		$	3,535,379
Inventory reserve	( 99,693		)	( 112,135		)
Net inventory	$	3,363,184		$	3,423,244

NOTE 6. Property and Equipment

Property and equipment are primarily located in the United States, with the exception of certain tooling and product molds located in Asia, and consisted of the following as of the dates presented:

	March 31, 2010 (unaudited)		December 31, 2009 (audited)
Machinery and equipment	$	396,337	$	471,953
Furniture and fixtures	127,594		106,314
Tooling and molds	549,779		481,984
Subtotal	1,073,710		1,060,251
Less accumulated depreciation	740,758		744,582
Total	$	332,952	$	315,669

Depreciation expense was $71,456 and $74,097 for the three months ended March 31, 2010 and 2009, respectively.

NOTE 7. Accrued Expenses

As of March 31, 2010 and December 31, 2009, accrued expenses consisted of the following:

	March 31, 2010 (unaudited)		December 31, 2009 (audited)
Accrued product costs	$	2,133,572	$	1,476,677
Other accruals (including taxes)	3,879,300		4,188,783
Total	$	6,012,872	$	5,665,460

NOTE 8. Borrowings

Pursuant to the Company’s Loan, Security and Bulk Purchase Agreement and a Letter of Credit and Security Agreement (collectively, the “Agreement”) with Wells Fargo Century, Inc. (“Lender”), the Lender may advance up to $45,000,000 to the Company based on the expected collections of eligible receivables as well as value of the Company’s eligible inventory determined in accordance with the

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Agreement. The outstanding advances may not exceed the lesser of (i) $45,000,000 or (ii) the sum of the value of the eligible receivables and eligible inventory multiplied by their respective advance rates as set forth in the Agreement ($12.8 million as of March 31, 2010). At March 31, 2010, the majority of the Company’s debt was based on foreign accounts receivable, a majority of which is insured. This credit facility is secured by all of the assets of the Company. The terms automatically roll over annually; however, the terms and conditions of such credit facility (including, without limitation, rates, eligibility, borrowing base and maximum line) may change. Subsequent to March 31, 2010, the Agreement was renewed under its current terms and conditions through April 2011. The interest rate for each borrowing under the credit facility is, at the option of the Company, either the Wells Fargo Bank N.A. prime rate minus 0.50% (3.25% minus 0.50% at March 31, 2010) or the LIBOR rate plus 2.00% (0.292% plus 2.00% at March 31, 2010) . At March 31, 2010, the amount drawn against the line of credit was $12,626,234 and the total amount available at March 31, 2010 was $ 12,778,276 . As of March 31, 2010, the Company was in compliance with the covenants of the credit facility.

The Company has no other notes payable.

NOTE 9. Recent Accounting Pronouncements

Recently Adopted:

On January 1, 2010, the Company adopted changes issued by the FASB to accounting for variable-interest entities. These changes require an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable-interest entity; to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable-interest entity; to eliminate the solely quantitative approach previously required for determining the primary beneficiary of a variable-interest entity; to add an additional reconsideration event for determining whether an entity is a variable-interest entity when any changes in facts and circumstances occur such that holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the entity that most significantly impact the entity’s economic performance; and to require enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable-interest entity. The adoption of these changes had no impact on the condensed consolidated financial statements.

On January 1, 2010, The Company adopted changes issued by the FASB to accounting for transfers of financial assets. These changes remove the concept of a qualifying special-purpose entity and remove the exception from the application of variable interest accounting to variable-interest entities that are qualifying special-purpose entities; limit the circumstances in which a transferor derecognizes a portion or component of a financial asset; define a participating interest; require a transferor to recognize and initially measure at fair value all assets obtained and liabilities incurred as a result of a transfer accounted for as a sale; and require enhanced disclosure. The adoption of these changes had no impact on the condensed consolidated financial statements.

Effective January 1, 2010, The Company adopted changes issued by the FASB on January 6, 2010, for a scope clarification to the FASB’s previously issued guidance on accounting for noncontrolling interests in consolidated financial statements. These changes clarify the accounting and reporting guidance for noncontrolling interests and changes in ownership interests of a consolidated subsidiary. An entity is required to deconsolidate a subsidiary when the entity ceases to have a controlling financial interest in the subsidiary. Upon deconsolidation of a subsidiary, an entity recognizes a gain or loss on the transaction and measures any retained investment in the subsidiary at fair value. The gain or loss includes any gain or loss associated with the difference between the fair value of the retained investment in the subsidiary and its carrying amount at the date the subsidiary is deconsolidated. In contrast, an entity is required to account for a decrease in its ownership interest of a subsidiary that does not result in a change of control of the subsidiary as an equity transaction. The adoption of these changes had no impact on the condensed consolidated financial statements.

Effective January 1, 2010, The Company adopted changes issued by the FASB on January 21, 2010, to disclosure requirements for fair value measurements. Specifically, the changes require a reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers. The changes also clarify existing disclosure requirements related to how assets and liabilities should be grouped by class and valuation techniques used for recurring and nonrecurring fair value measurements. The adoption of these changes had no impact on the condensed consolidated financial statements.

Effective January 1, 2010, The Company adopted changes issued by the FASB on February 24, 2010, to accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued, otherwise known as “subsequent events.” Specifically, these changes clarified that an entity that is required to file or furnish its financial statements with the SEC is not required to disclose the date through which subsequent events have been evaluated. Other than the elimination of disclosing the date through which management has performed its evaluation for subsequent events (see Note 12), the adoption of these changes had no impact on the condensed consolidated financial statements.

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ISSUED (Not adopted yet):

In October 2009, the FASB issued changes to revenue recognition for multiple-deliverable arrangements. These changes require separation of consideration received in such arrangements by establishing a selling price hierarchy (not the same as fair value) for determining the selling price of a deliverable, which will be based on available information in the following order: vendor-specific objective evidence, third-party evidence, or estimated selling price; eliminate the residual method of allocation and require that the consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the arrangement to each deliverable on the basis of each deliverable’s selling price; require that a vendor determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a stand-alone basis; and expand the disclosures related to multiple-deliverable revenue arrangements. These changes become effective for the Company on January 1, 2011. Management has determined that the adoption of these changes will not have an impact on the condensed consolidated financial statements, as the Company does not currently have any such arrangements with its customers.

In January 2010, the FASB issued changes to disclosure requirements for fair value measurements. Specifically, the changes require a reporting entity to disclose, in the reconciliation of fair value measurements using significant unobservable inputs (Level 3), separate information about purchases, sales, issuances and settlements (i.e., on a gross basis rather than as a single net number). These changes become effective for The Company beginning January 1, 2011. Other than the additional disclosure requirements, management has determined these changes will not have an impact on the condensed consolidated financial statements.

In March 2010, the FASB issued changes related to existing accounting requirements for embedded credit derivatives. Specifically, the changes clarify the scope exception regarding when embedded credit derivative features are not considered embedded derivatives subject to potential bifurcation and separate accounting. These changes become effective for the Company on July 1, 2010. Management has determined these changes will not have an impact on the condensed consolidated financial statements.

NOTE 10. Discontinued Operations

During the quarter ended June 30, 2008, the Company assessed opportunities in the United States and Mexico, and the Company began to implement actions necessary to close sales operations in both of those countries, which actions continue, although were substantially completed by the end of 2009. These two areas accounted for less than 1% of the Company’s net sales in the first three months of 2010 and 2009. Due to the changing environment and consolidation in the United States of the regional cellular carriers, along with the challenges of opening sales relations with the cellular carriers in Mexico, management determined that it was necessary to take decisive actions to mitigate further losses. The results of the unaudited discontinued operations are as follows:

	For the Three Months Ended March 31, (unaudited)
	2010			2009
Net Sales	$	24,000		$	246,946
Gross profit	24,000			(155,304		)
Operating income (loss)	(6,068		)	(192,040		)
Identifiable assets	923,453			3,104,980

Liabilities of discontinued operations consist primarily of accounts payable. Assets of discontinued operations are as follows:

	March 31, 2010 (unaudited)		December 31,2009 (audited)
Accounts Receivable	$	47,551	$	13,228
Prepaid Taxes	847,671		850,694
Other Assets	28,231		15,974
Total	$	923,453	$	879,896

As of March 31, 2010, the plans for the discontinued operations, although continuing to be implemented, were largely completed. However, the Company expects to continue to record potentially significant adjustments and expenses through discontinued operations as necessary.

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The Company re-evaluated its discontinued operations as of March 31, 2010 in accordance with applicable FASB guidance due to the Company’s remaining discontinued operations being outstanding for more than one year since the declaration to discontinue. The prepaid taxes identified above are in the process of being recovered from a foreign government, with the ability to settle beyond the Company’s control. As this matter is beyond the Company’s control classification as discontinued operations is still deemed appropriate.

NOTE 11. Geographic Information

The Company currently operates in one business segment. All fixed assets are located in Company or third-party facilities in the United States and Asia. The unaudited net sales by geographical area for the three months ended March 31, 2010 and 2009 were:

	For the Three Months Ended
	March 31, 2010 (unaudited)		March 31, 2009 (unaudited)
Central America	$	1,494,540	$	3,114,597
South America	26,046,503		39,510,521
Total	$	27,541,043	$	42,625,118

The unaudited net sales for the Company’s discontinued operations in the United States and Mexico for the three months ended March 31, 2010 and 2009 were $24,000 and $246,946, respectively.

NOTE 12. Commitments and Contingencies

LG Electronics Litigation

On July 1, 2009, the Company filed suit in the Superior Court of the State of California, County of San Diego (Case No. 37-2009-00092797-CU-BT-CTL) against defendants LG Electronics, Inc., LG Electronics USA, Inc., LG Electronics Panama S.A., LG Electronics Inc. Chile LTDA, LG Electronics Guatemala S.A. de C.V. and DOES 1-10. The complaint alleges claims for interference with contractual relations/inducing breach of contract, intentional interference with prospective economic relations, negligent interference with prospective economic relations, breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, fraud, promissory estoppel and violation of California Business and Professions Code §§ 17200, et seq. The Company is seeking in excess of $5 million in damages On July 31, 2009, the defendants removed the case to federal court in San Diego, CA. On April 23, 2010, the Company filed an amended complaint.

Nasdaq Delisting Notice

On May 4, 2010, the Company received a Nasdaq Staff Deficiency letter indicating that for the prior thirty consecutive business days the bid price for its common stock had closed below the minimum $1.00 per share requirement for continued listing on The NASDAQ Global Market under Nasdaq Marketplace Rule 5450(a)(1). In accordance with Nasdaq Marketplace Rule 5810(c)(3)(A), the Company was provided an initial period of 180 calendar days, or until November 1, 2010, to regain compliance. The letter stated that the Nasdaq staff would provide written notification that the Company had achieved compliance with Rule 5450(a)(1) if at any time prior to November 1, 2010, the bid price of its common stock closed at $1.00 per share or more for a minimum of ten consecutive business days.

During this period before November 1, 2010, absent the occurrence of any unexpected events, the Company’s common stock is expected to continue to trade on The NASDAQ Global Market. If compliance with Nasdaq Marketplace 5450(a)(1) cannot be demonstrated by November 1, 2010, the staff of The Nasdaq Stock Market Listing Qualifications department is expected to deliver a written notification to the Company that its common stock will be delisted from The NASDAQ Global Market. If the Company receives a delisting notice, it may appeal the Nasdaq staff’s determination to a Listing Qualifications Panel. Alternatively, it may apply to transfer the listing of its common stock to The NASDAQ Capital Market or another exchange or trading market. The Company intends to monitor the bid price of its common stock and consider available options if its common stock does not trade at a level likely to result in its regaining compliance with Nasdaq’s minimum bid price rule.

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The Company may become involved in certain other legal proceedings and claims which arise in the normal course of business. Other than as described above, as of the filing date of this report, the Company did not have any significant litigation outstanding.

NOTE 13. Fair Value of Financial Instruments

The Company’s financial instruments include cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued expenses. The book value of all other financial instruments is representative of their fair values. Cash and cash equivalents are the Company’s only financial instruments required to be measured at fair value and are measured using quoted prices for identical assets in an identical market.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements and Other General Information

This discussion and analysis of financial condition and results of operations should be read in conjunction with the accompanying unaudited consolidated financial statements and condensed notes thereto and other information included in this report and our Annual Report on Form 10-K for the year ended December 31, 2009 (including our 2009 audited consolidated financial statements and related notes thereto and other information). Our discussion and analysis of financial condition and results of operations are based upon, among other things, our unaudited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of financial statements in conformity with GAAP requires us to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent liabilities as of the date of our most recent balance sheet, and the reported amounts of revenues and expenses during the reporting periods. We review our estimates and assumptions on an ongoing basis. Our estimates are based on our historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ from these estimates under different assumptions or conditions, but we do not believe such differences will materially affect our financial position or results of operations, although they may. Our critical accounting policies, the policies we believe are most important to the presentation of our financial statements and require the most difficult, subjective and complex judgments are outlined below in “Critical Accounting Policies.” All references to results of operations in this discussion generally are to results from continuing operations, unless otherwise noted.

We decided during the second quarter of 2008 to discontinue our operations in Mexico and the U.S. Although we have largely completed this process, we continue to implement and record potentially significant adjustments required in the financial statements, which affects certain amounts of our results of operations and the classifications on the balance sheet, statement of operations and statement of cash flows for prior periods, and as of prior dates, as well as our disclosure in this report, including management’s discussion and analysis. The amounts related to our discontinued operations are shown separate from our continuing operations in our consolidated financial statements.

Safe Harbor Statement

This report contains “forward-looking statements,” including, without limitation, statements about future impacts of a new Argentina tariff and possible actions to be taken in response, customer relationships, marketing of our verykool ® products, sales levels, cost reductions, operating efficiencies and profitability, that are based on current management expectations and which involve certain risks and uncertainties. These risks and uncertainties, in whole or in part, could cause such expectations to fail to be achieved and have a material adverse effect on our business, financial condition and results of operations, and include, without limitation: (1) intense competition internationally, including competition from alternative business models, such as manufacturer-to-carrier sales, which may lead to reduced prices, lower sales, lower gross margins, extended payment terms with customers, increased capital investment and interest costs, bad debt risks and product supply shortages; (2) our dependency on Latin American sales, a majority of which are from Argentina, which may be significantly reduced or eliminated as a result of the recently adopted tariff in Argentina; (3) our ability to successfully design, manufacture, introduce and sell our verykool ® products and the related inventory risk of such products; (4) our ability to successfully establish, integrate and operate our new design facility in Beijing, China, (5) the extended effects of the global economic downturn; (6) an inability to secure adequate supply of competitive products on a timely basis and on commercially reasonable terms; (7) foreign exchange rate fluctuations, devaluation of a foreign currency, adverse governmental controls or actions, political or economic instability, or disruption of a foreign market, including, without limitation, the imposition, creation, increase or modification of tariffs, taxes, duties, levies and other charges and other related risks of our international operations, such as the recently adopted tariff in Argentina on certain electronics (including cellular phones), which could significantly increase selling prices to our customers and end-users; (8) our ability to attract new sources of profitable business from the expansion of products or services and risks associated with entry into new markets, including geographies, products and services; (9) an interruption or failure of our information systems or subversion of access or other system controls, which may result in a significant loss of business, assets, or competitive information; (10) significant changes in supplier terms and relationships; (11) termination of a

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supply or services agreement with a major supplier or product supply shortages; (12) continued consolidation in the wireless handset carrier market; (13) loss of business from one or more significant customers, such as what we have experienced with a large customer in Argentina; (14) customer and geographical accounts receivable concentration risk and other related risks; (15) rapid product improvement and technological change resulting in inventory obsolescence; (16) terrorist or military actions; (17) the loss of a key executive officer or other key employees; (18) changes in consumer demand for multimedia wireless handset products and features; (19) our failure to adequately adapt to industry changes and to manage potential growth and/or contractions; (20) seasonal buying patterns; (21) uncertain political and economic conditions internationally; (22) the resolution of any litigation for or against the Company; and (23) our ability to generate taxable income in future periods in order to utilize and realize any quarterly tax benefits recorded. Our actual results and condition could differ materially from those anticipated in our forward-looking statements.

We have instituted in the past, and continue to institute, changes to our strategies, operations and processes to address risks and uncertainties and to mitigate their impacts on our results of operations and financial condition. However, no assurances can be given that we will be successful in these efforts. For a further discussion of significant risk factors to consider, see “Risk Factors” below in this report and “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2009. In addition, other risks or uncertainties may be detailed from time to time in our future SEC filings.

Overview

We are a leading distributor and provider of wireless handsets and accessories in Latin America. We provide end-to-end handset and wireless terminal solutions for carriers in Latin America, and we distribute products of several key original equipment manufacturers (OEMs) such as Samsung. We are also involved in the designing, sourcing and distribution of a proprietary line of products under our own verykool® brand, which includes entry-level, mid-tier and high-end products.

Our distribution and solution services include product testing, approval and certification, warehousing, logistics services (packing, shipping and delivery), marketing campaigns, warranty services and end-user support. These services are provided for OEMs and our verykool ®-branded wireless handsets and accessories to facilitate sales to network carriers, agents, resellers, distributors, independent dealers and retailers in Central and South America. In addition, for our verykool ®-branded products, we design, test and contract with manufacturers to build these products.

Our interim financial condition or operating results may not be indicative of the entire fiscal year 2010 or other future financial condition or operating results. Our financial condition and operating results are influenced by several seasonal, general economic and other factors, which may cause our financial condition and operating results to fluctuate on a quarterly basis, including, but not limited to, inventory management and obsolescence, the timing and introduction of new products by our suppliers and competitors, promotions and subsidies by network operators, technical and certification delays by industry bodies and operators, purchasing and payment patterns of customers, the timing of holidays, the success of our proprietary verykool® products line and other events affecting our consumers.

Areas of Management Focus and Performance Indicators

We focus on the needs of our customers, developing and maintaining close relationships with manufacturers, seeking expansion in current and new markets, and sourcing and developing new and innovative products, while maintaining close attention to operational efficiencies and costs. We are particularly focused on increasing shipping volumes and improving efficiencies to achieve profitability and earnings growth, as well as monitoring and managing levels of accounts receivable and inventory. We provide distribution and other services for OEMs such as Samsung and for our own proprietary line of verykool® handsets. Performance indicators that are important for the monitoring and management of our business include operating and net income, cost of sales and gross margin percentage, operating expenses as a percent of revenues, and overall net sales growth, as well as balances of accounts receivable and inventory. We make extensive use of our customized information system to closely monitor all aspects of our business, including customer relationship management, intelligent purchasing, inventory control, inventory flow, line-item margin control for every order, and weighted-average cost and statistical data for products, customers and suppliers, as deemed appropriate. We believe a strong focus on providing better service to customers leads to increased customer satisfaction and retention and potential increases in sales.

Management and employees frequently travel to Latin America and Asia to spend time with key customers, suppliers and employees. We believe that these relationships are vital to our success, and we will continue to dedicate a significant amount of time to developing these relationships.

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Industry Trends and Risks

Since 2008, a rapid decline in wireless handset sales in the Central and South American markets we serve has negatively impacted and could continue to negatively impact our net sales. Excess supply conditions and the extended effects of the recent global economic downturn have reduced and may continue to reduce demand for our products and the market prices of the products we sell. These reductions affect our ability to generate net sales, margins and gross profit at expected levels and could continue to affect the value of our inventory, as well as customer payment trends. Conversely, should manufacturers be unable to respond to an unanticipated increase in demand as the global economy recovers on a timely basis, we, along with others in our industry, could experience supply constraints that would affect our ability to deliver products. We are unable to quantify these effects, as it is difficult to predict future supply conditions and demand patterns that affect our ability to meet customer demand or sell handsets at an acceptable gross profit.

During the second half of 2008, and continuing through the period of this report, our industry has been impacted by the recent worldwide economic slowdown. Some of the countries in the regions where we operate, particularly in Central America, have close economic relations with the United States, and we believe that weak economic conditions in the United States have adversely impacted consumer demand for the wireless handsets we sell in those countries, and as a result our overall operations, including net sales, during the first quarter of 2010. Although we began to experience a small increase in the demand for handsets in the third quarter of 2009, we have also begun to observe a decrease in some subsidies offered by operators in the region, which increases the handset price to the consumer, reducing overall handset volumes. We are also beginning to see more low-cost manufacturers gaining traction with entry-level products, which is negatively affecting both our OEM and verykool™ sales in the entry-level segment.

Company-Specific Trends and Risks

Our long-term strategy targets market growth for the various elements for our business, which we hope will result in future growth as global economic conditions recover. Our verykool® proprietary line of products, for which we had several models selling as of March 31 2010, is expected to become an increasing part of our overall business in the future.

Argentina, one of the countries where we have historically sold a significant amount of OEM products and where we generated 87% of our net sales in 2009, passed a new tariff in November 2009 affecting certain imported electronics, including wireless handsets. This new tariff could impact the pricing at the point of sale in excess of 30%, and it will reduce significantly our overall OEM sales volume in Argentina. This tariff had a material adverse impact on our sales, results of operations and prospects for our OEM products in Argentina in the first three months of 2010. We believe that this tariff will continue to have a material adverse impact on our sales, results of operations and prospects for our OEM products in Argentina.

During the first three months of 2010, we provided products and services to approximately 25 customers in Central and South America. Our three largest customers in this period, all carriers in South America, represented 43%, 28% and 11% of our net sales. In 2010, a customer accounting for 28% of our net sales for 2009 began significantly reducing its purchases from us as a result of the newly enacted Argentina tariff. Additional Argentina customers are expected to decrease or eliminate their purchases of imported wireless handsets in the coming fiscal quarters.

Recent Events

On May 4, 2010, we received a Nasdaq Staff Deficiency letter indicating that for the prior thirty consecutive business days the bid price for our common stock had closed below the minimum $1.00 per share requirement for continued listing on The NASDAQ Global Market under Nasdaq Marketplace Rule 5450(a)(1). In accordance with Nasdaq Marketplace Rule 5810(c)(3)(A), we were provided an initial period of 180 calendar days, or until November 1, 2010, to regain compliance. The letter stated that the Nasdaq staff would provide written notification that we had achieved compliance with Rule 5450(a)(1) if at any time prior to November 1, 2010, the bid price of our common stock closed at $1.00 per share or more for a minimum of ten consecutive business days.

During the period before November 1, 2010, absent the occurrence of any unexpected events, our common stock is expected to continue to trade on The NASDAQ Global Market. If compliance with Nasdaq Marketplace 5450(a)(1) cannot be demonstrated by November 1, 2010, the staff of The Nasdaq Stock Market Listing Qualifications department is expected to deliver a written notification to us that our common stock will be delisted from The NASDAQ Global Market. If we receive a delisting notice, we may appeal the Nasdaq staff’s determination to a Listing Qualifications Panel. Alternatively, we may apply to transfer the listing of our common stock to The NASDAQ Capital Market or another exchange or trading market. We intend to monitor the bid price of our common stock and consider available options if our common stock does not trade at a level likely to result in our regaining compliance with Nasdaq’s minimum bid price rule.

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Results of Operations

Three months ended March 31, 2010 compared with three months ended March 31, 2009

Net Sales

For the three months ended March 31, 2010, our net sales from continuing operations decreased 35% compared to the same period last year, to $27.5 million from $42.6 million for the three months ended March 31, 2009. The average selling price of wireless handsets sold in the three months ended March 31, 2010 decreased 23% compared to the same period last year, due primarily to the slower global economy, resulting in increased volumes of lower-priced handsets, including some of our verykool® and OEM products. The geographic mix of net sales shifted slightly in the three months ended March 31, 2010 as sales in South America were 95% of net sales, compared to 93% of net sales for the same period last year. Sales in Central America decreased to 5% of total net sales in the three months ended March 31, 2010, compared to 7% for the same period last year. Sales in Central America decreased sequentially to 5% of total net sales in the three months ended March 31, 2010, compared to 8% in the prior quarter. These regional shifts in net sales resulted from the factors discussed below.

	For the Three Months Ended March 31,
	2010			2009
	(Dollar amounts in thousands) (unaudited)
Net sales	$	27,541		$	42,625
Units sold, increase (decrease) over prior year	(16		)%	(44		)%
Average selling price, increase (decrease) over prior year	(23		)%	15		%

Net Sales by Geographic Region

In South and Central America, we have continued to work to retain our customer base and geographic presence by seeking new customers and additional business with existing customers. In addition, we have continued efforts to market and sell our proprietary verykool ® line of products in South and Central America. In South America, net sales were $26.0 million for the three months ended March 31, 2010, a 34% decrease from the same period last year. Our sales in Argentina, where we generated 87% of our net sales in 2009 and 95% for the three months ending March 31, 2010, has been materially adversely affected by the new tariff described above. We have experienced a significant decrease in sales to Argentina as of the date of this report, and we believe that in the coming quarters, the full impact of the tariff will necessitate significant steps by us in response. Such steps may include, without limitation, establishing manufacturing relationships in Argentina that eliminate the tariff on our OEM and proprietary products, focusing on increasing sales in other countries and aligning our cost structure with the level of sales.

In Central America, net sales decreased 52% to $1.5 million for the three months ended March 31, 2010, which was primarily due to the continuing low demand during the quarter, which we believe is related to the worldwide and regional economic downturn.

	For the Three Months Ended March 31,
	2010		2009		(Decrease)
	(Dollar amounts in thousands) (unaudited)
Central America	$	1,495	$	3,115	(52	)%
South America	26,046		39,510		(34	)%
Total	$	27,541	$	42,625	(35	)%

Cost of Sales, Gross Profit and Gross Margin

For the three months ended March 31, 2010, cost of sales was $26.1 million, or 94.8% of net sales, and gross margin was 5.2%, compared with cost of sales of $39.3 million, or 92.1% of net sales, and gross margin of 7.9% for the same period last year. The decreases in our cost of sales and in gross margin were due to product mix shift, including increased sales of lower-margin products (including our entry-level verykool® products.

	For the Three months Ended March 31,
	2010			2009			Decrease
	(Dollar amounts in thousands) (unaudited)
Net sales	$	27,541		$	42,625		(35	)%
Cost of sales	26,100			39,270			(34	)%
Gross profit	$	1,441		$	3,355		(57	)%
Gross margin	5.2		%	7.9		%

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Operating Expense and Operating Income (Loss) from Continuing Operations

For the three months ended March 31, 2010, operating expense decreased 31% compared to the same period last year. As a percentage of net sales from continuing operations, operating expense increased to 7.2% in the three months ended March 31, 2010, compared with 6.7% for the same period last year. The decrease in total operating expense was related to the decrease in net sales described above, as management took action to reduce fixed operational costs to match current market conditions. Management continues to review expenses in an effort to better match the operational costs with the future business opportunities, including by shifting expenses from fixed to variable components when possible. We believe such measures will assist us as we strive to achieve profitability in the current volatile market.

For the three months ended March 31, 2010, our operating loss from continuing operations was $533,000, compared with operating income from continuing operations of $478,000 for the same period last year. As a percentage of net sales, operating loss from continuing operations was 1.9% for the three months ended March 31, 2010, compared to operating income from continuing operations of 1.1% for the same period last year. The operating loss from continuing operations was a result of the decreases in net sales, gross margin and gross profit due to the factors discussed above.

Operating Expense

	For the Three Months Ended March 31,
	2010			2009			Decrease
	(Dollar amounts in thousands) (unaudited)
Net sales	$	27,541		$	42,625		(35	)%
Operating expense	$	1,974		$	2,877		(31	)%
Percentage of net sales	7.2		%	6.7		%

Operating Income (Loss) from Continuing Operations

	For the Three Months Ended March 31,
	2010			2009			Decrease
	(Dollar amounts in thousands) (unaudited)
Net sales	$	27,541		$	42,625		(35	)%
Operating income (loss) from continuing operations	$	(533	)	$	478		(224	)%
Percentage of net sales	(1.9		)%	1.1		%

Other Income and Expense

For the three months ended March 31, 2010, we incurred $23,000 of interest expense, compared with $28,000 for the same period last year. This was primarily due to a lower average outstanding balance on our line of credit, resulting from, among other things, decreased sales and decreased accounts receivable levels compared to the same period in the prior year. We expect to continue to regularly draw on our revolving line of credit, which will impact our interest expense in future periods.

	For the Three Months Ended March 31,
	2010			2009			(Decrease)
	(Dollar amounts in thousands)
	(unaudited)
Other loss	$	(1	)	$	—		0	%
Interest income (expense)	(23		)	(28		)	(17	)%
Total other income (expense)	$	(24	)	$	(28	)	(14	)%

Loss from Discontinued Operations (net of tax)

During the three months ended June 30, 2008, we assessed opportunities in the United States and Mexico and began to implement actions necessary to close sales operations in both of those countries, which actions, although largely complete, continued in the first quarter of 2010. For the three months ended March 31, 2010, we incurred a loss from discontinued operations of $6,000, compared to a loss of $193,000 from discontinued operations for the same period last year. We expect to continue to record adjustments and expenses through discontinued operations as necessary.

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Net Income (Loss)

For the three months ended March 31, 2010, our net loss was $567,150, or a loss of $0.04 per diluted share, compared to net income of $247,052, or earnings of $0.02 per diluted share, for the same period last year. This net loss was primarily due to the decreased net sales, gross margin and gross profit discussed above.

Financial Condition, Liquidity and Capital Resources

We generally use cash from our sales of products, lines of credit (bank and vendor) and from time to time sale and exercise of securities to provide capital needed to support our business.

Net Cash Provided by (Used in) Operating Activities

At March 31, 2010, we had $25.7 million in cash, an increase of $7.3 million from December 31, 2009 due to an increased level of collection of our accounts receivables. The net cash provided by operating activities was $20.3 million for the three months ended March 31, 2010, which resulted primarily from decreased accounts receivable and inventory levels partially offset by decreased accounts payable and an increase in accrued expenses. The decrease in accounts receivable was primarily due to the decrease in sales activity and the standard payment terms of sales we provide our customers. Accounts payable at March 31, 2010 decreased $1.9 million from December 31, 2009, primarily due to a decrease in vendor-provided lines of credit and lower levels of purchases, which resulted from the economic environment and our 2009 financial results, as well as from beneficial purchasing terms offered by other vendors and partners in the ordinary course during the period.

Days of Sales Outstanding

Days of sales outstanding (the average number of days it takes to collect revenue after a sale is made) at March 31, 2010 was 63 days, compared with 66 days at December 31, 2009. This decrease was due to improved collection rates. Normal payment terms require our customers to pay on a net 30-day or net 60-day basis depending on the customer. We are constantly working with our customers to reduce our days of sales outstanding. The extension of net 60-day terms is required to remain competitive in the regions where we currently operate, Central and South America. In an effort to obtain new customers and penetrate new markets, we may extend our normal payment terms.

Net Cash Used in Investing Activities

The net cash used in investing activities was $89,000 for the three months ended March 31, 2010, compared to net cash used of $112,000 for the three months ended March 31, 2009. This use of cash continued to be primarily the result of our investment related to geographic expansion, tooling and molds for our proprietary verykool® products.

Net Cash Provided by (Used in) Financing Activities

The net cash used in financing activities for the three months ended March 31, 2010 of $12.9 million was primarily used to make payments on our bank line of credit. The net cash provided by financing activities for the three months ended March 31, 2009 of $7.2 million was primarily the result of borrowings on our bank line of credit.

Working Capital

Our net working capital at March 31, 2010 was $23.9 million, compared to $24.4 million at December 31, 2009. This slight decrease was primarily due to the decrease in accounts receivable and the decreases in accounts payable and the bank line of credit offset by an increase in cash and cash equivalents.

Borrowings

Pursuant to our Loan, Security and Bulk Purchase Agreement and a Letter of Credit and Security Agreement (collectively, the “Agreement”) with Wells Fargo Century, Inc. (“Lender”), the Lender may advance up to $45,000,000 to us based on the expected collections of eligible receivables as well as value of our eligible inventory determined in accordance with the Agreement. The outstanding advances may not exceed the lesser of (i) $45,000,000 or (ii) the sum of the value of the eligible receivables and eligible inventory multiplied by their respective advance rates as set forth in the Agreement ($12.8 million as of March 31, 2010). At March 31, 2010, the majority of our debt was based on foreign accounts receivable, a majority of which is insured. This credit facility is secured by all of the assets of the Company. The terms automatically roll over annually; however, the terms and conditions of such credit facility (including, without limitations, rates, eligibility, borrowing base and maximum line) may change. Subsequent to March 31, 2010, the Agreement was renewed under its current terms and conditions through April 2011. The interest rate for each borrowing under the credit facility is, at our option, either the Wells Fargo Bank N.A. prime rate minus 0.50% (3.25% minus 0.50% at March 31,

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2010) or the LIBOR rate plus 2.00% (0.292% plus 2.00% at March 31, 2010) . At March 31, 2010, the amount drawn against the line of credit was $12,626,234 and the total amount available at March 31, 2010 was $ 12,778,276 . As of March 31, 2010, we were in compliance with the covenants of the credit facility.

We have no other notes payable.

C redit lines have been an important part of operating and growing our business, and market changes affecting accounts receivable have, and will in the future, diminish or increase the borrowing base of available funds under our current credit line. At March 31, 2010 our $12.6 million in advances were at 99% of the available borrowing base compared with advances of $25.5 million at 88% of the available borrowing base at December 31, 2009.

Critical Accounting Policies

There have been no material changes to our critical accounting policies and estimates affecting the application of those accounting policies since our Annual Report on Form 10-K for the year ended December 31, 2009.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The term “market risk” for us refers to the risk of loss arising from adverse changes in interest rates and various foreign currencies. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures.

Interest Rate Risk

We are exposed to market risk from changes in interest rates on our outstanding revolving line of credit. At March 31, 2010, we had $12.6 million outstanding under our line of credit, which could be affected by changes in short-term interest rates. Under our current credit facility, the interest rate for funds borrowed is, at our option, either the Wells Fargo prime rate minus 0.5% (3.25% minus 0.5% at March 31, 2010) or the LIBOR rate plus 2.00% (0.292% plus 2.00% at March 31, 2010). For every 1% increase in Wells Fargo’s prime rate or the LIBOR rate, our interest expense would increase by $126,000 annually, assuming $12.6 million remained outstanding for the entire year. Our actual borrowings will depend on changes in our working capital and other variables relating to our business, which could affect the foregoing sensitivity analysis.

Market Risk

Almost all of our sales and expenses are transacted in markets outside the United States. However, all sales transactions and accounts receivable are denominated in U.S. dollars. As a result of our international sales, our future operating results could be adversely affected by a variety of factors, including changes in specific countries’ political, economic or regulatory conditions, and trade protection measures. Our market risk management includes an accounts receivable insurance policy for our sales. However, there can be no assurance that our insurance policy will substantially offset the impact of fluctuations in currency exchange rates, political, economic or regulatory conditions on our results of operations and financial position. We do not believe that foreign currency fluctuations had a material impact on our financial results during the three month ended March 31, 2010. See “Consolidated Statements of Comprehensive Operations” in our financial statements included in this report.

Item 4. Controls and Procedures

Disclosure Controls

An evaluation was performed pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) under the supervision and with the participation of our management, including the Chief Executive Officer and President and the Interim Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this quarterly report. These disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that this information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation, the Chief Executive Officer and President and the Interim Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

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Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our fiscal quarter ended March 31, 2010, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

LG Electronics Litigation

On July 1, 2009, the Company filed suit in the Superior Court of the State of California, County of San Diego (Case No. 37-2009-00092797-CU-BT-CTL) against defendants LG Electronics, Inc., LG Electronics USA, Inc., LG Electronics Panama S.A., LG Electronics Inc. Chile LTDA, LG Electronics Guatemala S.A. de C.V. and DOES 1-10. The complaint alleges claims for interference with contractual relations/inducing breach of contract, intentional interference with prospective economic relations, negligent interference with prospective economic relations, breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, fraud, promissory estoppel and violation of California Business and Professions Code §§ 17200, et seq. The Company is seeking in excess of $5 million in damages. On July 31, 2009, the defendants removed the case to federal court in San Diego, CA. On April 23, 2010, the Company filed an amended complaint.

We may become involved in certain other legal proceedings and claims which arise in the normal course of business. Other than as described above, as of March 31, 2010, we did not have any significant litigation outstanding.

Item 1A. Risk Factors

In addition to the risk factors included below and 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, 2009, which factors and information could materially affect our business, financial condition or operating results. The risk factors and uncertainties described in our last Annual Report on Form 10-K and this report are not the only risks and uncertainties facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition or operating results. Except as set forth below, there have been no material changes to the risk factors included in our last Annual Report on Form 10-K.

A recently passed Argentina tariff will substantially increase the cost at the point of sale for certain imported electronics, including the products we sell, and this will have an adverse impact on our sales in Argentina.

Argentina, one of the countries where we currently sell a significant amount of OEM products and where we generated 95% of our net sales in the three months ended March 31, 2010, passed a new tariff in November 2009 affecting certain imported electronics, including wireless handsets. This new tariff impacts the pricing at the point of sale in excess of 30%, and has reduced significantly our overall OEM sales volume in Argentina. This tariff had a material adverse impact on our sales, results of operations and prospects for our OEM products in Argentina in the first three months of 2010. We believe that this tariff will continue to have a material adverse impact on our sales, results of operations and prospects for our OEM products in Argentina on an ongoing basis.

The loss or reduction in orders from principal customers or a reduction in prices we are able to charge these customers will have a negative impact upon our revenues and could cause our stock price to decline.

Our three largest customers in the three months ended March 31, 2010, all carriers in South America, represented 43%, 28% and 11% of our net sales during that period. In 2010, a customer accounting for 28% of our net sales for 2009 began significantly reducing its purchases from us as a result of the newly enacted Argentina tariff. Additional Argentina customers are expected to decrease or eliminate their purchases of imported wireless handsets in the coming fiscal quarters. The markets we serve are subject to significant price competition. Additionally, our customers are not contractually obligated to purchase products from us. For these and other reasons, such as competitive pricing and pressures, customers may seek to obtain products or services from us at lower prices than we have been able to charge in the past, and they could terminate our relationship or reduce their purchases from us in favor of lower-priced alternatives. In addition, we have experienced losses of certain customer bases through industry consolidation, a trend that may increase in our markets, and in the ordinary course of business. The further loss of any of our principal customers, a reduction in the amount of product or services our principal customers order from us or the inability to maintain current terms, including price, with these or other customers could have an adverse effect on our financial condition, results of operations and liquidity and could cause our stock price to decline.

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We buy a significant amount of our products from a limited number of suppliers, who may not provide us with competitive products at reasonable prices when we need them in the future.

We purchase wireless handsets and accessories principally from wireless communications OEMs and distributors. We depend on these suppliers to provide us with adequate inventories of currently popular brand name products on a timely basis and on favorable pricing and other terms, as well as on these suppliers’ quality products and services and financial stability. For the period ended March 31, 2010, one vendor, Samsung Electronics de Amazonia, S.A., accounted for 93% of our total cost of sales . We currently have one exclusive and several non-exclusive agreements with our principal suppliers, which can be terminated on short notice and provide for certain territorial restrictions. Our suppliers may not offer us competitive products on favorable terms or with timely delivery. The increased costs on importation of wireless handsets and other products into Argentina resulting from the recently enacted tariff will significantly reduce our supply of competitive products for Argentina. In addition, new products from other manufacturers could impact the demand for products from manufacturers we represent. From time to time, we have been unable to obtain sufficient product supplies. Any failure or delay by our suppliers, particularly our one primary vendor, in supplying us with products on favorable terms may severely diminish our ability to obtain and deliver products to our customers on a timely and competitive basis. If we lose any of our principal suppliers, or if these suppliers are unable to fulfill our product needs, or if any principal supplier imposes substantial price increases and alternative sources of supply are not readily available, it would have a material adverse effect on our results of operations and financial condition.

We have recently experienced net losses and net losses may continue in the future. If we continue to operate at a loss, our business may not be financially viable.

W e experienced losses for the three months ended March 31, 2010 and the year ended December 31, 2009. Given the impact of the recently passed Argentina tariff, the extended effects of the economic slowdown and contraction in the Central and South American markets that we serve, and general economic instability globally, we cannot adequately evaluate the financial viability of our business or our long-term prospects.

To achieve profitability, we must, among other things:

· increase gross profits while controlling operational expenses;

· generate sales and consumer demand for our verykool® products; and

· continue to work with our OEM vendors for increased margin opportunities.

If we do not succeed in these objectives, our business, among other things, will continue to experience losses and may not be sustainable in the future.

We may be delisted from The NASDAQ Stock Market if we do not satisfy continued listing requirements.

If compliance with Nasdaq Marketplace 5450(a)(1) cannot be demonstrated by November 1, 2010, the staff of The Nasdaq Stock Market Listing Qualifications department is expected to deliver a written notification to us that our common stock will be delisted from The NASDAQ Global Market. If we receive a delisting notice, we may appeal the Nasdaq staff’s determination to a Listing Qualifications Panel. Alternatively, we may apply to transfer the listing of our common stock to The NASDAQ Capital Market or another exchange or trading market. However, our application may not be granted if we do not satisfy the applicable listing requirements for The NASDAQ Capital Market at the time of the application. Even if we successfully transfer our common stock to The NASDAQ Capital Market, but are unable to satisfy the minimum bid price requirement or any of the other continued listing standards of The NASDAQ Capital Market, our common stock would be delisted from The NASDAQ Capital Market.

If our common stock were delisted from The NASDAQ Stock Market, you may find it difficult to dispose of your shares and our share price may be adversely affected.

If our common stock were to be delisted from The NASDAQ Global Market and we could not satisfy the listing standards of The NASDAQ Capital Market, trading of our common stock most likely would be conducted in the over-the-counter market on an electronic bulletin board established for unlisted securities such as the OTCQX marketplace or the OTC Bulletin Board. Such trading would reduce the market liquidity of our common stock. As a result, an investor would find it more difficult to dispose of, or obtain accurate quotations for the price of, our common stock, thereby negatively impacting the share price of our common stock.

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If our common stock is delisted from The NASDAQ Global Market and we could not satisfy the listing standards of The NASDAQ Capital Market and the trading price remains below $5.00 per share, trading in our common stock might also become subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, which require additional disclosure by broker-dealers in connection with any trade involving a stock defined as a “penny stock” (generally, any equity security not listed on a national securities exchange or quoted on The NASDAQ Stock Market that has a market price of less than $5.00 per share, subject to certain exceptions). Many brokerage firms are reluctant to recommend low-priced stocks to their clients. Moreover, various regulations and policies restrict the ability of shareholders to borrow against or “margin” low-priced stocks, and declines in the stock price below certain levels may trigger unexpected margin calls. Additionally, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher priced stocks, the current price of the common stock can result in an individual shareholder paying transaction costs that represent a higher percentage of total share value than would be the case if our share price were higher. This factor may also limit the willingness of institutions to purchase our common stock. Finally, the additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from facilitating trades in our common stock, which could severely limit the market liquidity of the stock and the ability of investors to trade our common stock, thereby negatively impacting the share price of our common stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Reserved

None.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number		Description of Exhibit
3.2		Bylaws, as amended (+).
10.1		Addendum to Distribution Agreement by and between InfoSonics Corporation and Samsung Electronics Argentina S.A. effective as of January 6, 2010 (1).
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (+).
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer (+).
32.1		Section 1350 Certification of Chief Executive Officer (+).
32.2		Section 1350 Certification of Chief Financial Officer (+).

(1) Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-32217), filed on January 12, 2010.

(+) Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		InfoSonics Corporation


Date:	May 14, 2010	By:	/s/ Joseph Ram
			Joseph Ram
			Chief Executive Officer and President


Date:	May 14, 2010	By:	/s/ Roger Laungani
			Roger Laungani
			Interim Chief Financial Officer

Exhibit 3.2

BYLAWS

INFOSONICS CORPORATION

(As amended through April 16, 2010)

ARTICLE I

Offices

The registered office of the corporation shall be in the City and County of Baltimore, State of Maryland or such other city and county as the board of directors shall determine.

The corporation may also have offices at such other places both within and without the State of Maryland as the board of directors may from time to time determine or the business of the corporation may require.

ARTICLE II

Stockholders

Section 1. Annual Meeting . The annual meeting of the stockholders shall be held at a time and date fixed by the board of directors for the purpose of electing directors and for the transaction of such other business as may come before the meeting. Notwithstanding the foregoing, the annual meeting shall be held upon reasonable notice and not later than a reasonable period following delivery of the corporation’s annual report to stockholders. If the election of directors shall not be held at the annual meeting of the stockholders, or at any adjournment thereof, the board of directors shall cause the election to be held at a special meeting of the stockholders as soon thereafter as conveniently may be.

Section 2. Special Meetings . Special meetings of the stockholders, for any purpose, unless otherwise prescribed by statute, may be called by the president or by the board of directors. Special meetings also shall be called by an officer of the corporation upon written request of stockholders holding in the aggregate not less than 25 percent of the outstanding shares of the common stock of the corporation entitled to vote at such meeting; subject, however, to the further provisions of this Section 2. Upon receipt of such a written request, either in person or by mail, stating the purpose(s) of the meeting and the matters proposed to be acted on at the meeting, the secretary of the corporation shall inform the requesting stockholder(s) of the reasonable estimated cost of preparing and mailing a notice of the meeting and upon payment of these costs to the corporation the secretary shall notify each stockholder entitled to notice of the meeting. The board of directors has the sole power to fix the record date for determining stockholders entitled to request a special meeting and the record date for determining stockholders entitled to notice of and to vote at the special meeting. The Board Of Directors also has the sole power to fix the date, time and place of any special meeting. Not less than 10 days nor more than 90 days before the special meeting, the secretary shall give, in accordance with Maryland law, written notice of the meeting to each stockholder entitled to vote at the meeting and each other stockholder entitled to notice of the meeting. The notice shall state the date, time, place and purpose of the special meeting.

Section 3. Place Of Meeting . Subject to the discretion of the Board Of Directors to designate otherwise as provided elsewhere in these Bylaws or pursuant to Maryland law, the person or persons authorized to call any annual or special meeting may designate any place, either within or outside Maryland, as the place for the meeting. A waiver of notice signed by all stockholders entitled to vote at a meeting may designate any place, either within or outside Maryland, as the place for such meeting. If no designation is made, the place of meeting shall be the principal corporate offices of the corporation.

Section 4. Fixing Date For Determination Of Stockholders Of Record . For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for any other lawful action, the board of directors may fix, in advance, a date as the record date for any such determination of stockholders, which date shall not be more than 90 nor less than ten days before the date of such meeting, nor more than 90 days prior to any other action. If no record date is fixed then the record date shall be as follows: (a) for determining stockholders entitled to notice of or to vote at the meeting of stockholders, (i) the close of business on the day on which notice of the meeting is mailed, or (ii) the 30 th day prior to the meeting; (b) for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the board of directors is necessary, the day

on which the first written consent is expressed, and (c) for determining stockholders for any other purpose, the close of business on the day on which the board of directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.

Section 5. Notice Of Meeting . Except as otherwise provided herein, written notice stating the place, day and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than 10 nor more than 90 days before the date of the meeting, unless otherwise required by statute, either personally, by mail or by electronic mail, to each stockholder of record entitled to vote at such meeting. Notice shall be deemed given to a stockholder when it is (i) personally delivered to the stockholder, (ii) left at the stockholder’s residence or usual place of business, (iii) mailed to the stockholder at the stockholder’s address as it appears on the records of the corporation, or (iv) transmitted to the stockholder by electronic mail to any electronic mail address of the stockholder or by any other electronic means. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the stockholder at his address as it appears on the stock books of the corporation, with postage thereon prepaid. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, provided, however, that notice shall be given if the adjourned meeting is to be is reconvened more than 120 days after the original record date concerning the meeting. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting.

Section 6. Organization . The president or any vice president shall call meetings of stockholders to order and act as chairman of such meetings. In the absence of said officers, any stockholder entitled to vote at that meeting, or any proxy of any such stockholder, may call the meeting to order and a chairman shall be elected by a majority of the stockholders entitled to vote at that meeting. In the absence of the secretary or any assistant secretary of the corporation, any person appointed by the chairman shall act as secretary of such meetings.

Section 7. Agenda And Procedure . The board of directors shall have the responsibility of establishing an agenda for each meeting of stockholders, subject to the rights of stockholders to raise matters for consideration which may otherwise properly be brought before the meeting although not included within the agenda. The chairman shall be charged with the orderly conduct of all meetings; provided however, that in the event of any difference in opinion with respect to the proper cause of action which cannot be resolved by reference to statute, or to the articles of incorporation or these bylaws, Robert’s Rules Of Order (as last revised) shall govern the disposition of the matter.

Section 8. Voting Lists . The officer who has charge of the stock books of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of each stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

Section 9. Quorum . A majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders for the transaction of business except as otherwise provided by statute or by the articles of incorporation. If fewer than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time in accordance with Section 5 of this Article until a quorum shall be present or represented.

Section 10. Manner Of Acting . When a quorum is present at any meeting, except as provided in Article III, Section 2 of these Bylaws with respect to the election of directors, the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless a different vote is required by law or the articles of incorporation, in which case such express provision shall govern.

Section 11. Informal Action By Stockholders . Any action required or permitted to be taken at any meeting of the common stockholders may be taken without a meeting, without prior notice and without a vote, provided that a consent in writing, setting forth the action so taken, shall be signed by each holder of outstanding common stock entitled to vote on the matter.

Section 12. Proxies . Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize any other person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after 11 months from its date unless the proxy provides for a longer period.

Section 13. Voting Of Shares . Unless otherwise provided in the articles of incorporation and subject to the provisions of Section 4 of this Article, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. In the election of directors, each record holder of stock entitled to vote at such election shall have the right to vote the number of shares owned by him for as many persons as there are directors to be elected and for whose election he has the right to vote. Cumulative voting shall not be allowed in the election of directors or for any other purpose.

Section 14. Voting Of Shares By Certain Holders . Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the corporation the pledgor has expressly empowered the pledgee to vote thereon, in which case only the pledgee or his proxy may represent such shares and vote thereon. If shares stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the secretary of the corporation is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the effects set forth in Section 2-508 of the General Corporation Law of the State of Maryland.

Section 15. Inspectors . The chairman of the meeting may at any time appoint one or more inspectors to serve at a meeting of the stockholders. Such inspector(s) shall decide upon the qualifications of voters, including the validity of proxies, accept and count the votes for and against the questions presented, report the results of such votes, and subscribe and deliver to the secretary of the meeting a certificate stating the number of shares of stock issued and outstanding and entitled to vote thereon and the number of shares voted for and against the questions presented. The inspector(s) does not need to be a stockholder of the corporation, and any director or officer of the corporation may be an inspector on any question other than a vote for or against his election to any position with the corporation or on any other question in which he may be directly interested.

Section 16. Notice . No business may be transacted at an annual meeting of stockholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the board of directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the annual meeting by any stockholder of the corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 16 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 16.

In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the secretary of the corporation.

To be timely, a stockholder’s notice to the secretary of the corporation must be delivered to or mailed and received at the principal executive offices of the corporation not less than 53 days nor more than 90 days prior to the annual meeting of stockholders at which the business proposed is to be acted upon by stockholders; provided, however, that if less than 60 days’ notice of the meeting is given to stockholders, written notice of business proposed by stockholders shall be delivered or mailed, as prescribed, to the secretary of the corporation not later than the close of the seventh day following the day on which notice of the meeting was mailed to stockholders.

To be in proper written form, a stockholder’s notice to the secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of such stockholder, (iii) the class and series and the number of shares of each class and series of stock of the corporation which are owned beneficially or of record by such stockholder, (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business and (v) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. In addition, notwithstanding anything in this Section 16 to the contrary, a stockholder intending to nominate one or more persons for election as a director at an annual or special meeting must comply with Article III, Section 3 of these Bylaws for such nomination or nominations to be properly brought before such meeting.

No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 16, provided, however, that once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 16 shall be deemed to preclude discussion by any stockholder of any such business. If the chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.

ARTICLE III

Board Of Directors

Section 1. General Powers . The business and affairs of the corporation shall be managed by or under the direction of its board of directors, except as otherwise provided in the General Corporation Law of the State of Maryland or the articles of incorporation. The directors are deemed to be in a fiduciary relationship with the corporation and the stockholders.

Section 2. Number, Tenure And Qualification . The number of directors of the corporation shall be determined by the board of directors and shall be not less than one or more than nine. Directors shall be elected at each annual meeting of stockholders, except as otherwise provided in Section 4 of this Article, by a vote of a plurality of stockholders present in person or by proxy at a meeting at which a quorum is present. Each director shall hold office for a term of one year and until his successor shall have been elected and shall qualify or until the earliest of his or her death, resignation or removal. A director can be reelected by the stockholders. Directors need not be residents of Maryland or stockholders of the Corporation.

Section 3. Notice Of Nominations . Nominations for the election of directors may be made by the board of directors or a committee of the board of directors or by any stockholder entitled to vote for the election of directors. Nominations by the board of directors or a committee of the board of directors may be made by oral or written notice delivered to the secretary of the corporation by any officer or director on behalf of the board of directors or committee at any time prior to or at any meeting of the stockholders at which directors are to be elected. Each notice of nomination of directors by the board of directors or a committee of the board of directors shall set forth the names of the nominees. Nominations by stockholders shall be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the secretary of the corporation not less than 90 days nor more than 130 days prior to (i) any meeting (other than an annual meeting) at which directors are to be elected, appointed or designated or, (ii) in the case of an annual meeting, the anniversary of the previous year’s annual meeting; provided, however, if, (x) in the case of an annual meeting, the annual meeting is scheduled to be held on a date more than thirty (30) days prior to or delayed by more than sixty (60) days after such anniversary date or, (y) in the case of any other meeting, less than 100 days’ notice of the meeting is given to stockholders, then notice by the stockholder must be delivered to the corporation no later than the close of business ninety (90) days prior to such meeting or the tenth day following the day on which notice of the date of the meeting was mailed or public disclosure of the date of the meeting was first made by the corporation (and in no event shall the public announcement of an adjournment of the meeting commence a new time period for the giving of a stockholder’s notice under this Section 3).

To be in proper form, a stockholder’s notice to the Secretary must set forth (a) as to each person whom the stockholder proposes to nominate for election as a director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the corporation which are owned beneficially or of record by the person, and (iv) any other information relating to the person that would be required in connection with solicitation of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving notice (i) the name and record address of such stockholder, (ii) the class or series and number of shares of capital stock of the corporation which are owned beneficially or of record by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice, and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitation of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section. The chairman of any meeting of stockholders of the corporation may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if the chairman should so determine, the chairman shall so declare to the meeting and the defective nomination shall be disregarded.

Section 4. Vacancies . Any director may resign at any time by giving written notice to the corporation. Such resignation shall take effect at the time specified therein; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any vacancy or newly created directorship resulting from an increase in the authorized

number of directors may be filled by the affirmative vote of the majority of directors then in office, although less than a quorum, or by a sole remaining director, and a director so chosen shall hold office until the next annual election and until his successor is duly elected and qualified, unless sooner displaced. If at any time, by reason of death, resignation or other cause, the corporation should have no directors in office, then an election of directors may be held in the manner provided by law. When one or more directors shall resign from the board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill any vacancy or vacancies, with the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office until the next annual election and until his successor is duly elected and has qualified.

Section 5. Regular Meetings . Unless otherwise approved by the board of directors, a regular meeting of the board of directors shall be held without other notice than this bylaw immediately after and at the same place as the annual meeting of stockholders. The board of directors may provide by resolution the time and place, either within or outside Maryland, for the holding of additional regular meetings without other notice than such resolution.

Section 6. Special Meetings . Special meetings of the board of directors may be called by or at the request of the chief executive officer, the chief operating officer, the president or any two directors. The person or persons authorized to call special meetings of the board of directors may fix any place, either within or outside Maryland, as the place for holding any special meeting of the board of directors called by them.

Section 7. Notice . Notice of any special meeting shall be given at least 24 hours previous thereto by written notice delivered personally, or at least one business day (and not less than 24 hours) previous thereto if sent by facsimile to the business address of the director, or at least five days previous thereto if mailed to a director at his business address, or by notice given at least two days previous thereto by telegraph. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting.

Section 8. Quorum . A majority of the number of directors then in office shall constitute a quorum for the transaction of business at any meeting of the board of directors, but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 9. Manner Of Acting . Except as may be otherwise specifically provided by law or the articles of incorporation, the vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors. In addition, without the concurrence of a majority of the then outstanding shares, the directors may not (i) sell all or substantially all of the assets of the corporation other than in the ordinary course of the corporation’s business or in connection with liquidation and dissolution; (ii) cause the merger or other reorganization of the corporation; or (iii) dissolve or liquidate the corporation, other than before the initial investment in property.

Section 10. Removal . Unless otherwise restricted by law, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of shares then entitled to be cast generally for the election of directors.

Section 11. Committees . The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to authorize dividends on stock, issue stock (other than as provided in the immediately following paragraph), recommend to the stockholders any action which requires stockholder approval, amend the bylaws, or approve any merger or share exchange which does not require stockholder approval.

If the board of directors has given general authorization for the issuance of stock providing for or establishing a method or procedure for determining the maximum number of shares to be issued, a committee of the board, in accordance with that general authorization or any stock option or other plan or program adopted by the board, may authorize or fix the terms of

stock subject to classification or reclassification and the terms on which any stock may be issued, including all terms and conditions required or permitted to be established or authorized by the board of directors under sections 2-203 and 2-208 of the General Corporation Law of Maryland.

Section 12. Compensation . Unless otherwise restricted by the articles of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at such meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of any committee of the board may be allowed like compensation for attending committee meetings.

Section 13. Action By Written Consent Of Directors . Unless otherwise restricted by the articles of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors or any committee thereof may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of the proceedings of the board or committee.

Section 14. Meetings By Telephone . Unless otherwise restricted by the articles of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee thereof, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting in such manner shall constitute presence in person at the meeting.

ARTICLE IV

Officers And Agents

Section 1. General . The officers of the corporation shall be a president, a secretary and a treasurer. The board of directors may appoint such other officers, assistant officers, and agents, including a chief executive officer, chief financial officer, chairman of the board, one or more vice-chairmen of the board, vice presidents, assistant secretaries and assistant treasurers, as they may consider necessary, who shall be chosen in such manner and hold their offices for such terms and have such authority and duties as from time to time may be determined by the board of directors. Any number of offices may be held by the same person with the exception of the office of president and vice president being held simultaneously by the same person, or as otherwise provided in the articles of incorporation or these bylaws.

Section 2. Election And Term Of Office . The officers of the corporation shall be elected by the board of directors annually at the first meeting of the board held after each annual meeting of the stockholders. If the election of officers shall not be held at that meeting, an election of officers shall be held as soon thereafter as conveniently may be. Each officer shall hold office until his successor shall have been duly elected and shall qualify or until the earliest to occur of his death, resignation or removal.

Section 3. Removal . Any officer or agent elected or appointed by the board of directors may be removed at any time by the board whenever in its judgment the best interests of the corporation will be served thereby.

Section 4. Vacancies . Any officer may resign at any time upon written notice to the corporation. Such resignation shall take effect at the time stated therein; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any vacancy occurring in any office by death, resignation, removal or otherwise shall be filled by the board of directors for the unexpired portion of the term or for any other term specified by the board of directors. If any officer shall be absent or unable for any reason to perform his duties, the board of directors, to the extent not otherwise inconsistent with these bylaws or law, may direct that the duties of such officer during such absence or inability shall be performed by such other officer or assistant officer as seems advisable to the board.

Section 5. Authority And Duties Of Officers . The officers of the corporation shall have the authority and shall exercise the powers and perform the duties specified below, and as may be otherwise specified by the board of directors or by these bylaws, except that in any event each officer shall exercise such powers and perform such duties as may be required by law, and in cases where the duties of any officer or agent are not prescribed by these bylaws or by the board of directors, such officer or agent shall follow the orders and instructions of (a) the chief executive officer, if a chief executive officer is elected, the chief operating officer, if a chief operating officer is elected, the president, and if a chairman of the board is elected, then (b) the chairman of the board.

(a) President . The president, subject to the direction and supervision of the board of directors, shall have the following responsibilities: (i) be the chief executive officer of the corporation and have general and active control of its affairs, business and property and general supervision of its officers, agents and employees; (ii) preside at all meetings of the stockholders; (iii) see that all orders and resolutions of the board of directors are carried into effect; and (iv) sign or countersign all certificates, contracts and other instruments of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. In addition, the president shall, unless otherwise directed by the board of directors, attend in person or by substitute appointed by them, or by written instruments appointing proxy or proxies to represent the corporation, all meetings of the stockholders of any corporation in which the corporation shall hold any stock and may, on behalf of the corporation, in person or by substitute or proxy, execute written waivers of notice and consents with respect to such meetings. At all such meetings, and otherwise, the president, in person or by substitute or proxy as aforesaid, may vote the stock so held by the corporation and may execute written consent and other instruments with respect to such stock and may exercise any and all rights and powers incident to the ownership of said stock, subject however to the instructions, if any, of the board of directors. Subject to the directions of the board of directors, the president shall exercise all other powers and perform all other duties normally incident to the office of president of a corporation and shall exercise such other powers and perform such other duties as from time to time may be assigned to him by the board.

(b) Chairman Of The Board . If a chairman of the board has been elected, the chairman of the board shall be the presiding officer at meetings of the board of directors and shall have, subject to the direction and modification of the board of directors, all the same responsibilities, rights and obligations as described in these bylaws for the president.

(c) Vice Presidents . The vice presidents, if any shall be elected, and if they be so directed, shall assist the president and shall perform such duties as may be assigned to them by the president or by the board of directors. In the absence of the president, the vice president designated by the board of directors or (if there be no such designation) designated in writing by the president shall have the powers and perform the duties of the president. If no such designation shall be made all vice presidents may exercise such powers and perform such duties.

(d) Secretary . The secretary shall perform the following functions: (i) record or cause to be recorded the proceedings of the meetings of the stockholders, the board of directors and any committees of the board of directors in a book to be kept for that purpose; (ii) see that all notices are duly given in accordance with the provisions of these bylaws or as required by law; (iii) be custodian of the corporate records and of the seal of the corporation; (iv) keep at the corporation’s registered office or principal place of business within or outside Maryland a record containing the names and addresses of all stockholders and the number and class of shares held by each, unless such a record shall be kept at the office of the corporation’s transfer agent or registrar; (v) have general charge of the stock books of the corporation, unless the corporation has a transfer agent; and (vi) in general, perform all other duties as from time to time may be assigned to him by the president, or by the board of directors. Assistant secretaries, if any, shall have the same duties and powers, subject to supervision by the secretary.

(e) Treasurer . The treasurer shall perform the following functions: (i) be the principal financial officer of the corporation and have the care and custody of all funds, securities, evidences of indebtedness and other personal property of the corporation and deposit the same in accordance with the instructions of the board of directors; (ii) receive and give receipts and acquittances for monies paid in on account of the corporation, and pay out of the funds on hand all bills, payrolls and other just debts of the corporation of whatever nature upon maturity; (iii) be the principal accounting officer of the corporation and as such prescribe and maintain the methods and systems of accounting to be followed, keep complete books and records of account, prepare and file all local, state and federal tax returns, prescribe and maintain an adequate system of internal audit, and prepare and furnish to the president and the board of directors statements of account showing the financial position of the corporation and the results of its operations; and (iv) perform all other duties incident to the office of treasurer and such other duties as from time to time may be assigned to him by the president or the board of directors. Assistant treasurers, if any, shall have the same powers and duties, subject to the supervision of the treasurer.

Section 6. Surety Bonds . The board of directors may require any officer or agent of the corporation to execute to the corporation a bond in such sums and with such sureties as shall be satisfactory to the board, conditioned upon the faithful performance of his duties and for the restoration to the corporation of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.

Section 7. Salaries . Officers of the corporation shall be entitled to such salaries, emoluments, compensation or reimbursement as shall be fixed or allowed from time to time by the board of directors.

ARTICLE V

Stock

Section 1. Certificates . Each holder of stock in the corporation shall be entitled to have a certificate signed in the name of the corporation by the president or a vice-president or the chairman of the board and countersigned by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Certificates of stock shall be consecutively numbered and shall be in such form consistent with law as shall be prescribed by the board of directors.

Section 2. Record . A record shall be kept of the name and address of each person or other entity holding the stock represented by each certificate for shares of the corporation issued, the number of shares represented by each such certificate, the date thereof and, in the case of cancellation, the date of cancellation. The person or other entity in whose name shares of stock stand on the books of the corporation shall be deemed the owner thereof, and thus a holder of record of such shares of stock, for all purposes as regards the corporation.

Section 3. Consideration For Shares . Shares shall be issued for such consideration (but not less than the par value thereof) as shall be determined from time to time by the board of directors. Treasury shares shall be disposed of for such consideration as may be determined from time to time by the board. Such consideration may consist, in whole or in part, of cash, personal property (whether tangible or intangible), real property, leases of real property, labor or services actually rendered, or promissory notes or other obligations for future payment in money, and, subject to the provisions of Section 4 of this Article V, shall be fully paid in such form prior to the issuance of the certificate representing such shares, in such manner and at such times as the directors may require.

Section 4. Issuance Of Stock . The capital stock issued by the corporation must be non-assessable. It shall be deemed to be fully paid and nonassessable stock, if: (a) the entire amount of the consideration has been received by the corporation in the form or forms set forth in Section 3 of this Article V and if any part of the consideration is in the form of a promissory note or other obligation, such note or obligation has been satisfied in full; or (b) not less than the amount of the consideration determined to be capital pursuant to statute has been received by the corporation in the form or forms set forth in Section 3 of this Article V and the corporation has received a binding obligation of the subscriber or purchaser to pay the balance of the subscription or purchase price; provided, however, nothing contained herein shall prevent the board of directors from issuing partly paid shares as described herein.

The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend upon partly paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

The directors may from time to time demand payment, in respect of each share of stock not fully paid, of such sum of money as the necessities of the business may, in the judgment of the board of directors, require, not exceeding in the whole, the balance remaining unpaid on said stock, and such sum so demanded shall be paid to the corporation at such times and by such installments as the directors shall direct. The directors shall give written notice of the time and place of such payments, which notice shall be mailed to each holder or subscriber to his last known post office address at least thirty days before the time for such payment for stock which is not fully paid.

The corporation may, but shall not be required to, issue fractional shares of stock. If it does not issue fractions of a share, it shall: (a) eliminate a fractional interest by rounding off to a full shares of stock; (b) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined; or (c) issue scrip or other evidence of ownership which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share shall, but scrip or warrants shall not unless provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the corporation in the event of liquidation. The board of directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the board of directors may impose.

The board of directors may, at any time and from time to time, if all of the shares of capital stock which the corporation is authorized by its articles of incorporation to issue have not been issued, subscribed for, or otherwise committed to be issued, issue or take subscriptions for additional shares of its capital stock up to the amount authorized in its articles of incorporation.

Section 5. Lost Certificates . In case of the alleged loss, destruction or mutilation of a certificate of stock, the board of directors may direct the issuance of a new certificate in lieu thereof upon such terms and conditions in conformity with law as it may prescribe. The board of directors may in its discretion require the owner of the certificate to give a bond in such form and amount and with such surety as it may determine, before issuing a new certificate in order to provide for indemnification of the corporation against any loss or claim arising as a result of the issuance of the new certificate.

Section 6. Transfer Of Shares . Upon surrender to the corporation or to a transfer agent of the corporation of a certificate of stock duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in the stock books; provided however, that the corporation shall not be required to effect the requested transfer if the corporation believes the requested transfer would be in violation of any applicable law, regulation, court order or other restriction of any nature.

Section 7. Registered Stockholders . The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and the corporation shall be entitled to hold liable for calls and assessments a person registered on its books as the owner of shares, and the corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof except as otherwise provided by the laws of the State of Maryland.

Section 8. Transfer Agents, Registrars And Paying Agents . The board may at its discretion appoint one or more transfer agents, registrars and agents for making payment upon any class of stock, bond, debenture or other security of the corporation. Such agents and registrars may be located either within or outside Maryland. They shall have such rights and duties and shall be entitled to such compensation as may be agreed.

ARTICLE VI

Indemnification Of Officers And Directors

Section 1. Indemnification Of Directors, Officers, And Others . Subject to Section 2 of this Article VI, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was at any time since the inception of the corporation a director, officer or employee of the corporation, or is or was at any time since the inception of the corporation serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including serving as trustee, plan administrator or other fiduciary of any employee benefit plan, shall be indemnified by the corporation to the full extent permitted by the General Corporation Law of the State of Maryland (or any similar provision or provisions of applicable law at the time in effect). Notwithstanding any other provision in these Bylaws, the corporation may adopt a system of issuance, recordation and transfer of its shares by electronic or other means not involving any issuance of certificates, including provisions for notice to purchasers in substitution for any required statements on certificates, and as may be required by applicable corporate securities laws, which system has been approved by the United States Securities and Exchange Commission. Any system so adopted shall not become effective as to issued and outstanding certificated securities until the certificates therefor have been surrendered to the corporation.

Section 2. Indemnification Of Officers, Directors And Employees Pursuant To The Common Law Or Statutory Provisions Other Than The General Corporation Law Of The State Of Maryland . Any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was at any time since the inception of the corporation a director, officer or employee of the corporation, or is or was at any time since the inception of the corporation serving at the request of the corporation as a director, officer, or employee of another corporation, partnership, joint venture, trust or other enterprise, including serving as trustee, plan administrator or other fiduciary of any employee benefit plan, shall be indemnified by the corporation to the full extent permitted by the common law and by any statutory provision other than the General Corporation Law of the State of Maryland.

Section 3. Mandatory Advance Of Expenses . Reasonable expenses incurred in defending any action, suit or proceeding described in Section 1 or 2 of this Article VI shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of (i) a written affirmation by the director of the director’s good faith belief that the standard of conduct necessary for indemnification by the corporation as authorized by Section 2-418 of the Maryland General Corporation Law has been met, and (ii) an undertaking by or on behalf of such director, officer or employee to repay such amount to the corporation if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this Article.

Section 4. Payment Of Indemnified Claims . Reasonable amounts required to be paid in settlement or as a judgment in any action, suit or proceeding described in Section 1 or 2 of this Article VI shall be paid by the corporation within 90 days of the receipt of an undertaking by or on behalf of such director, officer or employee to repay such amount to the corporation if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this Article; provided however, that the corporation shall not be required to pay such amounts if a majority of the members of the Board of Directors vote to deny the request for indemnification within the 90 day period set forth in this Section 4.

Section 5. Rights Of Appeal . In the event that the corporation advances funds for indemnification pursuant to this Article, and, subsequently, indemnification pursuant to this Article is declared unenforceable by a court, or the corporation determines that the director, officer or employee on whose behalf the funds were advanced is not entitled to indemnification pursuant to this Article, then such director, officer or employee shall have the right to retain the indemnification payments until all appeals of the court’s or the corporation’s decision have been exhausted.

Section 6. Additional Indemnification . Without limiting the indemnification otherwise provided by this Article VI, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was at any time since the inception of the corporation a director, officer or employee of the corporation or a wholly owned subsidiary of the corporation, or is or was at any time since the inception of the corporation a trustee, plan administrator or other fiduciary of any employee benefit plan of the corporation or a wholly owned subsidiary of the corporation, shall be indemnified by the corporation against all expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement, actually and reasonably incurred by him in connection with such action, suit or proceeding, including an action or suit by or in the right of the corporation to procure a judgment in its favor, if he (i) acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, (ii) his conduct was not material to the matter giving rise to the proceeding and was not committed in bad faith or was the result of active and deliberate dishonesty, (iii) he did not actually receive an improper personal benefit in money, property or services, and (iv) with respect to any criminal action or proceeding, he had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

Section 7. Indemnification Not Exclusive . The indemnification provided in this Article shall not be deemed exclusive of any other rights to which any person seeking indemnification may be entitled under any agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office.

Section 8. Insurance . By action of the board of directors, notwithstanding any interest of the directors in such action, the corporation may purchase and maintain insurance, in such amounts as the board may deem appropriate, on behalf of any person who is or was a director, officer or employee of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under applicable provisions of laws.

Section 9. Applicability; Effect . Any indemnification and advancement of expenses provided by or granted pursuant to this Article VI shall be applicable to acts or omissions that occurred prior to the adoption of this Article VI, shall continue as to any persons who ceased to be a director, officer, or employee of the corporation or a wholly owned subsidiary of the corporation, or was serving as or has since ceased to be a trustee, plan administrator or other fiduciary of any employee benefit plan of the corporation or a wholly owned subsidiary of the corporation, and shall inure to the benefit of the heirs, executors, and administrators of such person. The repeal or amendment of this Article VI or any Section or provision hereof which would have the effect of limiting, qualifying or restricting any of the powers or rights of indemnification provided or permitted in this Article VI shall not, solely by reason of such repeal or amendment, eliminate, restrict or otherwise affect the right or power of the corporation to indemnify any person, or affect any right of indemnification of such person, with respect to any acts or omissions which occurred prior to such repeal or amendment. All rights under this Article VI shall be deemed to be provided by a contract between the corporation and each person covered hereby.

Section 10. Savings Clause . If this Article VI or any Section or provision hereof shall be invalidated by any court on any ground, then the corporation shall nevertheless indemnify each party otherwise entitled to indemnification hereunder to the fullest extent permitted by law or any applicable provision of this Article VI that shall not have been invalidated.

ARTICLE VII

Execution Of Instruments; Loans; Checks And Endorsements; Deposits; Proxies

Section 1. Execution Of Instruments . The president or any vice president shall have the power to execute and deliver on behalf of and in the name of the corporation any instrument requiring the signature of an officer of the corporation, except as otherwise provided by law or in these bylaws or where the execution and delivery thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. Unless authorized to do so by these bylaws or by the board of directors, no officer, agent or employee shall have any power or authority to bind the corporation in any way, to pledge its credit or to render it liable pecuniarily for any purpose or in any amount.

Section 2. Loans To Directors, Officers And Employees . The corporation may lend money to, guarantee the obligations of and otherwise assist directors, officers and employees of the corporation, or directors of another corporation of which the corporation owns a majority of the voting stock, only upon compliance with the requirements of the General Corporation Law of the State of Maryland.

Section 3. Checks And Endorsements . All checks, drafts or other orders for the payment of money, obligations, notes or other evidences of indebtedness, bills of lading, warehouse receipts, trade acceptances and other such instruments shall be signed or endorsed by such officers or agents of the corporation as shall from time to time be determined by resolution of the board of directors, which resolution may provide for the use of facsimile signatures.

Section 4. Deposits . All funds of the corporation not otherwise employed shall be deposited from time to time to the corporation’s credit in such banks or other depositories as shall from time to time be determined by resolution of the board of directors, which resolution may specify the officers or agents of the corporation who shall have the power, and the manner in which such powers shall be exercised, to make such deposits and to endorse, assign and deliver for collection and deposit checks, drafts and other orders for the payment of money payable to the corporation or its order.

Section 5. Proxies . Unless otherwise provided by resolution adopted by the board of directors, the president or any vice president may from time to time appoint one or more agents or attorneys-in-fact of the corporation, in the name and on behalf of the corporation, to cast the votes which the corporation may be entitled to cast as the holder of stock or other securities in any other corporation, association or other entity any of whose stock or other securities may be held by the corporation, at meetings of the holders of the stock or other securities of such other corporation, association or other entity or to consent in writing, in the name of the corporation as such other entity, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed in the name and on behalf of the corporation and under its corporate seal, or otherwise, all such written proxies or other instruments as he may deem necessary or proper in the premises.

ARTICLE VIII

Miscellaneous

Section 1. Waivers Of Notice . Whenever notice is required to be given by law, by the articles of incorporation or by these bylaws, a written waiver thereof, signed by the person entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting or (in the case of a stockholder) by proxy shall constitute a waiver of notice of such meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need to be specified in any written waiver or notice unless so required by the articles of incorporation or these bylaws.

Section 2. Presumption Of Assent . A director or stockholder of the corporation who is present at a meeting of the board of directors or stockholders at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director or stockholder who voted in favor of such action.

Section 3. Seal . The corporate seal of the corporation shall be circular in form and shall contain the name of the corporation and the words “Seal, Maryland.” The custodian of the seal shall be the secretary, who along with the president or other officer authorized by the board of directors, may affix the seal to documents of the corporation.

Section 4. Amendments . These bylaws may be altered, amended or repealed or new bylaws may be adopted by the board of directors at any meeting of the directors. These bylaws may be altered, amended, or repealed or new bylaws may be adopted by a vote of a majority of the outstanding shares, without the necessity of the concurrence of the board of directors.

Section 5. Emergency Bylaws . Subject to repeal or change by action of the stockholders, the board of directors may adopt emergency bylaws in accordance with and pursuant to the provisions of the General Corporation Law of the State of Maryland.

EXHIBIT 31.1

CERTIFICATION

I, Joseph Ram, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of InfoSonics Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 14, 2010	/s/ Joseph Ram
	Joseph Ram, Chief Executive Officer and President

EXHIBIT 31.2

CERTIFICATION

I, Roger Laungani, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of InfoSonics Corporation;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 14, 2010	/s/ Roger Laungani
	Roger Laungani, Interim Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Quarterly Report on Form 10-Q (the “Report”) of InfoSonics Corporation (the “Company”) for the period ended March 31, 2010, Joseph Ram, the Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 14, 2010	/s/ JOSEPH RAM
	Joseph Ram,
	Chief Executive Officer and President

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Quarterly Report on Form 10-Q (the “Report”) of InfoSonics Corporation (the “Company”) for the period ended March 31, 2010, Roger Laungani, Interim Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 14, 2010	/s/ ROGER LAUNGANI
	Roger Laungani,
	Interim Chief Financial Officer