Simply, Inc. - Annual Report: 2018 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark one)

For the fiscal year ended December 31, 2018

or

FOR THE TRANSITION PERIOD FROM                      TO                     

Commission File No. 001-32217

Cool Holdings, Inc.

(Exact name of registrant as specified in its charter)

48 NW 25^th Street, Suite 108

Miami, FL 33127

(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: (786) 675-5246

Securities registered pursuant to Section 12(b) of the Act: Common Stock, Par Value $0.001 Per Share; Common stock traded on the NASDAQ Stock Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     ☐   Yes     ☒   No

Indicated by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.     ☐   Yes     ☒   No

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     ☒   Yes     ☐   No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☒

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, as of the last business day of the registrant’s most recently completed second fiscal quarter was $8,002,053. This calculation is based upon the closing price of $3.54 of the stock on June 29, 2018. Without asserting that any director or executive officer of the registrant, or the beneficial owner of more than five percent of the registrant’s common stock, is an affiliate, the shares of which they are the beneficial owners have been deemed to be owned by affiliates solely for this calculation.

As of April 16, 2019, there were 8,268,531 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Cool Holdings, Inc.

Form 10-K for the Year Ended December 31, 2018

INDEX

i

Forward-Looking Statements

Certain statements in this annual report on Form 10-K constitute “forward-looking statements.” These forward-looking statements involve known or unknown risks, uncertainties and other factors that may or may not be outside our control and that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Specifically, the actions of competitors, suppliers, customers and the NASDAQ Stock Market are generally outside of our control. Our ability to execute our business plans and to increase revenues and operating income are each dependent upon our ability to continue to expand our current businesses and to enter new business areas, as well as upon general economic conditions and other factors, including some of the factors identified as “Risk Factors” in this annual report and from time to time in our other SEC filings. You can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continues,” or the negative of these terms, or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements or continued market listing. We do not intend to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, unless required by law.

In this annual report on Form 10-K, “Cool Holdings,” “the Company,” “we,” “us” and “our” refer to Cool Holdings, Inc. and our wholly owned subsidiaries on a consolidated basis, unless the context otherwise provides.

ii

PART I

Company Overview

Cool Holdings is a company focused on premium retail brands.  Currently, our business is comprised of OneClick^®, a chain of 16 retail consumer electronics stores authorized under the Apple^® Premier Partner, APR (Apple^® Premium Reseller) and AAR MB (Apple^® Authorized Reseller Mono-Brand) programs, and Cooltech Distribution, an authorized distributor to the OneClick^® stores and other resellers of Apple^® products and other high-profile consumer electronic brands.  During 2018, we discontinued our verykool^® brand of Android-based wireless handsets, tablets and related products the Company sold to carriers, distributors and retailers in Latin America. 

We incorporated under the laws of the State of California on February 7, 1994, under the name InfoSonics Corporation. On September 11, 2003, we reincorporated under the same name under the laws of and into the State of Maryland.  On June 8, 2018, we changed our name to Cool Holdings, Inc.  Our corporate headquarters are in Miami, Florida.

On March 12, 2018, pursuant to an Agreement and Plan of Merger (as amended “Merger Agreement”) by and among the Company, Cooltech Holding Corp. (“Cooltech”), and the Company’s wholly-owned subsidiary, InfoSonics Acquisition Sub, Inc. (“Merger Sub”), Cooltech merged with and into Merger Sub (the “Merger”), with Cooltech surviving as a wholly-owned subsidiary of the Company.  As discussed in Note 17, because of the change of control that resulted from the Merger, it was treated as a reverse merger with Cooltech deemed to be acquiring InfoSonics for accounting purposes.  Therefore, the Company’s historical financial statements prior to the Merger reflect those of Cooltech.

During 2018, the Company conducted two fundraising transactions in which it raised aggregate gross proceeds of approximately $8.9 million.  In June 2018, the Company sold 885,000 common shares, 298,000 preferred shares and warrants to raise $3.7 million, and in October and November 2018 it sold convertible notes and warrants to raise $5.2 million.

In August 2018, the Company exercised an option to acquire the assets of a chain of seven retail electronics stores in the Dominican Republic referred to as the “Unitron Assets.”  The Option Agreement, as amended, was issued on January 5, 2018 as part of the Company’s Merger with Cooltech.  The Option Agreement provided that upon exercise of the Option by the Company, the Cooltech shareholders at the date of the merger would receive 625,000 shares of the Company’s common stock that was originally carved out of the Merger consideration when the Unitron acquisition had to be unwound as a result of the inability to produce pre-acquisition audited financial statements.

During August and September 2018, the Company conducted debt exchanges in which it converted an aggregate of approximately $12.5 million of outstanding promissory notes and other accrued liabilities into 3,400,000 common shares and warrants to substantially deleverage its balance sheet.

Reportable Segments and Geographic Areas

We operate our business in two segments: our OneClick retail stores and our Cooltech Distribution business.  Within the OneClick store segment, our stores operate in three geographies: United States (3 stores in Florida), Argentina (6 stores) and the Dominican Republic (7 stores).  Financial information about our segments is included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, and Note 14, "Segments," of the notes to the consolidated financial statements, included in Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Store Operations, Merchandise and Seasonality

As an Apple Premier Partner, we work with Apple to develop our network of OneClick stores in locations and markets where Apple has limited or no presence.  Our stores are generally located in high-traffic or local neighborhood strip centers or shopping malls.  In our stores, we sell all Apple and Apple-approved products and accessories, including accessories that we source from independent third parties.  We also provide repair service for Apple products and are one of the select authorized third-parties that Apple entrusts with its proprietary machines used to repair or replace damaged iPhone screens.  Retail customers may book a repair appointment at one of our OneClick stores directly through the Apple website.  Our OneClick business, like that of many retailers, is seasonal, with a large portion of our sales and operating profit realized during the fourth calendar quarter of the year.

2

Our Cooltech Distribution unit distributes various consumer electronics to resellers, retailers and small and medium-sized businesses in Latin America and the United States.  We market and distribute a variety of mobility, computing, audio/video, and other technology products including laptops, tablets, cell phones, drones, smart watches, gaming consoles, accessories and audio devices.  In addition to our direct relationship with Apple, we have direct relationships with top third-party brands in the Apple retail echo-system including Bose, Belkin, Speck, Tech21 and Thule, among others.

Purchasing and Suppliers

The majority of our product purchases are of Apple products, which we buy both directly from Apple as well as from two tier one distributors facilitated by our license agreements with Apple.  We also have direct relationships with approximately 6 accessory manufacturers and purchase other accessories from distributors.  We believe that maintaining and strengthening our relationships with Apple and our other vendors is essential to our operations and continued expansion.

Competition

The consumer electronics and accessory industry is intensely competitive and subject to rapid changes in consumer preferences and frequent new product introductions. We compete with mass merchants such as Wal-Mart, Best Buy and Target, and regional chains; specialty computer product and consumer electronics stores; and online retailers such as Amazon.  We also technically compete with Apple-owned stores and Apple’s online store.  However, Apple does not own any stores in Argentina and the Dominican Republic, where the majority of our stores are located.

Sustainability

We are committed to sustainability and to operating our business in a manner that results in a positive impact to the environment and our communities. Through our trade-in programs, we buy back or take in used consumer electronics that are otherwise destined for landfills and either refurbish them or recycle them. In addition, we continuously look for cost-effective ways to reduce our carbon emissions.

Employees

As of December 31, 2018, we had 178 full-time salaried and hourly employees. None of our employees are represented by a labor union or are members of a collective bargaining unit.

Available Information

Our website at www.coolholdings.com provides a link to the Securities and Exchange Commission’s (“SEC”) website where our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports (as well as exhibits and supplementary schedules) filed with or furnished to the SEC can be accessed free of charge. Our website also provides links to the charters for our Audit, Compensation and Nominating & Governance Committees as well as our Code of Business Conduct and Ethics, which can be accessed free of charge at http://www.coolholdings.com/corp/corporate-governance/.

The following risks and uncertainties, as well as other factors described elsewhere in this report or in other SEC filings by the Company, could adversely affect our business, financial condition and results of operations.

Risks Relating to Our Business

We sustained significant losses in the last two years. If we are unable to achieve sustained profitability, our business may not be financially viable.

For the years ended December 31, 2018 and 2017, we reported net losses of $27.3 million and $7.5 million, respectively. As of December 31, 2018, our balance of cash and restricted cash was $3.3 million, but we had negative net working capital of $2.0 million and long-term debt of $2.9 million. While we have significant expansion plans designed to attain and maintain profitability, if we do not succeed, our business might continue to experience losses and may not be sustainable in the future.  In addition, at December 31, 2018, our total liabilities exceeded our total assets and we had an accumulated stockholders’ deficit of $2.8 million.  Consequently, as discussed in Note 3 to our financial statements, we have substantial doubt that we could remain independent and continue as a going concern if we are not able to raise additional capital and/or refinance or restructure our existing debt.

3

Our OneClick business is highly dependent on a single supplier and a loss of that supplier or a deterioration of our relationship with them could significantly reduce our sales and profitability and jeopardize our business model.

Our business is highly dependent upon Apple as a supplier of Apple products and Apple-approved products that are sold in our OneClick stores.  In addition, the growth of our business is highly dependent upon our relationship with Apple in providing us with the licenses and approvals necessary to expand our footprint into various countries and regions around the world.  Apple has very strict performance standards and guidelines that we must achieve and adhere to in order to be successful and continue to receive their support.  Consequently, any deterioration of our performance or failure to adhere to their guidelines could jeopardize our strategy and adversely affect our financial performance.

A significant portion of our revenues are, and for the near future will likely continue to be, generated outside of the United States, in countries that may have volatile currencies or other risks.

A significant portion of our sales activities are conducted in territories and countries outside of the United States, primarily in Latin America. Our sales transactions in Latin America are denominated in local currencies and therefore may be impacted by changes in the strength of the U.S. dollar relative to the foreign economies where we conduct business. Specifically, the Argentine peso has been extremely volatile, and effective July 1, 2018 Argentina’s economy has been classified as highly inflationary, indicating that its cumulative inflation rate over the last 3 years exceeds 100%.  These transactions expose us to, among other things, increased credit risks, customs duties, import quotas and other trade restrictions, potentially greater and more unpredictable inflationary and currency pressures, labor risks and shipping delays. Changes may occur in social, political, regulatory (including tax) and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently buy and sell products. U.S. laws and regulations relating to investment and trade in foreign countries could also change to our detriment. In addition, other countries may change their own policies on business and foreign investment in companies in their respective countries. Any measures that could impact the cost or availability of the merchandise we offer could have an adverse impact on our business, because a significant portion of the products we offer are purchased from foreign vendors and manufactured in foreign countries. We cannot predict the effect that future exchange rate fluctuations will have on our operating results or financial position.

We depend on the timely delivery of new and innovative products from our vendors.

We depend on manufacturers to deliver our products in quantities sufficient to meet customer demand. In addition, we depend on these manufacturers to introduce new and innovative products to drive industry sales. Any material delay in the introduction or delivery, or limited allocations, of our products could result in reduced sales.

If our vendors fail to provide marketing and merchandising support at historical levels, our sales and earnings could be negatively impacted.

The manufacturers of our products have typically provided retailers with significant marketing and merchandising support for their products. As part of this support, we receive cooperative advertising and market development payments from our vendors, which enables us to actively promote and merchandise the products we sell and drive sales at our stores and on our websites. We cannot assure you that vendors will continue to provide this support at historical levels. If they fail to do so, our business and results of operations may be negatively impacted.

We have made and may make investments and acquisitions which could negatively impact our business if we fail to successfully complete and integrate them, or if they fail to perform in accordance with our expectations.

To enhance our efforts to grow and compete, we have made and may continue to make investments and acquisitions.  Our plans to pursue future transactions are subject to our ability to identify potential candidates and negotiate favorable terms for these transactions. Accordingly, we cannot assure you that future investments or acquisitions will be completed. In addition, to facilitate future transactions, we may take actions that could dilute the equity interests of our stockholders, increase our debt, or cause us to assume contingent liabilities, all of which may have a detrimental effect on the price of our common stock. Also, companies that we have acquired, and that we may acquire in the future, could have products that are in development, and there is no assurance that these products will be successfully developed. Finally, if any acquisitions are not successfully integrated with our business, or fail to perform in accordance with our expectations, our ongoing operations could be adversely affected.

4

Failure to effectively manage our new store openings could lower our sales and profitability.

Our sales and profitability depend in part upon opening new stores and operating them profitably. We currently operate a total of 16 OneClick stores. Our ability to open new stores and operate them profitably depends on a number of factors, some of which may be beyond our control. These factors include the ability to:

If we fail to manage new store openings in a timely and cost-efficient manner, our growth or profits may decrease.

If we are unable to renew or enter into new leases on favorable terms, our revenue may be adversely affected.

All of our retail stores are located on leased premises. If the cost of leasing existing stores increases, we cannot assure that we will be able to maintain our existing store locations as leases expire. In addition, we may not be able to enter into new leases on favorable terms or at all, or we may not be able to locate suitable alternative sites or additional sites for new store expansion in a timely manner. Our revenues and earnings may decline if we fail to maintain existing store locations, enter into new leases, locate alternative sites, or find additional sites for new store expansion.

If our management information systems fail to perform or are inadequate, our ability to manage our business could be disrupted.

We rely on computerized inventory and management systems to coordinate and manage the activities in our distribution center, point-of-sales systems to manage retail operations in our OneClick stores, and accounting systems to manage our finance activities. We rely upon these systems to replenish our store inventories on a weekly basis to keep them stocked at optimum levels and to manage our business finances and timely report our financial results.  Our systems are subject to damage or interruption from power outages, telecommunications failures, cyber-attacks, security breaches, and catastrophic events. If our inventory or management information systems fail to adequately perform their functions, our business could be adversely affected. In addition, if operations in any of our distribution centers were to shut down or be disrupted or if these centers were unable to accommodate stores in a particular region, our business and results of operations may be negatively impacted. With regard to our accounting systems, we intend to upgrade portions of our current system, and any failure in those systems could negatively impact our ability to timely report our financial results.

As a seller of certain consumer products, we are subject to various federal, state, local, and international laws and regulations relating to product safety and consumer protection

While we take steps to comply with these laws, there can be no assurance that we will be in compliance, and failure to comply with these laws could result in litigation, regulatory action, and penalties which could have a negative impact on our business, financial condition, and results of operations. In addition, our suppliers might not adhere to product safety requirements and the Company and those suppliers may therefore be subject to involuntary or voluntary product recalls or product liability lawsuits. Direct costs, lost sales, and reputational damage associated with product recalls, government enforcement actions, or product liability lawsuits, individually or in the aggregate, could have a negative impact on future revenues and results of operations.

Risks Related To Our Common Stock

We may issue additional stock to restructure outstanding debt and/or to raise capital to fund our expansion plans that would dilute substantially the voting power of our current stockholders.

In order to restructure outstanding debt and/or raise capital to fund expansion of our OneClick stores, we expect to issue additional shares of the Company’s stock that would substantially dilute the voting power of our current stockholders.

The market for our common stock is volatile and our stock price could decline.

The price of our stock, as well as the stock market in general, has been highly volatile. The market price of our common stock during the period from January 1, 2017 through March 12, 2018 (the date of the Merger) fluctuated between $26.00 and $6.00 (as adjusted for our reverse stock splits).  During the period from March 13, 2018 through December 31, 2018, our stock price fluctuated between $22.61 and $1.15.  We expect that our stock price is likely to remain volatile. Investors in our common stock may experience a decrease in the value of their stock, including decreases unrelated to our operating performance or prospects, resulting in a substantial (potentially total) loss on their investment. In addition, an active trading market for our common stock may not be sustained, which could affect the ability of our stockholders to sell their shares and could depress the market price of their shares.

5

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

At various times over the last several years we faced potential delisting from The NASDAQ Stock Market (“NASDAQ”) for failure to maintain the minimum $1.00 bid price per share requirement for continued listing. We effected a 1-for-5 reverse stock split in October 2017 in order to regain compliance of a previous deficiency.  We effected another 1-for-5 reverse stock split in March 2018, immediately before the Merger, to enable us to comply with the higher minimum bid price requirement of $4.00 per share necessitated by Nasdaq Listing Rule 5110(a) that required us to submit an initial listing application because the Merger with Cooltech (a non-Nasdaq entity) resulted in a change of control. We intend to closely monitor the bid price of our stock.

If our common stock were delisted from The NASDAQ Capital 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 NASDAQ, 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 OTC Pink, OTCQX, OTCQB 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. If our common stock is delisted from NASDAQ 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 Exchange Act, 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 NASDAQ 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 stockholders 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 stockholder 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 our stock and the ability of investors to trade our common stock, thereby negatively impacting the share price of our common stock.

Not Applicable.

All our OneClick stores and other facilities are leased.  Our stores range in size from small stores of only 500 sq.ft. to larger stores of up to 2,400 sq.ft.  Store leases in Argentina and the Dominican Republic typically provide for an initial lease term of three to four years, while leases in our Florida stores have lease terms of five or ten years.  We believe that, as current leases expire, we will be able to obtain either renewals at present locations or new leases for equivalent spaces in the same area.  The terms of our 16 leased stores by geographic location open as of December 31, 2018 expire in the calendar years as follows:

6

Our corporate headquarters office and our Cooltech Distribution center are located in Miami, Florida. We also have a small satellite corporate office located in San Diego, California.  All of these facilities are occupied pursuant to operating leases. The table below summarizes information concerning those leases, but does not include local sales tax or common area maintenance charges where applicable:

We believe that these facilities are adequate for our current requirements and that suitable alternative or additional space will be available as needed to accommodate future expansion of our operations.

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

Not Applicable.

7

PART II

Our Common Stock trades on The NASDAQ Capital Market under the symbol “AWSM.” The following table sets forth, for the periods indicated, the high and low trading prices of our common stock as reported by The NASDAQ Stock Market:

As of April 15, 2019, the closing price of our common stock on The NASDAQ Capital Market was $3.06, and there were approximately 118 stockholders of record.

We have not paid any cash dividends and do not expect to pay any cash dividends in the foreseeable future.

The information regarding equity compensation plans is incorporated by reference into Item 12 of this Form 10-K.

Unregistered Issuances.

None for applicable period.

Issuer Repurchases of Equity Securities.

None for applicable period.

Not Applicable.

8

Our management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our accompanying Consolidated Audited Financial Statements and related notes, as well as the “Risk Factors” and other information contained in this annual report. The discussion is based upon, among other things, our Consolidated Audited Financial Statements, which have been prepared in accordance with 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 at the financial statement dates 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 those 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 could. 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 are references to results of continuing operations, unless otherwise noted.

Overview and Recent Developments

Currently, our business is comprised of OneClick^®, a chain of 16 retail consumer electronics stores (7 in the Dominican Republic, 6 in Argentina and 3 in Florida USA) authorized under the Apple^® Premier Partner, APR (Apple Premium Reseller) and AAR MB (Apple Authorized Reseller Mono-Brand) programs, and Cooltech Distribution, an authorized distributor to the OneClick stores and other resellers of Apple products and other high-profile consumer electronic brands.  Our goal is to accelerate our expansion of our OneClick chain to become the largest Apple Premier Partner in North America.

We are in the early stages of executing our strategy.  We were formed as a result of the merger completed on March 12, 2018.  Pursuant to the Agreement and Plan of Merger (as amended “Merger Agreement”) by and among the Company, Cooltech Holding Corp. (“Cooltech”), and the Company’s wholly-owned subsidiary, InfoSonics Acquisition Sub, Inc. (“Merger Sub”), Cooltech merged with and into Merger Sub (the “Merger”), with Cooltech surviving as a wholly-owned subsidiary of the Company.  Cooltech was formed in late 2016, and prior to the Merger had acquired Cooltech Distribution and our OneClick business units in Argentina and Florida.  Then, in August 2018, post-Merger, we acquired the stores in the Dominican Republic.  In the fourth quarter of 2018, we discontinued our verykool^® brand of Android-based wireless handsets, tablets and related products sold to carriers, distributors and retailers in Latin America that represented the legacy business of InfoSonics prior to the Merger. 

During 2018 our efforts were focused on raising sufficient funding to support our business and deleveraging our balance sheet.  We conducted two fundraising transactions in which we raised aggregate gross proceeds of approximately $8.9 million.  In June 2018, we sold 885,000 common shares, 298,000 preferred shares and warrants to raise $3.6 million, and in October and November 2018 we sold convertible notes and warrants to raise an additional $5.2 million.  During August and September 2018, we conducted debt exchanges in which we converted an aggregate of approximately $12.5 million of outstanding promissory notes and other accrued liabilities into 3,400,000 common shares and warrants.

Critical Accounting Policies and Estimates

Critical accounting policies are those policies that, in management’s view, are most important in the portrayal of our financial condition and results of operations. The notes to our Consolidated Audited Financial Statements also include disclosure of significant accounting policies. The methods, estimates and judgments that we use in applying our accounting policies have a significant impact on the condition and results that we report in our financial statements. These critical accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates and assumptions regarding matters that are inherently uncertain. There is a likelihood that materially different amounts would be reported under different conditions or using different assumptions.  Our critical accounting policies and estimates and assumptions that require the most significant judgment are discussed further below.

Valuation of Merchandise Inventories

Our inventory is carried at the lower of cost or net realizable value generally using the first-in first-out method for cost.  In valuing inventory, we are required to make assumptions regarding write-downs required to properly value obsolete or over-valued items at the lower of cost or net realizable value.  In order to do this we consider a number of factors including quantities on hand, sales history, age of the product, new model introductions, vendor price protections and return policies, etc.

9

Allowance for Doubtful Accounts

We provide for the possible inability to collect accounts receivable by recording an allowance for doubtful accounts. We evaluate the collectability of our accounts receivable on an ongoing basis. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations, we record a specific allowance against amounts due in order to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other customers, we recognize allowances for doubtful accounts based on the length of time the receivables are past due, the current business environment and our historical experience.

Goodwill

Goodwill results from acquisitions and represents the excess purchase price over the net identifiable assets acquired.  We are required to evaluate our goodwill for impairment at least annually, or whenever indicators of impairment are present. Considerable management judgment is necessary to estimate the fair value of our reporting units. The discounted cash flows analyses utilize a five- to seven-year cash flow projection with a terminal value, which are discounted using a risk-adjusted weighted-average cost of capital. The projected cash flows include numerous assumptions such as, among others, future sales trends, operating margins, store count and capital expenditures, all of which are derived from our long-term financial forecasts. We may also use other market valuation methodologies including comparable market transaction comparisons and individual asset valuations, which also require the use of significant management judgment.

Results of Operations:

The following table sets forth our consolidated statement of operations for the years ended December 31, 2018 and 2017, and the change between the two years ($ in thousands): 

10

The following table sets forth the operating results of our segments for the years ended December 31, 2018 and 2017, and the change between the two years ($ in thousands): 

Year Ended December 31, 2018 Compared With Year Ended December 31, 2017

Net Sales

For the year ended December 31, 2018, our total net sales of $24.2 million increased by $10.6 million, or 78%, compared to net sales of $13.6 million in 2017.  Net sales in 2018 at our OneClick retail stores amounted to $16.1 million, an increase of $13.2 million, or 462%, compared to net sales of $2.9 million in 2017.  This increase is attributable to the OneClick acquisitions we made both in 2017 and 2018.  The acqusitions of OneClick Argentina and OneClick License in the U.S. were made on October 1, 2017, and consequently our 2017 sales included only 3 months of results from those business units.  Then, on August 17, 2018 we acquired the OneClick stores in the Dominican Republic, which were included in our results in 2018 for four and one-half months.  Net sales in 2018 at our Cooltech Distribution unit amounted to $8.1 million, a decrease of $2.6 million, or 25%, compared to net sales of $10.7 million in 2017.  The decrease in distribution sales was primarily the result of less available capital to purchase distribution inventories as we redirected resources to the newly acquired OneClick stores.

Cost of Sales, Gross Profit and Gross Margin 

For the year ended December 31, 2018, cost of sales was $19.1 million, 79.1% of net sales, gross profit was $5.0 million and gross margin was 20.9%.   For the year ended December 31, 2017, cost of sales was $12.2 million, 89.9% of net sales, gross profit was $1.4 million and gross margin was 10.1%.  As indicated in the segment table above, the change in our gross profit from 2017 to 2018 was primarily the result of the October 1, 2017 and August 17, 2018 acquisitions of our retail segment, which also resulted in a doubling of our gross margin percentage, as retail margins are significantly higher than distribution margins.  In addition, gross margins at our OneClick stores improved about 3% from 2017 to 2018, and the gross margin at our Cooltech Distribution unit increased 27% from 5.7% in 2017 to 7.2% in 2018 as a result of an improved mix of product sales with higher margins.

11

Selling, General and Administrative Expenses

For the year ended December 31, 2018, selling, general and administrative (“SG&A”) expenses of $14.7 million increased by $6.6 million, or 82%, from $8.1 million in 2017.  The increase is primarily the result of added SG&A expenses attributable to our OneClick retail stores acquired on October 1, 2017 and August 17, 2018.  In addition, we incurred significantly more legal fees during 2018 compared to 2017, as a result of the many fundraising and debt restructuring transactions we completed, and added personnel in 2018 at Cooltech Distribution and at our corporate office.

Goodwill and intangible impairments

During the year ended December 31, 2018, we conducted our annual impairment test of goodwill and intangible assets.  As a result of our assessment, we recognized goodwill and intangible asset impairment charges of $10.4 million related to our OneClick retail store acquisitions.

Other Income (Expense)

For the year ended December 31, 2018, interest expense amounted to $1.6 million, an increase of $0.6 million, or 56%, compared to $1.0 million in 2017.  The increase was attributable to both the higher level of debt during the year and the higher cost of debt, comprised of both stated interest rate and accretion expense on discounts arising from beneficial conversion features and warrants.  We recorded $479,000 in foreign exchange losses during 2018 as a result of the designation, effective July 1, 2018, of the economy of Argentina as “highly inflationary,” which requires that foreign exchange losses be recognized in the income statement rather than through the other comprehensive loss account on the balance sheet.  We also recognized a $1.2 million loss on early extinguishment of debt related to the August and September 2018 conversions of promissory notes, accrued interest and accounts payable aggregating $12.4 million into stock and warrants.  Other income in 2018 of $1.4 million, consisted principally of a $1.3 million settlement on an intellectual property claim, as well as a gain on an insurance settlement related to a theft of product.

Loss from Continuing Operations

For the year ended December 31, 2018, our loss from continuing operations was $22.1 million after a tax provision of $221,000.  The tax provision related to foreign taxes on the $1.3 million intellectual property settlement at our Canadian subsidiary.  Because of our prior operating losses and lack of carry-back ability, absent isolated events, our provision for income taxes is generally nominal.

Loss from Discontinued Operations

For the year ended December 31, 2018, our loss from discontinued operations related to the legacy verykool business was $5.2 million.  This includes $3.3 million of goodwill impairment related to verykool that was liquidated by the end of the year.

Comprehensive Loss

For the year ended December 31, 2018, our foreign currency translation loss related to our foreign subsidiaries amounted to $883,000, which resulted in a comprehensive loss of $28.2 million for the year.  For the year ended December 31, 2017, our foreign currency translation loss related to our foreign subsidiaries amounted to $128,000, which resulted in a comprehensive loss of $7.7 million for the year.

Liquidity and Capital Resources

Because we are in the early stages of executing our strategy and our operations are not yet producing positive cash flow, we rely upon both debt and equity financing for liquidity for operations, as well as for acquisitions.  During the years ended December 31, 2018 and 2017, we made a number of acquisitions, fundraisings and debt exchanges.  We expect to continue to rely upon debt and equity financing to fund our operations for at least the next 12 months.  Our reliance upon such financing is discussed further in Note 3— “Going Concern Considerations” to our consolidated financial statements.

12

Operating Activities

Net cash used by continuing operating activities for the year ended December 31, 2018 amounted to $9.6 million compared to $4.2 million for the year ended December 31, 2017. The $5.4 million increase in cash used was due to an increase of $4.0 million in the net loss after adjustment for non-cash items, and a $1.4 million increase in the working capital change required to support the new OneClick retail stores acquired.

Investing Activities

Net cash used in investing activities during the year ended December 31, 2018 amounted to $912,000.  During 2018, we completed a number of business combinations.  The Cooltech Merger was completed on March 12, 2018, which resulted in $1.3 million of cash acquired.  The acquisition of Cooltech Canada in June 2018 resulted in $21,000 of cash acquired.  In August 2018, we used $1.4 million for the acquisition of the Unitron assets.  Purchases of property and equipment in 2018 amounted to $620,000, and net purchases of investment securities amounted to $145,000.

During the year ended December 31, 2017, net cash provided by investing activities amount to $470,000.  The acquisitions of OneClick International and OneClick License in October 2017 resulted in $321,000 of cash acquired on a combined basis.  Recoveries during 2017 of property and equipment amounted to $151,000 and resulted from credits received from Apple for funding participation in new store openings.

Financing Activities

During the year ended December 31, 2018, net cash provided by financing activities amounted to $11.1 million.  Borrowings from notes payable amounted to $7.5 million, and payments of notes payable amounted to $1.8 million.  We had two transactions in which we sold stock and warrants.  The first transaction was a $1.75 million sale of stock and warrants in connection with the Cooltech Merger, and the second was a sale of stock and warrants pursuant to our S-3 shelf registration statement.  Together these transactions resulted in net proceees of $5.3 million.

Net cash provided by financing activities during the year ended December 31, 2017 amounted to $4.4 million.  Sales of stock provided $4.6 million and net cash used to pay down notes payable and lines of credit amounted to $177,000.

Off-Balance Sheet Arrangements

At December 31, 2018, we did not have any off-balance sheet arrangements.

Contractual Obligations

We lease all our retail store, distribution center and corporate and administrative office facilities and certain equipment under non-cancelable operating leases. Rent expense under these leases was approximately $2,033,000 and $472,000 for the years ended December 31, 2018 and 2017, respectively.

The following is a schedule of aggregate future minimum payments required by the above obligations (in thousands):

13

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 areas of loss. This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures.

Interest Rates

None of our outstanding debt bears interest at rates that are variable, and consequently we have minimal exposure to fluctuations in market interest rates.

Foreign Exchange and Other Risks

At December 31, 2018, foreign currency cash accounts in Argentine Pesos and Dominican Pesos amounted to $55,000 and $79,000, respectively. Also at December 31, 2018, accounts receivable denominated in Argentine Pesos and Dominican Pesos amounted to $1,716,000 and $25,000, respectively. We do not currently use hedging strategies to manage our foreign currency risk.

We translate the financial statements of our foreign subsidiaries into U.S. Dollars at the end of each reporting period. Translation adjustments are Dollar changes that result from the translation process, and these adjustments are included in the cumulative translation account that is a component of other comprehensive income in stockholders’ equity on our balance sheet. However, effective July 1, 2018, the economy in Argentina was designated as “highly inflationary,” which requires that foreign exchange losses be recognized in the income statement rather than through the other comprehensive loss account on the balance sheet.  At December 31, 2018, our accumulated comprehensive loss amounted to $1,011,000.

As a result of our international operations in Argentina and the Dominican Republic, our future operating results could be adversely affected by a variety of factors in those countries, including changes political, economic or regulatory conditions and trade protection measures.

The information required by this item is included below in “Item 15. Exhibits and Financial Statement Schedules” and incorporated by reference herein.

On March 27, 2018, the Audit Committee of the Company’s Board of Directors dismissed SingerLewak LLP (“SingerLewak”) as the Company’s independent registered public accounting firm, and approved the engagement of MNP LLP (“MNP”). During the fiscal year ended December 31, 2017 and the subsequent interim period through March 27, 2018, during which SingerLewak was the Company’s independent registered public accounting firm, there were: (i) no disagreements between the Company and SingerLewak on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement(s), if not resolved to the satisfaction of SingerLewak, would have caused SingerLewak to make reference to the subject matter thereof in connection with its report; and (ii) no reportable events within the meaning of Item 304(a)(1)(v) of Regulation S-K.

Effective December 27, 2018 (the “Effective Resignation Date”), MNP resigned as the independent registered public accounting firm for the Company.  From March 27, 2018 through the Effective Resignation Date, the period during which MNP was engaged as the Company’s independent registered public accounting firm, there were (i) no disagreements between the Company and MNP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement, if not resolved to the satisfaction of MNP, would have caused MNP to make reference thereto in their reports on the consolidated financial statements or such years, and (ii) no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

14

On December 27, 2018 the Audit Committee approved the appointment of Kaufman Rossin & Co. (“KR”) as the Company’s independent registered public accounting firm to replace MNP.  During the two most recent fiscal years ended December 31, 2017 and 2016, and the subsequent interim period through December 27, 2018, the Company has not consulted with KR regarding any of: (i) the application of accounting principles to a specified transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on the Company’s financial statements; or (iii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event of the type described in Item 304(a)(1)(v) of Regulation S-K. Additionally, during the two most recent fiscal years ended December 31, 2017 and 2016, and the subsequent interim period through December 27, 2018, no written report or oral advice was provided by KR to the Company that KR considered was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue.

(i) Disclosure Controls and Procedures

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 the 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 annual 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 the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this annual report.

(ii) Internal Control Over Financial Reporting.

Management’s Report on Internal Control Over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2018 as required by the Exchange Act Rule 13a-15(c). In making this assessment, we used the criteria set forth in the guidance for small and mid-size entities put forth in the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on our evaluation under the framework in Internal Control-Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2018.

It should be noted that while the Company’s CEO and CFO believe that the Company’s internal controls over financial reporting provide a reasonable level of assurance that they are effective, they do not expect that the Corporation’s internal controls over financial reporting will prevent all errors and fraud.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to law, rules and regulations that permit us to provide only management’s report in this annual report.

(iii) Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during our fourth fiscal quarter ended December 31, 2018, that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

None.

15

PART III

Directors

Information with respect to the Company’s current directors is set forth below.

Biographical Information

Mauricio Diaz, Director and Chief Executive Officer. Mr. Diaz has served as a Director and the Chief Executive Officer of Cool Holdings since its merger with Cooltech in March 2018.  Prior to that, Mr. Diaz served as Chief Executive Officer of Cooltech and/or certain of its subsidiaries since September 2016. Mr. Diaz also served as the Chief Operating Officer/Managing Partner of Icon Networks LLC from September 2014 until its merger with Cooltech in December 2016. From August 2006 until July 2014, Mr. Diaz served as the Director of Global Business Development of Electro Group, and from July 2005 until August 2006 he served as a Senior Manager of Samsung Electronics. From October 1996 until July 2005, Mr. Diaz served as a Business Development Manager of Panasonic Corporation. Mr. Diaz studied Social Communication at Pontificia Universidad Javeriana in Colombia. Mr. Diaz’s experience with Cooltech prior to the merger, including being a founder of Icon Networks, as well as his former depth of international management and business experience in the telecom field, provide the Board with a breadth of operational skills and experience.

Felipe Rezk, Director and Chief Sales and Marketing Officer. Mr. Rezk has served as a Director and the Chief Sales and Marketing Officer of Cool Holdings since its merger with Cooltech in March 2018.  Prior to that, Mr. Rezk served as the Executive Vice President of Sales and Marketing of Cooltech since December 2016. Mr. Rezk also served as the Chief Executive Officer and the founder of Icon Networks LLC since May 2013. From January 2011 until May 2013, Mr. Rezk was the Head of Enterprise Sales for Latin America at Apple Inc., and from March 2009 until January 2011 he was the Senior Manager, GTM Business Development, Emerging Channels Team at Cisco Systems, Inc. (“Cisco”). From August 2005 until March 2009, Mr. Rezk was the Senior Marketing Manager, Emerging Markets Channels at Cisco. Mr. Rezk received his bachelor’s degree in Economics from University of Los Andes, Bogotá and a Master in Business Administration and Master of Computer Information Systems from the University of Miami. Mr. Rezk’s experience with Cooltech prior to the merger, including being a founder of Icon Networks, as well as his experience as an executive at Apple and his skills in sales and marketing, strengthens the Board and give it an important connection to the Company’s relationship with Apple, which is critical to its success.

Michael Galloro, Director. Mr. Galloro has served as a Director of Cool Holdings since June 2018.  Mr. Galloro is currently a principal of ALOE Finance Inc., a private boutique firm specializing in transaction advisory, senior level finance solutions and management consulting.  From July 2018 to the present, Mr. Galloro has been a Director of Fountain Asset Corp., a Canadian based merchant bank.  From August 2017 to the present, he has been a Director of Eviana Health Corporation, a Canadian based producer of organic hemp-based CBD.  From November 2016 to the present, Mr. Galloro has been a Director of Liberty Health Sciences Inc., a Florida based chain of medical cannabis dispensaries.  From September 2012 to the present, he has been a Director, CEO and CFO of Goldstream Minerals Inc., a Canadian company previously engaged in the exploration and acquisition of mineral interests in northern Ontario.  From March 2012 to the present, Mr. Galloro has been a Director of SustainCo Inc., a Canadian investor of companies focused on sustainability, energy efficiency, water resources and building performance management.  Since December 2010 to the present, he has been the CFO of Yangaroo Inc., a Canadian company specializing in providing technology solutions for the music, advertising and awards industries.  Mr. Galloro also served previously as a Director and or CFO of a number of other Canadian-based companies in various industries.  Mr. Galloro’s extensive finance and accounting experience, as well as his depth of Director experience, provides the Board with a strong audit committee chair and strengthens its commitment to good governance.

16

Executive Officers

Information for our other current executive officers not otherwise discussed above as of December 31, 2018 is as follows:

Alfredo Carrasco, Chief Financial Officer, 49 years old. Mr. Carrasco has served as the Chief Financial Officer of Cool Holdings since the merger with Cooltech Holding Corp. on March 12, 2018.  Prior to that, Mr. Carrasco served as the Chief Financial Officer of Cooltech Holding since June 2017. Mr. Carrasco has served in various capacities over 20 years of experience in finance, management and operations with Tech Data Corporation, a Fortune 500 company and leader in the technology industry. For the last 8 years, Mr. Carrasco served as Tech Data Corporation’s Vice President of Finance, Latin-America. He has extensive experience leading teams in international markets to streamline operations and implement financial controls, processes and other improvements to increase productivity. Mr. Carrasco received his bachelor’s degree in Economics from University de Lima in Peru, and a Master in Business Administration from the Instituto Tecnologico de Monterrey in Mexico.

Reinier Voigt, Chief Operating Officer, 58 years old. Mr. Voigt has served as the Chief Operating Officer of Cool Holdings since the merger with Cooltech Holding Corp. on March 12, 2018.  Prior to that, Mr. Voigt served as the Chief Operating Officer of Cooltech Holding since December 2016.  From May 2015 until August 2016, Mr. Voigt was the President and Chief Operating Officer of TEReI International, and from September 2006 until April 2015 he was the Chief Operation Officer of Facey Telecome.  Mr. Voigt has more than twenty years of experience in business operations which includes a focus on profit and loss optimization, strategic planning, finance and financial reporting. Mr. Voigt received the equivalent of a Master in Business Administration from Anton De Kom University of Suriname

Director Compensation

The following table sets forth information regarding the compensation of Cool Holdings’ nonemployee directors from the closing of the Merger on March 12, 2018 through December 31, 2018, which consisted solely of retainer and committee chair fees. The nonemployee director compensation program is more particularly described below.

Nonemployee Director Compensation Program for 2018.   Nonemployee directors were compensated by an annual cash retainer fee of $20,000.  The Chairman of the Board and the Audit Committee Chairman received an additional annual cash retainer of $2,000.  Board members are also reimbursed for out-of-pocket costs related to their attendance at Board and Committee meetings.

Board Committees and Meetings

The Board of Directors has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. The Board of Directors annually reviews the Nasdaq Stock Market Rules’ definitions of independence for members of each of the committees and has determined that members of each of the committees are independent pursuant to applicable rules of the Nasdaq Stock Market Rules and the SEC. Copies of our committee charters may be viewed at the Company’s website at http://www.coolholdings.com/corp/corporate-governance/.

17

Directors currently serving on our committees are set forth below:

Audit Committee

Our Audit Committee performs, among other things, the following functions:

Mr. Galloro is currently the Chairman and sole member of the Audit Committee. Our Board of Directors has determined that he is an independent director and a financial expert.

Compensation Committee

Our Compensation Committee performs, among other things, the following functions:

Mr. Galloro is currently the Chairman and sole member of our Compensation Committee.

18

The Compensation Committee may invite to its meetings any member of management, including the Chief Executive Officer, and such other persons as it deems appropriate to carry out its duties and responsibilities. Our management assists the Compensation Committee by providing various support, including:

In addition, the Compensation Committee may from time to time engage an outside compensation consultant to:

The Compensation Committee did not use the services of a compensation consultant during 2018.

Nominating and Corporate Governance Committee

We also have a Nominating and Corporate Governance Committee, which, pursuant to its written charter, is responsible for recommending potential directors, for considering nominations for potential directors submitted by our stockholders and for certain matters related to corporate governance. Mr. Galloro serves on this committee.

There have been no material changes to the procedures (as described below) by which security holders may recommend nominees to our Board of Directors in the last fiscal year.

Director Candidates

The Nominating and Corporate Governance Committee believes that candidates for director should have certain minimum qualifications and have a high standard of personal and professional ethics, integrity and values. Candidates for director nominees are reviewed in the context of the current composition of our Board of Directors, our operating requirements and the long-term interests of our stockholders. In conducting this assessment, the Nominating and Corporate Governance Committee considers independence, professional background and experience, other board experience, industry knowledge, skills and expertise, and such other factors as it deems appropriate given the current needs of the Board and Cool Holdings, to maintain a balance of knowledge, experience and capabilities. Other factors considered may include diversity (including age, geography, professional and other experience), although the Company does not have a formal policy regarding diversity.

In the case of incumbent directors, the Nominating and Corporate Governance Committee reviews such directors’ overall service to us during their term, including the number of meetings attended, level of participation, quality of performance, and any other relevant considerations. In the case of new director candidates, the Nominating and Corporate Governance Committee also determines whether the nominee must be independent for Nasdaq purposes, which determination is based upon applicable Nasdaq listing standards, applicable SEC rules and regulations, and the advice of counsel, if necessary.

The Nominating and Corporate Governance Committee uses its network of contacts to compile a list of potential candidates, but may also engage, if it deems appropriate, a professional search firm. The Nominating and Corporate Governance Committee conducts appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of our Board of Directors. The Nominating and Corporate Governance Committee meets to discuss and consider such candidates’ qualifications and then selects nominees for recommendation to the Board by majority vote.

19

The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders. The Nominating and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether or not the candidate was recommended by a stockholder or not. Stockholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to the Board at an annual meeting of stockholders must do so by delivering, at least 120 days prior to the anniversary date of the mailing of the proxy statement for our last annual meeting of stockholders, a written recommendation to the Nominating and Corporate Governance Committee at the following address: c/o Corporate Secretary, 4445 Eastgate Mall, Suite 200, San Diego, California 92121. Each submission must set forth, among other things: the name and address of the stockholder on whose behalf the submission is made; the number of our shares that are owned beneficially by such stockholder as of the date of the submission; the full name of the proposed candidate; a description of the proposed candidate’s business experience for at least the previous five years; complete biographical information for the proposed candidate; and a description of the proposed candidate’s qualifications as a director. For additional information, see our Director Selection Guidelines attached as Exhibit A to the Nominating and Corporate Governance Committee’s Charter, which can be found on our website at http://www.coolholdings.com/corp/corporate-governance/#1543603177088-ddd0c0b5-0a70.

Meetings of the Board of Directors and Committee Member Attendance

During fiscal year 2018, our Board of Directors met 29 times, our Audit Committee met 7 times, our Compensation Committee met 3 times and our Nominating and Corporate Governance Committee met 2 times. With the exception of Mr. Serruya, who resigned from the Board on December 16, 2018, all directors attended at least 75% of the meetings of the Board and of the committees on which they served in fiscal year 2018 that were held while they were a director or committee member.

Board Leadership Structure and Role in Risk Oversight

At the present time, the Company has two vacancies on its Board that it is working to fill.  It currently has three Board members consisting of Mauricio Diaz, the Chairman of the Board and the Company’s Chief Executive Officer, Carlos Felipe Rezk, the Company’s Chief Sales and Marketing Officer, and Michael Galloro, an independent director and Chairman of the Audit Committee and Compensation Committee.  The Company is seeking to fill the two vacancies with independent directors, each of whom will be strong, seasoned business executives with expertise in areas critical to the Company, including retail consumer electronics and U.S. public company experience.

The Board of Directors has historically performed an important role in the review and oversight of risks, and generally oversees the Company’s risk management practices and processes, including entity level and financial controls. In its risk oversight role, the Board has the responsibility to satisfy itself that the risk management processes designed and implemented by the Company’s management are adequate and functioning as designed. The Board also oversees organizational structure, policies and procedures, such as the Code of Conduct and the Code of Ethics and other internal policies and guidelines designed to support the Company’s corporate governance and to comply with the laws, rules and regulations that apply to the Company’s business operations.

Although the Board of Directors is ultimately responsible for risk oversight at the Company, it has delegated primary oversight of the management of (i) financial reporting, internal controls, accounting and compliance risks to the Audit Committee, (ii) compensation risk to the Compensation Committee, and (iii) corporate governance risk to the Nominating and Corporate Governance Committee. Each of these committees routinely reports to the Board on the management of these specific risk areas.

To permit the Board of Directors and its committees to perform their respective risk oversight roles, members of management report directly to the Board or the relevant committee of the Board responsible for overseeing the management of specific risks, as applicable. The Chief Executive Officer reports directly to the Board. The Chief Financial Officer reports to the Chief Executive Officer, the Board and the Audit Committee. Members of the management team have a high degree of access and communication with the independent directors of the Board and the various Board committees. Members of the Company’s management regularly attend Board and committee meetings and are available to address any questions or concerns raised on matters related to risk management. The Company believes that a risk oversight structure with a Board consisting of a majority of independent directors is important for quality corporate governance.

Additional Corporate Governance Information

Stockholder Communications

Stockholders wishing to send communications to the Board may contact Vernon A. LoForti, our Vice President and Corporate Secretary, at the Company’s office located at 4445 Eastgate Mall, Suite 200, San Diego, CA 92121. All such communications will be shared with the members of the Board, or if applicable, a specified committee or director.

20

Code of Business Conduct and Ethics and Reporting of Accounting Concerns

We have adopted a Code of Business Conduct and Ethics (the “Code of Conduct”). We require all employees to adhere to the Code of Conduct in addressing legal and ethical issues encountered in conducting their work. The Code of Conduct requires that our employees avoid conflicts of interest, comply with all laws and other legal requirements, conduct business in an honest and ethical manner and otherwise act with integrity and in our best interest.

We have also adopted a Code of Ethics (the “Code of Ethics”) for our Chief Executive Officer and our Chief Financial Officer. The Code of Ethics supplements our Code of Conduct and is intended to promote honest and ethical conduct, full and accurate reporting, and compliance with laws as well as other matters.

The Code of Conduct and Code of Ethics can be found on our website at http://www.coolholdings.com/corp/corporate-goverance/#1543603177362-6a913a75-a72a.

We have established “whistle-blower procedures” that provide a process for the confidential and anonymous submission, receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters. These procedures provide protections to employees who report company misconduct.

Section 16(A) Beneficial Ownership Reporting Compliance

Based solely upon a review of Forms 3, 4 and 5 furnished to us, we are not aware of any person who at any time during the fiscal year ended December 31, 2018, was a director, officer or beneficial owner of more than ten percent of our common stock, who failed to file, on a timely basis, reports required by Section 16(a) of the Securities Exchange Act for transactions occurring during such fiscal year, except for the following:

Summary Compensation Table

The following table sets forth for our Chief Executive Officer, our Chief Financial Officer and our three other executive officers (each of these persons is referred to as a Named Executive Officer) information regarding salary, bonus and other compensation for the years ended December 31, 2018 and 2017.

21

Employment Agreements

On April 1, 2018, following the Company’s merger with Cooltech Holding, each of the newly Named Executive Officers received employment agreements with the Company.  The principle terms of the agreements are summarized below.

Mauricio Diaz.  The initial term of the employment agreement with Mr. Diaz is from April 1, 2018 to December 15, 2019, and renews automatically for successive one-year periods unless either party provides at least three months’ notice to the other of their intention not to renew.  The agreement provides for an annual base salary of $240,000, subject to annual review by the Compensation Committee.  Mr. Diaz is also eligible for an annual bonus of up to $90,000 based on the Company’s achievement of performance targets established by the Compensation Committee, which bonus is subject to clawback provisions in the event of a financial restatement.  

Mr. Diaz’s employment agreement provides for the payment of severance under certain conditions. If Cool Holdings terminates his employment other than for “cause” or if Mr. Diaz terminates his employment for “good reason,” Mr. Diaz is entitled to a severance payment equal to 12 months of salary, subject to his execution of a general release and waiver of claims against Cool Holdings. If Mr. Diaz voluntarily terminates his employment other than for “good reason,” he is not entitled to receive a severance payment. Under the terms of the agreement, Mr. Diaz is also subject to confidentiality and non-competition restrictions in favor of Cool Holdings.

Under the employment agreement, the term “good reason” generally means a material breach of the employment agreement by the Company that is not timely cured by the Company, a diminution of Mr. Diaz’s duties or title, or a termination of employment within 12 months after a “change of control.”  The term “change of control” generally means any one or more of the following: (i) the merger, consolidation, sale or other transfer of more than 50% of the outstanding shares of common stock of the Company, except where the holders of common stock immediately prior to the merger or consolidation own a majority of the voting common stock of the surviving corporation immediately after the merger, (ii) a sale of all or substantially all the Company’s assets, or (iii) during any period of 12 consecutive months there is a change of a majority of the members of the Company’s Board of Directors.

Felipe Rezk.  The initial term of the employment agreement with Mr. Rezk is from April 1, 2018 to December 15, 2019, and renews automatically for successive one-year periods unless either party provides at least three months’ notice to the other of their intention not to renew.  The agreement provides for an annual base salary of $240,000, subject to annual review by the Compensation Committee.  Mr. Rezk is also eligible for an annual bonus of up to $90,000 based on the Company’s achievement of performance targets established by the Compensation Committee, which bonus is subject to clawback provisions in the event of a financial restatement.  The remaining terms of his agreement are similar to those of Mr. Diaz noted above.

Alfredo Carrasco.  The initial term of the employment agreement with Mr. Carrasco is from April 1, 2018 to March 31, 2021, and renews automatically for successive one-year periods unless either party provides at least three months’ notice to the other of their intention not to renew.  The agreement provides for an annual base salary of $180,000, subject to annual review by the Compensation Committee.  Mr. Carrasco is also eligible for an annual bonus of up to $54,000 based on the Company’s achievement of performance targets established by the Compensation Committee, which bonus is subject to clawback provisions in the event of a financial restatement.  The remaining terms of his agreement are similar to those of Mr. Diaz noted above.

Reinier Voigt.  The initial term of the employment agreement with Mr. Voigt is from April 1, 2018 to March 31, 2021, and renews automatically for successive one-year periods unless either party provides at least three months’ notice to the other of their intention not to renew.  The agreement provides for an annual base salary of $180,000, subject to annual review by the Compensation Committee.  Mr. Voigt is also eligible for an annual bonus of up to $54,000 based on the Company’s achievement of performance targets established by the Compensation Committee, which bonus is subject to clawback provisions in the event of a financial restatement.  The remaining terms of his agreement are similar to those of Mr. Diaz noted above, except that Mr. Voigt’s severance benefit is equal to 9 months of salary.

Grants of Plan-Based Awards in 2018

No stock options or other plan-based grants were made under the Company’s amended and restated 2015 equity incentive plan (the “2015 Equity Incentive Plan”) to Cool Holdings’ Named Executive Officers during 2018.

22

Outstanding Equity Awards at 2018 Fiscal Year-End

At December 31, 2018, there were no equity awards outstanding held by the Cool Holdings’ Named Executive Officers. 

Change in Control Provisions Under 2015 Equity Incentive Plan

Under the 2015 Equity Incentive Plan, unless otherwise provided in the instrument evidencing an award or in a written employment, services or other agreement or policy between a participant and us, in the event of a change in control:

Under the 2015 Equity Incentive Plan “change in control” generally means the occurrence of any of the following events:

Equity Compensation Plan Information

The following table provides information presented as of December 31, 2018 with respect to our 2006 and 2015 Equity Incentive Plans as described below.

23

Security Ownership of Certain Beneficial Owners and Management

As of April 16, 2019, there were 8,268,531 shares of common stock outstanding. The following table sets forth certain information as of that date with respect to the beneficial ownership of common stock by each (i) Named Executive Officer listed in the Summary Compensation Table above, (ii) director and nominee for director, and (iii) all current executive officers and directors as a group. Other than Messrs. Diaz and Rezk, there is no other person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock.

Director Independence

NASDAQ Listing Rules require that a majority of our Board of Directors be composed of “independent” directors as defined by such rules. The standards relied upon by our Board of Directors in determining whether a director is “independent” consist of the independence standards of the NASDAQ Listing Rules.

In accordance with the NASDAQ Listing Rules, for a director to be considered “independent,” the Board of Directors must affirmatively determine that he or she is not an executive officer or employee of the Company or an individual that has a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Additionally, the following persons are not considered “independent”:

24

(a) a director who is or at any time during the past three years was employed by Cool Holdings or its subsidiaries;

(b) a director who accepted or has a family member who accepted any compensation from Cool Holdings in excess of $120,000 during any period of twelve consecutive months within the three years preceding the determination of independence, other than the following:

(i) compensation for board or board committee service;

(ii) compensation paid to a family member who is an employee (other than an executive officer) of Cool Holdings; or

(iii) benefits under a tax-qualified retirement plan or non-discretionary compensation;

(c) a director who is a family member of an individual who is or at any time during the past three years was employed by Cool Holdings as an executive officer;

(d) a director who is, or has a family member who is a partner in or a controlling stockholder or an executive officer of, any organization to which Cool Holdings has made, or from which Cool Holdings received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenues for that year, or $200,000, whichever is more, other than the following:

(i) payments arising solely from investments in Cool Holdings’ securities; or

(ii) payments under non-discretionary, charitable contribution matching programs;

(e) a director of Cool Holdings who is, or has a family member who is employed as an executive officer of another entity where at any time during the past three years any of the executive officers of Cool Holdings serve on the compensation committee of such other entity; or

(f) a director who is or has a family member who is a current partner of Cool Holdings’ outside auditor or was a partner or employee of Cool Holdings’ outside auditor who worked on the Cool Holdings audit at any time during any of the past three years.

At a meeting in October 2018, the Board undertook its annual review of director independence based on the foregoing standards. During this review, the Board considered, among other things, transactions and relationships between each director or any member of his or her immediate family and Cool Holdings and its subsidiaries and affiliates or any entity of which a director or an immediate family member is or was, as applicable, an executive officer, general partner or significant equity holder. As provided in the Director Qualification Standards of the Nominating and Corporate Governance Committee Charter, the purpose of this review was to determine whether any such relationships or transactions existed that were inconsistent with a determination that the director is independent.

As a result of this review, the Board affirmatively determined that the following directors nominated for election at the Annual Meeting were independent of Cool Holdings within the meaning of the NASDAQ Listing Rules and the applicable rules promulgated by the SEC:

Andrew DeFrancesco

Michael Galloro

Aaron Serruya

On December 16, 2018, Mr. Serruya resigned from the Board, and on December 31, 2018, Mr. DeFrancesco also resigned.  The resignation by both directors resulted from demands placed on their time by other obligations, and not the result of a disagreement regarding the Company’s operations, policies or procedures.  As a consequence of their resignations, the Company now only has one independent Board member and one member of its audit and compensation committees.  The Company is actively conducting a search for two independent director candidates to fill the vacancies.  The Staff of NASDAQ has provided the Company with an extension to fill the vacancies and regain compliance with the NASDAQ Listing Rules until June 14, 2019.

Conflicts of Interest Policies

NASDAQ Listing Rules require that our Audit Committee (or other independent body of our Board of Directors) review and oversee all related-party transactions for potential conflicts of interest on an ongoing basis. Our Board of Directors and our officers also are subject to certain provisions of Maryland law that are designed to eliminate or minimize the effects of certain potential conflicts of interest. Pursuant to these provisions of Maryland law and our articles of incorporation, any transaction between us and an interested party will not be invalidated because it is an interested-party transaction if it is fully disclosed to our Board, and a majority of the directors not otherwise interested in the transaction (including a majority of independent directors) make a determination that the transaction is fair, competitive and commercially reasonable and on terms and conditions not less favorable to us than those available from unaffiliated third parties.

25

All future transactions between us and any of our officers, directors or 5% stockholders are expected to be on terms no less favorable than could be obtained from independent third parties and to be approved by a majority of our independent, disinterested directors. We believe that by following these procedures, we will be able to mitigate the possible effects of any conflicts of interest. We had no transactions with related persons during 2018 which are required to be disclosed by the rules of the SEC.

Our independent registered public accounting firm for 2017 through the date of the Merger on March 12, 2018 was SingerLewak LLP (“SL”).  From March 12, 2018 to December 27, 2018, our independent registered public accounting firm was MNP LLP (“MNP”).  From December 27, 2018 to the current time, our independent registered public accounting firm is Kaufman Rossin & Co. (“KR”).  The Audit Committee reviews and determines whether specific projects or expenditures with our registered public accounting firm potentially affect its independence. The Audit Committee’s policy requires that all services the independent registered public accounting firm may provide to Cool Holdings, including audit services and permitted audit-related services, be pre-approved in advance by the Audit Committee. In the event that an audit or non-audit service requires approval prior to the next scheduled meeting of the Audit Committee, the auditor must contact the Chairman of the Audit Committee (who has been delegated by the Audit Committee the authority to act in such circumstances) to obtain such approval. The approval will be reported to the Audit Committee at its next scheduled meeting. All audit and non-audit services provided by our independent registered public accounting firms during 2017 and 2018 were pre-approved by the Audit Committee.

The following sets forth the aggregate fees billed to us by each of the above listed firms for the years ended December 31, 2017 and 2018.

Audit Fees

The aggregate fees billed for professional services rendered by SL for its audit of our annual financial statements and its review of our financial statements included in Forms 10-Q and 10-K in fiscal year 2017 and related SEC reporting work was $252,935.

The aggregate fees billed for professional services rendered by MNP for its review of our financial statements included in Forms 10-Q in fiscal year 2018 and related SEC reporting work was $76,880.

No fees were billed by MNP during 2018 as it was not engaged as our independent registered public accounting firm until December 27, 2018 and did not begin work on the audit of our 2018 financial statements until January 2019.

The aggregate fees billed for professional services rendered by KR for its audit of our annual financial statements included in our 10-K for fiscal year 2018 and related SEC reporting work was $237,500.

Audit Related Fees

The aggregate fees billed for audit-related services by SL in fiscal year 2017 was $95,975.

Tax Fees

There were no fees billed by any of the above listed firms in fiscal years 2017 and 2018 for professional services for tax compliance, tax advice or tax planning.

All Other Fees

There were no fees billed by any of the above listed firms in fiscal years 2017 and 2018 for professional services other than the services described above.

26

PART IV

(a) The following documents included elsewhere in this annual report on Form 10-K (see F-pages herein regarding financial statement information) are incorporated herein by reference and filed as part of this report:

(1) Financial statements:

The consolidated balance sheets as of December 31, 2018 and 2017, and the consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for the years ended December 31, 2018 and 2017, together with notes thereto.

(2) Financial statement schedule: None

(3) Exhibits required by Item 601 of Regulation S-K:

27

28

29

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

30

COOL HOLDINGS, INC.

Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

Table of Contents

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Cool Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Cool Holdings, Inc. (the “Company”) as of December 31, 2018, the related consolidated statements of operations and comprehensive loss, stockholders’ deficit, and cash flows for the year ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018, and the results of its operations and its cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Sustantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 3 to the consolidated financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern.  Management’s evaluation of the events and conditions and management’s plans regarding those matters are also described in Note 3.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Kaufman, Rossin & Co., P.A.

We have served as the Company's auditor since 2018.

Miami, Florida

April 16, 2019

F-2

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Cooltech Holding Corp.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Cooltech Holding Corp. (the Company) as of December 31, 2017, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the year ended December 31, 2017, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

The Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company’s recurring losses and negative cash flows from operations as well as working capital deficiency and accumulated deficit raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also discussed in Note 3 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ MNP LLP

We have served as the Company's auditor since 2016.

Toronto, Ontario, Canada

May 21, 2018 (Except for Notes 2 and 16 pertaining to certain reclassifications, as to which the date is April 16, 2019)

F-3

COOL HOLDINGS, INC.

Consolidated Balance Sheets

(Amounts in thousands, except per share data)

Accompanying notes are an integral part of these financial statements.

F-4

COOL HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Loss

(Amounts in thousands, except per share data)

Accompanying notes are an integral part of these financial statements.

F-5

COOL HOLDINGS, INC.

Consolidated Statements of Stockholders’ Deficit

(Amounts in thousands)