April 15, 2013

Zoom Technologies Reports Full Year and Fourth Quarter 2012 Results

Fourth Quarter 2012 Highlights:

  • Revenue for the fourth quarter of 2012 was $10.1 million, a decrease of 24.9% over same quarter last year of $13.5 million
  • Loss from continuing operations of $7.1 million for the quarter compared to $1.9 million
  • Net loss of $34.5 million compared to net loss of $2.9 million in same quarter last year
  • Net loss in the quarter resulted from disposition of our subsidiaries Profit Harvest and Celestial Digital Entertainment, impairment charges for the write down of goodwill related to Ever Elite, Nollec Wireless, and TCB Digital.

Full Year 2012 Highlights:

  • Revenue increased by $36.3 million from $13.5 million to $49.8 million
  • Sales of mobile handsets and accessories and commission from activation of services and residuals contributed $16.6 million and $33.2 million, respectively
  • Net loss for 2012 was $32.5 million compared to net income of $6.4 million in 2011

BEIJING, April 15, 2013 (GLOBE NEWSWIRE) -- Zoom Technologies, Inc. (Nasdaq:ZOOM) (the "Company") is a holding company with a subsidiary that engages in the distribution of cellular service and products in the U.S. Today, ZOOM reported financial results for the fourth quarter and full year ended December 31, 2012.

During the fourth quarter of 2012, ZOOM's management considered recent global economic conditions, industry trends and capital market conditions, and concluded that it is in the best interests of the Company to sell its operations in China. Therefore, the Company entered into a securities purchase agreement with Beijing Zhumu Culture Communication Company, Ltd. to sell ZOOM's manufacturing, research and development, mobile game development, and sales operations in China and Hong Kong for cash proceeds of $31.7 million. Please refer to our 10K Annual Report filed with the US SEC today for more details regarding the sale. ZOOM intends to use the proceeds from the sale to acquire businesses in North America with distribution channels for mobile products and consumer electronics. ZOOM expects to derive the majority of its revenue on a going forward basis from its operations in North America.

In connection with the sale of the operations, certain portions of the sales transaction have closed. As of December 31, 2012, the dispositions of the sales operation, Profit Harvest, and the mobile gaming development operation, Celestial Digital Entertainment, both based in Hong Kong, were completed. On April 5, 2013 the dispositions of Ever Elite and Nollec Wireless, the mobile handset development subsidiaries were also completed. The sale of TCB Digital, ZOOM's 80%-owned manufacturing operation, is expected to be finalized in the second quarter of 2013. As result of the closing on the disposition of Profit Harvest and Celestial Digital Entertainment, ZOOM recognized a $11.9 million loss. ZOOM also recognized $8.4 million in goodwill impairment charges related to the discontinuation of Ever Elite and Nollec Wireless; and recorded a $0.9 million goodwill impairment charge for the disposition of Celestial Digital Entertainment. Also related to the dispositions, ZOOM wrote off certain stock option grants and stock awards that ZOOM has historically amortized straight line over prescribed vesting periods; however, because the services related to these stock option grants and stock awards were for services rendered to the discontinued operations, ZOOM immediately recognized the remaining unamortized balances as of December 31, 2012. The additional expenses were approximately $4.6 million. As result of ZOOM's decision to discontinue and dispose of such operations, ZOOM's current remaining primary operations are those of Portables Unlimited LLC ("Portables") - a wholesale distributor of T-Mobile USA products and services. Accordingly, ZOOM's results of operations from continuing operations reflect the operating results of Portables.

For the fourth quarter of 2012, ZOOM generated net revenue of $10.1 million from continuing operations, down 24.9% from $13.5 million as compared to the fourth quarter of 2011. The decline in revenue reflected the general economic conditions in the United States.

Full year revenue for ZOOM from continuing operations increased $36.3 million from $13.5 million in 2011 to $49.8 million for 2012. The increase was due to the fact that ZOOM acquired Portables in October of 2011 and the activities reported for 2011 only included the results from October through December 2011, whereas the 2012 results from operations reflected the full year.

Mr. Lei Gu, Chairman & CEO of ZOOM explained, "Over the last two years, the capital markets have been difficult on our stock. Concurrently, the mobile phone business has faced rapid changes, and fierce competition has hurt our margins. We feel that we need to sell our China-based assets which are bringing ZOOM less than favorable operating results and poor capital market multiples. We intend to use that cash to purchase assets that will bring steady positive cash flows moving ahead. We believe North America provides the best opportunities for us to put the cash to good use and generate higher returns."

Net loss during the fourth quarters of 2012 and 2011 were $34.5 million and $2.9 million, respectively. Net loss for the year 2012 was $32.5 million as compared to net income of $6.4 million for 2011. The significant net losses were the results of discontinuation and disposal of operations detailed above.

Looking ahead, Mr. Gu remarked, "In 2013, our focus will be North America. Let's keep our eyes open and get to work on finding some additional businesses that we can acquire and help unlock value. We look forward to a fruitful 2013."

Conference Call Details

Zoom will review the fourth quarter and full year 2012 results and discuss management's expectations for 2013 on Tuesday, April 16, 2013 at 9:30 a.m. ET (6:30a.m. PT). The dial-in numbers are +1-855-500-8701 for US domestic callers and +65-6723-9385 for international callers, and then enter the access code (conference ID) 36138063. A replay of the conference call will be available through April 19, 2013. The replay dial-in numbers are +1 855-452-5696 for US domestic callers and +61-2-8199-0299 for international callers, and then enter access code 36138063.

About Zoom Technologies, Inc.

Zoom Technologies, Inc., through its subsidiary Portables Unlimited LLC, operates a wholesale distributor business for T-Mobile products and services in the United States.. As of the fourth quarter of 2012 the Company decided to dispose of substantially all of its manufacturing, development, and sales businesses in China (except its joint venture with Spreadtrum Communications (Tianjin) Co., Ltd.), and redeploy its capital for the acquisition and development of distribution channels for mobile products and consumer electronics in North America.

Forward-Looking Statements

Certain statements in this press release may constitute "forward looking statements" that involve risks and uncertainties. These include statements about our expectations, plans, objectives, assumptions or future events in which the outcome cannot be assured. You should not place undue reliance on these forward-looking statements. Information concerning factors that could cause our actual results to differ materially from these forward-looking statements can be found in our periodic reports filed with the Securities and Exchange Commission. We undertake no obligation to publicly release revisions to these forward-looking statements to reflect future events or circumstances or reflect the occurrence of unanticipated events.

ZOOM TECHNOLOGIES, INC. AFFILIATES & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS 
     
     
 AS OF DECEMBER 31,
  20122011
ASSETS     (Restated) 
Current assets    
 Cash and equivalents  $ 430,746  $ 214,683
 Restricted cash  19,044,294  -- 
 Accounts receivable, net  3,246,247  3,377,491
 Inventories, net  928,881  700,488
 Other receivables and prepaid expenses  4,514,434  327,952
 Due from related parties  20,964,025  8,743,535
 Current assets of discontinued operations, held for sale  144,751,290  115,142,591
 Total current assets  193,879,917  128,506,740
     
Property, plant and equipment, net   2,376,639  3,110,802
Equipment deposit  35,249  101,859
Intangible assets  480,690  370,995
Long-term investments  11,912,956  -- 
Goodwill  27,031,492  36,332,497
Non-current assets of discontinued operations, held for sale  --   13,722,214
TOTAL ASSETS $ 235,716,943  $ 182,145,107
     
LIABILITIES AND STOCKHOLDERS' EQUITY     
 Current liabilities    
 Short-term loans  3,519,999  902,614
 Accounts payable  6,409,278  9,994,990
 Accrued expenses and other payables  3,814,647  4,822,050
 Purchase deposit from buyer  8,740,490  -- 
 Taxes payable  22,334  22,113
 Due to related parties  9,889,037  6,742,373
 Warrant liability  7,340  850,841
 Current liabilities of discontinued operations  138,348,859  70,725,238
 Total current liabilities  170,751,984  94,060,219
     
Long-term payables  --   145,000
Long-term notes payables  317,500  500,000
Non-current liabilities of discontinued operations  --   10,458
TOTAL LIABILITIES  171,069,484  94,715,677
     
COMMITMENTS AND CONTINGENCIES    
     
STOCKHOLDERS' EQUITY     
Preferred stock: authorized 1,000,000 shares, par value $0.01 none issued and outstanding  --   -- 
Common stock: authorized 60,000,000 shares, par value $0.01, 29,320,848 shares issued and 29,319,168 shares outstanding at December 31, 2012; 23,865,723 shares issued and 23,864,043 shares outstanding at December 31, 2011.  293,192  238,640
Treasury shares: 1,680 shares at cost  (7,322)  (7,322)
Shares to be issued  --   1,000
Additional paid-in capital  51,108,409  44,557,801
Statutory surplus reserve  702,539  682,528
Accumulated other comprehensive income   4,058,657  2,081,429
Retained earnings  (4,098,798)  28,373,724
TOTAL STOCKHOLDERS' EQUITY  52,056,677  75,927,800
     
Non-controlling interest  12,590,782  11,501,630
     
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 235,716,943  $ 182,145,107
     
 The accompanying notes are an integral part of these consolidated financial statements. 
 
ZOOM TECHNOLOGIES, INC. AFFILIATES & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)
     
     
 FOR THE YEARS ENDED DECEMBER 31,
 20122011
   (Restated)
Net revenues  $ 49,773,552  $ 13,476,376
Cost of sales  40,813,304  11,185,774
 Gross profit  8,960,248  2,290,602
     
Operating expenses:     
 Selling, general, and administrative expenses  10,088,605  4,785,332
 Non-cash equity-based compensation   7,416,937  2,413,992
 Total operating expenses  17,505,542  7,199,324
     
Loss from operations   (8,545,294)  (4,908,722)
     
Other income and (expenses)    
 Interest income  --   51
 Interest expense  (986,427)  (117,697)
 Change in fair value of warrants  843,501  3,673,243
 Investment loss  (429,586)  -- 
 Other income (expense), net  (31,211)  805,299
   (603,723)  4,360,896
     
Loss before income taxes and non-controlling interest from continuing operations  (9,149,017)  (547,826)
     
Income taxes for continuing operations  190,845  -- 
     
Loss before non-controlling interest from continuing operations  (9,339,862)  (547,826)
     
 less: Income (loss) attributable to non-controlling interest of continuing operations  424,047  313,002
     
Loss attributable to Zoom Technologies, Inc. from continuing operations  (9,763,909)  (860,828)
     
Discontinued Operations:    
 Income (loss) from discontinued operations, net of tax  (11,178,671)  7,494,478
 Loss on disposal, net tax  (11,860,025)  -- 
     
 less: Income (loss) attributable to non-controlling interest from discontinued operations  (350,094)  255,803
     
Income (loss) attributable to Zoom Technologies, Inc. from discontinued operations  (22,688,602)  7,238,675
     
Net income (loss) attributable to Zoom Technologies, Inc.  $ (32,452,511)  $ 6,377,847
     
     
Basic and diluted loss per common share from continuing operations:    
 Basic  $ (0.36)  $ (0.05)
 Diluted  $ (0.36)  $ (0.05)
     
Basic and diluted income (loss) per common share from discontinued operations:    
 Basic  $ (0.84)  $ 0.42
 Diluted  $ (0.84)  $ 0.36
     
Basic and diluted income (loss) per common share    
 Basic  $ (1.20)  $ 0.37
 Diluted  $ (1.20)  $ 0.32
     
Weighted average common shares outstanding:    
 Basic  27,144,705  17,156,446
 Diluted  27,144,705  20,110,099
     
 The accompanying notes are an integral part of these consolidated financial statements.
 
ZOOM TECHNOLOGIES, INC. AFFILIATES & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS 
     
     
 FOR THE YEARS ENDED DECEMBER 31,
 20122011
   (Restated)
Cash flows from operating activities:     
Loss including non-controlling interest  $ (9,339,862)  $ (547,826)
     
Adjustments to reconcile income including non-controlling interest to cash provided by (used in) operating activities:    
 Depreciation and amortization  1,209,846  108,222
 Non-cash equity-based compensation  7,416,927  2,413,992
 Provision for doubtful accounts  686,141  --
 Loss on investment in joint venture  429,586  --
 Fair value adjustment on warrants  (843,501)  (3,673,243)
Changes in operating assets and liabilities:     
 Accounts receivable   (554,897)  3,396,543
 Inventories   (194,108)  310,705
 Prepaid expenses and other assets  (1,356,515)  2,788,595
 Accounts payable   (3,876,099)  (5,251,766)
 Related parties-net  (29,561,132)  (464,441)
 Accrued expenses and other current liabilities   237,831  (1,048,743)
Net cash used in operating activities  (35,745,783)  (1,967,962)
     
Cash flows from investing activities:    
 Purchase of property and equipment and other long-term assets  (321,835)  (58,105)
 Cash received for the sale of disposed units  31,740,490  --
Net cash provided by (used in) investing activities  31,418,655  (58,105)
     
Cash flows from financing activities:    
 Issuance of shares for cash  --  3,102,464
 Proceeds from short-term loans  2,617,384  (449,947)
 Repayment on notes payable  (182,500)  (1,023,673)
 Receipts from (payments to) related parties  2,542,596  --
 Repayment on borrowing from related parties  (434,369)  (25,499)
Net cash provided by financing activities  4,543,111  1,603,345
     
Effect of exchange rate changes on cash & equivalents  80  417
     
Net increase (decrease) in cash and equivalents  216,063  (422,305)
     
Cash and equivalents, beginning balance  214,683  636,988
     
Cash and equivalents, ending balance  $ 430,746  $ 214,683
     
SUPPLEMENTARY DISCLOSURES:    
 Interest paid  $ 2,564,364  $ 1,324,331
 Income tax paid  $ 2,802,488  $ 2,812,248
     
     
 The accompanying notes are an integral part of these consolidated financial statements. 
CONTACT: Investor Contact:

         

         Lynn Wei

         Investor Relations Coordinator

         Zoom Technologies, Inc.

         +86-10-5935-9576

         weilin@zoom.com

         www.zoom.com


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