Zoom Technologies Reports Full Year and Fourth Quarter 2012 Results
April 15, 2013: 05:09 PM ET
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,
2012
2011
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,
2012
2011
(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,
2012
2011
(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.
