Zoom Technologies Inc. Reports Operating Results (10-Q)
Zoom Technologies, Inc. has a market cap of $26.3 million; its shares were traded at around $1.0801 with a P/E ratio of 4.7 and P/S ratio of 0.1.
Highlight of Business Operations:The Company's revenues were $98,628,326 for the quarter ended June 30, 2012, an increase of $41,064,061 or 71.3% compared to $57,564,265 in the corresponding quarter in 2011. The increase of revenues in the second quarter of 2012 compared to the corresponding quarter in 2011 was mainly attributable to the Company's continued increase in sales of whole phones. In the second quarter of 2012, the Company sold 3.09 million whole phones, of which 0.82 million units were Leimone brand phones, with 0.17 million units of those phones being 3G handsets compared to 0.89 million whole phones, of which 0.21 million units were Leimone brand phones, with 0.15 million units being 3G, for the same period in 2011. Revenue from sales of the Company's own branded products in the second quarter of 2012 was $36.0 million as compared to $13.6 million for the same period in 2011.
Gross profit for the quarter ended June 30, 2012 increased by 41.5% to $8,322,485 compared to $5,881,890 for the corresponding same period in 2011. Gross profit as a percentage of revenues for the second quarter of 2012 was 8.4%, a decrease from 10.2% for the same period in 2011. Overall dollar amount of gross margins increased during the second quarter of 2012 because revenues grew significantly relative to revenues for the same quarter in 2011. The Company expects gross profit to continue to improve as the Company continues to increase its revenue going forward. The Company also expects gross margin expansion as result of the expected decrease in cost of goods sold on a per unit basis relative to stable sales prices.
The Company's research and development expenditures for the three months ended June 30, 2012 and 2011 were $859,332 and $1,393,511 respectively. These costs were incurred by our Nollec Wireless subsidiary for developmental costs in mobile handset design and software integration. R&D expenditures decreased by $534,179, or -38.3% as compared to the same period in the prior year. The Company continues to spend on research and development; however, its spending is focused on the continued development of products on platforms in which Company invested heavily in 2011. Accordingly, the Company expects future R&D expenditures to be steady as percentage of revenue.
For the quarter ended June 30, 2012, the Company's net income was $419,939 a decrease of $1,075,284 or -71.9% from $1,495,223 for the corresponding period in 2011. Net income as a percentage of revenues, for the three months ended June 30, 2012 and 2011 were 0.4% and 2.6% respectively. The Company's decreased gross margin as percentage of sales led to lower net profit margins during the quarter. As noted above, the Company expects gross margin to improve moving forward from increased bargaining power with suppliers as a function of expected increases in revenues in the future. Increases in general and administrative expenses are expected to decrease as a percentage of revenue as a result of the Company expectations such costs should scale with the Company's increase revenue in the future. Equity based compensation is expected to remain stable in the future. The Company also believes those that have been incentivized through equity based compensation will help the Company create brand recognition and improved profitability in the future.
Net cash provided by operating activities for the six months ended June 30, 2012 was $6,781,940 compared to net cash used in operating activities of $3,296,519 for the same period in 2011. In the first six months of 2012, operational sources of funds included net decreases in net due from related parties of $26,647,200, reduction in advances to suppliers of $7,545,083, and increases in accruals and other payables of $1,509,985. These increases were primarily partially offset by an increase in accounts receivable of $20,865,478, an increase of $4,381,831 in inventories. The significant increase in accounts receivable was related to the growth in sales activity by the Company. The Company does not expect difficulties in recovering its receivable as the Company has been successful with collections subsequent to June 30, 2012.
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