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Zoom Technologies Inc. Reports Operating Results (10-Q)

November 19, 2012 | About:
10qk

10qk

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Zoom Technologies Inc. (ZOOM) filed Quarterly Report for the period ended 2012-09-30.

Zoom Technologies, Inc. has a market cap of $23.3 million; its shares were traded at around $0.76 with a P/E ratio of 5 and P/S ratio of 0.1.

Highlight of Business Operations:

The Company's revenues were $117,180,898 for the quarter ended September 30, 2012, an increase of $66,432,293, or 130.9% compared to $50,748,605 in the corresponding quarter in 2011. The Company's revenues were $306,717,488 for the nine months ended September 30, 2012, an increase of $139,358,752, or 83.3% compared to $167,358,736 to the same period in 2011. The increase of revenues in the third quarter and for the nine months ended September 30, 2012 compared to the corresponding quarter and nine months in 2011 was mainly attributable to the Company's continued increase in sales of whole phones.

Gross profit for the quarter ended September 30, 2012 decreased by 10.7% to $5,987,592 compared to $6,702,100 for the corresponding same period in 2011. Gross profit as a percentage of revenues for the third quarter of 2012 was 5.1%, a decrease from 13.2% for the same period in 2011. Gross profit for the nine months ended September 30, 2012 increased by 8.0% to $20,465,593 compared to $18,957,615 for the corresponding same period in 2011 as a result of increased sales volume; however, gross profit as a percentage of revenues for the nine months of 2012 was 6.7%, a decrease from 11.3% for the same period in 2011 reflecting the highly competitive market. The Company expects gross profit to improve in future periods as the Company continues to increase its revenues going forward.

The sales of mobile handsets and accessories by Portables produced gross margins of 4.9%, while activation and reoccurring carrier service fees provided for 23.7% gross margins during the quarter ended September 30, 2012. Gross margins, on weighted average basis for the combined product and services mix derived from Portables was $2,133,735 or 18.0%. During the nine months ended September 30, 2012, the sales of mobile handsets and accessories by Portables produced gross margins of 4.5%, while activation and reoccurring carrier service fees provided for 25.3% gross margins. Gross margins, on weighted average basis for the combined product and services mix derived from Portables was $7,136,974 or 18.0%.

For the quarter ended September 30, 2012, the Company's net income was $752,314 a decrease of $1,824,051 or 70.8% from $2,576,365 for the corresponding period in 2011. For the nine months ended September 30, 2012, the Company's net income was $2,047,508, a decrease of $ $7,184,723 or 77.8% from $9,232,231 for the corresponding period in 2011. Net income as a percentage of revenues, for the three months ended September 30, 2012 and 2011 were 0.6% and 5.1% respectively. Net income as a percentage of revenues, for the nine months ended September 30, 2012 and 2011 were 0.7% and 5.5% 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. The Company's net income was impacted by the accounting for the warrants using derivative accounting. As detailed in above in Correction of Prior Period Financial Statements, the Company's net income for the three and nine months period ended September 30, 2011 was increased when the Company corrected this period, the relative increase as a result of the correction was significantly more than the income reported for 2012 as result of marking the warrants to fair value at the end September 30, 2012. Refer to Note 2 - Basis of Presentation and Summary of significant Accounting Polices for a more a detailed analysis.

Net cash used in operating activities for the nine months ended September 30, 2012 was $5,257,827 compared to net cash used in operating activities of $10,004,220 for the same period in 2011. In the first nine months of 2012, operational sources of funds included net increases in accounts payable of $24,834,057, increases in accruals and other payables of $6,278,057, reduction in advances to suppliers of $728,846, and increase in advance from customers of $2,026,810. These increases were primarily partially offset by an increase in accounts receivable of $38,096,887, an increase of $5,713,871 in prepaid expenses and $5,256,775 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 September 30, 2012.

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