0001136261-14-000280.txt : 20140626 0001136261-14-000280.hdr.sgml : 20140626 20140620122044 ACCESSION NUMBER: 0001136261-14-000280 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20140331 FILED AS OF DATE: 20140620 DATE AS OF CHANGE: 20140620 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZOOM TECHNOLOGIES INC CENTRAL INDEX KEY: 0000822708 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 510448969 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-18672 FILM NUMBER: 14932129 BUSINESS ADDRESS: STREET 1: C/O BARRY I. GROSSMAN, ESQ., ELLENOFF STREET 2: GROSSMAN & SCHOLE, 150 EAST 42ND STREET CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 9176090333 MAIL ADDRESS: STREET 1: C/O BARRY I. GROSSMAN, ESQ., ELLENOFF STREET 2: GROSSMAN & SCHOLE, 150 EAST 42ND STREET CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: ZOOM TELEPHONICS INC DATE OF NAME CHANGE: 19950622 10-Q/A 1 form10qa.htm 10-Q/A March 31, 2014 DOC


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q/A
Amendment No. 1

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED MARCH 31, 2014

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to _________

Commission file number 000-18672

ZOOM TECHNOLOGIES, INC.
(Exact name of Registrant as Specified in its Charter)

 
Delaware
51-0448969
  (State or Other Jurisdiction of Incorporation or Organization) 
(I.R.S. Employer Identification Number)

Headquarters:
Sanlitun SOHO, Building B, 19th Floor
No.8 Workers Stadium North Road
Chaoyang District, Beijing, China 100027

U.S. office:
c/o Ellenoff Grossman & Schole LLP
1345 Avenue of Americas
New York, NY 10105
(Address of principal executive offices including zip code)

(212) 370-1300
(Registrant's telephone number, including area code)

 
(Former name, former address and former fiscal year, if changed since last report)

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 reports), and (2) has been subject to such filing requirements for the past 90 days.
YES    x        NO    ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, 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  x     NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer    ¨

Accelerated filer    ¨

Non-accelerated filer    ¨
(Do not check if a smaller reporting company)

Smaller reporting company    x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES    ¨        NO    x

Applicable only to corporate issuers:

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: The number of shares of common stock, par value $0.01, outstanding as of June 16, 2014 is 3,008,569.



EXPLANATORY NOTE

The purpose of this Amendment No. 1 to the Quarterly Report of Zoom Technologies, Inc. (the "Company") on Form 10-Q for the period ended March 31, 2014, filed with the Securities and Exchange Commission on June 16, 2014 (the "Form 10-Q"), is to file Exhibit 101 to the Form 10-Q in accordance with Rule 405 of Regulation S-T. Exhibit 101 to this report provides the consolidated financial statements and related notes from the Form 10-Q formatted in XBRL (eXtensible Business Reporting Language).

Other than the aforementioned, no other changes have been made to the Form 10-Q. This Amendment No. 1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-Q.

Item 6. Exhibits.

The following exhibits are included with this report.

101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf on June 20, 2014 by the undersigned, thereunto duly authorized.

Zoom Technologies, Inc.
(Registrant)

By: /s/ Patrick Wong
Patrick Wong
Chief Financial Officer

 

 

 

 

 

 

 

 


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style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b><u>NOTE 1 &#151; ORGANIZATION AND NATURE OF BUSINESS OPERATIONS</u></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><u>Acquisition</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Zoom Technologies, Inc. (the &#34;Company&#34;) was incorporated in the state of Delaware on February 29, 2002. Until September 22, 2009, the Company was engaged in the design, production, marketing, sales, and support of broadband and dial-up modems, Voice over Internet Protocol or &#34;VoIP&#34; products and services, Bluetooth&#174; wireless products, and other communication-related products.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">On September 22, 2009, the Company consummated a share exchange transaction and acquired all the outstanding shares of Gold Lion Holding Limited (&#34;Gold Lion&#34;), a company incorporated in the British Virgin Islands (&#34;BVI&#34;), and its subsidiaries Jiangsu Leimone Electronics Co. Ltd (&#34;Jiangsu Leimone&#34;), Tianjin Tong Guang Group Digital Communication Co., Ltd (&#34;TCB Digital&#34;) both incorporated in the (People's Republic of China, (&#34;PRC&#34;), and Profit Harvest Corporation Limited (&#34;Profit Harvest&#34;) incorporated in Hong Kong. In connection with the share exchange transaction, the Company spun off its then-existing business to its stockholders, by distributing and transferring all assets and liabilities to its then subsidiary, Zoom Telephonics, Inc., and issuing shares of its then operating subsidiary as a dividend to its stockholders. The subsidiaries of Gold Lion were engaged in the manufacture design, sale and manufacture of mobile devices and handsets in China.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">On June 1, 2010, Zoom pursuant to a share exchange agreement dated April 29, 2010, acquired 100% of the shares of Silver Tech Enterprises Ltd, incorporated in the BVI and its wholly owned subsidiaries Ever Elite Corporation Limited, incorporated in Hong Kong, and Nollec Wireless Company Ltd., (&#34;Nollec&#34;), incorporated in the PRC. Nollec is engaged in mobile phone and wireless communication device design.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">On January 4, 2011, pursuant to a share exchange agreement, the Company via Profit Harvest acquired 100% ownership of Celestial Digital Entertainment, Ltd., (&#34;CDE&#34;) a mobile platform video game development company based in Hong Kong.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">On October 11, 2011, the Company and Zoom USA Holdings, Inc., a newly formed wholly- owned subsidiary of the Company (&#34;Zoom Sub&#34;) entered into a Securities Purchase Agreement (&#34;Securities Purchase Agreement&#34;) to purchase from The Cellular Network Communications Group, Inc. (&#34;CNCG&#34;) a 50% interest in Portables Unlimited LLC (&#34;Portables&#34;), one of the largest wholesale distributors and direct retailers of T-Mobile products in the United States. Subsequent to the purchase of the 50% stake in ownership from CNCG, the Company increased its stake in Portables to 50.1% by injecting additional capital.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">As of July 15, 2013, the Company was in default of the promissory note for $2,000,000 owed to Portables Unlimited, Inc. The promissory note was collateralized by the Company's ownership percentage in Portables. As of the date of this report, the Company was not able to recover its investment. As a result, Zoom ceased to have a an equity interest in Portables and did not retain an investment in it on the date of default, July 15, 2013, accordingly, the Company recognized a loss which includes a complete write off of its investment in Portables. The Company recorded a loss on disposal of approximately $11.5 million related to its write-off of Portables.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><u>Dispositions</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">On December 31, 2012, Zoom Technologies, Inc. (&#34;Zoom&#34; or the &#34;Company&#34;) entered into a Share Purchase Agreement (the &#34;SPA&#34;) with Beijing Zhumu Culture Communication Company, Ltd. (&#34;BZCC&#34;), a PRC company that provides services to the telecommunication industry. Pursuant to the SPA, the Company agreed to sell (the &#34;Subsidiary Sale&#34;) to the Purchaser all the equity interests the Company holds in its China based subsidiaries (except for SpreadZoom Technologies Co., Ltd. (&#34;SpreadZoom&#34;) as mentioned below), which include 100% of the outstanding equity interest of Ever Elite Corporation Limited, an intermediary holding company incorporated in Hong Kong, and its wholly owned subsidiary, Nollec, 80% of the outstanding equity interest of TCB Digital, 100% of the outstanding equity interest of Profit Harvest Corporation, Ltd. (&#34;Profit Harvest&#34;), and 100% of the outstanding equity interest of Celestial Digital Entertainment, Ltd. (&#34;CDE&#34;). As consideration for the Subsidiary Sale, the Purchaser agreed to pay to the Company RMB 200 million (approximately US$31.7 million) (the &#34;Purchase Price&#34;), subject to adjustment pending an appraisal by an independent third party appraiser. The Company on October 24, 2012 received approximately $12.6 million (RMB 80 million) less bank charges; the Company on November 5, 2012, received $19.1 million (RMB 120 million) less transaction fees and bank charges. As of the date of this report, the Purchaser has remitted the entire amount of RMB 200 million to the Company, of which RMB120 million was initially held in escrow pending the closing of the Subsidiary Sale. Of this amount, a portion of the funds, approximately RMB 80 million, has been released to the Company to use; accordingly, in the normal course of business, the Company deployed those funds to SpreadZoom and Tianjin Leimone as detailed in &#34;Note 11 - Related Party Transactions&#34;. The RMB 80 million released from escrow was a negotiated amount between the Company and the Purchaser. On December 30, 2013, BZCC assigned its purchase right to TCB Digital to Tianjin Huatianli Trading Co., Ltd. (&#34;Huatianli&#34;). On December 30, 2013, the Company consented to the assignment between BZCC and Huatianli and agreed to amend the SPA to reflect the change. In connection with the assignment, RMB120 million, representing the balance of the Purchase Price that was being held in escrow pending the closing of all of the sales under the SPA, was agreed upon to be released within 10 business days to a Company-designated bank account. Of that amount, approximately RMB 68 million was available for the Company's immediate use, and approximately RMB52 million, representing the purchase price for TCB Digital, was be monitored by Huatianli until the closing of the TCB Digital sale. As of the date of this report the RMB 120 million is held in a wealth management account at New Times Trust Holding Co., Ltd. The Company's Chief Executive Officer has unencumbered sole signing and dispositive rights to that account. As of May 16, 2014, the Company has received payment in full from Huatianli for the sale of TCB Digital and the Company has completed the transfer of Jiangsu Leimone's ownership interest in TCB Digital to Huatianli. Since the Company received payment separately from Huantianli for RMB 52 million, the Company is obligated to repay RMB 52 million to BZCC from the RMB 120 million held in the wealth management account.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company's ownership interest in SpreadZoom, which owns and operates mobile phone manufacturing facilities in Tianjin, was not part of the Subsidiary Sale.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The closing of the sale of Profit Harvest and CDE occurred on December 31, 2012; the closing of the sale of Ever Elite and Nollec occurred on April 5, 2013</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">As disclosed above, as of July 15, 2013, the Company has completely written off its investment in Portables Unlimited, LLC.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">As of May 31, 2014, the Company's board of directors decided that it would explore the sale of SpreadZoom; Huatianli, the buyer of TCB Digital has expressed interest in buying the SpreadZoom but has not given a formal offer with a price that is acceptable to the Company; however, subsequent to March 31, 2014, Huatianli made a deposit of RMB 2 million with the Company indicating its intent to purchase. The Company is currently awaiting an evaluation report to be issued by a third party appraisal firm to determine an appropriate sales price.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b><u> NOTE 2 &#151; BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</u></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><u>Basis of Presentation and Consolidation </u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company's accompanying condensed consolidated balance sheet at March 31, 2014 includes the accounts of Gold Lion Holding Ltd and its wholly owned subsidiary Jiangsu Leimone, its 100%-owned subsidiary Silver Tech, and its wholly owned subsidiary, Zoom Sub. The Company's consolidated balance sheet also included the accounts of TCB Digital for which the Company owns 80% indirectly held through Jiangsu Leimone which has been classified as discontinued operations held for sale.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company's accompanying condensed consolidated balance sheet at December 31, 2013 includes the accounts of Gold Lion Holding Ltd and its wholly owned subsidiary Jiangsu Leimone, its 100%-owned subsidiary Silver Tech, and its wholly owned subsidiary, Zoom Sub. The Company's consolidated balance sheet also included the accounts of TCB Digital for which the Company owns 80% indirectly held through Jiangsu Leimone which has been classified as discontinued operations held for sale.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company's condensed consolidated results of operations for the three months ended March 31, 2014 from continuing operations included the results of Gold Lion, Silver Tech, Jiangsu Leimone, Zoom Sub.; results of operations from TCB Digital have been presented as discontinued operations.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company's condensed consolidated results of operations for the three months ended March 31, 2013 from continuing operations included the results of Gold Lion, Silver Tech, Jiangsu Leimone, and Zoom Sub (as restated); results of operations from Ever Elite, Nollec Wireless, and TCB Digital have been presented as discontinued operations.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Noncontrolling interest represents the ownership interests in a subsidiary that was held by owners other than the parent and is part of the equity of the consolidated group. The noncontrolling interest is reported in the consolidated statement of financial position within equity, separately from the parent's equity. Net income or loss and comprehensive income or loss is attributed to the parent and the noncontrolling interest. &#160;If losses attributable to the parent and the noncontrolling interest in a subsidiary exceed their interests in the subsidiary's equity, the excess, and any further losses attributable to the parent and the noncontrolling interest, is attributed to those interests.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (&#34;US GAAP&#34;). The functional currency of the Company's continuing operation Jiangsu Leimone and its equity investment SpreadZoom is the Chinese Renminbi (&#34;RMB&#34;). The functional currency of the Company's continuing operation, Zoom Sub is United States Dollars (&#34;USD&#34; or &#34;$&#34;). The functional currency of the Company's discontinued operations, TCB Digital and Nollec is the RMB. The functional currency of the Company's discontinued operations Ever Elite and CDE is Hong Kong Dollars (&#34;HKD&#34;). The accompanying consolidated financial statements are translated and presented in the reporting currency of USD. The functional currency of the Company's equity method investment, Portables, is the USD.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The interim condensed consolidated financial information as of March 31, 2014 and for the three months ended March 31, 2014 and 2013 have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the &#34;SEC&#34;). Certain information and footnote disclosures, which are normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The interim consolidated financial information should be read in conjunction with the financial statements and the notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, previously filed with the SEC. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company's consolidated financial position as of March 31, 2014, its consolidated results of operations and cash flows for the three month periods ended March 31, 2014 and 2013, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><u>Equity Method Accounting</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">In May 2012, the Company invested $12.3 million to establish a joint venture named SpreadZoom Technologies Co. Ltd., (&#34;SpreadZoom&#34;). The Company owns 47.4% of SpreadZoom and accounted for this investment under the equity method of accounting (ASC 323-30). Refer to &#34;Note 18 - Equity Method Investments&#34; for details.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company revised its accounting for Portables Unlimited, LLC. Previously, the Company accounted for the investment as a subsidiary under the consolidation method of accounting; as of the date of this report, Company retroactively changed its method of accounting for Portables to the equity method. Previously reported net income/(loss) attributable to the Company were unchanged; however, the consolidated balance sheet at December 31, 2012 no longer includes all of the assets and liabilities of Portables. As of December 31, 2013, Portables was no longer an investment of the Company. The results of operations of Portables for the three months ended March 31, 2013 were presented using the consolidation method of accounting; those results have been restated and disclosed using the equity method of accounting under the line item &#34;equity method net investment loss&#34; under &#34;Other income and (expenses)&#34;. As disclosed above the Company completely wrote off the investment on July 15, 2013, recording a loss of approximately $11.5 million. At December 31, 2012, the Company was a joint borrower on a $3 million line of credit provided by M&#38;T Bank. This line was refinanced in February of 2013 to be reduced to $2.5 million; concurrently, the Company and Portables co-borrow $2.5 million in a term note from M&#38;T Bank. Both the line of credit and term note were accounted for as an increase to the investment amount when Portables was still owned by the Company. The investment was written off in July of 2013; however, at December 31, 2013, the maximum value of the line of credit of $2.5 million and the amortized balance of the term note are carried as liabilities on the Company's consolidated balance sheets. On May 20, 2014, Portables and M&#38;T Banks released the Company from the obligation of repaying the line of credit and term note. Refer to &#34;Note 9 - Short Term Loans&#34; for further details.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><u>Exclusion of Related Party Lessor from Consolidation</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Portables, commencing in January 2009, subleased its principal facility from one of its members. The member began leasing the facility in December 2005 from a related party, AUM Realty, LLC (&#34;AUM&#34;). The Company's management has assessed whether AUM should be consolidated pursuant to FASB ASC 810 Consolidations. ASC 810 is not a &#34;rules based&#34; standard and thereby includes limited circumstances under which it can be conclusively determined whether an entity should be consolidated. Management believes that AUM is not a variable interest entity (&#34;VIE&#34;) as defined in ASC 810 because AUM was adequately capitalized. Equity contributions from AUM's owners exceeded 20% of the acquisition costs of the property. Management believes that this is, according to ASC 810 criteria, &#34;sufficient to permit the entity to finance its activities without additional subordinated financial support.&#34; Management believes that the same was true up to July 15, 2013, the date of disposition of Portables.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Based on this assessment, management believes that AUM is not a VIE because the Company does not make decisions that have significant impact on the performance of AUM; therefore, it is not consolidated as a component of these consolidated financial statements. If the matter were to be assessed differently, these consolidated financial statements would have included AUM's assets (principally land and building), liabilities (principally loan payable) and expenses, with the excess of AUM's assets over liabilities shown as a &#34;non-controlling interest&#34;. AUM guarantees $1.7 million of the $3 million line of credit with M&#38;T Bank for Portables Unlimited, LLC.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><u>Use of Estimates</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><u>Risks and Uncertainties</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company is subject to substantial risks from, among other things, intense competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility of public markets.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><u>Comprehensive Income</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company follows the provisions of ASC 220 &#34;Reporting Comprehensive Income&#34;, establishes standards for the reporting and display of comprehensive income, its components and accumulated balances in a full set of general purpose financial statements.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">ASC 220 defines comprehensive income is comprised of net income and all changes to the statements of stockholders' equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders, including adjustments to minimum pension liabilities, accumulated foreign currency translation, and unrealized gains or losses on marketable securities.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><u>Foreign Currency Translation and Transactions</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The accounts of the Company's Chinese subsidiaries are maintained in the RMB and the accounts of the U.S. parent company are maintained in the USD. 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Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the income statement.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><u>Cash and Equivalents</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">For Statement of Cash Flows purposes, the Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. The Company maintains cash with various banks and trust companies located in China, Hong Kong and the United States. Cash accounts in China and Hong Kong are not insured or otherwise protected. Should any bank or trust company holding cash deposits become insolvent, or if the Company is otherwise unable to withdraw funds, the Company would lose the cash on deposit with that particular bank or trust company.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><u>Accounts Receivable</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Accounts are written off against the allowance when it becomes evident collection will not occur. For the contracted manufacturing activities, our standard terms for accounts receivable from our customers are between 60 to 75 days from close of the billing cycle; and for sales of own brand phones our terms include prepaid arrangements and extending receivable to customers up to 60 days. We also offer credit terms of up to 150 days in our trading activities to a certain customers.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><u>Inventories</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Inventories are stated at the lower of cost or market. Cost is determined on a weighted average basis and includes all expenditures incurred in bringing the goods to the point of sale and putting them in a saleable condition. 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Equity Method Investments (Details) link:presentationLink link:calculationLink link:definitionLink 00000067 - Disclosure - Discontinued Operations (Details) link:presentationLink link:calculationLink link:definitionLink 00000068 - Disclosure - Discontinued Operations (Narrative) (Details) link:presentationLink link:calculationLink link:definitionLink 00000069 - Disclosure - Correction of Error for Accounting of Portables Unlimited, LLC (Details) link:presentationLink link:calculationLink link:definitionLink EX-101.CAL 5 zoom-20140331_cal.xml XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT EX-101.DEF 6 zoom-20140331_def.xml XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT EX-101.LAB 7 zoom-20140331_lab.xml XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT Machinery and equipment Property, Plant and Equipment by Type [Axis] Electronic equipment Reconstruction of workshop and assembling line Transportation equipment Level 1 Fair Value, Hierarchy [Axis] Level 2 Level 3 Software Finite-Lived Intangible Assets by Major Class [Axis] Domain name, logo and trade mark Customer list Technology use right Patent techniques STL Loan 1 Short-term Debt, Type [Axis] STL Loan 2 STL Loan 3 STL Loan 4 STL Loan 5 STL Loan 6 STL Loan 7 STL Loan 8 STL Loan 9 STL Loan 10 STL Loan 11 STL Loan 12 STL Loan 13 STL Loan 14 STL Loan 15 STL Loan 16 STL Loan 17 STL Loan 18 STL Loan 19 STL Loan 20 STL Loan 21 STL Loan 22 STL Loan 23 STL Loan 24 STL Loan 25 Jiangsu Leimone Business Combination, Separately Recognized Transactions [Axis] Silver Tech Business Acquisition [Axis] CDE Portables Hui Pak Kong LegalEntity [Axis] Short Term RelatedPartyTransactionsByRelatedParty [Axis] Related Party Transactions Tianjin Tong Guang Group BeijingLeimone Shengtong Wireless Leimone (Tianjin) Industrial Beijing Leimone Shengtong Cultural TianjinTongGuang Group Shenzhen Leimone 712 (Prior Shareholder) Raja R Amar - CEO Portables AUM Realty Gu Wireless Holdings of Northeast Portables Unlimited International Portables Unlimited Others Series A Class of Warrant or Right [Axis] Series B Series C Series D Series E Series F Series G A C and Placement Agent Warrants of $3.26 Schedule of Share-based Compensation Arrangement by Share-based Payment Award, Award Type and Plan Name [Axis] F Warrants of $1.51 Placement Agent Warrants of $1.23 G and Placement Warrants of $1.04 865,000 Options Reprice 865,000 Options 235,000 Options Reprice 235,000 Options 677,000 Options Zoom Technologies Legal Entity [Axis] TCB Digital Nollec Wireless Profit Harvest Anthony Chan Spreadzoom Workshop reconstruction Leasehold improvements Computer equipment Office equipment STL Loan 26 STL Loan 27 STL Loan 28 Previouly Reported Adjustments for Error Corrections [Axis] Adjustment As Currently Reported Property, Plant and Equipment, Type [Axis] Minimum Range [Axis] Machinery and equipment Maximum Profit Harvest and CDE Disposal Group Name [Axis] Ever Elite and Nollec Wireless T Mobile USA Customer Concentration Risk Type [Axis] T Mobile USA Supplier February 14, 2013 Award Date [Axis] October 8, 2012 May 22, 2012 November 29, 2011 October 26, 2011 October 11, 2011 Zoom Technologies, Inc. Consolidation Items [Axis] Gold Lion Holding Limited Jiangsu Leimone Electronics Co. Ltd Tianjin Tong Guang Group Digital Communication Co., Ltd Profit Harvest Corporation Limited Silver Tech Enterprises Ltd Ever Elite Corporation Limited Nollec Wireless Company Ltd Celestial Digital Entertainment, Ltd. Zoom USA Holdings, Inc. Portables Unlimited LLC January 25, 2013 BOD January 25, 2013 November 12, 2012 October 4, 2011 Common stock Statement, Equity Components [Axis] Treasury stock Shares to be issued Additional paid-in capital Statutory surplus reserve Accumulated other comprehensive income Retained earnings (deficit) Total Noncontrolling interest Preferred Stock [Member] Preferred Stock SpreadZoom Investment, Name [Axis] November 2013 July 16, 2013 Former Executives of Nollec Debt Instrument [Axis] CNCG Document And Entity Information Entity Registrant Name Entity Central Index Key Document Type Document Period End Date Amendment Flag Current Fiscal Year End Date Is Entity a Well-known Seasoned Issuer? Is Entity a Voluntary Filer? Is Entity's Reporting Status Current? Entity Filer Category Entity Common Stock, Shares Outstanding Document Fiscal Period Focus Document Fiscal Year Focus Statement of Financial Position [Abstract] ASSETS Current assets Cash and cash equivalents Restricted cash Short-term investments Other receivables and prepaid expenses Due from related parties Current assets of discontinued operations, held for sale Total current assets Property, plant and equipment, net Intangible assets Long-term investments TOTAL ASSETS LIABILITIES AND EQUITY Current liabilities Short-term loans Notes payable Accrued expenses and other payables Purchase deposit from buyer Taxes payable Due to related parties Warrant liability Current liabilities of discontinued operations Total current liabilities Long-term loans TOTAL LIABILITIES COMMITMENTS AND CONTINGENCIES EQUITY 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, 3,008,737 shares issued and 3,008,569 shares outstanding at March 31, 2014 and December 31, 2013 Treasury shares: 168 shares at cost Additional paid-in capital Statutory surplus reserve Accumulated other comprehensive income Accumulated deficit TOTAL STOCKHOLDERS' EQUITY Noncontrolling interest TOTAL EQUITY TOTAL LIABILITIES AND EQUITY Preferred stock, par value Preferred stock, shares authorized Preferred stock, shares issued Preferred stock, shares outstanding Common stock, par value Common stock, shares authorized Common stock, shares issued Common stock, shares outstanding Treasury shares, at cost Income Statement [Abstract] Net revenues Cost of goods sold Gross profit Selling, general, and administrative expenses Loss from operations Other income (expenses) Interest income Interest expense Change in fair value of warrants Equity method net investment loss Other income (expense), net Other (expense) income, net Loss before income taxes and noncontrolling interest Income taxes for continuing operations Loss from continuing operations Discontinued Operations: Income (loss) from discontinued operations, net of tax Loss on disposal, net of tax Income (loss) from discontinued operations Net loss less: Loss attributable to noncontrolling interest Net loss attributable to Zoom Technologies Inc. Basic and diluted loss per common share from continuing operations: Basic Diluted Basic and diluted income (loss) per common share from discontinued operations: Basic Diluted Basic and diluted loss per common share: Basic Diluted Weighted average common shares outstanding: Basic Diluted Amounts attributable to Zoom Technologies, Inc. common shareholders Loss from continuing operations Income (loss) from discontinued operations Net loss attributable to Zoom Technologies Inc. Statement of Comprehensive Income [Abstract] Net loss attributable to noncontrolling interest Other comprehensive income: Foreign currency translation gain - Zoom Technologies Inc. Foreign currency translation gain - noncontrolling interest Comprehensive loss - Zoom Technologies Inc. Comprehensive (loss) income - noncontrolling interest Statement [Table] Statement [Line Items] Equity Components [Axis] Beginning balance Beginning balance, shares Adjustment for derivative accounting of warrants Issuance of shares for services Issuance of shares for services, shares Shares issued to replace cancelled options Shares issued to replace cancelled options, shares Shares issued against shares to be issued Shares issued against shares to be issued, shares Shares issued to employees Shares issued to employees, shares Shares issued to directors and consultants Shares issued to directors and consultants,shares Issuance for shares to be issued Issuance for shares to be issued, shares Exercise of stock options Exercise of stock options, shares Exercise of warrant Exercise of warrant, shares Issuance of shares for cash Issuance of shares for cash, shares Acquisition of Nollec Wireless Acquisition of Nollec Wireless, shares Acquisition of zoom.com Acquisition of zoom.com, shares Stock options expense Foreign currency translation Expenses paid by related party Acquisition of CDE Acquisition of CDE, shares Issuance of shares for M&A fees Issuance of shares for M&A fees, shares Issuance of shares for bonus to management Issuance of shares for bonus to management, shares Expenses overrecorded Interest paid on behalf of TCB by related party Capital Injection by Tongguang Group Dividends paid Net loss Appropriated statutory surplus reserve Adjustment of ownership in Portables Ending balance Ending balance, shares Statement of Cash Flows [Abstract] Cash flows from operating activities: Net loss Adjustments to reconcile net loss to cash provided by (used in) operating activities: Depreciation and amortization Non-cash equity-based compensation Provision on accounts receivable Gain on extinguishment of debt Loss on equity method of investment Fair value adjustment on warrants Changes in operating assets and liabilities: Accounts receivable Inventories Advances to suppliers Other receivables and prepaid expenses Accounts payable Advance from customers Related parties-net Accrued expenses and other current liabilities Net cash provided by (used in) operating activities Cash flows from investing activities: Restricted cash Purchase of property and equipment and other long-term assets Proceeds from collection on notes receivable Increase in notes receivable Net cash provided by (used in) investing activities Cash flows from financing activities: Proceeds from loans Repayment of loans Proceeds from issuance of notes Repayment on notes payable Receipt from related parties Repayment on borrowings from related parties Net cash (sed in) provided by financing activities Effect of exchange rate changes on cash & cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents of continuing components Cash and cash equivalents of discontinued components Cash and cash equivalents, end of period Cash and cash equivalents of continuing components Cash and cash equivalents of discontinued components SUPPLEMENTARY DISCLOSURES: Interest paid Income tax paid Notes to Financial Statements ORGANIZATION AND NATURE OF BUSINESS OPERATIONS - Note 1 BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES - Note 2 MERGER AND ACQUISITIONS - Note 3 RESTRICTED CASH - Note 4 SHORT-TERM INVESTMENT - Note 5 OTHER RECEIVABLES AND PREPAID EXPENSES - Note 6 PROPERTY, PLANT AND EQUIPMENT - Note 7 INTANGIBLE ASSETS - Note 8 SHORT-TERM LOANS - Note 9 NOTES PAYABLE - Note 10 RELATED PARTY TRANSACTIONS - Note 11 STOCKHOLDERS' EQUITY - Note 12 WARRANTS - Note 13 STOCK OPTIONS - Note 14 INCOME TAXES - Note 15 STATUTORY RESERVES - Note 16 OPERATING RISK - Note 17 Investments, Debt and Equity Securities [Abstract] EQUITY METHOD INVESTMENTS - Note 18 Other Income and Expenses [Abstract] DISCONTINUED OPERATIONS - Note 19 Subsequent Event - Note 20 SUBSEQUENT EVENT - Note 20 Correction Of Error For Accounting Of Portables Unlimited Llc - Note 21 CORRECTION OF ERROR FOR ACCOUNTING OF PORTABLES UNLIMITED LLC - Note 21 Principles of Consolidation Equity Method Accounting Basis of Presentation Use of Estimates Risks and Uncertainties Comprehensive Income Foreign Currency Translation and Transactions Cash and Equivalents Accounts Receivable Inventories Property, Plant and Equipment Capitalized Interest Impairment of Long-lived Assets Goodwill Revenue Recognition Income Taxes Uncertain Tax Positions Operating Leases Research and Development Costs Loss Per Share Fair Values of Financial Instruments Concentration of Credit Risk Non-controlling Interests Statement of Cash Flows Recent Accounting Pronouncements Correction of Prior Period Financial Statements Warrant accounting Accounting Policies Fair Value Of Financial Instruments Tables Fair Value Measurement (Tables) Property, Plant and Equipment [Abstract] Schedule of goodwill Property Plant And Equipment Tables Components of Property, Plant and Equipment Intangible Assets Tables Carrying values of intangible assets Notes Payable Tables Notes payable Related Party Transactions Tables Due From Related Parties Due To Related Parties Warrants Tables Warrant activity and summary Stock Options Tables Option plan activity Option plan summary Income Tax Tables Schedule of Tax Effects of Temporary Differences that Give Rise to Significant Portions of Deferred Tax Assets and Liabilities Schedule of Effective Income Tax Rate and Amount Reconciliation Equity Method Investments Tables Summary Investment Holdings Discontinued Operations Tables Schedule of Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures Correction Of Error Tables Restatement to Prior Year Income Entity Incorporation, State Country Name Entity Incorporation, Date of Incorporation Disposal Date Description and Timing of Disposal Loan Default Warrants Business Acquisition, Effective Date of Acquisition Business Acquisition, Name of Acquired Entity Business Acquisition, Description of Acquired Entity Business Combination, Reason for Business Combination Business Acquisition, Cost of Acquired Entity Business Acquisition, Percentage of Voting Interests Acquired Goodwill, Gross Less: Impairment Total goodwill Other Receivables And Prepaid Expenses Narrative Details Due from Profit Harvest Total other receivables Estimated Useful Lives Balance Sheet Related Disclosures [Abstract] Machinery and equipment Electronic equipment Transportation equipment Computer equipment Office equipment Property and equipment, gross Less: Accumulated depreciation Property Plant And Equipment Depreciation Narrative Details Depreciation expense Discontinued operations depreciation expense Useful life Intangible assets, gross Less: Accumulated amortization Intangible assets, net Intangible Assets Narrative Details Amortization of intangible assets Short-term Debt, Lender Short-term Debt, Terms Loans Payable to Bank, Noncurrent Terms of Note Payable Interest Rate Related Party [Axis] Due from related parties Due to related parties Related Party Transaction, Description of Transaction Related Party Transaction, Rate Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures Common Stock, Price per Share Share-based Compensation Options cancelled Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized Stockholders' Equity, Reverse Stock Split Exercise price, in dollars Warrant exercise term Description of warrants Warrants Activity Details Balance, December 31, 2013 Granted Lapsed Exercised Cancelled Balance, March 31, 2014 Weighted-average exercise price, beginning balance Weighted-average exercise price, granted Weighted-average exercise price, lapsed Weighted-average exercise price, exercised Weighted-average exercise price, cancelled Weighted-average exercise price, ending balance Aggregate intrinsic value, beginnig balance Aggregate intrinsic value, ending balance Summary Of Warrants Outstanding And Exercisable Details Warrants outstanding, Weighted-average remaining life, in years Warrants outstanding, Weighted-average exercise price Warrants exercisable, at March 31, 2014 Warrants exercisable, Weighted-average exercise price Share-based Compensation Arrangement, Description Stock price Exercise price Expected life Volatility Discount rate Non-cash compensation expense related to stock options Non-cash compensation expense related to stock options to be recorded up to 2014 Stock Option Activity Details Balance, December 31, 2013 Granted Lapsed Exercised Cancelled Balance, March 31, 2014 Weighted-average exercise price of options outstanding, December 31, 2013 Weighted-average exercise price of options granted during period Weighted-average exercise price of options lapsed during the period Weighted-average exercise price of options exercised during the period Weighted-average exercise price of options cancelled during the period Weighted-average exercise price of options outstanding, March 31, 2014 Aggregate Intrinsic Value, December 31, 2013 Aggregate Intrinsic Value, March 31, 2014 Stock Options Outstanding And Exercisable Details Options Outstanding, Number of Shares Options Outstanding, Weighted-Average Remaining Contractual Term (in years) Options Outstanding, Weighted-Average Exercise Price Per Share Options Exercisable, Number of Shares Options Exercisable, Weighted-Average Exercise Price Per Share Statutory tax rate Net operating loss carry forward period, years Net operating loss ("NOL") carry forwards Deferred tax asset valuation allowance provided Income Tax Schedule Of Tax Effects Of Temporary Differences In Deferred Tax Assets And Liabilities Details Deferred tax assets: Net operating loss Less: Valuation allowance Total deferred tax assets Deferred tax liabilities: Deferred tax assets, net Income Tax Schedule Of Effective Income Tax Rate Reconciliation Details US statutory rates Tax rate difference Valuation allowance State taxes Tax per financial statements Foreign pretax earnings Accumulated undistributed earnings of non-US subsidiaries invested indefinitely Additional U.S. federal income tax to be provided if earnings were remitted Statutory Reserves Narrative Details Statutory Accounting Practices, Statutory to GAAP, Description of Reconciling Item Increase in statutory surplus reserve Equity Method Investment, Description of Principal Activities Changes in Equity Method Investments Balance at beginning of period (restated) Equity method investment loss Increase in investment through co-borrowing on bank term note Reduction in investment through repayment of line of credit Reduction from repayment on bank term note Gain from default of promisssry note leading for fofeiture of ownership Loss on disposal Balance at end period (restated) Financial Position Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net ssset value Results of Operations Net revenues Cost of goods sold Gross profit Operating expenses Operating income (loss) Other income (expenses), net Income (loss) before taxes less: Provision for income taxes Net income (loss) Investment loss attributable to Zoom Technologies, Inc. Discontinued Operations Details Results of Operations Net revenues Cost of sales Gross profit Operating expenses Operating income Other income (expenses), net (Loss) income before taxes from discontinued operations less: Provision for income taxes Income (loss) from discontinued operations, net of tax Basic and diluted (loss) income per common share from discontinued operations: Basic Diluted Financial Position Cash and equivalents Restricted cash Notes receivable Accounts receivable, net Inventories, net Other receivables and prepaid expenses Advance to suppliers Due from related parties Property, plant and equipment, net Deferred tax assets, noncurrent Total current assets Total Assets of Discontinued Operations Short-term loans Notes payable Accounts payable Accrued expenses and other payables Advances from customers Taxes payable Due to related parties Total current liabilities Total Liabilities of Discontinued Operations Net (Liabilities) Assets of Discontinued Operations Cost of sales Gross profit Total operating expenses Loss from operations Other (expense) income, net Loss before income taxes from continuing operations Loss from discontinued operations, net of tax Loss from discontinued operations less: Income (loss) attributable to noncontrolling interest Basic and diluted loss per common share      Basic      Diluted Amount of undistributed earnings of foreign subsidiaries intended to be permanently reinvested outside the United States that are not subject to U.S. federal income taxes. Adjustment Member Gross amount, as of the balance sheet date, of long-lived, depreciable assets used in the production process to produce goods and services. Currently Reported Member Advance to suppliers of Discontinued Operation of Discontinued Operation Due from related parties of Discontinued Operation of Discontinued Operation of Discontinued Operation of Discontinued Operation Notes receivable of Discontinued Operation Restricted Cash of Discontinued Operation of Discontinued Operation Tabular disclosure of amounts due from related parties Tabular disclosure of amounts due to related parties Gross amount, as of the balance sheet date, of long-lived, depreciable assets used in the production process to produce goods and services. Date of stock option approval or term modification Member representing Mr. Gu. Member representing Hui Pak Kong Element representing Jiangsu Leimone Date of stock option approval or term modification Element representing Nollec Wireless Date of stock option approval or term modification Date of stock option approval or term modification Date of stock option approval or term modification Date of stock option approval or term modification Gross amount, as of the balance sheet date, of long-lived, depreciable assets used in the production process to produce goods and services. Amounts due from others within one year and the sum of the amounts paid in advance for capitalized costs that will be expensed with the passage of time or the occurrence of a triggering event, and will be charged against earnings within one year. Member representing debt that is not short term to related parties Previouly Reported Member Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Short-term loan Member representing short term debt liabilities to related parties Element representing Silver Tech Company's policy of cash flows under ASC 230. Element representing TCB Digital Gross amount, as of the balance sheet date, of long-lived, depreciable assets used in the production process to produce goods and services. Increase in investment through co-borrowing on bank term note. Reduction in investment through repayment of bank line of credit Reduction from repayment on bank term note Assets, Current Assets Liabilities, Current Liabilities Treasury Stock, Value Additional Paid in Capital Statutory Accounting Practices, Statutory Capital and Surplus Required Accumulated Other Comprehensive Income (Loss), Net of Tax Stockholders' Equity Attributable to Parent Partners' Capital Attributable to Noncontrolling Interest Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest Liabilities and Equity Interest Expense Discontinued Operation, Provision for Loss (Gain) on Disposal, Net of Tax Income (Loss) from Discontinued Operations and Disposal of Discontinued Operations, Net of Tax, Per Basic Share Income (Loss) from Discontinued Operations and Disposal of Discontinued Operations, Net of Tax, Per Diluted Share Weighted Average Number of Shares Outstanding, Basic Weighted Average Number of Shares Outstanding, Diluted Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest Comprehensive Income (Loss), Net of Tax, Attributable to Parent Comprehensive (Income) Loss, Net of Tax, Attributable to Noncontrolling Interest Shares, Issued Gains (Losses) on Extinguishment of Debt Increase (Decrease) in Prepaid Expense Net Cash Provided by (Used in) Operating Activities Decrease in Restricted Cash Payments to Acquire Property, Plant, and Equipment Increase (Decrease) in Notes Receivables Net Cash Provided by (Used in) Investing Activities, Continuing Operations Repayments of Short-term Debt Repayments of Related Party Debt Net Cash Provided by (Used in) Financing Activities Cash and Cash Equivalents, Period Increase (Decrease) Cash and Cash Equivalents, at Carrying Value, Including Discontinued Operations Inventory, Policy [Policy Text Block] Schedule of Short-term Debt [Table Text Block] Goodwill, Impaired, Accumulated Impairment Loss Machinery and Equipment, Gross ElectronicEquipment TransportationEquipment ComputerEquipment OfficeEquipment Property, Plant and Equipment, Gross Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment Due from Related Parties Due to Related Parties Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Intrinsic Value, Amount Per Share Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value Deferred Tax Assets, Valuation Allowance Deferred Tax Assets, Net of Valuation Allowance Deferred Tax Assets, Net Effective Income Tax Rate Reconciliation, Percent Equity Method Investment, Summarized Financial Information, Current Assets Equity Method Investment, Summarized Financial Information, Assets Equity Method Investment, Summarized Financial Information, Current Liabilities Equity Method Investment, Summarized Financial Information, Liabilities Equity Method Investment, Summarized Financial Information, Revenue Equity Method Investment, Summarized Financial Information, Cost of Sales Equity Method Investment, Summarized Financial Information, Gross Profit (Loss) EquityMethodInvestmentSummarizedFinancialInformationOperatingIncomeLoss EquityMethodInvestmentSummarizedFinancialInformationIncomeLossBeforeTaxes Equity Method Investment, Summarized Financial Information, Net Income (Loss) Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Abstract] Disposal Group, Including Discontinued Operation, Revenue Disposal Group, Including Discontinued Operation, Gross Profit (Loss) Disposal Group, Including Discontinued Operation, Operating Expense Disposal Group, Including Discontinued Operation, Operating Income (Loss) Discontinued Operation, Amount of Other Income (Loss) from Disposition of Discontinued Operations, before Income Tax Discontinued Operation, Income (Loss) from Discontinued Operation, before Income Tax Discontinued Operation, Tax Effect of Discontinued Operation Discontinued Operation, Income (Loss) from Discontinued Operation, Net of Tax, Per Basic Share Discontinued Operation, Income (Loss) from Discontinued Operation, Net of Tax, Per Diluted Share Disposal Group, Including Discontinued Operation, Classified Balance Sheet Disclosures [Abstract] 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Equity Method Investments (Tables)
3 Months Ended
Mar. 31, 2014
Equity Method Investments Tables  
Summary Investment Holdings

Changes in Equity Method Investments                  
      Portables     SpreadZoom     Total
Balance December 31, 2012 (Restated)   $ 11,846,018    $ 11,912,956    $ 23,758,974 
Equity method investment loss     105,606      (377,005)     (271,399)
Increase in investment through co-borrowing on bank term note     2,500,000      -      2,500,000 
Reduction in investment through repayment of line of credit     (500,000)     -      (500,000)
Reduction from repayment on bank term note     (489,310)     -      (489,310)
Gain from default of promisssry note leading for fofeiture of ownership     (2,000,000)     -      (2,000,000)
Loss on disposal     (11,462,314)     -      (11,462,314)
Balance December 31, 2013   $ -    $ 11,535,951    $ 11,535,951 
                   
Balance December 31, 2013   $ -    $ 11,535,951    $ 11,535,951 
Equity method investment loss     -      (377,005)     (377,005)
Balance March 31, 2014   $ -    $ 11,158,946    $ 11,158,946 

 

          March 31,         December 31,
      2014     2013
Financial Position of SpreadZoom     (Unaudited)      
Current assets   $ 24,227,267    $ 17,811,982 
Non-current assets     6,670,406      6,558,367 
Total assets     30,897,673      24,370,349 
             
Current liabilities     16,797,399      9,353,001 
Non-current liabilities     -      - 
Total liabilities     16,797,399      9,353,001 
             
Net asset value   $ 14,100,274    $ 15,017,348 
             
      For Three Months Ended
Results of Operations of SpreadZoom     March 31,
      2014     2013
      (Unaudited)     (Unaudited)
Net revenues   $ 12,074,348    $ 18,106,466 
Cost of goods sold     12,276,854      17,923,971 
Gross profit     (202,506)     182,495 
             
Operating expenses     593,525      715,903 
             
Operating loss     (796,031)     (533,408)
             
Other income (expenses), net     159      185 
             
Income (loss) before taxes     (795,872)     (533,223)
             
less: Provision for income taxes     -      - 
             
Net loss   $ (795,872)   $ (533,223)
             
Investment loss attributable to Zoom Technologies, Inc.   $ (377,005)   $ (252,588)

The Company accounted for its investment in Portables Unlimited, LLC using the equity method. The following are operating results of Portables for the three months ended March 31, 2013 (as restated).

      For Three Months Ended
Results of Operations of Portables     March 31,
      2013
      (Unaudited)
      (Restated)
Net revenues   $ 7,365,230 
Cost of goods sold     5,893,746 
Gross profit     1,471,484 
       
Operating expenses     1,637,860 
       
Operating loss     (166,376)
       
Other income (expenses), net     (137,978)
       
Income (loss) before taxes     (304,354)
       
less: Provision for income taxes     -  
       
Net loss   $ (304,354)

 

 

 

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Related Party Transactions (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Mar. 31, 2014
Due from related parties $ 9,358,033 $ 9,530,697
Due to related parties 3,449,922 3,342,294
BeijingLeimone Shengtong Wireless
   
Due from related parties 17,997 0
Related Party Transaction, Description of Transaction

Beijing Leimone Shengtong Wireless Technology Co., Ltd. ("Beijing Leimone") was founded by Gu, the largest shareholder of the Company. Beijing Leimone borrowed money from the Company. The borrowings bore no interest and had a maturity of 12 months. The balances are neither collateralized nor personally guaranteed by Gu. The balance has been repaid in full.

 

 

 
Related Party Transaction, Rate 0.00%  
Leimone (Tianjin) Industrial
   
Due to related parties 2,283,922 2,176,294
Related Party Transaction, Description of Transaction

Leimone (Tianjin) Industrial Co., Ltd. ("Tianjin Leimone") was controlled by Gu, the largest shareholder of the Company. As of December 31, 2013, the amount owed to Tianjin Leimone was $2,283,922. This balance is the result of a transfer from Tianjin Leimone of $10,719,532 (RMB 66,400,000) for Jiangsu Leimone to inject as capital into its discontinued operation TCB Digital. The transfer of funds from Tianjin exceeded the then outstanding balance of $8,435,610 owed by Tianjin Leimone; therefore, the remaining balance is a net due to Tianjin Leimone. The balance due to Tianjin Leimone of $2,283,922 at December 31, 2013 was reduced to $2,176,294 at March 31, 2014.

 

 

 

 
Shenzhen Leimone
   
Due from related parties 293,998 280,303
Related Party Transaction, Description of Transaction

Shenzhen Leimone Company, Ltd., formed by individuals including our Chairman, Mr. Gu, is set up with the intention of providing manufacturing services to our Company particularly for exports. As of March 31, 2014 and December 31, 2013, $208,303 and $293,998 of loans made to Shenzhen Leimone to be used for setup costs were still outstanding. The balance is expected to be repaid in full.

 

 
Spreadzoom
   
Due from related parties 9,046,038 9,250,394
Related Party Transaction, Description of Transaction

The balance due from SpreadZoom represents an advance to SpreadZoom for it to purchase components to manufacture handsets in the normal course of business. The advance bears no interest, and is uncollateralized. If the Company is able to successfully complete a sale of SpreadZoom, the Company expects to be repaid these advances.

 

 

 

 
Gu
   
Due to related parties 1,063,500 1,063,500
Related Party Transaction, Description of Transaction

Mr. Gu provided funds to the Company with no interest and are due on demand. As of March 31, 2014 and December 31, 2013, the balances of funds provided by Gu was $1,063,500.

 

 

 
Beijing Leimone Shengtong Cultural
   
Due to related parties $ 102,500 $ 102,500
Related Party Transaction, Description of Transaction

The balance owed to Beijing Lemone Shengtong Cultural Development Co, Ltd ("Beijing Shentong") arose in the normal course of business, as certain corporate staff expenses in Beijing were paid by Beijing Shentong on behalf of the Company.

 

 

 
XML 11 R48.htm IDEA: XBRL DOCUMENT v2.4.0.8
Property, Plant and Equipment (Details) (USD $)
Mar. 31, 2014
Dec. 31, 2013
Balance Sheet Related Disclosures [Abstract]    
Machinery and equipment $ 1,121,444 $ 1,130,554
Electronic equipment 91,670 92,415
Transportation equipment 51,384 51,801
Computer equipment 1,164 1,173
Office equipment 20,637 20,805
Property and equipment, gross 1,286,299 1,296,748
Less: Accumulated depreciation (1,286,299) (1,296,748)
Property, plant and equipment, net $ 0 $ 0
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Stockholders' Equity Common Stock (Narrative) (Details) (USD $)
1 Months Ended 3 Months Ended 12 Months Ended
Nov. 30, 2013
Mar. 31, 2014
Mar. 31, 2013
Dec. 31, 2013
July 16, 2013
Dec. 31, 2013
January 25, 2013 BOD
Dec. 31, 2013
January 25, 2013
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures       56,000 18,600 2,000
Common Stock, Price per Share         $ 6.50 $ 6.50
Share-based Compensation   $ 0 $ 193,844 $ 475,603 $ 120,900 $ 13,000
Options cancelled   (61,400)        
Stockholders' Equity, Reverse Stock Split

On November 12, 2013, the Company effectuated a 10 for 1 reverse split of its common stock. All share numbers and per share amounts have been retroactively restated to reflect the reverse split.

 

 

 

 

         

XML 14 R46.htm IDEA: XBRL DOCUMENT v2.4.0.8
Other Receivables and Prepaid Expenses (Narrative) (Details) (USD $)
Mar. 31, 2014
Dec. 31, 2013
Other Receivables And Prepaid Expenses Narrative Details    
Due from Profit Harvest $ 472,042 $ 614,403
Total other receivables $ 496,816 $ 614,403
XML 15 R33.htm IDEA: XBRL DOCUMENT v2.4.0.8
Intangible Assets (Tables)
3 Months Ended
Mar. 31, 2014
Intangible Assets Tables  
Carrying values of intangible assets

As of March 31, 2014 and December 31, 2013, the Company's intangible assets were summarized as follows:

    Estimated         March 31,         December 31,
    Useful Life     2014     2013
          (Unaudited)      
Domain name, logo and trade mark   Indefinite   $ 349,600    $ 349,600 
less: Accumulated amortization         -      - 
Intangible assets, net       $ 349,600    $ 349,600 

 

 

 

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Warrants Activity (Details) (USD $)
3 Months Ended
Mar. 31, 2014
Warrants Activity Details  
Balance, December 31, 2013 863,860
Granted 0
Lapsed 0
Exercised 0
Cancelled 0
Balance, March 31, 2014 863,860
Weighted-average exercise price, beginning balance $ 23.00
Weighted-average exercise price, granted $ 0
Weighted-average exercise price, lapsed $ 0
Weighted-average exercise price, exercised $ 0
Weighted-average exercise price, cancelled $ 0
Weighted-average exercise price, ending balance $ 23.00
Aggregate intrinsic value, beginnig balance $ 0
Aggregate intrinsic value, ending balance $ 0
XML 18 R25.htm IDEA: XBRL DOCUMENT v2.4.0.8
EQUITY METHOD INVESMENTS - Note 18
3 Months Ended
Mar. 31, 2014
Investments, Debt and Equity Securities [Abstract]  
EQUITY METHOD INVESTMENTS - Note 18

NOTE 18 - EQUITY METHOD INVESTMENTS

On May 10, 2012, the Company along with Spreadtrum Communications (Tianjin) Co., Ltd, Tianjin Baoshui District Investment Co, Ltd, and Han & Qin International (BVI) Limited invested in the joint venture SpreadZoom Technologies, Inc ("SpreadZoom"). SpreadZoom is domiciled in Tianjin, China with a registered capital of $47,352,700 (RMB 300,000,000). As of June 30, 2012, $17,520,500 (RMB 111,000,000) in capital had been contributed to SpreadZoom; the Company contributed $12,342,542 (RMB 78,000,000). The Company had committed to invest an additional $10,117,700 (RMB 64,100,000) in SpreadZoom. Management and control of the business have not been fully determined. The Company has used the equity method to account for its investment in SpreadZoom and has recorded a loss from investment of $377,005 and $ 252,588 for the three months ended March 31, 2014 and 2013, respectively. The Company is contemplating disposing of SpreadZoom. Refer to "Note 1 - Organization and Nature of Business Operations: Dispositions" for further details.

Changes in Equity Method Investments                  
      Portables     SpreadZoom     Total
Balance December 31, 2012 (Restated)   $ 11,846,018    $ 11,912,956    $ 23,758,974 
Equity method investment loss     105,606      (377,005)     (271,399)
Increase in investment through co-borrowing on bank term note     2,500,000      -      2,500,000 
Reduction in investment through repayment of line of credit     (500,000)     -      (500,000)
Reduction from repayment on bank term note     (489,310)     -      (489,310)
Gain from default of promisssry note leading for fofeiture of ownership     (2,000,000)     -      (2,000,000)
Loss on disposal     (11,462,314)     -      (11,462,314)
Balance December 31, 2013   $ -    $ 11,535,951    $ 11,535,951 
                   
Balance December 31, 2013   $ -    $ 11,535,951    $ 11,535,951 
Equity method investment loss     -      (377,005)     (377,005)
Balance March 31, 2014   $ -    $ 11,158,946    $ 11,158,946 

 

          March 31,         December 31,
      2014     2013
Financial Position of SpreadZoom     (Unaudited)      
Current assets   $ 24,227,267    $ 17,811,982 
Non-current assets     6,670,406      6,558,367 
Total assets     30,897,673      24,370,349 
             
Current liabilities     16,797,399      9,353,001 
Non-current liabilities     -      - 
Total liabilities     16,797,399      9,353,001 
             
Net asset value   $ 14,100,274    $ 15,017,348 
             
      For Three Months Ended
Results of Operations of SpreadZoom     March 31,
      2014     2013
      (Unaudited)     (Unaudited)
Net revenues   $ 12,074,348    $ 18,106,466 
Cost of goods sold     12,276,854      17,923,971 
Gross profit     (202,506)     182,495 
             
Operating expenses     593,525      715,903 
             
Operating loss     (796,031)     (533,408)
             
Other income (expenses), net     159      185 
             
Income (loss) before taxes     (795,872)     (533,223)
             
less: Provision for income taxes     -      - 
             
Net loss   $ (795,872)   $ (533,223)
             
Investment loss attributable to Zoom Technologies, Inc.   $ (377,005)   $ (252,588)

The Company accounted for its investment in Portables Unlimited, LLC using the equity method. The following are operating results of Portables for the three months ended March 31, 2013 (as restated).

      For Three Months Ended
Results of Operations of Portables     March 31,
      2013
      (Unaudited)
      (Restated)
Net revenues   $ 7,365,230 
Cost of goods sold     5,893,746 
Gross profit     1,471,484 
       
Operating expenses     1,637,860 
       
Operating loss     (166,376)
       
Other income (expenses), net     (137,978)
       
Income (loss) before taxes     (304,354)
       
less: Provision for income taxes     -  
       
Net loss   $ (304,354)

 

 

 

XML 19 R50.htm IDEA: XBRL DOCUMENT v2.4.0.8
Intangible Assets (Details) (USD $)
Mar. 31, 2014
Dec. 31, 2013
Intangible assets, gross $ 349,600 $ 349,600
Less: Accumulated amortization 0 0
Intangible assets, net 349,600 349,600
Domain name, logo and trade mark
   
Intangible assets, gross 349,600 349,600
Less: Accumulated amortization 0 0
Intangible assets, net $ 349,600 $ 349,600
XML 20 R42.htm IDEA: XBRL DOCUMENT v2.4.0.8
Organization and Nature of Business Operations (Narrative) (Details)
3 Months Ended
Mar. 31, 2014
Gold Lion Holding Limited
 
Entity Incorporation, State Country Name British Virgin Islands
Entity Incorporation, Date of Incorporation Sep. 22, 2009
Jiangsu Leimone Electronics Co. Ltd
 
Entity Incorporation, State Country Name People's Republic of China
Entity Incorporation, Date of Incorporation Sep. 22, 2009
Tianjin Tong Guang Group Digital Communication Co., Ltd
 
Entity Incorporation, State Country Name People's Republic of China
Entity Incorporation, Date of Incorporation Sep. 22, 2009
Disposal Date Sep. 30, 2013
Profit Harvest Corporation Limited
 
Entity Incorporation, State Country Name Hong Kong
Entity Incorporation, Date of Incorporation Sep. 22, 2009
Disposal Date Dec. 31, 2012
Silver Tech Enterprises Ltd
 
Entity Incorporation, State Country Name British Virgin Islands
Entity Incorporation, Date of Incorporation Jun. 01, 2010
Ever Elite Corporation Limited
 
Entity Incorporation, State Country Name Hong Kong
Entity Incorporation, Date of Incorporation Jun. 01, 2010
Disposal Date Apr. 05, 2013
Nollec Wireless Company Ltd
 
Entity Incorporation, State Country Name People's Republic of China
Entity Incorporation, Date of Incorporation Jun. 01, 2010
Disposal Date Apr. 05, 2013
Celestial Digital Entertainment, Ltd.
 
Entity Incorporation, State Country Name Hong Kong
Entity Incorporation, Date of Incorporation Jan. 04, 2011
Disposal Date Dec. 31, 2012
Zoom USA Holdings, Inc.
 
Entity Incorporation, State Country Name Delaware
Entity Incorporation, Date of Incorporation Oct. 11, 2011
Loan Default

 

Portables Unlimited LLC
 
Loan Default

As of July 15, 2013, the Company was in default of the promissory note for $2,000,000 owed to Portables Unlimited, Inc. The promissory note was collateralized by the Company's ownership percentage in Portables. As of the date of this report, the Company was not able to recover its investment. As a result, Zoom ceased to have a an equity interest in Portables and did not retain an investment in it on the date of default, July 15, 2013, accordingly, the Company recognized a loss which includes a complete write off of its investment in Portables. The Company recorded a loss on disposal of approximately $11.5 million related to its write-off of Portables.

Zoom Technologies, Inc.
 
Entity Incorporation, State Country Name Delaware
Entity Incorporation, Date of Incorporation Feb. 28, 2002
Description and Timing of Disposal

On December 31, 2012, Zoom Technologies, Inc. ("Zoom" or the "Company") entered into a Share Purchase Agreement (the "SPA") with Beijing Zhumu Culture Communication Company, Ltd. ("BZCC"), a PRC company that provides services to the telecommunication industry. Pursuant to the SPA, the Company agreed to sell (the "Subsidiary Sale") to the Purchaser all the equity interests the Company holds in its China based subsidiaries (except for SpreadZoom Technologies Co., Ltd. ("SpreadZoom") as mentioned below), which include 100% of the outstanding equity interest of Ever Elite Corporation Limited, an intermediary holding company incorporated in Hong Kong, and its wholly owned subsidiary, Nollec, 80% of the outstanding equity interest of TCB Digital, 100% of the outstanding equity interest of Profit Harvest Corporation, Ltd. ("Profit Harvest"), and 100% of the outstanding equity interest of Celestial Digital Entertainment, Ltd. ("CDE"). As consideration for the Subsidiary Sale, the Purchaser agreed to pay to the Company RMB 200 million (approximately US$31.7 million) (the "Purchase Price"), subject to adjustment pending an appraisal by an independent third party appraiser. The Company on October 24, 2012 received approximately $12.6 million (RMB 80 million) less bank charges; the Company on November 5, 2012, received $19.1 million (RMB 120 million) less transaction fees and bank charges. As of the date of this report, the Purchaser has remitted the entire amount of RMB 200 million to the Company, of which RMB120 million was initially held in escrow pending the closing of the Subsidiary Sale. Of this amount, a portion of the funds, approximately RMB 80 million, has been released to the Company to use; accordingly, in the normal course of business, the Company deployed those funds to SpreadZoom and Tianjin Leimone as detailed in "Note 11 - Related Party Transactions". The RMB 80 million released from escrow was a negotiated amount between the Company and the Purchaser. On December 30, 2013, BZCC assigned its purchase right to TCB Digital to Tianjin Huatianli Trading Co., Ltd. ("Huatianli"). On December 30, 2013, the Company consented to the assignment between BZCC and Huatianli and agreed to amend the SPA to reflect the change. In connection with the assignment, RMB120 million, representing the balance of the Purchase Price that was being held in escrow pending the closing of all of the sales under the SPA, was agreed upon to be released within 10 business days to a Company-designated bank account. Of that amount, approximately RMB 68 million was available for the Company's immediate use, and approximately RMB52 million, representing the purchase price for TCB Digital, was be monitored by Huatianli until the closing of the TCB Digital sale. As of the date of this report the RMB 120 million is held in a wealth management account at New Times Trust Holding Co., Ltd. The Company's Chief Executive Officer has unencumbered sole signing and dispositive rights to that account. As of May 16, 2014, the Company has received payment in full from Huatianli for the sale of TCB Digital and the Company has completed the transfer of Jiangsu Leimone's ownership interest in TCB Digital to Huatianli. Since the Company received payment separately from Huantianli for RMB 52 million, the Company is obligated to repay RMB 52 million to BZCC from the RMB 120 million held in the wealth management account.

The Company's ownership interest in SpreadZoom, which owns and operates mobile phone manufacturing facilities in Tianjin, was not part of the Subsidiary Sale.

The closing of the sale of Profit Harvest and CDE occurred on December 31, 2012; the closing of the sale of Ever Elite and Nollec occurred on April 5, 2013

As disclosed above, as of July 15, 2013, the Company has completely written off its investment in Portables Unlimited, LLC.

As of May 31, 2014, the Company's board of directors decided that it would explore the sale of SpreadZoom; Huatianli, the buyer of TCB Digital has expressed interest in buying the SpreadZoom but has not given a formal offer with a price that is acceptable to the Company; however, subsequent to March 31, 2014, Huatianli made a deposit of RMB 2 million with the Company indicating its intent to purchase. The Company is currently awaiting an evaluation report to be issued by a third party appraisal firm to determine an appropriate sales price.

 

 

XML 21 R37.htm IDEA: XBRL DOCUMENT v2.4.0.8
Stock Options (Tables)
3 Months Ended
Mar. 31, 2014
Stock Options Tables  
Option plan activity

The following summary represents options activity during the three months ended March 31, 2014 under the New Plan.

          Weighted-      
    Under     Average     Aggregate
    New     Exercise     Intrinsic
    Plan     Price     Value
Balance, December 31, 2013   199,125    $ 12.58    $ -  
     Granted   -              
     Lapsed   (61,400)     37.50      -  
     Exercised                 
     Cancelled   -       -       -  
Balance, March 31, 2014   137,725    $ 11.39    $ -  

 

 

 

Option plan summary

The following represents options summary as of March 31, 2014 under the New Plan.

    Options Outstanding   Options Exercisable
          Weighted-     Weighted-         Weighted-
          Average     Average         Average
    Number     Remaining     Exercise   Number     Exercise
    Outstanding     Contractual Life     Price   Exercisable     Price
Options   137,725      2.80 years   $ 11.39    137,725    $ 11.39 

 

 

 

XML 22 R52.htm IDEA: XBRL DOCUMENT v2.4.0.8
Short-term Loans (Narrative) (Details) (USD $)
3 Months Ended
Mar. 31, 2014
Dec. 31, 2013
Short-term loans $ 3,113,830 $ 3,158,587
Loans Payable to Bank, Noncurrent 1,248,023 1,352,103
STL Loan 1
   
Short-term Debt, Lender

M&T Bank

 

 

 

 
Short-term Debt, Terms

In 2012, the Company and Portables entered into a line of credit with M&T Bank for $3.0 million. At December 31, 2012 the loan balance which was classified as short term loan, was $2,994,999. The line was collateralized by real property, a certificate of deposit, and guarantees of Portables Unlimited, Inc. (the 49.9% owner of Portables). The interest rate was 1 month LIBOR plus 3.00%. The maturity date of the line of credit is March 26, 2015. In February of 2013, the line of credit was refinanced to a maximum borrowing amount of $2.5 million. At March 31, 2014 and December 31, 2013 the Company accrued an amount due on the line of credit for $2.5 million. On May 20, 2014, the Company was released by M&T Bank as co-borrower for the line of credit. The Company will recognize a gain in the second quarter of 2014 for $2.5 million reflecting the release.

 

 

 
Short-term loans 2,500,000 2,500,000
STL Loan 2
   
Short-term Debt, Lender

M&T Bank

 

 

 

 
Short-term Debt, Terms

In February of 2013 the Company and Portables jointly entered into a term loan with M&T Bank for $2,500,000 million that matures in February of 2017. The balance of the note fully amortizes via monthly principal and interest payments up through the maturity of the note. The note carries an interest of 1 month LIBOR plus 3.50%. At March 31, 2014, Portables had repaid $638,147 in principal; the outstanding balance of the note was $1,861,853. The Company accounted for the outstanding balance of $1,861,853 with $613,830 as short term, and the remainder of $1,248,023 as long term. On May 20, 2014, the Company was released by M&T Bank as co-borrower for the term note. The Company will recognize a gain in the second quarter of 2014 for $1,861,853 million reflecting the release.

 

 

 

 
Short-term loans 613,830  
Loans Payable to Bank, Noncurrent $ 1,248,023  
XML 23 R67.htm IDEA: XBRL DOCUMENT v2.4.0.8
Discontinued Operations (Details) (USD $)
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Dec. 31, 2013
Dec. 31, 2012
Results of Operations        
Net revenues $ 56,298,303 $ 42,257,043    
Cost of sales 54,275,799 40,241,554    
Gross profit 2,022,504 2,015,489    
Operating expenses 1,425,832 1,650,821    
Operating income 596,672 364,668    
Other income (expenses), net (465,327) (702,175)    
(Loss) income before taxes from discontinued operations 131,345 (337,507)    
less: Provision for income taxes 32,305 21,061    
Income (loss) from discontinued operations, net of tax 99,040 (358,568)    
Amounts attributable to Zoom Technologies, Inc. common shareholders        
Income (loss) from discontinued operations 154,632 (320,687)    
Basic $ 0.05 $ (0.11)    
Diluted $ 0.05 $ (0.11)    
Financial Position        
Cash and equivalents 8,963,618 4,522,371 2,848,859 3,225,516
Restricted cash 72,010,257   80,658,355  
Notes receivable      669,583  
Accounts receivable, net 17,085,575   20,225,872  
Inventories, net 19,846,379   18,809,671  
Other receivables and prepaid expenses 147,143   2,061,687  
Advance to suppliers 355,578   224,913  
Due from related parties 5,818,141   204,509  
Property, plant and equipment, net 1,472,004   1,636,316  
Deferred tax assets, noncurrent 69,570   70,136  
Total current assets 125,768,265   127,409,901  
Total Assets of Discontinued Operations 125,768,265   127,409,901  
Short-term loans 34,404,972   38,529,498  
Notes payable 29,588,128   42,441,911  
Accounts payable 40,342,706   42,843,584  
Accrued expenses and other payables 866,404   19,643  
Advances from customers 272,718   97,110  
Taxes payable (5,362,691)   (4,106,935)  
Due to related parties 37,162,963   19,284,688  
Total current liabilities 137,275,200   139,109,499  
Total Liabilities of Discontinued Operations 137,275,200   139,109,499  
Net (Liabilities) Assets of Discontinued Operations $ (11,506,935)   $ (11,699,598)  
XML 24 R61.htm IDEA: XBRL DOCUMENT v2.4.0.8
Stock Options Outstanding and Exercisable (Details) (USD $)
3 Months Ended
Mar. 31, 2014
Dec. 31, 2013
Stock Options Outstanding And Exercisable Details    
Options Outstanding, Number of Shares 137,725 199,125
Options Outstanding, Weighted-Average Remaining Contractual Term (in years) 2 years 292 days  
Options Outstanding, Weighted-Average Exercise Price Per Share $ 11.39 $ 12.58
Options Exercisable, Number of Shares 137,725  
Options Exercisable, Weighted-Average Exercise Price Per Share $ 11.39  
XML 25 R47.htm IDEA: XBRL DOCUMENT v2.4.0.8
Property and Equipment Estimated Useful Lives (Details)
3 Months Ended
Mar. 31, 2014
Machinery and equipment | Minimum
 
Estimated Useful Lives 4 years
Machinery and equipment | Maximum
 
Estimated Useful Lives 6 years
Electronic equipment | Minimum
 
Estimated Useful Lives 4 years
Electronic equipment | Maximum
 
Estimated Useful Lives 6 years
Transportation equipment | Minimum
 
Estimated Useful Lives 4 years
Transportation equipment | Maximum
 
Estimated Useful Lives 6 years
Computer equipment | Minimum
 
Estimated Useful Lives 4 years
Computer equipment | Maximum
 
Estimated Useful Lives 6 years
Office equipment | Minimum
 
Estimated Useful Lives 4 years
Office equipment | Maximum
 
Estimated Useful Lives 6 years
XML 26 R9.htm IDEA: XBRL DOCUMENT v2.4.0.8
BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES - Note 2
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES - Note 2

NOTE 2 — BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

The Company's accompanying condensed consolidated balance sheet at March 31, 2014 includes the accounts of Gold Lion Holding Ltd and its wholly owned subsidiary Jiangsu Leimone, its 100%-owned subsidiary Silver Tech, and its wholly owned subsidiary, Zoom Sub. The Company's consolidated balance sheet also included the accounts of TCB Digital for which the Company owns 80% indirectly held through Jiangsu Leimone which has been classified as discontinued operations held for sale.

The Company's accompanying condensed consolidated balance sheet at December 31, 2013 includes the accounts of Gold Lion Holding Ltd and its wholly owned subsidiary Jiangsu Leimone, its 100%-owned subsidiary Silver Tech, and its wholly owned subsidiary, Zoom Sub. The Company's consolidated balance sheet also included the accounts of TCB Digital for which the Company owns 80% indirectly held through Jiangsu Leimone which has been classified as discontinued operations held for sale.

The Company's condensed consolidated results of operations for the three months ended March 31, 2014 from continuing operations included the results of Gold Lion, Silver Tech, Jiangsu Leimone, Zoom Sub.; results of operations from TCB Digital have been presented as discontinued operations.

The Company's condensed consolidated results of operations for the three months ended March 31, 2013 from continuing operations included the results of Gold Lion, Silver Tech, Jiangsu Leimone, and Zoom Sub (as restated); results of operations from Ever Elite, Nollec Wireless, and TCB Digital have been presented as discontinued operations.

The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.

Noncontrolling interest represents the ownership interests in a subsidiary that was held by owners other than the parent and is part of the equity of the consolidated group. The noncontrolling interest is reported in the consolidated statement of financial position within equity, separately from the parent's equity. Net income or loss and comprehensive income or loss is attributed to the parent and the noncontrolling interest.  If losses attributable to the parent and the noncontrolling interest in a subsidiary exceed their interests in the subsidiary's equity, the excess, and any further losses attributable to the parent and the noncontrolling interest, is attributed to those interests.

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). The functional currency of the Company's continuing operation Jiangsu Leimone and its equity investment SpreadZoom is the Chinese Renminbi ("RMB"). The functional currency of the Company's continuing operation, Zoom Sub is United States Dollars ("USD" or "$"). The functional currency of the Company's discontinued operations, TCB Digital and Nollec is the RMB. The functional currency of the Company's discontinued operations Ever Elite and CDE is Hong Kong Dollars ("HKD"). The accompanying consolidated financial statements are translated and presented in the reporting currency of USD. The functional currency of the Company's equity method investment, Portables, is the USD.

The interim condensed consolidated financial information as of March 31, 2014 and for the three months ended March 31, 2014 and 2013 have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures, which are normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The interim consolidated financial information should be read in conjunction with the financial statements and the notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, previously filed with the SEC. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company's consolidated financial position as of March 31, 2014, its consolidated results of operations and cash flows for the three month periods ended March 31, 2014 and 2013, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

Equity Method Accounting

In May 2012, the Company invested $12.3 million to establish a joint venture named SpreadZoom Technologies Co. Ltd., ("SpreadZoom"). The Company owns 47.4% of SpreadZoom and accounted for this investment under the equity method of accounting (ASC 323-30). Refer to "Note 18 - Equity Method Investments" for details.

The Company revised its accounting for Portables Unlimited, LLC. Previously, the Company accounted for the investment as a subsidiary under the consolidation method of accounting; as of the date of this report, Company retroactively changed its method of accounting for Portables to the equity method. Previously reported net income/(loss) attributable to the Company were unchanged; however, the consolidated balance sheet at December 31, 2012 no longer includes all of the assets and liabilities of Portables. As of December 31, 2013, Portables was no longer an investment of the Company. The results of operations of Portables for the three months ended March 31, 2013 were presented using the consolidation method of accounting; those results have been restated and disclosed using the equity method of accounting under the line item "equity method net investment loss" under "Other income and (expenses)". As disclosed above the Company completely wrote off the investment on July 15, 2013, recording a loss of approximately $11.5 million. At December 31, 2012, the Company was a joint borrower on a $3 million line of credit provided by M&T Bank. This line was refinanced in February of 2013 to be reduced to $2.5 million; concurrently, the Company and Portables co-borrow $2.5 million in a term note from M&T Bank. Both the line of credit and term note were accounted for as an increase to the investment amount when Portables was still owned by the Company. The investment was written off in July of 2013; however, at December 31, 2013, the maximum value of the line of credit of $2.5 million and the amortized balance of the term note are carried as liabilities on the Company's consolidated balance sheets. On May 20, 2014, Portables and M&T Banks released the Company from the obligation of repaying the line of credit and term note. Refer to "Note 9 - Short Term Loans" for further details.

Exclusion of Related Party Lessor from Consolidation

Portables, commencing in January 2009, subleased its principal facility from one of its members. The member began leasing the facility in December 2005 from a related party, AUM Realty, LLC ("AUM"). The Company's management has assessed whether AUM should be consolidated pursuant to FASB ASC 810 Consolidations. ASC 810 is not a "rules based" standard and thereby includes limited circumstances under which it can be conclusively determined whether an entity should be consolidated. Management believes that AUM is not a variable interest entity ("VIE") as defined in ASC 810 because AUM was adequately capitalized. Equity contributions from AUM's owners exceeded 20% of the acquisition costs of the property. Management believes that this is, according to ASC 810 criteria, "sufficient to permit the entity to finance its activities without additional subordinated financial support." Management believes that the same was true up to July 15, 2013, the date of disposition of Portables.

Based on this assessment, management believes that AUM is not a VIE because the Company does not make decisions that have significant impact on the performance of AUM; therefore, it is not consolidated as a component of these consolidated financial statements. If the matter were to be assessed differently, these consolidated financial statements would have included AUM's assets (principally land and building), liabilities (principally loan payable) and expenses, with the excess of AUM's assets over liabilities shown as a "non-controlling interest". AUM guarantees $1.7 million of the $3 million line of credit with M&T Bank for Portables Unlimited, LLC.

Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.

Risks and Uncertainties

The Company is subject to substantial risks from, among other things, intense competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility of public markets.

Comprehensive Income

The Company follows the provisions of ASC 220 "Reporting Comprehensive Income", establishes standards for the reporting and display of comprehensive income, its components and accumulated balances in a full set of general purpose financial statements.

ASC 220 defines comprehensive income is comprised of net income and all changes to the statements of stockholders' equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders, including adjustments to minimum pension liabilities, accumulated foreign currency translation, and unrealized gains or losses on marketable securities.

Foreign Currency Translation and Transactions

The accounts of the Company's Chinese subsidiaries are maintained in the RMB and the accounts of the U.S. parent company are maintained in the USD. The accounts of the Chinese subsidiaries were translated into USD in accordance with Financial Accounting Standards ("FASB") Accounting Standards Codification ("ASC") Topic 810 with the RMB as the functional currency for the Chinese subsidiaries. According to ASC 810, all assets and liabilities were translated at the exchange rate at the date of the balance sheet; stockholders' equity is translated at historical rates; the line items on the statement of operations are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with FASB ASC Topic 220. Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the income statement.

Cash and Equivalents

For Statement of Cash Flows purposes, the Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. The Company maintains cash with various banks and trust companies located in China, Hong Kong and the United States. Cash accounts in China and Hong Kong are not insured or otherwise protected. Should any bank or trust company holding cash deposits become insolvent, or if the Company is otherwise unable to withdraw funds, the Company would lose the cash on deposit with that particular bank or trust company.

Accounts Receivable

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Accounts are written off against the allowance when it becomes evident collection will not occur. For the contracted manufacturing activities, our standard terms for accounts receivable from our customers are between 60 to 75 days from close of the billing cycle; and for sales of own brand phones our terms include prepaid arrangements and extending receivable to customers up to 60 days. We also offer credit terms of up to 150 days in our trading activities to a certain customers.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined on a weighted average basis and includes all expenditures incurred in bringing the goods to the point of sale and putting them in a saleable condition. In assessing the ultimate realization of inventories, the management makes judgments as to future demand requirements compared to current or committed inventory levels.

In addition, the Company estimates net realizable value based on intended use, current market value and inventory ageing analyses. The Company writes down inventories for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventories and their estimated market value based upon assumptions about future demand and market conditions.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Gains or losses on disposals are reflected as gain or loss in the year of disposal. All ordinary repair and maintenance costs are expensed as incurred. Expenditures for maintenance and repairs are expensed as incurred. Major renewals and betterments are charged to the property accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed in the current period. 

Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of assets. See "Note 7 - Property, Plant and Equipment" for details.

Capitalized Interest

Interest associated with major development and construction projects is capitalized and included in the cost of the project. When no debt is incurred specifically for a project, interest is capitalized on amounts expended on the project using weighted-average cost of the Company's outstanding borrowings. Capitalization of interest ceases when the project is substantially complete or development activity is suspended for more than a brief period. There have not been material amounts of capitalized interest for the three months ended March 31, 2014 and 2013.

Impairment of Long-lived Assets

In accordance with ASC 360, "Property, Plant and Equipment", the Company reviews the carrying values of long-lived assets, including property, plant and equipment and other intangible assets, whenever facts and circumstances indicate that the assets may be impaired. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If an asset is considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs of disposal. The Company last performed annual reviews of its long-lived assets at December 31, 2013.

Goodwill

The Company recognizes goodwill for the excess of the purchase price over the fair value of the identifiable net assets of the business acquired. ASC 350 "Intangible Assets-Goodwill and Other", an impairment test for goodwill is undertaken by the Company at the reporting unit level annually, or more frequently if events or changes in circumstances indicate that goodwill might be impaired. The Company recorded impairment of goodwill related to the following subsidiaries: Jiangsu Leimone, CDE, and Silver Tech. See "Note 3 - Merger and Acquisitions" for details.

Revenue Recognition

The Company recognizes sales in accordance with FASB ASC Topic 605, "Revenue Recognition."

The Company recognizes revenue when the following criteria are met:

(i) persuasive evidence of an arrangement exists;

(ii) delivery has occurred or services were rendered;

(iii) the price to the customer is fixed or determinable and,

(iv) collection of the resulting receivable is reasonably assured. Revenue is not recognized until title and risk of loss is transferred to the customer, which occurs upon delivery of goods, and objective evidence exists that customer acceptance provisions were met.

The Company bases its estimates on historical experience taking into consideration the type of products sold, the type of customer, and the type of specific transaction in each arrangement. Revenues represent the invoiced value of goods, net of value added tax ("VAT").

The Company does not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers. Deposits or advance payments from customers prior to delivery of goods and passage of title of goods are recorded as advanced from customers.

The Company's discontinued operation, Nollec is in the mobile phone design, software integration and mobile solution R&D business. Nollec recognizes revenue under the percentage of completion method ASC Topic 605- 35-25 (Construction - Type and Production - Type Contracts) when reasonably dependable estimates can be made and all the following conditions exist:

  1. Contracts executed by the parties normally include provisions that clearly specify the enforceable rights regarding goods or services to be provided and received by the parties, the consideration to be exchanged, and the manner and terms of settlement.
  2. The buyer can be expected to satisfy all obligations under the contract.
  3. The contractor can be expected to perform all contractual obligations.

Estimates of cost to complete is reviewed periodically and revised as appropriate to reflect new information. When the current estimates of total contract revenue and contract cost indicate a loss, a provision for the entire loss on the contract is made.

Income is recognized as the percentage of estimated total income, and is determined by dividing incurred costs to date by estimated total costs after giving effect to adjustments, if any, in estimates of costs to completion based upon the most recent information. Percentage of completion is based on labor hours incurred to date divided by total estimated labor hours for the contract.

Royalty income on sales of licensed products by its customers is recorded when the customers report sales to the Company. Royalty income is reported monthly and recorded in the period in which the product is sold. The Company has the right to audit the books of the licensees.

The Company's discontinued operation CDE is in the business of video games and applications for mobile phones and mobile platforms development. Revenue is recognized in accordance with ASC 985-605-55-125. Cost of Software Development Revenue is accounted for under ASC 985-20 to be sold, leased or otherwise marketed.

CDE capitalizes cost of development of software for hosting purpose in accordance with ASC subtopic 350-40 ("ASC 350-40"), Intangibles-Goodwill and Other: Internal-Use. As such, CDE expenses all costs that are incurred in connection with the planning and implementation phases of development and costs that are associated with repair or maintenance. Costs incurred in the development phase are capitalized and amortized over the estimated product life. Since the inception of CDE, the amount of costs qualifying for capitalization has been insignificant and as a result all internally used software development costs have been expensed as incurred.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740 "Income Taxes", previously SFAS No. 109. Under this method, deferred income taxes are recognized for the estimated tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts and each year-end based on enacted tax laws and statutory rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets to the amount expected to be realized when, in management's opinion; it is more likely than not that some portion of the deferred tax assets will not be realized. The provision for income taxes represents current taxes payable net of the change during the period in deferred tax assets and liabilities.

Uncertain Tax Positions

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. The Company classifies the liability for unrecognized tax benefits as current to the extent that the Company anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized and recorded as necessary in the provision for income taxes. There were no uncertain tax positions in 2013 and 2012. The Company's evaluation of uncertain tax positions was performed for the tax years ended December 31, 2009 and forward, the tax years which remain subject to examination as of March 31, 2014.

Operating Leases

Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company that do not meet the capitalization criteria of ASC 840 "Leases", are accounted for as operating leases. Rental payables under operating leases are expensed on the straight-line basis over the lease term.

Research and Development Costs

Research and development costs are related primarily to the development of cell phone technology, video games and applications for mobile phones and mobile platforms development. Research and development costs are expensed as incurred.

Loss per Share

The Company reports earnings (loss) per share in accordance with the provisions of ASC 260 "Earnings Per Share". ASC 260 requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock using the treasury method.

Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company's net income (loss) position at the calculation dates. When the Company's results from operations are a net loss, dilutive securities are not included in diluted loss per share because they would be considered anti-dilutive.

Fair Values of Financial Instruments

ASC 820 "Fair Value Measurements and Disclosures", defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The carrying amounts reported in the balance sheets for current receivables and payables qualify as financial instruments. Management concluded the carrying values are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and if applicable, their stated interest rate approximates current rates available. The three levels are defined as follows:

  • Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
  • Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
  • Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

The assets measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of March 31, 2014 and December 31, 2013 are as follows:

                  Significant      
            Active Markets     Other     Significant
      Carrying     for Identical     Observable     Unobservable
      Value     Assets     Inputs     Inputs
      March 31, 2014     (Level 1)     (Level 2)     (Level 3)
Cash and cash equivalents   $ 4,694,290    $ 4,694,290    $ -    $ - 
Restricted cash   $ 8,463,136    $ 8,463,136    $ -    $ - 
Short-term investments   $ 11,011,376    $ 11,011,376    $ -    $ - 
Warrants   $ -    $ -    $ -    $ - 
                         
                  Significant      
            Active Markets     Other     Significant
      Carrying     for Identical     Observable     Unobservable
      Value     Assets     Inputs     Inputs
      December 31, 2013     (Level 1)     (Level 2)     (Level 3)
Cash and cash equivalents   $ 36,735    $ 36,735    $ -    $ - 
Restricted cash   $ 19,632,865    $ 19,632,865    $ -    $ - 
Short-term investments   $ -    $ -    $ -    $ - 
Warrants   $ 377    $ -    $ 377    $ - 

The Company's financial instruments include cash and equivalents, restricted cash, accounts receivable, notes receivables, other receivables, accounts payable, notes payable, and warrants. Cash and cash equivalents consist primarily of high rated money market funds at a variety of well-known institutions with original maturities of three months or less. Restricted cash represents time deposits on account to secure short-term bank loans and notes payable. Management estimates the carrying amounts of the non-related party financial instruments approximate their fair values due to their short-term nature.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and equivalents and trade and bills receivables. As of March 31, 2014 and December 31, 2013, substantially all of the Company's cash and equivalents and restricted cash were held by major financial institutions located in the PRC, Hong Kong and the United States, which management believes are of high credit quality. With respect to trade and notes receivables, the Company extends credit based on an evaluation of the customer's financial condition. The Company generally does not require collateral for trade receivables and maintains an allowance for doubtful accounts of trade receivables.

Notes receivable are undertaken by the banks to honor the payments at maturity and the customers are required to place deposits with the banks equivalent to certain percentage of the notes amount as collateral. These notes receivable can be sold to any third party at a discount before maturity. The Company does not maintain an allowance for notes receivable in the absence of bad debt experience and the payments are undertaken by the banks.

Non-controlling Interests

The Company follows ASC 810 for reporting non-controlling interest ("NCI") in a subsidiary. As a result, the Company reports NCI as a separate component of Equity in the Consolidated Balance Sheet. Additionally, the Company reports the portion of net income and comprehensive income attributed to the Company and NCI separately in the Consolidated Statement of Income.

Statement of Cash Flows

In accordance with ASC 230, "Statement of Cash Flows", cash flows from the Company's operations are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.

Recent Accounting Pronouncements

The FASB has issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). The amendments in this ASU state that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company has not yet determined the effect of the adoption of this standard and it is expected to have a material impact on the Company's consolidated financial position and results of operations.

 

 

 

XML 27 R62.htm IDEA: XBRL DOCUMENT v2.4.0.8
Income Tax (Narrative) (Details) (USD $)
Mar. 31, 2014
Dec. 31, 2013
Zoom Technologies
   
Statutory tax rate 34.00%  
Net operating loss carry forward period, years 20  
Net operating loss ("NOL") carry forwards $ 4,290,000 $ 4,040,000
Deferred tax asset valuation allowance provided $ 4,290,000 $ 4,040,000
TCB Digital
   
Statutory tax rate 25.00%  
Jiangsu Leimone
   
Statutory tax rate 25.00%  
Nollec Wireless
   
Statutory tax rate 25.00%  
Profit Harvest
   
Statutory tax rate 16.50%  
CDE
   
Statutory tax rate 16.50%  
Portables
   
Statutory tax rate 34.00%  
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Accounting Policies (Fair Value of Financial Instruments) (Details) (USD $)
Mar. 31, 2014
Dec. 31, 2013
Mar. 31, 2013
Dec. 31, 2012
Cash and cash equivalents $ 4,694,290 $ 36,735 $ 8,730 $ 8,351
Restricted cash 8,463,136 19,632,865    
Warrants 0 377    
Level 1
       
Cash and cash equivalents 4,694,290 36,735    
Restricted cash 8,463,136 19,044,294    
Warrants 0 0    
Level 2
       
Cash and cash equivalents 0 0    
Restricted cash 0 0    
Warrants 0 377    
Level 3
       
Cash and cash equivalents 0 0    
Restricted cash 0 0    
Warrants $ 0 $ 0    

XML 30 R29.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
Principles of Consolidation

Principles of Consolidation

The Company's accompanying condensed consolidated balance sheet at March 31, 2014 includes the accounts of Gold Lion Holding Ltd and its wholly owned subsidiary Jiangsu Leimone, its 100%-owned subsidiary Silver Tech, and its wholly owned subsidiary, Zoom Sub. The Company's consolidated balance sheet also included the accounts of TCB Digital for which the Company owns 80% indirectly held through Jiangsu Leimone which has been classified as discontinued operations held for sale.

The Company's accompanying condensed consolidated balance sheet at December 31, 2013 includes the accounts of Gold Lion Holding Ltd and its wholly owned subsidiary Jiangsu Leimone, its 100%-owned subsidiary Silver Tech, and its wholly owned subsidiary, Zoom Sub. The Company's consolidated balance sheet also included the accounts of TCB Digital for which the Company owns 80% indirectly held through Jiangsu Leimone which has been classified as discontinued operations held for sale.

The Company's condensed consolidated results of operations for the three months ended March 31, 2014 from continuing operations included the results of Gold Lion, Silver Tech, Jiangsu Leimone, Zoom Sub.; results of operations from TCB Digital have been presented as discontinued operations.

The Company's condensed consolidated results of operations for the three months ended March 31, 2013 from continuing operations included the results of Gold Lion, Silver Tech, Jiangsu Leimone, and Zoom Sub (as restated); results of operations from Ever Elite, Nollec Wireless, and TCB Digital have been presented as discontinued operations.

The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.

Noncontrolling interest represents the ownership interests in a subsidiary that was held by owners other than the parent and is part of the equity of the consolidated group. The noncontrolling interest is reported in the consolidated statement of financial position within equity, separately from the parent's equity. Net income or loss and comprehensive income or loss is attributed to the parent and the noncontrolling interest.  If losses attributable to the parent and the noncontrolling interest in a subsidiary exceed their interests in the subsidiary's equity, the excess, and any further losses attributable to the parent and the noncontrolling interest, is attributed to those interests.

Exclusion of Related Party Lessor from Consolidation

Portables, commencing in January 2009, subleased its principal facility from one of its members. The member began leasing the facility in December 2005 from a related party, AUM Realty, LLC ("AUM"). The Company's management has assessed whether AUM should be consolidated pursuant to FASB ASC 810 Consolidations. ASC 810 is not a "rules based" standard and thereby includes limited circumstances under which it can be conclusively determined whether an entity should be consolidated. Management believes that AUM is not a variable interest entity ("VIE") as defined in ASC 810 because AUM was adequately capitalized. Equity contributions from AUM's owners exceeded 20% of the acquisition costs of the property. Management believes that this is, according to ASC 810 criteria, "sufficient to permit the entity to finance its activities without additional subordinated financial support." Management believes that the same was true up to July 15, 2013, the date of disposition of Portables.

Based on this assessment, management believes that AUM is not a VIE because the Company does not make decisions that have significant impact on the performance of AUM; therefore, it is not consolidated as a component of these consolidated financial statements. If the matter were to be assessed differently, these consolidated financial statements would have included AUM's assets (principally land and building), liabilities (principally loan payable) and expenses, with the excess of AUM's assets over liabilities shown as a "non-controlling interest". AUM guarantees $1.7 million of the $3 million line of credit with M&T Bank for Portables Unlimited, LLC.

 

 

Equity Method Accounting

Equity Method Accounting

 

In May 2012, the Company invested $12.3 million to establish a joint venture named SpreadZoom Technologies Co. Ltd., ("SpreadZoom"). The Company owns 47.4% of SpreadZoom and accounted for this investment under the equity method of accounting (ASC 323-30). Refer to "Note 18 - Equity Method Investments" for details.

The Company revised its accounting for Portables Unlimited, LLC. Previously, the Company accounted for the investment as a subsidiary under the consolidation method of accounting; as of the date of this report, Company retroactively changed its method of accounting for Portables to the equity method. Previously reported net income/(loss) attributable to the Company were unchanged; however, the consolidated balance sheet at December 31, 2012 no longer includes all of the assets and liabilities of Portables. As of December 31, 2013, Portables was no longer an investment of the Company. The results of operations of Portables for the three months ended March 31, 2013 were presented using the consolidation method of accounting; those results have been restated and disclosed using the equity method of accounting under the line item "equity method net investment loss" under "Other income and (expenses)". As disclosed above the Company completely wrote off the investment on July 15, 2013, recording a loss of approximately $11.5 million. At December 31, 2012, the Company was a joint borrower on a $3 million line of credit provided by M&T Bank. This line was refinanced in February of 2013 to be reduced to $2.5 million; concurrently, the Company and Portables co-borrow $2.5 million in a term note from M&T Bank. Both the line of credit and term note were accounted for as an increase to the investment amount when Portables was still owned by the Company. The investment was written off in July of 2013; however, at December 31, 2013, the maximum value of the line of credit of $2.5 million and the amortized balance of the term note are carried as liabilities on the Company's consolidated balance sheets. On May 20, 2014, Portables and M&T Banks released the Company from the obligation of repaying the line of credit and term note. Refer to "Note 9 - Short Term Loans" for further details.

 

Basis of Presentation

Basis of Presentation

 

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). The functional currency of the Company's continuing operation Jiangsu Leimone and its equity investment SpreadZoom is the Chinese Renminbi ("RMB"). The functional currency of the Company's continuing operation, Zoom Sub is United States Dollars ("USD" or "$"). The functional currency of the Company's discontinued operations, TCB Digital and Nollec is the RMB. The functional currency of the Company's discontinued operations Ever Elite and CDE is Hong Kong Dollars ("HKD"). The accompanying consolidated financial statements are translated and presented in the reporting currency of USD. The functional currency of the Company's equity method investment, Portables, is the USD.

The interim condensed consolidated financial information as of March 31, 2014 and for the three months ended March 31, 2014 and 2013 have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures, which are normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The interim consolidated financial information should be read in conjunction with the financial statements and the notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, previously filed with the SEC. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company's consolidated financial position as of March 31, 2014, its consolidated results of operations and cash flows for the three month periods ended March 31, 2014 and 2013, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

 

Use of Estimates

Use of Estimates

 

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.

 

 

 

 

Risks and Uncertainties

Risks and Uncertainties

 

The Company is subject to substantial risks from, among other things, intense competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility of public markets.

 

 

Comprehensive Income

Comprehensive Income

 

The Company follows the provisions of ASC 220 "Reporting Comprehensive Income", establishes standards for the reporting and display of comprehensive income, its components and accumulated balances in a full set of general purpose financial statements.

ASC 220 defines comprehensive income is comprised of net income and all changes to the statements of stockholders' equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders, including adjustments to minimum pension liabilities, accumulated foreign currency translation, and unrealized gains or losses on marketable securities.

 

Foreign Currency Translation and Transactions

Foreign Currency Translation and Transactions

The accounts of the Company's Chinese subsidiaries are maintained in the RMB and the accounts of the U.S. parent company are maintained in the USD. The accounts of the Chinese subsidiaries were translated into USD in accordance with Financial Accounting Standards ("FASB") Accounting Standards Codification ("ASC") Topic 810 with the RMB as the functional currency for the Chinese subsidiaries. According to ASC 810, all assets and liabilities were translated at the exchange rate at the date of the balance sheet; stockholders' equity is translated at historical rates; the line items on the statement of operations are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with FASB ASC Topic 220. Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the income statement.

 

 

 

 

Cash and Equivalents

Cash and Equivalents

 

For Statement of Cash Flows purposes, the Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. The Company maintains cash with various banks and trust companies located in China, Hong Kong and the United States. Cash accounts in China and Hong Kong are not insured or otherwise protected. Should any bank or trust company holding cash deposits become insolvent, or if the Company is otherwise unable to withdraw funds, the Company would lose the cash on deposit with that particular bank or trust company.

 

 

 

 

Accounts Receivable

Accounts Receivable

 

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Accounts are written off against the allowance when it becomes evident collection will not occur. For the contracted manufacturing activities, our standard terms for accounts receivable from our customers are between 60 to 75 days from close of the billing cycle; and for sales of own brand phones our terms include prepaid arrangements and extending receivable to customers up to 60 days. We also offer credit terms of up to 150 days in our trading activities to a certain customers.

 

 

Inventories

Inventories

 

Inventories are stated at the lower of cost or market. Cost is determined on a weighted average basis and includes all expenditures incurred in bringing the goods to the point of sale and putting them in a saleable condition. In assessing the ultimate realization of inventories, the management makes judgments as to future demand requirements compared to current or committed inventory levels.

In addition, the Company estimates net realizable value based on intended use, current market value and inventory ageing analyses. The Company writes down inventories for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventories and their estimated market value based upon assumptions about future demand and market conditions.

 

Property, Plant and Equipment

Property, Plant and Equipment

 

Property, plant and equipment are recorded at cost. Gains or losses on disposals are reflected as gain or loss in the year of disposal. All ordinary repair and maintenance costs are expensed as incurred. Expenditures for maintenance and repairs are expensed as incurred. Major renewals and betterments are charged to the property accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed in the current period. 

Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of assets. See "Note 7 - Property, Plant and Equipment" for details.

 

Capitalized Interest

Capitalized Interest

 

Interest associated with major development and construction projects is capitalized and included in the cost of the project. When no debt is incurred specifically for a project, interest is capitalized on amounts expended on the project using weighted-average cost of the Company's outstanding borrowings. Capitalization of interest ceases when the project is substantially complete or development activity is suspended for more than a brief period. There have not been material amounts of capitalized interest for the three months ended March 31, 2014 and 2013.

 

Impairment of Long-lived Assets

Impairment of Long-lived Assets

 

In accordance with ASC 360, "Property, Plant and Equipment", the Company reviews the carrying values of long-lived assets, including property, plant and equipment and other intangible assets, whenever facts and circumstances indicate that the assets may be impaired. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If an asset is considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs of disposal. The Company last performed annual reviews of its long-lived assets at December 31, 2013.

 

 

 

Goodwill

Goodwill

 

The Company recognizes goodwill for the excess of the purchase price over the fair value of the identifiable net assets of the business acquired. ASC 350 "Intangible Assets-Goodwill and Other", an impairment test for goodwill is undertaken by the Company at the reporting unit level annually, or more frequently if events or changes in circumstances indicate that goodwill might be impaired. The Company recorded impairment of goodwill related to the following subsidiaries: Jiangsu Leimone, CDE, and Silver Tech. See "Note 3 - Merger and Acquisitions" for details.

 

Revenue Recognition

Revenue Recognition

 

The Company recognizes sales in accordance with FASB ASC Topic 605, "Revenue Recognition."

The Company recognizes revenue when the following criteria are met:

(i) persuasive evidence of an arrangement exists;

(ii) delivery has occurred or services were rendered;

(iii) the price to the customer is fixed or determinable and,

(iv) collection of the resulting receivable is reasonably assured. Revenue is not recognized until title and risk of loss is transferred to the customer, which occurs upon delivery of goods, and objective evidence exists that customer acceptance provisions were met.

The Company bases its estimates on historical experience taking into consideration the type of products sold, the type of customer, and the type of specific transaction in each arrangement. Revenues represent the invoiced value of goods, net of value added tax ("VAT").

The Company does not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers. Deposits or advance payments from customers prior to delivery of goods and passage of title of goods are recorded as advanced from customers.

The Company's discontinued operation, Nollec is in the mobile phone design, software integration and mobile solution R&D business. Nollec recognizes revenue under the percentage of completion method ASC Topic 605- 35-25 (Construction - Type and Production - Type Contracts) when reasonably dependable estimates can be made and all the following conditions exist:

  1. Contracts executed by the parties normally include provisions that clearly specify the enforceable rights regarding goods or services to be provided and received by the parties, the consideration to be exchanged, and the manner and terms of settlement.
  2. The buyer can be expected to satisfy all obligations under the contract.
  3. The contractor can be expected to perform all contractual obligations.

Estimates of cost to complete is reviewed periodically and revised as appropriate to reflect new information. When the current estimates of total contract revenue and contract cost indicate a loss, a provision for the entire loss on the contract is made.

Income is recognized as the percentage of estimated total income, and is determined by dividing incurred costs to date by estimated total costs after giving effect to adjustments, if any, in estimates of costs to completion based upon the most recent information. Percentage of completion is based on labor hours incurred to date divided by total estimated labor hours for the contract.

Royalty income on sales of licensed products by its customers is recorded when the customers report sales to the Company. Royalty income is reported monthly and recorded in the period in which the product is sold. The Company has the right to audit the books of the licensees.

The Company's discontinued operation CDE is in the business of video games and applications for mobile phones and mobile platforms development. Revenue is recognized in accordance with ASC 985-605-55-125. Cost of Software Development Revenue is accounted for under ASC 985-20 to be sold, leased or otherwise marketed.

CDE capitalizes cost of development of software for hosting purpose in accordance with ASC subtopic 350-40 ("ASC 350-40"), Intangibles-Goodwill and Other: Internal-Use. As such, CDE expenses all costs that are incurred in connection with the planning and implementation phases of development and costs that are associated with repair or maintenance. Costs incurred in the development phase are capitalized and amortized over the estimated product life. Since the inception of CDE, the amount of costs qualifying for capitalization has been insignificant and as a result all internally used software development costs have been expensed as incurred.

 

 

 

Income Taxes

Income Taxes

 

The Company accounts for income taxes in accordance with ASC 740 "Income Taxes", previously SFAS No. 109. Under this method, deferred income taxes are recognized for the estimated tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts and each year-end based on enacted tax laws and statutory rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets to the amount expected to be realized when, in management's opinion; it is more likely than not that some portion of the deferred tax assets will not be realized. The provision for income taxes represents current taxes payable net of the change during the period in deferred tax assets and liabilities.

 

Uncertain Tax Positions

Uncertain Tax Positions

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. The Company classifies the liability for unrecognized tax benefits as current to the extent that the Company anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized and recorded as necessary in the provision for income taxes. There were no uncertain tax positions in 2013 and 2012. The Company's evaluation of uncertain tax positions was performed for the tax years ended December 31, 2009 and forward, the tax years which remain subject to examination as of March 31, 2014.

Operating Leases

Operating Leases

 

Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company that do not meet the capitalization criteria of ASC 840 "Leases", are accounted for as operating leases. Rental payables under operating leases are expensed on the straight-line basis over the lease term.

 

 

Research and Development Costs

Research and Development Costs

 

Research and development costs are related primarily to the development of cell phone technology, video games and applications for mobile phones and mobile platforms development. Research and development costs are expensed as incurred.

Loss Per Share

Loss Per Share

 

The Company reports earnings (loss) per share in accordance with the provisions of ASC 260 "Earnings Per Share". ASC 260 requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock using the treasury method.

Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company's net income (loss) position at the calculation dates. When the Company's results from operations are a net loss, dilutive securities are not included in diluted loss per share because they would be considered anti-dilutive.

 

 

 

 

 

Fair Values of Financial Instruments

Fair Values of Financial Instruments

 

ASC 820 "Fair Value Measurements and Disclosures", defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The carrying amounts reported in the balance sheets for current receivables and payables qualify as financial instruments. Management concluded the carrying values are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and if applicable, their stated interest rate approximates current rates available. The three levels are defined as follows:

  • Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
  • Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
  • Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

The assets measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of March 31, 2014 and December 31, 2013 are as follows:

                  Significant      
            Active Markets     Other     Significant
      Carrying     for Identical     Observable     Unobservable
      Value     Assets     Inputs     Inputs
      March 31, 2014     (Level 1)     (Level 2)     (Level 3)
Cash and cash equivalents   $ 4,694,290    $ 4,694,290    $ -    $ - 
Restricted cash   $ 8,463,136    $ 8,463,136    $ -    $ - 
Short-term investments   $ 11,011,376    $ 11,011,376    $ -    $ - 
Warrants   $ -    $ -    $ -    $ - 
                         
                  Significant      
            Active Markets     Other     Significant
      Carrying     for Identical     Observable     Unobservable
      Value     Assets     Inputs     Inputs
      December 31, 2013     (Level 1)     (Level 2)     (Level 3)
Cash and cash equivalents   $ 36,735    $ 36,735    $ -    $ - 
Restricted cash   $ 19,632,865    $ 19,632,865    $ -    $ - 
Short-term investments   $ -    $ -    $ -    $ - 
Warrants   $ 377    $ -    $ 377    $ - 

 

The Company's financial instruments include cash and equivalents, restricted cash, accounts receivable, notes receivables, other receivables, accounts payable, notes payable, and warrants. Cash and cash equivalents consist primarily of high rated money market funds at a variety of well-known institutions with original maturities of three months or less. Restricted cash represents time deposits on account to secure short-term bank loans and notes payable. Management estimates the carrying amounts of the non-related party financial instruments approximate their fair values due to their short-term nature.

 

 

Concentration of Credit Risk

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and equivalents and trade and bills receivables. As of March 31, 2014 and December 31, 2013, substantially all of the Company's cash and equivalents and restricted cash were held by major financial institutions located in the PRC, Hong Kong and the United States, which management believes are of high credit quality. With respect to trade and notes receivables, the Company extends credit based on an evaluation of the customer's financial condition. The Company generally does not require collateral for trade receivables and maintains an allowance for doubtful accounts of trade receivables.

Notes receivable are undertaken by the banks to honor the payments at maturity and the customers are required to place deposits with the banks equivalent to certain percentage of the notes amount as collateral. These notes receivable can be sold to any third party at a discount before maturity. The Company does not maintain an allowance for notes receivable in the absence of bad debt experience and the payments are undertaken by the banks.

 

 

Non-controlling Interests

Non-controlling Interests

 

The Company follows ASC 810 for reporting non-controlling interest ("NCI") in a subsidiary. As a result, the Company reports NCI as a separate component of Equity in the Consolidated Balance Sheet. Additionally, the Company reports the portion of net income and comprehensive income attributed to the Company and NCI separately in the Consolidated Statement of Income.

 

 

Statement of Cash Flows

Statement of Cash Flows

 

In accordance with ASC 230, "Statement of Cash Flows", cash flows from the Company's operations are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.

 

 

Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

The FASB has issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). The amendments in this ASU state that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company has not yet determined the effect of the adoption of this standard and it is expected to have a material impact on the Company's consolidated financial position and results of operations.

 

 

Correction of Prior Period Financial Statements

NOTE 21 - CORRECTION OF ERROR FOR ACCOUNTING OF PORTABLES UNLIMITED, LLC

On May 5, 2014, the Company concluded that the consolidated balance sheet, and related consolidated statement of operations and comprehensive income/(loss), stockholders' equity and statements of cash flows included in Form 10K Annual Report, dated April 15, 2013 (the "2012 Financials") will need to be restated as a result of the Company erroneous application of the consolidation method of accounting for its former 50.1% equity interest investment in Portables Unlimited, LLC ("Portables"). The Company's management determined during the fourth quarter of the year ended December 31, 2013 that the Company's former investment in Portables was incorrectly accounted for using the consolidation method and should instead have been accounted for using the equity method. The error resulted in an overstatement of the total assets, total liabilities, net revenues, cost of sales, operating expenses, and operating income in the previously filed consolidated financial statements. The Company did not demonstrate that it had unilateral control over the investment, but rather, the Company only exercised substantive participating rights; accordingly, the Company should have used the equity method of accounting to account for its former investment.

The following tables show the previously reported amounts, the required adjustment and the currently restated amounts related to the Company's results of operations for three months ended March 31, 2013 (as restated).

      For the Three Months Ended March 31, 2013
      As Previously           As Currently
      Reported     Adjustment     Reported
                  (Restated)
Net revenues   $ 7,365,230    $ (7,365,230)   $ - 
Cost of sales     5,893,746      (5,893,746)     - 
     Gross profit     1,471,484      (1,471,484)     - 
                   
Total operating expenses     2,292,010      (1,637,860)     654,150 
                   
Loss from operations      (820,526)     166,376      (654,150)
                   
Other (expense) income, net     (470,915)     (14,503)     (485,418)
                   
Loss before income taxes for continuing operations     (1,291,441)     151,873      (1,139,568)
                   
Income taxes for continuing operations     2,250      -      2,250 
                   
Loss from continuing operations     (1,293,691)     151,873      (1,141,818)
                   
Discontinued Operations:                  
Loss from discontinued operations, net of tax     (358,568)     -      (358,568)
Loss on disposal, net tax     -      -      - 
Loss from discontinued operations     (358,568)     -      (358,568)
                   
Net loss   $ (1,652,259)   $ 151,873    $ (1,500,386)
                   
less: Income (loss) attributable to noncontrolling interest     (189,754)     151,873      (37,881)
                   
     Net loss attributable to Zoom Technologies, Inc.   $ (1,462,505)   $ -    $ (1,462,505)
                   
                   
Basic and diluted loss per common share                  
     Basic   $ (0.50)   $ -     $ (0.50)
     Diluted   $ (0.50)   $ -     $ (0.50)

These corrections will be made to applicable prior period financial information in future filings with the SEC including this filing.

 

 

 

Warrant accounting

The Company has accounted for all of the outstanding Series A, C, F, G, and related placement warrants as liabilities. The Company assessed the value of these warrants by using the binomial lattice model. When the Company valued the warrants it used the following assumptions as part of inputs into the valuation model. US treasury rates as measure of the risk free rate of return. The Company also used the mean of the annualized standard deviation of the log normal returns of comparable companies in the same line of business as measure of volatility. The Company controls whether dilution may occur, so it did not add additional assumptions regarding dilutive events into the future discrete outcomes found in the model. The warrants values were adjusted for the dilutive effect as ratio of the outstanding common stock at the time of measurement. In determining the probabilities of an up movement or down movement in the discrete outcomes, as well as the related magnitude of such up or down movements, the Company used a Cox-Ross-Rubenstein approach in applying the binomial lattice model.

 

 

XML 31 R28.htm IDEA: XBRL DOCUMENT v2.4.0.8
CORRECTION OF ERROR FOR ACCOUNTING OF PORTABLES UNLIMITED LLC - Note 21
3 Months Ended
Mar. 31, 2014
Correction Of Error For Accounting Of Portables Unlimited Llc - Note 21  
CORRECTION OF ERROR FOR ACCOUNTING OF PORTABLES UNLIMITED LLC - Note 21

NOTE 21 - CORRECTION OF ERROR FOR ACCOUNTING OF PORTABLES UNLIMITED LLC

On May 5, 2014, the Company concluded that the consolidated balance sheet, and related consolidated statement of operations and comprehensive income/(loss), stockholders' equity and statements of cash flows included in Form 10K Annual Report, dated April 15, 2013 (the "2012 Financials") will need to be restated as a result of the Company erroneous application of the consolidation method of accounting for its former 50.1% equity interest investment in Portables Unlimited, LLC ("Portables"). The Company's management determined during the fourth quarter of the year ended December 31, 2013 that the Company's former investment in Portables was incorrectly accounted for using the consolidation method and should instead have been accounted for using the equity method. The error resulted in an overstatement of the total assets, total liabilities, net revenues, cost of sales, operating expenses, and operating income in the previously filed consolidated financial statements. The Company did not demonstrate that it had unilateral control over the investment, but rather, the Company only exercised substantive participating rights; accordingly, the Company should have used the equity method of accounting to account for its former investment.

The following tables show the previously reported amounts, the required adjustment and the currently restated amounts related to the Company's results of operations for three months ended March 31, 2013 (as restated).

      For the Three Months Ended March 31, 2013
      As Previously           As Currently
      Reported     Adjustment     Reported
                  (Restated)
Net revenues   $ 7,365,230    $ (7,365,230)   $ - 
Cost of sales     5,893,746      (5,893,746)     - 
     Gross profit     1,471,484      (1,471,484)     - 
                   
Total operating expenses     2,292,010      (1,637,860)     654,150 
                   
Loss from operations      (820,526)     166,376      (654,150)
                   
Other (expense) income, net     (470,915)     (14,503)     (485,418)
                   
Loss before income taxes for continuing operations     (1,291,441)     151,873      (1,139,568)
                   
Income taxes for continuing operations     2,250      -      2,250 
                   
Loss from continuing operations     (1,293,691)     151,873      (1,141,818)
                   
Discontinued Operations:                  
Loss from discontinued operations, net of tax     (358,568)     -      (358,568)
Loss on disposal, net tax     -      -      - 
Loss from discontinued operations     (358,568)     -      (358,568)
                   
Net loss   $ (1,652,259)   $ 151,873    $ (1,500,386)
                   
less: Income (loss) attributable to noncontrolling interest     (189,754)     151,873      (37,881)
                   
     Net loss attributable to Zoom Technologies, Inc.   $ (1,462,505)   $ -    $ (1,462,505)
                   
                   
Basic and diluted loss per common share                  
     Basic   $ (0.50)   $ -     $ (0.50)
     Diluted   $ (0.50)   $ -     $ (0.50)

These corrections will be made to applicable prior period financial information in future filings with the SEC including this filing.

 

 

 

XML 32 R56.htm IDEA: XBRL DOCUMENT v2.4.0.8
Warrants (Narrative) (Details)
3 Months Ended
Mar. 31, 2014
Series A
 
Exercise price, in dollars 60.00
Warrant exercise term 5 years
Description of warrants

The Company granted Series A, B, C, D and E warrants to the accredited investors as part of its private placement offering on October 16, 2009 and November 18, 2009.

Series A Warrants: The Series A warrants had an exercise price of $60.00 and a term of 5 years from the issue date subject to the Exchange Cap (as defined in the agreement).

Anti-dilution Adjustments for Certain Warrants: Since the private placement in November 2010 involved sales of the Company's stock at a price that activated anti-dilution provisions in the Series A, C, F and certain placement agent warrants, the exercise price of these warrants is adjusted to $37.40 per share and the number of warrants eligible is multiplied by a factor of 60 / 37.40 or 1.60 with fractional shares rounding up.

 

 

 

Series B
 
Exercise price, in dollars 0.10
Warrant exercise term 3 months
Description of warrants

The Company granted Series A, B, C, D and E warrants to the accredited investors as part of its private placement offering on October 16, 2009 and November 18, 2009.

Series B Warrants: The Series B warrants had an exercise price of $0.10 and a term of three (3) months from the issue date provided, however, that such date shall be extended indefinitely if the warrant cannot be exercised due to the Beneficial Ownership Limitation (as defined in the agreement) or the Exchange Cap Limitation (as defined in the agreement) until the warrant can be exercised in full by the holder thereof without breaching the Beneficial Ownership Limitation (as defined in the agreement) or the Exchange Cap Limitation (as defined in the agreement). All B Warrants were exercised in December 2009.

 

 

Series C
 
Exercise price, in dollars 60.00
Warrant exercise term 5 years
Description of warrants

The Company granted Series A, B, C, D and E warrants to the accredited investors as part of its private placement offering on October 16, 2009 and November 18, 2009.

Series C Warrants: The Series C warrants are exercisable only upon the exercise of the Series B warrants. The Series C warrants had an exercise price of $60.00 and a term of 5 years from the issue date.

Anti-dilution Adjustments for Certain Warrants: Since the private placement in November 2010 involved sales of the Company's stock at a price that activated anti-dilution provisions in the Series A, C, F and certain placement agent warrants, the exercise price of these warrants is adjusted to $37.40 per share and the number of warrants eligible is multiplied by a factor of 60 / 37.40 or 1.60 with fractional shares rounding up.

 

 

 

Series D
 
Exercise price, in dollars 0.10
Warrant exercise term 3 months
Description of warrants

The Company granted Series A, B, C, D and E warrants to the accredited investors as part of its private placement offering on October 16, 2009 and November 18, 2009.

Series D Warrants: The Series D warrants were exercisable if the Company failed to meet certain performance criteria for the year 2009. The Series D warrant had an exercise price of $0.10 and a term of exercise equal to three (3) months from the date the Maximum Eligibility Date (as defined in the agreement); provided, however, that such date would be extended indefinitely if the warrant could not be exercised due to the Beneficial Ownership Limitation (as defined in the agreement) or the Exchange Cap (as defined in the agreement) until the warrant can be exercised in full by the holder without breaching the Beneficial Ownership Limitation (as defined in the agreement) or the Exchange Cap Limitation (as defined in the agreement). Due to the Net Income of Zoom as reported in the Company's annual report for the year 2009 exceeding the eligibility threshold pursuant to the agreement, the Series D Warrants became ineligible for exercise.

Series E
 
Exercise price, in dollars 0.10
Warrant exercise term 3 months
Description of warrants

The Company granted Series A, B, C, D and E warrants to the accredited investors as part of its private placement offering on October 16, 2009 and November 18, 2009.

Series E Warrants: The Series E warrants were exercisable if the Company fails to meet certain performance criteria for the year 2010. The Series E warrants had an exercise price of $0.10 and a term of three (3) months from the date the Maximum Eligibility Date (as defined in the agreement); provided, however, that such date would be extended indefinitely if the warrant could not be exercised due to the Beneficial Ownership Limitation (as defined in the agreement) until the Warrant could be exercised in full by the holder thereof without breaching the Beneficial Ownership Limitation (as defined in the agreement). Due to the Net Income of Zoom as reported in the Company's annual report for the year 2010 exceeding the eligibility threshold pursuant to the agreement, the Series E Warrants became ineligible for exercise.

 

 

 

Series F
 
Exercise price, in dollars 60.00
Warrant exercise term 5 years
Description of warrants

The Company granted on May 6, 2010, Series F warrants to the above investors for their temporary forfeiture of their right to participate in the Company's future financings.

 

Series F Warrants: The Series F warrants had an exercise price of $60.00 and a term of 5 years from the issue date. The Company issued 37,500 Series F warrants to investors who participated in private placement transaction pursuant to the Securities Purchase Agreement dated October 15, 2009, to temporarily waive their right for a period of eight months to participate in a future offering of the Company. The investors originally have a period of twenty-four months ("Rights Period") in which they have the right to participate, and for providing a temporary waiver, an eight-month duration is added to the original expiration of the Rights Period.

Anti-dilution Adjustments for Certain Warrants: Since the private placement in November 2010 involved sales of the Company's stock at a price that activated anti-dilution provisions in the Series A, C, F and certain placement agent warrants, the exercise price of these warrants is adjusted to $3.74 per share and the number of warrants eligible is multiplied by a factor of 6 / 3.74 or 1.60 with fractional shares rounding up.

 

 

Series G
 
Exercise price, in dollars 47.10
Warrant exercise term 5 years
Description of warrants

The Company granted Series G warrants to the accredited investors as part of its private place offering on November 15, 2010.

 

Series G Warrants: The Series G warrants shall have an exercise price of $47.10 and a term of 5 years from the issue date.

 

 

XML 33 R44.htm IDEA: XBRL DOCUMENT v2.4.0.8
Merger and Acquisitions (Narrative) (Details) (USD $)
3 Months Ended 3 Months Ended
Mar. 31, 2014
Silver Tech
May 31, 2010
Silver Tech
Mar. 31, 2014
CDE
Jan. 04, 2011
CDE
Business Acquisition, Effective Date of Acquisition May 31, 2010   Jan. 04, 2011  
Business Acquisition, Name of Acquired Entity

Silver Tech Enterprises, Ltd.

 

Celestial Digital Entertainment, Ltd., ("CDE")

 
Business Acquisition, Description of Acquired Entity

The Company acquired 100% equity in Silver Tech on May 31, 2010. As of May 31, 2010, the net assets of Silver Tech were $2,564,160. The purchase consideration was $10,960,000 which resulted in goodwill of $8,395,840.

 

 

 

The Company acquired 100% ownership of CDE on January 4, 2011. As of January 4, 2011, the net liabilities of CDE were $43,409. The purchase consideration was $1,818,000 which resulted in goodwill of $1,861,409.

 

 
Business Combination, Reason for Business Combination

As of December 31, 2012, the Company has taken action to dispose of Silver Tech's operating subsidiaries Ever Elite and Nollec; accordingly, all goodwill related to Silver Tech has been written off.

 

 

As of December 31, 2012, as part of the Company's disposal of Profit Harvest the Company has indirectly disposed of CDE, accordingly, all of the goodwill related to CDE has been written off.

 
Business Acquisition, Cost of Acquired Entity   $ 10,960,000   $ 1,818,000
Business Acquisition, Percentage of Voting Interests Acquired   100.00%   100.00%
XML 34 R30.htm IDEA: XBRL DOCUMENT v2.4.0.8
Accounting Policies (Fair Value of Financial Instruments) (Tables)
3 Months Ended
Mar. 31, 2014
Accounting Policies Fair Value Of Financial Instruments Tables  
Fair Value Measurement (Tables)

The assets measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of March 31, 2014 and December 31, 2013 are as follows:

                  Significant      
            Active Markets     Other     Significant
      Carrying     for Identical     Observable     Unobservable
      Value     Assets     Inputs     Inputs
      March 31, 2014     (Level 1)     (Level 2)     (Level 3)
Cash and cash equivalents   $ 4,694,290    $ 4,694,290    $ -    $ - 
Restricted cash   $ 8,463,136    $ 8,463,136    $ -    $ - 
Short-term investments   $ 11,011,376    $ 11,011,376    $ -    $ - 
Warrants   $ -    $ -    $ -    $ - 
                         
                  Significant      
            Active Markets     Other     Significant
      Carrying     for Identical     Observable     Unobservable
      Value     Assets     Inputs     Inputs
      December 31, 2013     (Level 1)     (Level 2)     (Level 3)
Cash and cash equivalents   $ 36,735    $ 36,735    $ -    $ - 
Restricted cash   $ 19,632,865    $ 19,632,865    $ -    $ - 
Short-term investments   $ -    $ -    $ -    $ - 
Warrants   $ 377    $ -    $ 377    $ - 

 

 

 

XML 35 R31.htm IDEA: XBRL DOCUMENT v2.4.0.8
Merger and Acquisitions (Tables)
3 Months Ended
Mar. 31, 2014
Property, Plant and Equipment [Abstract]  
Schedule of goodwill

The following table summarizes goodwill as of March 31, 2014 and December 31, 2013 resulting from the acquisitions of Jiangsu Leimone, and Silver Tech:

          March 31,         December 31,
      2014     2013
      (Unaudited)      
Jiangsu Leimone   $ 103,057    $ 103,057 
Silver Tech     8,395,840      8,395,840 
Total     8,498,897      8,498,897 
Less: Impairment     (8,498,897)     (8,498,897)
Total goodwill   $ -    $ - 

 

 

XML 36 R8.htm IDEA: XBRL DOCUMENT v2.4.0.8
ORGANIZATION AND NATURE OF BUSINESS OPERATIONS - Note 1
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
ORGANIZATION AND NATURE OF BUSINESS OPERATIONS - Note 1

NOTE 1 — ORGANIZATION AND NATURE OF BUSINESS OPERATIONS

Acquisition

Zoom Technologies, Inc. (the "Company") was incorporated in the state of Delaware on February 29, 2002. Until September 22, 2009, the Company was engaged in the design, production, marketing, sales, and support of broadband and dial-up modems, Voice over Internet Protocol or "VoIP" products and services, Bluetooth® wireless products, and other communication-related products.

On September 22, 2009, the Company consummated a share exchange transaction and acquired all the outstanding shares of Gold Lion Holding Limited ("Gold Lion"), a company incorporated in the British Virgin Islands ("BVI"), and its subsidiaries Jiangsu Leimone Electronics Co. Ltd ("Jiangsu Leimone"), Tianjin Tong Guang Group Digital Communication Co., Ltd ("TCB Digital") both incorporated in the (People's Republic of China, ("PRC"), and Profit Harvest Corporation Limited ("Profit Harvest") incorporated in Hong Kong. In connection with the share exchange transaction, the Company spun off its then-existing business to its stockholders, by distributing and transferring all assets and liabilities to its then subsidiary, Zoom Telephonics, Inc., and issuing shares of its then operating subsidiary as a dividend to its stockholders. The subsidiaries of Gold Lion were engaged in the manufacture design, sale and manufacture of mobile devices and handsets in China.

On June 1, 2010, Zoom pursuant to a share exchange agreement dated April 29, 2010, acquired 100% of the shares of Silver Tech Enterprises Ltd, incorporated in the BVI and its wholly owned subsidiaries Ever Elite Corporation Limited, incorporated in Hong Kong, and Nollec Wireless Company Ltd., ("Nollec"), incorporated in the PRC. Nollec is engaged in mobile phone and wireless communication device design.

On January 4, 2011, pursuant to a share exchange agreement, the Company via Profit Harvest acquired 100% ownership of Celestial Digital Entertainment, Ltd., ("CDE") a mobile platform video game development company based in Hong Kong.

On October 11, 2011, the Company and Zoom USA Holdings, Inc., a newly formed wholly- owned subsidiary of the Company ("Zoom Sub") entered into a Securities Purchase Agreement ("Securities Purchase Agreement") to purchase from The Cellular Network Communications Group, Inc. ("CNCG") a 50% interest in Portables Unlimited LLC ("Portables"), one of the largest wholesale distributors and direct retailers of T-Mobile products in the United States. Subsequent to the purchase of the 50% stake in ownership from CNCG, the Company increased its stake in Portables to 50.1% by injecting additional capital.

As of July 15, 2013, the Company was in default of the promissory note for $2,000,000 owed to Portables Unlimited, Inc. The promissory note was collateralized by the Company's ownership percentage in Portables. As of the date of this report, the Company was not able to recover its investment. As a result, Zoom ceased to have a an equity interest in Portables and did not retain an investment in it on the date of default, July 15, 2013, accordingly, the Company recognized a loss which includes a complete write off of its investment in Portables. The Company recorded a loss on disposal of approximately $11.5 million related to its write-off of Portables.

Dispositions

On December 31, 2012, Zoom Technologies, Inc. ("Zoom" or the "Company") entered into a Share Purchase Agreement (the "SPA") with Beijing Zhumu Culture Communication Company, Ltd. ("BZCC"), a PRC company that provides services to the telecommunication industry. Pursuant to the SPA, the Company agreed to sell (the "Subsidiary Sale") to the Purchaser all the equity interests the Company holds in its China based subsidiaries (except for SpreadZoom Technologies Co., Ltd. ("SpreadZoom") as mentioned below), which include 100% of the outstanding equity interest of Ever Elite Corporation Limited, an intermediary holding company incorporated in Hong Kong, and its wholly owned subsidiary, Nollec, 80% of the outstanding equity interest of TCB Digital, 100% of the outstanding equity interest of Profit Harvest Corporation, Ltd. ("Profit Harvest"), and 100% of the outstanding equity interest of Celestial Digital Entertainment, Ltd. ("CDE"). As consideration for the Subsidiary Sale, the Purchaser agreed to pay to the Company RMB 200 million (approximately US$31.7 million) (the "Purchase Price"), subject to adjustment pending an appraisal by an independent third party appraiser. The Company on October 24, 2012 received approximately $12.6 million (RMB 80 million) less bank charges; the Company on November 5, 2012, received $19.1 million (RMB 120 million) less transaction fees and bank charges. As of the date of this report, the Purchaser has remitted the entire amount of RMB 200 million to the Company, of which RMB120 million was initially held in escrow pending the closing of the Subsidiary Sale. Of this amount, a portion of the funds, approximately RMB 80 million, has been released to the Company to use; accordingly, in the normal course of business, the Company deployed those funds to SpreadZoom and Tianjin Leimone as detailed in "Note 11 - Related Party Transactions". The RMB 80 million released from escrow was a negotiated amount between the Company and the Purchaser. On December 30, 2013, BZCC assigned its purchase right to TCB Digital to Tianjin Huatianli Trading Co., Ltd. ("Huatianli"). On December 30, 2013, the Company consented to the assignment between BZCC and Huatianli and agreed to amend the SPA to reflect the change. In connection with the assignment, RMB120 million, representing the balance of the Purchase Price that was being held in escrow pending the closing of all of the sales under the SPA, was agreed upon to be released within 10 business days to a Company-designated bank account. Of that amount, approximately RMB 68 million was available for the Company's immediate use, and approximately RMB52 million, representing the purchase price for TCB Digital, was be monitored by Huatianli until the closing of the TCB Digital sale. As of the date of this report the RMB 120 million is held in a wealth management account at New Times Trust Holding Co., Ltd. The Company's Chief Executive Officer has unencumbered sole signing and dispositive rights to that account. As of May 16, 2014, the Company has received payment in full from Huatianli for the sale of TCB Digital and the Company has completed the transfer of Jiangsu Leimone's ownership interest in TCB Digital to Huatianli. Since the Company received payment separately from Huantianli for RMB 52 million, the Company is obligated to repay RMB 52 million to BZCC from the RMB 120 million held in the wealth management account.

The Company's ownership interest in SpreadZoom, which owns and operates mobile phone manufacturing facilities in Tianjin, was not part of the Subsidiary Sale.

The closing of the sale of Profit Harvest and CDE occurred on December 31, 2012; the closing of the sale of Ever Elite and Nollec occurred on April 5, 2013

As disclosed above, as of July 15, 2013, the Company has completely written off its investment in Portables Unlimited, LLC.

As of May 31, 2014, the Company's board of directors decided that it would explore the sale of SpreadZoom; Huatianli, the buyer of TCB Digital has expressed interest in buying the SpreadZoom but has not given a formal offer with a price that is acceptable to the Company; however, subsequent to March 31, 2014, Huatianli made a deposit of RMB 2 million with the Company indicating its intent to purchase. The Company is currently awaiting an evaluation report to be issued by a third party appraisal firm to determine an appropriate sales price.

 

 

 

 

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XML 39 R40.htm IDEA: XBRL DOCUMENT v2.4.0.8
Discontinued Operations (Tables)
3 Months Ended
Mar. 31, 2014
Discontinued Operations Tables  
Schedule of Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures

The sale of Profit Harvest and CDE closed on December 31, 2012. The portion of the sale covered in the Share Purchase Agreement for Ever Elite and Nollec closed on April 5, 2013. The sale of TCB Digital closed on May 16, 2014.

Results of Operations     Three Months Ended March 31,
      2014     2013
             
Net revenues   $ 56,298,303    $ 42,257,043 
Cost of sales     54,275,799      40,241,554 
     Gross profit     2,022,504      2,015,489 
             
Operating expenses     1,425,832      1,650,821 
Operating income     596,672      364,668 
             
Other income (expenses), net     (465,327)     (702,175)
(Loss) income before taxes from discontinued operations     131,345      (337,507)
             
less: Provision for income taxes     32,305      21,061 
             
Income (loss) from discontinued operations, net of tax   $ 99,040    $ (358,568)
             
Income (loss) from discontinued operations attributable to Zoom Technologies, Inc.   $ 154,632    $ (320,687)
             
Basic and diluted (loss) income per common share from            
     discontinued operations:            
     Basic   $ 0.05    $ (0.11)
     Diluted   $ 0.05    $ (0.11)

 

 

Financial Position         March 31,         December 31,
      2014     2013
             
Cash and equivalents   $ 8,963,618    $ 2,848,859 
Restricted cash     72,010,257      80,658,355 
Notes receivable     -      669,583 
Accounts receivable, net     17,085,575      20,225,872 
Inventories, net     19,846,379      18,809,671 
Other receivables and prepaid expenses     147,143      2,061,687 
Advance to suppliers     355,578      224,913 
Due from related parties     5,818,141      204,509 
Property, plant and equipment, net      1,472,004      1,636,316 
Deferred tax assets, noncurrent     69,570      70,136 
Total current assets     125,768,265      127,409,901 
             
Total Assets of Discontinued Operations   $ 125,768,265    $ 127,409,901 
             
Short-term loans   $ 34,404,972    $ 38,529,498 
Notes payable     29,588,128      42,441,911 
Accounts payable     40,342,706      42,843,584 
Accrued expenses and other payables     866,404      19,643 
Advances from customers     272,718      97,110 
Taxes payable     (5,362,691)     (4,106,935)
Due to related parties     37,162,963      19,284,688 
Total current liabilities     137,275,200      139,109,499 
             
Total Liabilities of Discontinued Operations     137,275,200      139,109,499 
             
Net (Liabilities) Assets of Discontinued Operations   $ (11,506,935)   $ (11,699,598)

 

 

 

 

XML 40 R53.htm IDEA: XBRL DOCUMENT v2.4.0.8
Notes Payable (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Mar. 31, 2014
Notes payable $ 350,937 $ 350,937
Former Executives of Nollec
   
Notes payable 145,000 145,000
Terms of Note Payable

There was a note owed to the former executives of Nollec that was an incentive for key managers to remain with the Nollec after Zoom acquired it in 2010. The note neither bears interest nor is collateralized by any assets.

As of March 31, 2014, and for the three months then ended, the Company has not made any payments on these outstanding notes and they are considered in default.

 

 
CNCG
   
Notes payable $ 205,937 $ 205,937
Terms of Note Payable

The Note due to CNCG carries an annual interest rate of 8.00% to be made in quarterly installments of $43,708. The Company's subsidiary Zoom Sub is currently in default of the note due to CNCG therefore the interest rate adjusted to 14.00%. The note amortizes and matures in October of 2014. The note is unsecured and is not guaranteed by Zoom Technologies, Inc. The note was previously classified as long term.

As of March 31, 2014, and for the three months then ended, the Company has not made any payments on these outstanding notes and they are considered in default.

 

 

 

 
Interest Rate 14.00%  
XML 41 R2.htm IDEA: XBRL DOCUMENT v2.4.0.8
CONSOLIDATED BALANCE SHEETS (USD $)
Mar. 31, 2014
Dec. 31, 2013
Current assets    
Cash and cash equivalents $ 4,694,290 $ 36,735
Restricted cash 8,463,136 19,632,865
Short-term investments 11,011,376 0
Other receivables and prepaid expenses 496,816 614,403
Due from related parties 9,530,697 9,358,033
Current assets of discontinued operations, held for sale 125,768,265 127,409,901
Total current assets 159,964,580 157,051,937
Property, plant and equipment, net 0 0
Intangible assets 349,600 349,600
Long-term investments 10,503,972 10,880,977
TOTAL ASSETS 170,818,152 168,282,514
Current liabilities    
Short-term loans 3,113,830 3,158,587
Notes payable 350,937 350,937
Accrued expenses and other payables 928,087 866,367
Purchase deposit from buyer 13,109,118 8,240,490
Taxes payable 22,315 21,860
Due to related parties 3,342,294 3,449,922
Warrant liability 0 377
Current liabilities of discontinued operations 137,275,200 139,109,499
Total current liabilities 158,141,781 155,198,039
Long-term loans 1,248,023 1,352,103
TOTAL LIABILITIES 159,389,804 156,550,142
COMMITMENTS AND CONTINGENCIES     
STOCKHOLDERS' EQUITY    
Preferred stock: authorized 1,000,000 shares, par value $0.01 none issued and outstanding 0 0
Common stock: authorized 60,000,000 shares, par value $0.01, 3,008,737 shares issued and 3,008,569 shares outstanding at March 31, 2014 and December 31, 2013 30,087 30,087
Treasury shares: 168 shares at cost (7,322) (7,322)
Additional paid-in capital 53,699,157 53,699,157
Statutory surplus reserve 727,822 727,822
Accumulated other comprehensive income 1,035,740 817,365
Accumulated deficit (43,471,300) (42,985,768)
TOTAL STOCKHOLDERS' EQUITY 12,014,184 12,281,341
Noncontrolling interest (585,836) (548,969)
TOTAL EQUITY 11,428,348 11,732,372
TOTAL LIABILITIES AND EQUITY $ 170,818,152 $ 168,282,514
XML 42 R45.htm IDEA: XBRL DOCUMENT v2.4.0.8
Merger and Acquisitions - Goodwill (Details) (USD $)
Mar. 31, 2014
Dec. 31, 2013
Goodwill, Gross $ 8,498,897 $ 8,498,897
Less: Impairment (8,498,897) (8,498,897)
Total goodwill 0 0
Jiangsu Leimone
   
Goodwill, Gross 103,057 103,057
Silver Tech
   
Goodwill, Gross $ 8,395,840 $ 8,395,840
XML 43 R6.htm IDEA: XBRL DOCUMENT v2.4.0.8
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
Preferred Stock
Common stock
Treasury stock
Additional paid-in capital
Statutory surplus reserve
Accumulated other comprehensive income
Retained earnings (deficit)
Total
Noncontrolling interest
Beginning balance at Dec. 31, 2012 $ 0 $ 29,321 $ (7,322) $ 52,083,153 $ 702,539 $ 4,058,657 $ (4,098,798) $ 52,767,550 $ 3,000,849
Beginning balance, shares at Dec. 31, 2012 0 2,932,137              
Shares issued to directors and consultants   766    1,480,266          1,481,052  
Shares issued to directors and consultants,shares   76,600              
Stock options expense         135,718          135,718  
Foreign currency translation               (3,241,292)    (3,241,292) (356,630)
Capital Injection by Tongguang Group                        2,679,883
Dividends paid                        (1,079,061)
Net loss                  (38,861,687) (38,861,687) (4,794,010)
Appropriated statutory surplus reserve            25,283    (25,283)     
Ending balance at Dec. 31, 2013 0 30,087 (7,322) 53,699,157 727,822 817,365 (42,985,768) 12,281,341 (548,969)
Ending balance, shares at Dec. 31, 2013 0 3,008,737              
Foreign currency translation           218,375   218,375 18,725
Net loss             (485,532) (485,532) (55,592)
Ending balance at Mar. 31, 2014 $ 0 $ 30,087 $ (7,322) $ 53,699,157 $ 727,822 $ 1,035,740 $ (43,471,300) $ 12,014,184 $ (585,836)
Ending balance, shares at Mar. 31, 2014 0 3,008,737              
XML 44 R59.htm IDEA: XBRL DOCUMENT v2.4.0.8
Stock Option Grants (Narrative) (Details) (USD $)
3 Months Ended 1 Months Ended
Mar. 31, 2014
Feb. 28, 2013
February 14, 2013
Nov. 30, 2013
November 2013
Share-based Compensation Arrangement, Description  

On February 14, 2013, the Company's BOD approved of the granting of 10,000 options to an employee with an exercise price of $6.50, with monthly vesting beginning in February 2013. The options expire four years from the date of grant. The Company determined the grant date fair value of 10,000 options of $0.17 per share which was calculated using the Black Scholes Options Pricing Model as follows: Stock price of $6.50 per share, exercise price of $6.50 per share, expected life of 4.00 years, volatility of 32.48% and discount rate of 0.64%.

 

 

In November of 2013, the Company's BOD approved of the granting of 55,000 options to certain employees with an exercise price of $3.14, with monthly vesting beginning in November 2013. The options expire four years from the date of grant. The Company determined the grant date fair value of 55,000 options of $1.14 per share which was calculated using the Black Scholes Options Pricing Model.

 

 

Stock price   $ 6.50 $ 3.14
Exercise price   $ 6.50 $ 3.14
Expected life   4 years 4 years
Volatility   32.48%  
Discount rate   0.64%  
Non-cash compensation expense related to stock options $ 0    
XML 45 R35.htm IDEA: XBRL DOCUMENT v2.4.0.8
Related Party Transactions (Tables)
3 Months Ended
Mar. 31, 2014
Related Party Transactions Tables  
Due From Related Parties

As of March 31, 2014 and December 31, 2013, the amounts due from related parties were:

          March 31,         December 31,
Due from related parties     2014     2013
      (Unaudited)      
Beijing Leimone Shengtong Wireless Technology Co., Ltd.   $ -    $ 17,997 
Shenzhen Leimone     280,303      293,998 
Spreadzoom     9,250,394      9,046,038 
Total due from related parties   $ 9,530,697    $ 9,358,033 

 

 

 

Due To Related Parties

As of March 31, 2014 and December 31, 2013, the amounts due to related parties were:

          March 31,         December 31,
Due to related parties     2014     2013
      (Unaudited)      
Mr. Lei Gu   $ 1,063,500    $ 1,063,500 
Leimone (Tianjin) Industrial Co., Ltd.     2,176,294      2,283,922 
Beijing Leimone Shengtong Cultural Development Co., Ltd.     102,500      102,500 
Total due to related parties   $ 3,342,294    $ 3,449,922 

 

 

XML 46 R65.htm IDEA: XBRL DOCUMENT v2.4.0.8
Statutory Reserves (Narrative) (Details) (USD $)
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Dec. 31, 2013
Statutory Reserves Narrative Details      
Statutory Accounting Practices, Statutory to GAAP, Description of Reconciling Item

As stipulated by the Company Law of the PRC, net income after taxation can only be distributed as dividends after appropriation has been made for the following:

i) Making up cumulative prior years' losses, if any;

ii) Allocations to the "Statutory surplus reserve" of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital;

iii) Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's "Statutory common welfare fund", which is established for the purpose of providing employee facilities and other collective benefits to the Company's employees; and Statutory common welfare fund is no longer required per the new cooperation law executed in 2006.

iv) Allocations to the discretionary surplus reserve, if approved in the shareholders' general meeting.

 

   
Statutory surplus reserve $ 727,822   $ 727,822
Increase in statutory surplus reserve $ 0 $ 0  
XML 47 R22.htm IDEA: XBRL DOCUMENT v2.4.0.8
INCOME TAXES - Note 15
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
INCOME TAXES - Note 15

NOTE 15 - INCOME TAXES

The Company is subject to income taxes by entity on income arising in or derived from the tax jurisdiction in which each entity is domiciled.

Zoom Technologies Inc., the parent company was incorporated in the U.S. and has net operating losses ("NOL") for income tax purposes, which can be carried forward for up to 20 years from the year the loss is incurred. Zoom has NOL carry forwards for income taxes of approximately $4.29 million and $4.04 million at March 31, 2014 and December 31, 2013, which may be available to reduce future years' taxable income. Management believes the realization of benefits from these losses remains uncertain due to Zoom's limited operating history and continuing losses. Accordingly, a 100% deferred tax asset valuation allowance has been provided.

The discontinued operations of TCB Digital and Nollec, and the continuing operation of Jiangsu Leimone are governed by the Income Tax Law of the PRC concerning the private-run enterprises, which are generally subject to tax at a statutory rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments.

Jiangsu Leimone is exempt from income tax in PRC for two years starting from the first profitable year or the year 2008, whichever is earlier, and is subject to a 50% exemption on normal income tax rate for the following three years. 2012 was the last year that Jiangsu Leimone was afforded the 50% exemption from PRC income taxes.

SpreadZoom in subject to the Income Tax Law of the PRC concerning the private-run enterprises, which are generally subject to tax at a statutory rate of 25% on profit that is reported in the statutory financial statements after appropriate tax adjustments.

Nollec is exempt from income tax in PRC for two years starting from 2008, and is subject to a 50% exemption on normal income tax rate for three years starting from 2010 and is subject to normal income tax rate from 2013.

Nollec had pre-tax loss up to the date of its disposition April 5, 2013. The Company's net income and earnings per share had no effect due to its income tax exemption.

The discontinued and disposed operations Profit Harvest and CDE are governed by the Income Tax Law of Hong Kong, which is generally subject to tax at a statutory rate of 16.5% on income reported in the statutory financial statements after appropriate tax adjustments.

Portables is governed by the Income Tax Law of United States; however, because Portables is a pass through entity for tax purposes, tax liabilities are the responsibility of its members. Therefore, Zoom Sub, which is responsible to report and make payments on its portion of income generated by Portables was subject to a maximum graduated statutory tax rate of 34%. In 2014, the Company no longer owns any interest in Portables; accordingly, it will not be subject to future income taxes generated from the results of operations from Portables on a go forward basis.

U.S. NOL carryforwards are only those arising after September 22, 2009, which was the date when a more-than-50% ownership change occurred.

The following table summarizes the temporary differences which result in deferred tax assets and liabilities as at March 31, 2014 and December 31, 2013:

          March 31,         December 31,
      2014     2013
Deferred tax assets:     (Unaudited)      
Net operating loss   $ 1,458,834    $ 1,373,600 
less: Valuation allowance     (1,458,834)     (1,373,600)
Total deferred tax assets     -      - 
             
Deferred tax liabilities:     -      - 
Deferred tax assets, net   $ -    $ - 

The following table reconciles the U.S. statutory rates to the Company's effective tax rates for the three months ended March 31, 2014 and 2013:

    For Three Months Ended
    March 31,
    2014   2013
    (Unaudited)   (Unaudited)
        (Restated)
US statutory rates   34.00%   34.00%
Tax rate difference   -5.47%   -2.24%
Valuation allowance   -28.53%   -31.76%
State taxes   -0.24%   0.20%
Tax per financial statements   -0.24%   0.20%

 

 

XML 48 R36.htm IDEA: XBRL DOCUMENT v2.4.0.8
Warrants (Tables)
3 Months Ended
Mar. 31, 2014
Warrants Tables  
Warrant activity and summary

The following summary represents warrants activity during the three months ended March 31, 2014:

          Weighted-      
          Average     Aggregate
    Number of     Exercise     Intrinsic
    Warrants     Price     Value
Balance, December 31, 2013   863,860    $ 23.00    $ - 
     Granted                
     Lapsed                
     Exercised                
     Cancelled                
Balance, March 31, 2014   863,860    $ 23.00    $ - 

 

The following presents a warrants summary as of March 31, 2014:

    Warrants Outstanding   Warrants Exercisable
          Weighted-     Weighted-         Weighted-
          Average     Average         Average
    Number     Remaining     Exercise   Number     Exercise
    Outstanding     Contractual Life     Price   Exercisable     Price
Warrants   863,860      0.84 years   $ 23.00    863,860    $ 23.00 

 

 

 

XML 49 R24.htm IDEA: XBRL DOCUMENT v2.4.0.8
OPERATING RISK - Note 17
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
OPERATING RISK - Note 17

NOTE 17 - OPERATING RISK

  • Industry risk

The industry in which we compete is a rapidly evolving, highly competitive and fragmented market driven by consumer preferences and quickly evolving technology. Increased competition may result in price reductions, reduced gross margin and loss of market share. Failure to compete successfully against current or future competitors could have a material adverse effect on the Company's business, operating results and financial condition.

  • Exchange risk

The Company cannot guarantee the Renminbi and USD exchange rate will remain steady; therefore, the Company could post the same profit for two comparable periods and post higher or lower profit depending on exchange rate of Renminbi and USD. The exchange rate could fluctuate depending on changes in the political and economic environments without s

  • Political risk

Currently, PRC is in a period of growth and is openly promoting business development in order to bring more business into PRC. Additionally PRC currently allows a Chinese corporation to be owned by a United States corporation. If the laws or regulations relating to ownership of a Chinese corporation are changed by the PRC government, the Company's ability to operate the PRC subsidiaries could be affected.

  • Interest risk

The Company is exposed to interest rate risk arising from short-term variable rate borrowings from time to time. The Company's future interest expense will fluctuate in line with any change in borrowing rates.

The Company had outstanding warrants that are accounted for as derivative securities. Their values are re-measured at each reporting period. The quoted U.S. treasury rates with the maturities similar to those of the warrants are used as inputs in calculating their value; accordingly, the value of the warrants, are subject to fluctuations interest rates.

 

 

XML 50 R68.htm IDEA: XBRL DOCUMENT v2.4.0.8
Discontinued Operations (Narrative) (Details)
3 Months Ended
Mar. 31, 2014
Profit Harvest and CDE
 
Description and Timing of Disposal

On December 31, 2012, the Company announced its plan to dispose of certain business operations to Beijing Zhumu Culture Communication Company, Ltd. covered in the Share Purchase Agreement as described in "Note 1 - Organization and Nature of Business Operations" was for approximately $31.7 million (RMB 200 million) in sales proceeds. The Share Purchase Agreement covers the sale of several business operations in different jurisdictions, with differing regulatory requirements regarding the purchase and sale of businesses. For accounting purposes the Company has accounted for those operations as discontinued operations up to the point of the individual closing of the relevant entities under relevant local jurisdictions as detailed in the tables below.

The sale of Profit Harvest and CDE closed on December 31, 2012. The portion of the sale covered in the Share Purchase Agreement for Ever Elite and Nollec closed on April 5, 2013. The sale of TCB Digital closed on May 16, 2014.

 

Ever Elite and Nollec Wireless
 
Description and Timing of Disposal

On December 31, 2012, the Company announced its plan to dispose of certain business operations to Beijing Zhumu Culture Communication Company, Ltd. covered in the Share Purchase Agreement as described in "Note 1 - Organization and Nature of Business Operations" was for approximately $31.7 million (RMB 200 million) in sales proceeds. The Share Purchase Agreement covers the sale of several business operations in different jurisdictions, with differing regulatory requirements regarding the purchase and sale of businesses. For accounting purposes the Company has accounted for those operations as discontinued operations up to the point of the individual closing of the relevant entities under relevant local jurisdictions as detailed in the tables below.

The sale of Profit Harvest and CDE closed on December 31, 2012. The portion of the sale covered in the Share Purchase Agreement for Ever Elite and Nollec closed on April 5, 2013. The sale of TCB Digital closed on May 16, 2014.

 

TCB Digital
 
Description and Timing of Disposal

On December 31, 2012, the Company announced its plan to dispose of certain business operations to Beijing Zhumu Culture Communication Company, Ltd. covered in the Share Purchase Agreement as described in "Note 1 - Organization and Nature of Business Operations" was for approximately $31.7 million (RMB 200 million) in sales proceeds. The Share Purchase Agreement covers the sale of several business operations in different jurisdictions, with differing regulatory requirements regarding the purchase and sale of businesses. For accounting purposes the Company has accounted for those operations as discontinued operations up to the point of the individual closing of the relevant entities under relevant local jurisdictions as detailed in the tables below.

The sale of Profit Harvest and CDE closed on December 31, 2012. The portion of the sale covered in the Share Purchase Agreement for Ever Elite and Nollec closed on April 5, 2013. The sale of TCB Digital closed on May 16, 2014.

 

 

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CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
3 Months Ended 12 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Dec. 31, 2013
Cash flows from operating activities:      
Net loss $ (541,124) $ (1,500,386)  
Adjustments to reconcile net loss to cash provided by (used in) operating activities:      
Depreciation and amortization 213,710 275,400  
Non-cash equity-based compensation 0 193,844  
Provision on accounts receivable 10,330 (2,111)  
Gain on extinguishment of debt (149,214) 0  
Loss on equity method of investment 377,005 405,069 271,399
Fair value adjustment on warrants 0 6,375  
Changes in operating assets and liabilities:      
Accounts receivable 2,989,369 789,812  
Inventories (1,194,196) (933,036)  
Advances to suppliers (133,482) (969,778)  
Other receivables and prepaid expenses 2,029,684 7,519  
Accounts payable (2,171,632) (4,634,216)  
Advance from customers 177,726 899,184  
Related parties-net 17,266 125,721  
Accrued expenses and other current liabilities 4,519,339 (18,163,053)  
Net cash provided by (used in) operating activities 6,144,781 (23,499,656)  
Cash flows from investing activities:      
Restricted cash 8,058,081 (4,363,017)  
Purchase of property and equipment and other long-term assets (61,451) (70,575)  
Proceeds from collection on notes receivable 669,210 0  
Increase in notes receivable 0 (1,229,598)  
Net cash provided by (used in) investing activities 8,665,840 (5,663,190)  
Cash flows from financing activities:      
Proceeds from loans 0 4,302,620  
Repayment of loans (3,842,632) 0  
Proceeds from issuance of notes 8,088,434 25,075,290  
Repayment on notes payable (20,694,617) 0  
Receipt from related parties 18,170,350 1,042,937  
Repayment on borrowings from related parties (5,657,793) 0  
Net cash (sed in) provided by financing activities (3,936,258) 30,420,847  
Effect of exchange rate changes on cash & cash equivalents (102,049) 39,233  
Net increase in cash and cash equivalents 10,772,314 1,297,234  
Cash and cash equivalents, beginning of period 2,885,594 3,233,867 3,233,867
Cash and cash equivalents of continuing components 36,735 8,351 8,351
Cash and cash equivalents of discontinued components 2,848,859 3,225,516 3,225,516
Cash and cash equivalents, end of period 13,657,908 4,531,101 2,885,594
Cash and cash equivalents of continuing components 4,694,290 8,730 36,735
Cash and cash equivalents of discontinued components 8,963,618 4,522,371 2,848,859
SUPPLEMENTARY DISCLOSURES:      
Interest paid 0 (73,911)  
Income tax paid $ 1,529 $ 2,250  
XML 53 R3.htm IDEA: XBRL DOCUMENT v2.4.0.8
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Mar. 31, 2014
Dec. 31, 2013
STOCKHOLDERS' EQUITY    
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, shares authorized 1,000,000 1,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 60,000,000 60,000,000
Common stock, shares issued 3,008,737 3,008,737
Common stock, shares outstanding 3,008,569 3,008,569
Treasury shares, at cost 168 168
XML 54 R17.htm IDEA: XBRL DOCUMENT v2.4.0.8
NOTES PAYABLE - Note 10
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
NOTES PAYABLE - Note 10

NOTE 10 - NOTES PAYABLE

As of March 31, 2014 and December 31, 2013, the Company's notes payable consisted of the following:

          March 31,         December 31,
      2014     2013
      (Unaudited)      
Former Executives of Nollec   $ 145,000    $ 145,000 
The Cellular Network Communications Group, Inc.     205,937      205,937 
Total   $ 350,937    $ 350,937 

There was a note owed to the former executives of Nollec that was an incentive for key managers to remain with the Nollec after Zoom acquired it in 2010. The note neither bears interest nor is collateralized by any assets.

The Note due to CNCG carries an annual interest rate of 8.00% to be made in quarterly installments of $43,708. The Company's subsidiary Zoom Sub is currently in default of the note due to CNCG therefore the interest rate adjusted to 14.00%. The note amortizes and matures in October of 2014. The note is unsecured and is not guaranteed by Zoom Technologies, Inc. The note was previously classified as long term.

As of March 31, 2014, and for the three months then ended, the Company has not made any payments on these outstanding notes and they are considered in default.

 

 

XML 55 R1.htm IDEA: XBRL DOCUMENT v2.4.0.8
Document and Entity Information
3 Months Ended
Mar. 31, 2014
Jun. 16, 2014
Document And Entity Information    
Entity Registrant Name ZOOM TECHNOLOGIES INC  
Entity Central Index Key 0000822708  
Document Type 10-Q  
Document Period End Date Mar. 31, 2014  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Is Entity a Well-known Seasoned Issuer? No  
Is Entity a Voluntary Filer? No  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   3,008,569
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2014  
XML 56 R18.htm IDEA: XBRL DOCUMENT v2.4.0.8
RELATED PARTY TRANSACTIONS - Note 11
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
RELATED PARTY TRANSACTIONS - Note 11

NOTE 11 - RELATED PARTY TRANSACTIONS

Due from related parties

As of March 31, 2014 and December 31, 2013, the amounts due from related parties were:

          March 31,         December 31,
Due from related parties     2014     2013
      (Unaudited)      
Beijing Leimone Shengtong Wireless Technology Co., Ltd.   $ -    $ 17,997 
Shenzhen Leimone     280,303      293,998 
Spreadzoom     9,250,394      9,046,038 
Total due from related parties   $ 9,530,697    $ 9,358,033 

Beijing Leimone Shengtong Wireless Technology Co., Ltd. ("Beijing Leimone") was founded by Gu, the largest shareholder of the Company. Beijing Leimone borrowed money from the Company. The borrowings bore no interest and had a maturity of 12 months. The balances are neither collateralized nor personally guaranteed by Gu. The balance has been repaid in full.

Shenzhen Leimone Company, Ltd., formed by individuals including our Chairman, Mr. Gu, is set up with the intention of providing manufacturing services to our Company particularly for exports. As of March 31, 2014 and December 31, 2013, $208,303 and $293,998 of loans made to Shenzhen Leimone to be used for setup costs were still outstanding. The balance is expected to be repaid in full.

The balance due from SpreadZoom represents an advance to SpreadZoom for it to purchase components to manufacture handsets in the normal course of business. The advance bears no interest, and is uncollateralized. If the Company is able to successfully complete a sale of SpreadZoom, the Company expects to be repaid these advances.

Due to related parties

As of March 31, 2014 and December 31, 2013, the amounts due to related parties were:

          March 31,         December 31,
Due to related parties     2014     2013
      (Unaudited)      
Mr. Lei Gu   $ 1,063,500    $ 1,063,500 
Leimone (Tianjin) Industrial Co., Ltd.     2,176,294      2,283,922 
Beijing Leimone Shengtong Cultural Development Co., Ltd.     102,500      102,500 
Total due to related parties   $ 3,342,294    $ 3,449,922 

Mr. Gu provided funds to the Company with no interest and are due on demand. As of March 31, 2014 and December 31, 2013, the balances of funds provided by Gu was $1,063,500.

Leimone (Tianjin) Industrial Co., Ltd. ("Tianjin Leimone") was controlled by Gu, the largest shareholder of the Company. As of December 31, 2013, the amount owed to Tianjin Leimone was $2,283,922. This balance is the result of a transfer from Tianjin Leimone of $10,719,532 (RMB 66,400,000) for Jiangsu Leimone to inject as capital into its discontinued operation TCB Digital. The transfer of funds from Tianjin exceeded the then outstanding balance of $8,435,610 owed by Tianjin Leimone; therefore, the remaining balance is a net due to Tianjin Leimone. The balance due to Tianjin Leimone of $2,283,922 at December 31, 2013 was reduced to $2,176,294 at March 31, 2014.

The balance owed to Beijing Lemone Shengtong Cultural Development Co, Ltd ("Beijing Shentong") arose in the normal course of business, as certain corporate staff expenses in Beijing were paid by Beijing Shentong on behalf of the Company.

 

 

XML 57 R4.htm IDEA: XBRL DOCUMENT v2.4.0.8
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Income Statement [Abstract]    
Net revenues $ 0 $ 0
Cost of goods sold 0 0
Gross profit 0 0
Selling, general, and administrative expenses 414,785 654,150
Loss from operations (414,785) (654,150)
Other income (expenses)    
Interest income 85 0
Interest expense 0 (73,911)
Change in fair value of warrants 0 (6,375)
Equity method net investment loss (377,005) (405,069)
Other income (expense), net 153,070 (63)
Other (expense) income, net (223,850) (485,418)
Loss before income taxes and noncontrolling interest (638,635) (1,139,568)
Income taxes for continuing operations 1,529 2,250
Loss from continuing operations (640,164) (1,141,818)
Income (loss) from discontinued operations, net of tax 99,040 (358,568)
Loss on disposal, net of tax 0 0
Income (loss) from discontinued operations 99,040 (358,568)
Net loss (541,124) (1,500,386)
less: Loss attributable to noncontrolling interest (55,592) (37,881)
Net loss attributable to Zoom Technologies Inc. (485,532) (1,462,505)
Basic and diluted loss per common share from continuing operations:    
Basic $ (0.21) $ (0.39)
Diluted $ (0.21) $ (0.39)
Basic $ 0.05 $ (0.11)
Diluted $ 0.05 $ (0.11)
Basic and diluted loss per common share:    
Basic $ (0.16) $ (0.50)
Diluted $ (0.16) $ (0.50)
Weighted average common shares outstanding:    
Basic 3,008,569 2,946,795
Diluted 3,008,569 2,946,795
Amounts attributable to Zoom Technologies, Inc. common shareholders    
Loss from continuing operations (640,164) (1,141,818)
Income (loss) from discontinued operations 154,632 (320,687)
Net loss attributable to Zoom Technologies Inc. $ (485,532) $ (1,462,505)
XML 58 R12.htm IDEA: XBRL DOCUMENT v2.4.0.8
SHORT-TERM INVESTMENT - Note 5
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
SHORT-TERM INVESTMENT - Note 5

NOTE 5 - SHORT-TERM INVESTMENT

A portion of the funds received by the Company for the sale of Profit Harvest, CDE, Ever Elite, Nollec, and TCB Digital was deposited in a wealth management account. The funds were previously classified as restricted; however, they are no longer encumbered. Accordingly, the have been classified as a short term investment.

 

 

XML 59 R11.htm IDEA: XBRL DOCUMENT v2.4.0.8
RESTRICTED CASH - Note 4
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
RESTRICTED CASH - Note 4

NOTE 4 - RESTRICTED CASH

Restricted cash was part of the funds deposited with the Company for sale to BZCC of Profit Harvest, CDE, Ever Elite, Nollec, and TCB Digital. BZCC has assigned its rights to purchase TCB Digital to Huatianli. The funds become unrestricted upon closing of the disposition transaction.

 

 

XML 60 R23.htm IDEA: XBRL DOCUMENT v2.4.0.8
STATUTORY RESERVES - Note 16
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
STATUTORY RESERVES - Note 16

NOTE 16 - STATUTORY RESERVES

As stipulated by the Company Law of the PRC, net income after taxation can only be distributed as dividends after appropriation has been made for the following:

i) Making up cumulative prior years' losses, if any;

ii) Allocations to the "Statutory surplus reserve" of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital;

iii) Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's "Statutory common welfare fund", which is established for the purpose of providing employee facilities and other collective benefits to the Company's employees; and Statutory common welfare fund is no longer required per the new cooperation law executed in 2006.

iv) Allocations to the discretionary surplus reserve, if approved in the shareholders' general meeting.

As of March 31, 2014 and December 31, 2013, the Company's statutory surplus reserve was $727,822 and $727,822 respectively.

 

 

 

 

XML 61 R19.htm IDEA: XBRL DOCUMENT v2.4.0.8
STOCKHOLDERS' EQUITY - Note 12
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
STOCKHOLDERS' EQUITY - Note 12

NOTE 12 - STOCKHOLDERS' EQUITY

COMMON STOCK

On January 25, 2013 the Company issued 18,600 shares of its common stock to its Board of Directors for the service period from January 1, 2013 to December 31, 2013. These shares were valued at $6.50 per share which was the closing price on the date of Board Approval. The Company recorded non-cash compensation expense of $120,900 for the year ended December 31, 2013.

On January 25, 2013 the Company issued 2,000 shares of its common stock to consultants for the service period from January 1, 2013 to December 31, 2013. These shares were valued at $6.50 per share which was the closing price on the date of Board approval. The Company recorded non-cash compensation expense of $ 13,000 for the year ended December 31, 2013.

On July 16, 2013, the Company issued 56,000 shares as compensation to Mr. Anthony Chan for back pay. The Company recorded $475,603 of compensation expense.

On November 12, 2013, the Company effectuated a 10 for 1 reverse split of its common stock. All share numbers and per share amounts have been retroactively restated to reflect the reverse split.

For the year ended December 31, 2013, the Company accelerated the write off of certain deferred stock based compensation totaling $395,250.

The Company has not issued or accrued any stock based compensation for the three months ended March 31, 2014.

 

 

 

XML 62 R15.htm IDEA: XBRL DOCUMENT v2.4.0.8
INTANGIBLE ASSETS - Note 8
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
INTANGIBLE ASSETS - Note 8

NOTE 8 - INTANGIBLE ASSETS

As of March 31, 2014 and December 31, 2013, the Company's intangible assets were summarized as follows:

    Estimated         March 31,         December 31,
    Useful Life     2014     2013
          (Unaudited)      
Domain name, logo and trade mark   Indefinite   $ 349,600    $ 349,600 
less: Accumulated amortization         -      - 
Intangible assets, net       $ 349,600    $ 349,600 

Intangible assets are stated at cost less accumulated amortization. The Company acquired the domain name "zoom.com" and related logo and trade name for 80,000 shares of common stock valued $349,600 as of the date of purchase. The domain name, logo and trademark have indefinite lives and no amortization was recorded for the three months ended March 31, 2014 and 2013.

 

 

 

XML 63 R60.htm IDEA: XBRL DOCUMENT v2.4.0.8
Stock Option Activity (Details) (USD $)
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Stock Option Activity Details    
Balance, December 31, 2013 199,125  
Granted 0 65,000
Lapsed (61,400)  
Exercised 0  
Cancelled 0  
Balance, March 31, 2014 137,725  
Weighted-average exercise price of options outstanding, December 31, 2013 $ 12.58  
Weighted-average exercise price of options lapsed during the period $ 37.50  
Weighted-average exercise price of options outstanding, March 31, 2014 $ 11.39  
Aggregate Intrinsic Value, December 31, 2013 $ 0  
Aggregate Intrinsic Value, March 31, 2014 $ 0  
XML 64 R13.htm IDEA: XBRL DOCUMENT v2.4.0.8
OTHER RECEIVABLES AND PREPAID EXPENSES - Note 6
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
OTHER RECEIVABLES AND PREPAID EXPENSES - Note 6

NOTE 6 - OTHER RECEIVABLES AND PREPAID EXPENSES

As of March 31, 2014 and December 31, 2013, the Company's other receivables and prepaid expenses consisted of a balance of $496,816, which includes $472,042 of receivables owed to the Company by Profit Harvest that arose in the normal course of business where the Company paid for expenses and professional fees on behalf of Profit Harvest. Profit Harvest was previously a subsidiary of the Company. At December 31, 2013, there was $614,403 in receivables owed by Profit Harvest arising in the normal course of business as described above. In 2012, Profit Harvest was sold to Beijing Zhumu Culture Communication Company, Ltd. These amounts are expected to be recovered by the Company. The Company has continued to collect outstanding balances from Profit Harvest subsequent to December 31, 2013; accordingly, the Company has determined the amounts are fully recoverable and no allowance has been provided.

 

 

XML 65 R14.htm IDEA: XBRL DOCUMENT v2.4.0.8
PROPERTY, PLANT AND EQUIPMENT - Note 7
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
PROPERTY, PLANT AND EQUIPMENT - Note 7

NOTE 7 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of March 31, 2014 and December 31, 2013 consisted of the following:

    Estimated         March 31,         December 31,
    Useful Lives     2014     2013
          (Unaudited)      
Machinery and equipment   4-6 years   $ 1,121,444    $ 1,130,554 
Electronic equipment   4-6 years     91,670      92,415 
Transportation equipment   4-6 years     51,384      51,801 
Computer equipment   4-6 years     1,164      1,173 
Office equipment   4-6 years     20,637      20,805 
Total         1,286,299      1,296,748 
less: Accumulated depreciation         (1,286,299)     (1,296,748)
Property, plant and equipment, net       $ -    $ - 

Depreciation expense for the three months ended March 31, 2014 and 2013 was $0 and $0, respectively. The Company recorded $213,710 and $275,400 of depreciation in discontinued operations for the three months ended March 31, 2014 and 2013, respectively.

 

 

XML 66 R16.htm IDEA: XBRL DOCUMENT v2.4.0.8
SHORT-TERM LOANS - Note 9
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
SHORT-TERM LOANS - Note 9

NOTE 9 - SHORT-TERM LOANS

In 2012, the Company and Portables entered into a line of credit with M&T Bank for $3.0 million. At December 31, 2012 the loan balance which was classified as short term loan, was $2,994,999. The line was collateralized by real property, a certificate of deposit, and guarantees of Portables Unlimited, Inc. (the 49.9% owner of Portables). The interest rate was 1 month LIBOR plus 3.00%. The maturity date of the line of credit is March 26, 2015. In February of 2013, the line of credit was refinanced to a maximum borrowing amount of $2.5 million. At March 31, 2014 and December 31, 2013 the Company accrued an amount due on the line of credit for $2.5 million. On May 20, 2014, the Company was released by M&T Bank as co-borrower for the line of credit. The Company will recognize a gain in the second quarter of 2014 for $2.5 million reflecting the release.

In February of 2013 the Company and Portables jointly entered into a term loan with M&T Bank for $2,500,000 million that matures in February of 2017. The balance of the note fully amortizes via monthly principal and interest payments up through the maturity of the note. The note carries an interest of 1 month LIBOR plus 3.50%. At March 31, 2014, Portables had repaid $638,147 in principal; the outstanding balance of the note was $1,861,853. The Company accounted for the outstanding balance of $1,861,853 with $613,830 as short term, and the remainder of $1,248,023 as long term. On May 20, 2014, the Company was released by M&T Bank as co-borrower for the term note. The Company will recognize a gain in the second quarter of 2014 for $1,861,853 million reflecting the release.

 

 

 

XML 67 R64.htm IDEA: XBRL DOCUMENT v2.4.0.8
Income Tax (Schedule of Effective Income Tax Rate Reconciliation) (Details)
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Income Tax Schedule Of Effective Income Tax Rate Reconciliation Details    
US statutory rates 34.00% 34.00%
Tax rate difference (5.47%) (2.24%)
Valuation allowance (28.53%) (31.76%)
State taxes (0.24%) 0.20%
Tax per financial statements (0.24%) 0.20%
XML 68 R66.htm IDEA: XBRL DOCUMENT v2.4.0.8
Equity Method Investments (Details) (USD $)
3 Months Ended 12 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Dec. 31, 2013
Changes in Equity Method Investments      
Balance at beginning of period (restated) $ 10,880,977 $ 23,758,974 $ 23,758,974
Equity method investment loss (377,005) (405,069) (271,399)
Increase in investment through co-borrowing on bank term note     2,500,000
Reduction in investment through repayment of line of credit     (500,000)
Reduction from repayment on bank term note     (489,310)
Gain from default of promisssry note leading for fofeiture of ownership     (2,000,000)
Loss on disposal     (11,462,314)
Balance at end period (restated) 10,503,972   10,880,977
Results of Operations      
Investment loss attributable to Zoom Technologies, Inc. (377,005) (405,069) (271,399)
SpreadZoom
     
Equity Method Investment, Description of Principal Activities

On May 10, 2012, the Company along with Spreadtrum Communications (Tianjin) Co., Ltd, Tianjin Baoshui District Investment Co, Ltd, and Han & Qin International (BVI) Limited invested in the joint venture SpreadZoom Technologies, Inc ("SpreadZoom"). SpreadZoom is domiciled in Tianjin, China with a registered capital of $47,352,700 (RMB 300,000,000). As of June 30, 2012, $17,520,500 (RMB 111,000,000) in capital had been contributed to SpreadZoom; the Company contributed $12,342,542 (RMB 78,000,000). The Company had committed to invest an additional $10,117,700 (RMB 64,100,000) in SpreadZoom. Management and control of the business have not been fully determined. The Company has used the equity method to account for its investment in SpreadZoom and has recorded a loss from investment of $377,005 and $ 252,588 for the three months ended March 31, 2014 and 2013, respectively. The Company is contemplating disposing of SpreadZoom. Refer to "Note 1 - Organization and Nature of Business Operations: Dispositions" for further details.

 

 

   
Changes in Equity Method Investments      
Balance at beginning of period (restated) 11,535,951 11,912,956 11,912,956
Equity method investment loss (377,005) (252,588) (377,005)
Reduction in investment through repayment of line of credit       
Balance at end period (restated) 11,158,946   11,535,951
Financial Position      
Current assets 17,811,982   24,227,267
Non-current assets 6,558,367   6,670,406
Total assets 24,370,349   30,897,673
Current liabilities 9,353,001   16,797,399
Non-current liabilities        
Total liabilities 9,353,001   16,797,399
Net ssset value 15,017,348   14,100,274
Results of Operations      
Net revenues 12,074,348 18,106,466  
Cost of goods sold 12,276,854 17,923,971  
Gross profit (202,506) 182,495  
Operating expenses 593,525 715,903  
Operating income (loss) (796,031) (533,408)  
Other income (expenses), net 159 185  
Income (loss) before taxes (795,872) (533,223)  
less: Provision for income taxes        
Net income (loss) (795,872) (533,223)  
Investment loss attributable to Zoom Technologies, Inc. (377,005) (252,588) (377,005)
Portables
     
Changes in Equity Method Investments      
Balance at beginning of period (restated) 0 11,846,018 11,846,018
Equity method investment loss     105,606
Increase in investment through co-borrowing on bank term note     2,500,000
Reduction in investment through repayment of line of credit     (500,000)
Reduction from repayment on bank term note     (489,310)
Gain from default of promisssry note leading for fofeiture of ownership     (2,000,000)
Loss on disposal     (11,462,314)
Balance at end period (restated) 0   0
Results of Operations      
Net revenues 7,365,230    
Cost of goods sold 5,893,746    
Gross profit 1,471,484    
Operating expenses 1,637,860    
Operating income (loss) (166,376)    
Other income (expenses), net (137,978)    
Income (loss) before taxes (304,354)    
less: Provision for income taxes       
Net income (loss) (304,354)    
Investment loss attributable to Zoom Technologies, Inc.     $ 105,606
XML 69 R63.htm IDEA: XBRL DOCUMENT v2.4.0.8
Income Tax (Schedule of Tax Effects of Temporary Differences in Deferred Tax Assets and Liabilities) (Details) (USD $)
Mar. 31, 2014
Dec. 31, 2013
Income Tax Schedule Of Tax Effects Of Temporary Differences In Deferred Tax Assets And Liabilities Details    
Net operating loss $ 1,458,834 $ 1,373,600
Less: Valuation allowance (1,458,834) (1,373,600)
Total deferred tax assets 0 0
Deferred tax liabilities: 0 0
Deferred tax assets, net $ 0 $ 0
XML 70 R34.htm IDEA: XBRL DOCUMENT v2.4.0.8
Notes Payable (Tables)
3 Months Ended
Mar. 31, 2014
Notes Payable Tables  
Notes payable

As of March 31, 2014 and December 31, 2013, the Company's notes payable consisted of the following:

          March 31,         December 31,
      2014     2013
      (Unaudited)      
Former Executives of Nollec   $ 145,000    $ 145,000 
The Cellular Network Communications Group, Inc.     205,937      205,937 
Total   $ 350,937    $ 350,937 

 

 

 

 

XML 71 R51.htm IDEA: XBRL DOCUMENT v2.4.0.8
Intangible Assets (Narrative) (Details) (USD $)
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Intangible Assets Narrative Details    
Amortization of intangible assets $ 0 $ 0
XML 72 R21.htm IDEA: XBRL DOCUMENT v2.4.0.8
STOCK OPTIONS - Note 14
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
STOCK OPTIONS - Note 14

NOTE 14 - STOCK OPTIONS

The 2009 Equity Incentive Compensation Plan

The following summary represents options activity during the three months ended March 31, 2014 under the New Plan.

          Weighted-      
    Under     Average     Aggregate
    New     Exercise     Intrinsic
    Plan     Price     Value
Balance, December 31, 2013   199,125    $ 12.58    $ -  
     Granted   -              
     Lapsed   (61,400)     37.50      -  
     Exercised                 
     Cancelled   -       -       -  
Balance, March 31, 2014   137,725    $ 11.39    $ -  

The following represents options summary as of March 31, 2014 under the New Plan.

    Options Outstanding   Options Exercisable
          Weighted-     Weighted-         Weighted-
          Average     Average         Average
    Number     Remaining     Exercise   Number     Exercise
    Outstanding     Contractual Life     Price   Exercisable     Price
Options   137,725      2.80 years   $ 11.39    137,725    $ 11.39 

On February 14, 2013, the Company's BOD approved of the granting of 10,000 options to an employee with an exercise price of $6.50, with monthly vesting beginning in February 2013. The options expire four years from the date of grant. The Company determined the grant date fair value of 10,000 options of $0.17 per share which was calculated using the Black Scholes Options Pricing Model as follows: Stock price of $6.50 per share, exercise price of $6.50 per share, expected life of 4.00 years, volatility of 32.48% and discount rate of 0.64%.

In November of 2013, the Company's BOD approved of the granting of 55,000 options to certain employees with an exercise price of $3.14, with monthly vesting beginning in November 2013. The options expire four years from the date of grant. The Company determined the grant date fair value of 55,000 options of $1.14 per share which was calculated using the Black Scholes Options Pricing Model.

As a result, of the issuances in February and November of 2013 of 10,000 and 55,000 shares respectively, the total options issued during 2013 were 65,000.

The Company did not record any non-cash stock compensation expense for the three months ended March 31, 2014.

 

 

 

XML 73 R26.htm IDEA: XBRL DOCUMENT v2.4.0.8
DISCONTINUED OPERATIONS - Note 19
3 Months Ended
Mar. 31, 2014
Other income (expenses)  
DISCONTINUED OPERATIONS - Note 19

NOTE 19 - DISCONTINUED OPERATIONS

On December 31, 2012, the Company announced its plan to dispose of certain business operations to Beijing Zhumu Culture Communication Company, Ltd. covered in the Share Purchase Agreement as described in "Note 1 - Organization and Nature of Business Operations" was for approximately $31.7 million (RMB 200 million) in sales proceeds. The Share Purchase Agreement covers the sale of several business operations in different jurisdictions, with differing regulatory requirements regarding the purchase and sale of businesses. For accounting purposes the Company has accounted for those operations as discontinued operations up to the point of the individual closing of the relevant entities under relevant local jurisdictions as detailed in the tables below.

The sale of Profit Harvest and CDE closed on December 31, 2012. The portion of the sale covered in the Share Purchase Agreement for Ever Elite and Nollec closed on April 5, 2013. The sale of TCB Digital closed on May 16, 2014.

Results of Operations     Three Months Ended March 31,
      2014     2013
             
Net revenues   $ 56,298,303    $ 42,257,043 
Cost of sales     54,275,799      40,241,554 
     Gross profit     2,022,504      2,015,489 
             
Operating expenses     1,425,832      1,650,821 
Operating income     596,672      364,668 
             
Other income (expenses), net     (465,327)     (702,175)
(Loss) income before taxes from discontinued operations     131,345      (337,507)
             
less: Provision for income taxes     32,305      21,061 
             
Income (loss) from discontinued operations, net of tax   $ 99,040    $ (358,568)
             
Income (loss) from discontinued operations attributable to Zoom Technologies, Inc.   $ 154,632    $ (320,687)
             
Basic and diluted (loss) income per common share from            
     discontinued operations:            
     Basic   $ 0.05    $ (0.11)
     Diluted   $ 0.05    $ (0.11)

 

 

Financial Position         March 31,         December 31,
      2014     2013
             
Cash and equivalents   $ 8,963,618    $ 2,848,859 
Restricted cash     72,010,257      80,658,355 
Notes receivable     -      669,583 
Accounts receivable, net     17,085,575      20,225,872 
Inventories, net     19,846,379      18,809,671 
Other receivables and prepaid expenses     147,143      2,061,687 
Advance to suppliers     355,578      224,913 
Due from related parties     5,818,141      204,509 
Property, plant and equipment, net      1,472,004      1,636,316 
Deferred tax assets, noncurrent     69,570      70,136 
Total current assets     125,768,265      127,409,901 
             
Total Assets of Discontinued Operations   $ 125,768,265    $ 127,409,901 
             
Short-term loans   $ 34,404,972    $ 38,529,498 
Notes payable     29,588,128      42,441,911 
Accounts payable     40,342,706      42,843,584 
Accrued expenses and other payables     866,404      19,643 
Advances from customers     272,718      97,110 
Taxes payable     (5,362,691)     (4,106,935)
Due to related parties     37,162,963      19,284,688 
Total current liabilities     137,275,200      139,109,499 
             
Total Liabilities of Discontinued Operations     137,275,200      139,109,499 
             
Net (Liabilities) Assets of Discontinued Operations   $ (11,506,935)   $ (11,699,598)

 

 

 

XML 74 R49.htm IDEA: XBRL DOCUMENT v2.4.0.8
Property, Plant and Equipment Depreciation (Narrative) (Details) (USD $)
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Property Plant And Equipment Depreciation Narrative Details    
Depreciation expense $ 0 $ 0
Discontinued operations depreciation expense $ 213,710 $ 275,400
XML 75 R41.htm IDEA: XBRL DOCUMENT v2.4.0.8
Correction of Error (Tables)
3 Months Ended
Mar. 31, 2014
Correction Of Error Tables  
Restatement to Prior Year Income

The following tables show the previously reported amounts, the required adjustment and the currently restated amounts related to the Company's results of operations for three months ended March 31, 2013 (as restated).

      For the Three Months Ended March 31, 2013
      As Previously           As Currently
      Reported     Adjustment     Reported
                  (Restated)
Net revenues   $ 7,365,230    $ (7,365,230)   $ - 
Cost of sales     5,893,746      (5,893,746)     - 
     Gross profit     1,471,484      (1,471,484)     - 
                   
Total operating expenses     2,292,010      (1,637,860)     654,150 
                   
Loss from operations      (820,526)     166,376      (654,150)
                   
Other (expense) income, net     (470,915)     (14,503)     (485,418)
                   
Loss before income taxes for continuing operations     (1,291,441)     151,873      (1,139,568)
                   
Income taxes for continuing operations     2,250      -      2,250 
                   
Loss from continuing operations     (1,293,691)     151,873      (1,141,818)
                   
Discontinued Operations:                  
Loss from discontinued operations, net of tax     (358,568)     -      (358,568)
Loss on disposal, net tax     -      -      - 
Loss from discontinued operations     (358,568)     -      (358,568)
                   
Net loss   $ (1,652,259)   $ 151,873    $ (1,500,386)
                   
less: Income (loss) attributable to noncontrolling interest     (189,754)     151,873      (37,881)
                   
     Net loss attributable to Zoom Technologies, Inc.   $ (1,462,505)   $ -    $ (1,462,505)
                   
                   
Basic and diluted loss per common share                  
     Basic   $ (0.50)   $ -     $ (0.50)
     Diluted   $ (0.50)   $ -     $ (0.50)

These corrections will be made to applicable prior period financial information in future filings with the SEC including this filing.

 

 

XML 76 R5.htm IDEA: XBRL DOCUMENT v2.4.0.8
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $)
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Statement of Comprehensive Income [Abstract]    
Net loss attributable to Zoom Technologies Inc. $ (485,532) $ (1,462,505)
Net loss attributable to noncontrolling interest (55,592) (37,881)
Other comprehensive income:    
Foreign currency translation gain - Zoom Technologies Inc. 218,375 331,873
Foreign currency translation gain - noncontrolling interest 18,725 82,968
Comprehensive loss - Zoom Technologies Inc. (267,157) (1,130,632)
Comprehensive (loss) income - noncontrolling interest $ (36,867) $ 45,087
XML 77 R10.htm IDEA: XBRL DOCUMENT v2.4.0.8
MERGER AND ACQUISITIONS - Note 3
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
MERGER AND ACQUISITIONS - Note 3

NOTE 3 - MERGER AND ACQUISITIONS

The Company acquired 100% equity in Silver Tech on May 31, 2010. As of May 31, 2010, the net assets of Silver Tech were $2,564,160. The purchase consideration was $10,960,000 which resulted in goodwill of $8,395,840. As of December 31, 2012, the Company has taken action to dispose of Silver Tech's operating subsidiaries Ever Elite and Nollec; accordingly, all goodwill related to Silver Tech has been written off.

The Company acquired 100% ownership of CDE on January 4, 2011. As of January 4, 2011, the net liabilities of CDE were $43,409. The purchase consideration was $1,818,000 which resulted in goodwill of $1,861,409. As of December 31, 2012, as part of the Company's disposal of Profit Harvest the Company has indirectly disposed of CDE, accordingly, all of the goodwill related to CDE has been written off.

The following table summarizes goodwill as of March 31, 2014 and December 31, 2013 resulting from the acquisitions of Jiangsu Leimone, and Silver Tech:

          March 31,         December 31,
      2014     2013
      (Unaudited)      
Jiangsu Leimone   $ 103,057    $ 103,057 
Silver Tech     8,395,840      8,395,840 
Total     8,498,897      8,498,897 
Less: Impairment     (8,498,897)     (8,498,897)
Total goodwill   $ -    $ - 

The Company reviews the carrying value of the goodwill for impairment regularly.

 

 

 

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Summary of Warrants Outstanding and Exercisable (Details) (USD $)
3 Months Ended
Mar. 31, 2014
Dec. 31, 2013
Summary Of Warrants Outstanding And Exercisable Details    
Balance, March 31, 2014 863,860 863,860
Warrants outstanding, Weighted-average remaining life, in years 1 year 7 months 6 days  
Warrants outstanding, Weighted-average exercise price $ 23.00  
Warrants exercisable, at March 31, 2014 863,860  
Warrants exercisable, Weighted-average exercise price $ 23.00  
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Correction of Error for Accounting of Portables Unlimited, LLC (Details) (USD $)
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Net revenues $ 0 $ 0
Cost of sales 0 0
Gross profit 0 0
Loss from operations (414,785) (654,150)
Other (expense) income, net (223,850) (485,418)
Loss before income taxes from continuing operations (638,635) (1,139,568)
Income taxes for continuing operations 1,529 2,250
Loss from continuing operations (640,164) (1,141,818)
Loss from discontinued operations, net of tax 99,040 (358,568)
Loss on disposal, net of tax 0 0
Loss from discontinued operations 99,040 (358,568)
Net loss (541,124) (1,500,386)
less: Income (loss) attributable to noncontrolling interest (55,592) (37,881)
Net loss attributable to Zoom Technologies Inc. (485,532) (1,462,505)
Basic $ (0.16) $ (0.50)
Diluted $ (0.16) $ (0.50)
Previouly Reported
   
Net revenues   7,365,230
Cost of sales   5,893,746
Gross profit   1,471,484
Total operating expenses   2,292,010
Loss from operations   (820,526)
Other (expense) income, net   (470,915)
Loss before income taxes from continuing operations   (1,291,441)
Income taxes for continuing operations   2,250
Loss from continuing operations   (1,293,691)
Loss from discontinued operations, net of tax   (358,568)
Loss on disposal, net of tax     
Loss from discontinued operations   (358,568)
Net loss   (1,652,259)
less: Income (loss) attributable to noncontrolling interest   (189,754)
Net loss attributable to Zoom Technologies Inc.   (1,462,505)
Basic   $ (0.50)
Diluted   $ (0.50)
Adjustment
   
Net revenues   (7,365,230)
Cost of sales   (5,893,746)
Gross profit   (1,471,484)
Total operating expenses   (1,637,860)
Loss from operations   166,376
Other (expense) income, net   (14,503)
Loss before income taxes from continuing operations   151,873
Income taxes for continuing operations     
Loss from continuing operations   151,873
Loss from discontinued operations, net of tax     
Loss on disposal, net of tax     
Loss from discontinued operations     
Net loss   151,873
less: Income (loss) attributable to noncontrolling interest   151,873
Net loss attributable to Zoom Technologies Inc.     
Basic     
Diluted     
As Currently Reported
   
Net revenues     
Cost of sales     
Gross profit     
Total operating expenses   654,150
Loss from operations   (654,150)
Other (expense) income, net   (485,418)
Loss before income taxes from continuing operations   (1,139,568)
Income taxes for continuing operations   2,250
Loss from continuing operations   (1,141,818)
Loss from discontinued operations, net of tax   (358,568)
Loss on disposal, net of tax     
Loss from discontinued operations   (358,568)
Net loss   (1,500,386)
less: Income (loss) attributable to noncontrolling interest   (37,881)
Net loss attributable to Zoom Technologies Inc.   $ (1,462,505)
Basic   $ (0.50)
Diluted   $ (0.50)
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SUBSEQUENT EVENT - Note 20
3 Months Ended
Mar. 31, 2014
Subsequent Event - Note 20  
SUBSEQUENT EVENT - Note 20

NOTE 20 - SUBSEQUENT EVENT

On December 31, 2012, the Company entered into a Securities Purchase Agreement with BZCC, which among other assets included the sale of TCB Digital by the Company to BZCC. On or about December 30, 2013, the Company consented to BZCC assigning its purchase rights to Huatianli; on May 15, 2014, the Company completed the sale of TCB Digital to Huatianli which is evidenced by the recording of transfer ownership with the PRC government, and the Company's receipt of payment in full from Huatianli. Additionally, the Company is obligated to refund a purchase deposit of RMB 52 million to BZCC for funds previously deposited in a restricted trust account in the Company's name.

On May 20, 2014, the Company received releases from M&T Bank for balances owed under both a line of credit and term note owed at March 31, 2014. As result of these releases, the liabilities will be written off as gains in the second quarter of 2014.

 

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Income Tax (Tables)
3 Months Ended
Mar. 31, 2014
Income Tax Tables  
Schedule of Tax Effects of Temporary Differences that Give Rise to Significant Portions of Deferred Tax Assets and Liabilities

The following table summarizes the temporary differences which result in deferred tax assets and liabilities as at March 31, 2014 and December 31, 2013:

          March 31,         December 31,
      2014     2013
Deferred tax assets:     (Unaudited)      
Net operating loss   $ 1,458,834    $ 1,373,600 
less: Valuation allowance     (1,458,834)     (1,373,600)
Total deferred tax assets     -      - 
             
Deferred tax liabilities:     -      - 
Deferred tax assets, net   $ -    $ - 

 

 

 

Schedule of Effective Income Tax Rate and Amount Reconciliation

The following table reconciles the U.S. statutory rates to the Company's effective tax rates for the three months ended March 31, 2014 and 2013:

    For Three Months Ended
    March 31,
    2014   2013
    (Unaudited)   (Unaudited)
        (Restated)
US statutory rates   34.00%   34.00%
Tax rate difference   -5.47%   -2.24%
Valuation allowance   -28.53%   -31.76%
State taxes   -0.24%   0.20%
Tax per financial statements   -0.24%   0.20%

 

 

 

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WARRANTS - Note 13
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
WARRANTS - Note 13

NOTE 13 - WARRANTS

The Company granted Series A, B, C, D and E warrants to the accredited investors as part of its private placement offering on October 16, 2009 and November 18, 2009.

Following is the brief description of warrants:

Series A Warrants: The Series A warrants had an exercise price of $60.00 and a term of 5 years from the issue date subject to the Exchange Cap (as defined in the agreement).

Series B Warrants: The Series B warrants had an exercise price of $0.10 and a term of three (3) months from the issue date provided, however, that such date shall be extended indefinitely if the warrant cannot be exercised due to the Beneficial Ownership Limitation (as defined in the agreement) or the Exchange Cap Limitation (as defined in the agreement) until the warrant can be exercised in full by the holder thereof without breaching the Beneficial Ownership Limitation (as defined in the agreement) or the Exchange Cap Limitation (as defined in the agreement). All B Warrants were exercised in December 2009.

Series C Warrants: The Series C warrants are exercisable only upon the exercise of the Series B warrants. The Series C warrants had an exercise price of $60.00 and a term of 5 years from the issue date.

Series D Warrants: The Series D warrants were exercisable if the Company failed to meet certain performance criteria for the year 2009. The Series D warrant had an exercise price of $0.10 and a term of exercise equal to three (3) months from the date the Maximum Eligibility Date (as defined in the agreement); provided, however, that such date would be extended indefinitely if the warrant could not be exercised due to the Beneficial Ownership Limitation (as defined in the agreement) or the Exchange Cap (as defined in the agreement) until the warrant can be exercised in full by the holder without breaching the Beneficial Ownership Limitation (as defined in the agreement) or the Exchange Cap Limitation (as defined in the agreement). Due to the Net Income of Zoom as reported in the Company's annual report for the year 2009 exceeding the eligibility threshold pursuant to the agreement, the Series D Warrants became ineligible for exercise.

Series E Warrants: The Series E warrants were exercisable if the Company fails to meet certain performance criteria for the year 2010. The Series E warrants had an exercise price of $0.10 and a term of three (3) months from the date the Maximum Eligibility Date (as defined in the agreement); provided, however, that such date would be extended indefinitely if the warrant could not be exercised due to the Beneficial Ownership Limitation (as defined in the agreement) until the Warrant could be exercised in full by the holder thereof without breaching the Beneficial Ownership Limitation (as defined in the agreement). Due to the Net Income of Zoom as reported in the Company's annual report for the year 2010 exceeding the eligibility threshold pursuant to the agreement, the Series E Warrants became ineligible for exercise.

The Company granted on May 6, 2010, Series F warrants to the above investors for their temporary forfeiture of their right to participate in the Company's future financings.

Series F Warrants: The Series F warrants had an exercise price of $60.00 and a term of 5 years from the issue date. The Company issued 37,500 Series F warrants to investors who participated in private placement transaction pursuant to the Securities Purchase Agreement dated October 15, 2009, to temporarily waive their right for a period of eight months to participate in a future offering of the Company. The investors originally have a period of twenty-four months ("Rights Period") in which they have the right to participate, and for providing a temporary waiver, an eight-month duration is added to the original expiration of the Rights Period.

The Company granted Series G warrants to the accredited investors as part of its private placement offering on November 15, 2010.

Series G Warrants: The Series G warrants have an exercise price of $47.10 and a term of 5 years from the issue date.

Anti-dilution Adjustments for Certain Warrants: Since the private placement in November 2010 involved sales of the Company's stock at a price that activated anti-dilution provisions in the Series A, C, F and certain placement agent warrants, the exercise price of these warrants is adjusted to $37.40 per share and the number of warrants eligible is multiplied by a factor of 60 / 37.40 or 1.60 with fractional shares rounding up.

The following summary represents warrants activity during the three months ended March 31, 2014:

          Weighted-      
          Average     Aggregate
    Number of     Exercise     Intrinsic
    Warrants     Price     Value
Balance, December 31, 2013   863,860    $ 23.00    $ - 
     Granted                
     Lapsed                
     Exercised                
     Cancelled                
Balance, March 31, 2014   863,860    $ 23.00    $ - 

The following presents a warrants summary as of March 31, 2014:

    Warrants Outstanding   Warrants Exercisable
          Weighted-     Weighted-         Weighted-
          Average     Average         Average
    Number     Remaining     Exercise   Number     Exercise
    Outstanding     Contractual Life     Price   Exercisable     Price
Warrants   863,860      0.84 years   $ 23.00    863,860    $ 23.00 

The Company has accounted for all of the outstanding Series A, C, F, G, and related placement warrants as liabilities. The Company assessed the value of these warrants by using the binomial lattice model. When the Company valued the warrants it used the following assumptions as part of inputs into the valuation model. US treasury rates as measure of the risk free rate of return. The Company also used the mean of the annualized standard deviation of the log normal returns of comparable companies in the same line of business as measure of volatility. The Company controls whether dilution may occur, so it did not add additional assumptions regarding dilutive events into the future discrete outcomes found in the model. The warrants values were adjusted for the dilutive effect as ratio of the outstanding common stock at the time of measurement. In determining the probabilities of an up movement or down movement in the discrete outcomes, as well as the related magnitude of such up or down movements, the Company used a Cox-Ross-Rubenstein approach in applying the binomial lattice model.

 

 

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Property, Plant and Equipment (Tables)
3 Months Ended
Mar. 31, 2014
Property Plant And Equipment Tables  
Components of Property, Plant and Equipment

Property, plant and equipment as of March 31, 2014 and December 31, 2013 consisted of the following:

    Estimated         March 31,         December 31,
    Useful Lives     2014     2013
          (Unaudited)      
Machinery and equipment   4-6 years   $ 1,121,444    $ 1,130,554 
Electronic equipment   4-6 years     91,670      92,415 
Transportation equipment   4-6 years     51,384      51,801 
Computer equipment   4-6 years     1,164      1,173 
Office equipment   4-6 years     20,637      20,805 
Total         1,286,299      1,296,748 
less: Accumulated depreciation         (1,286,299)     (1,296,748)
Property, plant and equipment, net       $ -    $ -