RELATED PARTY TRANSACTIONS - Note 16

9 Months Ended

Sep. 30, 2012

Notes to Financial Statements

RELATED PARTY TRANSACTIONS - Note 16

NOTE 16 - RELATED PARTY TRANSACTIONS

Due from related parties

As of September 30, 2012 and December 31, 2011, due from related parties were:

	September 30,		December 31,
	2012		2011
Due from related parties - short term	(Unaudited)
Tianjin Tong Guang Group Electronics Science & Technology Co., Ltd.	$	6,810,361	$	3,883,641
Beijing Leimone Shengtong Wireless Technology Co., Ltd.		110,302		167,172
Leimone (Tianjin) Industrial Co., Ltd.		7,441,408		20,473,338
Beijing Leimone Shengtong Cultural Development Co., Ltd.		1,708,438		2,744,697
Tianjin Tong Guang Group		-		379,994
Shenzhen Leimone		13,990		429,170
712 (Prior Shareholder)		758,858		992,815
Raja R Amar - Chief Executive Officer of Portables		-		741,448
Spreadzoom		9,387,561		-
Others		2,872,566		613,425
Total due from related parties	$	29,103,484	$	30,425,700

Tianjin Tong Guang Group Electronics Science & Technology Co., Ltd. ("Electronics Science & Tech"), an entity related to the Company through a common shareholder of TCB Digital, purchased products from the Company. For the nine months ended September 30, 2012 and 2011, the Company recorded revenues of $41,055,041 and $21,603,055 from sales to Electronics Science & Tech respectively. For the three months ended September 30, 2012 and 2011, the Company recorded revenues of $18,305,584 and $9,061,134 from sales to Electronics Science & Tech respectively.

Beijing Leimone Shengtong Wireless Technology Co., Ltd. ("Beijing Leimone") was founded by Gu, the largest shareholder of the Company. Beijing Leimone borrows 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.

Leimone (Tianjin) Industrial Co., Ltd. ("Tianjin Leimone") was controlled by Gu, the largest shareholder of the Company. Tianjin Leimone sells raw materials to the Company. For the nine months ended September 30, 2012 and 2011, the Company recorded total purchases from Tianjin Leimone of $118,188,000 and $36,153,234 respectively. The amount due from Tianjin Leimone represented advances of $12,049,192 and $13,708,030 as of September 30, 2012 and December 31, 2011 respectively. The Company also sold certain products to Tianjin Leimone of $10,445,942. In addition, Tianjin Leimone borrowed money from the Company and these borrowings bore no interest. As of September 30, 2012 and December 31, 2011, the balance of such loans was $11,495,490 and $6,765,308 respectively. The balances are neither collateralized nor personally guaranteed by Gu.

The amount due from Beijing Leimone Shengtong Cultural Development Co., Ltd. ("Beijing Leimone Cultural") for short term loan granted by the Company. Beijing Leimone Cultural was controlled by Gu. The borrowing bore no interest and is due on demand. The balances are neither collateralized nor personally guaranteed by Gu.

Tianjin Tong Guang Group, a 20% shareholder of our TCB subsidiary, borrowed money from the Company. The borrowings bear no interest and are due on demand. As of September 30, 2012, there was no outstanding balance due from Tianjin Tong Guang Group.

712 was a minority shareholder of TCB Digital before Mr. Gu exercised the option to acquire 29.0% of TCB Digital. (See note 1.) 712 purchases raw materials from the Company. For the nine months ended September 30, 2012 and 2011, the Company recorded revenues from sales to 712 of nil and $15,757,425 respectively. For the three months ended September 30, 2012 and 2011, the Company did not recognize and sales to 712. As of September 30, 2012 and December 31, 2011, the balance of such sales was $563,539 and $796,419 respectively. In addition, the Company purchases raw materials from 712. For the nine months ended September 30, 2012 and 2011, the Company recorded purchases from 712 of 580,617 and $15,523,282 respectively. For the three months ended September 30, 2012 and 2011, the Company recorded total purchases from 712 of 580,617.19 and nil respectively. 712 was no longer a related party of the Company after Mr. Gu exercised his option to acquire the additional 29.0% of TCB Digital in March 2010.

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. $369,185.39 and $408,831 as of September 30, 2012 and December 31, 2011 was a loan to Shenzhen Leimone for setup costs. Our Chairman, Mr. Gu, plans to personally fund the cost of equipment as his investment into Shenzhen Leimone and become the controlling shareholder of Shenzhen Leimone. The Company purchased raw materials from Shenzhen Leimone in 2011. The balance as of September 30, 2012 was advance to Shenzhen Leimone amounted to $13,990. In addition, For the nine months ended September 30, 2012 and 2011, the Company recorded revenues from sales to Shenzhen Leimone of $16,055 and $153,695 respectively. For the three months ended September 30, 2012 and 2011, the Company recorded total revenue from sales to Shenzhen Leimone of $2,729 and $153,695 respectively.

The amounts due from Raja R Amar are related to loans made to Raja R Amar by Portables prior to its acquisition by Zoom. The loans are interest free and are unsecured and are expected to be repaid by December 31, 2012. There was no balance due from Raja R. Amar at September 30, 2012. Amounts owed by him personally have been settled.

The entire balance of receivables due from SpreadZoom was for mobile handsets manufactured by the Company and sold to SpreadZoom. The Company expects to receive payments for these outstanding receivables in the normal course of business.

Due to related parties

As of September 30, 2012 and December 31, 2011, due to related parties were:

	September 30,		December 31,
	2012		2011
Due to related parties	(Unaudited)		(Audited)
Mr. Lei Gu	$	2,883,500	$	2,788,635
Anthony Chan		328,854		-
Tianjin Tong Guang Group Electronics Science & Technology Co., Ltd.		37,636		-
Beijing Leimone Shengtong Cultural Development Co., Ltd.		72,500		-
Tianjin Tong Guang Group		37,845		-
Leimone (Tianjin) Industrial Co., Ltd.		17,171,257		-
Wireless Holdings of Northeast		117,600		117,600
Portables Unlimited International		4,079,864		2,633,147
Portables Unlimited, Inc.		1,110,000		650,000
AUM Realty, Inc.		125,446		269,049
Others		-		283,943
Total due to related parties	$	25,964,502	$	6,742,374

The Company borrowed money from Hui Pak Kong, a prior shareholder of CDE before the Company's acquisition on January 4, 2011. The borrowings bear no interest and are due on demand. As of September 30, 2012 and December 31, 2011, the balance of such loans was Nil and $277,076 respectively. The loan owed to Hui Pak Kong was forgiven and the amount was added to the additional paid in capital during the nine months ended September 30, 2012.

Gu provides fund to the Company with no interest and are due on demand. As of September 30, 2012 and December 31, 2011, the balances of funds provided by Gu was $2,883,500 and $2,788,635, respectively.

TCB Digital had outstanding related party payable of $17,171,257 owed to Tianjin Leimone for raw materials that TCB Digital purchased through Tianjin Leimone for its manufacturing in the normal course of business. During the nine months ended September 30, 2012, the TCB Digital purchased approximately $118.2 million of material from Tianjin Leimone.

In January 2011, the Portables entered into a line of credit agreement with a Portables Unlimited International for $5,000,000. Interest on the line is due and payable on demand at 5.6%. The unpaid balance as of September 30, 2012 and December 31, 2011 was $4,079,864 and $2,633,147 respectively.

Portables received advances from one of its non-controlling owner, Portables Unlimited, Inc., totaling $1,110,000. The advance has an interest rate of 12% per annum and is due on demand.