Zoom Technologies Reports Results for the Third Quarter of 2002

Business Wire, Oct 29, 2002

Business Editors/High-Tech Writers

BOSTON--(BUSINESS WIRE)--Oct. 29, 2002

Zoom Technologies, Inc. (Nasdaq: ZOOM), a leading manufacturer of modems and other data communications products, today reported sales for its third quarter ending September 30, 2002 of $10.9 million, up 18.5% from the second quarter ending June 30, 2002 and down 7.2% from the third quarter ending September 30, 2001.

Zoom reported net income of $0.1 million for the third quarter of 2002, compared to net losses of $1.2 million for the second quarter of 2002 and $5.5 million for the third quarter of 2001. Zoom reported a net loss of $4.6 million or $0.59 per share for the first nine months of 2002, versus a net loss of $13.4 million or $1.70 per share for the first nine months of 2001.

Zoom achieved profitability in the third quarter of 2002 due to improved gross margin and reduced operating expenses. Compared to the third quarter of 2001, gross profits increased from 24.1% of revenue to 29.1%, and operating expenses decreased from 39.0% of revenue to 28.7%.

Zoom's cash balance on September 30, 2002 was $7.0 million, or $.89 per share, up $0.9 million from its cash balance on June 30, 2002 and up $1.7 million from its cash balance on December 31, 2001. On September 30, 2002 Zoom had a current ratio of 4.3 and stockholders' equity of $14.0 million or $1.78 per share.

"We are pleased with our quarter's results for a number of reasons," said Frank Manning, Zoom's President and CEO. "Revenues were fairly strong, even considering that the third quarter is normally a good one for Zoom. We achieved high dial-up modem unit volume, our highest since 1999, reflecting improved retail market share and increased system integrator business. We achieved record ADSL revenues, reflecting accelerating sales in Europe. Gross margins were up, reflecting reasonable dial-up modem margins and reduced inventory write-downs. Operating expenses were down as a result of our headcount reductions and careful attention to cost-cutting. Our balance sheet on September 30, 2002 was strong, showing stockholders' equity of $14 million with our headquarters building at $2.5 million, $6.8 million less than its appraised value in September of this year. Looking forward, we are encouraged to see that the national rollout of V.92 is finally starting to occur in the US, with Zoom positioned as the top V.92 client modem supplier. We are also seeing ADSL modem momentum in Europe, including momentum through the retail channel, a strong channel for Zoom. However, we believe that overall demand for PC products at retail in the US is relatively weak; and we will continue to keep a close watch on expenses as we continue to invest in enhancing our position as a leading supplier of dial-up and broadband modems."

Zoom also announced today that it received a Nasdaq staff determination letter on October 22, 2002 indicating that the Company fails to comply with the $1.00 minimum bid price requirement for continued listing set forth in Marketplace Rule 4450(a)(5), and that its common stock is, therefore, subject to delisting from the Nasdaq National Market. Zoom has requested a hearing before a Nasdaq Listing Qualifications Panel to review the Nasdaq staff determination. There can be no assurance the Panel will grant the Company's request for continued listing. Zoom's common stock will continue to trade on the Nasdaq National Market pending the outcome of the hearing. If Zoom is unable to remain on the Nasdaq National Market, the Company intends to apply for listing on the Nasdaq Small Cap market.

Zoom has scheduled a Q3 2002 earnings conference call for Tuesday, October 29 at 8:45 a.m. Eastern Time. The call will be simulcast to stock analysts and other interested parties on Zoom's website (www.zoom.com/Q3) and other financial and investor-oriented websites via the CCBN / Business Wire StreetEvents network. Shortly after the conference call, a recorded broadcast will be available on Zoom's website. For additional information, please contact Investor Relations, Zoom Technologies, 207 South Street, Boston, MA 02111, telephone (617) 423-1072, email investor@zoom.com, or visit Zoom's website at www.zoom.com.

This release contains forward-looking information relating to Zoom's plans, expectations and intentions, including statements relating to Zoom's dial-up modem, cable modem, DSL modem, and wireless networking sales and development activities, the anticipated timing and significance of the V.92 service rollout, the anticipated development of Zoom's markets and sales channels, the anticipated level of ADSL in Europe and demand for Zoom's products, the anticipated impact of Zoom's cost-cutting measures, Zoom's ability to continue listing on the Nasdaq National Market or, if necessary, obtain listing on the Nasdaq Small Cap market, and Zoom's financial condition or results of operations. Actual results may be materially different than those expectations as a result of known and unknown risks, including: Zoom's continuing losses; Zoom's ability to obtain additional financing for working capital and other purposes; Zoom's ability to effectively manage its inventory; uncertainty of new product development and introduction, including budget overruns, project delays and the risk that newly introduced products may contain undetected errors or defects or otherwise not perform as anticipated, and other delays in shipments of products; the early stage of development of the cable and DSL data communications markets, the uncertainty of market growth of those markets, and Zoom's ability to more successfully penetrate those markets, which have been challenging markets with significant barriers to entry; several market conditions; Zoom's dependence on one or a limited number of suppliers for certain key components; rapid technological change; competition; the risk that Zoom's common stock will be delisted from the Nasdaq National Market or be unable to qualify for listing on the Nasdaq Small Cap; and other risks set forth in Zoom's filings with the Securities and Exchange Commission. Zoom cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Zoom expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in the Zoom's expectations or any change in events, conditions or circumstance on which any such statement is based.