Holding Rex Global Entertainment, which will buy 30% of Yota Devices, revealed all the secrets of the company

Yota Devices earned $ 15.8 million in the first nine months of 2015. True, the company's losses reached $ 30.7 million. The developer of the smartphone YotaPhone still did not disclose financial performance. It was only known that it is unprofitable.

On Thursday, all these figures were published by Hong Kong holding Rex Global Entertainment , preparing to buy 30% of Yota Devices from Telconet Capital Limited Partnership Sergey Adonyev and Albert Avdolyan.

In October 2015, it became known that the Hong Kong holding Rex Global Entertainment was going to buy 64.9% of the shares of Yota Devices for $ 100 million. But in February 2016, the terms of the takeover changed .
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The reason for the revision of the terms of the deal was the listing committee, which suspected that the Telconet deal could be a reverse takeover. In this scenario, the absorbed company is worth more than the one that makes the takeover. The holding is considering buying a 30% stake for $ 46.2 million, taking into account the payment of Telconet debts in the amount of $ 7 million and $ 27 million held by its subsidiary Yota Devices. Despite the acquisition of only 30% of Yota Devices shares, REX Global will have the right to exclusive use of patents and the YotaPhone trademark in China for seven years.

Rex Global disclosed Yota Devices since 2012, when it earned $ 2.2 million. The following year, the company almost doubled its revenue - to $ 5.7 million. And in 2014, Yota Devices was able to earn $ 29.7 million. Most of this money came in the last quarter of the year - Yota Devices brought in $ 14.3 million in the first nine months of 2014, Rex Global reports.

In 2012, the net loss was $ 4.2 million, and in the following year it rose to $ 20 million. The company ended 2014 with a loss of $ 46.1 million, of which a significant part also fell in the fourth quarter of the year. The first nine months of 2014 brought her a $ 28.3 million loss.

Since the launch of the first YotaPhone and by the end of 2015, the company sold more than 75,000 smartphones: about 20,000 first-generation YotaPhone and about 55,000 YotaPhone 2, Ekaterina Lapshina, general manager of Marsfield ( Telconet management company), told Vedomosti.

In addition, the Chinese partner Yota Devices - Jiliean - released 21,000 phones in 2015 and Yota Devices received a commission from selling them, she adds.

YotaPhone 2 sales accelerated at the end of 2015, when the company reduced their prices to 21,990 rubles. As a result, more than 12,000 smartphones were sold in the fourth quarter of 2015, says Lapshina.

In the first two years, the company had sales only in Russia, and in 2014 Russia accounted for $ 19.6 million, Asian buyers brought in $ 6 million, and $ 4 million from sales in the rest of the world. In the first nine months of 2015, the company earned $ 8 million in Russia, $ 3.3 million in Asia, and $ 4.5 million in other countries.

Sales of YotaPhone 2 in retail are calculated in hundreds of pieces per month. Among the major Russian retailers, YotaPhone is selling Svyaznoy , MegaFon , M.Video and Technosila , RBC reports. Previously, the device sold and MTS, but now sales are not conducted, told RBC company spokesman Dmitry Solodovnikov. This is a niche product, and the demand for it is “limited,” he noted. According to a company representative, dozens of smartphones sold in the MTS are sold in two years.

The second screen was not enough to stimulate demand: the scenarios of its use were not so attractive for buyers, the Vedomosti source said. In addition, the second YotaPhone entered the market in December 2014, when the ruble collapsed.

The company and shareholders have invested heavily in development and technology, as well as infrastructure. This led to losses, explains Lapshina. But due to the technological and infrastructure base being created, Lapshin is waiting for the cost price reduction of the smartphone. The Yota Phone 3 model, whose launch is scheduled for the end of 2016, should have a positive operating margin, says Lapshina.

Secondly, due to the devaluation of the ruble, the purchasing power of Russians has declined and demand has shifted to the cheaper segments of smartphones. This influenced the company's results for 2014-2015, since for Yota Devices Russia is the main market, says Lapshina.

The materials for the shareholders meeting of the Rex Global Fund also noted that in August 2015, the Singapore-based Hi-P Electronics filed a lawsuit against Yota Devices with the International Arbitration Center in Singapore. The company is accused of failure to comply with the requirements of the contract on the minimum lot of smartphones for production.

Hi-P Electronics builds YotaPhone in China. The amount of legal claims of the company is $ 126 million. In turn, Yota Devices indicates poor quality and production speed at the Hi-P factory.

If the dispute is not settled in the pretrial order, the proceedings may last up to two years. Yota Devices has reserved $ 15 million in an escrow account (a special conditional account that records property, documents, or cash before certain circumstances or certain obligations are met) for the purchase of a minimum batch of smartphones.

Companies are in the final stage of negotiations on an amicable settlement.