Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Feb. 28, 2014 | Jun. 30, 2013 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'Zoom Telephonics, Inc. | ' | ' |
Entity Central Index Key | '0001467761 | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Dec-13 | ' | ' |
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 Public Float | ' | ' | $1,076,331 |
Entity Common Stock, Shares Outstanding | ' | 7,982,704 | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Condensed_Balance_Sheets
Condensed Balance Sheets (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Current assets | ' | ' |
Cash and cash equivalents | $55,393 | $195,704 |
Marketable securities | 0 | 44,000 |
Accounts receivable, net of allowances of $811,897 at December 31, 2012 and $640,456 at December 31, 2013 | 1,674,812 | 1,966,334 |
Inventories | 1,714,081 | 2,630,386 |
Prepaid expenses and other current assets | 225,152 | 261,688 |
Total current assets | 3,669,438 | 5,098,112 |
Equipment, net | 51,025 | 26,045 |
Total assets | 3,720,463 | 5,124,157 |
Current liabilities | ' | ' |
Bank debt | 318,318 | 910,807 |
Accounts payable | 693,546 | 931,607 |
Accrued expenses | 322,410 | 379,841 |
Total current liabilities | 1,334,274 | 2,222,255 |
Total liabilities | 1,334,274 | 2,222,255 |
Stockholders' equity | ' | ' |
Common stock, $0.01 par value: Authorized - 25,000,000 shares; issued and outstanding - 6,973,704 shares at December 31, 2012 and 7,982,704 shares at December 31, 2013 | 79,827 | 69,737 |
Additional paid-in capital | 34,177,779 | 33,904,003 |
Accumulated deficit | -32,235,772 | -31,170,788 |
Accumulated other comprehensive income (loss) | 364,355 | 98,950 |
Total stockholders' equity | 2,386,189 | 2,901,902 |
Total liabilities and stockholders' equity | $3,720,463 | $5,124,157 |
Condensed_Balance_Sheets_Paren
Condensed Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Assets | ' | ' |
Accounts receivable allowances | $811,897 | $640,456 |
Stockholders Equity | ' | ' |
Common stock, par value | $0.01 | $0.01 |
Common stock, authorized | 25,000,000 | 25,000,000 |
Common stock, issued | 7,982,704 | 6,973,704 |
Common stock, outstanding | 7,982,704 | 6,973,704 |
Condensed_Statement_of_Operati
Condensed Statement of Operations and Comprehensive Income (Loss) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Statement [Abstract] | ' | ' |
Net sales | $11,241,164 | $14,691,186 |
Cost of goods sold | 8,139,084 | 11,056,893 |
Gross profit | 3,102,080 | 3,634,293 |
Operating expenses: | ' | ' |
Selling | 1,572,632 | 1,906,711 |
General and administrative | 1,316,402 | 1,252,654 |
Research and development | 919,722 | 1,154,810 |
Total | 3,808,756 | 4,314,175 |
Operating profit (loss) | -706,676 | -679,882 |
Other income (expense): | ' | ' |
Interest income | 39 | 112 |
Other income (expense), net | -354,403 | -49,180 |
Total other income (expense), net | -354,364 | -49,068 |
Income (loss) before income taxes | -1,061,040 | -728,950 |
Income taxes (benefit) | 3,944 | 3,392 |
Net income (loss) | -1,064,984 | -732,342 |
Other comprehensive income (loss): | ' | ' |
Foreign currency translation adjustments | -7,504 | 11,660 |
Unrealized gain (loss) for the period | 272,909 | -38,280 |
Total comprehensive income (loss) | ($799,579) | ($758,962) |
Basic and diluted net income (loss) per share | ($0.14) | ($0.11) |
Weighted average common and common equivalent shares: | ' | ' |
Basic and diluted | 7,363,482 | 6,973,704 |
Condensed_Statements_of_Shareh
Condensed Statements of Shareholders Equity (USD $) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income / Loss | Total |
Beginning Balance, Amount at Dec. 31, 2011 | $69,737 | $33,864,793 | ($30,438,446) | $125,570 | $3,621,654 |
Beginning Balance, Shares at Dec. 31, 2011 | 6,973,704 | ' | ' | ' | ' |
Stock based compensation | ' | 39,210 | ' | ' | 39,210 |
Comprehensive income (loss) | ' | ' | ' | -26,620 | -26,620 |
Net income (loss) | ' | ' | -732,342 | ' | -732,342 |
Ending Balance, Amount at Dec. 31, 2012 | 69,737 | 33,904,003 | -31,170,788 | 98,950 | 2,901,902 |
Beginning Balance, Shares at Dec. 31, 2012 | 6,973,704 | ' | ' | ' | ' |
Stock based compensation | ' | 35,189 | ' | ' | 35,189 |
Stock rights offering (net of issuance costs of $33,671), Amount | 10,090 | 238,587 | ' | ' | 248,677 |
Stock rights offering (net of issuance costs of $33,671), Shares | 1,009,000 | ' | ' | ' | ' |
Comprehensive income (loss) | ' | ' | ' | 265,405 | 265,405 |
Net income (loss) | ' | ' | -1,064,984 | ' | -1,064,984 |
Ending Balance, Amount at Dec. 31, 2013 | $79,827 | $34,177,779 | ($32,235,772) | $364,355 | $2,386,189 |
Ending Balance, Shares at Dec. 31, 2013 | 7,982,704 | ' | ' | ' | ' |
Condensed_Statements_of_Cash_F
Condensed Statements of Cash Flows (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Operating activities: | ' | ' |
Net income (loss) | ($1,064,984) | ($732,342) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ' | ' |
Stock based compensation | 35,189 | 39,210 |
Depreciation and amortization | 9,777 | 14,082 |
Provision for accounts receivable allowances | 11,211 | 19,154 |
Provision for inventory reserves | -390,140 | -155,223 |
Reclassification out of Accumulated Other Comprehensive Income (Loss) | 272,909 | 0 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable | 277,754 | -580,500 |
Inventories | 1,306,445 | 247,621 |
Prepaid expenses and other assets | 35,105 | -73,771 |
Accounts payable and accrued expenses | -297,325 | -117,458 |
Net cash provided by (used in) operating activities | 195,941 | -1,339,227 |
Investing activities: | ' | ' |
Purchases of property, plant and equipment | -34,757 | -19,959 |
Proceeds from sale of marketable securities | 39,983 | 0 |
Net cash provided by (used in) investing activities | 5,226 | -19,959 |
Financing activities: | ' | ' |
Proceeds from stock rights offering (net of issuance costs) | 248,677 | 0 |
Net funds (to) from bank credit lines | -592,489 | 910,807 |
Net cash provided by (used in) financing activities | -343,812 | 910,807 |
Effect of exchange rate changes on cash | 2,334 | -282 |
Net change in cash | -140,311 | -448,661 |
Cash and cash equivalents at beginning of period | 195,704 | 644,365 |
Cash and cash equivalents at end of period | 55,393 | 195,704 |
Supplemental disclosures of cash flow information: | ' | ' |
Cash paid during the period for: Interest | 68,128 | 49,358 |
Cash paid during the period for: Income taxes | $3,944 | $3,392 |
1_NATURE_OF_OPERATIONS
1. NATURE OF OPERATIONS | 12 Months Ended |
Dec. 31, 2013 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
1. NATURE OF OPERATIONS | ' |
Zoom Telephonics, Inc. (the "Company") designs, produces, and markets broadband and dial-up modems and other communication-related products. | |
The Company has had recurring net losses and continues to experience negative cash flows from operations. As described further in Note 3, to conserve cash and manage liquidity, the Company has implemented cost cutting initiatives including the reduction of employee headcount and overhead costs; however, management does not believe the Company has sufficient resources to fund its normal operations over the next 12 months unless sales improve significantly or it raises capital. Additional financing may not be available on terms favorable to the Company, or at all. If these funds are not available, the Company may not be able to execute its business plan or take advantage of business opportunities. The ability of the Company to obtain such additional financing and to achieve its operating goals is uncertain. In the event that the Company does not obtain additional capital or is not able to increase cash flow through the increase of sales, there is substantial doubt as to its ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
2_Summary_of_Significant_Accou
2. Summary of Significant Accounting Policies | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Summary of Significant Accounting Policies | ' | ||||||||
(a) Basis of Presentation and Use of Estimates | |||||||||
The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP). | |||||||||
The preparation of 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 date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results may differ from those estimates. Significant estimates made by the Company include: 1) allowance for doubtful accounts for accounts receivable (collectability and sales returns) and asset valuation allowance for deferred income tax assets; 2) write-downs of inventory for slow-moving and obsolete items, and market valuations; and 3) stock based compensation. | |||||||||
(b) Cash and Cash Equivalents | |||||||||
All highly liquid investments with original maturities of less than 90 days from the date of purchase are classified as cash equivalents. Cash equivalents consist exclusively of money market funds. The Company has deposits at a limited number of financial institutions with federally insured limits. Balances of cash and cash equivalents at these institutions are normally in excess of the insured limits. However, the Company believes that the institutions are financially sound and there is only nominal risk of loss. | |||||||||
(c) Inventories | |||||||||
Inventories are stated at the lower of cost, determined using the first-in, first-out method, or market. Consigned inventory is held at third-party locations. The Company retains title to the inventory until purchased by the third-party. Consigned inventory, consisting of finished goods, was approximately $305,000 and $489,000 at December 31, 2013 and 2012, respectively. | |||||||||
(d) Equipment and Leasehold Improvements | |||||||||
Equipment and leasehold improvements are stated at cost, less accumulated depreciation and amortization. Depreciation of equipment is provided using the straight-line method over the estimated useful lives of the assets. Amortization of leasehold improvements is provided using the straight-line method over the estimated useful lives of the improvement or lease term, whichever is shorter. | |||||||||
(e) Impairment of Long-Lived Assets | |||||||||
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. | |||||||||
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to undiscounted future net cash flows expected to be generated by the asset or asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. | |||||||||
(f) Income Taxes | |||||||||
Deferred income taxes are provided on the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and on net operating loss and tax credit carry forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for that portion of deferred tax assets not expected to be realized. | |||||||||
(g) Earnings (Loss) Per Common Share | |||||||||
Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed by dividing net income by the weighted average number of common shares and dilutive potential common shares outstanding during the period. Under the treasury stock method, the unexercised options are assumed to be exercised at the beginning of the period or at issuance, if later. The assumed proceeds are then used to purchase common shares at the average market price during the period. A summary of the denominators used to compute basic and diluted earnings (loss) per share follow: | |||||||||
2012 | 2013 | ||||||||
Weighted average shares outstanding – used to compute basic earnings (loss) per share | 6,973,704 | 7,363,482 | |||||||
Net effect of dilutive potential common shares outstanding, based on the treasury stock method | –– | –– | |||||||
Weighted average shares outstanding – used to compute diluted earnings (loss) per share | 6,973,704 | 7,363,482 | |||||||
Potential common shares for which inclusion would have the effect of increasing diluted earnings per share (i.e., anti-dilutive) are excluded from the computation. Options to purchase 2,585,000 shares of common stock at December 31, 2013 and 1,083,750 shares of common stock as of December 31, 2012 were outstanding, but not included in the computation of diluted earnings per share as their effect would be anti-dilutive. | |||||||||
(h) Revenue Recognition | |||||||||
The Company primarily sells hardware products to its customers. The hardware products include dial-up modems, DSL modems, cable modems, embedded modems, ISDN modems, telephone dialers, and wireless and wired networking equipment. The Company generally does not sell software. | |||||||||
The Company derives its net sales primarily from the sales of hardware products to computer peripherals retailers, computer product distributors, and original equipment manufacturers (OEMs). The Company sells an immaterial amount of its hardware products to direct consumers or to any customers via the internet. | |||||||||
The Company recognizes net hardware sales for all four types of customers at the point when the customers take legal ownership of the delivered products. Legal ownership passes to the customer based on the contractual FOB point specified in signed contracts and purchase orders, which are both used extensively. Many customer contracts or purchase orders specify FOB destination. | |||||||||
When Zoom consigns inventory to a retailer, sales revenue for an item in that inventory is recognized when that item is sold to by the retailer to a customer. The item remains in Zoom inventory when it is consigned, and moves out of Zoom inventory when the item is sold by the retailer. | |||||||||
The Company's net sales of hardware are reduced by certain events which are characteristic of the sales of hardware to retailers of computer peripherals. These events are product returns, certain sales and marketing incentives, price protection refunds, and consumer and in-store mail-in rebates. Each of these is accounted for as a reduction of net sales based on management estimates, which are reconciled to actual customer or end-consumer credits on a monthly or quarterly basis. | |||||||||
The estimates for product returns are based on recent historical trends plus estimates for returns prompted by announced stock rotations, announced customer store closings, etc. Management analyzes historical returns, current economic trends, and changes in customer demand and acceptance of the Company's products when evaluating the adequacy of sales return allowances. The Company's estimates for price protection refunds require a detailed understanding and tracking by customer, by sales program. Estimated price protection refunds are recorded in the same period as the announcement of a pricing change. Information from customer inventory-on-hand reports or from direct communications with the customers is used to estimate the refund, which is recorded as a reserve against accounts receivable and a reduction of current period revenue. The Company's estimates for consumer mail-in rebates are comprised of actual rebate claims processed by the rebate redemption centers plus an accrual for an estimated lag in processing. The Company's estimates for store rebates are comprised of actual credit requests from the eligible customers. | |||||||||
The Company accounts for point-of-sale taxes on a net basis. | |||||||||
(i) Fair Value of Financial Instruments | |||||||||
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: | |||||||||
● | Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities. The Company has the ability to access. | ||||||||
● | Level 2 - Inputs are inputs (other than quoted prices included within Level 1) that are observable for the asset or liability, either directly or indirectly. | ||||||||
● | Level 3 - Inputs include unobservable inputs for the asset or liability and rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability. (The unobservable inputs should be developed based on the best information available in the circumstances and may include the Company’s own data.) | ||||||||
Financial instruments consist of cash and cash equivalents, marketable securities, accounts receivable, bank debt, accounts payable, and accrued expenses. Due to the short term nature and payment terms associated with these instruments, except the marketable securities, their carrying amounts approximate fair value. The fair value of the marketable securities is based on observable inputs that reflect quoted prices in an active market and is classified under Level 1 of the fair value hierarchy described above at December 31, 2013 and 2012. Unrealized gains or losses resulting from changes in the fair value of marketable securities were charged or credited to “accumulated other comprehensive income,” until sale of these marketable securities in 2013. | |||||||||
(j) Stock-Based Compensation | |||||||||
Compensation cost for awards is generally recognized over the required service period based on the estimated fair value of the awards on their grant date. Fair value is determined using the Black-Scholes option-pricing model. | |||||||||
(k) Advertising Costs | |||||||||
Advertising costs are expensed as incurred and reported in selling expense in the accompanying statements of operations and comprehensive income (loss), and include costs of advertising, production, trade shows, and other activities designed to enhance demand for the Company's products. There are no deferred advertising costs in the accompanying balance sheets. The Company reported advertising costs of $300.5 thousand in 2012 and $247.5 thousand in 2013. | |||||||||
(l) Foreign Currencies | |||||||||
The Company generates a portion of its revenues in markets outside North America principally in transactions denominated in foreign currencies, which exposes the Company to risks of foreign currency fluctuations. Foreign currency transaction gains and losses are reflected in operations and were not material for any period presented. The Company does not use derivative financial instruments. | |||||||||
The Company considers the local currency to be the functional currency for its U.K. branch. Assets and liabilities denominated in foreign currencies are translated using the exchange rates as of the balance sheet date. Revenues and expenses are translated at average exchange rates prevailing during the year. Translation adjustments resulting from this process are charged or credited to “accumulated other comprehensive income.” | |||||||||
(m) Warranty Costs | |||||||||
The Company provides for the estimated costs that may be incurred under its standard warranty obligations, based on actual historical repair costs. The reserve for the provision for warranty costs was $52,683 and $38,098 at December 31, 2012 and 2013, respectively. | |||||||||
(n) Shipping and Freight Costs | |||||||||
The Company records the expense associated with customer-delivery shipping and freight costs in selling expense. The Company reported shipping and freight costs of $234.6 thousand in 2012 and $191.7 thousand in 2013. | |||||||||
(o) Recently Issued Accounting Pronouncements | |||||||||
In February 2013, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update on the reporting of amounts reclassified out of accumulated other comprehensive income, to improve the transparency of reporting. These reclassifications present the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income-but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. This standard update is effective for reporting periods beginning after December 15, 2012. As this guidance only revises the presentation and disclosures related to the reclassification of items out of accumulated other comprehensive income (loss), the Company’s adoption of this guidance did not affect it’s financial position, results of operations or cash flows. See Note (15) – Reclassifications Out of Accumulated Other Comprehensive Income (Loss), which presents the disclosures required by this update. | |||||||||
(p) Reclassifications | |||||||||
Certain reclassifications have been made to the prior year’s financial statements to conform to the 2013 presentation. The reclassifications relate to the presentation of changes in accounts receivable and inventory on the statements of cash flows. | |||||||||
(q) Contingencies | |||||||||
The Company reviews the status of its legal proceedings and records a provision for a liability when it is considered probable that both a liability has been incurred and the amount of the loss can be reasonably estimated. This review is updated periodically as additional information becomes available. If either or both of the criteria are not met, the Company reassesses whether there is at lease a reasonable possibility that a loss, or additional losses, may be incurred. If there is a reasonable possibility that a loss may be incurred, the Company discloses the estimate of the amount of the loss or range of losses, that the amount is not material, or that an estimate of loss cannot be made. The Company expenses its legal fees as incurred. | |||||||||
In assessing potential loss contingencies, the Company considers a number of factors, including those listed in the FASB’s Accounting Standards Codifications 450-20, Contingencies – Loss Contingencies, regarding assessing the probability of a loss and assessing whether a loss is reasonably estimable. |
3_Liquidity
3. Liquidity | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Liquidity | ' |
On December 31, 2013 we had working capital of $2.3 million including $55 thousand in cash and cash equivalents. On December 31, 2012 we had working capital of $2.9 million including $0.2 million in cash and cash equivalents. Our current ratio at December 31, 2013 was 2.8 compared to 2.3 at December 31, 2012. | |
In 2013, the Company’s operating activities used $0.1 million in cash, primarily due to a net loss of $1.1 million, offset by a $0.9 million decrease in inventory. In 2012, the Company’s operating activities used $1.3 million in cash, primarily to fund an increase of $0.7 million in gross receivables and a net loss of $0.7 million. In 2013, the Company’s net cash was used in financing activities to reduce bank debt by $0.6 million. Also in 2013, the Company increased net cash in financing activities by $0.2 million from the net proceeds of a rights offering completed in August 2013. Under the rights offering, existing shareholders of the Company’s common stock were granted rights to purchase, at an offering price of $0.28 per share, one share of stock for each share held. The rights offering resulted in the issuance of 1,009,000 shares of common stock. In 2012, the Company’s net cash provided by financing activities was $0.9 million resulting from an increase in bank debt. | |
To conserve cash and manage our liquidity, we have implemented cost-cutting initiatives including the reduction of employee headcount and overhead costs. On December 31, 2013 we had a headcount of 28 compared to 30 as of December 31, 2012. As of February 28, 2014 we had 27 full-time and part-time employees, 1 part-time temporary employee and 2 consultants, one in sales and one in IT that were not included in our headcount. We plan to continue to assess our cost structure as it relates to our revenues and cash position, and we may make further reductions if the actions are deemed necessary. | |
On April 10, 2012 Zoom Telephonics, Inc. entered into a Loan and Security Agreement with Silicon Valley Bank (the “Loan Agreement”). This Loan Agreement was filed with the SEC in an 8-K dated April 13, 2012. The Loan Agreement provided for up to $1 million of revolving credit, subject to a borrowing base formula and other terms and conditions as specified in the Loan Agreement. The Loan Agreement had a one year term which was set to expire April 9, 2013. Borrowings were secured by all of Zoom’s assets including Zoom’s intellectual property. We used a portion of the proceeds from the financing arrangement with Rosenthal & Rosenthal, Inc., as described below, to pay off our existing loan of $879,047 with Silicon Valley Bank. On December 19, 2012, the Loan Agreement with Silicon Valley Bank was terminated upon payment in full by us of all amounts owed under such agreement. | |
On December 18, 2012, Zoom Telephonics, Inc. (“Zoom”) entered into a Financing Agreement with Rosenthal & Rosenthal, Inc. (the “Financing Agreement”). This Loan Agreement was filed with the SEC in an 8-K dated December 21, 2012. The Financing Agreement provides for up to $1.75 million of revolving credit, subject to a borrowing base formula and other terms and conditions as specified in the Financing Agreement. The Financing Agreement has a two year term. Borrowings are secured by all of Zoom’s assets including Zoom’s intellectual property. The Loan Agreement contained several covenants, including a requirement that we maintain a tangible net worth not less than $2.5 million and working capital not less than $2.5 million. On March 25, 2014, we entered into an amendment to the Financing Agreement (the “Amendment”) with an effective date of January 1, 2013. The Amendment clarified the definition of current assets in the Financing Agreement, reduced the size of the revolving credit line to $1.25 million and revised the financial covenants such that we are required to maintain tangible net worth of not less than $2.0 million and working capital of not less than $1.75 million. | |
There is substantial doubt in our ability to continue as a going concern due to the risk that we may not have sufficient cash and liquid assets at December 31, 2013 to cover our operating and capital requirements for the next twelve-month period; and if in that case sufficient cash cannot be obtained, we would have to substantially alter, or possibly even discontinue, operations. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. | |
At December 31, 2013 the Company's total current assets were $3.7 million and current liabilities were $1.3 million, which included $0.3 million in bank debt. The Company did not have any long-term debt at December 31, 2013. |
4_Inventories
4. Inventories | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Inventories | ' | ||||||||
Inventories, net of reserves, consist of the following at December 31: | |||||||||
2012 | 2013 | ||||||||
Materials | $ | 720,113 | $ | 440,723 | |||||
Finished goods (including $489,400 and $304,500 held by customers at December 31, 2012 and 2013, respectively) | 1,910,273 | 1,273,358 | |||||||
Total | $ | 2,630,386 | $ | 1,714,081 | |||||
The Company reviews inventory for obsolete and slow moving products each quarter and makes provisions based on our estimate of the probability that the material will not be consumed or that it will be sold below cost. The reserve for provision for slow moving and obsolete inventory was $750,764 and $360,624 at December 31, 2012 and 2013, respectively. |
5_EQUIPMENT
5. EQUIPMENT | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||||||
5. EQUIPMENT | ' | ||||||||||||
Equipment consists of the following at December 31: | |||||||||||||
2012 | 2013 | Estimated | |||||||||||
Useful lives | |||||||||||||
in years | |||||||||||||
Computer hardware and software | $ | 190,339 | $ | 194,528 | 3 | ||||||||
Machinery and equipment | 254,533 | 254,533 | 5 | ||||||||||
Molds, tools and dies | 42,460 | 78,257 | 5 | ||||||||||
Office furniture and fixtures | 44,138 | 38,938 | 5 | ||||||||||
531,470 | 566,256 | ||||||||||||
Accumulated depreciation and amortization | (505,425 | ) | (515,231 | ) | |||||||||
Equipment and leasehold improvements, net | $ | 26,045 | $ | 51,025 | |||||||||
Depreciation expense for year ended | $ | 14,082 | $ | 9,777 | |||||||||
6_COMMITMENTS_AND_CONTINGENCIE
6. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Commitments and Contingencies | ' |
(a) Lease Obligations | |
Since 1983 the Company’s headquarters has been near South Station in downtown Boston at 201 and 207 South Street. In December 2006, the Company sold its owned headquarters buildings in Boston, Massachusetts and leased back 25,200 square feet for two years expiring December 2008. In November 2008 the Company signed a lease amendment for its headquarters’ offices in Boston in the existing building for approximately 14,400 square feet for three years with a six month termination option starting July 1, 2010. In May 2010 the Company signed a second lease amendment extending the term of the lease to April 30, 2016 with a six month termination option starting December 1, 2011. In December 2011 the Company signed a third lease amendment reducing the Company lease space by 3,800 square feet effective June 1, 2012, with a proportionate decrease in lease expense. | |
In August 1996 the Company entered into a lease for a 77,428 square feet manufacturing and warehousing facility at 645 Summer Street, Boston, MA. The term of this lease expired in August 2006 and the Company began the planned move of its manufacturing and warehousing facility to Tijuana, Mexico. In August 2006 the Company signed a lease for a 35,575 square foot manufacturing and warehousing facility in Tijuana, Mexico with an initial lease term from October 2006 to May 2007, with five two-year options thereafter. In February 2007 the Company renegotiated the first renewal term and signed a one-year extension starting in May 2007, with five two-year options thereafter. The Company signed another one-year extension starting in May 2008. In March 2009 the Company signed a one-year lease with one one-year option for a smaller facility for lower cost. In March 2011 the Company signed a one-year lease extension starting May 1, 2011, with three one-year renewal options thereafter. In April 2012 the Company exercised the first of three renewal options, with no change in lease cost. In February 2013 the Company exercised the second of three renewal options, with no increase in lease cost. | |
In September 2005 the Company entered into a two year office lease consisting of 2,400 square feet at 2 Kings Road, Fleet, Hants, U.K. for its U.K. sales office. In September 2007 the lease was continued on a month-to-month basis with a 3 month cancellation notice required by the Company or the landlord. In September 2008 the Company signed an Office Service Agreement, which is an office rental agreement, rather than a lease. The rent is paid monthly, with a three month cancellation notice period. The Company cancelled its Office Service Agreement effective October 31, 2011. The Company has one U.K. employee that works from home. | |
Rent expense for all of the Company's leases was $295.8 thousand in 2012 and $277.2 thousand in 2013. | |
As of December 31, 2013, the Company's estimated future minimum committed rental payments, excluding executory costs, under the operating leases described above to their expiration or the earliest possible termination date, whichever is sooner, are $187.9 thousand for 2014. There are no future minimum committed rental payments that extend beyond 2014. | |
(b) Contingencies | |
The Company is party to various lawsuits and administrative proceedings arising in the ordinary course of business. The Company evaluates such lawsuits and proceedings on a case-by-case basis, and its policy is to vigorously contest any such claims which it believes are without merit. The Company's management believes that the ultimate resolution of such matters will not materially and adversely affect the Company's business, financial position, results of operations or cash flows. | |
On October 15, 2012 Telecom innovations LLC files a complaint against Zoom Telephonics and at least 23 other companies including Dell Inc., various dial-up modem producers, and many fax machine produces. The complaint related to dial-up modems and alleged that Zoom infringed upon Telecomm Innovation patents. Zoom believed that it was licensed for these patents already through its modem chipset suppliers. On January22, 2014, a Stipulation of Dismissal was filed for the case and the case has been closed pursuant to a resolution of the dispute between Zoom and Telecomm Innovations. | |
On February 6, 2013 Voice Integration Technologies filed a complaintagainst Zoom Telephonics alleging infringement of U.S. Patent No. 7,127,048 (the "048 Patent"), entitled "Systems and Methods for Integrating Analog Voice Service and Derived POTS Voice Service in a Digital Subscriber Line Enviroment." On July 1, 2013, this case was closed following the filing of a stipulation of dismissal with prejudice persuant to a resolution of the dispute between Zoom and Voice Integration Technolgies. | |
On November 6, 2013 Innovative Wireless Solutions, LLC ("IWS") filed a complaint against Zoom Telephonics alleging infringement of U.S. Patens Nos. 5,912,895, 6,327,264, and 6,587,473 all entitled "Information Network Access Apparatus and Methods of Communicating Information packets via Telephone Links." The Complaint asserts that Zoom sells products with "wireless access points and/or routers capable of connecting to an Ethernet network and an IEEE 802.11 wireless network to provide wireless Internt access." The case is in its early stages and a Scheduling conference is currently set for May 22, 2014. Management is unable to reasonably estimate any potential outcome at this time. |
7_STOCK_OPTION_PLANS
7. STOCK OPTION PLANS | 12 Months Ended | ||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||||||||
7. STOCK OPTION PLANS | ' | ||||||||||||||||||||||
On December 10, 2009, the Company established two stock option plans. The Board of Directors approved the two plans called the 2009 Stock Option Plan and the 2009 Directors Stock Option Plan and these plans received shareholder approval at the Company’s 2010 annual meeting. In 2013, these plans received shareholder approval to increase the number of shares available for issuance in each plan. The new number of authorized shares available for issuance is indicated below. Further, these plans are described below. | |||||||||||||||||||||||
2009 Stock Option Plan | |||||||||||||||||||||||
The 2009 Stock Option Plan is for officers and certain full-time and part-time employees of the Company. Non-employee directors of the Company are not entitled to participate under this plan. The 2009 Stock Option Plan provides for 5,500,000 shares of common stock for issuance upon the exercise of stock options granted under the plan. Under this plan, stock options are granted at the discretion of the Compensation Committee of the Board of Directors at an option price not less than the fair market value of the stock on the date of grant. The options are exercisable in accordance with terms specified by the Compensation Committee not to exceed ten years from the date of grant. Option activity under this plan follows. | |||||||||||||||||||||||
Number of shares | Weighted average | ||||||||||||||||||||||
exercise price | |||||||||||||||||||||||
Balance as of January 1, 2012 | 970,000 | $ | 0.51 | ||||||||||||||||||||
Granted | –– | –– | |||||||||||||||||||||
Exercised | –– | –– | |||||||||||||||||||||
Expired | –– | –– | |||||||||||||||||||||
Balance as of December 31, 2012 | 970,000 | $ | 0.51 | ||||||||||||||||||||
Granted | 1,505,000 | $ | 0.25 | ||||||||||||||||||||
Exercised | –– | –– | |||||||||||||||||||||
Expired | (160,000 | ) | 0.25 | ||||||||||||||||||||
Balance as of December 31, 2013 | 2,315,000 | $ | 0.35 | ||||||||||||||||||||
There were no options granted in 2012. The weighted average grant date fair value of options granted was $0.03 in 2013. The aggregate intinsic value of options outstanding was zero at December 31, 2013. The aggregate intrinsic fair value of exercisable options was zero at December 31, 2013. | |||||||||||||||||||||||
The following table summarizes information about fixed stock options under the 2009 Stock Option Plan outstanding on December 31, 2013. | |||||||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||||||
Exercise | Number | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Number | Weighted Average Exercise Price | ||||||||||||||||||
Prices | Outstanding | Exercisable | |||||||||||||||||||||
$ | 0.53 | 555,000 | 0.11 | $ | 0.53 | 555,000 | $ | 0.53 | |||||||||||||||
$ | 0.48 | 365,000 | 1.3 | $ | 0.48 | 365,000 | $ | 0.48 | |||||||||||||||
$ | 0.25 | 1,395,000 | 4.1 | $ | 0.25 | 348,750 | $ | 0.25 | |||||||||||||||
$ | 0.25 to 0.53 | 2,315,000 | 2.7 | $ | 0.35 | 1,268,750 | $ | 0.44 | |||||||||||||||
2009 Director Stock Option Plan | |||||||||||||||||||||||
On December 10, 2009 the Company established the 2009 Director Stock Option Plan (the "Directors Plan"). The Directors Plan was established for all directors of the Company except for any director who is a full-time employee or full-time officer of the Company. The option price is the fair market value of the common stock on the date the option is granted. There are 700,000 shares authorized for issuance under the Directors Plan. Each option expires five years from the grant date. Option activity under this plan follows. | |||||||||||||||||||||||
Number of | Weighted average | ||||||||||||||||||||||
shares | exercise price | ||||||||||||||||||||||
Balance as of January 1, 2012 | 150,000 | 0.38 | |||||||||||||||||||||
Granted | 60,000 | 0.26 | |||||||||||||||||||||
Exercised | –– | –– | |||||||||||||||||||||
Expired | –– | –– | |||||||||||||||||||||
Balance as of December 31, 2012 | 210,000 | 0.35 | |||||||||||||||||||||
Granted | 60,000 | 0.18 | |||||||||||||||||||||
Exercised | –– | –– | |||||||||||||||||||||
Expired | –– | –– | |||||||||||||||||||||
Balance as of December 31, 2013 | 270,000 | $ | 0.31 | ||||||||||||||||||||
The weighted average grant date fair value of options granted was $0.12 in 2012 and $0.06 in 2013. The aggregate intinsic value of options outstanding was zero at December 31, 2013. The aggregate intrinsic fair value of exercisable options was zero at December 31, 2013. | |||||||||||||||||||||||
The following table summarizes information about fixed stock options under the Directors Plan on December 31, 2013. | |||||||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||||||
Exercise Prices | Number | Weighted Average | Weighted Average | Number | Weighted Average | ||||||||||||||||||
Outstanding | Remaining Contractual Life | Exercise Price | Exercisable | Exercise Price | |||||||||||||||||||
$ | 0.16-0.20 | 60,000 | 4.4 | $ | 0.18 | 60,000 | $ | 0.18 | |||||||||||||||
$ | 0.25-0.26 | 60,000 | 3.4 | $ | 0.26 | 60,000 | $ | 0.26 | |||||||||||||||
$ | 0.27-0.41 | 60,000 | 1.4 | $ | 0.34 | 60,000 | $ | 0.34 | |||||||||||||||
$ | 0.35-0.36 | 60,000 | 2.4 | $ | 0.36 | 60,000 | $ | 0.36 | |||||||||||||||
$ | 0.53 | 30,000 | 1 | $ | 0.53 | 30,000 | $ | 0.53 | |||||||||||||||
$ | 0.16-0.53 | 270,000 | 2.7 | $ | 0.35 | 270,000 | $ | 0.31 | |||||||||||||||
The Black-Scholes range of assumptions for the Zoom Telephonics’ options for 2013 and 2012 are shown below: | |||||||||||||||||||||||
Assumptions | 2009 Stock Option Plan and | ||||||||||||||||||||||
the 2009 Directors Stock Option Plan | |||||||||||||||||||||||
Expected life | 2.75 (yrs) - 3.5 (yrs) | ||||||||||||||||||||||
Expected volatility | 49.23% - 67.08% | ||||||||||||||||||||||
Risk-free interest rate | 0.35% - 1.88% | ||||||||||||||||||||||
Expected dividend yield | 0.00% | ||||||||||||||||||||||
The unrecognized stock based compensation expense related to non-vested stock awards was approximately $11 thousand as of December 31, 2013. This amount will be recognized through the first quarter of 2015. |
8_INCOME_TAXES
8. INCOME TAXES | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||||||
8. INCOME TAXES | ' | ||||||||||||
Income tax expense (benefit) consists of: | |||||||||||||
Current | Deferred | Total | |||||||||||
Year Ended December 31, 2012: | |||||||||||||
US federal | $ | –– | $ | –– | $ | –– | |||||||
State and local | –– | –– | –– | ||||||||||
Foreign | 3,392 | –– | 3,392 | ||||||||||
$ | 3,392 | $ | –– | $ | 3,392 | ||||||||
Year Ended December 31, 2013: | |||||||||||||
US federal | $ | –– | $ | –– | $ | –– | |||||||
State and local | –– | –– | –– | ||||||||||
Foreign | 3,944 | –– | 3,944 | ||||||||||
$ | 3,944 | $ | –– | $ | 3,944 | ||||||||
A reconciliation of the expected income tax expense or benefit to actual follows: | |||||||||||||
2012 | 2013 | ||||||||||||
Computed "expected" US tax (benefit) at Federal statutory rate | $ | (248,996 | ) | $ | (362,095 | ) | |||||||
Change resulting from: | |||||||||||||
State and local income taxes, net of federal income tax benefit | –– | –– | |||||||||||
Foreign income taxes | 3,392 | 3,944 | |||||||||||
Valuation allowance | 235,607 | (126,339 | ) | ||||||||||
Non––deductible items | 14,456 | 11,390 | |||||||||||
Expired State Net Operating Losses | –– | 477,044 | |||||||||||
Change in estimate for prior years’ provisions | (1,067 | ) | –– | ||||||||||
Income tax expense (benefit) | $ | 3,392 | $ | 3,944 | |||||||||
Temporary differences at December 31 follow: | |||||||||||||
2012 | 2013 | ||||||||||||
Deferred income tax assets: | |||||||||||||
Inventories | $ | 333,315 | $ | 165,225 | |||||||||
Accounts receivable | 292,846 | 235,207 | |||||||||||
Intangible assets | 96,791 | 25,738 | |||||||||||
Accrued expenses | 60,397 | 44,112 | |||||||||||
Net operating loss and tax credit carry forwards | 17,792,110 | 17,977,742 | |||||||||||
Plant and equipment | 15,378 | 15,018 | |||||||||||
Stock compensation | 88,059 | 89,515 | |||||||||||
Other – investment impairments | 127,855 | 127,855 | |||||||||||
Total deferred income tax assets | 18,806,751 | 18,680,412 | |||||||||||
Valuation allowance | (18,806,751 | ) | (18,680,412 | ) | |||||||||
Net deferred tax assets | $ | –– | $ | –– | |||||||||
As of December 31, 2013 the Company had federal net operating loss carry forwards of approximately $49,363,000 which are available to offset future taxable income. They are due to expire in varying amounts from 2018 to 2033. As of December 31, 2013, the Company had Massachusetts state net operating loss carry forwards of approximately $8,069,000 which are available to offset future taxable income. They are due to expire in varying amounts from 2014 through 2018. | |||||||||||||
The distribution of Zoom Telephonics stock to Zoom Technologies’ shareholders was not intended to be a tax-free distribution governed by Section 355 of the Internal Revenue Code. A taxable distribution will generally result in taxable gain to the distributing corporation; however, Zoom Technologies’ tax basis in Zoom Telephonics is believed to exceed the fair market value of that stock as of the date of distribution. In addition, even if Zoom Technologies’ tax basis in the Zoom Telephonics stock was less than the fair market value of that stock as of the date of distribution, it is believed that there are sufficient net operating loss carry forwards to offset any taxable gain recognized. To the extent that either of these assumptions are incorrect, Zoom Telephonics, as the successor to Zoom Technologies, has fully indemnified TCB Digital for any pre-closing income taxes incurred, including any income tax resulting from the distribution of Zoom Telephonics. Management believes the likelihood of the Company incurring any obligation under this indemnification is remote. | |||||||||||||
Effective January 1, 2007, the Company adopted the provisions of a new standard which provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a "more-likely-than-not" recognition threshold at the effective date to be recognized upon adoption and in subsequent periods. Upon the adoption, and at December 31, 2013 and 2012, the Company did not have any uncertain tax positions. No interest and penalties related to uncertain tax positions were accrued at December 31, 2013 and 2012. | |||||||||||||
The Company files income tax returns in the United States and the United Kingdom. Years subsequent to 2009 are open for U.S. Federal and state income tax reporting and years subsequent to 2007 are open in the United Kingdom. | |||||||||||||
The Company has not provided for U.S. income taxes related to undistributed earnings from its foreign operations at December 31, 2013, as the Company considers these earnings to be permanently reinvested. Determination of the additional income taxes and applicable withholding that would be payable on the remittance of such undistributed earnings is not practicable because such liability, if any, is dependent upon circumstances existing if and when the Company no longer considers all or a portion of such undistributed earnings to be permanently reinvested. |
9_SIGNIFICANT_CUSTOMERS
9. SIGNIFICANT CUSTOMERS | 12 Months Ended |
Dec. 31, 2013 | |
Risks and Uncertainties [Abstract] | ' |
9. SIGNIFICANT CUSTOMERS | ' |
The Company sells its products primarily through high-volume distributors and retailers, Internet service providers, telephone service providers, value-added resellers, PC system integrators, and original equipment manufacturers ("OEMs"). The Company supports its major accounts in their efforts to discern strategic directions in the market, to maintain appropriate inventory levels, and to offer a balanced selection of attractive products. | |
Relatively few customers have accounted for a substantial portion of the Company’s revenues. In 2013 three customers accounted for 69% of our total net sales with our largest customer accounting for 51% of our net sales. At December 31, 2013, three customers accounted for 84% of our gross accounts receivable, with our largest customer representing 71% of our gross accounts receivable. During 2012 three customers accounted for 67% of the Company’s total net sales with our largest customer accounting for 54% of our net sales. At December 31, 2012, three customers accounted for 85% of our gross accounts receivable, with our largest customer representing 79% of our gross accounts receivable | |
The Company’s customers generally do not enter into long-term agreements obligating them to purchase products. The Company may not continue to receive significant revenues from any of these or from other large customers. A reduction or delay in orders from any of the Company’s significant customers, or a delay or default in payment by any significant customer could materially harm the Company’s business and prospects. Because of the Company’s significant customer concentration, its net sales and operating income (loss) could fluctuate significantly due to changes in political or economic conditions, or the loss, reduction of business, or less favorable terms for any of the Company's significant customers. | |
10_Segment_and_Geographic_Info
10. Segment and Geographic Information | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||
Segment and Geographic Information | ' | ||||||||||||||||
The Company's operations are classified as one reportable segment. Substantially all of the Company's operations and long-lived assets reside primarily in the United States. Net sales information follows: | |||||||||||||||||
2012 | Percent | 2013 | Percent | ||||||||||||||
United States | $ | 13,424,789 | 91 | % | $ | 10,541,921 | 94 | % | |||||||||
Outside United States | 1,266,397 | 9 | % | 699,243 | 6 | % | |||||||||||
Total | $ | 14,691,186 | 100 | % | $ | 11,241,164 | 100 | % | |||||||||
11_DEPENDENCE_ON_KEY_SUPPLIERS
11. DEPENDENCE ON KEY SUPPLIERS AND CONTRACT MANUFACTURERS | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
11. DEPENDENCE ON KEY SUPPLIERS AND CONTRACT MANUFACTURERS | ' |
The Company participates in the PC peripherals industry, which is characterized by aggressive pricing practices, continually changing customer demand patterns and rapid technological developments. The Company's operating results could be adversely affected should the Company be unable to successfully anticipate customer demand accurately; manage its product transitions, inventory levels and manufacturing process efficiently; distribute its products quickly in response to customer demand; differentiate its products from those of its competitors or compete successfully in the markets for its new products. | |
The Company depends on many third-party suppliers for key components contained in its product offerings. For some of these components, the Company may only use a single source supplier, in part due to the lack of alternative sources of supply. If the supply of a key material component is delayed or curtailed, the Company's ability to ship the related product or solution in desired quantities and in a timely manner could be adversely affected, possibly resulting in reductions in net sales. In cases where alternative sources of supply are available, qualification of the sources and establishment of reliable supplies could result in delays and possible reduction in net sales. | |
In the event that the financial condition of the Company's third-party suppliers for key components was to erode, the delay or curtailment of deliveries of key material components could occur. Additionally, the Company's reliance on third-party suppliers of key material components exposes the Company to potential product quality issues that could affect the reliability and performance of its products and solutions. Any lesser ability to ship its products in desired quantities and in a timely manner due to a delay or curtailment of the supply of material components, or product quality issues arising from faulty components manufactured by third-party suppliers, could adversely affect the market for the Company's products and lead to a reduction in the Company's net sales. | |
In 2013 the Company had one supplier that provided 84% of the Company's purchased inventory. The loss of their services or a material adverse change in their business or in the Company’s relationship could materially and adversely harm the Company’s business. |
12_RETIREMENT_PLAN
12. RETIREMENT PLAN | 12 Months Ended |
Dec. 31, 2013 | |
Compensation and Retirement Disclosure [Abstract] | ' |
12. RETIREMENT PLAN | ' |
The Company has a 401(k) retirement savings plan for employees. Under the plan, the Company matches 25% of an employee's contribution, up to a maximum of $350 per employee per year. Company matching contributions charged to expense in 2012 and 2013 were $5,164 and $4,779, respectively. | |
13_Valuation_of_Marketable_Sec
13. Valuation of Marketable Securities | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Valuation of Marketable Securities | ' |
In October 2010 Zoom Telephonics, Inc. entered into an agreement with Zoom Technologies, Inc. (Nasdaq: ZOOM) in which Zoom Telephonics transferred its rights to the zoom.com domain name and certain trademark rights in exchange for 80,000 shares of Zoom Technologies common stock. These shares had trading restrictions that ended January 18, 2012. The Company values the marketable securities at market value in the financial statements. The Company did not sell any Zoom Technologies shares in 2012. In the fourth quarter of 2013, Zoom Technologies, Inc. announced a reverse merger resulting in a 10:1 split so that the 80,000 shares became 8,000 shares. In December 2013 the Company sold all 8,000 shares of Zoom Technologies, Inc. stock. The Company received proceeds of $40 thousand and reported a realized loss of $273 thousand in 2013. | |
14_Bank_Credit_Line
14. Bank Credit Line | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Bank Credit Line | ' |
On April 10, 2012 Zoom Telephonics, Inc. entered into a Loan and Security Agreement with Silicon Valley Bank (the “Loan Agreement”). This Loan Agreement was filed with the SEC in an 8-K dated April 13, 2012. The Loan Agreement provides for up to $1 million of revolving credit, subject to a borrowing base formula and other terms and conditions as specified in the Loan Agreement. The Company’s most recent charge for the month of September was an annualized interest rate of 11.125%, but this may change (or decrease) depending on Zoom’s balance sheet as specified in the Loan Agreement. Our outstanding bank debt at September 30, 2012 was $796,000. The Loan Agreement has a one year term which expires April 9, 2013. Borrowings are secured by all of Zoom’s assets including Zoom’s intellectual property. We used a portion of the proceeds from the financing arrangement with Rosenthal & Rosenthal, Inc., as described below, to pay off our existing loan of $879,047 with Silicon Valley Bank. On December 19, 2012, the Loan Agreement with Silicon Valley Bank was terminated upon payment in full by us of all amounts owed under such agreement. | |
On December 18, 2012, we entered into a Financing Agreement with Rosenthal & Rosenthal, Inc. (the “Financing Agreement”). The Financing Agreement provides for up to $1.75 million of revolving credit, subject to a borrowing base formula and other terms and conditions as specified in the Financing Agreement. The Financing Agreement has a two year term. Borrowings are secured by all of our assets including our intellectual property. The Loan Agreement contained several covenants, including a requirement that we maintain a tangible net worth not less than $2.5 million and working capital not less than $2.5 million. On March 25, 2014, we entered into an amendment to the Financing Amendment (the “Amendment”) with an effective date of January 1, 2013. The Amendment clarified the definition of current assets in the Financing Agreement, reduced the size of the revolving credit line to $1.25 million and revised the financial covenants such that we are required to maintain tangible net worth of not less than $2.0 million and working capital of not less than $1.75 million. |
15_RECLASSIFICATIONS_OUT_OF_AC
15. RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Equity [Abstract] | ' | ||||||||
15. RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ' | ||||||||
2012 | 2013 | ||||||||
Accumulated Other Comprehensive Income (Loss) Components | |||||||||
Foreign currency translations: | |||||||||
Balance at beginning of period | $ | 360,199 | $ | 371,859 | |||||
Current period currency translation adjustments | 11,660 | (7,504 | ) | ||||||
Balance at end of period | $ | 371,859 | $ | 364,355 | |||||
Marketable securities available for sale: | |||||||||
Balance at beginning of period | $ | (234,629 | ) | $ | (272,909 | ) | |||
Current period comprehensive income (loss) | (38,280 | ) | (19,983 | ) | |||||
Amounts reclassified on sales of marketable securities | –– | 292,892 | |||||||
Balance at end of period | $ | (272,909 | ) | $ | –– | ||||
Accumulated Other Comprehensive Income (Loss) end of period | $ | 98,950 | $ | 364,355 |
16_SUBSEQUENT_EVENTS
16. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2013 | |
Subsequent Events [Abstract] | ' |
16. SUBSEQUENT EVENTS | ' |
Management of the Company has reviewed subsequent events from December 31, 2013 through the date of filing and concluded that there were no subsequent events requiring adjustment to or disclosure in these financial statements. | |
Recovered_Sheet1
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Summary Of Significant Accounting Policies Policies | ' | ||||||||
Basis of Presentation and Use of Estimates | ' | ||||||||
(a) Basis of Presentation and Use of Estimates | |||||||||
The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP). | |||||||||
The preparation of 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 date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results may differ from those estimates. Significant estimates made by the Company include: 1) allowance for doubtful accounts for accounts receivable (collectability and sales returns) and asset valuation allowance for deferred income tax assets; 2) write-downs of inventory for slow-moving and obsolete items, and market valuations; and 3) stock based compensation. | |||||||||
Cash and Cash Equivalents | ' | ||||||||
(b) Cash and Cash Equivalents | |||||||||
All highly liquid investments with original maturities of less than 90 days from the date of purchase are classified as cash equivalents. Cash equivalents consist exclusively of money market funds. The Company has deposits at a limited number of financial institutions with federally insured limits. Balances of cash and cash equivalents at these institutions are normally in excess of the insured limits. However, the Company believes that the institutions are financially sound and there is only nominal risk of loss. | |||||||||
Inventories | ' | ||||||||
(c) Inventories | |||||||||
Inventories are stated at the lower of cost, determined using the first-in, first-out method, or market. Consigned inventory is held at third-party locations. The Company retains title to the inventory until purchased by the third-party. Consigned inventory, consisting of finished goods, was approximately $305,000 and $489,000 at December 31, 2013 and 2012, respectively. | |||||||||
Equipment and Leasehold Improvements | ' | ||||||||
(d) Equipment and Leasehold Improvements | |||||||||
Equipment and leasehold improvements are stated at cost, less accumulated depreciation and amortization. Depreciation of equipment is provided using the straight-line method over the estimated useful lives of the assets. Amortization of leasehold improvements is provided using the straight-line method over the estimated useful lives of the improvement or lease term, whichever is shorter. | |||||||||
Impairment of Long-Lived Assets | ' | ||||||||
(e) Impairment of Long-Lived Assets | |||||||||
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. | |||||||||
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to undiscounted future net cash flows expected to be generated by the asset or asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. | |||||||||
Income Taxes | ' | ||||||||
(f) Income Taxes | |||||||||
Deferred income taxes are provided on the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and on net operating loss and tax credit carry forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for that portion of deferred tax assets not expected to be realized. | |||||||||
Earnings (Loss) Per Common Share | ' | ||||||||
(g) Earnings (Loss) Per Common Share | |||||||||
Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed by dividing net income by the weighted average number of common shares and dilutive potential common shares outstanding during the period. Under the treasury stock method, the unexercised options are assumed to be exercised at the beginning of the period or at issuance, if later. The assumed proceeds are then used to purchase common shares at the average market price during the period. A summary of the denominators used to compute basic and diluted earnings (loss) per share follow: | |||||||||
2012 | 2013 | ||||||||
Weighted average shares outstanding – used to compute basic earnings (loss) per share | 6,973,704 | 7,363,482 | |||||||
Net effect of dilutive potential common shares outstanding, based on the treasury stock method | –– | –– | |||||||
Weighted average shares outstanding – used to compute diluted earnings (loss) per share | 6,973,704 | 7,363,482 | |||||||
Potential common shares for which inclusion would have the effect of increasing diluted earnings per share (i.e., anti-dilutive) are excluded from the computation. Options to purchase 2,585,000 shares of common stock at December 31, 2013 and 1,083,750 shares of common stock as of December 31, 2012 were outstanding, but not included in the computation of diluted earnings per share as their effect would be anti-dilutive. | |||||||||
Revenue Recognition | ' | ||||||||
(h) Revenue Recognition | |||||||||
The Company primarily sells hardware products to its customers. The hardware products include dial-up modems, DSL modems, cable modems, embedded modems, ISDN modems, telephone dialers, and wireless and wired networking equipment. The Company generally does not sell software. | |||||||||
The Company derives its net sales primarily from the sales of hardware products to computer peripherals retailers, computer product distributors, and original equipment manufacturers (OEMs). The Company sells an immaterial amount of its hardware products to direct consumers or to any customers via the internet. | |||||||||
The Company recognizes net hardware sales for all four types of customers at the point when the customers take legal ownership of the delivered products. Legal ownership passes to the customer based on the contractual FOB point specified in signed contracts and purchase orders, which are both used extensively. Many customer contracts or purchase orders specify FOB destination. | |||||||||
When Zoom consigns inventory to a retailer, sales revenue for an item in that inventory is recognized when that item is sold to by the retailer to a customer. The item remains in Zoom inventory when it is consigned, and moves out of Zoom inventory when the item is sold by the retailer. | |||||||||
The Company's net sales of hardware are reduced by certain events which are characteristic of the sales of hardware to retailers of computer peripherals. These events are product returns, certain sales and marketing incentives, price protection refunds, and consumer and in-store mail-in rebates. Each of these is accounted for as a reduction of net sales based on management estimates, which are reconciled to actual customer or end-consumer credits on a monthly or quarterly basis. | |||||||||
The estimates for product returns are based on recent historical trends plus estimates for returns prompted by announced stock rotations, announced customer store closings, etc. Management analyzes historical returns, current economic trends, and changes in customer demand and acceptance of the Company's products when evaluating the adequacy of sales return allowances. The Company's estimates for price protection refunds require a detailed understanding and tracking by customer, by sales program. Estimated price protection refunds are recorded in the same period as the announcement of a pricing change. Information from customer inventory-on-hand reports or from direct communications with the customers is used to estimate the refund, which is recorded as a reserve against accounts receivable and a reduction of current period revenue. The Company's estimates for consumer mail-in rebates are comprised of actual rebate claims processed by the rebate redemption centers plus an accrual for an estimated lag in processing. The Company's estimates for store rebates are comprised of actual credit requests from the eligible customers. | |||||||||
The Company accounts for point-of-sale taxes on a net basis. | |||||||||
Fair Value of Financial Instruments | ' | ||||||||
(i) Fair Value of Financial Instruments | |||||||||
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: | |||||||||
● | Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities. The Company has the ability to access. | ||||||||
● | Level 2 - Inputs are inputs (other than quoted prices included within Level 1) that are observable for the asset or liability, either directly or indirectly. | ||||||||
● | Level 3 - Inputs include unobservable inputs for the asset or liability and rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability. (The unobservable inputs should be developed based on the best information available in the circumstances and may include the Company’s own data.) | ||||||||
Financial instruments consist of cash and cash equivalents, marketable securities, accounts receivable, bank debt, accounts payable, and accrued expenses. Due to the short term nature and payment terms associated with these instruments, except the marketable securities, their carrying amounts approximate fair value. The fair value of the marketable securities is based on observable inputs that reflect quoted prices in an active market and is classified under Level 1 of the fair value hierarchy described above at December 31, 2013 and 2012. Unrealized gains or losses resulting from changes in the fair value of marketable securities were charged or credited to “accumulated other comprehensive income,” until sale of these marketable securities in 2013. | |||||||||
Stock-Based Compensation | ' | ||||||||
(j) Stock-Based Compensation | |||||||||
Compensation cost for awards is generally recognized over the required service period based on the estimated fair value of the awards on their grant date. Fair value is determined using the Black-Scholes option-pricing model. | |||||||||
Advertising Costs | ' | ||||||||
(k) Advertising Costs | |||||||||
Advertising costs are expensed as incurred and reported in selling expense in the accompanying statements of operations and comprehensive income (loss), and include costs of advertising, production, trade shows, and other activities designed to enhance demand for the Company's products. There are no deferred advertising costs in the accompanying balance sheets. The Company reported advertising costs of $300.5 thousand in 2012 and $247.5 thousand in 2013. | |||||||||
Foreign Currencies | ' | ||||||||
(l) Foreign Currencies | |||||||||
The Company generates a portion of its revenues in markets outside North America principally in transactions denominated in foreign currencies, which exposes the Company to risks of foreign currency fluctuations. Foreign currency transaction gains and losses are reflected in operations and were not material for any period presented. The Company does not use derivative financial instruments. | |||||||||
The Company considers the local currency to be the functional currency for its U.K. branch. Assets and liabilities denominated in foreign currencies are translated using the exchange rates as of the balance sheet date. Revenues and expenses are translated at average exchange rates prevailing during the year. Translation adjustments resulting from this process are charged or credited to “accumulated other comprehensive income.” | |||||||||
Warranty Costs | ' | ||||||||
(m) Warranty Costs | |||||||||
The Company provides for the estimated costs that may be incurred under its standard warranty obligations, based on actual historical repair costs. The reserve for the provision for warranty costs was $52,683 and $38,098 at December 31, 2012 and 2013, respectively. | |||||||||
Shipping and Freight Costs | ' | ||||||||
(n) Shipping and Freight Costs | |||||||||
The Company records the expense associated with customer-delivery shipping and freight costs in selling expense. The Company reported shipping and freight costs of $234.6 thousand in 2012 and $191.7 thousand in 2013. | |||||||||
Recently Issued Accounting Pronouncements | ' | ||||||||
(o) Recently Issued Accounting Pronouncements | |||||||||
In February 2013, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update on the reporting of amounts reclassified out of accumulated other comprehensive income, to improve the transparency of reporting. These reclassifications present the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income-but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. This standard update is effective for reporting periods beginning after December 15, 2012. As this guidance only revises the presentation and disclosures related to the reclassification of items out of accumulated other comprehensive income (loss), the Company’s adoption of this guidance did not affect it’s financial position, results of operations or cash flows. See Note (15) – Reclassifications Out of Accumulated Other Comprehensive Income (Loss), which presents the disclosures required by this update. | |||||||||
Reclassifications | ' | ||||||||
(p) Reclassifications | |||||||||
Certain reclassifications have been made to the prior year’s financial statements to conform to the 2013 presentation. The reclassifications relate to the presentation of changes in accounts receivable and inventory on the statements of cash flows. | |||||||||
Contingencies | ' | ||||||||
The Company reviews the status of its legal proceedings and records a provision for a liability when it is considered probable that both a liability has been incurred and the amount of the loss can be reasonably estimated. This review is updated periodically as additional information becomes available. If either or both of the criteria are not met, the Company reassesses whether there is at lease a reasonable possibility that a loss, or additional losses, may be incurred. If there is a reasonable possibility that a loss may be incurred, the Company discloses the estimate of the amount of the loss or range of losses, that the amount is not material, or that an estimate of loss cannot be made. The Company expenses its legal fees as incurred. | |||||||||
In assessing potential loss contingencies, the Company considers a number of factors, including those listed in the FASB’s Accounting Standards Codifications 450-20, Contingencies – Loss Contingencies, regarding assessing the probability of a loss and assessing whether a loss is reasonably estimable. |
2_SUMMARY_OF_SIGNIFICANT_ACCOU1
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Summary Of Significant Accounting Policies Tables | ' | ||||||||
Earnings (Loss) Per Common Share | ' | ||||||||
2012 | 2013 | ||||||||
Weighted average shares outstanding – used to compute basic earnings (loss) per share | 6,973,704 | 7,363,482 | |||||||
Net effect of dilutive potential common shares outstanding, based on the treasury stock method | –– | –– | |||||||
Weighted average shares outstanding – used to compute diluted earnings (loss) per share | 6,973,704 | 7,363,482 |
4_Inventories_Tables
4. Inventories (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Inventories Tables | ' | ||||||||
Inventories consist | ' | ||||||||
2012 | 2013 | ||||||||
Materials | $ | 720,113 | $ | 440,723 | |||||
Finished goods (including $489,400 and $304,500 held by customers at December 31, 2012 and 2013, respectively) | 1,910,273 | 1,273,358 | |||||||
Total | $ | 2,630,386 | $ | 1,714,081 |
5_EQUIPMENT_Tables
5. EQUIPMENT (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||||||
Equipment | ' | ||||||||||||
2012 | 2013 | Estimated | |||||||||||
Useful lives | |||||||||||||
in years | |||||||||||||
Computer hardware and software | $ | 190,339 | $ | 194,528 | 3 | ||||||||
Machinery and equipment | 254,533 | 254,533 | 5 | ||||||||||
Molds, tools and dies | 42,460 | 78,257 | 5 | ||||||||||
Office furniture and fixtures | 44,138 | 38,938 | 5 | ||||||||||
531,470 | 566,256 | ||||||||||||
Accumulated depreciation and amortization | (505,425 | ) | (515,231 | ) | |||||||||
Equipment and leasehold improvements, net | $ | 26,045 | $ | 51,025 | |||||||||
Depreciation expense for year ended | $ | 14,082 | $ | 9,777 |
7_STOCK_OPTION_PLANS_Tables
7. STOCK OPTION PLANS (Tables) | 12 Months Ended | ||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||
Schedule stock options under the 2009 Stock Option Plan | ' | ||||||||||||||||||||||
Assumptions | 2009 Stock Option Plan and | ||||||||||||||||||||||
the 2009 Directors Stock Option Plan | |||||||||||||||||||||||
Expected life | 2.75 (yrs) - 3.5 (yrs) | ||||||||||||||||||||||
Expected volatility | 49.23% - 67.08% | ||||||||||||||||||||||
Risk-free interest rate | 0.35% - 1.88% | ||||||||||||||||||||||
Expected dividend yield | 0.00% | ||||||||||||||||||||||
2009 Stock Option Plan | ' | ||||||||||||||||||||||
Plan Activity | ' | ||||||||||||||||||||||
Number of shares | Weighted average | ||||||||||||||||||||||
exercise price | |||||||||||||||||||||||
Balance as of January 1, 2012 | 970,000 | $ | 0.51 | ||||||||||||||||||||
Granted | –– | –– | |||||||||||||||||||||
Exercised | –– | –– | |||||||||||||||||||||
Expired | –– | –– | |||||||||||||||||||||
Balance as of December 31, 2012 | 970,000 | $ | 0.51 | ||||||||||||||||||||
Granted | 1,505,000 | $ | 0.25 | ||||||||||||||||||||
Exercised | –– | –– | |||||||||||||||||||||
Expired | (160,000 | ) | 0.25 | ||||||||||||||||||||
Balance as of December 31, 2013 | 2,315,000 | $ | 0.35 | ||||||||||||||||||||
Schedule stock options under the Plan | ' | ||||||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||||||
Exercise | Number | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Number | Weighted Average Exercise Price | ||||||||||||||||||
Prices | Outstanding | Exercisable | |||||||||||||||||||||
$ | 0.53 | 555,000 | 0.11 | $ | 0.53 | 555,000 | $ | 0.53 | |||||||||||||||
$ | 0.48 | 365,000 | 1.3 | $ | 0.48 | 365,000 | $ | 0.48 | |||||||||||||||
$ | 0.25 | 1,395,000 | 4.1 | $ | 0.25 | 348,750 | $ | 0.25 | |||||||||||||||
$ | 0.25 to 0.53 | 2,315,000 | 2.7 | $ | 0.35 | 1,268,750 | $ | 0.44 | |||||||||||||||
Directors Plan | ' | ||||||||||||||||||||||
Plan Activity | ' | ||||||||||||||||||||||
Number of | Weighted average | ||||||||||||||||||||||
shares | exercise price | ||||||||||||||||||||||
Balance as of January 1, 2012 | 150,000 | 0.38 | |||||||||||||||||||||
Granted | 60,000 | 0.26 | |||||||||||||||||||||
Exercised | –– | –– | |||||||||||||||||||||
Expired | –– | –– | |||||||||||||||||||||
Balance as of December 31, 2012 | 210,000 | 0.35 | |||||||||||||||||||||
Granted | 60,000 | 0.18 | |||||||||||||||||||||
Exercised | –– | –– | |||||||||||||||||||||
Expired | –– | –– | |||||||||||||||||||||
Balance as of December 31, 2013 | 270,000 | $ | 0.31 | ||||||||||||||||||||
Schedule stock options under the Plan | ' | ||||||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||||||
Exercise Prices | Number | Weighted Average | Weighted Average | Number | Weighted Average | ||||||||||||||||||
Outstanding | Remaining Contractual Life | Exercise Price | Exercisable | Exercise Price | |||||||||||||||||||
$ | 0.16-0.20 | 60,000 | 4.4 | $ | 0.18 | 60,000 | $ | 0.18 | |||||||||||||||
$ | 0.25-0.26 | 60,000 | 3.4 | $ | 0.26 | 60,000 | $ | 0.26 | |||||||||||||||
$ | 0.27-0.41 | 60,000 | 1.4 | $ | 0.34 | 60,000 | $ | 0.34 | |||||||||||||||
$ | 0.35-0.36 | 60,000 | 2.4 | $ | 0.36 | 60,000 | $ | 0.36 | |||||||||||||||
$ | 0.53 | 30,000 | 1 | $ | 0.53 | 30,000 | $ | 0.53 | |||||||||||||||
$ | 0.16-0.53 | 270,000 | 2.7 | $ | 0.35 | 270,000 | $ | 0.31 |
8_INCOME_TAXES_Tables
8. INCOME TAXES (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||||||
Schedule of income taxes | ' | ||||||||||||
Current | Deferred | Total | |||||||||||
Year Ended December 31, 2012: | |||||||||||||
US federal | $ | –– | $ | –– | $ | –– | |||||||
State and local | –– | –– | –– | ||||||||||
Foreign | 3,392 | –– | 3,392 | ||||||||||
$ | 3,392 | $ | –– | $ | 3,392 | ||||||||
Year Ended December 31, 2013: | |||||||||||||
US federal | $ | –– | $ | –– | $ | –– | |||||||
State and local | –– | –– | –– | ||||||||||
Foreign | 3,944 | –– | 3,944 | ||||||||||
$ | 3,944 | $ | –– | $ | 3,944 | ||||||||
Schedule of income tax reconciliation | ' | ||||||||||||
2012 | 2013 | ||||||||||||
Computed "expected" US tax (benefit) at Federal statutory rate | $ | (248,996 | ) | $ | (362,095 | ) | |||||||
Change resulting from: | |||||||||||||
State and local income taxes, net of federal income tax benefit | –– | –– | |||||||||||
Foreign income taxes | 3,392 | 3,944 | |||||||||||
Valuation allowance | 235,607 | (126,339 | ) | ||||||||||
Non––deductible items | 14,456 | 11,390 | |||||||||||
Expired State Net Operating Losses | –– | 477,044 | |||||||||||
Change in estimate for prior years’ provisions | (1,067 | ) | –– | ||||||||||
Income tax expense (benefit) | $ | 3,392 | $ | 3,944 | |||||||||
Schedule of deferred tax assets | ' | ||||||||||||
2012 | 2013 | ||||||||||||
Deferred income tax assets: | |||||||||||||
Inventories | $ | 333,315 | $ | 165,225 | |||||||||
Accounts receivable | 292,846 | 235,207 | |||||||||||
Intangible assets | 96,791 | 25,738 | |||||||||||
Accrued expenses | 60,397 | 44,112 | |||||||||||
Net operating loss and tax credit carry forwards | 17,792,110 | 17,977,742 | |||||||||||
Plant and equipment | 15,378 | 15,018 | |||||||||||
Stock compensation | 88,059 | 89,515 | |||||||||||
Other – investment impairments | 127,855 | 127,855 | |||||||||||
Total deferred income tax assets | 18,806,751 | 18,680,412 | |||||||||||
Valuation allowance | (18,806,751 | ) | (18,680,412 | ) | |||||||||
Net deferred tax assets | $ | –– | $ | –– |
10_Segment_and_Geographic_Info1
10. Segment and Geographic Information (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Segment And Geographic Information Tables | ' | ||||||||||||||||
Company's net sales by geographic region | ' | ||||||||||||||||
2012 | Percent | 2013 | Percent | ||||||||||||||
United States | $ | 13,424,789 | 91 | % | $ | 10,541,921 | 94 | % | |||||||||
Outside United States | 1,266,397 | 9 | % | 699,243 | 6 | % | |||||||||||
Total | $ | 14,691,186 | 100 | % | $ | 11,241,164 | 100 | % |
15_RECLASSIFICATIONS_OUT_OF_AC1
15. RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Equity [Abstract] | ' | ||||||||
RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ' | ||||||||
2012 | 2013 | ||||||||
Accumulated Other Comprehensive Income (Loss) Components | |||||||||
Foreign currency translations: | |||||||||
Balance at beginning of period | $ | 360,199 | $ | 371,859 | |||||
Current period currency translation adjustments | 11,660 | (7,504 | ) | ||||||
Balance at end of period | $ | 371,859 | $ | 364,355 | |||||
Marketable securities available for sale: | |||||||||
Balance at beginning of period | $ | (234,629 | ) | $ | (272,909 | ) | |||
Current period comprehensive income (loss) | (38,280 | ) | (19,983 | ) | |||||
Amounts reclassified on sales of marketable securities | –– | 292,892 | |||||||
Balance at end of period | $ | (272,909 | ) | $ | –– | ||||
Accumulated Other Comprehensive Income (Loss) end of period | $ | 98,950 | $ | 364,355 |
2_SUMMARY_OF_SIGNIFICANT_ACCOU2
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Summary Of Significant Accounting Policies Tables | ' | ' |
Weighted average shares outstanding - used to compute basic earnings (loss) per share | 7,363,482 | 6,973,704 |
Net effect of dilutive potential common shares outstanding, based on the treasury stock method | 0 | 0 |
Weighted average shares outstanding - used to compute diluted earnings (loss) per share | 7,363,482 | 6,973,704 |
4_Inventories_Details
4. Inventories (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Inventories Details | ' | ' |
Materials | $440,723 | $720,113 |
Finished goods (including $489,400 and $304,500 held by customers at December 31, 2012 and 2013, respectively) | 1,273,358 | 1,910,273 |
Total inventories | $1,714,081 | $2,630,386 |
4_Inventories_Details_Narrativ
4. Inventories (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Inventories Details | ' | ' |
Reserve for the provision for slow moving and obsolete inventory | $360,624 | $750,764 |
5_EQUIPMENT_Details
5. EQUIPMENT (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Property and equipment | $566,256 | $531,470 |
Accumulated depreciation and amortization | -515,231 | -505,425 |
Equipment and leasehold improvements, net | 51,025 | 26,045 |
Depreciation expense for year ended | 9,777 | 14,082 |
Computer hardware and software | ' | ' |
Property and equipment | 194,528 | 190,339 |
Machinery and equipment | ' | ' |
Property and equipment | 254,533 | 254,533 |
Molds, tools and dies | ' | ' |
Property and equipment | 78,257 | 42,460 |
Office furniture and fixtures | ' | ' |
Property and equipment | $38,938 | $44,138 |
7_STOCK_OPTION_PLANS_Details
7. STOCK OPTION PLANS (Details) (2009 Stock Option Plan, USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
2009 Stock Option Plan | ' | ' |
Number of shares Outstanding at beginning of period | 970,000 | 970,000 |
Granted | 1,505,000 | 0 |
Exercised | 0 | 0 |
Expired | -160,000 | 0 |
Number of shares Outstanding end of period | 2,315,000 | 970,000 |
Weighted average Price | ' | ' |
Weighted average exercise price, beginning | $0.51 | $0.51 |
Granted | $0.25 | ' |
Exercised | ' | ' |
Expired | $0.25 | ' |
Weighted average exercise price, ending | $0.35 | $0.51 |
7_STOCK_OPTION_PLANS_Details_1
7. STOCK OPTION PLANS (Details 1) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
0.53 | ' |
Weighted average exercise price, beginning | $0.53 |
Number of shares Outstanding end of period | 555,000 |
Weighted average remaining contractual life | '11 months |
Weighted average exercise price, ending | $0.53 |
Number Exercisable | 555,000 |
Weighted average exercise price | $0.53 |
0.48 | ' |
Weighted average exercise price, beginning | $0.48 |
Number of shares Outstanding end of period | 365,000 |
Weighted average remaining contractual life | '1 year 3 months 18 days |
Weighted average exercise price, ending | $0.48 |
Number Exercisable | 365,000 |
Weighted average exercise price | $0.48 |
0.25 | ' |
Weighted average exercise price, beginning | $0.25 |
Number of shares Outstanding end of period | 1,395,000 |
Weighted average remaining contractual life | '4 years 1 month 6 days |
Weighted average exercise price, ending | $0.25 |
Number Exercisable | 348,750 |
Weighted average exercise price | $0.25 |
0.25 to 0.53 | ' |
Option price range, upper | $0.53 |
Option price range, lower | $0.25 |
Number of shares Outstanding end of period | 2,315,000 |
Weighted average remaining contractual life | '2 years 7 months |
Number Exercisable | 1,268,750 |
Weighted average exercise price | $0.44 |
7_STOCK_OPTION_PLANS_Details_2
7. STOCK OPTION PLANS (Details 2) (Directors Plan, USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Directors Plan | ' | ' |
Number of shares Outstanding at beginning of period | 210,000 | 150,000 |
Granted | 60,000 | 60,000 |
Exercised | 0 | 0 |
Expired | 0 | 0 |
Number of shares Outstanding end of period | 270,000 | 210,000 |
Weighted average Price | ' | ' |
Weighted average exercise price, beginning | $0.35 | $0.38 |
Granted | $0.18 | $0.26 |
Exercised | ' | ' |
Expired | ' | ' |
Weighted average exercise price, ending | $0.31 | $0.35 |
7_STOCK_OPTION_PLANS_Details_3
7. STOCK OPTION PLANS (Details 3) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
0.16-0.20 | ' |
Weighted average exercise price, beginning | $0.18 |
Option price range, upper | $0.20 |
Option price range, lower | $0.16 |
Number of shares Outstanding end of period | 60,000 |
Weighted average remaining contractual life | '4 years 4 months 24 days |
Weighted average exercise price, ending | $0.18 |
Number Exercisable | 60,000 |
Weighted average exercise price | $0.18 |
0.25-0.26 | ' |
Weighted average exercise price, beginning | $0.26 |
Option price range, upper | $0.26 |
Option price range, lower | $0.25 |
Number of shares Outstanding end of period | 60,000 |
Weighted average remaining contractual life | '3 years 4 months 24 days |
Weighted average exercise price, ending | $0.26 |
Number Exercisable | 60,000 |
Weighted average exercise price | $0.26 |
0.27-0.41 | ' |
Weighted average exercise price, beginning | $0.34 |
Option price range, upper | $0.41 |
Option price range, lower | $0.27 |
Number of shares Outstanding end of period | 60,000 |
Weighted average remaining contractual life | '1 year 4 months 24 days |
Weighted average exercise price, ending | $0.34 |
Number Exercisable | 60,000 |
Weighted average exercise price | $0.34 |
0.35-0.36 | ' |
Weighted average exercise price, beginning | $0.36 |
Option price range, upper | $0.36 |
Option price range, lower | $0.35 |
Number of shares Outstanding end of period | 60,000 |
Weighted average remaining contractual life | '2 years 4 months 24 days |
Weighted average exercise price, ending | $0.36 |
Number Exercisable | 60,000 |
Weighted average exercise price | $0.36 |
0.53 | ' |
Weighted average exercise price, beginning | $0.53 |
Number of shares Outstanding end of period | 30,000 |
Weighted average remaining contractual life | '1 year |
Weighted average exercise price, ending | $0.53 |
Number Exercisable | 30,000 |
Weighted average exercise price | $0.53 |
0.16-0.53 | ' |
Weighted average exercise price, beginning | $0.35 |
Option price range, upper | $0.53 |
Option price range, lower | $0.16 |
Number of shares Outstanding end of period | 270,000 |
Weighted average remaining contractual life | '2 years 7 months |
Weighted average exercise price, ending | $0.35 |
Number Exercisable | 270,000 |
Weighted average exercise price | $0.31 |
7_STOCK_OPTION_PLANS_Details_4
7. STOCK OPTION PLANS (Details 4) | 12 Months Ended |
Dec. 31, 2013 | |
Expected dividend yield | 0.00% |
Minimum | ' |
Expected life | '2 years 9 months |
Expected volatility | 49.23% |
Risk-free interest rate | 0.35% |
Maximum | ' |
Expected life | '3 years 6 months |
Expected volatility | 67.08% |
Risk-free interest rate | 1.88% |
8_INCOME_TAXES_Details
8. INCOME TAXES (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Current tax expense | ' | ' |
US Federal | $0 | $0 |
State and local | 0 | 0 |
Foreign | 3,944 | 3,392 |
Total current tax expense | 3,944 | 3,392 |
Deferred tax expense (benefit) | ' | ' |
US Federal | 0 | 0 |
State and local | 0 | 0 |
Total deferred tax expense (benefit) | 0 | 0 |
Total tax expense | ' | ' |
US federal | 0 | 0 |
State and local | 0 | 0 |
Foreign | 3,944 | 3,392 |
Total | $3,944 | $3,392 |
8_INCOME_TAXES_Details_1
8. INCOME TAXES (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Tax Disclosure [Abstract] | ' | ' |
Computed ""expected"" US tax (benefit) at Federal statutory rate | ($362,095) | ($248,996) |
Change resulting from: | ' | ' |
State and local income taxes, net of federal income tax benefit | 0 | 0 |
Foreign income taxes | 3,944 | 3,392 |
Federal valuation allowance | -126,339 | 235,607 |
Nonbbdeductible items | 11,390 | 14,456 |
Expired State Net Operating Losses | 477,044 | 0 |
Change in estimate for prior yearsb provisions | 0 | -1,067 |
Income tax expense (benefit) | $3,944 | $3,392 |
8_INCOME_TAXES_Details_2
8. INCOME TAXES (Details 2) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Deferred income tax assets: | ' | ' |
Inventories | $165,225 | $333,315 |
Accounts receivable | 235,207 | 292,846 |
Intangible assets | 25,738 | 96,791 |
Accrued expenses | 44,112 | 60,397 |
Net operating loss and tax credit carry forwards | 17,977,742 | 17,792,110 |
Plant and equipment | 15,018 | 15,378 |
Stock compensation | 89,515 | 88,059 |
Other b investment impairments | 127,855 | 127,855 |
Total deferred income tax assets | 18,680,412 | 18,806,751 |
Valuation allowance | -18,680,412 | -18,806,751 |
Net deferred tax assets | $0 | $0 |
9_SIGNIFICANT_CUSTOMERS_Detail
9. SIGNIFICANT CUSTOMERS (Details Narrative) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Three customers percentage of total sales | ' | ' |
Percent concentration | 69.00% | 67.00% |
One customer percentage of total sales | ' | ' |
Percent concentration | 51.00% | 54.00% |
Three customers percentage of total accounts receivables | ' | ' |
Percent concentration | 84.00% | 85.00% |
One customer percentage of total accounts receivables | ' | ' |
Percent concentration | 71.00% | 79.00% |
10_Segment_and_Geographic_Info2
10. Segment and Geographic Information (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ' | ' |
Net sales, amount | $11,241,164 | $14,691,186 |
Net sales, % of total | 100.00% | 100.00% |
United States | ' | ' |
Revenues from External Customers and Long-Lived Assets [Line Items] | ' | ' |
Net sales, amount | 10,541,921 | 13,424,789 |
Net sales, % of total | 94.00% | 91.00% |
Outside United States | ' | ' |
Revenues from External Customers and Long-Lived Assets [Line Items] | ' | ' |
Net sales, amount | $699,243 | $1,266,397 |
Net sales, % of total | 6.00% | 9.00% |
12_RETIREMENT_PLAN_Details_Nar
12. RETIREMENT PLAN (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Retirement Plan Details Narrative | ' | ' |
Company matching contributions charged to expense | $5,164 | $4,779 |
15_RECLASSIFICATIONS_OUT_OF_AC2
15. RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Reclassifications Out Of Accumulated Other Comprehensive Income Loss Details Narrative | ' | ' |
Balance at beginning of period | $371,859 | $360,199 |
Current period currency translation adjustments | -7,504 | 11,660 |
Balance at end of period | 364,355 | 371,859 |
Balance at beginning of period | -272,909 | -234,629 |
Current period comprehensive income (loss) | -19,983 | -38,280 |
Amounts reclassified on sales of marketable securities | 292,892 | 0 |
Balance at end of period | 0 | -272,909 |
Accumulated Other Comprehensive Income (Loss) end of period | $364,355 | $98,950 |