Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended |
Jun. 30, 2014 | |
Document And Entity Information | ' |
Entity Registrant Name | 'Zoom Telephonics, Inc. |
Entity Central Index Key | '0001467761 |
Document Type | '10-Q |
Document Period End Date | 30-Jun-14 |
Amendment Flag | 'false |
Current Fiscal Year End Date | '--12-31 |
Is Entity a Well-known Seasoned Issuer? | 'No |
Is Entity a Voluntary Filer? | 'No |
Is Entity's Reporting Status Current? | 'Yes |
Entity Filer Category | 'Smaller Reporting Company |
Entity Common Stock, Shares Outstanding | 7,982,704 |
Document Fiscal Period Focus | 'Q2 |
Document Fiscal Year Focus | '2014 |
Condensed_Balance_Sheets_Unaud
Condensed Balance Sheets (Unaudited) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Current assets | ' | ' |
Cash and cash equivalents | $53,684 | $55,393 |
Accounts receivable, net of allowances of $484,767 at June 30, 2014 and $640,456 at December 31, 2013 | 1,527,516 | 1,674,812 |
Inventories | 2,447,065 | 1,714,081 |
Prepaid expenses and other current assets | 256,597 | 225,152 |
Total current assets | 4,284,862 | 3,669,438 |
Equipment, net | 47,549 | 51,025 |
Total assets | 4,332,411 | 3,720,463 |
Current liabilities | ' | ' |
Bank debt | 960,273 | 318,318 |
Accounts payable | 866,239 | 693,546 |
Accrued expenses | 251,959 | 322,410 |
Total current liabilities | 2,078,471 | 1,334,274 |
Total liabilities | 2,078,471 | 1,334,274 |
Stockholders' equity | ' | ' |
Common stock, $0.01 par value: Authorized - 25,000,000 shares; issued and outstanding – 7,982,704 shares at June 30, 2014 and December 31, 2013, respectively | 79,827 | 79,827 |
Additional paid-in capital | 34,187,162 | 34,177,779 |
Accumulated deficit | -32,379,509 | -32,235,772 |
Accumulated other comprehensive income (loss) | 366,460 | 364,355 |
Total stockholders' equity | 2,253,940 | 2,386,189 |
Total liabilities and stockholders' equity | $4,332,411 | $3,720,463 |
Condensed_Balance_Sheets_Unaud1
Condensed Balance Sheets (Unaudited) (Parenthetical) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Assets | ' | ' |
Accounts receivable allowances | $484,767 | $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 | 7,982,704 |
Common stock, outstanding | 7,982,704 | 7,982,704 |
Condensed_Statement_of_Operati
Condensed Statement of Operations and Comprehensive Income (Loss) (Unaudited) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Income Statement [Abstract] | ' | ' | ' | ' |
Net sales | $2,640,702 | $2,999,019 | $5,787,047 | $5,816,618 |
Cost of goods sold | 1,841,012 | 1,964,785 | 4,054,890 | 4,078,416 |
Gross profit | 799,690 | 1,034,234 | 1,732,157 | 1,738,202 |
Operating expenses: | ' | ' | ' | ' |
Selling | 355,055 | 400,094 | 707,834 | 822,759 |
General and administrative | 238,109 | 354,346 | 530,662 | 693,880 |
Research and development | 290,213 | 213,606 | 598,879 | 472,118 |
Total | 883,377 | 968,046 | 1,837,375 | 1,988,757 |
Operating profit (loss) | -83,687 | 66,188 | -105,218 | -250,555 |
Other: | ' | ' | ' | ' |
Interest income | 9 | 17 | 16 | 26 |
Other, net | -20,293 | -15,797 | -34,494 | -32,126 |
Total other income (expense), net | -20,284 | -15,780 | -34,478 | -32,100 |
Income (loss) before income taxes | -103,971 | 50,408 | -139,696 | -282,655 |
Income taxes (benefit) | 2,711 | 1,016 | 4,041 | 1,527 |
Net income (loss) | -106,682 | 49,392 | -143,737 | -284,182 |
Other comprehensive income (loss): | ' | ' | ' | ' |
Foreign currency translation adjustments | 1,743 | 1,896 | 2,105 | -8,059 |
Unrealized gain (loss) for the period | 0 | -24,000 | 0 | -11,200 |
Net comprehensive income (loss) | ($104,939) | $27,288 | ($141,632) | ($303,441) |
Basic and diluted net income (loss) per share | ($0.01) | $0.01 | ($0.02) | ($0.04) |
Weighted average common and common equivalent shares: | ' | ' | ' | ' |
Basic and diluted | 7,982,704 | 6,973,704 | 7,982,704 | 6,973,704 |
Condensed_Statements_of_Cash_F
Condensed Statements of Cash Flows (Unaudited) (USD $) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
Operating activities: | ' | ' |
Net income (loss) | ($143,737) | ($284,182) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ' | ' |
Depreciation and amortization | 4,556 | 5,230 |
Stock based compensation | 9,383 | 20,918 |
Provision for accounts receivable allowances | -723 | -4,683 |
Provision for inventory reserves | 37,730 | 13,899 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable | 148,523 | 70,042 |
Inventories | -770,714 | 466,418 |
Prepaid expenses and other assets | -31,257 | 13,539 |
Accounts payable and accrued expenses | 102,395 | -253,572 |
Net cash provided by (used in) operating activities | -643,844 | 47,609 |
Investing activities: | ' | ' |
Additions to property, plant and equipment | -1,080 | -30,543 |
Net cash provided by (used in) investing activities | -1,080 | -30,543 |
Financing activities: | ' | ' |
Net funds received from (paid to) bank credit lines | 641,955 | -168,315 |
Net cash provided by (used in) financing activities | 641,955 | -168,315 |
Effect of exchange rate changes on cash | 1,260 | 28 |
Net change in cash | -1,709 | -151,221 |
Cash and cash equivalents at beginning of period | 55,393 | 195,704 |
Cash and cash equivalents at end of period | 53,684 | 44,483 |
Supplemental disclosures of cash flow information: | ' | ' |
Cash paid during the period for: Interest | 34,279 | 35,403 |
Cash paid during the period for: Income taxes | $4,041 | $1,527 |
1_Summary_of_Significant_Accou
1. Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2014 | |
Notes to Financial Statements | ' |
Summary of Significant Accounting Policies | ' |
The accompanying financial statements are unaudited. However, the condensed balance sheet as of December 31, 2013 was derived from audited financial statements. In the opinion of management, the accompanying financial statements include all adjustments to present fairly the financial position, results of operations and cash flows of the Company. The adjustments are of a normal, recurring nature. | |
The results of operations for the periods presented are not necessarily indicative of the results to be expected for the entire year. The Company has evaluated subsequent events from June 30, 2014 through the date of this filing and determined that there are no such events requiring recognition or disclosure in the financial statements. | |
The condensed financial statements of the Company presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2013 included in the Company's 2013 Annual Report on Form 10-K. | |
(a) Reclassifications | |
Certain reclassifications have been made to the prior year’s financial statements to conform to the 2014 presentation. The reclassifications relate to the presentation of changes in accounts receivable and inventory on the statements of cash flows. The reclassifications do not change the balance sheet or statement of operations. | |
2_Liquidity
2. Liquidity | 6 Months Ended |
Jun. 30, 2014 | |
Notes to Financial Statements | ' |
Liquidity | ' |
Zoom’s cash balance on June 30, 2014 was $54 thousand, down slightly from $55 thousand on December 31, 2013. Zoom’s maximum available line of credit was $1.25 million on June 30, 2014, and bank debt outstanding under this line of credit was $960 thousand. Zoom’s net inventory increased $0.7 million to $2.4 million from December 31, 2013 to June 30, 2014 due to reduced retailer promotions, thus reducing sales of one of Zoom’s top products, and also due to an intentional increase in cable modem inventory to safeguard against a threatened dock strike. This increase in inventory and the $144 thousand loss for the first half of 2014 were the primary reasons for a $0.6 million increase in bank debt from December 31, 2013 to $960 thousand at June 30, 2014. | |
On June 30, 2014 the Company had working capital of $2.2 million including $54 thousand in cash and cash equivalents. On December 31, 2013 we had working capital of $2.3 million including $55 thousand in cash and cash equivalents. Our current ratio at June 30, 2014 was 2.1 compared to 2.8 at December 31, 2013. | |
On December 18, 2012, the Company entered into a Financing Agreement with Rosenthal & Rosenthal, Inc. (the “Financing Agreement”). The Financing Agreement provided 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 continues until November 30, 2014 and from year to year thereafter, unless sooner terminated by either party as specified in the Financing Agreement. Borrowings are secured by all of the Company assets including intellectual property. The Loan Agreement contained several covenants, including a requirement that the Company maintain tangible net worth of not less than $2.5 million and working capital of not less than $2.5 million. On March 25, 2014, the Company 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 so that Zoom is required to maintain tangible net worth of not less than $2.0 million and working capital of not less than $1.75 million. | |
The Company is continuing to develop new products and to take other measures to increase sales. Increasing sales typically results in increased inventory and higher accounts receivable, both of which reduce cash. Zoom believes that its financial resources and line of credit are sufficient to fund operations for the foreseeable future if Zoom management's sales and operating profit expectations are met. |
3_Inventories
3. Inventories | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Notes to Financial Statements | ' | ||||||||
Inventories | ' | ||||||||
Inventories consist of : | June 30, | December 31, | |||||||
2014 | 2013 | ||||||||
Materials | $ | 300,025 | $ | 440,723 | |||||
Work in process | 87,300 | –– | |||||||
Finished goods (including $78,500 and $304,500 held by customers at June 30, 2014 and December 31, 2013, respectively) | 2,059,740 | 1,273,358 | |||||||
Total | $ | 2,447,065 | $ | 1,714,081 |
4_Contingencies
4. Contingencies | 6 Months Ended |
Jun. 30, 2014 | |
Notes to Financial Statements | ' |
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, Telecomm Innovations LLC filed a complaint against Zoom Telephonics and at least 23 other companies including Dell Inc., various dial-up modem producers, and many fax machine producers. The complaint was 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 January 22, 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. The closing of the case did not materially affect the Company’s business, financial position, results of operations or cash flows. | |
On November 6, 2013, Innovative Wireless Solutions, LLC (“IWS”) filed a complaint against Zoom Telephonics alleging infringement of U.S. Patents 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 Internet access.” The case is in its early stages and a Scheduling Order was recently issued in the case. Management is unable to reasonably estimate any potential outcome at this time. |
5_Segment_and_Geographic_Infor
5. Segment and Geographic Information | 6 Months Ended | ||||||||||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||||||||||||||||||
Segment and Geographic Information | ' | ||||||||||||||||||||||||||||||||
The Company’s operations are classified as one reportable segment. The Company’s net sales by geographic region follow: | |||||||||||||||||||||||||||||||||
Three Months | Three Months | Six Months | Six Months | ||||||||||||||||||||||||||||||
Ended | Ended | Ended | Ended | ||||||||||||||||||||||||||||||
June 30, | % of | June 30, | % of | June 30, | % of | June 30, | % of | ||||||||||||||||||||||||||
2014 | Total | 2013 | Total | 2014 | Total | 2013 | Total | ||||||||||||||||||||||||||
North America | $ | 2,521,144 | 95 | % | $ | 2,762,556 | 92 | % | $ | 5,596,925 | 97 | % | $ | 5,335,229 | 92 | % | |||||||||||||||||
UK | 53,399 | 2 | % | 78,584 | 3 | % | 88,810 | 1 | % | 222,804 | 4 | % | |||||||||||||||||||||
All Other | 66,159 | 3 | % | 157,879 | 5 | % | 101,312 | 2 | % | 258,585 | 4 | % | |||||||||||||||||||||
Total | $ | 2,640,702 | 100 | % | $ | 2,999,019 | 100 | % | $ | 5,787,047 | 100 | % | $ | 5,816,618 | 100 | % | |||||||||||||||||
6_Customer_Concentrations
6. Customer Concentrations | 6 Months Ended |
Jun. 30, 2014 | |
Notes to Financial Statements | ' |
Customer Concentrations | ' |
The Company sells its products primarily through high-volume retailers and distributors, Internet 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 the second quarter of 2014, three customers accounted for 78% of our total net sales with our largest customer accounting for 56% of our net sales. In the first six months of 2014, three customers accounted for 74% of the Company’s total net sales with our largest customer accounting for 56% of our net sales. At June 30, 2014, three customers accounted for 86% of our gross accounts receivable, with our largest customer representing 63% of our gross accounts receivable. In the second quarter of 2013, three customers accounted for 73% of our net sales with our largest customer accounting for 54% of our net sales. In the first six months of 2013, three customers accounted for 66% of our total net sales with our largest customer accounting for 49% 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. | |
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. |
7_Valuation_of_Marketable_Secu
7. Valuation of Marketable Securities | 6 Months Ended |
Jun. 30, 2014 | |
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 valued the marketable securities at market value in the financial statements. 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. |
8_Bank_Credit_Line
8. Bank Credit Line | 6 Months Ended |
Jun. 30, 2014 | |
Notes to Financial Statements | ' |
Bank Credit Line | ' |
On December 18, 2012, the Company entered into a Financing Agreement with Rosenthal & Rosenthal, Inc. (the “Financing Agreement”). The Financing Agreement provided 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 continues until November 30, 2014 and from year to year thereafter, unless sooner terminated by either party as specified in the Financing Agreement. Borrowings are secured by all of the Company assets including intellectual property. The Loan Agreement contained several covenants, including a requirement that the Company maintain tangible net worth of not less than $2.5 million and working capital of not less than $2.5 million. On March 25, 2014, the Company 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 so that Zoom is required to maintain tangible net worth of not less than $2.0 million and working capital of not less than $1.75 million. | |
On June 30, 2014 Zoom was in compliance with the covenants of the Financing Agreement with Rosenthal & Rosenthal, Inc. | |
3_Inventories_Tables
3. Inventories (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Inventories Tables | ' | ||||||||
Inventories consist | ' | ||||||||
Inventories consist of : | June 30, | December 31, | |||||||
2014 | 2013 | ||||||||
Materials | $ | 300,025 | $ | 440,723 | |||||
Work in process | 87,300 | –– | |||||||
Finished goods (including $78,500 and $304,500 held by customers at June 30, 2014 and December 31, 2013, respectively) | 2,059,740 | 1,273,358 | |||||||
Total | $ | 2,447,065 | $ | 1,714,081 |
5_Segment_and_Geographic_Infor1
5. Segment and Geographic Information (Tables) | 6 Months Ended | ||||||||||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||||||||||
Segment And Geographic Information Tables | ' | ||||||||||||||||||||||||||||||||
Company's net sales by geographic region | ' | ||||||||||||||||||||||||||||||||
Three Months | Three Months | Six Months | Six Months | ||||||||||||||||||||||||||||||
Ended | Ended | Ended | Ended | ||||||||||||||||||||||||||||||
June 30, | % of | June 30, | % of | June 30, | % of | June 30, | % of | ||||||||||||||||||||||||||
2014 | Total | 2013 | Total | 2014 | Total | 2013 | Total | ||||||||||||||||||||||||||
North America | $ | 2,521,144 | 95 | % | $ | 2,762,556 | 92 | % | $ | 5,596,925 | 97 | % | $ | 5,335,229 | 92 | % | |||||||||||||||||
UK | 53,399 | 2 | % | 78,584 | 3 | % | 88,810 | 1 | % | 222,804 | 4 | % | |||||||||||||||||||||
All Other | 66,159 | 3 | % | 157,879 | 5 | % | 101,312 | 2 | % | 258,585 | 4 | % | |||||||||||||||||||||
Total | $ | 2,640,702 | 100 | % | $ | 2,999,019 | 100 | % | $ | 5,787,047 | 100 | % | $ | 5,816,618 | 100 | % |
3_Inventories_Details
3. Inventories (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Inventories Details | ' | ' |
Raw materials | $300,025 | $440,723 |
Work in process | 87,300 | 0 |
Finished goods (including $78,500 and $304,500 held by customers at June 30, 2014 and December 31, 2013, respectively) | 2,059,740 | 1,273,358 |
Total inventories | $2,447,065 | $1,714,081 |
3_Inventories_Details_Narrativ
3. Inventories (Details Narrative) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Inventories Details | ' | ' |
Finished goods held by customer | $78,500 | $304,500 |
5_Segment_and_Geographic_Infor2
5. Segment and Geographic Information (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ' | ' | ' | ' |
Net sales, amount | $2,640,702 | $2,999,019 | $5,787,047 | $5,816,618 |
Net sales, % of total | 100.00% | 100.00% | 100.00% | 100.00% |
NorthAmericaMember | ' | ' | ' | ' |
Revenues from External Customers and Long-Lived Assets [Line Items] | ' | ' | ' | ' |
Net sales, amount | 2,521,144 | 2,762,556 | 5,596,925 | 5,335,229 |
Net sales, % of total | 95.00% | 92.00% | 97.00% | 92.00% |
United Kingdom [Member] | ' | ' | ' | ' |
Revenues from External Customers and Long-Lived Assets [Line Items] | ' | ' | ' | ' |
Net sales, amount | 53,399 | 78,584 | 88,810 | 222,804 |
Net sales, % of total | 2.00% | 3.00% | 1.00% | 4.00% |
All Other [Member] | ' | ' | ' | ' |
Revenues from External Customers and Long-Lived Assets [Line Items] | ' | ' | ' | ' |
Net sales, amount | $66,159 | $157,879 | $101,312 | $258,585 |
Net sales, % of total | 3.00% | 5.00% | 2.00% | 4.00% |
6_Customer_Concentrations_Deta
6. Customer Concentrations (Details Narrative) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
Major customer, % of sales | 56.00% | ' |
Three Customers | ' | ' |
Major customer, % of sales | 74.00% | 66.00% |