Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended |
Mar. 31, 2015 | |
Document And Entity Information | |
Entity Registrant Name | Zoom Telephonics, Inc. |
Entity Central Index Key | 1467761 |
Document Type | 10-Q |
Document Period End Date | 31-Mar-15 |
Amendment Flag | FALSE |
Current Fiscal Year End Date | -19 |
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 | 7,995,204 |
Document Fiscal Period Focus | Q1 |
Document Fiscal Year Focus | 2015 |
Condensed_Balance_Sheets_Unaud
Condensed Balance Sheets (Unaudited) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Current assets | ||
Cash and cash equivalents | $64,581 | $137,637 |
Accounts receivable, net of allowances of $373,332 at March 31, 2015 and $381,234 at December 31, 2014 | 1,579,526 | 1,811,006 |
Inventories | 1,630,017 | 1,724,507 |
Prepaid expenses and other current assets | 250,560 | 270,263 |
Total current assets | 3,524,684 | 3,943,413 |
Other assets | 110,000 | 0 |
Equipment, net | 66,852 | 67,142 |
Total assets | 3,701,536 | 4,010,555 |
Current liabilities | ||
Bank debt | 468,871 | 840,585 |
Accounts payable | 801,714 | 726,627 |
Accrued expenses | 263,982 | 284,736 |
Total current liabilities | 1,534,567 | 1,851,948 |
Total liabilities | 1,534,567 | 1,851,948 |
Stockholders' equity | ||
Common stock, $0.01 par value: Authorized - 25,000,000 shares; issued and outstanding - 7,995,204 shares at March 31, 2015 and 7,982,704 shares at December 31, 2014 | 79,952 | 79,827 |
Additional paid-in capital | 34,195,733 | 34,192,066 |
Accumulated deficit | -32,108,716 | -32,113,286 |
Total stockholders' equity | 2,166,969 | 2,158,607 |
Total liabilities and stockholders' equity | $3,701,536 | $4,010,555 |
Condensed_Balance_Sheets_Unaud1
Condensed Balance Sheets (Unaudited) (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Assets | ||
Accounts receivable allowances | $373,332 | $381,234 |
Stockholders Equity | ||
Common stock, par value | $0.01 | $0.01 |
Common stock, authorized | 25,000,000 | 25,000,000 |
Common stock, issued | 7,995,204 | 7,982,704 |
Common stock, outstanding | 7,995,204 | 7,982,704 |
Condensed_Statement_of_Operati
Condensed Statement of Operations and Comprehensive Income (Loss) (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Income Statement [Abstract] | ||
Net sales | $3,059,448 | $3,146,345 |
Cost of goods sold | 2,102,582 | 2,213,878 |
Gross profit | 956,866 | 932,467 |
Operating expenses: | ||
Selling | 408,601 | 352,780 |
General and administrative | 249,455 | 292,552 |
Research and development | 271,162 | 308,667 |
Total | 929,218 | 953,999 |
Operating profit (loss) | 27,648 | -21,532 |
Other income (expense): | ||
Interest income | 6 | 7 |
Other, net | -23,084 | -14,200 |
Total other income (expense), net | -23,078 | -14,193 |
Income (loss) before income taxes | 4,570 | -35,725 |
Income taxes (benefit) | 0 | 1,331 |
Net income (loss) | 4,570 | -37,056 |
Other comprehensive income (loss): | ||
Foreign currency translation adjustments | 0 | 362 |
Net comprehensive income (loss) | $4,570 | ($36,694) |
Net income (loss) per share: Basic and Diluted | $0 | $0 |
Weighted average common and common equivalent shares: | ||
Basic | 7,985,204 | 7,982,704 |
Diluted | 7,999,371 | 7,982,704 |
Condensed_Statements_of_Cash_F
Condensed Statements of Cash Flows (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Operating activities: | ||
Net income (loss) | $4,570 | ($37,056) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 7,128 | 2,289 |
Stock based compensation | 2,292 | 5,770 |
Provision for accounts receivable allowances | -2,089 | 995 |
Provision for inventory reserves | -13,751 | 12,150 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 233,569 | -187,133 |
Inventories | 108,241 | -166,007 |
Prepaid expenses and other assets | -90,297 | -17,685 |
Accounts payable and accrued expenses | 54,334 | 233,277 |
Net cash provided by (used in) operating activities | 303,997 | -153,400 |
Investing activities: | ||
Additions to equipment | -6,838 | 0 |
Net cash provided by (used in) investing activities | -6,838 | 0 |
Financing activities: | ||
Net funds received from (paid to) bank credit lines | -371,715 | 137,091 |
Funds received from stock option exercise | 1,500 | 0 |
Net cash provided by (used in) financing activities | -370,215 | 137,091 |
Effect of exchange rate changes on cash | 0 | 230 |
Net change in cash | -73,056 | -16,079 |
Cash and cash equivalents at beginning of period | 137,637 | 55,393 |
Cash and cash equivalents at end of period | 64,581 | 39,314 |
Supplemental disclosures of cash flow information: | ||
Cash paid during the period for: Interest | 22,067 | 14,374 |
Cash paid during the period for: Income taxes | $0 | $1,331 |
1_Summary_of_Significant_Accou
1. Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
Summary of Significant Accounting Policies | The accompanying financial statements are unaudited. However, the condensed balance sheet as of December 31, 2014 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 Zoom Telephonics, Inc. ( “the Company” or “Zoom”). 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 March 31, 2015 through the date of this filing and determined that there are no such events requiring recognition or disclosure in the financial statements. | |
The 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, 2014 included in the Company's 2014 Annual Report on Form 10-K. | |
(a) Reclassifications | |
Certain reclassifications have been made to the prior year’s financial statements to conform to the 2015 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, statement of operations, or total cash flows from operations. | |
(b) Recently Issued Accounting Pronouncements | |
In August 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-15, "Presentation of Financial Statements —Going Concern" This standard requires management to evaluate for each annual and interim reporting period whether it is probable that the reporting entity will not be able to meet its obligations as they become due within one year after the date that the financial statements are issued. If the entity is in such a position, the standard provides for certain disclosures depending on whether or not the entity will be able to successfully mitigate its going concern status. This guidance is effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early application is permitted. The Company does not expect a material impact to the Company's financial condition, results of operations or cash flows from the adoption of this guidance. | |
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers," which will replace most existing revenue recognition guidance in generally accepted accounting principles in the United States of America. The core principle of this ASU is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. This ASU requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. This ASU will be effective for the Company beginning January 1, 2017, including interim periods in 2017, and allows for both retrospective and prospective methods of adoption. The Company is in the process of determining method of adoption and assessing the impact of this ASU on its consolidated financial statements. |
2_Liquidity
2. Liquidity | 3 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
Liquidity | Zoom’s cash and cash equivalents balance on March 31, 2015 was $65 thousand, down $73 thousand from December 31, 2014. Zoom’s maximum available line of credit was $1.25 million on March 31, 2015, of which bank debt outstanding under this line of credit was $469 thousand. Zoom’s $372 thousand decrease of which bank debt and $90 thousand increase in prepaid expenses decreased cash, while a $231 thousand decrease in net accounts receivable, $94 thousand decrease in net inventory, and $75 thousand increase in accounts payable increased cash. |
On March 31, 2015 the Company had working capital of $2.0 million including $65 thousand in cash and cash equivalents. On December 31, 2014 we had working capital of $2.1 million including $138 thousand in cash and cash equivalents. Our current ratio at March 31, 2015 was 2.4 compared to 2.1 at December 31, 2014. | |
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. The Lender shall have the right to terminate the Financing Agreement at any time by giving the Company sixty days’ prior written notice. 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 March 31, 2015 Zoom was in compliance with the covenants of the Financing Agreement with Rosenthal & Rosenthal, Inc. | |
At March 31, 2015 the Company's total current assets were $3.5 million, and current liabilities including $0.5 million bank debt were $1.5 million. The Company did not have any long-term debt at March 31, 2015. | |
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 | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Notes to Financial Statements | |||||||||
Inventories | |||||||||
Inventories consist of : | March 31, | December 31, | |||||||
2015 | 2014 | ||||||||
Materials | $ | 510,946 | $ | 332,804 | |||||
Work in process | 207,515 | –– | |||||||
Finished goods (including $113,500 and $85,600 held by customers at March 31, 2015 and December 31, 2014, respectively) | 911,556 | 1,391,703 | |||||||
Total | $ | 1,630,017 | $ | 1,724,507 | |||||
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 the provision for slow moving and obsolete inventory was $265,637 and $279,388 at March 31, 2015 and December 31, 2014, respectively. |
4_Contingencies
4. Contingencies | 3 Months Ended |
Mar. 31, 2015 | |
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 November 6, 2013, Innovative Wireless Solutions, LLC ("IWS") filed a complaint against the Company 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." Final Judgment of Non-Infringement in Zoom’s favor was entered on March 20, 2015 in the IWS matter, so that matter is no longer pending. | |
On November 14, 2014, Concinnitas, LLC and Mr. George W. Hindman (collectively "Concinnitas") filed a complaint against the Company alleging infringement of U.S. Patent No. 7,805,542 (“the ’542 patent”) titled "“Mobile United Attached in a Mobile Environment that Fully Restricts Access to Data Received via Wireless Signal to a Separate Computer in the Mobile Environment.” The Complaint asserts that the Company sells "products and/or systems (including at least the [wireless router model no.] 4530)" that infringe the '542 patent. The case is in the early stages of discovery and a trial date has been set for April 11, 2016. | |
On January 30, 2015, Wetro LAN LLC ("Wetro LAN") filed a complaint against the Company alleging infringement of U.S. Patent No. 6,795,918 (“the ’918 patent”). The ’918 patent is titled “Service Level Computer Security.” Wetro LAN alleges that the Company’s wireless routers, including its Model 4501 Wireless-N Router, infringe the '918 patent. The case is in its early stages and a date for the scheduling conference has not yet been set. |
5_Segment_and_Geographic_Infor
5. Segment and Geographic Information | 3 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
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 | % of | Three Months | % of | ||||||||||||||
Ended | Total | Ended | Total | ||||||||||||||
March 31, | March 31, | ||||||||||||||||
2015 | 2014 | ||||||||||||||||
North America | $ | 3,008,495 | 98 | % | $ | 3,075,782 | 98 | % | |||||||||
Outside North America | 50,953 | 2 | % | 70,563 | 2 | % | |||||||||||
Total | $ | 3,059,448 | 100 | % | $ | 3,146,345 | 100 | % |
6_Customer_Concentrations
6. Customer Concentrations | 3 Months Ended |
Mar. 31, 2015 | |
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 offer a well-chosen selection of attractive products and to maintain appropriate inventory levels. |
Relatively few customers have accounted for a substantial portion of the Company’s revenues. In the first quarter of 2015, three customers accounted for 70% of our total net sales with our largest customer accounting for 40% of our net sales. In the first quarter of 2014, three customers accounted for 73% of the Company’s total net sales with our largest customer accounting for 56% of our net sales. At March 31, 2015, three customers accounted for 87% of our gross accounts receivable, with our largest customer representing 62% 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_Bank_Credit_Lines
7. Bank Credit Lines | 3 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
Bank Credit Lines | 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. The Lender shall have the right to terminate the Financing Agreement at any time by giving the Company sixty days’ prior written notice. 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 March 31, 2015 Zoom was in compliance with the covenants of the Financing Agreement with Rosenthal & Rosenthal, Inc. | |
At March 31, 2015 the Company's total current assets were $3.5 million, and current liabilities including $0.5 million bank debt were $1.5 million. The Company did not have any long-term debt at March 31, 2015. |
3_Inventories_Tables
3. Inventories (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Inventories Tables | |||||||||
Inventories consist | Inventories consist of : | March 31, | December 31, | ||||||
2015 | 2014 | ||||||||
Materials | $ | 510,946 | $ | 332,804 | |||||
Work in process | 207,515 | –– | |||||||
Finished goods (including $113,500 and $85,600 held by customers at March 31, 2015 and December 31, 2014, respectively) | 911,556 | 1,391,703 | |||||||
Total | $ | 1,630,017 | $ | 1,724,507 |
5_Segment_and_Geographic_Infor1
5. Segment and Geographic Information (Tables) | 3 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Segment And Geographic Information Tables | |||||||||||||||||
Company's net sales by geographic region | Three Months | % of | Three Months | % of | |||||||||||||
Ended | Total | Ended | Total | ||||||||||||||
March 31, | March 31, | ||||||||||||||||
2015 | 2014 | ||||||||||||||||
North America | $ | 3,008,495 | 98 | % | $ | 3,075,782 | 98 | % | |||||||||
Outside North America | 50,953 | 2 | % | 70,563 | 2 | % | |||||||||||
Total | $ | 3,059,448 | 100 | % | $ | 3,146,345 | 100 | % |
3_Inventories_Details
3. Inventories (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Inventories Details | ||
Raw materials | $510,946 | $332,804 |
Work in process | 207,515 | 0 |
Finished goods (including $113,500 and $85,600 held by customers at March 31, 2015 and December 31, 2014, respectively) | 911,556 | 1,391,703 |
Total inventories | $1,630,017 | $1,724,507 |
3_Inventories_Details_Narrativ
3. Inventories (Details Narrative) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Inventories Details | ||
Reserve for the provision for slow moving and obsolete inventory | $265,637 | $279,388 |
5_Segment_and_Geographic_Infor2
5. Segment and Geographic Information (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales, amount | $3,059,448 | $3,146,345 |
Net sales, % of total | 100.00% | 100.00% |
North America | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales, amount | 3,008,495 | 3,075,782 |
Net sales, % of total | 98.00% | 98.00% |
Outside North America [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales, amount | $50,953 | $70,563 |
Net sales, % of total | 2.00% | 2.00% |
6_Customer_Concentrations_Deta
6. Customer Concentrations (Details Narrative) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Three Customers Percentage of Sales | ||
Percent concentration | 70.00% | 73.00% |
One Customer Percentage of Sales | ||
Percent concentration | 40.00% | 56.00% |
Three Customers Percentage of Receivables | ||
Percent concentration | 87.00% | |
One Customer Percentage of Receivables | ||
Percent concentration | 62.00% |