Document and Entity Information
Document and Entity Information - Jun. 30, 2015 - shares | Total |
Document And Entity Information | |
Entity Registrant Name | Zoom Telephonics, Inc. |
Entity Central Index Key | 1,467,761 |
Document Type | 10-Q |
Document Period End Date | Jun. 30, 2015 |
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 | 8,021,854 |
Document Fiscal Period Focus | Q2 |
Document Fiscal Year Focus | 2,015 |
Condensed Balance Sheets (Unaud
Condensed Balance Sheets (Unaudited) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Current assets | ||
Cash and cash equivalents | $ 252,348 | $ 137,637 |
Accounts receivable, net of allowances of $451,328 at June 30, 2015 and $381,234 at December 31, 2014 | 1,253,650 | 1,811,006 |
Inventories | 2,206,430 | 1,724,507 |
Prepaid expenses and other current assets | 247,989 | 270,263 |
Total current assets | 3,960,417 | 3,943,413 |
Other assets | 236,666 | 0 |
Equipment, net | 62,256 | 67,142 |
Total assets | 4,259,339 | 4,010,555 |
Current liabilities | ||
Bank debt | 1,039,228 | 840,585 |
Accounts payable | 921,868 | 726,627 |
Accrued expenses | 222,385 | 284,736 |
Total current liabilities | 2,183,481 | 1,851,948 |
Total liabilities | 2,183,481 | 1,851,948 |
Stockholders' equity | ||
Common stock, $0.01 par value: Authorized - 25,000,000 shares; issued and outstanding - 8,021,854 shares at June 30, 2015 and 7,982,704 shares at December 31, 2014 | 80,219 | 79,827 |
Additional paid-in capital | 34,210,031 | 34,192,066 |
Accumulated deficit | (32,214,392) | (32,113,286) |
Total stockholders' equity | 2,075,858 | 2,158,607 |
Total liabilities and stockholders' equity | $ 4,259,339 | $ 4,010,555 |
Condensed Balance Sheets (Unau3
Condensed Balance Sheets (Unaudited) (Parenthetical) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Assets | ||
Accounts receivable allowances | $ 451,328 | $ 381,234 |
Stockholders Equity | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, authorized | 25,000,000 | 25,000,000 |
Common stock, issued | 8,021,854 | 7,982,704 |
Common stock, outstanding | 8,021,854 | 7,982,704 |
Condensed Statement of Operatio
Condensed Statement of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Income Statement [Abstract] | ||||
Net sales | $ 2,592,295 | $ 2,640,702 | $ 5,651,744 | $ 5,787,047 |
Cost of goods sold | 1,740,342 | 1,841,012 | 3,842,925 | 4,054,890 |
Gross profit | 851,953 | 799,690 | 1,808,819 | 1,732,157 |
Selling | 384,191 | 355,055 | 792,792 | 707,834 |
General and administrative | 254,274 | 238,109 | 503,729 | 530,662 |
Research and development | 292,599 | 290,213 | 563,761 | 598,879 |
Total | 931,064 | 883,377 | 1,860,282 | 1,837,375 |
Operating profit (loss) | (79,111) | (83,687) | (51,463) | (105,218) |
Other: | ||||
Interest income | 9 | 9 | 15 | 16 |
Other, net | (22,795) | (20,293) | (45,879) | (34,494) |
Total other income (expense), net | (22,786) | (20,284) | (45,864) | (34,478) |
Income (loss) before income taxes | (101,897) | (103,971) | (97,327) | (139,696) |
Income taxes (benefit) | 3,779 | 2,711 | 3,779 | 4,041 |
Net income (loss) | (105,676) | (106,682) | (101,106) | (143,737) |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustments | 0 | 1,743 | 0 | 2,105 |
Net comprehensive income (loss) | $ (105,676) | $ (104,939) | $ (101,106) | $ (141,632) |
Basic and diluted net income (loss) per share | $ (0.01) | $ (0.01) | $ (0.01) | $ (0.02) |
Weighted average common and common equivalent shares: | ||||
Basic and diluted | 7,996,905 | 7,982,704 | 7,991,087 | 7,982,704 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Operating activities: | ||
Net income (loss) | $ (101,106) | $ (143,737) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 22,370 | 4,556 |
Stock based compensation | 9,294 | 9,383 |
Provision for accounts receivable allowances | (3,082) | (723) |
Provision for inventory reserves | (22,388) | 37,730 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 560,438 | 148,523 |
Inventories | (459,535) | (770,714) |
Prepaid expenses and other assets | (222,726) | (31,257) |
Accounts payable and accrued expenses | 132,890 | 102,395 |
Net cash provided by (used in) operating activities | (83,845) | (643,844) |
Investing activities: | ||
Additions to equipment | (9,150) | (1,080) |
Net cash provided by (used in) investing activities | (9,150) | (1,080) |
Financing activities: | ||
Net funds received from (paid to) bank credit lines | 198,643 | 641,955 |
Funds received from stock option exercise | 9,063 | 0 |
Net cash provided by (used in) financing activities | 207,706 | 641,955 |
Effect of exchange rate changes on cash | 0 | 1,260 |
Net change in cash | 114,711 | (1,709) |
Cash and cash equivalents at beginning of period | 137,637 | 55,393 |
Cash and cash equivalents at end of period | 252,348 | 53,684 |
Supplemental disclosures of cash flow information: | ||
Cash paid during the period for: Interest | 45,013 | 34,279 |
Cash paid during the period for: Income taxes | $ 3,779 | $ 4,041 |
1. Summary of Significant Accou
1. Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 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, Zoom, or our). 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, 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) 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. In June 2015, the FASB issued ASU No. 2015-10, "Technical Corrections and Improvements. ASU 2015-10 clarifies various topics in the FASB Accounting Standards Codification. ASU 2015-10 is effective for the interim and annual periods ending after December 15, 2015. Early adoption is permitted. The Company does not expect a material impact to the Companys financial condition, results of operations or cash flows from the adoption of this guidance. |
2. Liquidity
2. Liquidity | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Liquidity | Zooms cash and cash equivalents balance on June 30, 2015 was $252 thousand, up $115 thousand from December 31, 2014. Zooms maximum available line of credit was $1.25 million on June 30, 2015, of which bank debt outstanding under this line of credit was $1.04 million. Zooms $557 thousand decrease in net accounts receivable and $199 thousand increase in bank debt increased cash, while a $482 thousand increase in net inventory, and net loss of $101 thousand decreased cash. On June 30, 2015 the Company had working capital of $1.8 million including $252 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 June 30, 2015 was 1.8 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 continued until November 30, 2014 and automatically renews 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. The Company is required to calculate its covenant compliance on a quarterly basis. As of June 30, 2015, the Company was in compliance with its working capital covenant, but was not in compliance with its tangible net worth covenant. The covenant requires that the Company maintain tangible net worth of not less than $2.0 million. At June 30, 2015, the Companys tangible net worth was approximately $1.839 million, $161 thousand less than the $2.0 million required to meet the requirement. The Company has received a waiver of such covenant for the period ending June 30, 2015. At June 30, 2015 the Company's total current assets were $4.0 million, and current liabilities including $1.0 million bank debt were $2.2 million. The Company did not have any long-term debt at June 30, 2015. The Company is continuing to develop new products and to take other measures to increase sales. In addition, on May 18, 2015 Zoom announced licensing of the Motorola trademark for cable modems in North America for 5 years starting January 1, 2016. The Company believes that this is likely to dramatically increase sales. Increasing sales typically results in increased inventory and higher accounts receivable, both of which reduce cash. |
3. Inventories
3. Inventories | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Inventories | Inventories consist of : June 30, 2015 December 31, 2014 Materials $ 667,363 $ 332,804 Work in process 62,641 Finished goods (including $97,800 and $85,600 held by customers at June 30, 2015 and December 31, 2014, respectively) 1,476,426 1,391,703 Total $ 2,206,430 $ 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 $257,000 and $279,388 at June 30, 2015 and December 31, 2014, respectively. |
4. Commitments and Contingencie
4. Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Commitments and 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 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. Concinnitas and the Company have executed a settlement agreement and the parties expect to soon file papers with the Court to dismiss this case. 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 Companys 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. On May 14, 2015 Zoom entered into a License Agreement with Motorola Mobility LLC (the License Agreement). The License Agreement provides Zoom with an exclusive license to use certain trademarks owned by Motorola Trademark Holdings, LLC. for the manufacture, sale and marketing of consumer cable modem products in the United States and Canada through certain authorized sales channels. The License Agreement has a five year term beginning January 1, 2016 through December 31, 2020. In connection with the License Agreement Zoom had agreed to pay Motorola Mobility a one-time set-up fee due prior to January 1, 2016 and a royalty based on net sales during the term of the License Agreement. The License Agreement provides for minimum annual royalty payments during the term. Zoom and Motorola Mobility also agreed to other terms and conditions including quality provisions designed to protect the Motorola brand. |
5. Segment and Geographic Infor
5. Segment and Geographic Information | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Segment and Geographic Information | The Companys operations are classified as one reportable segment. The Companys 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 2015 Total 2014 Total 2015 Total 2014 Total North America $ 2,539,986 98 % $ 2,521,144 9 % $ 5,548,482 98 % $ 5,596,925 97 % Outside North America 52,309 2 % 119,558 5 % 103,262 2 % 190,122 3 % Total $ 2,592,295 100 % $ 2,640,702 100 % $ 5,651,744 100 % $ 5,787,047 100 % |
6. Customer Concentrations
6. Customer Concentrations | 6 Months Ended |
Jun. 30, 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 Companys revenues. In the second quarter of 2015, three customers accounted for 76% of our total net sales with our largest customer accounting for 45% of our net sales. In the first six months of 2015, three customers accounted for 75% of the Companys total net sales with our largest customer accounting for 45% of our net sales. At June 30, 2015, three customers accounted for 88% of our gross accounts receivable, with our largest customer representing 58% of our gross accounts receivable. In the second quarter of 2014, three customers accounted for 78% of our 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 our total net sales with our largest customer accounting for 56% of our net sales. At December 31, 2014, three customers accounted for 92% of our gross accounts receivable, with our largest customer representing 64% of our gross accounts receivable. The Companys 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 Companys significant customers, or a delay or default in payment by any significant customer could materially harm the Companys business and prospects. Because of the Companys 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 | 6 Months Ended |
Jun. 30, 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 continued until November 30, 2014 and automatically renews 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. The Company is required to calculate its covenant compliance on a quarterly basis. As of June 30, 2015, the Company was in compliance with its working capital covenant, but was not in compliance with its tangible net worth covenant. The covenant requires that the Company maintain tangible net worth of not less than $2.0 million. At June 30, 2015, the Companys tangible net worth was approximately $1.839 million, $161 thousand less than the $2.0 million required to meet the requirement. The Company has received a waiver of such covenant for the period ending June 30, 2015. At June 30, 2015 the Company's total current assets were $4.0 million, and current liabilities including $1.0 million bank debt were $2.2 million. The Company did not have any long-term debt at June 30, 2015. |
3. Inventories (Tables)
3. Inventories (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Inventories Tables | |
Inventories consist | Inventories consist of : June 30, 2015 December 31, 2014 Materials $ 667,363 $ 332,804 Work in process 62,641 Finished goods (including $97,800 and $85,600 held by customers at June 30, 2015 and December 31, 2014, respectively) 1,476,426 1,391,703 Total $ 2,206,430 $ 1,724,507 |
5. Segment and Geographic Inf14
5. Segment and Geographic Information (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
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 2015 Total 2014 Total 2015 Total 2014 Total North America $ 2,539,986 98 % $ 2,521,144 9 % $ 5,548,482 98 % $ 5,596,925 97 % Outside North America 52,309 2 % 119,558 5 % 103,262 2 % 190,122 3 % Total $ 2,592,295 100 % $ 2,640,702 100 % $ 5,651,744 100 % $ 5,787,047 100 % |
3. Inventories (Details)
3. Inventories (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Inventories Details | ||
Raw materials | $ 667,363 | $ 332,804 |
Work in process | 62,641 | 0 |
Finished goods (including $97,800 and $85,600 held by customers at June 30, 2015 and December 31, 2014, respectively) | 1,476,426 | 1,391,703 |
Total inventories | $ 2,206,430 | $ 1,724,507 |
3. Inventories (Details Narrati
3. Inventories (Details Narrative) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Inventories Details | ||
Finished goods held by customer | $ 97,800 | $ 85,600 |
Reserve for the provision for slow moving and obsolete inventory | $ 257,000 | $ 279,388 |
5. Segment and Geographic Inf17
5. Segment and Geographic Information (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Net sales, amount | $ 2,592,295 | $ 2,640,702 | $ 5,651,744 | $ 5,787,047 |
Net sales, % of total | 100.00% | 100.00% | 100.00% | 100.00% |
North America | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Net sales, amount | $ 2,539,986 | $ 2,521,144 | $ 5,548,482 | $ 5,596,925 |
Net sales, % of total | 98.00% | 95.00% | 98.00% | 97.00% |
Outside North America [Member] | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Net sales, amount | $ 52,309 | $ 119,558 | $ 103,262 | $ 190,122 |
Net sales, % of total | 2.00% | 5.00% | 2.00% | 3.00% |
6. Customer Concentrations (Det
6. Customer Concentrations (Details Narrative) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 | |
Three Customers Percentage of Sales | |||||
Percent concentration | 76.00% | 78.00% | 75.00% | 74.00% | |
One Customer Percentage of Sales | |||||
Percent concentration | 45.00% | 56.00% | 45.00% | 56.00% | |
One Customer Percentage of Receivables | |||||
Percent concentration | 58.00% | 64.00% | |||
Three Customers Percentage of Receivables | |||||
Percent concentration | 88.00% | 92.00% |