Minim (MINM) 10-Q 13 May 16 2016 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 12, 2016
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	Mar. 31, 2016
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		13,689,303
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2,016

Condensed Balance Sheets (Unaud

Condensed Balance Sheets (Unaudited) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Current assets
Cash and cash equivalents	$ 303,043	$ 1,846,704
Accounts receivable, net of allowances of $369,483 at March 31, 2016 and $483,349 at December 31, 2015	1,422,366	1,079,145
Inventories	3,316,304	2,784,610
Prepaid expenses and other current assets	859,190	381,205
Total current assets	5,900,903	6,091,664
Other assets	621,374	573,049
Equipment, net	191,681	205,132
Total assets	6,713,958	6,869,845
Current liabilities
Accounts payable	1,578,467	1,423,503
Accrued expenses	529,705	292,756
Total liabilities	2,108,172	1,716,259
Stockholders' equity
Common stock: Authorized: 25,000,000 shares at $0.01 par value Issued and outstanding: 13,689,303 shares at March 31, 2016 and 13,477,803 shares at December 31, 2015	136,893	134,778
Additional paid-in capital	38,143,044	37,965,230
Accumulated deficit	(33,674,151)	(32,946,422)
Total stockholders' equity	4,605,786	5,153,586
Total liabilities and stockholders' equity	$ 6,713,958	$ 6,869,845

Condensed Balance Sheets (Unau3

Condensed Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Assets
Accounts receivable allowances	$ 369,483	$ 483,349
Stockholders Equity
Common stock, par value	$ 0.01	$ 0.01
Common stock, authorized	25,000,000	25,000,000
Common stock, issued	13,689,303	13,477,803
Common stock, outstanding	13,689,303	13,477,803

Condensed Statement of Operatio

Condensed Statement of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Statement [Abstract]
Net sales	$ 2,720,845	$ 3,059,448
Cost of goods sold	1,886,617	2,102,582
Gross profit	834,228	956,866
Operating expenses:
Selling	745,803	408,601
General and administrative	469,334	249,455
Research and development	347,012	271,162
Total	1,562,149	929,218
Operating profit (loss)	(727,921)	27,648
Other income (expense):
Interest income	195	6
Interest expense	0	(22,067)
Other, net	(12)	(1,017)
Total other income (expense)	183	(23,078)
Income (loss) before income taxes	(727,738)	4,570
Income taxes (benefit)	(9)	0
Net income (loss)	$ (727,729)	$ 4,570
Other comprehensive income (loss):
Net income (loss) per share: Basic and Diluted	$ (.05)	$ 0
Weighted average common and common equivalent shares:
Basic	13,567,946	7,985,204
Diluted	13,567,946	7,999,371

Condensed Statements of Cash Fl

Condensed Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Operating activities:
Net income (loss)	$ (727,729)	$ 4,570
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	122,425	7,128
Stock based compensation	78,409	2,292
Provision (recovery) for accounts receivable allowances	325	(2,089)
Provision for inventory reserves	1,882	(13,751)
Changes in operating assets and liabilities:
Accounts receivable	(343,546)	233,569
Inventories	(533,576)	108,241
Prepaid expenses and other assets	(477,985)	(90,297)
Accounts payable and accrued expenses	391,913	54,334
Net cash provided by (used in) operating activities	(1,487,882)	303,997
Investing activities:
Other assets	(150,000)	0
Purchases of plant and equipment	(7,299)	(6,838)
Net cash provided by (used in) investing activities	(157,299)	(6,838)
Financing activities:
Net funds (to) from bank credit lines	0	(371,715)
Proceeds from stock option exercises	101,520	1,500
Net cash provided by (used in) financing activities	101,520	(370,215)
Net change in cash	(1,543,661)	(73,056)
Cash and cash equivalents at beginning of period	1,846,704	137,637
Cash and cash equivalents at end of period	303,043	64,581
Supplemental disclosures of cash flow information:
Cash paid during the period for: Interest	$ 0	$ 22,067

1. Summary of Significant Accou

1. Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2016
Notes to Financial Statements
Summary of Significant Accounting Policies	The accompanying consolidated financial statements (“financial statements”) are unaudited. However, the condensed consolidated balance sheet as of December 31, 2015 was derived from audited financial statements. In the opinion of management, the accompanying financial statements include all necessary adjustments to present fairly the consolidated 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, 2016 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, 2015 included in the Company's 2015 Annual Report on Form 10-K for the year ended December 15, 2015. 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 from operations, or cash flows from the adoption of this guidance. In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” Currently, all inventory is measured at the lower of cost or market. ASU 2015-11 changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. The standard is effective for annual reporting periods beginning after December 15, 2015, which for the Company commenced with the year beginning January 1, 2016. Prospective application is required. The Company does not believe the implementation of this standard will have a material impact on the Company’s consolidated financial statements. In August 2015, the FASB issued ASU No. 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.” The amendments in this Update defer the effective date of ASU 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASC 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is assessing the impact to the Company's financial condition, results of operations or cash flows from the adoption of this guidance. In March 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in its balance sheet, a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term (the lease asset). For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial condition, results of operations and cash flows.

2. Liquidity

2. Liquidity	3 Months Ended
	Mar. 31, 2016
Notes to Financial Statements
Liquidity	The Company’s cash and cash equivalents balance on March 31, 2016 was approximately $303 thousand, a decrease of $1.5 million from December 31, 2015. Major uses of cash were attributed to a $728 thousand loss for the quarter ended March 31, 2016, an increase of approximately $534 thousand in inventory, and increases of approximately $478 thousand in prepaid expense and approximately $344 thousand in accounts receivable. These were partially offset by increases of approximately $237 thousand in accrued expenses and approximately $155 thousand in accounts payable. On March 31, 2016 the Company had no bank debt, a maximum available line of credit of $1.25 million, working capital of approximately $3.8 million including approximately $303 thousand in cash and cash equivalents. The Company raised $3.65 million in 2015 from a $3.42 million private placement in September 2015 and a $229 thousand rights offering in July 2015. On December 31, 2015 the Company had working capital of approximately $4.4 million including approximately $1.8 million in cash and cash equivalents. The Company’s current ratio at March 31, 2016 was 2.8 compared to 3.6 at December 31, 2015. On May 18, 2015, the Company announced licensing of the Motorola trademark for cable modems and gateways for the U.S. and Canada for five (5) years starting January 2016. In order to support anticipated sales growth, the Company raised approximately $3.65 million as described above. The Company believes that its existing financial resources along with its existing line of credit, with the potential to increase the maximum credit limit, will be sufficient to fund operations for the foreseeable future if the Company’s sales and operating profit expectations are met.

3. Inventories

3. Inventories	3 Months Ended
	Mar. 31, 2016
Notes to Financial Statements
Inventories	Inventories consist of : March 31, 2016 December 31, 2015 Materials $ 542,275 $ 477,929 Work in process 46,207 –– Finished goods 2,727,822 2,306,681 Total $ 3,316,304 $ 2,784,610 Finished goods includes consigned inventory held by our customers of $320,200 at March 31, 2016 and $119,100 at December 31, 2015. The Company reviews inventory for obsolete and slow moving products each quarter and makes provisions based on its estimate of the probability that the material will not be consumed or that it will be sold below cost. The provision for inventory reserves was negligible in both the first quarter of 2016 and the fourth quarter of 2015.

4. Commitments and Contingencie

4. Commitments and Contingencies	3 Months Ended
	Mar. 31, 2016
Notes to Financial Statements
Commitments and Contingencies	From time to time, 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, that 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, or results of operations. 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”) entitled “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 on March 15, 2016 the court set a trial date of April 17, 2017. 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, the Company has committed to reserving a certain percentage of wholesale prices for use in advertising, merchandising and promotion of the related products. Additionally, the Company is required to make quarterly royalty payments equal to a certain percentage of the preceding quarter’s net sales with minimum annual royalty payments as follows: Year ending December 31, 2016: $2,000,000 2017: $2,400,000 2018: $2,600,000 2019: $2,600,000 2020: $2,600,000 Royalty expense under the License Agreement amounted to $250,000 for the first quarter of 2016 and is included in selling expense on the accompanying condensed consolidated statements of operations. The balance of the committed royalty expense for 2016 amounts to $583,333 for each of the remaining three quarters of 2016. In order to facilitate the Company’s current and planned increase in production demand, driven in part by the launch of Motorola branded products, the Company has committed with North American Production Sharing, Inc. (“NAPS”) to extend its existing lease used in connection with the Production Sharing Agreement (“PSA”) entered into between the Company and NAPS. The extension term is December 1, 2015 through November 30, 2018 and allows the Company to contract additional Mexico personnel to work in the Tijuana facility.

5. Customer Concentrations

5. Customer Concentrations	3 Months Ended
	Mar. 31, 2016
Notes to Financial Statements
Customer Concentrations	The Company sells its products primarily through high-volume retailers and distributors, Internet service providers, value-added resellers, Personal Computer (“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 account for a substantial portion of the Company’s revenues. In the first quarter of 2016, three retailers accounted for 73% of our total net sales, with our largest retailer accounting for 31% of our net sales. At March 31, 2016, three retailers accounted for 79% of our accounts receivable, with our largest retailer representing 50% of our accounts receivable. In the first quarter of 2015, three retailers accounted for 70% of the Company’s total net sales, with our largest retailer accounting for 40% of our net sales. At March 31, 2015, three retailers accounted for 87% of our accounts receivable, with our largest retailer representing 62% of our 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 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.

6. Bank Credit Lines

6. Bank Credit Lines	3 Months Ended
	Mar. 31, 2016
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 originally provided for up to $1.75 million of revolving credit, subject to a borrowing base formula and other terms and conditions. The Financing Agreement continued until November 30, 2014 and automatically renews from year to year thereafter, unless sooner terminated by either party. The lender has the right to terminate the Financing Agreement at any time on 60 days’ prior written notice. Borrowings are secured by all of the Company assets including intellectual property. The Financing Agreement contains 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 October 29, 2015, the Company entered into a second amendment to the Financing Agreement (the “Second Amendment”). Retroactive to October 1, 2015, the Second Amendment eliminated $2,500 in monthly charges for the Financing Agreement. Effective December 1, 2015, the Second Amendment reduces the effective rate of interest to 2.25% plus an amount equal to the higher of prime rate or 3.25%. The Company is required to calculate its covenant compliance on a quarterly basis. As of March 31, 2016, the Company was in compliance with both its working capital and tangible net worth covenants. At March 31, 2016, the Company’s tangible net worth was approximately $4.0 million, while the Company’s working capital was approximately $3.8 million.

1. Summary of Significant Acc12

1. Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2016
Summary Of Significant Accounting Policies Policies
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 from operations, or cash flows from the adoption of this guidance. In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” Currently, all inventory is measured at the lower of cost or market. ASU 2015-11 changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. The standard is effective for annual reporting periods beginning after December 15, 2015, which for the Company commenced with the year beginning January 1, 2016. Prospective application is required. The Company does not believe the implementation of this standard will have a material impact on the Company’s consolidated financial statements. In August 2015, the FASB issued ASU No. 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.” The amendments in this Update defer the effective date of ASU 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASC 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is assessing the impact to the Company's financial condition, results of operations or cash flows from the adoption of this guidance. In March 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in its balance sheet, a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term (the lease asset). For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial condition, results of operations and cash flows.

3. Inventories (Tables)

3. Inventories (Tables)	3 Months Ended
	Mar. 31, 2016
Inventories Tables
Inventories	Inventories consist of : March 31, 2016 December 31, 2015 Materials $ 542,275 $ 477,929 Work in process 46,207 –– Finished goods 2,727,822 2,306,681 Total $ 3,316,304 $ 2,784,610

3. Inventories (Details)

3. Inventories (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Inventories Details
Raw materials	$ 542,275	$ 477,929
Work in process	46,207	0
Finished goods	2,727,822	2,306,681
Total inventories	$ 3,316,304	$ 2,784,610

3. Inventories (Details Narrati

3. Inventories (Details Narrative) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Inventories Details
Finished goods held by customer	$ 320,200	$ 119,100

4. Commitments and Contingenc16

4. Commitments and Contingencies (Details Narrative)	Mar. 31, 2016USD ($)
Future royalty payments for the year ending December 31,
2,016	$ 2,000,000
2,017	2,400,000
2,018	2,600,000
2,019	2,600,000
2,020	$ 2,600,000

5. Customer Concentrations (Det

5. Customer Concentrations (Details Narrative)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Three Customers Percentage of Sales
Percent concentration	73.00%	70.00%
One Customer Percentage of Sales
Percent concentration	31.00%	40.00%
Three Customers Percentage of Receivables
Percent concentration	79.00%	87.00%
One Customer Percentage of Receivables
Percent concentration	50.00%	62.00%