Minim (MINM) 10-Q 9 Nov 17 2017 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 06, 2017
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	Sep. 30, 2017
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		15,067,790
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2,017

Condensed Balance Sheets (Unaud

Condensed Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Current assets
Cash and cash equivalents	$ 90,853	$ 179,846
Accounts receivable, net of allowances of $661,892 at September 30, 2017 and $507,296 at December 31, 2016	2,104,555	2,498,259
Inventories	5,306,662	4,926,612
Prepaid expenses and other current assets	935,984	652,402
Total current assets	8,438,054	8,257,119
Other assets	398,824	588,907
Equipment, net	187,374	175,743
Total assets	9,024,252	9,021,769
Current liabilities
Bank debt	594,778	1,306,620
Accounts payable	3,761,662	2,502,323
Accrued expenses	1,214,240	1,051,616
Total liabilities	5,570,680	4,860,559
Commitments and contingencies (Note 4)
Stockholders' equity
Common stock: Authorized: 25,000,000 shares at $0.01 par value Issued and outstanding: 15,037,790 shares at September 30, 2017 and 14,685,290 shares at December 31, 2016	150,378	146,853
Additional paid-in capital	40,163,143	39,893,919
Accumulated deficit	(36,859,949)	(35,879,562)
Total stockholders' equity	3,453,572	4,161,210
Total liabilities and stockholders' equity	$ 9,024,252	$ 9,021,769

Condensed Balance Sheets (Unau3

Condensed Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Assets
Accounts receivable allowances	$ 661,892	$ 507,296
Stockholders Equity
Common stock, par value	$ 0.01	$ 0.01
Common stock, authorized	25,000,000	25,000,000
Common stock, issued	15,037,790	14,685,290
Common stock, outstanding	15,037,790	14,685,290

Condensed Statement of Operatio

Condensed Statement of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement [Abstract]
Net sales	$ 8,582,076	$ 5,990,432	$ 20,556,157	$ 12,688,142
Cost of goods sold	5,515,753	4,064,834	13,561,520	8,727,755
Gross profit	3,066,323	1,925,598	6,994,637	3,960,387
Operating expenses:
Selling	1,812,921	1,473,787	5,341,239	3,520,030
General and administrative	383,475	354,237	1,153,753	1,236,239
Research and development	457,309	352,849	1,367,718	1,154,789
Total	2,653,705	2,180,873	7,862,710	5,911,058
Operating income (loss)	412,618	(255,275)	(868,073)	(1,950,671)
Other income (expense):
Interest income	22	21	59	238
Interest expense	(30,636)	(27,778)	(87,178)	(32,115)
Other, net	65	41,482	(11,072)	42,232
Total other income (expense)	(30,549)	13,725	(98,191)	10,355
Income (loss) before income taxes	382,069	(241,550)	(966,264)	(1,940,316)
Income taxes	4,984	2,034	14,123	3,312
Net income (loss)	$ 377,085	$ (243,584)	$ (980,387)	$ (1,943,628)
Net income (loss) per share: Basic	$ 0.03	$ (0.02)	$ (0.07)	$ (0.14)
Net income (loss) per share: Diluted	$ 0.02	$ (0.02)	$ (0.07)	$ (0.14)
Weighted average common and common equivalent shares:
Basic	14,953,285	13,877,407	14,851,229	13,722,680
Diluted	16,419,374	13,877,407	14,851,229	13,722,680

Condensed Statements of Cash Fl

Condensed Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Operating activities:
Net income (loss)	$ (980,387)	$ (1,943,628)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	391,181	389,487
Stock based compensation	170,074	164,795
Provision for accounts receivable allowances	540	8,988
Provision for inventory reserves	186,440	10,450
Changes in operating assets and liabilities:
Accounts receivable	393,164	(1,801,446)
Inventories	(566,490)	(1,454,910)
Prepaid expenses and other assets	(327,462)	(193,245)
Accounts payable and accrued expenses	1,421,963	1,084,228
Net cash provided by (used in) operating activities	689,023	(3,735,281)
Investing activities:
Cost of other assets	(75,000)	(295,000)
Additions to plant and equipment	(93,849)	(32,303)
Net cash provided by (used in) investing activities'	(168,849)	(327,303)
Financing activities:
Net funds received from (to) bank credit lines	(711,842)	2,141,799
Proceeds from stock option exercises	102,675	249,389
Net cash provided by (used in) financing activities	(609,167)	2,391,188
Net change in cash	(88,993)	(1,671,396)
Cash and cash equivalents at beginning of period	179,846	1,846,704
Cash and cash equivalents at end of period	90,853	175,308
Supplemental disclosures of cash flow information:
Cash paid during the period for: Interest	87,178	32,115
Cash paid during the period for: Income taxes	$ 14,123	$ 3,312

1. Summary of Significant Accou

1. Summary of Significant Accounting Policies	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
Summary of Significant Accounting Policies	The accompanying condensed consolidated financial statements (“financial statements”) are unaudited. However, the condensed consolidated balance sheet as of December 31, 2016 was derived from audited financial statements. In the opinion of management, the accompanying financial statements include all necessary adjustments to present fairly the condensed consolidated financial position, results of operations and cash flows of 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 September 30, 2017 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, 2016 included in the Company's 2016 Annual Report on Form 10-K for the year ended December 31, 2016. Recently Adopted Accounting Standards In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company adopted ASU 2016-09 as of January 1, 2017 and elected an accounting policy to record forfeitures as they occur. The impact of this change in accounting policy had an insignificant effect on accumulated deficit as of January 1, 2017. ASU 2016-09 also provides that companies no longer record excess tax benefits or certain tax deficiencies in additional paid-in capital. Instead, all excess tax benefits and tax deficiencies are recorded as income tax expense or benefit in the statement of operations. There was no financial statement impact of adopting this provision of ASU 2016-09 as the Company is currently in a net operating loss position and the excess tax benefits that existed from options previously exercised had a full valuation allowance. The effects of adopting the remaining provisions in ASU 2016-09 affecting the classification of awards as either equity or liabilities when an entity partially settles the award in cash in excess of the employer’s minimum statutory withholding requirements and classification in the statement of cash flows did not have a significant impact on the Company’s financial position, results of operations or cash flows. Recently Issued Accounting Standards In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in ASC Topic 605, “Revenue Recognition” and some cost guidance included in ASC Subtopic 605-35, “Revenue Recognition - Construction-Type and Production-Type Contracts.” The core principle of ASU 2014-09 is that revenue is recognized when the transfer of goods or services to customers occurs in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. ASU 2014-09 requires the disclosure of sufficient information to enable readers of the Company’s financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. ASU 2014-09 also requires disclosure of information regarding significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 provides two methods of retrospective application. The first method would require the Company to apply ASU 2014-09 to each prior reporting period presented. The second method would require the Company to retrospectively apply ASU 2014-09 with the cumulative effect recognized at the date of initial application. There have been four new ASUs issued amending certain aspects of ASU 2014-09, ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross Versus Net),” was issued in March 2016 to clarify certain aspects of the principal versus agent guidance in ASU 2014-09. In addition, ASU 2016-10, “Identifying Performance Obligations and Licensing,” issued in April 2016, amends other sections of ASU 2014-09 including clarifying guidance related to identifying performance obligations and licensing implementation. ASU 2016-12, “Revenue from Contracts with Customers - Narrow Scope Improvements and Practical Expedients” provides amendments and practical expedients to the guidance in ASU 2014-09 in the areas of assessing collectability, presentation of sales taxes received from customers, noncash consideration, contract modification and clarification of using the full retrospective approach to adopt ASU 2014-09. Finally, ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,” was issued in December 2016, and provides elections regarding the disclosures required for remaining performance obligations in certain cases and also makes other technical corrections and improvements to the standard. With its evaluation of the impact of ASU 2014-09, the Company will also consider the impact on its financial statements related to the updated guidance provided by these four new ASUs. The Company will adopt the new guidance in fiscal 2018, and anticipates using the modified retrospective method. The Company is in the final process of evaluating the new standard against its existing account policies, including the timing of revenue recognition and its contracts with customers to determine the effect the guidance will have on its financial statements and what changes to systems and controls may be warranted. 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 the balance sheets, 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. In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments Credit Losses —Measurement of Credit Losses on Financial Instruments." ASU 2016-13 requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for public business entities that are SEC filers for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted in any interim or annual period for fiscal years beginning after December 15, 2018. An entity should apply the amendments in ASU 2016-13 through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (modified-retrospective approach). The Company is currently evaluating the potential impact that the adoption of ASU 2016-13 may have on its consolidated financial statements. In May 2017, the FASB issued ASU No. 2017-09, “Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting.” ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity should account for the effects of a modification unless all of the following criteria are met: (1) The fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification. (2) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. (3) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. Disclosure requirements remain unchanged. ASU 2017-09 is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted as described in ASU 2017-09. The Company is currently evaluating the potential impact that the adoption of ASU 2017-09 will have on its consolidated financial statements.

2. Liquidity

2. Liquidity	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
Liquidity	The Company’s cash and cash equivalents balance on September 30, 2017 was approximately $91 thousand, down from $180 thousand on December 31, 2016. Major uses of cash were a $980 thousand loss for the nine months ended September 30, 2017, a decrease of approximately $712 thousand in bank debt, an increase of approximately $380 thousand in inventory, and an increase of approximately $284 thousand in prepaid expenses. These were offset by an increase of approximately $1.4 million in accounts payable and accrued expenses, a decrease of approximately $394 thousand in accounts receivable, and a decrease of approximately $190 thousand in other assets. On September 30, 2017 the Company had approximately $595 thousand in bank debt for a $3.0 million asset-based credit line and had working capital of approximately $2.9 million, including approximately $91 thousand in cash and cash equivalents. On December 31, 2016 the Company had working capital of approximately $3.4 million including approximately $180 thousand in cash and cash equivalents. The Company’s current ratio at September 30, 2017 was 1.5 compared to 1.7 at December 31, 2016. Although the Company has experienced losses in the past, the Company has experienced dramatic growth over the last year and one-half. Sales in 2016 were up 65% over sales in 2015 and sales in the first nine months of 2017 were up 62% over sales in the first nine months of 2016. The Company believes that year-over-year growth is likely to continue for the foreseeable future due to a number of factors including the strength of the Motorola brand, new product introductions, increased shelf space, growing online retailer sales, and international expansion. Because of projected sales increases, the associated improved net income, and its Financing Agreement (as defined below) with , the Company expects to maintain acceptable levels of liquidity to meet its obligations as they become due for at least twelve months from the date of our quarterly filing of this Form 10-Q with the Securities Exchange Commission.

3. Inventories

3. Inventories	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
Inventories	Inventories consist of : September 30, 2017 December 31, 2016 Materials $ 1,287,621 $ 888,830 Work in process 209,694 27,708 Finished goods 3,809,347 4,010,074 Total $ 5,306,662 $ 4,926,612 Finished goods includes consigned inventory held by our customers of $835,800 at September 30, 2017 and $442,300 at December 31, 2016. 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 $60,096 for the three months ended September 30, 2017 and $7,838 for the three months ended September 30, 2016. The provision for inventory reserves was $186,440 for the nine months ended September 30, 2017 and $10,450 for the nine months ended September 30, 2016.

4. Commitments and Contingencie

4. Commitments and Contingencies	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
Commitments and Contingencies	(a) 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 May 17, 2016, Magnacross LLC ("Magnacross") filed a complaint in the U.S. District Court for the Eastern District of Texas (U.S.D.C., E.D.Tex.) against the Company alleging infringement of U.S. Patent No. 6,917,304 (“the ’304 patent”) entitled “Wireless Multiplex Data Transmission System.” Magnacross alleged that the Company’s wireless routers, including its Model 5363, 5360, and 5354 (N300, N600, and AC1900) Routers, infringe the '304 patent. In its complaint, Magnacross sought injunctive relief and unspecified compensatory damages. The case was resolved on February 2, 2017 with the entry by the judge of an Order of Dismissal with Prejudice. (b) Commitments In May 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. In August 2016 Zoom entered into an amendment to the License Agreement with Motorola Mobility LLC (the “2016 Amendment”). The 2016 Amendment expands Zoom’s exclusive license to use the Motorola trademark to a wide range of authorized channels worldwide, and expands the license from cable modems and gateways to also include consumer routers, WiFi range extenders, home powerline network adapters, and access points. In August 2017 Zoom entered into an amendment to the License Agreement with Motorola Mobility LLC (the “2017 Amendment”). The 2017 Amendment expands Zoom’s exclusive license to use the Motorola trademark to a wide range of authorized channels worldwide, and expands the license from cable modems, gateways, consumer routers, WiFi range extenders, home powerline network adapters, and access points to also include MoCa adapters, and cellular sensors. The License Agreement, as amended, has a five-year term beginning January 1, 2016 through December 31, 2020 and increased the minimum royalty payments as outlined below. In connection with the License Agreement, the Company has committed to reserve 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, 2017 $ 3,000,000 2018 $ 3,500,000 2019 $ 4,500,000 2020 $ 5,100,000 Royalty expense under the License Agreement was $583,333 for the third quarter of 2016 and $750,000 for the third quarter of 2017, and royalty expense is included in selling expense on the accompanying condensed consolidated statements of operations. The balance of the committed royalty expense for 2017 amounts to $750,000 for the remaining quarter of 2017. 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 Mexican personnel to work in the Tijuana facility. The Company moved its headquarters on June 29, 2016 from its long time location at 207 South Street, Boston, MA. to a nearby location at 99 High Street, Boston, MA. The Company signed a lease for 11,480 square feet that terminates on June 29, 2019. Payments under the lease are zero for the first 2 months, an aggregate of $413,280 for the next 12 months, an aggregate of $424,760 for the next 12 months, and an aggregate of $363,533 for the remaining term of the lease ending June 29, 2019. Rent expense was $102,338 for the third quarter of 2017.

5. Customer Concentrations

5. Customer Concentrations	9 Months Ended
	Sep. 30, 2017
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 third quarter of 2017, three customers accounted for 10% or greater separately and 92% combined of the Company’s total net sales. In the first nine months of 2017, three customers accounted for 10% or greater separately and 90% combined of the Company’s total net sales. At September 30, 2017, three customers with an accounts receivable balance of 10% or greater accounted for a combined 83% of the Company’s accounts receivable. In the third quarter of 2016, three customers accounted for 10% or greater separately and 86% combined of the Company’s total net sales. In the first nine months of 2016, three customers accounted for 10% or greater separately and 81% combined of the Company’s total net sales. At September 30, 2016 three customers with an accounts receivable balance of 10% or greater accounted for a combined 88% of the Company’s 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	9 Months Ended
	Sep. 30, 2017
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 with automatic renewals 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. 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%. On July 19, 2016, the Company entered into a third amendment to the Financing Agreement. The Amendment increased the size of the revolving credit line to $2.5 million effective as of date of the amendment. On September 1, 2016, the Company entered into a fourth amendment to the Financing Agreement. The Amendment increased the size of the revolving credit line to $3.0 million effective with the date of this amendment. The Company is required to calculate its covenant compliance on a quarterly basis. As of September 30, 2017, the Company was in compliance with both its working capital and tangible net worth covenants. At September 30, 2017, the Company’s tangible net worth was approximately $3.1 million, while the Company’s working capital was approximately $2.9 million.

7. Earnings (Loss) Per Share

7. Earnings (Loss) Per Share	9 Months Ended
	Sep. 30, 2017
Earnings Loss Per Share
Earnings (Loss) Per Share	Basic earnings (loss) per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares, except for periods with a loss from operations. Diluted earnings (loss) per share reflects additional common shares that would have been outstanding if dilutive potential shares of common stock had been issued. Potential shares of common stock that may be issued by the Company include shares of common stock that may be issued upon exercise of outstanding stock options. Under the treasury stock method, the unexercised options are assumed to be exercised at the beginning of the period or at issuance, if later. The assumed proceeds are then used to purchase shares of common stock at the average market price during the period. Diluted earnings (loss) per common share for the three-month period ended September 30, 2017 includes the effects of 1,466,089 common share equivalents. Diluted earnings (loss) per common share for the three-month period ended September 30, 2016 excludes the effects of 2,015,825 common share equivalents, since such inclusion would be anti-dilutive. Diluted earnings (loss) per common share for the nine-month periods ended September 30, 2017 and 2016 excludes the effects of 1,466,089 and 2,015,825 common share equivalents, respectively, since such inclusions would be anti-dilutive. The common share equivalents consist of common shares issuable upon exercise of outstanding stock options.

1. Summary of Significant Acc13

1. Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2017
Summary Of Significant Accounting Policies Policies
Recently Adopted Accounting Standards	In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company adopted ASU 2016-09 as of January 1, 2017 and elected an accounting policy to record forfeitures as they occur. The impact of this change in accounting policy had an insignificant effect on accumulated deficit as of January 1, 2017. ASU 2016-09 also provides that companies no longer record excess tax benefits or certain tax deficiencies in additional paid-in capital. Instead, all excess tax benefits and tax deficiencies are recorded as income tax expense or benefit in the statement of operations. There was no financial statement impact of adopting this provision of ASU 2016-09 as the Company is currently in a net operating loss position and the excess tax benefits that existed from options previously exercised had a full valuation allowance. The effects of adopting the remaining provisions in ASU 2016-09 affecting the classification of awards as either equity or liabilities when an entity partially settles the award in cash in excess of the employer’s minimum statutory withholding requirements and classification in the statement of cash flows did not have a significant impact on the Company’s financial position, results of operations or cash flows.
Recently Issued Accounting Standards	In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in ASC Topic 605, “Revenue Recognition” and some cost guidance included in ASC Subtopic 605-35, “Revenue Recognition - Construction-Type and Production-Type Contracts.” The core principle of ASU 2014-09 is that revenue is recognized when the transfer of goods or services to customers occurs in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. ASU 2014-09 requires the disclosure of sufficient information to enable readers of the Company’s financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. ASU 2014-09 also requires disclosure of information regarding significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 provides two methods of retrospective application. The first method would require the Company to apply ASU 2014-09 to each prior reporting period presented. The second method would require the Company to retrospectively apply ASU 2014-09 with the cumulative effect recognized at the date of initial application. There have been four new ASUs issued amending certain aspects of ASU 2014-09, ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross Versus Net),” was issued in March 2016 to clarify certain aspects of the principal versus agent guidance in ASU 2014-09. In addition, ASU 2016-10, “Identifying Performance Obligations and Licensing,” issued in April 2016, amends other sections of ASU 2014-09 including clarifying guidance related to identifying performance obligations and licensing implementation. ASU 2016-12, “Revenue from Contracts with Customers - Narrow Scope Improvements and Practical Expedients” provides amendments and practical expedients to the guidance in ASU 2014-09 in the areas of assessing collectability, presentation of sales taxes received from customers, noncash consideration, contract modification and clarification of using the full retrospective approach to adopt ASU 2014-09. Finally, ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,” was issued in December 2016, and provides elections regarding the disclosures required for remaining performance obligations in certain cases and also makes other technical corrections and improvements to the standard. With its evaluation of the impact of ASU 2014-09, the Company will also consider the impact on its financial statements related to the updated guidance provided by these four new ASUs. The Company will adopt the new guidance in fiscal 2018, and anticipates using the modified retrospective method. The Company is in the final process of evaluating the new standard against its existing account policies, including the timing of revenue recognition and its contracts with customers to determine the effect the guidance will have on its financial statements and what changes to systems and controls may be warranted. 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 the balance sheets, 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. In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments Credit Losses —Measurement of Credit Losses on Financial Instruments." ASU 2016-13 requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for public business entities that are SEC filers for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted in any interim or annual period for fiscal years beginning after December 15, 2018. An entity should apply the amendments in ASU 2016-13 through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (modified-retrospective approach). The Company is currently evaluating the potential impact that the adoption of ASU 2016-13 may have on its consolidated financial statements. In May 2017, the FASB issued ASU No. 2017-09, “Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting.” ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity should account for the effects of a modification unless all of the following criteria are met: (1) The fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification. (2) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. (3) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. Disclosure requirements remain unchanged. ASU 2017-09 is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted as described in ASU 2017-09. The Company is currently evaluating the potential impact that the adoption of ASU 2017-09 will have on its consolidated financial statements.

3. Inventories (Tables)

3. Inventories (Tables)	9 Months Ended
	Sep. 30, 2017
Inventories Tables
Inventories	Inventories consist of : September 30, 2017 December 31, 2016 Materials $ 1,287,621 $ 888,830 Work in process 209,694 27,708 Finished goods 3,809,347 4,010,074 Total $ 5,306,662 $ 4,926,612

3. Inventories (Details)

3. Inventories (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Inventories Details
Raw materials	$ 1,287,621	$ 888,830
Work in process	209,694	27,708
Finished goods	3,809,347	4,010,074
Total inventories	$ 5,306,662	$ 4,926,612

3. Inventories (Details Narrati

3. Inventories (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Inventories Details
Finished goods held by customer	$ 835,800		$ 835,800		$ 442,300
Provision for inventory reserves	$ 60,096	$ 7,838	$ 186,440	$ 10,450

4. Commitments and Contingenc17

4. Commitments and Contingencies (Details Narrative)	Sep. 30, 2017USD ($)
Future royalty payments for the year ending December 31,
2,017	$ 3,000,000
2,018	3,500,000
2,019	4,500,000
2,020	$ 5,100,000

5. Customer Concentrations (Det

5. Customer Concentrations (Details Narrative)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Three Customers Percentage of Sales
Percent concentration	92.00%	86.00%	90.00%	81.00%
Three Customers Percentage of Receivables
Percent concentration	83.00%	88.00%