Minim (MINM) 10-Q 15 May 19 2019 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2019	May 14, 2019
Document And Entity Information
Entity Registrant Name	Zoom Telephonics, Inc.
Entity Central Index Key	0001467761
Document Type	10-Q
Document Period End Date	Mar. 31, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding		20,707,636
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2019

Condensed Balance Sheets (Unaud

Condensed Balance Sheets (Unaudited) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents	$ 115,586	$ 125,982
Accounts receivable, net	3,188,684	2,760,606
Inventories	6,482,650	7,927,678
Prepaid expenses and other current assets	606,043	918,585
Total current assets	10,392,963	11,732,851
Other assets	311,660	222,160
Operating lease right-of-use assets, net	274,663	0
Equipment, net	228,773	261,476
Total assets	11,208,059	12,216,487
Current liabilities
Bank debt	2,121,384	1,741,272
Accounts payable	3,486,865	4,369,309
Operating lease liabilities	205,958	0
Accrued other expenses	2,373,403	2,229,561
Total current liabilities	8,187,610	8,340,142
Long-term operating lease liabilities	85,110	0
Total liabilities	8,272,720	8,340,142
Commitments and contingencies (Note 4)
Stockholders' equity
Common stock: Authorized: 25,000,000 shares at $0.01 par value Issued and outstanding: 16,162,181 shares at March 31, 2019 and 16,124,681 shares at December 31, 2018	161,622	161,247
Additional paid-in capital	41,215,673	41,035,936
Accumulated deficit	(38,441,956)	(37,320,838)
Total stockholders' equity	2,935,339	3,876,345
Total liabilities and stockholders' equity	$ 11,208,059	$ 12,216,487

Condensed Balance Sheets (Una_2

Condensed Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2019	Dec. 31, 2018
Stockholders Equity
Common stock, par value	$ 0.01	$ 0.01
Common stock, authorized	25,000,000	25,000,000
Common stock, issued	16,162,181	16,124,681
Common stock, outstanding	16,162,181	16,124,681

Condensed Statement of Operatio

Condensed Statement of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Income Statement [Abstract]
Net sales	$ 8,010,089	$ 8,336,867
Cost of goods sold	5,591,772	5,055,477
Gross profit	2,418,317	3,281,390
Operating expenses:
Selling	2,447,513	2,054,557
General and administrative	567,799	448,078
Research and development	482,403	410,258
Total	3,497,715	2,912,893
Operating income (loss)	(1,079,398)	368,497
Other income (expense):
Interest income	35	104
Interest expense	(32,217)	(6,168)
Other, net	(1,750)	43
Total other income (expense)	(33,932)	(6,021)
Income (loss) before income taxes	(1,113,330)	362,476
Income taxes (benefit)	7,788	3,598
Net income (loss)	$ (1,121,118)	$ 358,878
Net income (loss) per share:
Basic	$ (0.07)	$ 0.02
Diluted	$ (0.07)	$ 0.02
Basic weighted average common and common equivalent shares	16,137,598	15,727,163
Diluted weighted average common and common equivalent shares	16,137,598	16,510,632

Condensed Consolidated Statemen

Condensed Consolidated Statements of Stockholders' Equity - USD ($)	Common Stock	Additional Paid In Capital	Accumulated Deficit	Total
Beginning Balance, Amount at Dec. 31, 2017	$ 152,865	$ 40,265,282	$ (37,246,561)	$ 3,171,586
Beginning Balance, Shares at Dec. 31, 2017	15,286,540
Net income (loss)			358,878	358,878
Stock option exercise, Amount	$ 5,913	146,550		152,463
Stock option exercise, Shares	591,250
Stock based compensation		33,798		33,798
Ending Balance, Amount at Mar. 31, 2018	$ 158,778	40,445,630	(36,887,683)	3,716,725
Ending Balance, Shares at Mar. 31, 2018	15,877,790
Beginning Balance, Amount at Dec. 31, 2018	$ 161,247	41,035,936	(37,320,838)	3,876,345
Beginning Balance, Shares at Dec. 31, 2018	16,124,681
Net income (loss)			(1,121,118)	(1,121,118)
Stock option exercise, Amount	$ 375	4,725		5,100
Stock option exercise, Shares	37,500
Stock based compensation		175,012		175,012
Ending Balance, Amount at Mar. 31, 2019	$ 161,622	$ 41,215,673	$ (38,441,956)	$ 2,935,339
Ending Balance, Shares at Mar. 31, 2019	16,162,181

Condensed Statements of Cash Fl

Condensed Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Operating activities:
Net income (loss)	$ (1,121,118)	$ 358,878
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	78,203	97,990
Amortization of right-of-use assets	120,902	0
Stock based compensation	175,012	33,798
Provision for (recovery of) accounts receivable allowances	1,943	(185)
Provision for inventory reserves	23,957	0
Changes in operating assets and liabilities:
Accounts receivable	(430,021)	(606,421)
Inventories	1,421,071	(177,628)
Prepaid expenses and other assets	312,542	(487,067)
Operating lease liabilities	(129,831)	0
Accounts payable and accrued expenses	(713,268)	920,752
Net cash provided by (used in) operating activities	(260,608)	140,117
Investing activities:
Cost of other assets	(135,000)	(40,000)
Purchases of plant and equipment	0	(18,905)
Net cash provided by (used in) investing activities	(135,000)	(58,905)
Financing activities:
Net proceeds from (payments to) bank credit lines	380,112	(39,707)
Proceeds from stock option exercises	5,100	152,463
Net cash provided by (used in) financing activities	385,212	112,756
Net change in cash	(10,396)	193,968
Cash and cash equivalents at beginning of period	125,982	229,218
Cash and cash equivalents at end of period	115,586	423,186
Supplemental disclosures of cash flow information:
Cash paid during the period for: Interest	32,217	6,168
Cash paid during the period for: Income taxes	$ 7,788	$ 3,598

1. Summary of Significant Accou

1. Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2019
Notes to Financial Statements
Summary of Significant Accounting Policies	Basis of Presentation The accompanying condensed consolidated financial statements (“financial statements”) are unaudited. However, the condensed consolidated balance sheet as of December 31, 2018 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 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, 2018 included in the Company's 2018 Annual Report on Form 10-K for the year ended December 31, 2018. Subsequent Events The Company closed on a $5 million private placement and issued an aggregate of 4,545,455 shares on May 3, 2019 and effective on the closing of the offering, Jeremy Hitchcock and Jonathan Seelig joined Zoom’s Board of Directors. Other than noted above, the Company has evaluated subsequent events from March 31, 2019 through the date of this filing and determined that there are no such events requiring recognition or disclosure in the financial statements. Sales Tax The Company has a state sales tax liability stemming from the Company’s ‘Fulfilled By Amazon’ sales agreement which allows Amazon to warehouse the Company’s inventory throughout a number of states. During 2018 the Company put policies and procedures in place to collect and pay sales tax for Amazon sales in states where the Company believes it has nexus and is required to charge sales tax. Sales tax is now collected in states where the Company is required to collect and has registered with the state. Sales and Use Tax filings are completed and filed and tax remitted back to the states consistent with the individual state filing requirements. Changes to state sales tax regulations are monitored to stay current with the law. As of March 31, 2019, approximately $86 thousand of the original state sales tax liability remains open. The additional liability of approximately $119.5 thousand relates to sales tax that has been collected and not yet remitted to the respective states. Revenue Recognition The Company adopted Accounting Standards Codification (“ASC”) Topic 606 using the modified retrospective method provision of this standard effective January 1, 2018, January 1, 2018 January 1, 2018 Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied. ● Identification of the contract, or contracts, with a customer — ● Identification of the performance obligations in the contract — ● Determination of the transaction price ● Allocation of the transaction price to the performance obligations in the contract ● Recognition of revenue when, or as, the Company satisfies a performance obligation ● The Company has a present right to payment ● The customer has legal title to the goods ● The Company has transferred physical possession of the goods ● The customer has the significant risks and rewards of ownership of the goods ● The customer has accepted the goods The Company has concluded that transfer of control substantively transfers to the customer upon shipment or delivery, depending on the delivery terms of the purchase agreement. Other considerations of Topic 606 include the following: ● Warranties ● Returned Goods ● Price protection ● Volume Rebates and Promotion Programs Accounts receivable, net: March 31, 2019 December 31, 2018 Gross accounts receivable $ 3,204,640 $ 2,774,619 Allowance for doubtful accounts (15,956 ) (14,013 ) Total accounts receivable, net $ 3,188,684 $ 2,760,606 Accrued other expenses: March 31, 2019 December 31, 2018 Audit, legal, payroll $ 172,900 $ 234,119 Royalty costs 1,125,000 875,000 Sales and use tax 205,468 219,286 Sales allowances * 656,650 611,719 Other 213,385 289,437 Total accrued other expenses $ 2,373,403 $ 2,229,561 ------------------------------------------------------------------------------------------------------------------------------------------------------------ * Upon adoption of ASC 606 on January 1, 2018, certain allowances were reclassified as accrued other expenses. Company revenues are primarily from the selling of products that are shipped and billed. Consistent with the revenue recognition accounting standard, revenues are recognized when control is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services. Sales are earned at a point in time through ship-and-bill performance obligations. Regarding disaggregated revenue disclosures, as previously noted, the Company’s business is controlled as a single operating segment that consists of the manufacture and sale of Internet access and other communications-related products. Most of the Company’s transactions are very similar in nature, contract, terms, timing, and transfer of control of goods. Disaggregated revenue by distribution channel for three months ended: Through : March 31, 2019 March 31, 2018 Retailers $ 7,227,364 $ 7,933,218 Distributors 529,391 185,066 Other 253,334 218,583 Total $ 8,010,089 $ 8,336,867 Disaggregated revenue by product for three months ended: March 31, 2019 March 31, 2018 Cable Modems & gateways $ 7,073,277 $ 7,826,164 Other 936,812 510,703 Total $ 8,010,089 $ 8,336,867 Revenue is recognized when obligations under the terms of a contract with customers are satisfied. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring the products. Based on the nature of the Company’s products and customer contracts, the Company has not recorded any deferred revenue. Any agreements with customers that could impact revenue such as rebates or promotions are recognized in the period of agreement. Recently Adopted Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting standards Update (“ASU”) 2016-02, “ Leases (Topic 842)” Adoption of this standard resulted in the recognition of operating lease right-of-use assets and corresponding lease liabilities of $396 thousand and $421 thousand, respectively, on the consolidated balance sheet as of January 1, 2019. The standard did not materially impact operating results or liquidity. Disclosures related to the amount, timing and uncertainty of cash flows arising from leases are included in Note 5, Leases Recently Issued Accounting Standards 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.

2. Liquidity

2. Liquidity	3 Months Ended
	Mar. 31, 2019
Notes to Financial Statements
Liquidity	On March 31, 2019 the Company had approximately $2.1 million in bank debt for a $3.0 million asset-based credit line, approximately $116 thousand in cash and cash equivalents, and working capital of approximately $2.2 million. The Company’s credit line has a maturity date of November 2019, and automatically renews from year to year unless cancelled under the terms of agreement. Major sources of cash during the first quarter of 2019 were decreases of approximately $1.4 million in inventory, and prepaid expenses of approximately $313 thousand, and increase in debt of approximately $380 thousand. Major decreases in cash were a loss of approximately $1.1 million, a decrease in accounts payable and accrued liabilities of approximately $793 thousand, and accounts receivable increase of approximately $428 thousand. On May 3, 2019, the Company closed on a private placement pursuant to which the Company sold an aggregate of 4,545,455 shares of common stock at a purchase price of $1.10 per share. The gross proceeds to the Company at the closing of the private placement were approximately $5.0 million. The Company intends to utilize the proceeds from the offering to accelerate the roll-out of new products, for working capital, and for other corporate purposes. The Company’s ability to maintain adequate levels of liquidity is dependent upon its ability to sell inventory on hand and collect related receivables. Although the Company has experienced losses The Company expects year-over-year growth to continue for an unpredictable number of years 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 reduction in net loss, and its Financing Agreement and private placement, 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 issuance of the Company’s Quarterly filing of this Form 10-Q with the Securities Exchange Commission.

3. Inventories

3. Inventories	3 Months Ended
	Mar. 31, 2019
Notes to Financial Statements
Inventories	Inventories consist of : March 31, 2019 December 31, 2018 Materials $ 1,223,789 $ 2,043,843 Work in process 153,607 121,624 Finished goods 5,105,254 5,762,211 Total $ 6,482,650 $ 7,927,678 Finished goods includes consigned inventory of $910,900 at March 31, 2019 and $1,537,300 at December 31, 2018. 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 for both three months ended March 31, 2019 and 2018, respectively.

4. Commitments and Contingencie

4. Commitments and Contingencies	3 Months Ended
	Mar. 31, 2019
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. The Company does not currently have any pending or outstanding legal proceedings. (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 exclusive license from cable modems and gateways to also include consumer routers, WiFi range extenders, home powerline network adapters, and wireless 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 on an exclusive basis and and cellular sensors on a non-exclusive basis. The License Agreement, as amended, has a five-year term beginning January 1, 2016 through December 31, 2020 and increases 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, 2019: $ 4,500,000 2020: $ 5,100,000 Royalty expense under the License Agreement was $1,125,000 for the first quarter of 2019 and $875,000 for the first quarter of 2018, and is included in selling expense on the accompanying condensed consolidated statements of operations. The balance of the committed royalty expense for 2019 amounts to $3,375,000.

5. Leases

5. Leases	3 Months Ended
	Mar. 31, 2019
Leases [Abstract]
Leases	In September 2015 the Company agreed with North American Production Sharing, Inc. (“NAPS”) to extend the Company’s Tijuana facility’s lease in connection with the Production Sharing Agreement (“PSA”) entered into between the Company and NAPS. That extension went through November 30, 2018 and also facilitated the Company’s contracting with Mexican personnel to work in our Tijuana facility. The Company currently has an agreement in principle to stay in the existing facilities through at least November 30, 2020, and Zoom expects to sign a lease extension once certain building repairs are completed. Rent expense was $26.6 thousand for the first quarter of 2019 and $26.6 thousand for the first quarter of 2018 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 expires on June 29, 2019. Rent expense was $109,194 for the first quarter of 2019 and $109,804 for the first quarter of 2018. The Company expects to move to a new location in downtown Boston on or before June 29, 2019. The potential impact of lease terms on a new location cannot be determined at this time. At inception of a lease the Company determines whether that lease meets the classification criteria of a finance or operating lease. Some of the Company’s lease arrangements contain lease components (e.g. minimum rent payments) and non-lease components (e.g. maintenance, labor charges, etc.). The Company generally accounts for each component separately based on the estimated standalone price of each component. Operating Leases Operating leases are included in operating lease right-of-use assets, operating lease liabilities, and long-term operating lease liabilities on the condensed consolidated balance sheets. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company’s secured incremental borrowing rates or implicit rates, when readily determinable. The Company used 10% as its secured incremental borrowing rate when calculating the present value of remaining lease payments over the lease term. Short-term operating leases, which have an initial term of 12 months or less, are not recorded on the balance sheet. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Lease expense is included in general and administrative expenses on the condensed consolidated statements of operations. The following table presents information about the amount and timing of the Company’s operating leases as of March 31, 2019 assuming that a lease renewal for our Tijuana facility will be consummated consistent with the agreement in principle described above. March 31, 2019 Maturity of Lease Liabilities Lease Payments 2019 (remaining) $ 188,730 2020 106,226 Total undiscounted operating lease payments $ 294,956 Less: Imputed interest (3,888 ) Present value of operating lease liabilities $ 291,068 Balance Sheet Classification Operating lease liabilities $ 205,958 Long-term operating lease liabilities 85,110 Total operating lease liabilities $ 291,068 Other Information Weighted-average remaining lease term for operating leases 1.16 years Weighted-average discount rate for operating leases 10.0 % Cash Flows Upon adoption of the new lease standard, the Company recorded a lease liability in the amount of $420,899, right-of-use assets of $399,565, and reclassified deferred rent of $25,334 as a reduction of the right-of-use assets. During the three months ended March 31, 2019, the operating lease liability was reduced by $129,831 and we recorded amortization of our right-of-use assets of $120,902. Supplemental cash flow information and non-cash activity related to our operating leases are as follows: Three Months Ended March 31, 2019 2018 Operating cash flow information: Amounts included in measurement of lease liabilities $ 135,617 $ –– Non-cash activities Right-of-use assets obtained in exchange for lease obligations $ 395,565 $ ––

6. Customer and Vendor Concentr

6. Customer and Vendor Concentrations	3 Months Ended
	Mar. 31, 2019
Notes to Financial Statements
Customer and Vendor Concentrations	The Company sells its products primarily through high-volume retailers and distributors, Internet service providers, value-added resellers, 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 companies account for a substantial portion of the Company’s revenues. In the first quarter of 2019 two companies accounted for 10% or greater individually and 81% in the aggregate of the Company’s total net sales. At March 31, 2019 three companies with an accounts receivable balance of 10% or greater individually accounted for a combined 67% of the Company’s accounts receivable. In the first quarter of 2018, three companies accounted for 10% or greater individually and 92% in the aggregate of the Company’s total net sales. At March 31, 2018, three companies with an accounts receivable balance of 10% or greater individually accounted for a combined 84% 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. The Company participates in the PC peripherals industry, which is characterized by aggressive pricing practices, continually changing customer demand patterns and rapid technological developments. The Company's operating results could be adversely affected should the Company be unable to successfully anticipate customer demand accurately; manage its product transitions, inventory levels and manufacturing process efficiently; distribute its products quickly in response to customer demand; differentiate its products from those of its competitors or compete successfully in the markets for its new products. The Company depends on many third-party suppliers for key components contained in its product offerings. For some of these components, the Company may only use a single source supplier, in part due to the lack of alternative sources of supply. During the first quarter of 2019, the Company had one supplier that provided 99% of the Company's purchased inventory. During the first quarter of 2018, the Company had one supplier that provided 99% of the Company's purchased inventory.

7. Credit Lines

7. Credit Lines	3 Months Ended
	Mar. 31, 2019
Notes to Financial Statements
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. On November 2, 2018, the Company entered into a fifth amendment to the Financing Agreement. The Amendment reduced the effective interest rate by 1 percentage point and reduced the annual facility fee by 0.25 percent. The Company is required to calculate its loan covenant compliance on a quarterly basis. At March 31, 2019, the Company was in compliance with both its working capital and tangible net worth covenants. At March 31, 2019, the Company’s tangible net worth was approximately $2.6 million, above the $2 million requirement; and the Company’s working capital was approximately $2.2 million, above the $1.75 million requirement. Loan availability is based on eligible receivables less offsets, if any. Approximately $120 thousand was available on this line on March 31, 2019, consisting of $206 thousand as 75% of eligible receivables less an offset of $86 thousand for state tax liabilities. The sales tax offset will be reduced as the sales tax liability is paid down.

8. Earnings (Loss) Per Share

8. Earnings (Loss) Per Share	3 Months Ended
	Mar. 31, 2019
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. Basic and diluted loss per common share for the three-month period ended March 31, 2019 was ($0.07), and diluted loss per common share excludes the effects of 496,028 common share equivalents, since such inclusion would be anti-dilutive. Basic earnings per common share for the three-month period ended March 31, 2018 was $0.02. Diluted earnings per common share for the three-month period ended March 31, 2018 was $0.02, and includes the dilutive effects of 783,469 common share equivalents. The common share equivalents consist of common shares issuable upon exercise of outstanding stock options.

1. Summary of Significant Acc_2

1. Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2019
Summary Of Significant Accounting Policies
Basis of Presentation	The accompanying condensed consolidated financial statements (“financial statements”) are unaudited. However, the condensed consolidated balance sheet as of December 31, 2018 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 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, 2018 included in the Company's 2018 Annual Report on Form 10-K for the year ended December 31, 2018.
Subsequent Events	The Company closed on a $5 million private placement and issued an aggregate of 4,545,455 shares on May 3, 2019 and effective on the closing of the offering, Jeremy Hitchcock and Jonathan Seelig joined Zoom’s Board of Directors. Other than noted above, the Company has evaluated subsequent events from March 31, 2019 through the date of this filing and determined that there are no such events requiring recognition or disclosure in the financial statements.
Sales Tax	The Company has a state sales tax liability stemming from the Company’s ‘Fulfilled By Amazon’ sales agreement which allows Amazon to warehouse the Company’s inventory throughout a number of states. During 2018 the Company put policies and procedures in place to collect and pay sales tax for Amazon sales in states where the Company believes it has nexus and is required to charge sales tax. Sales tax is now collected in states where the Company is required to collect and has registered with the state. Sales and Use Tax filings are completed and filed and tax remitted back to the states consistent with the individual state filing requirements. Changes to state sales tax regulations are monitored to stay current with the law. As of March 31, 2019, approximately $86 thousand of the original state sales tax liability remains open. The additional liability of approximately $119.5 thousand relates to sales tax that has been collected and not yet remitted to the respective states.
Revenue Recognition	The Company adopted Accounting Standards Codification (“ASC”) Topic 606 using the modified retrospective method provision of this standard effective January 1, 2018, January 1, 2018 January 1, 2018 Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied. ● Identification of the contract, or contracts, with a customer — ● Identification of the performance obligations in the contract — ● Determination of the transaction price ● Allocation of the transaction price to the performance obligations in the contract ● Recognition of revenue when, or as, the Company satisfies a performance obligation ● The Company has a present right to payment ● The customer has legal title to the goods ● The Company has transferred physical possession of the goods ● The customer has the significant risks and rewards of ownership of the goods ● The customer has accepted the goods The Company has concluded that transfer of control substantively transfers to the customer upon shipment or delivery, depending on the delivery terms of the purchase agreement. Other considerations of Topic 606 include the following: ● Warranties ● Returned Goods ● Price protection ● Volume Rebates and Promotion Programs Accounts receivable, net: March 31, 2019 December 31, 2018 Gross accounts receivable $ 3,204,640 $ 2,774,619 Allowance for doubtful accounts (15,956 ) (14,013 ) Total accounts receivable, net $ 3,188,684 $ 2,760,606 Accrued other expenses: March 31, 2019 December 31, 2018 Audit, legal, payroll $ 172,900 $ 234,119 Royalty costs 1,125,000 875,000 Sales and use tax 205,468 219,286 Sales allowances * 656,650 611,719 Other 213,385 289,437 Total accrued other expenses $ 2,373,403 $ 2,229,561 ------------------------------------------------------------------------------------------------------------------------------------------------------------ * Upon adoption of ASC 606 on January 1, 2018, certain allowances were reclassified as accrued other expenses. Company revenues are primarily from the selling of products that are shipped and billed. Consistent with the revenue recognition accounting standard, revenues are recognized when control is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services. Sales are earned at a point in time through ship-and-bill performance obligations. Regarding disaggregated revenue disclosures, as previously noted, the Company’s business is controlled as a single operating segment that consists of the manufacture and sale of Internet access and other communications-related products. Most of the Company’s transactions are very similar in nature, contract, terms, timing, and transfer of control of goods. Disaggregated revenue by distribution channel for three months ended: Through : March 31, 2019 March 31, 2018 Retailers $ 7,227,364 $ 7,933,218 Distributors 529,391 185,066 Other 253,334 218,583 Total $ 8,010,089 $ 8,336,867 Disaggregated revenue by product for three months ended: March 31, 2019 March 31, 2018 Cable Modems & gateways $ 7,073,277 $ 7,826,164 Other 936,812 510,703 Total $ 8,010,089 $ 8,336,867 Revenue is recognized when obligations under the terms of a contract with customers are satisfied. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring the products. Based on the nature of the Company’s products and customer contracts, the Company has not recorded any deferred revenue. Any agreements with customers that could impact revenue such as rebates or promotions are recognized in the period of agreement.
Recently Accounting Standards	Recently Adopted Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting standards Update (“ASU”) 2016-02, “ Leases (Topic 842)” Adoption of this standard resulted in the recognition of operating lease right-of-use assets and corresponding lease liabilities of $396 thousand and $421 thousand, respectively, on the consolidated balance sheet as of January 1, 2019. The standard did not materially impact operating results or liquidity. Disclosures related to the amount, timing and uncertainty of cash flows arising from leases are included in Note 5, Leases Recently Issued Accounting Standards 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.

1. Summary of Significant Acc_3

1. Summary of Significant Accounting Policies (Tables)	3 Months Ended
	Mar. 31, 2019
Summary Of Significant Accounting Policies Tables Abstract
Reclassification of accounts receivable allowances to accrued other expenses	Accounts receivable, net: March 31, 2019 December 31, 2018 Gross accounts receivable $ 3,204,640 $ 2,774,619 Allowance for doubtful accounts (15,956 ) (14,013 ) Total accounts receivable, net $ 3,188,684 $ 2,760,606 Accrued other expenses: March 31, 2019 December 31, 2018 Audit, legal, payroll $ 172,900 $ 234,119 Royalty costs 1,125,000 875,000 Sales and use tax 205,468 219,286 Sales allowances * 656,650 611,719 Other 213,385 289,437 Total accrued other expenses $ 2,373,403 $ 2,229,561 ------------------------------------------------------------------------------------------------------------------------------------------------------------ * Upon adoption of ASC 606 on January 1, 2018, certain allowances were reclassified as accrued other expenses.
Disaggregation of Revenue	Disaggregated revenue by distribution channel for three months ended: Through : March 31, 2019 March 31, 2018 Retailers $ 7,227,364 $ 7,933,218 Distributors 529,391 185,066 Other 253,334 218,583 Total $ 8,010,089 $ 8,336,867 Disaggregated revenue by product for three months ended: March 31, 2019 March 31, 2018 Cable Modems & gateways $ 7,073,277 $ 7,826,164 Other 936,812 510,703 Total $ 8,010,089 $ 8,336,867

3. Inventories (Tables)

3. Inventories (Tables)	3 Months Ended
	Mar. 31, 2019
Inventories Tables Abstract
Inventories	Inventories consist of : March 31, 2019 December 31, 2018 Materials $ 1,223,789 $ 2,043,843 Work in process 153,607 121,624 Finished goods 5,105,254 5,762,211 Total $ 6,482,650 $ 7,927,678

4. Commitments and Contingenc_2

4. Commitments and Contingencies (Tables)	3 Months Ended
	Mar. 31, 2019
Commitments And Contingencies
Minimum annual royalty payments	2019: $ 4,500,000 2020: $ 5,100,000

5. Leases (Tables)

5. Leases (Tables)	3 Months Ended
	Mar. 31, 2019
Leases Tables Abstract
Lease maturity	March 31, 2019 Maturity of Lease Liabilities Lease Payments 2019 (remaining) $ 188,730 2020 106,226 Total undiscounted operating lease payments $ 294,956 Less: Imputed interest (3,888 ) Present value of operating lease liabilities $ 291,068 Balance Sheet Classification Operating lease liabilities $ 205,958 Long-term operating lease liabilities 85,110 Total operating lease liabilities $ 291,068 Other Information Weighted-average remaining lease term for operating leases 1.16 years Weighted-average discount rate for operating leases 10.0 %
Supplemental cash flow information related to operating leases	Three Months Ended March 31, 2019 2018 Operating cash flow information: Amounts included in measurement of lease liabilities $ 135,617 $ –– Non-cash activities Right-of-use assets obtained in exchange for lease obligations $ 395,565 $ ––

1. Summary of Significant Acc_4

1. Summary of Significant Accounting Policies (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Summary Of Significant Accounting Policies Tables Abstract
Gross accounts receivable	$ 3,204,640	$ 2,774,619
Allowance for doubtful accounts	(15,956)	(14,013)
Total accounts receivable, net	3,188,684	2,760,606
Audit, legal, payroll	172,900	234,119
Royalty costs	1,125,000	875,000
Sales and use tax	205,468	219,286
Sales and allowances	656,650	611,719
Other	213,385	289,437
Total accrued other expenses	$ 2,373,403	$ 2,229,561

1. Summary of Significant Acc_5

1. Summary of Significant Accounting Policies (Details 1) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Revenues	$ 8,010,089	$ 8,336,867
Cable Modems & gateways
Revenues	7,073,277	7,826,164
Other
Revenues	936,812	510,703
Retailers
Revenues	7,227,364	7,933,218
Distributors
Revenues	529,391	185,066
Other
Revenues	$ 253,334	$ 218,583

3. Inventories (Details)

3. Inventories (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Inventories Details Narrative Abstract
Materials	$ 1,223,789	$ 2,043,843
Work in process	153,607	121,624
Finished goods	5,105,254	5,762,211
Total inventories	$ 6,482,650	$ 7,927,678

3. Inventories (Details Narrati

3. Inventories (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Inventories Details Narrative Abstract
Finished goods held by customer	$ 910,900		$ 1,537,300
Provision for inventory reserves	$ 23,957	$ 0

4. Commitments and Contingenc_3

4. Commitments and Contingencies (Details)	Mar. 31, 2019USD ($)
Future royalty payments for the year ending December 31,
2019	$ 4,500,000
2020	$ 5,100,000

5. Leases (Details)

5. Leases (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Leases Details 1Abstract
2019 (remaining)	$ 188,730
2020	106,226
Total undiscounted operating lease payments	294,956
Less: Imputed interest	(3,888)
Present value of operating lease liabilities	291,068
Operating lease liabilities	205,958	$ 0
Long-term operating lease liabilities	85,110	$ 0
Total operating lease liabilities	$ 291,068
Weighted-average remaining lease term for operating leases	1 year 1 month 28 days
Weighted-average discount rate for operating leases	10.00%

5. Leases (Details 1)

5. Leases (Details 1) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Leases Details Abstract
Amounts included in measurement of lease liabilities	$ 135,617	$ 0
Right-of-use assets obtained in exchange for lease obligations	$ 395,565	$ 0

6. Customer Concentrations (Det

6. Customer Concentrations (Details Narrative)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Two Customers Percentage of Sales
Percent concentration	81.00%
Three Customers Percentage of Receivables
Percent concentration	67.00%	84.00%
Three Customers Percentage of Sales
Percent concentration		92.00%
One Supplier Percentage of Purchased Inventory
Percent concentration	99.00%	99.00%