Minim (MINM) 10-Q 14 Nov 19 2019 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Nov. 11, 2019
Document And Entity Information
Entity Registrant Name	Zoom Telephonics, Inc.
Entity Central Index Key	0001467761
Document Type	10-Q
Document Period End Date	Sep. 30, 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 Shell Company	false
Entity Common Stock, Shares Outstanding		20,880,136
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2019

Condensed Balance Sheets (Unaud

Condensed Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents	$ 2,279,820	$ 125,982
Accounts receivable, net	4,747,507	2,760,606
Inventories	6,341,792	7,927,678
Deposits on inventory purchases	28,728	723,639
Prepaid expenses and other current assets	356,371	194,946
Total current assets	13,754,218	11,732,851
Other assets	202,894	222,160
Operating lease right-of-use assets, net	127,410	0
Equipment, net	283,986	261,476
Total assets	14,368,508	12,216,487
Current liabilities
Bank debt	0	1,741,272
Accounts payable	4,361,223	4,369,309
Operating lease liabilities	101,127	0
Accrued other expenses	2,706,534	2,229,561
Total current liabilities	7,168,884	8,340,142
Long-term operating lease liabilities	26,283	0
Total liabilities	7,195,167	8,340,142
Commitments and contingencies (Note 4)
Stockholders' equity
Common stock: authorized: 40,000,000 shares at $0.01 par value, issued and outstanding: 20,880,136 shares at September 30, 2019 and 16,124,681 shares at December 31, 2018	208,801	161,247
Additional paid-in capital	46,411,235	41,035,936
Accumulated deficit	(39,446,695)	(37,320,838)
Total stockholders' equity	7,173,341	3,876,345
Total liabilities and stockholders' equity	$ 14,368,508	$ 12,216,487

Condensed Balance Sheets (Una_2

Condensed Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2019	Dec. 31, 2018
Stockholders Equity
Common stock, par value	$ 0.01	$ 0.01
Common stock, authorized	40,000,000	25,000,000
Common stock, issued	20,880,136	16,124,681
Common stock, outstanding	20,880,136	16,124,681

Condensed Statement of Operatio

Condensed Statement of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Statement [Abstract]
Net sales	$ 10,874,149	$ 9,000,060	$ 27,042,961	$ 24,859,173
Cost of goods sold	7,746,821	5,726,970	18,728,928	15,572,098
Gross profit	3,127,328	3,273,090	8,314,033	9,287,075
Operating expenses:
Selling	2,067,728	2,032,486	7,068,841	6,209,842
General and administrative	733,486	438,326	1,858,043	1,059,613
Research and development	563,881	420,475	1,484,160	1,199,067
Total	3,365,095	2,891,287	10,411,044	8,468,522
Operating income (loss)	(237,767)	381,803	(2,097,011)	818,553
Other income (expense):
Interest income	5,626	39	9,627	230
Interest expense	0	(33,051)	(48,405)	(44,763)
Other, net	36,156	(320)	34,251	(385)
Total other income (expense)	41,782	(33,332)	(4,527)	(44,918)
Income (loss) before income taxes	(195,985)	348,471	(2,101,538)	773,635
Income taxes (benefit)	3,641	2,537	24,319	21,493
Net income (loss)	$ (199,626)	$ 345,934	$ (2,125,857)	$ 752,142
Net income (loss) per share:
Basic	$ (0.01)	$ 0.02	$ (0.11)	$ 0.05
Diluted	$ (0.01)	$ 0.02	$ (0.11)	$ 0.05
Basic weighted average common and common equivalent shares	20,832,174	16,050,540	18,696,083	15,905,348
Diluted weighted average common and common equivalent shares	20,832,174	16,775,498	18,696,083	16,630,306

Condensed Consolidated Statemen

Condensed Consolidated Statements of Stockholders' Equity - USD ($)	Common Stock	Additional Paid In Capital	Accumulated Deficit	Total
Beginning Balance, Shares at Dec. 31, 2017	15,286,540
Beginning Balance, Amount at Dec. 31, 2017	$ 152,865	$ 40,265,282	$ (37,246,561)	$ 3,171,586
Net income (loss)			358,878	358,878
Stock option exercise, Shares	591,250
Stock option exercise, Amount	$ 5,913	146,550		152,463
Stock based compensation		33,798		33,798
Ending Balance, Shares at Mar. 31, 2018	15,877,790
Ending Balance, Amount at Mar. 31, 2018	$ 158,778	40,445,630	(36,887,683)	3,716,725
Beginning Balance, Shares at Dec. 31, 2017	15,286,540
Beginning Balance, Amount at Dec. 31, 2017	$ 152,865	40,265,282	(37,246,561)	3,171,586
Net income (loss)				752,142
Stock based compensation				226,160
Ending Balance, Shares at Sep. 30, 2018	16,106,681
Ending Balance, Amount at Sep. 30, 2018	$ 161,067	40,857,998	(36,494,419)	4,524,646
Beginning Balance, Shares at Mar. 31, 2018	15,877,790
Beginning Balance, Amount at Mar. 31, 2018	$ 158,778	40,445,630	(36,887,683)	3,716,725
Net income (loss)			47,330	47,330
Stock option exercise, Shares	128,891
Stock option exercise, Amount	$ 1,289	197,356		198,645
Stock based compensation		22,229		22,229
Ending Balance, Shares at Jun. 30, 2018	16,006,681
Ending Balance, Amount at Jun. 30, 2018	$ 160,067	40,665,215	(36,840,353)	3,984,929
Net income (loss)			345,934	345,934
Stock option exercise, Shares	100,000
Stock option exercise, Amount	$ 1,000	22,650		23,650
Stock based compensation		170,133		170,133
Ending Balance, Shares at Sep. 30, 2018	16,106,681
Ending Balance, Amount at Sep. 30, 2018	$ 161,067	40,857,998	(36,494,419)	4,524,646
Beginning Balance, Shares at Dec. 31, 2018	16,124,681
Beginning Balance, Amount at Dec. 31, 2018	$ 161,247	41,035,936	(37,320,838)	3,876,345
Net income (loss)			(1,121,118)	(1,121,118)
Stock option exercise, Shares	37,500
Stock option exercise, Amount	$ 375	4,725		5,100
Stock based compensation		175,012		175,012
Ending Balance, Shares at Mar. 31, 2019	16,162,181
Ending Balance, Amount at Mar. 31, 2019	$ 161,622	41,215,673	(38,441,956)	2,935,339
Beginning Balance, Shares at Dec. 31, 2018	16,124,681
Beginning Balance, Amount at Dec. 31, 2018	$ 161,247	41,035,936	(37,320,838)	3,876,345
Net income (loss)				(2,125,857)
Stock based compensation				432,044
Ending Balance, Shares at Sep. 30, 2019	20,880,136
Ending Balance, Amount at Sep. 30, 2019	$ 208,801	46,411,235	(39,446,695)	7,173,341
Beginning Balance, Shares at Mar. 31, 2019	16,162,181
Beginning Balance, Amount at Mar. 31, 2019	$ 161,622	41,215,673	(38,441,956)	2,935,339
Net income (loss)			(805,113)	(805,113)
Private investment offering, net of expenses of $57,391, Shares	4,545,455
Private investment offering, net of expenses of $57,391, Amount	$ 45,454	4,897,155		4,942,609
Stock option exercise, Shares	35,000
Stock option exercise, Amount	$ 350	8,400		8,750
Stock based compensation		138,756		138,756
Ending Balance, Shares at Jun. 30, 2019	20,742,636
Ending Balance, Amount at Jun. 30, 2019	$ 207,426	46,259,984	(39,247,069)	7,220,341
Net income (loss)			(199,626)	(199,626)
Stock option exercise, Shares	137,500
Stock option exercise, Amount	$ 1,375	32,975		34,350
Stock based compensation		118,276		118,276
Ending Balance, Shares at Sep. 30, 2019	20,880,136
Ending Balance, Amount at Sep. 30, 2019	$ 208,801	$ 46,411,235	$ (39,446,695)	$ 7,173,341

Condensed Statements of Cash Fl

Condensed Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Operating activities:
Net income (loss)	$ (2,125,857)	$ 752,142
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	252,471	274,339
Amortization of right-of-use assets	268,155	0
Stock based compensation	432,044	226,160
Provision for (recovery of) accounts receivable allowances	8,549	5,651
Provision for inventory reserves	19,983	(120,420)
Changes in operating assets and liabilities:
Accounts receivable	(1,996,450)	(2,176,171)
Inventories	1,565,903	(978,071)
Prepaid expenses and other assets	533,486	(102,005)
Operating lease liabilities	(293,489)	0
Accounts payable and accrued expenses	494,221	123,722
Net cash provided by (used in) operating activities	(839,984)	(1,994,653)
Investing activities:
Cost of other assets	(135,000)	(23,560)
Purchases of plant and equipment	(120,715)	(207,181)
Net cash provided by (used in) investing activities	(255,715)	(230,741)
Financing activities:
Net proceeds from (payments to) bank credit lines	(1,741,272)	1,859,590
Net proceeds from private placement offering	4,942,609	0
Proceeds from stock option exercises	48,200	374,758
Net cash provided by (used in) financing activities	3,249,537	2,234,348
Net change in cash	2,153,838	8,954
Cash and cash equivalents at beginning of period	125,982	229,218
Cash and cash equivalents at end of period	2,279,820	238,172
Supplemental disclosures of cash flow information:
Cash paid during the period for: Interest	48,405	44,763
Cash paid during the period for: Income taxes	$ 24,319	$ 21,493

1. Summary of Significant Accou

1. Summary of Significant Accounting Policies	9 Months Ended
	Sep. 30, 2019
Accounting Policies [Abstract]
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 has evaluated subsequent events from September 30, 2019 through the date of this filing and has 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, and this inventory is warehoused in a number of states. During 2018 the Company put policies and procedures in place to collect and remit 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 by the Company in states where the Company is required to collect and the Company 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. Many states have adopted regulations which require marketplace facilitators, such as Amazon, to collect and remit sales and use tax. This has eased the burden on the Company of filing and remitting sales tax returns for those states that have enacted such laws. As of September 30, 2019, approximately $51 thousand of the original state sales tax liability remains open. An additional liability of approximately $138 thousand relates to sales tax that has been collected and not yet remitted to the respective states, and is included in Accrued other expenses on the accompanying condensed consolidated balance sheets as of September 30, 2019. 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: September 30, 2019 December 31, 2018 Gross accounts receivable $ 4,770,069 $ 2,774,619 Allowance for doubtful accounts (22,562 ) (14,013 ) Total accounts receivable, net $ 4,747,507 $ 2,760,606 Accrued other expenses: September 30, 2019 December 31, 2018 Audit, legal, payroll $ 179,762 $ 234,119 Royalty costs 1,125,000 875,000 Sales and use tax 188,630 219,286 Sales allowances * 969,961 611,719 Other 243,182 289,437 Total accrued other expenses $ 2,706,534 $ 2,229,561 ------------------------------------------------------------------------------------------------------------------------------------------------------------ * Upon adoption of ASC 606 on January 1, 2018, certain sales allowances (warranties, returned goods, price protection, volume rebates, and promotion programs) were reclassified as accrued other expenses. Furthermore, a related inventory contract asset stemming from the sales return reserve of $439 thousand and $318 thousand is included within Inventories on the accompanying condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018, respectively 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: Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Retailers $ 10,479,310 $ 7,998,492 $ 25,140,598 $ 22,745,719 Distributors 122,111 552,346 1,095,335 1,255,259 Other 272,728 449,222 807,028 858,195 Total $ 10,874,149 $ 9,000,060 $ 27,042,961 $ 24,859,173 Disaggregated revenue by product: Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Cable Modems & gateways $ 10,004,676 $ 8,162,319 $ 24,291,501 $ 22,782,715 Other 869,473 837,741 2,751,460 2,076,458 Total $ 10,874,149 $ 9,000,060 $ 27,042,961 $ 24,859,173 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. Amended and Restated Certificate of Incorporation On July 25, 2019, the Company filed a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company which increased the number of authorized common shares from 25,000,000 to 40,000,000. 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	9 Months Ended
	Sep. 30, 2019
Liquidity
Liquidity	On September 30, 2019 the Company had no bank debt on a $3.0 million asset-based credit line, approximately $2.3 million in cash and cash equivalents, and working capital of approximately $6.6 million. The Company’s credit line has a maturity date of November 30, 2019, and automatically renews on November 30 of each year unless cancelled under the terms of the agreement. The Company closed on a $5 million private placement and issued an aggregate of 4,545,455 shares on May 3, 2019, and soon after the closing of the offering Jeremy Hitchcock and Jonathan Seelig joined Zoom’s Board of Directors. Other major changes of cash during the first nine months of 2019 were decreases of approximately $1.6 million in inventory and $533 thousand in prepaid expenses; and increases in accounts payable and accrued expenses of approximated $494 thousand. Major items that decreased cash were a net loss of approximately $2.1 million, a reduction in debt of approximately $1.7 million, and an accounts receivable increase of approximately $2.0 million. The Company’s ability to maintain adequate levels of liquidity depends in part on our ability to sell inventory on hand and collect related receivables. The Company was profitable for the first nine months of 2018. Although the Company has recently experienced losses The Company expects year-over-year growth 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 strength of its balance sheet, its unused line of credit, and efforts to move production capability outside of China, 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	9 Months Ended
	Sep. 30, 2019
Inventory Disclosure [Abstract]
Inventories	Inventories consist of : September 30, 2019 December 31, 2018 Materials $ 1,032,815 $ 2,043,843 Work in process 94,491 121,624 Finished goods 5,214,486 5,762,211 Total $ 6,341,792 $ 7,927,678 Finished goods includes consigned inventory of $1,516,500 at September 30, 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 the three and nine months ended September 30, 2019. The provision for inventory reserves was negligible for the three months ended September 30, 2018. The provision for inventory reserves recognized a recovery of approximately $120 thousand for the nine months ended September 30, 2018.

4. Commitments and Contingencie

4. Commitments and Contingencies	9 Months Ended
	Sep. 30, 2019
Commitments and Contingencies Disclosure [Abstract]
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 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 sales 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 third quarter of 2019 and $875,000 for the third quarter of 2018. Royalty expense under the License Agreement was $3.39 million for nine months ended September 30, 2019 and $2.64 million for the nine months ended September 30, 2018. Included in the royalty expense is $5 thousand per quarter, and $15 thousand for nine months in both 2019 and 2018 related to the amortization of start-up costs of the Motorola agreement. These costs are included in selling expense on the accompanying condensed consolidated statements of operations. The remaining balance of the committed royalty expense for 2019 amounts to $1,125,000. The Company prefunded a $150,000 letter of credit to a third party pursuant to an arrangement that expedites inventory shipping time. The letter of credit expires on July 8, 2020 and the amount is included within Prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets as of September 30, 2019.

5. Leases

5. Leases	9 Months Ended
	Sep. 30, 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 signed a lease extension to stay in the existing facilities through at least November 30, 2020. Rent expense was $26.6 thousand for both the third quarter of 2019 and the third quarter of 2018. Rent expense was $79.7 thousand for both the first nine months of 2019 and the first nine months of 2018. The Company had a lease for 11,480 square feet at 99 High Street, Boston, MA that expired on June 29, 2019. The Company signed a twelve-month lease agreement for offices at 225 Franklin Street, Boston, MA and completed the move to this location on June 28, 2019. The lease has an automatic renewal option provision and renews unless cancelled under the terms of the agreement. The Company has elected to apply the short-term lease exception under ASC 842 which does not require the recognition of an operating lease liability or right-of-use asset on the condensed consolidated balance sheet in relation to the lease at 225 Franklin Street. Rent expense was $117.6 thousand for the third quarter of 2019 and $104.6 thousand for the third quarter of 2018. Rent expense was $325.4 thousand for the first nine months of 2019 and $319.0 thousand for the first nine months of 2018. The Company also has a lease for approximately 1,550 square feet in Boston, MA that expired on October 31, 2019 and has been renewed for an additional 12 month starting November 1, 2019. The Company has elected to apply the short-term lease exception under ASC 842 which does not require the recognition of an operating lease liability or right-of-use asset on the condensed consolidated balance sheet in relation to this lease. Rent expense was approximately $18 thousand for the third quarter of 2019 and 2018. Rent expense for this lease was approximately $54 thousand for the first nine months of 2019 and approximately $18 thousand for the first nine months of 2018. 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 September 30, 2019. September 30, 2019 Maturity of Lease Liabilities Lease Payments 2019 (remaining) $ 26,557 2020 106,226 Total undiscounted operating lease payments $ 132,783 Less: Imputed interest (5,373 ) Present value of operating lease liabilities $ 127,410 Balance Sheet Classification Operating lease liabilities $ 101,127 Long-term operating lease liabilities 26,283 Total operating lease liabilities $ 127,410 Other Information Weighted-average remaining lease term for operating leases 1.17 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 nine months ended September 30, 2019, the operating lease liability was reduced by $293,489 and we recorded amortization of our right-of-use assets of $268,155. Supplemental cash flow information and non-cash activity related to our operating leases are as follows: Nine Months Ended September 30, 2019 2018 Operating cash flow information: Amounts included in measurement of lease liabilities $ 297,790 $ –– 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	9 Months Ended
	Sep. 30, 2019
Risks and Uncertainties [Abstract]
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 third quarter of 2019 two companies accounted for 10% or greater individually, and 86% in the aggregate of the Company’s total net sales. In the first nine months of 2019 two companies accounted for 10% or greater individually, and 83% in the aggregate of the Company’s total net sales. At September 30, 2019 three companies with an accounts receivable balance of 10% or greater individually accounted for a combined 86% of the Company’s accounts receivable. In the third quarter of 2018 two companies accounted for 10% or greater individually, and 77% in the aggregate of the Company’s total net sales. In the first nine months of 2018 two companies accounted for 10% or greater individually, and 78% in the aggregate of the Company’s total net sales. At September 30, 2018, three companies with an accounts receivable balance of 10% or greater individually accounted for a combined 72% 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, 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 third quarter of 2019, the Company had one supplier that provided 95% of the Company's purchased inventory. During the third quarter of 2018, the Company had one supplier that provided 98% of the Company's purchased inventory. During the first nine months of 2019, the Company had one supplier that provided 95% of the Company's purchased inventory. During the first nine months of 2018, the Company had one supplier that provided 99% of the Company's purchased inventory.

7. Credit Lines

7. Credit Lines	9 Months Ended
	Sep. 30, 2019
Line of Credit Facility [Abstract]
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 September 30, 2019, the Company was in compliance with both its working capital and tangible net worth covenants. At September 30, 2019, the Company’s tangible net worth was approximately $6.9 million, well above the $2 million requirement; and the Company’s working capital was approximately $6.6 million, well above the $1.75 million requirement. Loan availability is based on eligible receivables less offsets, if any. Approximately $2.2 million was available on this line on September 30, 2019, consisting of $2.3 million as 75% of eligible receivables less an offset of $54 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	9 Months Ended
	Sep. 30, 2019
Net income (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 September 30, 2019 was $0.01, and diluted loss per common share excludes the effects of 496,319 common share equivalents, since such inclusion would be anti-dilutive. Basic earnings per common share for the three-month period ended September 30, 2018 was $0.02. Diluted earnings per common share for the three-month period ended September 30, 2018 was $0.02 and includes the dilutive effects of 724,958 common share equivalents. Basic and diluted loss per common share for the nine-month period ended September 30, 2019 was $0.11, and diluted loss per common share excludes the effects of 496,319 common share equivalents, since such inclusion would be anti-dilutive. Diluted earnings per common share for the nine-month period ended September 30, 2018 was $0.05 and includes the dilutive effects of 724,958 common share equivalents. The common share equivalents consist of common shares issuable upon exercise of outstanding stock options.

9. Private Placement

9. Private Placement	9 Months Ended
	Sep. 30, 2019
Private Placement
Private Placement	On May 3, 2019, the Company entered into a Stock Purchase Agreement with certain accredited investors, including certain independent investment funds, members of Zoom management and Zoom’s Board of Directors, and certain co-founders of Zoom, in a private placement pursuant to which the Company sold an aggregate of 4,545,455 shares of common stock, par value $0.01 per share, at a purchase price of $1.10 per share. In connection with the Stock Purchase Agreement the Company incurred $57,391 of expenses which has been recorded as a reduction of additional paid in capital as presented in the condensed consolidated statements of stockholders’ equity. The net proceeds to the Company at the closing of the private placement were $4.94 million.

1. Summary of Significant Acc_2

1. Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2019
Accounting Policies [Abstract]
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 has evaluated subsequent events from September 30, 2019 through the date of this filing and has 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, and this inventory is warehoused in a number of states. During 2018 the Company put policies and procedures in place to collect and remit 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 by the Company in states where the Company is required to collect and the Company 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. Many states have adopted regulations which require marketplace facilitators, such as Amazon, to collect and remit sales and use tax. This has eased the burden on the Company of filing and remitting sales tax returns for those states that have enacted such laws. As of September 30, 2019, approximately $51 thousand of the original state sales tax liability remains open. An additional liability of approximately $138 thousand relates to sales tax that has been collected and not yet remitted to the respective states, and is included in Accrued other expenses on the accompanying condensed consolidated balance sheets as of September 30, 2019.
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: September 30, 2019 December 31, 2018 Gross accounts receivable $ 4,770,069 $ 2,774,619 Allowance for doubtful accounts (22,562 ) (14,013 ) Total accounts receivable, net $ 4,747,507 $ 2,760,606 Accrued other expenses: September 30, 2019 December 31, 2018 Audit, legal, payroll $ 179,762 $ 234,119 Royalty costs 1,125,000 875,000 Sales and use tax 188,630 219,286 Sales allowances * 969,961 611,719 Other 243,182 289,437 Total accrued other expenses $ 2,706,534 $ 2,229,561 ------------------------------------------------------------------------------------------------------------------------------------------------------------ * Upon adoption of ASC 606 on January 1, 2018, certain sales allowances (warranties, returned goods, price protection, volume rebates, and promotion programs) were reclassified as accrued other expenses. Furthermore, a related inventory contract asset stemming from the sales return reserve of $439 thousand and $318 thousand is included within Inventories on the accompanying condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018, respectively 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: Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Retailers $ 10,479,310 $ 7,998,492 $ 25,140,598 $ 22,745,719 Distributors 122,111 552,346 1,095,335 1,255,259 Other 272,728 449,222 807,028 858,195 Total $ 10,874,149 $ 9,000,060 $ 27,042,961 $ 24,859,173 Disaggregated revenue by product: Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Cable Modems & gateways $ 10,004,676 $ 8,162,319 $ 24,291,501 $ 22,782,715 Other 869,473 837,741 2,751,460 2,076,458 Total $ 10,874,149 $ 9,000,060 $ 27,042,961 $ 24,859,173 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.
Amended and Restated Certificate of Incorporation	On July 25, 2019, the Company filed a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company which increased the number of authorized common shares from 25,000,000 to 40,000,000.
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)	9 Months Ended
	Sep. 30, 2019
Accounting Policies [Abstract]
Reclassification of accounts receivable allowances to accrued other expenses	September 30, 2019 December 31, 2018 Gross accounts receivable $ 4,770,069 $ 2,774,619 Allowance for doubtful accounts (22,562 ) (14,013 ) Total accounts receivable, net $ 4,747,507 $ 2,760,606 Accrued other expenses: September 30, 2019 December 31, 2018 Audit, legal, payroll $ 179,762 $ 234,119 Royalty costs 1,125,000 875,000 Sales and use tax 188,630 219,286 Sales allowances * 969,961 611,719 Other 243,182 289,437 Total accrued other expenses $ 2,706,534 $ 2,229,561
Disaggregation of revenue	Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Retailers $ 10,479,310 $ 7,998,492 $ 25,140,598 $ 22,745,719 Distributors 122,111 552,346 1,095,335 1,255,259 Other 272,728 449,222 807,028 858,195 Total $ 10,874,149 $ 9,000,060 $ 27,042,961 $ 24,859,173 Disaggregated revenue by product: Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Cable Modems & gateways $ 10,004,676 $ 8,162,319 $ 24,291,501 $ 22,782,715 Other 869,473 837,741 2,751,460 2,076,458 Total $ 10,874,149 $ 9,000,060 $ 27,042,961 $ 24,859,173

3. Inventories (Tables)

3. Inventories (Tables)	9 Months Ended
	Sep. 30, 2019
Inventory Disclosure [Abstract]
Inventories	Inventories consist of : September 30, 2019 December 31, 2018 Materials $ 1,032,815 $ 2,043,843 Work in process 94,491 121,624 Finished goods 5,214,486 5,762,211 Total $ 6,341,792 $ 7,927,678

4. Commitments and Contingenc_2

4. Commitments and Contingencies (Tables)	9 Months Ended
	Sep. 30, 2019
Commitments and Contingencies Disclosure [Abstract]
Minimum annual royalty payments	2019: $ 4,500,000 2020: $ 5,100,000

5. Leases (Tables)

5. Leases (Tables)	9 Months Ended
	Sep. 30, 2019
Leases [Abstract]
Lease maturity	September 30, 2019 Maturity of Lease Liabilities Lease Payments 2019 (remaining) $ 26,557 2020 106,226 Total undiscounted operating lease payments $ 132,783 Less: Imputed interest (5,373 ) Present value of operating lease liabilities $ 127,410 Balance Sheet Classification Operating lease liabilities $ 101,127 Long-term operating lease liabilities 26,283 Total operating lease liabilities $ 127,410 Other Information Weighted-average remaining lease term for operating leases 1.17 Weighted-average discount rate for operating leases 10.0 %
Supplemental cash flow information related to operating leases	Nine Months Ended September 30, 2019 2018 Operating cash flow information: Amounts included in measurement of lease liabilities $ 297,790 $ –– 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 ($)	Sep. 30, 2019	Dec. 31, 2018
Accounting Policies [Abstract]
Gross accounts receivable	$ 4,770,069	$ 2,774,619
Allowance for doubtful accounts	(22,562)	(14,013)
Total accounts receivable, net	4,747,507	2,760,606
Audit, legal, payroll	179,762	234,119
Royalty costs	1,125,000	875,000
Sales and use tax	188,630	219,286
Sales and allowances	969,961	611,719
Other	243,182	289,437
Total accrued other expenses	$ 2,706,534	$ 2,229,561

1. Summary of Significant Acc_5

1. Summary of Significant Accounting Policies (Details 1) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenues	$ 10,874,149	$ 9,000,060	$ 27,042,961	$ 24,859,173
Cable Modems & gateways
Revenues	10,004,676	8,162,319	24,291,501	22,782,715
Other
Revenues	869,473	837,741	2,751,460	2,076,458
Retailers
Revenues	10,479,310	7,998,492	25,140,598	22,745,719
Distributors
Revenues	122,111	552,346	1,095,335	1,255,259
Other
Revenues	$ 272,728	$ 449,222	$ 807,028	$ 858,195

3. Inventories (Details)

3. Inventories (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Materials	$ 1,032,815	$ 2,043,843
Work in process	94,491	121,624
Finished goods	5,214,486	5,762,211
Total inventories	$ 6,341,792	$ 7,927,678

3. Inventories (Details Narrati

3. Inventories (Details Narrative) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Finished goods held by customer	$ 1,516,500	$ 1,537,300

4. Commitments and Contingenc_3

4. Commitments and Contingencies (Details)	Sep. 30, 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 ($)	Sep. 30, 2019	Dec. 31, 2018
Leases [Abstract]
2019 (remaining)	$ 26,557
2020	106,226
Total undiscounted operating lease payments	132,783
Less: Imputed interest	(5,373)
Present value of operating lease liabilities	127,410
Operating lease liabilities	101,127	$ 0
Long-term operating lease liabilities	26,283	$ 0
Total operating lease liabilities	$ 127,410
Weighted-average remaining lease term for operating leases	1 year 2 months 1 day
Weighted-average discount rate for operating leases	10.00%

5. Leases (Details 1)

5. Leases (Details 1) - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Leases [Abstract]
Amounts included in measurement of lease liabilities	$ 297,790	$ 0
Right-of-use assets obtained in exchange for lease obligations	$ 395,565	$ 0

6. Customer and Vendor Concen_2

6. Customer and Vendor Concentrations (Details Narrative)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Two Customers Percentage of Sales
Percent concentration	86.00%	77.00%	83.00%	78.00%
Three Customers Percentage of Receivables
Percent concentration			86.00%	72.00%
One Supplier Percentage of Purchased Inventory
Percent concentration	95.00%	98.00%	95.00%	99.00%