Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Apr. 09, 2020 | Jun. 30, 2019 | |
Document And Entity Information | |||
Entity Registrant Name | Zoom Telephonics, Inc. | ||
Entity Central Index Key | 0001467761 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Public Float | $ 14,141,442 | ||
Entity Common Stock, Shares Outstanding | 21,276,762 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2019 | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation State Country Code | DE | ||
Entity File Number | 04-2621506 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Current assets | ||
Cash and cash equivalents | $ 1,216,893 | $ 125,982 |
Restricted cash | 150,000 | 0 |
Accounts receivable, net | 4,070,576 | 2,760,606 |
Inventories | 7,440,350 | 7,927,678 |
Deposits on inventory purchases | 1,830 | 723,639 |
Prepaid expenses and other current assets | 267,908 | 194,946 |
Total current assets | 13,147,557 | 11,732,851 |
Equipment, net | 303,099 | 261,476 |
Operating lease right-of-use assets, net | 102,716 | 0 |
Other assets | 349,335 | 222,160 |
Total assets | 13,902,707 | 12,216,487 |
Current liabilities | ||
Bank credit line | 0 | 1,741,272 |
Accounts payable | 5,024,529 | 4,369,309 |
Operating lease liabilities | 102,716 | 0 |
Accrued other expenses | 2,666,471 | 2,229,561 |
Total current liabilities | 7,793,716 | 8,340,142 |
Commitments and contingencies (Note 6) | ||
Stockholders' equity | ||
Common stock: Authorized: 40,000,000 shares at $0.01 par value; Issued and outstanding: 20,929,928 shares and 16,124,681 shares at December 31, 2019 and 2018, respectively | 209,299 | 161,247 |
Additional paid-in capital | 46,496,330 | 41,035,936 |
Accumulated deficit | (40,596,638) | (37,320,838) |
Total stockholders' equity | 6,108,991 | 3,876,345 |
Total liabilities and stockholders' equity | $ 13,902,707 | $ 12,216,487 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 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 | 20,929,928 | 16,124,681 |
Common stock, outstanding | 20,929,928 | 16,124,681 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Statement [Abstract] | ||
Net sales | $ 37,614,456 | $ 32,323,482 |
Cost of goods sold | 26,708,653 | 20,679,116 |
Gross profit | 10,905,803 | 11,644,366 |
Operating expenses: | ||
Selling | 9,222,737 | 8,171,052 |
General and administrative | 2,666,876 | 1,648,748 |
Research and development | 2,237,416 | 1,771,887 |
Total | 14,127,029 | 11,591,687 |
Operating profit (loss) | (3,221,226) | 52,679 |
Other: | ||
Interest income | 13,975 | 285 |
Interest expense | (48,404) | (78,396) |
Other income (expense), net | 4,720 | (23,047) |
Total other income (expense), net | (29,709) | (101,158) |
Income (loss) before income taxes | (3,250,935) | (48,479) |
Income taxes | 24,865 | 25,798 |
Net income (loss) | $ (3,275,800) | $ (74,277) |
Basic and diluted net income (loss) per share | $ (0.18) | $ 0 |
Weighted average common and common equivalent shares: | ||
Basic and diluted | 18,051,070 | 15,956,785 |
CONSOLIDATED STATEMENTS OF STOC
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) | (74,277) | (74,277) | ||
Stock option exercise, Shares | 838,141 | |||
Stock option exercise, Amount | $ 8,382 | 370,875 | 379,257 | |
Stock based compensation | 399,779 | |||
Ending Balance, Shares at Dec. 31, 2018 | 16,124,681 | |||
Ending Balance, Amount at Dec. 31, 2018 | $ 161,247 | 41,035,936 | (37,320,838) | 3,876,345 |
Net income (loss) | (3,275,800) | (3,275,800) | ||
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 | 4,987,156 | 4,942,610 | |
Stock option exercise, Shares | 259,792 | |||
Stock option exercise, Amount | $ 2,598 | 58,050 | 60,648 | |
Stock based compensation | 505,188 | 505,188 | ||
Ending Balance, Shares at Dec. 31, 2019 | 20,929,928 | |||
Ending Balance, Amount at Dec. 31, 2019 | $ 209,299 | $ 46,496,330 | $ (40,596,638) | $ 6,108,991 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Operating activities: | ||
Net income (loss) | $ (3,275,800) | $ (74,277) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Stock based compensation | 505,188 | 399,779 |
Depreciation and amortization | 315,456 | 365,076 |
Amortization of right-of-use assets | 292,849 | 0 |
Provision (recovery) for accounts receivable allowances | 264,808 | (1,080) |
Provision (recovery) for inventory reserves | 18,988 | (77,698) |
Changes in operating assets and liabilities: | ||
Accounts receivable | (1,574,778) | (530,014) |
Inventories | 468,340 | (2,647,677) |
Prepaid expense and other current assets | 648,847 | (305,739) |
Operating lease liabilities | (318,183) | 0 |
Accounts payable and accrued expenses | 1,117,464 | 1,068,035 |
Net cash provided by (used in) operating activities | (1,536,821) | (1,803,595) |
Investing activities: | ||
Purchases of plant and equipment | (174,254) | (236,910) |
Certification costs incurred and capitalized | (310,000) | (93,000) |
Net cash provided by (used in) investing activities | (484,254) | (329,910) |
Financing activities: | ||
Proceeds from stock option exercise | 60,648 | 379,257 |
Net proceeds from private placement offering | 4,942,610 | 0 |
Net (payments to) proceeds from bank credit lines | (1,741,272) | 1,651,012 |
Net cash provided by (used in) financing activities | 3,261,986 | 2,030,269 |
Net change in cash | 1,240,911 | (103,236) |
Cash, cash equivalents, and restricted cash - Beginning | 125,982 | 229,218 |
Cash, cash equivalents, and restricted cash - Ending | 1,366,893 | 125,982 |
Cash paid during the period for: | ||
Interest | 48,404 | 78,396 |
Income taxes | 31,769 | 25,798 |
Cash is reported on the consolidated statements of cash flows as follows: | ||
Cash and cash equivalents | 1,216,893 | 125,982 |
Restricted cash | 150,000 | 0 |
Total Cash | $ 1,366,893 | $ 125,982 |
1. NATURE OF OPERATIONS
1. NATURE OF OPERATIONS | 12 Months Ended |
Dec. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF OPERATIONS | Zoom Telephonics, Inc. and its wholly owned subsidiary MTRLC LLC (collectively the "Company"), designs, produces, markets and supports cable modems and other communication products. |
2. SUMMARY OF SIGNIFICANT ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | (a) Basis of Presentation and Use of Estimates The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). All significant intercompany balances and transactions have been eliminated in the consolidation. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. Actual results may differ from those estimates. Significant estimates made by the Company include: 1) allowance for doubtful accounts for accounts receivable (collectability); 2) contract liabilities (sales returns, and other variable considerations); 3) asset valuation allowance for deferred income tax assets; 4) write-downs of inventory for slow-moving and obsolete items, and market valuations; 5) stock based compensation; 6) management’s assessment of going concern; 7) and estimated life of certification costs. (b) Cash and Cash Equivalents All highly liquid investments with original maturities of less than 90 days from the date of purchase are classified as cash equivalents. Cash equivalents consist exclusively of money market funds. The Company has deposits at a limited number of financial institutions with federally insured limits. Balances of cash and cash equivalents at these institutions can be in excess of the insured limits. However, the Company believes that the institutions are financially sound and there is only nominal risk of loss. (c) Restricted Cash All cash held by the Company that is not immediately available for working capital purposes or has restrictions on use is reported as Restricted cash in the accompanying consolidated balance sheets. Restricted cash balance at December 31, 2019 was $150,000 and is a Letter of Credit to support bond on tariffs. Restricted cash balance at December 31, 2018 was $0. (d) Inventories Inventories are stated at the lower of cost, determined using the first-in, first-out method, or net realizable value. Consigned inventory is held at third-party locations. The Company retains title to the inventory until purchased by the third-party. Consigned inventory, consisting of finished goods, was approximately $1,841,400 and $1,537,300 at December 31, 2019 and 2018, respectively. (e) Equipment Equipment is stated at cost, less accumulated depreciation. Depreciation of equipment is provided using the straight-line method over the estimated useful lives of the assets. (f) Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to undiscounted future net cash flows expected to be generated by the asset or asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. (g) Other Assets Other assets are stated at cost, less accumulated amortization. Certain certification costs incurred that are necessary to market and sell products are capitalized and reported as “other assets” in the accompanying consolidated balance sheets when the costs are measurable, significant, and relating to products that are projected to generate revenue beyond twelve months. These costs are amortized over an eighteen-month period, beginning when the related products are available to be sold. Total certification costs capitalized during the year ended December 31, 2019 were $310,000, with related amortization expense of $128,385 in 2019.Total certification costs capitalized during the year ended December 31, 2018 were $93,000, with related amortization expense of $208,068 in 2018. (h) Income Taxes Deferred income taxes are provided on the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and on net operating loss and tax credit carry forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for that portion of deferred tax assets not expected to be realized. (i) Sales Tax The Company recorded a sales tax accrual in 2017 after the Company became aware that a state sales tax liability was both probable and estimable as of December 31, 2017. The state sales tax liability stems from the Company’s ‘Fulfilled By Amazon’ sales agreement which allows Amazon to warehouse the Company’s inventory throughout a number of states. As a result, the Company recorded an expense of approximately $831 thousand in during the year ended December 31, 2017. During the year 2018, the Company settled its obligations with most of the states, and re-assessed its liability which resulted in a reduction of approximately $203 thousand in the sales tax liability. As of December 31, 2018, approximately $86 thousand of the original state sales tax liability remains and $133 thousand relates to sales tax that has been collected and not yet remitted to the respective states. As of December 31, 2019, approximately $51 thousand of the original state sales tax liability remains and $98 thousand relates to sales tax that has been collected and not yet remitted to the respective states. (j) Earnings (Loss) Per Common Share Basic earnings (loss) per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares, except for periods with a loss from operations. Diluted earnings (loss) per share reflects additional common shares that would have been outstanding if dilutive potential shares of common stock had been issued. Potential shares of common stock that may be issued by the Company include shares of common stock that may be issued upon exercise of outstanding stock options. Under the treasury stock method, the unexercised options are assumed to be exercised at the beginning of the period or at issuance, if later. The assumed proceeds are then used to purchase shares of common stock at the average market price during the period. Diluted earnings (loss) per common share for the years ended December 31, 2019 and 2018 exclude the effects of 467,641 and 732,772 common share equivalents, respectively, since such inclusion would be anti-dilutive. The common share equivalents consist of common shares issuable upon exercise of outstanding stock options. (k) Revenue Recognition The Company primarily sells hardware products to its customers. The hardware products include cable modems, mobile broadband modems, DSL modems, dial-up modems and wireless and wired networking equipment. The Company does not sell software. The Company derives its net sales primarily from the sales of hardware products to computer peripherals retailers, computer product distributors, OEMs, and direct to consumers and other channel partners via the Internet. The Company accounts for point-of-sale taxes on a net basis. 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: December 31, 2019 December 31, 2018 Gross accounts receivable $ 4,346,810 $ 2,774,619 Allowance for doubtful accounts (276,234 ) (14,013 ) Total accounts receivable, net $ 4,070,576 $ 2,760,606 Accrued other expenses: December 31, 2019 December 31, 2018 Audit, legal, payroll $ 256,966 $ 234,119 Royalty costs 1,125,000 875,000 Sales allowances* 901,196 611,719 Sales and use tax 148,836 219,286 Other 234,473 289,437 Total accrued other expenses $ 2,666,471 $ 2,229,561 -------------------------------------------------------------------------------------------------------------------------------------------------------- *A related inventory contract asset stemming from the sales return reserve of $376 thousand and $318 thousand is included within inventories on the accompanying consolidated balance sheets as of December 31, 2019 and 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: Year 2019 Year 2018 Retailers $ 35,164,563 $ 29,166,422 Distributors 1,309,875 1,730,702 Other 1,140,018 1,426,359 Total $ 37,614,456 $ 32,323,483 Disaggregated revenue by product: Year 2019 Year 2018 Cable Modems & gateways $ 33,810,410 $ 29,135,155 Other 3,804,046 3,188,328 Total $ 37,614,456 $ 32,323,483 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. (l) Fair Value of Financial Instruments The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: ● Level 1 ● Level 2 ● Level 3 Financial instruments consist of cash and cash equivalents, accounts receivable, bank debt, and accounts payable. Due to the short-term nature and payment terms associated with these instruments, their carrying amounts approximate fair value. (m) Stock-Based Compensation Compensation cost for awards is generally recognized over the required service period based on the estimated fair value of the awards on their grant date. Fair value is determined using the Black-Scholes option-pricing model wherein the discount rate is based on published daily treasury interest rates for zero-coupon bonds available from the US Treasury. Volatility is based on the historical volatility over a period that is commensurate with the expected life of the option granted. (n) Advertising Costs Advertising costs are expensed as incurred and reported in selling expense in the accompanying consolidated statements of operations, and include costs of advertising, production, trade shows, and other activities designed to enhance demand for the Company's products. The Company reported advertising costs of approximately $2.73 million in 2019 and $2.76 million in 2018. (o) Foreign Currencies The Company generates a portion of its revenues in markets outside North America principally in transactions denominated in foreign currencies, which exposes the Company to risks of foreign currency fluctuations. Foreign currency transaction gains and losses are reflected in operations and were not material for any period presented. The Company does not use derivative financial instruments for hedging purposes. (p) Warranty Costs The Company provides for the estimated costs that may be incurred under its standard warranty obligations, based on actual historical repair costs. The reserve for the provision for warranty costs was $37,718 and $31,852 at December 31, 2019 and 2018, respectively. (q) Shipping and Freight Costs The Company records the expense associated with customer-delivery shipping and freight costs in selling expense. The Company reported shipping and freight costs of $301.3 thousand in 2019 and $356.6 thousand in 2018. (r) 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 6(a), Lease obligations In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) — Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor's own operations by issuing share-based payment awards, and that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. ASU 2018-07 is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company adopted this standard effective January 1, 2019. The adoption of this standard was not material to our consolidated financial statements. (s) Recently Issued Accounting Standards In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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, which includes the Company’s accounts receivable. This ASU is effective for the Company for reporting periods beginning after December 15, 2022. The Company is currently assessing the potential impact that the adoption of this ASU will have on our consolidated financial statements. (t) 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. |
3. LIQUIDITY
3. LIQUIDITY | 12 Months Ended |
Dec. 31, 2019 | |
Liquidity | |
LIQUIDITY | The Company’s cash balance on December 31, 2019 was $1.2 million compared to $126 thousand on December 31, 2018. On December 31, 2019, the Company had no bank debt on an available asset-based credit line of $3.0 million, working capital of $5.4 million, and a current ratio of 1.7. 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. The Company’s net losses of $3.3 million in 2019 and $74k in 2018, along with cash used in operations of $1.5 million in 2019 and $1.8 million in 2018 have raised management concerns as to the Company’s ability to continue as going concern. Adding to that is recent impact of COVID-19 and its potential disruptions to the Company’s operations. The 25% US tariffs assessed on products imported from China had a significant impact on cash and net loss for 2019. These tariffs will continue to have an impact on our financial performance until we have fully transitioned all of our production supply out of China. In late 2019, we made the decision to move our outsourced manufacturing operations from China to Vietnam, primarily to end the exposure to the trade-war imposed tariffs with China. While the COVID-19 outbreak caused delays in the original transition plan, we are actively working with our primary outsourced development partner to establish manufacturing operations in Haiphong, Vietnam. The transition to Vietnam has begun, we have reached full production in Vietnam on one of our top models and expect to have all manufacturing of existing models fully transitioned to Vietnam by the end of June 2020. This will save the company approximately $500,000 per month in tariff cost, plus release an additional $800,000 in restricted cash over the next year related to performance bonds required to be posted related to the tariffs. The company is also further diversifying its relationships with outsourced manufacturers. Zoom signed an agreement with [Foxconn], one of the leading global outsourced manufacturers to the high-tech industry, to manufacture several of the new models the company plans to introduce to the market during 2020. The Company has implemented cost cutting measures to conserve cash, put a hold on all new hiring during 2020, and has given notice that we will not renew the same footprint of our headquarters office lease when it expires in June 2020, retaining just a few offices in our current co-work space office suite for research and testing purposes. Our work force continues to work remotely and we are continuing operations. We have negotiated improved payment terms with our primary outsourced manufacturing partner. The Company has been approved by Rosenthal & Rosenthal for an expansion of our revolving working capital line of credit from $3 to $4 million. We signed an extension of our networking product license agreement with Motorola through 2025 and we also signed a new license agreement with Motorola to sell consumer grade home security and monitoring products and to provide related services, We continue to develop new products and are on track to introduce several new models to the market during 2020 and 2021. While the COVID-19 outbreak disrupted sales and production for a short period of time during mid-March 2020, we worked through the disruption. In mid-March, sales initially decreased in response to a key distributor focusing its distribution logistics on essential healthcare products. Our products, which are instrumental to businesses and consumers establishing remote and home-based offices, have since been designated as essential and are once again being offered and are selling at normal levels and certain models are currently selling above their average run rates before COVID-19 had a global impact on business and the economy. We continue to work closely with our manufacturing partners and our distributors to ensure that our products remain consistently available for sale to end-users. Our sales throughout the first quarter of 2020 were tracking higher the level booked in the fourth quarter of 2019 except for the short-term reduction we experienced in the middle of March. The current environment is difficult, but with the steps the Company has taken and continues to take, as noted above, management expects to maintain acceptable levels of liquidity to meet its obligations as they become due and for at least twelve months from the date of issuance of the Company’s filing of this Annual Form 10-K with the Securities and Exchange Commission, t |
4. INVENTORIES
4. INVENTORIES | 12 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | Inventories consist of the following at December 31: 2019 2018 Materials $ 911,054 $ 2,043,843 Work in process 10,284 121,624 Finished goods 6,519,012 5,762,211 Total $ 7,440,350 $ 7,927,678 Finished goods includes consigned inventory held by our customers of $1,841,400 and $1,537,300 at December 31, 2019 and 2018, respectively. 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 both year ended December 31, 2019 and year ended December 31, 2018. |
5. EQUIPMENT
5. EQUIPMENT | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
EQUIPMENT | Equipment consists of the following at December 31: 2019 2018 Estimated Useful lives in years Computer hardware and software $ 308,767 $ 261,863 3 Machinery and equipment 316,945 300,441 5 Molds, tools and dies 651,063 551,162 5 Office furniture and fixtures 50,948 40,001 5 1,327,722 1,153,467 Accumulated depreciation (1,024,623 ) (891,991 ) Equipment, net $ 303,099 $ 261,476 Depreciation expense for the year ended $ 132,632 $ 137,008 |
6. COMMITMENTS AND CONTINGENCIE
6. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | (a) Lease Obligations In June 2016 the Company signed a three-year sub-lease agreement for 11,480 square feet on the 28th floor of 99 High Street, Boston, MA 02110. The lease for this facility expired on June 30, 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 lease for these offices expires on June 30, 2020. 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 $558.2 thousand in 2019 and $423.5 thousand in 2018. The Company performs most of the final assembly, testing, packaging, warehousing and distribution at a production and warehouse facility in Tijuana, Mexico. In November 2014 we signed a one-year lease with five one-year renewal options thereafter for an 11,390 square foot facility in Tijuana, Mexico. In September 2015, Zoom extended the term of the lease from December 1, 2015 through November 30, 2018. In September 2015, Zoom also signed a new lease for additional space in the adjacent building, which doubled our capacity. The term of this lease was from March 1, 2016 through November 30, 2018. The Company currently has signed a lease extension to stay in the existing facilities through at least November 30, 2020. Rent expense was $106.2 thousand in 2019 and $106.2 thousand in 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 another one-year lease signed in December 2019 for approximately 1,500 square feet in Boston The Company has elected to apply the short-term lease exception for both of these leases 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 for these leases was approximately $74.9 thousand in 2019 and approximately $18 thousand in 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. As of December 31, 2019, the Company's estimated future minimum committed rental payments, excluding executory costs, under the operating leases described above to their expiration or the earliest possible termination date, whichever is sooner, are $452 thousand for 2020. There are no future minimum committed rental payments that extend beyond 2020. 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. Based on the Company's financial position and ability to obtain financing at the time ASC 842 was adopted, 10% was considered by management to be a reasonable 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 December 31, 2019. December 31, 2019 Maturity of Lease Liabilities Lease Payments 2020 $ 106,226 Less: Imputed interest (3,510 ) Present value of operating lease liabilities $ 102,716 Balance Sheet Classification Operating lease liabilities $ 102,716 Other Information Weighted-average remaining lease term for operating leases 1.00 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 $395,565, and reclassified deferred rent of $25,334 as a reduction of the right-of-use assets. During the year-ended December 31, 2019, the operating lease liability was reduced by $318,183 and we recorded amortization of our right-of-use assets of $292,849. Supplemental cash flow information and non-cash activity related to our operating leases are as follows: Year Ended December 31, 2019 2018 Operating cash flow information: Amounts included in measurement of lease liabilities $ 324,346 $ –– Non-cash activities Right-of-use assets obtained in exchange for lease obligations $ 395,565 $ –– (b) Contingencies The Company is party to various lawsuits and administrative proceedings arising in the ordinary course of business. The Company evaluates such lawsuits and proceedings on a case-by-case basis, and its policy is to vigorously contest any such claims which it believes are without merit. The Company reviews the status of its legal proceedings and records a provision for a liability when it is considered probable that both a liability has been incurred and the amount of the loss can be reasonably estimated. This review is updated periodically as additional information becomes available. If either or both of the criteria are not met, the Company reassesses whether there is at least a reasonable possibility that a loss, or additional losses, may be incurred. If there is a reasonable possibility that a loss may be incurred, the Company discloses the estimate of the amount of the loss or range of losses, that the amount is not material, or that an estimate of the loss cannot be made. The Company expenses its legal fees as incurred. On January 23, 2020, William Schulze filed a complaint (the “Schulze Complaint”) as lead plaintiff on behalf of purchasers of Zoom modems in a putative class action lawsuit against Zoom in the U.S. District Court for the District of Massachusetts. The Schulze Complaint alleges that Zoom modems were sold as new despite containing refurbished parts. Zoom intends to vigorously defend itself against these claims. The Company does not have any other pending or outstanding legal proceedings beyond that referenced above. (c) Commitments In May 2015 Zoom entered into a License Agreement with Motorola Mobility LLC (the “License Agreement”). The License Agreement provides Zoom with an exclusive license to use certain trademarks owned by Motorola Trademark Holdings, LLC. for the manufacture, sale and marketing of consumer cable modem products in the United States and Canada through certain authorized sales channels. In August 2016 Zoom entered into an amendment to the License Agreement with Motorola Mobility LLC (the “2016 Amendment”). The 2016 Amendment expands Zoom’s exclusive license to use the Motorola trademark to a wide range of authorized channels worldwide, and expands the license from cable modems and gateways to also include consumer routers, WiFi range extenders, home powerline network adapters, and access points. In August 2017 Zoom entered into an amendment to the License Agreement with Motorola Mobility LLC (the “2017 Amendment”). The 2017 Amendment expands Zoom’s exclusive license to use the Motorola trademark to a wide range of authorized channels worldwide, and expands the license from cable modems, gateways, consumer routers, WiFi range extenders, home powerline network adapters, and access points to also include MoCa adapters, and cellular sensors. The License Agreement, as amended, has a five-year term beginning January 1, 2016 through December 31, 2020 and increased the minimum royalty payments as outlined below. In March 2020 Zoom entered into an amendment to the License Agreement with Motorola Mobility LLC. The 2020 Amendment expands Zoom’s exclusive license to use the Motorola trademark to a wide range of authorized channels worldwide, including Service Provider Channels. The License Agreement, as amended, has a ten-year term beginning January 1, 2016 through December 31, 2025 and modified 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, 2020: $ 5,100,000 2021: $ 4,300,000 2022: $ 4,300,000 2023: $ 4,300,000 2024: $ 4,300,000 2025: $ 4,300,000 Royalty expense under the License Agreement amounted to $4,500,000 for 2019 and $3,500,000 for 2018, and is reported in selling expense on the accompanying consolidated statements of operations. |
7. STOCK OPTION PLANS
7. STOCK OPTION PLANS | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
STOCK OPTION PLANS | 2019 Stock Option Plan On July 9, 2019, the Company established the 2019 Stock Option Plan Number of shares Weighted average exercise price Weighted Average Remaining Contractual Life Outstanding as of January 1, 2019 — $ — — Granted 820,000 0.83 Exercised — — Outstanding as of December 31, 2019 820,000 $ 0.83 2.68 Options exercisable at December 31, 2019 — — — The weighted average grant date fair value of options granted was $0.40 in 2019. The aggregate intrinsic value of options outstanding was approximately $0.3 million at December 31, 2019. The aggregate intrinsic value of exercisable options was approximately $0 at December 31, 2019. As of December 31, 2019 there remained 3,180,000 options available to be issued under the 2019 Stock Option Plan. 2019 Director Stock Option Plan On July 9, 2019 the Company established the 2019 Director Stock Option Plan Number of shares Weighted average exercise price Weighted Average Remaining Contractual Life Outstanding as of January 1, 2019 –– $ –– –– Granted 45,000 0.97 Exercised –– –– Outstanding as of December 31, 2019 45,000 $ 0.97 2.50 Options exercisable at December 31, 2019 45,000 $ 0.97 2.50 The weighted average grant date fair value of options granted was $0.53 in 2019. The aggregate intrinsic value of options outstanding was approximately $9.5 thousand at December 31, 2019. The aggregate intrinsic value of exercisable options was approximately $9.5 thousand at December 31, 2019. As of December 31, 2019 there remained 955,000 options available to be issued under the 2019 Director Stock Option Plan. 2009 Stock Option Plan On December 10, 2009, the Company established the 2009 Stock Option Plan Number of shares Weighted average exercise price Weighted Average Remaining Contractual Life Outstanding as of January 1, 2018 1,459,494 $ 0.45 1.59 Granted 899,500 2.11 Exercised (740,641 ) 0.34 Expired/Forfeited (48,750 ) — Outstanding as of December 31, 2018 1,569,603 1.41 2.13 Granted 90,000 0.95 Exercised (199,792 ) 0.24 Expired/Forfeited (150,000 ) — Outstanding as of December 31, 2019 1,309,811 $ 1.45 1.28 Options exercisable at December 31, 2019 859,936 $ 1.22 1.04 The weighted average grant date fair value of options granted was $0.46 in 2019. The weighted average grant date fair value of options granted was $0.92 in 2018. The aggregate intrinsic value of options outstanding was approximately $369 thousand at December 31, 2019 and approximately $730 thousand at December 31, 2018. The aggregate intrinsic value of exercisable options was approximately $353 thousand at December 31, 2019 and $730 thousand at December 31, 2018. As of December 31, 2019 there remained no options available to be issued under the 2009 Stock Option Plan. The 2009 Stock Option Plan terminated on December 1, 2019. The 2019 Stock Option Plan was approved on July 9, 2019 and replaced the 2009 Stock Option Plan. 2009 Director Stock Option Plan On December 10, 2009 the Company established the 2009 Director Stock Option Plan Number of shares Weighted average exercise price Weighted Average Remaining Contractual Life Outstanding as of January 1, 2018 330,000 $ 1.32 2.80 Granted 110,000 2.51 Exercised (97,500 ) 1.29 Outstanding as of December 31, 2018 342,500 1.71 2.52 Granted 97,500 1.09 Exercised (60,000 ) 0.23 Forfeited (80,000 ) Outstanding as of December 31, 2019 300,000 $ 1.63 2.00 Options exercisable at December 31, 2019 300,000 $ 1.63 2.00 The weighted average grant date fair value of options granted was $0.57 in 2019 and $1.28 in 2018. The aggregate intrinsic value of options outstanding was approximately $41 thousand at December 31, 2019 and $119 thousand at December 31, 2018. The aggregate intrinsic value of exercisable options was approximately $41 thousand at December 31, 2019 and $119 thousand at December 31, 2018. As of December 31, 2019 there remained no options available to be issued under the 2009 Director Stock Option Plan. The 2009 Director Stock Option Plan terminated on December 1, 2019. The 2019 Director Stock Option Plan was approved on July 9, 2019 and replaced the 2009 Director Stock Option Plan. The Black-Scholes range of assumptions for the all Stock Option Plans is shown below: 2019 2018 Assumptions: Expected life 2.75 (yrs) - 3.5 (yrs) 2.75 (yrs) - 3.5 (yrs) Expected volatility 77.74% - 87.40% 71.97% - 88.86% Risk-free interest rate 1.34% - 2.69% 2.08% - 2.74% Expected dividend yield 0.00% 0.00% The unrecognized stock based compensation expense related to non-vested stock awards was approximately $258 thousand as of December 31, 2019. This amount will be recognized through the fourth quarter of 2021. The Company has a commitment to grant variable amount of stock options by October 4, 2020 driven by $100,000 of fair value of stock option expense. |
8. INCOME TAXES
8. INCOME TAXES | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | Income tax expense consists of: Current Deferred Total Year Ended December 31, 2018: U.S. federal $ –– $ –– $ –– State and local 14,305 –– 14,305 Foreign 11,493 –– 11,493 $ 25,798 $ –– $ 25,798 Year Ended December 31, 2019: U.S. federal $ –– $ –– $ –– State and local 10,792 –– 10,792 Foreign 14,073 –– 14,073 $ 24,865 $ –– $ 24,865 A reconciliation of the expected income tax expense or benefit to actual follows: 2018 2019 Computed "expected" US tax (benefit) at Federal statutory rate $ (12,594 ) $ (685,652 ) Change resulting from: State and local income taxes, net of federal income tax benefit 4,927 (102,770 ) Valuation allowance 115,960 411,810 Non––deductible items 701 87,998 Expired Federal net operating loss 90,375 218,376 Federal and state rate changes (173,571 ) 95,103 State net operating loss true up and rate change –– –– Income tax expense $ 25,798 $ 24,865 Temporary differences at December 31 follow: 2018 2019 Deferred income tax assets: Inventories $ 129,349 $ 145,884 Accounts receivable 137,522 253,559 Accrued expenses 72,749 80,068 Net operating loss and tax credit carry forwards 13,020,122 13,276,081 Plant and equipment 13,615 6,014 Stock compensation 112,664 123,841 Lease accounting –– 26,515 Other – interest expense –– 12,385 Total deferred income tax assets 13,486,022 13,924,347 Valuation allowance (13,486,022 ) (13,924,347 ) Net deferred tax assets $ –– $ –– On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) that significantly revised the U.S. tax code effective January 1, 2018 by, among other things, lowering the corporate income tax rate from a top marginal rate of 35% to a flat 21%. As of December 31, 2019 the Company had federal net operating loss carry forwards of approximately $56,267,000 which are available to offset future taxable income. They are due to expire in varying amounts from 2020 to 2038. Federal net operating losses occurring after December 31, 2017, of approximated $3,138,000 may be carried forward indefinitely. As of December 31, 2019, the Company had state net operating loss carry forwards of approximately $11,350,000 which are available to offset future taxable income. They are due to expire in varying amounts from 2031 through 2038. A valuation allowance has been established for the full amount of deferred income tax assets as management has concluded that it is more-likely than-not that the benefits from such assets will not be realized. The Company reviews annually the guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a "more-likely-than-not" recognition threshold. At December 31, 2019 and 2018, the Company did not have any uncertain tax positions. No interest and penalties related to uncertain tax positions were accrued at December 31, 2019 and 2018. The Company files income tax returns in the United States and Mexico. Tax years subsequent to 2015 remain subject to examination for both US federal and state tax reporting purposes. Tax years subsequent to 2013 remain subject to examination for Mexico tax reporting purposes. The foreign income tax reported represents tax on operations for the Company that is located in a special economic zone in Mexico. Other than the Mexico facility, the Company has no operations in a foreign location. |
9. SIGNIFICANT CUSTOMERS
9. SIGNIFICANT CUSTOMERS | 12 Months Ended |
Dec. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
SIGNIFICANT CUSTOMERS | The Company sells its products primarily through high-volume distributors and retailers, internet service providers, telephone service providers, value-added resellers, PC system integrators, and OEMs. The Company supports its major accounts in their efforts to discern strategic directions in the market, to maintain appropriate inventory levels, and to offer a balanced selection of attractive products. Relatively few companies account for a substantial portion of the Company’s revenues. In 2019 two companies accounted for 10% or greater individually, and 84% in the aggregate of the Company’s total net sales. At December 31, 2019 three companies with an accounts receivable balance of 10% or greater individually accounted for a combined 84% of the Company’s accounts receivable. In 2018 two companies accounted for 10% or greater individually, and 78% in the aggregate of the Company’s total net sales. At December 31, 2018, four companies with an accounts receivable balance of 10% or greater individually accounted for a combined 79% of the Company’s accounts receivable. |
10. SEGMENT AND GEOGRAPHIC INFO
10. SEGMENT AND GEOGRAPHIC INFORMATION | 12 Months Ended |
Dec. 31, 2019 | |
Segment Reporting [Abstract] | |
SEGMENT AND GEOGRAPHIC INFORMATION | The Company's operations are classified as one reportable segment. Substantially all of the Company's operations and long-lived assets reside primarily in the North America. Net sales information follows: FY 2019 Percent FY 2018 Percent North America $ 36,741,262 97.7 % $ 31,687,051 98.0 % Outside North America 873,194 2.3 % 636,432 2.0 % Total $ 37,614,456 100.0 % $ 32,323,483 100.0 % |
11. DEPENDENCE ON KEY SUPPLIERS
11. DEPENDENCE ON KEY SUPPLIERS | 12 Months Ended |
Dec. 31, 2019 | |
Dependence On Key Suppliers | |
DEPENDENCE ON KEY SUPPLIERS | 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. In 2019, the Company had one supplier that provided 96.3% of the Company's purchased inventory. In 2018, the Company had one supplier that provided 98.7% of the Company's purchased inventory. |
12. RETIREMENT PLAN
12. RETIREMENT PLAN | 12 Months Ended |
Dec. 31, 2019 | |
Retirement Benefits [Abstract] | |
RETIREMENT PLAN | The Company has a 401(k) retirement savings plan for employees. Under the plan, the Company matches 25% of an employee's contribution, up to a maximum of $350 per employee per year. Company matching contributions charged to expense in 2018 and 2019 were $6,848 and $5,405, respectively. |
13. BANK CREDIT LINE
13. BANK CREDIT LINE | 12 Months Ended |
Dec. 31, 2019 | |
Line of Credit Facility [Abstract] | |
BANK CREDIT LINE | On December 18, 2012, the Company entered into a Financing Agreement with Rosenthal & Rosenthal, Inc. (the “Financing Agreement”). The Financing Agreement provided for up to $1.75 million of revolving credit, subject to a borrowing base formula and other terms and conditions as specified in the Financing Agreement. The Financing Agreement continued until November 30, 2014 and automatically renews from year to year thereafter, unless sooner terminated by either party as specified in the Financing Agreement. The Lender shall have the right to terminate the Financing Agreement at any time by giving the Company sixty days’ prior written notice. 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 covenant compliance on a quarterly basis and as of December 31, 2019, the Company was in compliance with both its working capital and tangible net worth covenants. At December 31, 2019, the Company’s tangible net worth was approximately $5.7 million, while the Company’s working capital was approximately $5.4 million. Loan availability is based on certain eligible receivables. Loan availability was approximately $3 million as of December 31, 2019. |
14. PRIVATE PLACEMENT
14. PRIVATE PLACEMENT | 12 Months Ended |
Dec. 31, 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 the Company’s management and its Board of Directors, and certain co-founders of the Company, 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. |
15. RELATED PARTY DISCLOSURES
15. RELATED PARTY DISCLOSURES | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
RELATED PARTY DISCLOSURES | On July 25, 2019, the Company entered into a Master Partnership Agreement with Minim Inc. (“Minim”), together with a related Statement of Work, License, Collaborative Agreement, Software/Service Availability Agreement and Software/Service Support Level Agreement (collectively, the “Partnership Agreement”). Under the Partnership Agreement, the Company will integrate Minim software and services into certain hardware products distributed by the Company, and Minim will be entitled to certain fees and a portion of revenue received from the end users of such services and software. The Company and Minim entered into an additional Statement of Work on December 31, 2019 providing for further integration of Minim services, with a monthly minimum payment of $5,000 payable by the Company to Minim starting in January 2020 for a period of thirty-six months and a requirement for Minim to purchase at least $90,000 of the Company’s hardware by December 2022. Jeremy Hitchcock, who serves as Chairman of the Company’s Board of Directors, is the co-founder, Chief Executive Officer and a stockholder of Minim. During the fiscal year ended December 31, 2019, no payments were made by either the Company or Minim under the Partnership Agreement other than nominal payments, and no services were provided or expenses incurred in connection with the Partnership Agreement. As of December 31, 2019, no amounts were due from or to the Company under the Partnership Agreement. |
16. SUBSEQUENT EVENTS
16. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | Due to requirements of the United States Department of Homeland Security, and resulting from the continued 25% tariff on imports from China, the Company had to commit $400 thousand on a letter of credit in January, 2020 and another $250 thousand in April, 2020 to secure a bond on the import of these products. These funds will be reported as restricted cash, consistent with accounting reporting guidance. COVID-19 pandemic has had an impact on all areas of our company. Production has experienced delays, supply chain is disrupted, employees are working remotely. We are continuing operations, we have not laid off any employees, and we are taking steps necessary to operate under the restrictions currently placed on people and businesses. At this point, the extent to which COVID-19 may impact our financial condition or results of operations is uncertain. In February 2020 Zoom entered into a manufacture supply agreement with Foxconn. Agreement outlines general manufacturing procedures, with specific terms as the product quantity, price, delivery per purchase requisition. The term of the agreement is three years, with one-year automatic renewals, subject to three-month cancellation notice. In March 2020 Zoom entered into an amendment to the License Agreement with Motorola Mobility LLC (the “2020 Amendment”). The 2020 Amendment expands Zoom’s exclusive license to use the Motorola trademark to a wide range of authorized channels worldwide, including Service Provider Channels. The License Agreement, as amended, also extended the term through December 31, 2025. In March 2020 Zoom entered into a License Agreement with Motorola Mobility LLC to sell consumer grade home security and monitoring products and provide related services (the “2020 License Agreement”). In connection with the 2020 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, 2021: $ 2,050,000 2022: $ 2,300,000 2023: $ 2,550,000 2024: $ 2,800,000 2025: $ 2,800,000 Other than above, Management of the Company has reviewed subsequent events from December 31, 2019 through the date of filing and has concluded that there were no other subsequent events requiring adjustment to or disclosure in these consolidated financial statements. |
2. SUMMARY OF SIGNIFICANT ACC_2
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Use of Estimates | The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). All significant intercompany balances and transactions have been eliminated in the consolidation. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. Actual results may differ from those estimates. Significant estimates made by the Company include: 1) allowance for doubtful accounts for accounts receivable (collectability); 2) contract liabilities (sales returns, and other variable considerations); 3) asset valuation allowance for deferred income tax assets; 4) write-downs of inventory for slow-moving and obsolete items, and market valuations; 5) stock based compensation; 6) management’s assessment of going concern; 7) and estimated life of certification costs. |
Cash and Cash Equivalents | All highly liquid investments with original maturities of less than 90 days from the date of purchase are classified as cash equivalents. Cash equivalents consist exclusively of money market funds. The Company has deposits at a limited number of financial institutions with federally insured limits. Balances of cash and cash equivalents at these institutions can be in excess of the insured limits. However, the Company believes that the institutions are financially sound and there is only nominal risk of loss. |
Restricted Cash | All cash held by the Company that is not immediately available for working capital purposes or has restrictions on use is reported as Restricted cash in the accompanying consolidated balance sheets. Restricted cash balance at December 31, 2019 was $150,000 and is a Letter of Credit to support bond on tariffs. Restricted cash balance at December 31, 2018 was $0. |
Inventories | Inventories are stated at the lower of cost, determined using the first-in, first-out method, or net realizable value. Consigned inventory is held at third-party locations. The Company retains title to the inventory until purchased by the third-party. Consigned inventory, consisting of finished goods, was approximately $1,841,400 and $1,537,300 at December 31, 2019 and 2018, respectively. |
Equipment | Equipment is stated at cost, less accumulated depreciation. Depreciation of equipment is provided using the straight-line method over the estimated useful lives of the assets. |
Impairment of Long-Lived Assets | Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to undiscounted future net cash flows expected to be generated by the asset or asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. |
Other Assets | Other assets are stated at cost, less accumulated amortization. Certain certification costs incurred that are necessary to market and sell products are capitalized and reported as “other assets” in the accompanying consolidated balance sheets when the costs are measurable, significant, and relating to products that are projected to generate revenue beyond twelve months. These costs are amortized over an eighteen-month period, beginning when the related products are available to be sold. Total certification costs capitalized during the year ended December 31, 2019 were $310,000, with related amortization expense of $128,385 in 2019.Total certification costs capitalized during the year ended December 31, 2018 were $93,000, with related amortization expense of $208,068 in 2018. |
Income Taxes | Deferred income taxes are provided on the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and on net operating loss and tax credit carry forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for that portion of deferred tax assets not expected to be realized. |
Sales Tax | The Company recorded a sales tax accrual in 2017 after the Company became aware that a state sales tax liability was both probable and estimable as of December 31, 2017. The state sales tax liability stems from the Company’s ‘Fulfilled By Amazon’ sales agreement which allows Amazon to warehouse the Company’s inventory throughout a number of states. As a result, the Company recorded an expense of approximately $831 thousand in during the year ended December 31, 2017. During the year 2018, the Company settled its obligations with most of the states, and re-assessed its liability which resulted in a reduction of approximately $203 thousand in the sales tax liability. As of December 31, 2018, approximately $86 thousand of the original state sales tax liability remains and $133 thousand relates to sales tax that has been collected and not yet remitted to the respective states. As of December 31, 2019, approximately $51 thousand of the original state sales tax liability remains and $98 thousand relates to sales tax that has been collected and not yet remitted to the respective states. |
Earnings (Loss) Per Common Share | Basic earnings (loss) per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares, except for periods with a loss from operations. Diluted earnings (loss) per share reflects additional common shares that would have been outstanding if dilutive potential shares of common stock had been issued. Potential shares of common stock that may be issued by the Company include shares of common stock that may be issued upon exercise of outstanding stock options. Under the treasury stock method, the unexercised options are assumed to be exercised at the beginning of the period or at issuance, if later. The assumed proceeds are then used to purchase shares of common stock at the average market price during the period. Diluted earnings (loss) per common share for the years ended December 31, 2019 and 2018 exclude the effects of 467,641 and 732,772 common share equivalents, respectively, since such inclusion would be anti-dilutive. The common share equivalents consist of common shares issuable upon exercise of outstanding stock options. |
Revenue Recognition | The Company primarily sells hardware products to its customers. The hardware products include cable modems, mobile broadband modems, DSL modems, dial-up modems and wireless and wired networking equipment. The Company does not sell software. The Company derives its net sales primarily from the sales of hardware products to computer peripherals retailers, computer product distributors, OEMs, and direct to consumers and other channel partners via the Internet. The Company accounts for point-of-sale taxes on a net basis. 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: December 31, 2019 December 31, 2018 Gross accounts receivable $ 4,346,810 $ 2,774,619 Allowance for doubtful accounts (276,234 ) (14,013 ) Total accounts receivable, net $ 4,070,576 $ 2,760,606 Accrued other expenses: December 31, 2019 December 31, 2018 Audit, legal, payroll $ 256,966 $ 234,119 Royalty costs 1,125,000 875,000 Sales allowances* 901,196 611,719 Sales and use tax 148,836 219,286 Other 234,473 289,437 Total accrued other expenses $ 2,666,471 $ 2,229,561 --------------------------------------------------------------------------------------------------------------------------------------------------------- *A related inventory contract asset stemming from the sales return reserve of $376 thousand and $318 thousand is included within inventories on the accompanying consolidated balance sheets as of December 31, 2019 and 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: Year 2019 Year 2018 Retailers $ 35,164,563 $ 29,166,422 Distributors 1,309,875 1,730,702 Other 1,140,018 1,426,359 Total $ 37,614,456 $ 32,323,483 Disaggregated revenue by product: Year 2019 Year 2018 Cable Modems & gateways $ 33,810,410 $ 29,135,155 Other 3,804,046 3,188,328 Total $ 37,614,456 $ 32,323,483 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. |
Fair Value of Financial Instruments | The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: ● Level 1 ● Level 2 ● Level 3 Financial instruments consist of cash and cash equivalents, accounts receivable, bank debt, and accounts payable. Due to the short-term nature and payment terms associated with these instruments, their carrying amounts approximate fair value. |
Stock-Based Compensation | Compensation cost for awards is generally recognized over the required service period based on the estimated fair value of the awards on their grant date. Fair value is determined using the Black-Scholes option-pricing model wherein the discount rate is based on published daily treasury interest rates for zero-coupon bonds available from the US Treasury. Volatility is based on the historical volatility over a period that is commensurate with the expected life of the option granted. |
Advertising Costs | Advertising costs are expensed as incurred and reported in selling expense in the accompanying consolidated statements of operations, and include costs of advertising, production, trade shows, and other activities designed to enhance demand for the Company's products. The Company reported advertising costs of approximately $2.73 million in 2019 and $2.76 million in 2018. |
Foreign Currencies | The Company generates a portion of its revenues in markets outside North America principally in transactions denominated in foreign currencies, which exposes the Company to risks of foreign currency fluctuations. Foreign currency transaction gains and losses are reflected in operations and were not material for any period presented. The Company does not use derivative financial instruments for hedging purposes. |
Warranty Costs | The Company provides for the estimated costs that may be incurred under its standard warranty obligations, based on actual historical repair costs. The reserve for the provision for warranty costs was $37,718 and $31,852 at December 31, 2019 and 2018, respectively. |
Shipping and Freight Costs | The Company records the expense associated with customer-delivery shipping and freight costs in selling expense. The Company reported shipping and freight costs of $301.3 thousand in 2019 and $356.6 thousand in 2018. |
Recently Issued Accounting Pronouncements | 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 6(a), Lease obligations In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) — Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor's own operations by issuing share-based payment awards, and that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. ASU 2018-07 is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company adopted this standard effective January 1, 2019. The adoption of this standard was not material to our consolidated financial statements. (s) Recently Issued Accounting Standards In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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, which includes the Company’s accounts receivable. This ASU is effective for the Company for reporting periods beginning after December 15, 2022. The Company is currently assessing the potential impact that the adoption of this ASU will have on our consolidated financial statements. |
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. |
2. SUMMARY OF SIGNIFICANT ACC_3
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Reclassification of accounts receivable allowances to accrued other expenses | December 31, 2019 December 31, 2018 Gross accounts receivable $ 4,346,810 $ 2,774,619 Allowance for doubtful accounts (276,234 ) (14,013 ) Total accounts receivable, net $ 4,070,576 $ 2,760,606 Accrued other expenses: December 31, 2019 December 31, 2018 Audit, legal, payroll $ 256,966 $ 234,119 Royalty costs 1,125,000 875,000 Sales allowances* 901,196 611,719 Sales and use tax 148,836 219,286 Other 234,473 289,437 Total accrued other expenses $ 2,666,471 $ 2,229,561 |
Disaggregation of revenue | Year 2019 Year 2018 Retailers $ 35,164,563 $ 29,166,422 Distributors 1,309,875 1,730,702 Other 1,140,018 1,426,359 Total $ 37,614,456 $ 32,323,483 Disaggregated revenue by product: Year 2019 Year 2018 Cable Modems & gateways $ 33,810,410 $ 29,135,155 Other 3,804,046 3,188,328 Total $ 37,614,456 $ 32,323,483 |
4. INVENTORIES (Tables)
4. INVENTORIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Inventories | 2019 2018 Materials $ 911,054 $ 2,043,843 Work in process 10,284 121,624 Finished goods 6,519,012 5,762,211 Total $ 7,440,350 $ 7,927,678 |
5. EQUIPMENT (Tables)
5. EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Equipment | 2019 2018 Estimated Useful lives in years Computer hardware and software $ 308,767 $ 261,863 3 Machinery and equipment 316,945 300,441 5 Molds, tools and dies 651,063 551,162 5 Office furniture and fixtures 50,948 40,001 5 1,327,722 1,153,467 Accumulated depreciation (1,024,623 ) (891,991 ) Equipment, net $ 303,099 $ 261,476 Depreciation expense for the year ended $ 132,632 $ 137,008 |
6. COMMITMENTS AND CONTINGENC_2
6. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Lease maturity | December 31, 2019 Maturity of Lease Liabilities Lease Payments 2020 $ 106,226 Less: Imputed interest (3,510 ) Present value of operating lease liabilities $ 102,716 Balance Sheet Classification Operating lease liabilities $ 102,716 Other Information Weighted-average remaining lease term for operating leases 1.00 Weighted-average discount rate for operating leases 10.0 % |
Supplemental cash flow information related to operating leases | Year Ended December 31, 2019 2018 Operating cash flow information: Amounts included in measurement of lease liabilities $ 324,346 $ –– Non-cash activities Right-of-use assets obtained in exchange for lease obligations $ 395,565 $ –– |
Minimum annual royalty payments | Year ending December 31, 2020: $ 5,100,000 2021: $ 4,300,000 2022: $ 4,300,000 2023: $ 4,300,000 2024: $ 4,300,000 2025: $ 4,300,000 |
7. STOCK OPTION PLANS (Tables)
7. STOCK OPTION PLANS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Fair value assumptions | 2019 2018 Assumptions: Expected life 2.75 (yrs) - 3.5 (yrs) 2.75 (yrs) - 3.5 (yrs) Expected volatility 77.74% - 87.40% 71.97% - 88.86% Risk-free interest rate 1.34% - 2.69% 2.08% - 2.74% Expected dividend yield 0.00% 0.00% |
2019 Stock Option Plan | |
Plan activity | Number of shares Weighted average exercise price Weighted Average Remaining Contractual Life Outstanding as of January 1, 2019 — $ — — Granted 820,000 0.83 Exercised — — Outstanding as of December 31, 2019 820,000 $ 0.83 2.68 Options exercisable at December 31, 2019 — — — |
2019 Stock Option Plan | Directors Plan | |
Plan activity | Number of shares Weighted average exercise price Weighted Average Remaining Contractual Life Outstanding as of January 1, 2019 — $ — — Granted 45,000 0.97 Exercised — — Outstanding as of December 31, 2019 45,000 $ 0.97 2.50 Options exercisable at December 31, 2019 45,000 $ 0.97 2.50 |
2009 Stock Option Plan | |
Plan activity | Number of shares Weighted average exercise price Weighted Average Remaining Contractual Life Outstanding as of January 1, 2018 1,459,494 $ 0.45 1.59 Granted 899,500 2.11 Exercised (740,641 ) 0.34 Expired/Forfeited (48,750 ) — Outstanding as of December 31, 2018 1,569,603 1.41 2.13 Granted 90,000 0.95 Exercised (199,792 ) 0.24 Expired/Forfeited (150,000 ) — Outstanding as of December 31, 2019 1,309,811 $ 1.45 1.28 Options exercisable at December 31, 2019 859,936 $ 1.22 1.04 |
2009 Stock Option Plan | Directors Plan | |
Plan activity | Number of shares Weighted average exercise price Weighted Average Remaining Contractual Life Outstanding as of January 1, 2018 330,000 $ 1.32 2.80 Granted 110,000 2.51 Exercised (97,500 ) 1.29 Outstanding as of December 31, 2018 342,500 1.71 2.52 Granted 97,500 1.09 Exercised (60,000 ) 0.23 Forfeited (80,000 ) Outstanding as of December 31, 2019 300,000 $ 1.63 2.00 Options exercisable at December 31, 2019 300,000 $ 1.63 2.00 |
8. INCOME TAXES (Tables)
8. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of income taxes | Current Deferred Total Year Ended December 31, 2018: U.S. federal $ –– $ –– $ –– State and local 14,305 –– 14,305 Foreign 11,493 –– 11,493 $ 25,798 $ –– $ 25,798 Year Ended December 31, 2019: U.S. federal $ –– $ –– $ –– State and local 10,792 –– 10,792 Foreign 14,073 –– 14,073 $ 24,865 $ –– $ 24,865 |
Schedule of income tax reconciliation | 2018 2019 Computed "expected" US tax (benefit) at Federal statutory rate $ (12,594 ) $ (685,652 ) Change resulting from: State and local income taxes, net of federal income tax benefit 4,927 (102,770 ) Valuation allowance 115,960 411,810 Non––deductible items 701 87,998 Expired Federal net operating loss 90,375 218,376 Federal and state rate changes (173,571 ) 95,103 State net operating loss true up and rate change –– –– Income tax expense $ 25,798 $ 24,865 |
Schedule of deferred tax assets | 2018 2019 Deferred income tax assets: Inventories $ 129,349 $ 145,884 Accounts receivable 137,522 253,559 Accrued expenses 72,749 80,068 Net operating loss and tax credit carry forwards 13,020,122 13,276,081 Plant and equipment 13,615 6,014 Stock compensation 112,664 123,841 Lease accounting –– 26,515 Other – interest expense –– 12,385 Total deferred income tax assets 13,486,022 13,924,347 Valuation allowance (13,486,022 ) (13,924,347 ) Net deferred tax assets $ –– $ –– |
10. SEGMENT AND GEOGRAPHIC IN_2
10. SEGMENT AND GEOGRAPHIC INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Segment Reporting [Abstract] | |
Company's net sales by geographic region | FY 2019 Percent FY 2018 Percent North America $ 36,741,262 97.7 % $ 31,687,051 98.0 % Outside North America 873,194 2.3 % 636,432 2.0 % Total $ 37,614,456 100.0 % $ 32,323,483 100.0 % |
16. SUBSEQUENT EVENTS (Tables)
16. SUBSEQUENT EVENTS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
Minimum quarterly royalties payable | Year ending December 31, 2021: $ 2,050,000 2022: $ 2,300,000 2023: $ 2,550,000 2024: $ 2,800,000 2025: $ 2,800,000 |
2. SUMMARY OF SIGNIFICANT ACC_4
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Accounting Policies [Abstract] | ||
Gross accounts receivable | $ 4,346,810 | $ 2,774,619 |
Allowance for doubtful accounts | (276,234) | (14,013) |
Total accounts receivable, net | 4,070,576 | 2,760,606 |
Audit, legal, payroll | 256,966 | 234,119 |
Royalty costs | 1,125,000 | 875,000 |
Sales allowances | 901,196 | 611,719 |
Sales and use tax | 148,836 | 219,286 |
Other | 234,473 | 289,437 |
Total accrued other expenses | $ 2,666,471 | $ 2,229,561 |
2. SUMMARY OF SIGNIFICANT ACC_5
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Revenues | $ 37,614,456 | $ 32,323,482 |
Cable Modems & gateways | ||
Revenues | 33,810,410 | 29,135,155 |
Other | ||
Revenues | 3,804,046 | 3,188,328 |
Retailers | ||
Revenues | 35,164,563 | 29,166,422 |
Distributors | ||
Revenues | 1,309,875 | 1,730,702 |
Other | ||
Revenues | $ 1,140,018 | $ 1,426,359 |
4. INVENTORIES (Details)
4. INVENTORIES (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Materials | $ 911,054 | $ 2,043,843 |
Work in process | 10,284 | 121,624 |
Finished goods | 6,519,012 | 5,762,211 |
Total inventories | $ 7,440,350 | $ 7,927,678 |
4. INVENTORIES (Details Narrati
4. INVENTORIES (Details Narrative) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Finished goods held by customer | $ 1,841,400 | $ 1,537,300 |
5. EQUIPMENT (Details)
5. EQUIPMENT (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Equipment | $ 1,327,722 | $ 1,153,467 |
Accumulated depreciation | (1,024,623) | (891,991) |
Equipment, net | 303,099 | 261,476 |
Depreciation expense for year ended | 132,632 | 137,008 |
Computer hardware and software | ||
Equipment | $ 308,767 | 261,863 |
Estimated useful lives | 3 years | |
Machinery and equipment | ||
Equipment | $ 316,945 | 300,441 |
Estimated useful lives | 5 years | |
Molds, tools and dies | ||
Equipment | $ 651,063 | 551,162 |
Estimated useful lives | 5 years | |
Office furniture and fixtures | ||
Equipment | $ 50,948 | $ 40,001 |
Estimated useful lives | 5 years |
6. COMMITMENTS AND CONTINGENC_3
6. COMMITMENTS AND CONTINGENCIES (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Leases [Abstract] | ||
2020 | $ 106,226 | |
Less: Imputed interest | (3,510) | |
Present value of operating lease liabilities | 102,716 | |
Operating lease liabilities | $ 102,716 | $ 0 |
Weighted-average remaining lease term for operating leases | 1 year | |
Weighted-average discount rate for operating leases | 10.00% |
6. COMMITMENTS AND CONTINGENC_4
6. COMMITMENTS AND CONTINGENCIES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Leases [Abstract] | ||
Amounts included in measurement of lease liabilities | $ 0 | $ 324,346 |
Right-of-use assets obtained in exchange for lease obligations | $ 0 | $ 395,565 |
6. COMMITMENTS AND CONTINGENC_5
6. COMMITMENTS AND CONTINGENCIES (Details 2) | Dec. 31, 2019USD ($) |
Future royalty payments for the year ending December 31, | |
2020 | $ 5,100,000 |
2021 | 4,300,000 |
2022 | 4,300,000 |
2023 | 4,300,000 |
2024 | 4,300,000 |
2025 | $ 4,300,000 |
7. STOCK OPTION PLANS (Details)
7. STOCK OPTION PLANS (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
2019 Stock Option Plan | ||
Number of shares outstanding, beginning | 0 | |
Granted | 820,000 | |
Exercised | 0 | |
Expired/Forfeited | 0 | |
Number of shares outstanding, ending | 820,000 | 0 |
Number of shares exercisable | 0 | |
Weighted average exercise price, beginning | $ 0 | |
Granted | 0.83 | |
Exercised | 0 | |
Expired | 0 | |
Weighted average exercise price, ending | 0.83 | $ 0 |
Weighted average exercise price exercisable | $ 0 | |
Weighted average remaining contractual life outstanding | 2 years 8 months 5 days | |
2009 Stock Option Plan | ||
Number of shares outstanding, beginning | 1,569,603 | 1,459,494 |
Granted | 90,000 | 899,500 |
Exercised | (199,792) | (740,641) |
Expired/Forfeited | (150,000) | (48,750) |
Number of shares outstanding, ending | 1,309,811 | 1,569,603 |
Number of shares exercisable | 859,936 | |
Weighted average exercise price, beginning | $ 1.41 | $ 0.45 |
Granted | 0.95 | 2.11 |
Exercised | 0.24 | 0.34 |
Expired | 0 | 0 |
Weighted average exercise price, ending | 1.45 | $ 1.41 |
Weighted average exercise price exercisable | $ 1.22 | |
Weighted average remaining contractual life outstanding | 1 year 3 months 11 days | 2 years 1 month 17 days |
7. STOCK OPTION PLANS (Details
7. STOCK OPTION PLANS (Details 1) - Directors Plan - $ / shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
2019 Stock Option Plan | ||
Number of shares outstanding, beginning | 0 | |
Granted | 45,000 | |
Exercised | 0 | |
Forfeited | 0 | |
Number of shares outstanding, ending | 45,000 | 0 |
Number of shares exercisable | 45,000 | |
Weighted average exercise price, beginning | $ 0 | |
Granted | 0.97 | |
Exercised | 0 | |
Expired | 0 | |
Weighted average exercise price, ending | 0.97 | $ 0 |
Weighted average exercise price exercisable | $ 0.97 | |
Weighted average remaining contractual life outstanding | 2 years 6 months | |
Weighted average remaining contractual life exercisable | 2 years 6 months | |
2009 Stock Option Plan | ||
Number of shares outstanding, beginning | 342,500 | |
Granted | 97,500 | |
Exercised | (60,000) | |
Forfeited | (80,000) | |
Number of shares outstanding, ending | 300,000 | 342,500 |
Number of shares exercisable | 300,000 | |
Weighted average exercise price, beginning | $ 1.71 | |
Granted | 1.09 | |
Exercised | 0.23 | |
Expired | 0 | |
Weighted average exercise price, ending | 1.63 | $ 1.71 |
Weighted average exercise price exercisable | $ 1.63 | |
Weighted average remaining contractual life outstanding | 2 years | |
Weighted average remaining contractual life exercisable | 2 years | |
2009 Stock Option Plan | ||
Number of shares outstanding, beginning | 342,500 | 330,000 |
Granted | 110,000 | |
Exercised | (97,500) | |
Number of shares outstanding, ending | 342,500 | |
Weighted average exercise price, beginning | $ 1.32 | |
Granted | 2.51 | |
Exercised | $ 1.29 | |
Weighted average remaining contractual life outstanding | 2 years 6 months 7 days |
7. STOCK OPTION PLANS (Detail_2
7. STOCK OPTION PLANS (Details 2) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Expected dividend yield | 0.00% | 0.00% |
Minimum | ||
Expected life | 2 years 9 months | 2 years 9 months |
Expected volatility | 77.74% | 71.97% |
Risk-free interest rate | 1.34% | 2.08% |
Maximum | ||
Expected life | 3 years 6 months | 3 years 6 months |
Expected volatility | 87.40% | 88.86% |
Risk-free interest rate | 2.69% | 2.74% |
8. INCOME TAXES (Details)
8. INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Current tax expense | ||
US Federal | $ 0 | $ 0 |
State and local | 10,792 | 14,305 |
Foreign | 14,073 | 11,493 |
Total current tax expense | 24,865 | 25,798 |
Deferred tax expense (benefit) | ||
US Federal | 0 | 0 |
State and local | 0 | 0 |
Foreign | 0 | 0 |
Total deferred tax expense (benefit) | 0 | 0 |
Total tax expense | ||
US federal | 0 | 0 |
State and local | 10,792 | 14,305 |
Foreign | 14,073 | 11,493 |
Total | $ 24,865 | $ 25,798 |
8. INCOME TAXES (Details 1)
8. INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Computed "expected" US tax (benefit) at Federal statutory rate | $ (685,652) | $ (12,594) |
Change resulting from: | ||
State and local income taxes, net of federal income tax benefit | (102,770) | 4,927 |
Valuation allowance | 411,810 | 115,960 |
Non-deductible items | 87,998 | 701 |
Expired Federal capital loss | 218,376 | 90,375 |
Federal rate change | 95,103 | (173,571) |
State net operating loss true up and rate change | 0 | 0 |
Income tax expense | $ 24,865 | $ 25,798 |
8. INCOME TAXES (Details 2)
8. INCOME TAXES (Details 2) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Deferred income tax assets: | ||
Inventories | $ 145,884 | $ 129,349 |
Accounts receivable | 253,559 | 137,522 |
Accrued expenses | 80,068 | 72,749 |
Net operating loss and tax credit carry forwards | 13,276,081 | 13,020,122 |
Plant and equipment | 6,014 | 13,615 |
Stock compensation | 123,841 | 112,664 |
Lease accounting | 26,515 | 0 |
Other - interest expense | 12,385 | 0 |
Total deferred income tax assets | 13,924,347 | 13,486,022 |
Valuation allowance | (13,924,347) | (13,486,022) |
Net deferred tax assets | $ 0 | $ 0 |
10. SEGMENT AND GEOGRAPHIC IN_3
10. SEGMENT AND GEOGRAPHIC INFORMATION (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Net sales, amount | $ 37,614,456 | $ 32,323,482 |
Net sales, % of total | 100.00% | 100.00% |
North America | ||
Net sales, amount | $ 36,741,262 | $ 31,687,051 |
Net sales, % of total | 97.70% | 98.00% |
Outside North America | ||
Net sales, amount | $ 873,194 | $ 636,432 |
Net sales, % of total | 2.30% | 2.00% |
12. RETIREMENT PLAN (Details Na
12. RETIREMENT PLAN (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Retirement Benefits [Abstract] | ||
Company matching contributions charged to expense | $ 5,405 | $ 6,848 |
16. SUBSEQUENT EVENTS (Details)
16. SUBSEQUENT EVENTS (Details) | Dec. 31, 2019USD ($) |
Future quarterly royalty payments for the year ending December 31, | |
2021 | $ 2,050,000 |
2022 | 2,300,000 |
2023 | 2,550,000 |
2024 | 2,800,000 |
2025 | $ 2,800,000 |