Document and Entity Information
Document and Entity Information - USD ($) | 9 Months Ended | ||
Sep. 30, 2015 | Feb. 28, 2015 | Jun. 30, 2014 | |
Document And Entity Information | |||
Entity Registrant Name | Zoom Telephonics, Inc. | ||
Entity Central Index Key | 1,467,761 | ||
Document Type | S1 | ||
Document Period End Date | Sep. 30, 2015 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 948,994 | ||
Entity Common Stock, Shares Outstanding | 13,271,303 | 7,982,704 | |
Document Fiscal Period Focus | Q3 | ||
Document Fiscal Year Focus | 2,015 |
Condensed Balance Sheets (Unaud
Condensed Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
Current assets | |||
Cash and cash equivalents | $ 2,516,254 | $ 137,637 | $ 55,393 |
Accounts receivable, net of allowances of $394,370 at September 30, 2015 and $381,234 at December 31, 2014 (net of allowances of $640,456 at December 31, 2013 and $381,234 at December 31, 2014) | 1,960,607 | 1,811,006 | 1,674,812 |
Inventories | 1,387,809 | 1,724,507 | 1,714,081 |
Prepaid expenses and other current assets | 463,792 | 270,263 | 225,152 |
Total current assets | 6,328,462 | 3,943,413 | 3,669,438 |
Other assets | 393,886 | 0 | |
Equipment, net | 89,846 | 67,142 | 51,025 |
Total assets | 6,812,194 | 4,010,555 | 3,720,463 |
Current liabilities | |||
Bank debt | 0 | 840,585 | 318,318 |
Accounts payable | 775,356 | 726,627 | 693,546 |
Accrued expenses | 268,977 | 284,736 | 322,410 |
Total current liabilities | 1,044,333 | 1,851,948 | 1,334,274 |
Total liabilities | 1,044,333 | 1,851,948 | 1,334,274 |
Stockholders' equity | |||
Common stock, $0.01 par value: Authorized - 25,000,000 shares; 13,271,303 shares at September 30, 2015 and 7,982,704 shares at December 31, 2014 (Common stock, $0.01 par value: Authorized - 25,000,000 shares; issued and outstanding - 7,982,704 shares at December 31, 2013 and 2014) | 132,713 | 79,827 | 79,827 |
Additional paid-in capital | 37,857,405 | 34,192,066 | 34,177,779 |
Accumulated deficit | (32,222,257) | (32,113,286) | (32,235,772) |
Accumulated other comprehensive income (loss) | 0 | 364,355 | |
Total stockholders' equity | 5,767,861 | 2,158,607 | 2,386,189 |
Total liabilities and stockholders' equity | $ 6,812,194 | $ 4,010,555 | $ 3,720,463 |
Condensed Balance Sheets (Unau3
Condensed Balance Sheets (Unaudited) (Parenthetical) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
Assets | |||
Accounts receivable allowances | $ 394,370 | $ 381,234 | $ 640,456 |
Stockholders Equity | |||
Common stock, par value | $ 0.01 | $ 0.01 | $ 0.01 |
Common stock, authorized | 25,000,000 | 25,000,000 | 25,000,000 |
Common stock, issued | 13,271,303 | 7,982,704 | 7,982,704 |
Common stock, outstanding | 13,271,303 | 7,982,704 | 7,982,704 |
Condensed Statement of Operatio
Condensed Statement of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Income Statement [Abstract] | ||||||
Net sales | $ 3,367,838 | $ 3,404,026 | $ 9,019,582 | $ 9,191,073 | $ 11,901,339 | $ 11,241,164 |
Cost of goods sold | 2,267,235 | 2,479,624 | 6,110,159 | 6,534,514 | 8,409,665 | 8,139,084 |
Gross profit | 1,100,603 | 924,402 | 2,909,423 | 2,656,559 | 3,491,674 | 3,102,080 |
Selling | 418,017 | 352,900 | 1,210,809 | 1,060,736 | 1,446,110 | 1,572,632 |
General and administrative | 306,827 | 257,645 | 810,556 | 788,307 | 1,052,326 | 1,316,402 |
Research and development | 354,252 | 265,393 | 918,014 | 864,272 | 1,132,791 | 919,722 |
Total | 1,079,096 | 875,938 | 2,939,379 | 2,713,315 | 3,631,227 | 3,808,756 |
Operating profit (loss) | 21,507 | 48,464 | (29,956) | (56,754) | (139,553) | (706,676) |
Other: | ||||||
Interest income | 16 | 7 | 31 | 23 | 33 | 39 |
Other income (expense), net | (27,410) | (24,306) | (73,289) | (58,800) | 269,086 | (354,403) |
Total other income (expense), net | (27,394) | (24,299) | (73,258) | (58,777) | 269,119 | (354,364) |
Income (loss) before income taxes | (5,887) | 24,165 | (103,214) | (115,531) | 129,566 | (1,061,040) |
Income taxes (benefit) | 1,978 | 1,797 | 5,757 | 5,839 | 7,080 | 3,944 |
Net income (loss) | (7,865) | 22,368 | (108,971) | (121,370) | 122,486 | (1,064,984) |
Other comprehensive income (loss): | ||||||
Foreign currency translation adjustments | 0 | (4,339) | 0 | (2,234) | (3,621) | (7,504) |
Foreign currency translation recognition upon reclassification from accumulated other comprehensive income | (360,734) | 0 | ||||
Unrealized gain (loss) for the period | 0 | 272,909 | ||||
Total comprehensive income (loss) | $ (7,865) | $ 18,029 | $ (108,971) | $ (123,604) | $ (241,869) | $ (799,579) |
Basic and diluted net income (loss) per share | $ 0 | $ 0 | $ (0.01) | $ (0.02) | $ 0.02 | $ (0.14) |
Weighted average common and common equivalent shares: | ||||||
Basic | 7,982,704 | 7,363,482 | ||||
Diluted | 7,982,704 | 7,363,482 | ||||
Basic and diluted | 8,519,051 | 7,982,704 | 8,167,187 | 7,982,704 | 7,982,704 | 7,363,482 |
Condensed Statements of Shareho
Condensed Statements of Shareholders Equity - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income/(Loss) | Total |
Beginning Balance, Amount at Dec. 31, 2012 | $ 69,737 | $ 33,904,003 | $ (31,170,788) | $ 98,950 | $ 2,901,902 |
Beginning Balance, Shares at Dec. 31, 2012 | 6,973,704 | ||||
Stock based compensation | 35,189 | 35,189 | |||
Stock rights offering (net of issuance costs of $33,843), Amount | $ 10,090 | 238,587 | 248,677 | ||
Stock rights offering (net of issuance costs of $33,843), Shares | 1,009,000 | ||||
Total other comprehensive income (loss) | $ 265,405 | 265,405 | |||
Net income (loss) | $ (1,064,984) | (1,064,984) | |||
Ending Balance, Amount at Dec. 31, 2013 | $ 79,827 | 34,177,779 | $ (32,235,772) | $ 364,355 | 2,386,189 |
Ending Balance, Shares at Dec. 31, 2013 | 7,982,704 | ||||
Stock based compensation | 14,287 | 14,287 | |||
Total other comprehensive income (loss) | $ (364,355) | (364,355) | |||
Net income (loss) | $ 122,486 | 122,486 | |||
Ending Balance, Amount at Dec. 31, 2014 | $ 79,827 | $ 34,192,066 | $ (32,113,286) | 2,158,607 | |
Ending Balance, Shares at Dec. 31, 2014 | 7,982,704 | ||||
Net income (loss) | (108,971) | ||||
Ending Balance, Amount at Sep. 30, 2015 | $ 5,767,861 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Operating activities: | ||||
Net income (loss) | $ (108,971) | $ (121,370) | $ 122,486 | $ (1,064,984) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||
Depreciation and amortization | 58,724 | 6,784 | 9,048 | 9,777 |
Stock based compensation | 48,839 | 11,696 | 14,287 | 35,189 |
Provision for accounts receivable allowances | 34 | 844 | 574 | (1,579) |
Provision for inventory reserves | 22,913 | 86,846 | 81,843 | 15,936 |
Reclassification out of Accumulated Other Comprehensive Income (Loss) | (360,734) | 272,909 | ||
Changes in operating assets and liabilities: | ||||
Accounts receivable | (149,635) | (325,118) | (136,768) | 290,544 |
Inventories | 313,785 | 201,488 | (92,269) | 900,369 |
Prepaid expenses and other current assets | (623,529) | (34,085) | (45,111) | 35,105 |
Accounts payable and accrued expenses | 32,970 | (41,612) | (4,593) | (297,325) |
Net cash provided by (used in) operating activities | (404,870) | (214,527) | (411,237) | 195,941 |
Investing activities: | ||||
Purchases of property, plant and equipment | (45,314) | (5,336) | (25,165) | (34,757) |
Proceeds from sale of marketable securities | 0 | 39,983 | ||
Net cash provided by (used in) investing activities | (45,314) | (5,336) | (25,165) | 5,226 |
Financing activities: | ||||
Net funds received from (paid to) bank credit lines | (840,585) | 371,057 | 522,267 | (592,489) |
Proceeds from stock option exercise | 19,425 | 0 | ||
Proceeds from private placement offering (net of issuance costs) | 3,421,001 | 0 | ||
Proceeds from stock rights offering (net of issuance costs) | 228,960 | 0 | 0 | 248,677 |
Net cash provided by (used in) financing activities | 2,828,801 | 371,057 | 522,267 | (343,812) |
Effect of exchange rate changes on cash | 0 | (171) | (3,621) | 2,334 |
Net change in cash | 2,378,617 | 151,023 | 82,244 | (140,311) |
Cash and cash equivalents at beginning of period | 137,637 | 55,393 | 55,393 | 195,704 |
Cash and cash equivalents at end of period | 2,516,254 | 206,416 | 137,637 | 55,393 |
Supplemental disclosures of cash flow information: | ||||
Cash paid during the period for: Interest | 72,360 | 58,201 | 77,225 | 68,128 |
Cash paid during the period for: Income taxes | $ 5,757 | $ 5,839 | $ 7,080 | $ 3,944 |
1. Summary of Significant Accou
1. Summary of Significant Accounting Policies | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Notes to Financial Statements | ||
Summary of Significant Accounting Policies | The accompanying financial statements are unaudited. However, the condensed balance sheet as of December 31, 2014 was derived from audited financial statements. In the opinion of management, the accompanying financial statements include all adjustments to present fairly the financial position, results of operations and cash flows Zoom Telephonics, Inc. (the Company, Zoom, or our). The adjustments are of a normal, recurring nature. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the entire year. The Company has evaluated subsequent events from September 30, 2015 through the date of this filing and other than the amendment listed in Note 7, Bank Credit Lines, determined that there are no other events requiring recognition or disclosure in the financial statements. The financial statements of the Company presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2014 included in the Company's 2014 Annual Report on Form 10-K. (a) Recently Issued Accounting Pronouncements In August 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-15, "Presentation of Financial Statements Going Concern" This standard requires management to evaluate for each annual and interim reporting period whether it is probable that the reporting entity will not be able to meet its obligations as they become due within one year after the date that the financial statements are issued. If the entity is in such a position, the standard provides for certain disclosures depending on whether or not the entity will be able to successfully mitigate its going concern status. This guidance is effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early application is permitted. The Company does not expect a material impact to the Company's financial condition, results of operations or cash flows from the adoption of this guidance. In June 2015, the FASB issued ASU No. 2015-10, "Technical Corrections and Improvements. ASU 2015-10 clarifies various topics in the FASB Accounting Standards Codification. ASU 2015-10 is effective for the interim and annual periods ending after December 15, 2015. Early adoption is permitted. The Company does not expect a material impact to the Companys financial condition, results of operations or cash flows from the adoption of this guidance. In August 2015, the Financial Accounting Standards Board, (FASB) issued the Accounting Standards Update (ASU) No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date . | (a) Basis of Presentation and Use of Estimates The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP). The preparation of financial statements in conformity with US 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 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 and sales returns) and asset valuation allowance for deferred income tax assets; 2) write-downs of inventory for slow-moving and obsolete items, and market valuations; 3) and stock based compensation. (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 are normally 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) Inventories Inventories are stated at the lower of cost, determined using the first-in, first-out method, or market. 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 $86,000 and $305,000 at December 31, 2014 and 2013, respectively. (d) Equipment and Leasehold Improvements Equipment and leasehold improvements are stated at cost, less accumulated depreciation and amortization. Depreciation of equipment is provided using the straight-line method over the estimated useful lives of the assets. Amortization of leasehold improvements is provided using the straight-line method over the estimated useful lives of the improvement or lease term, whichever is shorter. (e) 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. (f) 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. (g) Earnings (Loss) Per Common Share Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed by dividing net income by the weighted average number of common shares and dilutive potential common shares outstanding during the period. 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 common shares at the average market price during the period. A summary of the denominators used to compute basic and diluted earnings (loss) per share follow: 2013 2014 Weighted average shares outstanding used to compute basic earnings (loss) per share 7,363,482 7,982,704 Net effect of dilutive potential common shares outstanding, based on the treasury stock method Weighted average shares outstanding used to compute diluted earnings (loss) per share 7,363,482 7,982,704 Potential common shares for which inclusion would have the effect of increasing diluted earnings per share (i.e., anti-dilutive) are excluded from the computation. Options to purchase 1,855,500 shares of common stock at December 31, 2014 and 2,585,000 shares of common stock as of December 31, 2013 were outstanding, but not included in the computation of diluted earnings per share as their effect would be anti-dilutive. (h) Revenue Recognition The Company primarily sells hardware products to its customers. The hardware products include dial-up modems, DSL modems, cable modems, embedded modems, ISDN modems, telephone dialers, and wireless and wired networking equipment. The Company generally does not sell software. The Company derives its net sales primarily from the sales of hardware products to computer peripherals retailers, computer product distributors, and original equipment manufacturers (OEMs). The Company sells an immaterial amount of its hardware products to direct consumers or to any customers via the internet. The Company recognizes net hardware sales for all four types of customers at the point when the customers take legal ownership of the delivered products. Legal ownership passes to the customer based on the contractual FOB point specified in signed contracts and purchase orders, which are both used extensively. Many customer contracts or purchase orders specify FOB destination. When Zoom consigns inventory to a retailer, sales revenue for an item in that inventory is recognized when that item is sold by the retailer to a customer. The item remains in Zoom inventory when it is consigned, and moves out of Zoom inventory when the item is sold by the retailer. The Company's net sales of hardware are reduced by certain events which are characteristic of the sales of hardware to retailers of computer peripherals. These events are product returns, certain sales and marketing incentives, price protection refunds, and consumer and in-store mail-in rebates. Each of these is accounted for as a reduction of net sales based on management estimates, which are reconciled to actual customer or end-consumer credits on a monthly or quarterly basis. The estimates for product returns are based on recent historical trends plus estimates for returns prompted by announced stock rotations, announced customer store closings, etc. Management analyzes historical returns, current economic trends, and changes in customer demand and acceptance of the Company's products when evaluating the adequacy of sales return allowances. Product return reserves were $535.2 thousand and $354.0 thousand at December 31, 2013 and 2014, respectively. The Company's estimates for price protection refunds require a detailed understanding and tracking by customer, by sales program. Estimated price protection refunds are recorded in the same period as the announcement of a pricing change. Information from customer inventory-on-hand reports or from direct communications with the customers is used to estimate the refund, which is recorded as a reserve against accounts receivable and a reduction of current period revenue. Price protection reserves were $10.7 thousand and $0 at December 31, 2013 and 2014, respectively. The Company's estimates for consumer mail-in rebates are comprised of actual rebate claims processed by the rebate redemption centers plus an accrual for an estimated lag in processing. The Company's estimates for store rebates are comprised of actual credit requests from the eligible customers. Rebate reserves were $40.7 thousand and $0 at December 31, 2013 and 2014, respectively. Additionally, sales and marketing incentive reserves were $41.7 thousand and $15.2 thousand at December 31, 2013 and 2014, respectively. The Companys allowance for doubtful accounts was approximately $12 thousand at both December 31, 2013 and 2014. The Company accounts for point-of-sale taxes on a net basis. (i) 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, accounts payable, and accrued expenses. Due to the short term nature and payment terms associated with these instruments, their carrying amounts approximate fair value. (j) 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. (k) Advertising Costs Advertising costs are expensed as incurred and reported in selling expense in the accompanying statements of operations and comprehensive income (loss), and include costs of advertising, production, trade shows, and other activities designed to enhance demand for the Company's products. There are no deferred advertising costs in the accompanying balance sheets. The Company reported advertising costs of $247.5 thousand in 2013 and $255.0 thousand in 2014. (l) 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. The Company considers the local currency to be the functional currency for its U.K. branch. Assets and liabilities denominated in foreign currencies are translated using the exchange rates as of the balance sheet date. Revenues and expenses are translated at average exchange rates prevailing during the year. Translation adjustments resulting from this process are charged or credited to accumulated other comprehensive income. During Q4 2014 Zoom Telephonics closed its UK office. This required the recognition of foreign currency translation gains that had previously been recorded as accumulated other comprehensive income. Zoom reported $361 thousand of other income in operations and a reduction in accumulated other comprehensive income of $361 thousand, resulting in zero impact to net comprehensive income. The associated balance sheet adjustment similarly had zero effect on total Stockholders Equity. (m) 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 $38,098 and $25,069 at December 31, 2013 and 2014, respectively. (n) 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 $191.7 thousand in 2013 and $232.1 thousand in 2014. (o) Recently Issued Accounting Pronouncements In August 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-15, "Presentation of Financial Statements Going Concern" This standard requires management to evaluate for each annual and interim reporting period whether it is probable that the reporting entity will not be able to meet its obligations as they become due within one year after the date that the financial statements are issued. If the entity is in such a position, the standard provides for certain disclosures depending on whether or not the entity will be able to successfully mitigate its going concern status. This guidance is effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early application is permitted. The Company does not expect a material impact to the Company's financial condition, results of operations or cash flows from the adoption of this guidance. In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers," which will replace most existing revenue recognition guidance in generally accepted accounting principles in the United States of America. The core principle of this ASU is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. This ASU requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. This ASU will be effective for the Company beginning January 1, 2017, including interim periods in 2017, and allows for both retrospective and prospective methods of adoption. The Company is in the process of determining method of adoption and assessing the impact of this ASU on its consolidated financial statements. (p) Reclassifications Certain reclassifications have been made to the prior years financial statements to conform to the 2014 presentation. The reclassifications relate to the presentation of changes in accounts receivable and inventory on the statements of cash flows. (q) Contingencies 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. In assessing potential loss contingencies, the Company considers a number of factors, including those listed in the FASBs Accounting Standards Codification 450-20, Contingencies Loss Contingencies , |
1A. NATURE OF OPERATIONS
1A. NATURE OF OPERATIONS | 12 Months Ended |
Dec. 31, 2014 | |
A. Nature Of Operations | |
NATURE OF OPERATIONS | Zoom Telephonics, Inc. (the "Company") designs, produces, and markets broadband and dial-up modems and other communication-related products. |
2. Liquidity
2. Liquidity | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Notes to Financial Statements | ||
Liquidity | Zooms cash balance on September 30, 2015 was $2.52 million compared to $138 thousand on December 31, 2014. The Company raised approximately $3.65 million net in Q3 2015 from a $3.42 million private placement in September, whereby the Company sold an aggregate of 4,909,999 shares of common stock and a $229 thousand rights offering in July. Zooms cash balance was also augmented by a $337 thousand decrease in net inventory. These increases were offset by a pay-down in the outstanding bank debt of $841 thousand, a $150 thousand increase in net accounts receivable and an overall net 9-month loss of $109 thousand. As of September 30, 2015 Zoom had no bank debt, an available line of credit of $1.25 million, working capital of $5.28 million, and a current ratio of 6.1. The Company is continuing to develop new products and to take other measures to increase sales. In addition, on May 18, 2015, Zoom announced licensing of the Motorola trademark for cable modems and gateways for the USA and Canada for 5 years starting January 1, 2016. The Company believes that this is likely to increase sales. Increasing sales typically results in increased inventory and higher accounts receivable, both of which reduce cash. In order to support this anticipated sales growth, Zoom raised approximately $3.65 million net in Q3 2015. Zoom believes that its existing financial resources along with its existing line of credit, with its maximum credit increased as planned, will be sufficient to fund operations for the foreseeable future if Zoom management's sales and operating profit expectations are met. | On December 31, 2014 we had working capital of $2.1 million including $138 thousand in cash and cash equivalents. On December 31, 2013 we had working capital of $2.3 million including $55 thousand in cash and cash equivalents. Our current ratio at December 31, 2014 was 2.1 compared to 2.8 at December 31, 2013. In 2014, the Companys operating activities used $411 thousand in cash, primarily due to $361 thousand recognized foreign currency gains previously reported in Accumulated Other Comprehensive Income on the Balance Sheets, and $137 thousand increase in accounts receivable. In 2013, the Companys operating activities used $0.1 million in cash, primarily due to a net loss of $1.1 million, offset by a $0.9 million decrease in inventory. In 2013, the Companys net cash was used in financing activities to reduce bank debt by $0.6 million. Also in 2013, the Company increased net cash in financing activities by $0.2 million from the net proceeds of a rights offering completed in August 2013. Under the rights offering, existing shareholders of the Companys common stock were granted rights to purchase, at an offering price of $0.28 per share, one share of stock for each share held. The rights offering resulted in the issuance of 1,009,000 shares of common stock. To conserve cash and manage our liquidity, we have implemented cost-cutting initiatives including the reduction of employee headcount and overhead costs. On December 31, 2014 we had a headcount of 24 compared to 28 as of December 31, 2013. As of February 27, 2015 we had 24 full-time and part-time employees, and 2 consultants, one in sales and one in information systems that was not included in our headcount. We plan to continue to assess our cost structure as it relates to our revenues and cash position, and we may make further reductions if the actions are deemed necessary. On December 18, 2012, the Company entered into a Financing Agreement with Rosenthal & Rosenthal, Inc. (theFinancing Agreement). The Financing Agreement provided for up to $1.75 million of revolving credit, subject to aborrowing base formula and other terms and conditions as specified in the Financing Agreement. The Financing Agreement continues until November 30, 2014 and 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. Borrowings are secured by all of the Company assets including intellectual property. The Loan Agreement contained several covenants, including a requirement that the Company maintain tangible net worth of not less than $2.5 million and working capital of not less than $2.5 million. On March 25, 2014, the Company entered into an amendment to the Financing Agreement (the Amendment) with an effective date of January 1, 2013. The Amendment clarified the definition of current assets in the Financing Agreement, reduced the size of the revolving credit line to $1.25 million, and revised the financial covenants so that Zoom is required to maintain tangible net worth of not less than $2.0 million and working capital of not less than $1.75 million. On December 31, 2014 Zoom was in compliance with the covenants of the Financing Agreement with Rosenthal & Rosenthal, Inc. At December 31, 2014 the Company's total current assets were $3.9 million and current liabilities were $1.9 million, which included $0.8 million in bank debt. The Company did not have any long-term debt at December 31, 2014. The Company believes that cash generated from operating activities, together with funds available under its bank credit line, are expected, under current conditions, to be sufficient to finance the Companys planned operations for at least the next twelve months. |
3. Inventories
3. Inventories | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Notes to Financial Statements | ||
Inventories | Inventories consist of: September 30, 2015 December 31, 2014 Materials $ 468,578 $ 332,804 Work in process 22,383 Finished goods (including $142,600 and $85,600 held by customers at September 30, 2015 and December 31, 2014, respectively) 896,848 1,391,703 Total $ 1,387,809 $ 1,724,507 The Company reviews inventory for obsolete and slow moving products each quarter and makes provisions based on our estimate of the probability that the material will not be consumed or that it will be sold below cost. The allowance for slow moving and obsolete inventory was $249,130 and $279,388 at September 30, 2015 and December 31, 2014, respectively. | Inventories, net of reserves, consist of the following at December 31: 2013 2014 Materials $ 440,723 $ 332,804 Finished goods (including $304,500 and $85,600 held by customers at December 31, 2013 and 2014, respectively) 1,273,358 1,391,703 Total $ 1,714,081 $ 1,724,507 The Company reviews inventory for obsolete and slow moving products each quarter and makes provisions based on our estimate of the probability that the material will not be consumed or that it will be sold below cost. The reserve for the provision for slow moving and obsolete inventory was $360,624 and $279,388 at December 31, 2013 and 2014, respectively. |
4. Commitments and Contingencie
4. Commitments and Contingencies | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Notes to Financial Statements | ||
Commitments and 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's management believes that the ultimate resolution of such matters will not materially and adversely affect the Company's business, financial position, results of operations or cash flows. On November 14, 2014, Concinnitas, LLC and Mr. George W. Hindman (collectively "Concinnitas") filed a complaint against the Company alleging infringement of U.S. Patent No. 7,805,542 (the 542 patent) titled "Mobile United Attached in a Mobile Environment that Fully Restricts Access to Data Received via Wireless Signal to a Separate Computer in the Mobile Environment. The Complaint asserts that the Company sells "products and/or systems (including at least the [wireless router model no.] 4530)" that infringe the '542 patent. Concinnitas and the Company have executed a settlement agreement. On August 13, 2015, this case was closed following an order of dismissal with prejudice pursuant to a resolution of the dispute between Zoom and Concinnitas, LLC. On January 30, 2015, Wetro LAN LLC ("Wetro LAN") filed a complaint against the Company alleging infringement of U.S. Patent No. 6,795,918 (the 918 patent). The 918 patent is titled Service Level Computer Security. Wetro LAN alleges that the Companys wireless routers, including its Model 4501 Wireless-N Router, infringe the '918 patent. The case is in its early stages and a date for the scheduling conference has not yet been set. On May 14, 2015, Zoom entered into a License Agreement with Motorola Mobility LLC (the License Agreement). The License Agreement provides Zoom with an exclusive license to use certain trademarks owned by Motorola Trademark Holdings, LLC. for the manufacture, sale and marketing of consumer cable modem products in the United States and Canada through certain authorized sales channels. The License Agreement has a five-year term beginning January 1, 2016 through December 31, 2020. In connection with the License Agreement Zoom has agreed to pay Motorola Mobility a one-time set-up fee due prior to January 1, 2016 and a royalty based on net sales during the term of the License Agreement. The License Agreement provides for significant minimum annual royalty payments during the term. Zoom and Motorola Mobility also agreed to other terms and conditions including quality provisions designed to protect the Motorola brand. In order to facilitate Zooms current and planned increase in production demand, driven in part by the launch of Motorola branded products, Zoom has committed with North American Production Sharing, Inc. (NAPS) to extend its existing lease used in connection with the Production Sharing Agreement (PSA) entered into between Zoom and NAPS. The extension term is December 1, 2015 through November 30, 2018. Also, the parties will lease additional space adjacent to its current space, which will double Zooms existing production capacity. The term of the new lease for additional space will run from March 1, 2016 through November 30, 2018 with early access granted as of December 1, 2015. | (a) Lease Obligations Since 1983 the Companys headquarters has been near South Station in downtown Boston at 201 and 207 South Street. In December 2006, the Company sold its owned headquarters buildings in Boston, Massachusetts and leased back 25,200 square feet for two years expiring December 2008. In November 2008 the Company signed a lease amendment for its headquarters offices in Boston in the existing building for approximately 14,400 square feet for three years with a six month termination option starting July 1, 2010. In May 2010 the Company signed a second lease amendment extending the term of the lease to April 30, 2016 with a six month termination option starting December 1, 2011. In December 2011 the Company signed a third lease amendment reducing the Company lease space by 3,800 square feet effective June 1, 2012, with a proportionate decrease in lease expense. In August 2006 the Company signed a lease for a 35,575 square foot manufacturing and warehousing facility in Tijuana, Mexico with an initial lease term from October 2006 to May 2007, with five two-year options thereafter. In February 2007 the Company renegotiated the first renewal term and signed a one-year extension starting in May 2007, with five two-year options thereafter. The Company signed another one-year extension starting in May 2008. In March 2009 the Company signed a one-year lease with one one-year option for a smaller facility for lower cost. In March 2011 the Company signed a one-year lease extension starting May 1, 2011, with three one-year renewal options thereafter. In April 2012 the Company exercised the first of three renewal options, with no significant change in lease cost. In February 2013 the Company exercised the second of three renewal options, with no significant increase in lease cost. In November 2014 we cancelled our existing lease and signed a one-year lease with five one-year renewal options thereafter for an adjacent 11,390 square foot facility. In September 2005 the Company entered into a two year office lease consisting of 2,400 square feet at 2 Kings Road, Fleet, Hants, U.K. for its U.K. sales office. In September 2007 the lease was continued on a month-to-month basis with a 3 month cancellation notice required by the Company or the landlord. In September 2008 the Company signed an Office Service Agreement, which is an office rental agreement, rather than a lease. We cancelled our Office Service Agreement effective October 31, 2011. Zoom closed the U.K. sales office in October 2014 and now has an independent sales representative for the U.K. and Ireland. Rent expense for all of the Company's leases was $277.2 thousand in 2013 and $313.4 thousand in 2014. As of December 31, 2014, 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 $227.2 thousand for 2015. There are no future minimum committed rental payments that extend beyond 2015. (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's management believes that the ultimate resolution of such matters will not materially and adversely affect the Company's business, financial position, results of operations or cash flows. On November 6, 2013, Innovative Wireless Solutions, LLC ("IWS") filed a complaint against the Company alleging infringement of U.S. Patents Nos. 5,912,895, 6,327,264, and 6,587,473, all entitled "Information Network Access Apparatus and Methods of Communicating Information packets via Telephone Links." Final Judgment of Non-Infringement in Zooms favor was entered on March 20, 2015 in the IWS matter, so that matter is no longer pending. On November 14, 2014, Concinnitas, LLC and Mr. George W. Hindman (collectively "Concinnitas") filed a complaint against the Company alleging infringement of U.S. Patent No. 7,805,542 (the 542 patent) titled "Mobile United Attached in a Mobile Environment that Fully Restricts Access to Data Received via Wireless Signal to a Separate Computer in the Mobile Environment. The Complaint asserts that the Company sells "products and/or systems (including at least the [wireless router model no.] 4530)" that infringe the '542 patent. The case is in its early stages and a scheduling conference has been set for the end of March 2015. On January 30, 2015, Wetro LAN LLC ("Wetro LAN") filed a complaint against the Company alleging infringement of U.S. Patent No. 6,795,918 (the 918 patent). The 918 patent is titled Service Level Computer Security. Wetro LAN alleges that the Companys wireless routers, including its Model 4501 Wireless-N Router, infringe the '918 patent. The case is in its early stages and the Company plans on responding to the Complaint shortly. |
5. Segment and Geographic Infor
5. Segment and Geographic Information | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Notes to Financial Statements | ||
Segment and Geographic Information | The Companys operations are classified as one reportable segment. The Companys net sales by geographic region follow: Three Months Three Months Nine Months Nine Months Ended % of Ended % of Ended % of Ended % of September 30, 2015 Total September 30, 2014 Total September 30, 2015 Total September 30, 2014 Total North America $ 3,295,501 98% $ 3,325,678 98% $ 8,843,983 98% $ 8,922,604 97% Outside North America 72,337 2% 78,348 2% 175,599 2% 268,469 3% Total $ 3,367,838 100% $ 3,404,026 100% $ 9,019,582 100% $ 9,191,073 100% | 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 United States. Net sales information follows: 2013 Percent 2014 Percent United States $ 10,541,921 94 % $ 11,563,956 97 % Outside United States 699,243 6 % 337,383 3 % Total $ 11,241,164 100 % $ 11,901,339 100 % |
5A. Equipment
5A. Equipment | 12 Months Ended |
Dec. 31, 2014 | |
A. Equipment | |
Equipment | Equipment consists of the following at December 31: 2013 2014 Estimated Useful lives in years Computer hardware and software $ 194,528 $ 196,070 3 Machinery and equipment 254,533 258,446 5 Molds, tools and dies 78,257 96,557 5 Office furniture and fixtures 38,938 38,938 5 566,256 590,011 Accumulated depreciation and amortization (515,231 ) (522,869 ) Equipment and leasehold improvements, net $ 51,025 $ 67,142 Depreciation expense for year ended $ 9,777 $ 9,048 |
6. Customer Concentrations
6. Customer Concentrations | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Notes to Financial Statements | ||
Customer Concentrations | The Company sells its products primarily through high-volume retailers and distributors, Internet service providers, value-added resellers, PC system integrators, and original equipment manufacturers ("OEMs"). The Company supports its major accounts in their efforts to offer a well-chosen selection of attractive products and to maintain appropriate inventory levels. Relatively few customers have accounted for a substantial portion of the Companys revenues. In the third quarter of 2015, three customers accounted for 79% of our total net sales with our largest customer accounting for 48% of our net sales. In the first nine months of 2015, three customers accounted for 77% of the Companys total net sales with our largest customer accounting for 46% of our net sales. At September 30, 2015, three customers accounted for 90% of our gross accounts receivable, with our largest customer representing 61% of our gross accounts receivable. In the third quarter of 2014, three customers accounted for 72% of our net sales with our largest customer accounting for 51% of our net sales. In the first nine months of 2014, three customers accounted for 73% of our total net sales with our largest customer accounting for 54% of our net sales. At September 30, 2014 three customers accounted for 88% of our gross accounts receivable, with our largest customer representing 65% of our gross accounts receivable. The Companys customers generally do not enter into long-term agreements obligating them to purchase products. The Company may not continue to receive significant revenues from any of these or from other large customers. A reduction or delay in orders from any of the Companys significant customers, or a delay or default in payment by any significant customer, could materially harm the Companys business and prospects. Because of the Companys significant customer concentration, its net sales and operating income (loss) could fluctuate significantly due to changes in political or economic conditions, or the loss, reduction of business, or less favorable terms for any of the Company's significant customers. | The Company sells its products primarily through high-volume distributors and retailers, Internet service providers, telephone service providers, value-added resellers, PC system integrators, and original equipment manufacturers ("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 customers have accounted for a substantial portion of the Companys revenues. In 2014 three customers accounted for 74% of our total net sales, with our largest customer accounting for 53% of our net sales. At December 31, 2014, three customers accounted for 92% of our gross accounts receivable, with our largest customer representing 64% of our gross accounts receivable. In 2013 three customers accounted for 69% of the Companys total net sales with our largest customer accounting for 51% of our net sales. At December 31, 2013, three customers accounted for 84% of our gross accounts receivable, with our largest customer representing 71% of our gross accounts receivable. The Companys customers generally do not enter into long-term agreements obligating them to purchase products. The Company may not continue to receive significant revenues from any of these or from other large customers. A reduction or delay in orders from any of the Companys significant customers, or a delay or default in payment by any significant customer could materially harm the Companys business and prospects. Because of the Companys significant customer concentration, its net sales and operating income (loss) could fluctuate significantly due to changes in political or economic conditions, or the loss, reduction of business, or less favorable terms for any of the Company's significant customers. |
7. Bank Credit Lines
7. Bank Credit Lines | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Notes to Financial Statements | ||
Bank Credit Lines | On December 18, 2012, the Company entered into a Financing Agreement with Rosenthal & Rosenthal, Inc. (the Financing Agreement). The Financing Agreement 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. Borrowings are secured by all of the Company assets including intellectual property. The Loan Agreement contained several covenants, including a requirement that the Company maintain tangible net worth of not less than $2.5 million and working capital of not less than $2.5 million. On March 25, 2014, the Company entered into an amendment to the Financing Agreement (the Amendment) with an effective date of January 1, 2013. The Amendment clarified the definition of current assets in the Financing Agreement, reduced the size of the revolving credit line to $1.25 million, and revised the financial covenants so that Zoom is required to maintain tangible net worth of not less than $2.0 million and working capital of not less than $1.75 million. On October 29, 2015, subsequent to the close of the quarter, the Company entered into a second amendment to the Financing Agreement (the Second Amendment). Retroactive to October 1, 2015, the Second Amendment eliminated $2,500 in monthly charges for the Financing Agreement. Effective December 1, 2015, the Second Amendment reduces the effective rate of interest to 2.25% plus an amount equal to the higher of prime rate or 3.25%. The Company is required to calculate its covenant compliance on a quarterly basis. As of September 30, 2015, the Company was in compliance with both its working capital and tangible net worth covenants. At September 30, 2015, the Companys tangible net worth was approximately $5.4 million, while the Companys working capital was approximately $5.3 million. | On December 18, 2012, the Company entered into a Financing Agreement with Rosenthal & Rosenthal, Inc. (theFinancing Agreement). The Financing Agreement provided for up to $1.75 million of revolving credit, subject to aborrowing base formula and other terms and conditions as specified in the Financing Agreement. The Financing Agreement continued until November 30, 2014 and 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. Borrowings are secured by all of the Company assets including intellectual property. The Loan Agreement contained several covenants, including a requirement that the Company maintain tangible net worth of not less than $2.5 million and working capital of not less than $2.5 million. On March 25, 2014, the Company entered into an amendment to the Financing Agreement (the Amendment) with an effective date of January 1, 2013. The Amendment clarified the definition of current assets in the Financing Agreement, reduced the size of the revolving credit line to $1.25 million, and revised the financial covenants so that Zoom is required to maintain tangible net worth of not less than $2.0 million and working capital of not less than $1.75 million. On December 31, 2014 Zoom was in compliance with the covenants of the Financing Agreement with Rosenthal & Rosenthal, Inc. |
7A. Stock Option Plans
7A. Stock Option Plans | 12 Months Ended |
Dec. 31, 2014 | |
A. Stock Option Plans | |
Stock Option Plans | On December 10, 2009, the Company established two stock option plans. The Board of Directors approved the two plans called the 2009 Stock Option Plan and the 2009 Directors Stock Option Plan and these plans received shareholder approval at the Companys 2010 annual meeting. In 2013, these plans received shareholder approval to increase the number of shares available for issuance in each plan. The new number of authorized shares available for issuance is indicated below. Further, these plans are described below. 2009 Stock Option Plan The 2009 Stock Option Plan is for officers and certain full-time and part-time employees of the Company. Non-employee directors of the Company are not entitled to participate under this plan. The 2009 Stock Option Plan provides for 5,500,000 shares of common stock for issuance upon the exercise of stock options granted under the plan. Under this plan, stock options are granted at the discretion of the Compensation Committee of the Board of Directors at an option price not less than the fair market value of the stock on the date of grant. The options are exercisable in accordance with terms specified by the Compensation Committee not to exceed ten years from the date of grant. Option activity under this plan follows. Number of shares Weighted average exercise price Balance as of January 1, 2013 970,000 $ 0.51 Granted 1,505,000 0.25 Exercised Expired (160,000 ) 0.25 Balance as of December 31, 2013 2,315,000 $ 0.35 Granted 50,000 $ 0.12 Exercised Expired (674,500 ) 0.49 Balance as of December 31, 2014 1,690,500 $ 0.29 The weighted average grant date fair value of options granted was $0.03 in 2013. The weighted average grant date fair value of options granted was $0.04 in 2014. The aggregate intrinsic value of options outstanding was zero at December 31, 2014 and 2013. The aggregate intrinsic value of exercisable options was zero at December 31, 2014 and 2013. The following table summarizes information about fixed stock options under the 2009 Stock Option Plan outstanding on December 31, 2014. Options Outstanding Options Exercisable Exercise Prices Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $ 0.48 345,500 1.20 $ 0.48 345,500 $ 0.48 $ 0.25 1,295,000 3.10 $ 0.25 971,250 $ 0.25 $ 0.12 50,000 4.10 $ 0.12 12,500 $ 0.12 $ 0.12 to 0.48 1,690,500 2.74 $ 0.29 1,329,250 $ 0.32 2009 Director Stock Option Plan On December 10, 2009 the Company established the 2009 Director Stock Option Plan (the "Directors Plan"). The Directors Plan was established for all directors of the Company except for any director who is a full-time employee or full-time officer of the Company. The option price is the fair market value of the common stock on the date the option is granted. There are 700,000 shares authorized for issuance under the Directors Plan. Each option expires five years from the grant date. Option activity under this plan follows. Number of shares Weighted average exercise price Balance as of January 1, 2013 210,000 0.35 Granted 60,000 0.18 Exercised Expired Balance as of December 31, 2013 270,000 0.31 Granted 60,000 0.13 Exercised Expired (165,000 ) Balance as of December 31, 2014 165,000 $ 0.24 The weighted average grant date fair value of options granted was $0.06 in 2013 and $0.04 in 2014. The aggregate intrinsic value of options outstanding was zero at December 31, 2014 and 2013. The aggregate intrinsic value of exercisable options was nominal at December 31, 2014 and 2013. The following table summarizes information about fixed stock options under the Directors Plan on December 31, 2014. Options Outstanding Options Exercisable Exercise Prices Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $ 0.12-0.14 45,000 4.32 $ 0.13 30,000 $ 0.13 $ 0.16-0.20 30,000 3.30 $ 0.18 30,000 $ 0.18 $ 0.25-0.26 30,000 2.30 $ 0.26 30,000 $ 0.26 $ 0.27-0.41 30,000 .40 $ 0.34 30,000 $ 0.34 $ 0.35-0.36 30,000 1.30 $ 0.36 30,000 $ 0.36 $ 0.12-0.41 165,000 2.5 $ 0.24 165,000 $ 0.24 The Black-Scholes range of assumptions for the Zoom Telephonics options for 2014 and 2013 are shown below: Assumptions 2009 Stock Option Plan and the 2009 Directors Stock Option Plan Expected life 2.75 (yrs) - 3.5 (yrs) Expected volatility 48.32% - 67.08% Risk-free interest rate 0.35% - 1.88% Expected dividend yield 0.00% The unrecognized stock based compensation expense related to non-vested stock awards was approximately $1 thousand as of December 31, 2014. This amount will be recognized through the first quarter of 2016. |
8. Income Taxes
8. Income Taxes | 12 Months Ended |
Dec. 31, 2014 | |
Income Taxes | |
Income Taxes | Income tax expense (benefit) consists of: Current Deferred Total Year Ended December 31, 2013: US federal $ $ $ State and local Foreign 3,944 3,944 $ 3,944 $ $ 3,944 Year Ended December 31, 2014: US federal $ $ $ State and local Foreign 7,080 7,080 $ 7,080 $ $ 7,080 A reconciliation of the expected income tax expense or benefit to actual follows: 2013 2014 Computed "expected" US tax (benefit) at Federal statutory rate $ (362,095 ) $ 41,645 Change resulting from: State and local income taxes, net of federal income tax benefit Valuation allowance (126,339 ) (281,039 ) Nondeductible items 15,334 12,063 Expired State Net Operating Losses 477,044 234,411 Income tax expense (benefit) $ 3,944 $ 7,080 Temporary differences at December 31 follow: 2013 2014 Deferred income tax assets: Inventories $ 165,225 $ 132,511 Accounts receivable 235,207 143,780 Intangible assets 25,738 Accrued expenses 44,112 36,621 Net operating loss and tax credit carry forwards 17,977,742 17,863,473 Plant and equipment 15,018 4,629 Stock compensation 89,515 90,504 Other investment impairments 127,855 127,855 Total deferred income tax assets 18,680,412 18,399,373 Valuation allowance (18,680,412 ) (18,399,373 ) Net deferred tax assets $ $ As of December 31, 2014 the Company had federal net operating loss carry forwards of approximately $49,650,000 which are available to offset future taxable income. They are due to expire in varying amounts from 2018 to 2034. As of December 31, 2014, the Company had Massachusetts state net operating loss carry forwards of approximately $4,054,000 which are available to offset future taxable income. They are due to expire in varying amounts from 2031 through 2034. Effective January 1, 2007, the Company adopted the provisions of a new standard which provides detailed 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 the effective date to be recognized upon adoption and in subsequent periods. Upon the adoption, and at December 31, 2014 and 2013, the Company did not have any uncertain tax positions. No interest and penalties related to uncertain tax positions were accrued at December 31, 2014 and 2013. The Company files income tax returns in the United States and the United Kingdom. Years subsequent to 2010 are open for U.S. Federal and state income tax reporting and years subsequent to 2009 are open in the United Kingdom. |
9. Significant Customers
9. Significant Customers | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Significant Customers | ||
Significant Customers | The Company sells its products primarily through high-volume retailers and distributors, Internet service providers, value-added resellers, PC system integrators, and original equipment manufacturers ("OEMs"). The Company supports its major accounts in their efforts to offer a well-chosen selection of attractive products and to maintain appropriate inventory levels. Relatively few customers have accounted for a substantial portion of the Companys revenues. In the third quarter of 2015, three customers accounted for 79% of our total net sales with our largest customer accounting for 48% of our net sales. In the first nine months of 2015, three customers accounted for 77% of the Companys total net sales with our largest customer accounting for 46% of our net sales. At September 30, 2015, three customers accounted for 90% of our gross accounts receivable, with our largest customer representing 61% of our gross accounts receivable. In the third quarter of 2014, three customers accounted for 72% of our net sales with our largest customer accounting for 51% of our net sales. In the first nine months of 2014, three customers accounted for 73% of our total net sales with our largest customer accounting for 54% of our net sales. At September 30, 2014 three customers accounted for 88% of our gross accounts receivable, with our largest customer representing 65% of our gross accounts receivable. The Companys customers generally do not enter into long-term agreements obligating them to purchase products. The Company may not continue to receive significant revenues from any of these or from other large customers. A reduction or delay in orders from any of the Companys significant customers, or a delay or default in payment by any significant customer, could materially harm the Companys business and prospects. Because of the Companys significant customer concentration, its net sales and operating income (loss) could fluctuate significantly due to changes in political or economic conditions, or the loss, reduction of business, or less favorable terms for any of the Company's significant customers. | The Company sells its products primarily through high-volume distributors and retailers, Internet service providers, telephone service providers, value-added resellers, PC system integrators, and original equipment manufacturers ("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 customers have accounted for a substantial portion of the Companys revenues. In 2014 three customers accounted for 74% of our total net sales, with our largest customer accounting for 53% of our net sales. At December 31, 2014, three customers accounted for 92% of our gross accounts receivable, with our largest customer representing 64% of our gross accounts receivable. In 2013 three customers accounted for 69% of the Companys total net sales with our largest customer accounting for 51% of our net sales. At December 31, 2013, three customers accounted for 84% of our gross accounts receivable, with our largest customer representing 71% of our gross accounts receivable. The Companys customers generally do not enter into long-term agreements obligating them to purchase products. The Company may not continue to receive significant revenues from any of these or from other large customers. A reduction or delay in orders from any of the Companys significant customers, or a delay or default in payment by any significant customer could materially harm the Companys business and prospects. Because of the Companys significant customer concentration, its net sales and operating income (loss) could fluctuate significantly due to changes in political or economic conditions, or the loss, reduction of business, or less favorable terms for any of the Company's significant customers. |
11. Dependence on Key Suppliers
11. Dependence on Key Suppliers and Contract Manufacturers | 12 Months Ended |
Dec. 31, 2014 | |
Dependence On Key Suppliers And Contract Manufacturers | |
Dependence on Key Suppliers and Contract Manufacturers | 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. If the supply of a key material component is delayed or curtailed, the Company's ability to ship the related product or solution in desired quantities and in a timely manner could be adversely affected, possibly resulting in reductions in net sales. In cases where alternative sources of supply are available, qualification of the sources and establishment of reliable supplies could result in delays and possible reduction in net sales. In the event that the financial condition of the Company's third-party suppliers for key components was to erode, the delay or curtailment of deliveries of key material components could occur. Additionally, the Company's reliance on third-party suppliers of key material components exposes the Company to potential product quality issues that could affect the reliability and performance of its products and solutions. Any lesser ability to ship its products in desired quantities and in a timely manner due to a delay or curtailment of the supply of material components, or product quality issues arising from faulty components manufactured by third-party suppliers, could adversely affect the market for the Company's products and lead to a reduction in the Company's net sales. In 2014 the Company had one supplier that provided 86% of the Company's purchased inventory. The loss of their services or a material adverse change in their business or in the Companys relationship could materially and adversely harm the Companys business. |
12. Retirement Plan
12. Retirement Plan | 12 Months Ended |
Dec. 31, 2014 | |
Retirement Plan | |
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 2013 and 2014 were $4,779 and $4,682, respectively. |
13. Valuation of Marketable Sec
13. Valuation of Marketable Securities | 12 Months Ended |
Dec. 31, 2014 | |
Valuation Of Marketable Securities | |
Valuation of Marketable Securities | In October 2010 Zoom Telephonics, Inc. entered into an agreement with Zoom Technologies, Inc. (Nasdaq: ZOOM) in which Zoom Telephonics transferred its rights to the zoom.com domain name and certain trademark rights in exchange for shares of Zoom Technologies common stock. The Company valued the marketable securities at market value in the financial statements. In December 2013 the Company sold all shares of Zoom Technologies, Inc. stock. The Company received proceeds of $40 thousand and reported a realized loss of $273 thousand in 2013. |
15. Reclassifications Out of Ac
15. Reclassifications Out of Accumulated Other Comprehensive Income (Loss) | 12 Months Ended |
Dec. 31, 2014 | |
Reclassifications Out Of Accumulated Other Comprehensive Income Loss | |
Reclassifications Out of Accumulated Other Comprehensive Income (Loss) | 2013 2014 Accumulated Other Comprehensive Income (Loss) Components : Foreign currency translations: Balance at beginning of period $ 371,859 $ 364,355 Current period currency translation adjustments (7,504 ) (3,621 ) Amounts reclassified on closing of U.K. branch in Q4, 2014 (360,734 ) Balance at end of period $ 364,355 $ Marketable securities available for sale: Balance at beginning of period $ (272,909 ) $ Current period comprehensive income (loss) (19,983 ) Amounts reclassified on sales of marketable securities 292,892 Balance at end of period $ $ Accumulated Other Comprehensive Income (Loss) end of period $ 364,355 $ |
16. Subsequent Events
16. Subsequent Events | 12 Months Ended |
Dec. 31, 2014 | |
Subsequent Events [Abstract] | |
Subsequent Events | Management of the Company has reviewed subsequent events from December 31, 2014 through the date of filing and concluded that there were no subsequent events requiring adjustment to or disclosure in these financial statements. |
1. Summary of Significant Acc24
1. Summary of Significant Accounting Policies (Policies) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Summary Of Significant Accounting Policies Policies | ||
Basis of Presentation and Use of Estimates | The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP). The preparation of financial statements in conformity with US 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 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 and sales returns) and asset valuation allowance for deferred income tax assets; 2) write-downs of inventory for slow-moving and obsolete items, and market valuations; 3) and stock based compensation. | |
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 are normally in excess of the insured limits. However, the Company believes that the institutions are financially sound and there is only nominal risk of loss. | |
Inventories | Inventories are stated at the lower of cost, determined using the first-in, first-out method, or market. 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 $86,000 and $305,000 at December 31, 2014 and 2013, respectively. | |
Equipment and Leasehold Improvements | Equipment and leasehold improvements are stated at cost, less accumulated depreciation and amortization. Depreciation of equipment is provided using the straight-line method over the estimated useful lives of the assets. Amortization of leasehold improvements is provided using the straight-line method over the estimated useful lives of the improvement or lease term, whichever is shorter. | |
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. | |
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. | |
Earnings (Loss) Per Common Share | Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed by dividing net income by the weighted average number of common shares and dilutive potential common shares outstanding during the period. 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 common shares at the average market price during the period. A summary of the denominators used to compute basic and diluted earnings (loss) per share follow: 2013 2014 Weighted average shares outstanding used to compute basic earnings (loss) per share 7,363,482 7,982,704 Net effect of dilutive potential common shares outstanding, based on the treasury stock method Weighted average shares outstanding used to compute diluted earnings (loss) per share 7,363,482 7,982,704 Potential common shares for which inclusion would have the effect of increasing diluted earnings per share (i.e., anti-dilutive) are excluded from the computation. Options to purchase 1,855,500 shares of common stock at December 31, 2014 and 2,585,000 shares of common stock as of December 31, 2013 were outstanding, but not included in the computation of diluted earnings per share as their effect would be anti-dilutive. | |
Revenue Recognition | The Company primarily sells hardware products to its customers. The hardware products include dial-up modems, DSL modems, cable modems, embedded modems, ISDN modems, telephone dialers, and wireless and wired networking equipment. The Company generally does not sell software. The Company derives its net sales primarily from the sales of hardware products to computer peripherals retailers, computer product distributors, and original equipment manufacturers (OEMs). The Company sells an immaterial amount of its hardware products to direct consumers or to any customers via the internet. The Company recognizes net hardware sales for all four types of customers at the point when the customers take legal ownership of the delivered products. Legal ownership passes to the customer based on the contractual FOB point specified in signed contracts and purchase orders, which are both used extensively. Many customer contracts or purchase orders specify FOB destination. When Zoom consigns inventory to a retailer, sales revenue for an item in that inventory is recognized when that item is sold by the retailer to a customer. The item remains in Zoom inventory when it is consigned, and moves out of Zoom inventory when the item is sold by the retailer. The Company's net sales of hardware are reduced by certain events which are characteristic of the sales of hardware to retailers of computer peripherals. These events are product returns, certain sales and marketing incentives, price protection refunds, and consumer and in-store mail-in rebates. Each of these is accounted for as a reduction of net sales based on management estimates, which are reconciled to actual customer or end-consumer credits on a monthly or quarterly basis. The estimates for product returns are based on recent historical trends plus estimates for returns prompted by announced stock rotations, announced customer store closings, etc. Management analyzes historical returns, current economic trends, and changes in customer demand and acceptance of the Company's products when evaluating the adequacy of sales return allowances. Product return reserves were $535.2 thousand and $354.0 thousand at December 31, 2013 and 2014, respectively. The Company's estimates for price protection refunds require a detailed understanding and tracking by customer, by sales program. Estimated price protection refunds are recorded in the same period as the announcement of a pricing change. Information from customer inventory-on-hand reports or from direct communications with the customers is used to estimate the refund, which is recorded as a reserve against accounts receivable and a reduction of current period revenue. Price protection reserves were $10.7 thousand and $0 at December 31, 2013 and 2014, respectively. The Company's estimates for consumer mail-in rebates are comprised of actual rebate claims processed by the rebate redemption centers plus an accrual for an estimated lag in processing. The Company's estimates for store rebates are comprised of actual credit requests from the eligible customers. Rebate reserves were $40.7 thousand and $0 at December 31, 2013 and 2014, respectively. Additionally, sales and marketing incentive reserves were $41.7 thousand and $15.2 thousand at December 31, 2013 and 2014, respectively. The Companys allowance for doubtful accounts was approximately $12 thousand at both December 31, 2013 and 2014. The Company accounts for point-of-sale taxes on a net basis. | |
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, accounts payable, and accrued expenses. 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. | |
Advertising Costs | Advertising costs are expensed as incurred and reported in selling expense in the accompanying statements of operations and comprehensive income (loss), and include costs of advertising, production, trade shows, and other activities designed to enhance demand for the Company's products. There are no deferred advertising costs in the accompanying balance sheets. The Company reported advertising costs of $247.5 thousand in 2013 and $255.0 thousand in 2014. | |
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. The Company considers the local currency to be the functional currency for its U.K. branch. Assets and liabilities denominated in foreign currencies are translated using the exchange rates as of the balance sheet date. Revenues and expenses are translated at average exchange rates prevailing during the year. Translation adjustments resulting from this process are charged or credited to accumulated other comprehensive income. During Q4 2014 Zoom Telephonics closed its UK office. This required the recognition of foreign currency translation gains that had previously been recorded as accumulated other comprehensive income. Zoom reported $361 thousand of other income in operations and a reduction in accumulated other comprehensive income of $361 thousand, resulting in zero impact to net comprehensive income. The associated balance sheet adjustment similarly had zero effect on total Stockholders Equity. | |
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 $38,098 and $25,069 at December 31, 2013 and 2014, 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 $191.7 thousand in 2013 and $232.1 thousand in 2014. | |
Recently Issued Accounting Pronouncements | In August 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-15, "Presentation of Financial Statements Going Concern" This standard requires management to evaluate for each annual and interim reporting period whether it is probable that the reporting entity will not be able to meet its obligations as they become due within one year after the date that the financial statements are issued. If the entity is in such a position, the standard provides for certain disclosures depending on whether or not the entity will be able to successfully mitigate its going concern status. This guidance is effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early application is permitted. The Company does not expect a material impact to the Company's financial condition, results of operations or cash flows from the adoption of this guidance. In June 2015, the FASB issued ASU No. 2015-10, "Technical Corrections and Improvements. ASU 2015-10 clarifies various topics in the FASB Accounting Standards Codification. ASU 2015-10 is effective for the interim and annual periods ending after December 15, 2015. Early adoption is permitted. The Company does not expect a material impact to the Companys financial condition, results of operations or cash flows from the adoption of this guidance. In August 2015, the Financial Accounting Standards Board, (FASB) issued the Accounting Standards Update (ASU) No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. | In August 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-15, "Presentation of Financial Statements Going Concern" This standard requires management to evaluate for each annual and interim reporting period whether it is probable that the reporting entity will not be able to meet its obligations as they become due within one year after the date that the financial statements are issued. If the entity is in such a position, the standard provides for certain disclosures depending on whether or not the entity will be able to successfully mitigate its going concern status. This guidance is effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early application is permitted. The Company does not expect a material impact to the Company's financial condition, results of operations or cash flows from the adoption of this guidance. In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers," which will replace most existing revenue recognition guidance in generally accepted accounting principles in the United States of America. The core principle of this ASU is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. This ASU requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. This ASU will be effective for the Company beginning January 1, 2017, including interim periods in 2017, and allows for both retrospective and prospective methods of adoption. The Company is in the process of determining method of adoption and assessing the impact of this ASU on its consolidated financial statements. |
Reclassifications | Certain reclassifications have been made to the prior years financial statements to conform to the 2014 presentation. The reclassifications relate to the presentation of changes in accounts receivable and inventory on the statements of cash flows. | |
Contingencies | 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. In assessing potential loss contingencies, the Company considers a number of factors, including those listed in the FASBs Accounting Standards Codification 450-20, Contingencies Loss Contingencies , |
1A. Summary of Significant Acco
1A. Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
A. Summary Of Significant Accounting Policies Tables | |
Earnings (Loss) Per Common Share | 2013 2014 Weighted average shares outstanding used to compute basic earnings (loss) per share 7,363,482 7,982,704 Net effect of dilutive potential common shares outstanding, based on the treasury stock method Weighted average shares outstanding used to compute diluted earnings (loss) per share 7,363,482 7,982,704 |
3. Inventories (Tables)
3. Inventories (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Inventories Tables | ||
Inventories consist | Inventories consist of: September 30, 2015 December 31, 2014 Materials $ 468,578 $ 332,804 Work in process 22,383 Finished goods (including $142,600 and $85,600 held by customers at September 30, 2015 and December 31, 2014, respectively) 896,848 1,391,703 Total $ 1,387,809 $ 1,724,507 | 2013 2014 Materials $ 440,723 $ 332,804 Finished goods (including $304,500 and $85,600 held by customers at December 31, 2013 and 2014, respectively) 1,273,358 1,391,703 Total $ 1,714,081 $ 1,724,507 |
5. Segment and Geographic Inf27
5. Segment and Geographic Information (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Segment And Geographic Information Tables | ||
Company's net sales by geographic region | Three Months Three Months Nine Months Nine Months Ended % of Ended % of Ended % of Ended % of September 30, 2015 Total September 30, 2014 Total September 30, 2015 Total September 30, 2014 Total North America $ 3,295,501 98% $ 3,325,678 98% $ 8,843,983 98% $ 8,922,604 97% Outside North America 72,337 2% 78,348 2% 175,599 2% 268,469 3% Total $ 3,367,838 100% $ 3,404,026 100% $ 9,019,582 100% $ 9,191,073 100% | 2013 Percent 2014 Percent United States $ 10,541,921 94 % $ 11,563,956 97 % Outside United States 699,243 6 % 337,383 3 % Total $ 11,241,164 100 % $ 11,901,339 100 % |
5A. Equipment (Tables)
5A. Equipment (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
A. Equipment Tables | |
Equipment | 2013 2014 Estimated Useful lives in years Computer hardware and software $ 194,528 $ 196,070 3 Machinery and equipment 254,533 258,446 5 Molds, tools and dies 78,257 96,557 5 Office furniture and fixtures 38,938 38,938 5 566,256 590,011 Accumulated depreciation and amortization (515,231 ) (522,869 ) Equipment and leasehold improvements, net $ 51,025 $ 67,142 Depreciation expense for year ended $ 9,777 $ 9,048 |
7. Stock Option Plans (Tables)
7. Stock Option Plans (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Schedule stock options under the 2009 Stock Option Plan | Assumptions 2009 Stock Option Plan and the 2009 Directors Stock Option Plan Expected life 2.75 (yrs) - 3.5 (yrs) Expected volatility 48.32% - 67.08% Risk-free interest rate 0.35% - 1.88% Expected dividend yield 0.00% |
Schedule of assumptions for option valuation | Assumptions 2009 Stock Option Plan and the 2009 Directors Stock Option Plan Expected life 2.75 (yrs) - 3.5 (yrs) Expected volatility 48.32% - 67.08% Risk-free interest rate 0.35% - 1.88% Expected dividend yield 0.00% |
Stock Option Plan 2009 | |
Plan Activity | Number of shares Weighted average exercise price Balance as of January 1, 2013 970,000 $ 0.51 Granted 1,505,000 0.25 Exercised Expired (160,000 ) 0.25 Balance as of December 31, 2013 2,315,000 $ 0.35 Granted 50,000 $ 0.12 Exercised Expired (674,500 ) 0.49 Balance as of December 31, 2014 1,690,500 $ 0.29 |
Schedule stock options under the Plan | Options Outstanding Options Exercisable Exercise Prices Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $ 0.48 345,500 1.20 $ 0.48 345,500 $ 0.48 $ 0.25 1,295,000 3.10 $ 0.25 971,250 $ 0.25 $ 0.12 50,000 4.10 $ 0.12 12,500 $ 0.12 $ 0.12 to 0.48 1,690,500 2.74 $ 0.29 1,329,250 $ 0.32 |
Directors Plan | |
Plan Activity | Number of shares Weighted average exercise price Balance as of January 1, 2013 210,000 0.35 Granted 60,000 0.18 Exercised Expired Balance as of December 31, 2013 270,000 0.31 Granted 60,000 0.13 Exercised Expired (165,000 ) Balance as of December 31, 2014 165,000 $ 0.24 |
Schedule stock options under the Plan | Options Outstanding Options Exercisable Exercise Prices Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $ 0.12-0.14 45,000 4.32 $ 0.13 30,000 $ 0.13 $ 0.16-0.20 30,000 3.30 $ 0.18 30,000 $ 0.18 $ 0.25-0.26 30,000 2.30 $ 0.26 30,000 $ 0.26 $ 0.27-0.41 30,000 .40 $ 0.34 30,000 $ 0.34 $ 0.35-0.36 30,000 1.30 $ 0.36 30,000 $ 0.36 $ 0.12-0.41 165,000 2.5 $ 0.24 165,000 $ 0.24 |
8. Income Taxes (Tables)
8. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Income Taxes Tables | |
Schedule of income taxes | Current Deferred Total Year Ended December 31, 2013: US federal $ $ $ State and local Foreign 3,944 3,944 $ 3,944 $ $ 3,944 Year Ended December 31, 2014: US federal $ $ $ State and local Foreign 7,080 7,080 $ 7,080 $ $ 7,080 |
Schedule of income tax reconciliation | 2013 2014 Computed "expected" US tax (benefit) at Federal statutory rate $ (362,095 ) $ 41,645 Change resulting from: State and local income taxes, net of federal income tax benefit Valuation allowance (126,339 ) (281,039 ) Nondeductible items 15,334 12,063 Expired State Net Operating Losses 477,044 234,411 Income tax expense (benefit) $ 3,944 $ 7,080 |
Schedule of deferred tax assets | 2013 2014 Deferred income tax assets: Inventories $ 165,225 $ 132,511 Accounts receivable 235,207 143,780 Intangible assets 25,738 Accrued expenses 44,112 36,621 Net operating loss and tax credit carry forwards 17,977,742 17,863,473 Plant and equipment 15,018 4,629 Stock compensation 89,515 90,504 Other investment impairments 127,855 127,855 Total deferred income tax assets 18,680,412 18,399,373 Valuation allowance (18,680,412 ) (18,399,373 ) Net deferred tax assets $ $ |
15. Reclassifications Out of 31
15. Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Reclassifications Out Of Accumulated Other Comprehensive Income Loss Tables | |
Reclassifications Out of Accumulated Other Comprehensive Income (Loss) | 2013 2014 Accumulated Other Comprehensive Income (Loss) Components : Foreign currency translations: Balance at beginning of period $ 371,859 $ 364,355 Current period currency translation adjustments (7,504 ) (3,621 ) Amounts reclassified on closing of U.K. branch in Q4, 2014 (360,734 ) Balance at end of period $ 364,355 $ Marketable securities available for sale: Balance at beginning of period $ (272,909 ) $ Current period comprehensive income (loss) (19,983 ) Amounts reclassified on sales of marketable securities 292,892 Balance at end of period $ $ Accumulated Other Comprehensive Income (Loss) end of period $ 364,355 $ |
1A. Summary of Significant Ac32
1A. Summary of Significant Accounting Policies (Details) - shares | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
A. Summary Of Significant Accounting Policies Details | ||
Weighted average shares outstanding - used to compute basic earnings (loss) per share | 7,982,704 | 7,363,482 |
Net effect of dilutive potential common shares outstanding, based on the treasury stock method | 0 | 0 |
Weighted average shares outstanding - used to compute diluted earnings (loss) per share | 7,982,704 | 7,363,482 |
3. Inventories (Details)
3. Inventories (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
Inventories Details | |||
Raw materials | $ 468,578 | $ 332,804 | $ 440,723 |
Work in process | 22,383 | 0 | |
Finished goods (including $142,600 and $85,600 held by customers at September 30, 2015 and December 31, 2014, respectively) (including $304,500 and $85,600 held by customers at December 31, 2013 and 2014, respectively) | 896,848 | 1,391,703 | 1,273,358 |
Total inventories | $ 1,387,809 | $ 1,724,507 | $ 1,714,081 |
3. Inventories (Details Narrati
3. Inventories (Details Narrative) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
Inventories Details | |||
Finished goods held by customer | $ 142,600 | $ 85,600 | $ 304,500 |
Reserve for the provision for slow moving and obsolete inventory | $ 249,130 | $ 279,388 | $ 360,624 |
5. Segment and Geographic Inf35
5. Segment and Geographic Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||||
Net sales, amount | $ 3,367,838 | $ 3,404,026 | $ 9,019,582 | $ 9,191,073 | $ 11,901,339 | $ 11,241,164 |
Net sales, % of total | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% |
North America | ||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||||
Net sales, amount | $ 3,295,501 | $ 3,325,678 | $ 8,843,983 | $ 8,922,604 | ||
Net sales, % of total | 98.00% | 98.00% | 98.00% | 97.00% | ||
Outside North America [Member] | ||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||||
Net sales, amount | $ 72,337 | $ 78,348 | $ 175,599 | $ 268,469 | ||
Net sales, % of total | 2.00% | 2.00% | 2.00% | 3.00% | ||
United States | ||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||||
Net sales, amount | $ 11,563,956 | $ 10,541,921 | ||||
Net sales, % of total | 97.00% | 94.00% | ||||
Outside United States | ||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||||
Net sales, amount | $ 337,383 | $ 699,243 | ||||
Net sales, % of total | 3.00% | 6.00% |
5A. Equipment (Details)
5A. Equipment (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2015 | |
Property and equipment | $ 590,011 | $ 566,256 | |
Accumulated depreciation and amortization | (522,869) | (515,231) | |
Equipment and leasehold improvements, net | 67,142 | 51,025 | $ 89,846 |
Depreciation expense for year ended | 9,048 | 9,777 | |
Computer Hardware and Software | |||
Property and equipment | 196,070 | 194,528 | |
Machinery and Equipment | |||
Property and equipment | 258,446 | 254,533 | |
Tools, Dies and Molds | |||
Property and equipment | 96,557 | 78,257 | |
Office Furniture and Equipment | |||
Property and equipment | $ 38,938 | $ 38,938 |
6. Customer Concentrations (Det
6. Customer Concentrations (Details Narrative) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Three Customers Percentage of Sales | ||||
Percent concentration | 79.00% | 72.00% | 77.00% | 73.00% |
One Customer Percentage of Sales | ||||
Percent concentration | 48.00% | 51.00% | 46.00% | 54.00% |
One Customer Percentage of Receivables | ||||
Percent concentration | 61.00% | 65.00% | ||
Three Customers Percentage of Receivables | ||||
Percent concentration | 90.00% | 88.00% |
7. Stock Option Plans (Details)
7. Stock Option Plans (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Stock Option Plans Details | ||
Number of shares Outstanding at beginning of period | 2,315,000 | 970,000 |
Granted | 50,000 | 1,505,000 |
Exercised | 0 | 0 |
Expired | (674,500) | (160,000) |
Number of shares Outstanding end of period | 1,690,500 | 2,315,000 |
Weighted average Price | ||
Weighted average exercise price, beginning | $ 0.35 | $ 0.51 |
Granted | $ 0.12 | $ 0.25 |
Exercised | ||
Expired | $ 0.49 | $ 0.25 |
Weighted average exercise price, ending | $ 0.29 | $ 0.35 |
7. Stock Option Plans (Details
7. Stock Option Plans (Details 1) | 12 Months Ended |
Dec. 31, 2014$ / sharesshares | |
Number of shares Outstanding end of period | shares | 1,690,500 |
Weighted average exercise price, ending | $ / shares | $ 0.29 |
0.48 | |
Number of shares Outstanding end of period | shares | 345,500 |
Weighted average remaining contractual life | 1 year 2 months 12 days |
Weighted average exercise price, ending | $ / shares | $ 0.48 |
Number Exercisable | shares | 345,500 |
Weighted average exercise price | $ / shares | $ 0.48 |
0.25 | |
Number of shares Outstanding end of period | shares | 1,295,000 |
Weighted average remaining contractual life | 3 years 1 month 6 days |
Weighted average exercise price, ending | $ / shares | $ 0.25 |
Number Exercisable | shares | 971,250 |
Weighted average exercise price | $ / shares | $ 0.25 |
0.12 | |
Number of shares Outstanding end of period | shares | 50,000 |
Weighted average remaining contractual life | 4 years 1 month 6 days |
Weighted average exercise price, ending | $ / shares | $ 0.12 |
Number Exercisable | shares | 12,500 |
Weighted average exercise price | $ / shares | $ 0.12 |
0.12 to 0.48 | |
Number of shares Outstanding end of period | shares | 1,690,500 |
Weighted average remaining contractual life | 2 years 8 months 27 days |
Weighted average exercise price, ending | $ / shares | $ 0.29 |
Number Exercisable | shares | 1,329,250 |
Weighted average exercise price | $ / shares | $ 0.32 |
7. Stock Option Plans (Detail40
7. Stock Option Plans (Details 2) - $ / shares | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Number of shares Outstanding at beginning of period | 2,315,000 | 970,000 |
Granted | 50,000 | 1,505,000 |
Exercised | 0 | 0 |
Expired | (674,500) | (160,000) |
Number of shares Outstanding end of period | 1,690,500 | 2,315,000 |
Weighted average Price | ||
Weighted average exercise price, beginning | $ 0.35 | $ 0.51 |
Granted | $ 0.12 | $ 0.25 |
Exercised | ||
Expired | $ 0.49 | $ 0.25 |
Weighted average exercise price, ending | $ 0.29 | $ 0.35 |
Directors Plan | ||
Number of shares Outstanding at beginning of period | 270,000 | 210,000 |
Granted | 60,000 | 60,000 |
Exercised | 0 | 0 |
Expired | (165,000) | 0 |
Number of shares Outstanding end of period | 165,000 | 270,000 |
Weighted average Price | ||
Weighted average exercise price, beginning | $ 0.31 | $ 0.35 |
Granted | $ 0.13 | $ 0.18 |
Exercised | ||
Expired | ||
Weighted average exercise price, ending | $ 0.24 | $ 0.31 |
7. Stock Option Plans (Detail41
7. Stock Option Plans (Details 3) | 12 Months Ended |
Dec. 31, 2014$ / sharesshares | |
Number of shares Outstanding end of period | shares | 1,690,500 |
Weighted average exercise price, ending | $ 0.29 |
0.12 - 0.48 | |
Option price range, upper | 0.14 |
Option price range, lower | $ 0.12 |
Number of shares Outstanding end of period | shares | 45,000 |
Weighted average remaining contractual life | 4 years 3 months 25 days |
Weighted average exercise price, ending | $ 0.13 |
Number Exercisable | shares | 30,000 |
Weighted average exercise price | $ 0.13 |
0.16 - 0.20 | |
Option price range, upper | 0.20 |
Option price range, lower | $ 0.16 |
Number of shares Outstanding end of period | shares | 30,000 |
Weighted average remaining contractual life | 3 years 3 months 18 days |
Weighted average exercise price, ending | $ 0.18 |
Number Exercisable | shares | 30,000 |
Weighted average exercise price | $ 0.18 |
0.25 - 0.26 | |
Option price range, upper | 0.26 |
Option price range, lower | $ 0.25 |
Number of shares Outstanding end of period | shares | 30,000 |
Weighted average remaining contractual life | 2 years 3 months 18 days |
Weighted average exercise price, ending | $ 0.26 |
Number Exercisable | shares | 30,000 |
Weighted average exercise price | $ 0.26 |
0.27 - 0.41 | |
Option price range, upper | 0.41 |
Option price range, lower | $ 0.27 |
Number of shares Outstanding end of period | shares | 30,000 |
Weighted average remaining contractual life | 4 months 24 days |
Weighted average exercise price, ending | $ 0.34 |
Number Exercisable | shares | 30,000 |
Weighted average exercise price | $ 0.34 |
0.35 - 0.36 | |
Option price range, upper | 0.36 |
Option price range, lower | $ 0.35 |
Number of shares Outstanding end of period | shares | 30,000 |
Weighted average remaining contractual life | 1 year 3 months 18 days |
Weighted average exercise price, ending | $ 0.36 |
Number Exercisable | shares | 30,000 |
Weighted average exercise price | $ 0.36 |
0.12 - 0.41 | |
Option price range, upper | 0.41 |
Option price range, lower | $ 0.12 |
Number of shares Outstanding end of period | shares | 165,000 |
Weighted average remaining contractual life | 2 years 6 months |
Weighted average exercise price, ending | $ 0.24 |
Number Exercisable | shares | 165,000 |
Weighted average exercise price | $ 0.24 |
7. Stock Option Plans (Detail42
7. Stock Option Plans (Details 4) | 12 Months Ended |
Dec. 31, 2014 | |
Expected dividend yield | 0.00% |
Minimum | |
Expected life | 2 years 9 months |
Expected volatility | 48.32% |
Risk-free interest rate | 0.35% |
Maximum | |
Expected life | 3 years 6 months |
Expected volatility | 67.08% |
Risk-free interest rate | 1.88% |
8. Income Taxes (Details)
8. Income Taxes (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Current tax expense | ||||||
US Federal | $ 0 | $ 0 | ||||
State and local | 0 | 0 | ||||
Foreign | 7,080 | 3,944 | ||||
Total current tax expense | 7,080 | 3,944 | ||||
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 | 0 | 0 | ||||
Foreign | 7,080 | 3,944 | ||||
Total | $ 1,978 | $ 1,797 | $ 5,757 | $ 5,839 | $ 7,080 | $ 3,944 |
8. Income Taxes (Details 1)
8. Income Taxes (Details 1) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Income Taxes Details 1 | ||||||
Computed ""expected"" US tax (benefit) at Federal statutory rate | $ 41,645 | $ (362,095) | ||||
Change resulting from: | ||||||
State and local income taxes, net of federal income tax benefit | 0 | 0 | ||||
Valuation allowance | (281,039) | (126,339) | ||||
Non-deductible items | 12,063 | 15,334 | ||||
Expired State Net Operating Losses | 234,411 | 477,044 | ||||
Income tax expense (benefit) | $ 1,978 | $ 1,797 | $ 5,757 | $ 5,839 | $ 7,080 | $ 3,944 |
8. Income Taxes (Details 2)
8. Income Taxes (Details 2) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Deferred income tax assets: | ||
Inventories | $ 132,511 | $ 165,225 |
Accounts receivable | 143,780 | 235,207 |
Intangible assets | 0 | 25,738 |
Accrued expenses | 36,621 | 44,112 |
Net operating loss and tax credit carry forwards | 17,863,473 | 17,977,742 |
Plant and equipment | 4,629 | 15,018 |
Stock compensation | 90,504 | 89,515 |
Other- investment impairments | 127,855 | 127,855 |
Total deferred income tax assets | 18,399,373 | 18,680,412 |
Valuation allowance | (18,399,373) | (18,680,412) |
Net deferred tax assets | $ 0 | $ 0 |
9. Significant Customers (Detai
9. Significant Customers (Details Narrative) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Three Customers Percentage of Total Sales | ||
Percent concentration | 74.00% | 69.00% |
One Customer Percentage of Total Sales | ||
Percent concentration | 53.00% | 51.00% |
Three Customers Percentage of Total Accounts Receivable | ||
Percent concentration | 92.00% | 84.00% |
One Customer Percentage of Total Accounts Receivable | ||
Percent concentration | 64.00% | 71.00% |
12. Retirement Plan (Details Na
12. Retirement Plan (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Retirement Plan Details Narrative | ||
Company matching contributions charged to expense | $ 4,682 | $ 4,779 |
15. Reclassifications Out of 48
15. Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Foreign currency translations: | ||
Balance at beginning of period | $ 364,355 | $ 371,859 |
Current period currency translation adjustments | (3,621) | (7,504) |
Amounts reclassified on closing of U.K. branch in Q4, 2014 | (360,734) | 0 |
Balance at end of period | 0 | 364,355 |
Marketable securities available for sale: | ||
Balance at beginning of period | 0 | (272,909) |
Current period comprehensive income (loss) | 0 | (19,983) |
Amounts reclassified on sales of marketable securities | 0 | 292,892 |
Balance at end of period | 0 | 0 |
Accumulated Other Comprehensive Income (Loss) end of period | $ 0 | $ 364,355 |