Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 30, 2016 | |
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, 2016 |
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 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Current assets | |||
Cash and cash equivalents | $ 175,308 | $ 1,846,704 | $ 137,637 |
Accounts receivable, net of allowances of $460,155, $483,349 and $381,234 at September 30 2016, December 31, 2015 and 2014, respectively | 2,871,603 | 1,079,145 | 1,811,006 |
Inventories, net | 4,229,070 | 2,784,610 | 1,724,507 |
Prepaid expenses and other current assets | 574,450 | 381,205 | 270,263 |
Total current assets | 7,850,431 | 6,091,664 | 3,943,413 |
Equipment, net | 173,804 | 205,132 | 67,142 |
Other assets | 542,193 | 573,049 | 0 |
Total assets | 8,566,428 | 6,869,845 | 4,010,555 |
Current liabilities | |||
Bank credit line | 2,141,799 | 0 | 840,585 |
Accounts payable | 1,851,778 | 1,423,503 | 726,627 |
Accrued expenses | 948,709 | 292,756 | 284,736 |
Total current liabilities | 4,942,286 | 1,716,259 | 1,851,948 |
Total liabilities | 4,942,286 | 1,716,259 | 1,851,948 |
Commitments and contingencies (Note 6) | |||
Stockholders' equity | |||
Common stock: Authorized: 25,000,000 shares at $0.01 par value Issued and outstanding: 13,976,059, 13,477,803 shares and 7,982,704 shares at September 30, 2016, December 31, 2015 and 2014, respectively | 139,761 | 134,778 | 79,827 |
Additional paid-in capital | 38,374,431 | 37,965,230 | 34,192,066 |
Accumulated deficit | (34,890,050) | (32,946,422) | (32,113,286) |
Total stockholders' equity | 3,624,142 | 5,153,586 | 2,158,607 |
Total liabilities and stockholders' equity | $ 8,566,428 | $ 6,869,845 | $ 4,010,555 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Assets | |||
Accounts receivable allowances | $ 460,155 | $ 483,349 | $ 381,234 |
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 | 13,976,059 | 13,477,803 | 7,982,704 |
Common stock, outstanding | 13,976,059 | 13,477,803 | 7,982,704 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
Income Statement [Abstract] | ||||||
Net sales | $ 5,990,432 | $ 3,367,838 | $ 12,688,142 | $ 9,019,582 | $ 10,790,342 | $ 11,901,339 |
Cost of goods sold | 4,064,834 | 2,267,235 | 8,727,755 | 6,110,159 | 7,388,075 | 8,409,665 |
Gross profit | 1,925,598 | 1,100,603 | 3,960,387 | 2,909,423 | 3,402,267 | 3,491,674 |
Operating expenses: | ||||||
Selling | 1,473,787 | 418,017 | 3,520,030 | 1,210,809 | 1,571,256 | 1,446,110 |
General and administrative | 354,237 | 306,827 | 1,236,239 | 810,556 | 1,229,198 | 1,052,326 |
Research and development | 352,849 | 354,252 | 1,154,789 | 918,014 | 1,342,081 | 1,132,791 |
Total | 2,180,873 | 1,079,096 | 5,911,058 | 2,939,379 | 4,142,535 | 3,631,227 |
Operating profit (loss) | (255,275) | 21,507 | (1,950,671) | (29,956) | (740,268) | (139,553) |
Other: | ||||||
Interest income | 21 | 16 | 238 | 31 | 444 | 33 |
Interest expense | (27,778) | (27,347) | (32,115) | (72,360) | (72,360) | (77,225) |
Other income (expense), net | 41,482 | (63) | 42,232 | (929) | (13,589) | 346,311 |
Total other income (expense), net | 13,725 | (27,394) | 10,355 | (73,258) | (85,505) | 269,119 |
Income (loss) before income taxes | (241,550) | (5,887) | (1,940,316) | (103,214) | (825,773) | 129,566 |
Income taxes (benefit) | 2,034 | 1,978 | 3,312 | 5,757 | 7,363 | 7,080 |
Net income (loss) | $ (243,584) | $ (7,865) | $ (1,943,628) | $ (108,971) | (833,136) | 122,486 |
Other comprehensive income (loss): | ||||||
Foreign currency translation adjustments | 0 | (3,621) | ||||
Foreign currency translation recognition upon reclassification from accumulated other comprehensive income | 0 | (360,734) | ||||
Total comprehensive income (loss) | $ (833,136) | $ (241,869) | ||||
Basic and diluted net income (loss) per share | $ (0.02) | $ 0 | $ (0.14) | $ (0.01) | $ (0.09) | $ 0.02 |
Weighted average common and common equivalent shares: | ||||||
Basic and diluted | 13,877,407 | 8,519,051 | 13,722,680 | 8,167,187 | 9,470,848 | 7,982,704 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) | Common Stock | Additional Paid In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total |
Beginning Balance, Amount at Dec. 31, 2013 | $ 79,827 | $ 34,177,779 | $ (32,235,772) | $ 364,355 | $ 2,386,189 |
Beginning Balance, Shares at Dec. 31, 2013 | 7,982,704 | ||||
Net income (loss) | 122,486 | 122,486 | |||
Total other comprehensive income (loss) | $ (364,355) | (364,355) | |||
Stock based compensation | 14,287 | 14,287 | |||
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 | 7,982,704 | |||
Net income (loss) | (833,136) | $ (833,136) | |||
Private placement offering (net of issuance costs, Amount | $ 49,100 | 3,371,901 | 3,421,001 | ||
Private placement offering (net of issuance costs, Shares | 4,909,999 | ||||
Stock rights offering (net of issuance costs, Amount | $ 2,986 | 225,974 | 228,960 | ||
Stock rights offering (net of issuance costs, Shares | 298,600 | ||||
Stock option exercise | $ 2,865 | 99,755 | 102,620 | ||
Stock option exercise, Shares | 286,500 | ||||
Stock based compensation | 75,534 | 75,534 | |||
Ending Balance, Amount at Dec. 31, 2015 | $ 134,778 | $ 37,965,230 | $ (32,946,422) | $ 5,153,586 | |
Ending Balance, Shares at Dec. 31, 2015 | 13,477,803 | 13,477,803 | |||
Net income (loss) | $ (1,943,628) | ||||
Ending Balance, Amount at Sep. 30, 2016 | $ 3,624,142 | ||||
Ending Balance, Shares at Sep. 30, 2016 | 13,976,059 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
Operating activities: | ||||
Net income (loss) | $ (1,943,628) | $ (108,971) | $ (833,136) | $ 122,486 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||
Stock based compensation | 164,795 | 48,839 | 75,534 | 14,287 |
Depreciation and amortization | 389,487 | 58,724 | 121,027 | 9,048 |
Provision (recovery) for accounts receivable allowances | 8,988 | 34 | (3,915) | 574 |
Provision for inventory reserves | 10,450 | 22,913 | 18,078 | 81,843 |
Reclassification out of Accumulated Other Comprehensive Income (Loss) | 0 | (360,734) | ||
Changes in operating assets and liabilities: | ||||
Accounts receivable | (1,801,446) | (149,635) | 735,776 | (136,768) |
Inventories | (1,454,910) | 313,785 | (1,078,181) | (92,269) |
Prepaid expense and other current assets | (193,245) | (623,529) | (110,942) | (45,111) |
Accounts payable and accrued expenses | 1,084,228 | 32,970 | 704,896 | (4,593) |
Net cash provided by (used in) operating activities | (3,735,281) | (404,870) | (370,863) | (411,237) |
Investing activities: | ||||
Purchases of plant and equipment | (32,303) | (45,314) | (177,066) | (25,165) |
Other assets | (295,000) | 0 | (655,000) | 0 |
Net cash provided by (used in) investing activities | (327,303) | (45,314) | (832,066) | (25,165) |
Financing activities: | ||||
Proceeds from stock option exercise | 249,389 | 19,425 | 102,620 | 0 |
Proceeds from private placement offering | 0 | 3,421,001 | 3,437,001 | 0 |
Proceeds from private placement offering (net of issuance costs) | 0 | 228,960 | (16,000) | 0 |
Proceeds from stock rights offering (net of issuance costs) | 268,740 | 0 | ||
Issuance costs of stock rights offering | (39,780) | 0 | ||
Net funds (to) from bank credit lines | 2,141,799 | (840,585) | (840,585) | 522,267 |
Net cash provided by (used in) financing activities | 2,391,188 | 2,828,801 | 2,911,996 | 522,267 |
Effect of exchange rate changes on cash | 0 | (3,621) | ||
Net change in cash | (1,671,396) | 2,378,617 | 1,709,067 | 82,244 |
Cash and cash equivalents at beginning of year | 1,846,704 | 137,637 | 137,637 | 55,393 |
Cash and cash equivalents at end of year | 175,308 | 2,516,254 | 1,846,704 | 137,637 |
Cash paid during the period for: | ||||
Cash paid during the period for: Interest | 32,115 | 72,360 | 72,360 | 77,225 |
Cash paid during the period for: Income taxes | $ 3,312 | $ 5,757 | $ 7,363 | $ 7,080 |
1. NATURE OF OPERATIONS
1. NATURE OF OPERATIONS | 12 Months Ended |
Dec. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF OPERATIONS | Zoom Telephonics, Inc. and its wholly owned subsidiary MTRLC LLC (collectively the "Company"), designs, produces, markets and supports cable modems and other communication products. |
2. SUMMARY OF SIGNIFICANT ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Notes to Financial Statements | ||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | The accompanying condensed consolidated financial statements (“financial statements”) are unaudited. However, the presentation of the condensed consolidated balance sheet as of December 31, 2015 was derived from audited financial statements. In the opinion of management, the accompanying financial statements include all necessary adjustments to present fairly the consolidated financial position, results of operations and cash flows of Zoom Telephonics, Inc. (the “Company” or “Zoom”). The adjustments are of a normal, recurring nature. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the entire year. The Company has evaluated subsequent events from September 30, 2016 through the date of this filing and other than the subscription agreements disclosed in Note 7, has determined that there are no such events requiring recognition or disclosure in the financial statements. The financial statements of the Company presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2015 included in the Company's 2015 Annual Report on Form 10-K . 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 from operations, or cash flows from the adoption of this guidance. In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” Currently, all inventory is measured at the lower of cost or market. ASU 2015-11 changes the measurement principle for inventory from the lower of cost or market to the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. The standard is effective for annual reporting periods beginning after December 15, 2015, which for the Company commenced with the year beginning January 1, 2016. Prospective application is required. The Company does not believe the implementation of this standard has a material impact on the Company’s consolidated financial statements. In August 2015, the issued “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.” The amendments in this update defer the effective date of ASU 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. In March 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in its balance sheet, a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term (the lease asset). For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial condition, results of operations and cash flows. In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation.” ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the simplified areas apply only to nonpublic entities. ASU 2016-09 is effective for public business entities for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. If an entity early adopts ASU 2016-09 in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. Methods of adoption vary according to each of the amendment provisions. The Company is currently evaluating the potential impact that the adoption of ASU 2016-09 may have on its consolidated financial statements. In April 2016, the FASB issued ASU No. 2016-10, "Revenue from Contracts with Customers — Identifying Performance Obligations and Licensing." ASU 2016-10 does not change the core principle of the guidance, rather it clarifies the identification of performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. ASU 2016-10 clarifies the guidance in ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," which is not yet effective. The effective date and transition requirements for ASU 2016-10 are the same as for ASU 2014-09, which was deferred by one year by ASU No.2015-14, "Revenue from Contracts with Customers — Deferral of the Effective Date." Public business entities should adopt the new revenue recognition standard for annual reporting periods beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that year. The Company is currently evaluating the potential impact that the adoption of ASU 2016-10 may have on its consolidated financial statements. In May 2016, the FASB issued ASU No. 2016-12, "Revenue from Contracts with Customers — Narrow- Scope Improvements and Practical Expedients." ASU 2016-12 does not change the core principle of the guidance, rather it affects only certain narrow aspects of Topic 606, including assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. ASU 2016-12 affects the guidance in ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," which is not yet effective. The effective date and transition requirements for ASU 2016-12 are the same as for ASU 2014-09, which was deferred by one year by ASU No. 2015-14, "Revenue from Contracts with Customers —Deferral of the Effective Date." Public business entities should adopt the new revenue recognition standard for annual reporting periods beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that year. The Company is currently evaluating the potential impact that the adoption of ASU 2016-12 may have on its consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments Credit Losses —Measurement of Credit Losses on Financial Instruments." ASU 2016-13 requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for public business entities that are SEC filers for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted in any interim or annual period for fiscal years beginning after December 15, 2018. An entity should apply the amendments in ASU 2016-13 through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (modified-retrospective approach). The Company is currently evaluating the potential impact that the adoption of ASU 2016-13 may have on its consolidated financial statements, however, it does not expect it to have a material effect. | (a) Basis of Presentation and Use of Estimates The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). All significant intercompany balances and transactions have been eliminated in the consolidation The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. Actual results may differ from those estimates. Significant estimates made by the Company include: 1) allowance for doubtful accounts for accounts receivable (collectability 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) stock based compensation; 4) management plan forecast; 5) and estimated life of certification costs. (b) Cash and Cash Equivalents All highly liquid investments with original maturities of less than 90 days from the date of purchase are classified as cash equivalents. Cash equivalents consist exclusively of money market funds. The Company has deposits at a limited number of financial institutions with federally insured limits. Balances of cash and cash equivalents at these institutions can be in excess of the insured limits. However, the Company believes that the institutions are financially sound and there is only nominal risk of loss. (c) 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 $119,000 and $86,000 at December 31, 2015 and 2014, respectively. (d) Equipment Equipment is stated at cost, less accumulated depreciation. Depreciation of equipment is provided using the straight-line method over the estimated useful lives of the assets. (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 earnings (loss) per share is computed by dividing net income (loss) 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: 2015 2014 Weighted average shares outstanding used to compute basic earnings (loss) per share 9,470,848 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 9,470,848 7,982,701 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 2,761,500 shares of common stock at December 31, 2015 and 1,855,500 shares of common stock as of December 31, 2014 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 does not sell software. The Company derives its net sales primarily from the sales of hardware products to computer peripherals retailers, computer product distributors, OEMs, and direct to consumers and other channel partners via the Internet. The Company recognizes net hardware sales at the point when the customers take legal ownership of the delivered products. Legal ownership passes to the customer based on the contractual delivery terms specified in signed contracts and purchase orders, which are both used extensively. Many customer contracts or purchase orders specify FOB destination, which means buyer takes delivery of goods once the goods arrive at the buyers dock. When the Company 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 the Companys inventory when it is consigned, and moves out of Company inventory when the item is sold by the retailer. The Company's net sales of hardware are reduced by certain events that 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. These are 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 approximately $322.0 thousand and $354.0 thousand at December 31, 2015 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 approximately $131.3 and $0 thousand at December 31, 2015 and 2014, respectively. The increase in price protection reserve was driven by a decrease in price for certain products in response to a competitors decrease in price for similar products. 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 $0 at both December 31, 2015 and 2014. Additionally, sales and marketing incentive reserves were approximately $22.0 thousand and $15.2 thousand at December 31, 2015 and 2014, respectively. The Companys allowances for doubtful accounts were approximately $8.1 thousand and $12.0 thousand at December 31, 2015 and 2014, respectively. These allowances are included in allowances for accounts receivable on the accompanying consolidated balance sheets. 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 wherein the discount rate is based on published daily treasury interest rates for zero-coupon bonds available from the US Treasury. When not available for expected option lives, the Company has used implied zero-coupon yields available from sources such as Bloomberg. Volatility is based on the historical volatility over a period that is commensurate with the expected life of the option granted. (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 approximately $459.5 thousand in 2015 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. (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 $21,475 and $25,069 at December 31, 2015 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 $247.1 thousand in 2015 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 Companys financial condition, results from operations, or cash flows from the adoption of this guidance. In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. Currently, all inventory is measured at the lower of cost or market. ASU 2015-11 changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. The standard is effective for annual reporting periods beginning after December 15, 2015, which for the Company will commence with the year beginning January 1, 2016. Prospective application is required. The Company does not believe the implementation of this standard will have a material impact on the Companys consolidated financial statements. In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendments in this Update defer the effective date of ASU 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASC 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is assessing the impact to the Company's financial condition, results of operations or cash flows from the adoption of this guidance. In March 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the balance sheets, a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term (the lease asset). For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The adoption of this standard is not expected to have a material impact on the Companys consolidated financial condition, results of operations and cash flows. (p) Other Assets Other assets are stated at cost, less accumulated amortization. Certain certification costs incurred that are necessary to market and sell products are capitalized and reported as other assets in the accompanying consolidated balance sheets when the costs are measurable, significant, and whose related products are projected to generate revenue beyond twelve months. These costs are amortized over an eighteen-month period, beginning when the related products are available to be sold. Total certification costs capitalized through December 31, 2015 were $655,000, accumulated amortization was $81,951 at December 31, 2015, and amortization expense was $81,951 in 2015. There were no certification costs capitalized through December 31, 2014 and therefore no related accumulated amortization at December 31, 2014 and no amortization expense in 2014. Expected amortization expense is $238,331 in 2016, $271,384 in 2017, and $63,334 in 2018. |
3. LIQUIDITY
3. LIQUIDITY | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Notes to Financial Statements | ||
LIQUIDITY | The Company’s cash and cash equivalents balance at September 30, 2016 was approximately $175 thousand, a decrease of $1.7 million from December 31, 2015. Major uses of cash were attributed to a $1.9 million loss for the nine months ended September 30, 2016, an increase of approximately $1.8 million in accounts receivable, an increase of approximately $1.4 million in inventory, and an increase of approximately $0.2 million in prepaid expense. These were partially offset by increases of approximately $2.1 million in bank debt, approximately $0.7 million in accrued expenses, and approximately $0.4 million in accounts payable. On September 30, 2016 the Company had approximately $2.1 million in bank debt of a $3.0 million credit line, working capital of approximately $2.9 million including approximately $175 thousand in cash and cash equivalents. The Company raised $3.65 million from a $3.42 million private placement in September 2015 and a $229 thousand rights offering in July 2015. On December 31, 2015 the Company had working capital of approximately $4.4 million including approximately $1.8 million in cash and cash equivalents. The Company’s current ratio at September 30, 2016 was 1.6 compared to 3.6 at December 31, 2015. On May 18, 2015, the Company announced licensing of the Motorola trademark for cable modems and gateways for the U.S. and Canada for five years starting January 2016. | On December 31, 2015 the Company had working capital of $4.4 million including $1.8 million in cash and cash equivalents. On December 31, 2014 the Company had working capital of $2.1 million including $138 thousand in cash and cash equivalents. The Companys current ratio at December 31, 2015 was 3.6 compared to 2.1 at December 31, 2014. The Company raised $3.65 million in 2015 from a $3.42 million private placement in September and a $229 thousand rights offering in July. The Companys cash balance was also augmented by a $697 thousand increase in accounts payable, a $732 thousand decrease in net accounts receivable. These increases were offset by a pay-down in the outstanding bank debt of $840 thousand, a $1.1 million increase in net inventory and a 12-month loss of $833 thousand. As of December 31, 2015 the Company had no bank debt, a maximum available line of credit of $1.25 million, working capital of $4.4 million, and a current ratio of 3.6. 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 Consolidated Balance Sheets, and $137 thousand increase in accounts receivable. On May 18, 2015, the Company announced licensing of the Motorola trademark for cable modems and gateways for the US and Canada for 5 years starting January 2016. In order to support anticipated sales growth, the Company raised approximately $3.65 million net, as described above. The Company believes that its existing financial resources along with its existing line of credit, with the potential to increase the maximum credit limit, will be sufficient to fund operations for the foreseeable future if the Company management's sales and operating profit expectations are met. |
4. INVENTORIES
4. INVENTORIES | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Notes to Financial Statements | ||
INVENTORIES | Inventories consist of : September 30, 2016 December 31, 2015 Materials $ 1,166,501 $ 477,929 Work in process 162,539 –– Finished goods 2,900,030 2,306,681 Total $ 4,229,070 $ 2,784,610 Finished goods includes consigned inventory held by our customers of $402,963 at September 30, 2016 and $119,100 at December 31, 2015. The Company reviews inventory for obsolete and slow moving products each quarter and makes provisions based on its estimate of the probability that the material will not be consumed or that it will be sold below cost. The provision for inventory reserves was negligible in both the first nine months of 2016 and 2015. | Inventories, net of reserves, consist of the following at December 31: 2015 2014 Materials $ 477,929 $ 300,739 Finished goods 2,306,681 1,423,768 Total $ 2,784,610 $ 1,724,507 Finished goods includes consigned inventory held by our customers of $119,100 and $85,600 at December 31, 2015 and 2014, respectively. The Company reviews inventory for obsolete and slow moving products each quarter and makes provisions based on its estimate of the probability that the material will not be consumed or that it will be sold below cost. The provision for inventory reserves was $18,078 and $81,843 for the years ending December 31, 2015 and 2014, respectively. |
5. EQUIPMENT
5. EQUIPMENT | 12 Months Ended |
Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | |
EQUIPMENT | Equipment consists of the following at December 31: 2015 2014 Estimated Useful lives in years Computer hardware and software $ 209,517 $ 196,070 3 Machinery and equipment 265,446 258,446 5 Molds, tools and dies 244,192 96,557 5 Office furniture and fixtures 39,451 38,938 5 758,606 590,011 Accumulated depreciation (553,474 ) (522,869 ) Equipment, net $ 205,132 $ 67,142 Depreciation expense for year ended $ 39,076 $ 9,048 |
5A. CUSTOMER CONCENTRATIONS
5A. CUSTOMER CONCENTRATIONS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Notes to Financial Statements | ||
CUSTOMER CONCENTRATIONS | The Company sells its products primarily through high-volume retailers and distributors, Internet service providers, value-added resellers, personal computer 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 Company’s revenues. In the third quarter of 2016, three customers accounted for 86% of the Company’s net sales with the Company’s largest customer accounting for 32% of its net sales. In the first nine months of 2016, three customers accounted for 81% of the Company’s total net sales with the Company’s largest customer accounting for 30% of its net sales. At September 30, 2016 three customers accounted for 88% of the Company’s accounts receivable, with the Company’s largest customer representing 48% of its accounts receivable. In the third quarter of 2015, three customers accounted for 79% of the Company’s total net sales with the Company’s largest customer accounting for 48% of its net sales. In the first nine months of 2015, three customers accounted for 77% of the Company’s total net sales with the Company’s largest customer accounting for 46% of its net sales. At September 30, 2015, three customers accounted for 90% of the Company’s accounts receivable, with the Company’s largest customer representing 61% of its accounts receivable. The Company’s customers generally do not enter into long-term agreements obligating them to purchase products. The Company may not continue to receive significant revenues from any of these or from other large customers. A reduction or delay in orders from any of the Company’s significant customers, or a delay or default in payment by any significant customer, could materially harm the Company’s business and prospects. Because of the Company’s significant customer concentration, its net sales and operating income (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 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 account for a substantial portion of the Companys revenues. In 2015 three customers accounted for 77% of the Companys total net sales with our largest customer accounting for 46% of our net sales. At December 31, 2015, three customers accounted for 93% of our gross accounts receivable, with our largest customer representing 67% of our gross accounts receivable. 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. |
6. COMMITMENTS AND CONTINGENCIE
6. COMMITMENTS AND CONTINGENCIES | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Notes to Financial Statements | ||
COMMITMENTS AND CONTINGENCIES | From time to time, the Company is party to various lawsuits and administrative proceedings arising in the ordinary course of business. The Company evaluates such lawsuits and proceedings on a case-by-case basis, and its policy is to vigorously contest any such claims, that it believes are without merit. The Company's management believes that the ultimate resolution of such matters will not materially and adversely affect the Company's business, financial position, or results of operations. On January 30, 2015, Wetro LAN LLC ("Wetro LAN") filed a complaint in the U.S. District Court for the Eastern District of Texas (U.S.D.C., E.D.Tex.) against the Company alleging infringement of U.S. Patent No. 6,795,918 (“the ’918 patent”) entitled “Service Level Computer Security.” Wetro LAN alleged that the Company’s wireless routers, including its Model 4501 Wireless-N Router, infringe the '918 patent. “In its complaint, Wetro LAN sought unspecified compensatory damages.” The case was resolved on May 18, 2016 with the entry by the Judge of an Order of Dismissal with Prejudice. On May 17, 2016, Magnacross LLC ("Magnacross") filed a complaint in the U.S. District Court for the Eastern District of Texas (U.S.D.C., E.D.Tex.) against the Company alleging infringement of U.S. Patent No. 6,917,304 (“the ’304 patent”) entitled “Wireless Multiplex Data Transmission System.” Magnacross alleged that the Company’s wireless routers, including its Model 5363, 5360 5354 (N300, N600, AC1900) Routers, infringe the '304 patent. In its complaint, Magnacross sought injunctive relief and unspecified compensatory damages. The case is in its early stages and the Court entered an Amended Docket Control Order on October 12, 2016. If the case is not otherwise resolved, trial is scheduled to commence on November 6, 2017. 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. On August 8, 2016, Zoom entered into an amendment to the License Agreement with Motorola Mobility LLC (the “Amendment”). The Amendment expands Zoom’s exclusive license to use the Motorola trademark to a wide range of authorized channels worldwide, and expands the license from cable modems and gateways to also include consumer routers, WiFi range extenders, home powerline network adapters, and access points. The License Agreement, as amended, has a five-year term beginning January 1, 2016 through December 31, 2020. In connection with the amended License Agreement, the Company has committed to spend a certain percentage of its Motorola revenues for use in advertising, merchandising and promotion of the related products. Additionally, the Company is required to make quarterly royalty payments equal to a certain percentage of the preceding quarter’s net sales with minimum annual royalty payments as follows: Year ending December 31, 2016: $2,000,000 2017: $3,000,000 2018: $3,500,000 2019: $4,000,000 2020: $4,500,000 Royalty expense under the License Agreement amounted to $583,333 for the third quarter of 2016 and $1,416,666 for the first nine months of 2016, and is included in selling expense on the accompanying condensed consolidated statements of operations. The balance of the committed royalty expense for 2016 amounts to $583,334 for the remaining quarter of 2016. In order to facilitate the Company’s current and planned increase in production demand, driven in part by the launch of Motorola branded products, the Company has committed with North American Production Sharing, Inc. (“NAPS”) to extend its existing lease used in connection with the Production Sharing Agreement (“PSA”) entered into between the Company and NAPS. The extension term is December 1, 2015 through November 30, 2018 and allows the Company to contract additional Mexican personnel to work in the Tijuana facility. The Company moved its headquarters on June 29, 2016 from its long time location at 207 South Street, Boston, MA. to a nearby location at 99 High Street, Boston, MA. The Company signed a lease for 11,480 square feet that terminates on June 29, 2019. Payments under the lease are zero for the first 2 months, an aggregate of $413,280 for the next 12 months, an aggregate of $424,760 for the next 12 months, and an aggregate of $363,533 for the remaining term of the lease ending June 29, 2019. Rent expense amounted to $99,876 for the third quarter of 2016 and $302,935 for the first nine months of 2016. | (a) Lease Obligations In December 2011 the Company signed a lease amendment for 10,600 square feet effective June 1, 2012 at the Companys headquarters in Boston, Massachusetts. This lease expires on April 30, 2016. The Company performs most of the final assembly, test, packaging, warehousing and distribution at a production and warehouse facility in Tijuana, Mexico. In November 2014, the Company signed a one-year lease with five one-year renewal options thereafter for an 11,390 square foot facility. In September 2015, the Company extended the term of the lease from December 1, 2015 through November 30, 2018. In September 2015, the Company also signed a new lease for additional space in the adjacent building, which doubles our existing capacity. The term of the lease is from March 1, 2016 through November 30, 2018 with early access granted as of December 1, 2015. In order to facilitate the Companys current and planned increase in production demand, driven in part by the launch of Motorola branded products, the Company has committed with North American Production Sharing, Inc. (NAPS) to extend its existing lease used in connection with the Production Sharing Agreement (PSA) entered into between the Company and NAPS. The extension term is December 1, 2015 through November 30, 2018 and allows the Company to contract additional Mexico personnel to work in the Tijuana facility. The Company closed the UK 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 $363.8 thousand in 2015 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 $177.1 thousand for 2016, $104.6 thousand for 2017, and $95.8 thousand for 2018. There are no future minimum committed rental payments that extend beyond 2018. (b) Contingencies The Company is party to various lawsuits and administrative proceedings arising in the ordinary course of business. The Company evaluates such lawsuits and proceedings on a case-by-case basis, and its policy is to vigorously contest any such claims which it believes are without merit. The Company reviews the status of its legal proceedings and records a provision for a liability when it is considered probable that both a liability has been incurred and the amount of the loss can be reasonably estimated. This review is updated periodically as additional information becomes available. If either or both of the criteria are not met, the Company reassesses whether there is at least a reasonable possibility that a loss, or additional losses, may be incurred. If there is a reasonable possibility that a loss may be incurred, the Company discloses the estimate of the amount of the loss or range of losses, that the amount is not material, or that an estimate of the loss cannot be made. The Company expenses its legal fees as incurred. On January 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 on March 15th, 2016 the trial date was set by the judge for April 17, 2017. 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. (c) Commitments On May 13, 2015 the Company entered into a non-cancellable licensing agreement (the Agreement) to use certain trademarks in connection with the manufacture, sale, marketing, and distribution of cable modem equipment. The Agreement commences on January 1, 2016 and terminates on December 31, 2020. Additionally, the Company has committed to reserving a certain percentage of wholesale prices for use in advertising, merchandising and promotion of the related products. In conjunction with the Agreement, the Company is required to make quarterly royalty payments equal to a certain percentage of the preceding quarters net sales with minimum annual royalty payments as follows: Year ending December 31, 2016: $2,000,000 2017: $2,400,000 2018: $2,600,000 2019: $2,600,000 2020: $2,600,000 |
7. STOCK OPTION PLANS
7. STOCK OPTION PLANS | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
STOCK OPTION PLANS | 2009 Stock Option Plan On December 10, 2009, the Company established the 2009 Stock Option Plan Number of shares Weighted average exercise price Balance as of January 1, 2014 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 Granted 1,155,000 0.49 Exercised (256,500 ) 0.36 Expired (52,500 ) 0.16 Balance as of December 31, 2015 2,536,500 $ 0.38 The weighted average grant date fair value of options granted was $0.04 in 2014. The weighted average grant date fair value of options granted was $0.13 in 2015. The aggregate intrinsic value of options outstanding was approximately $4.9 million at December 31, 2015 and $0 at December 31, 2014. The aggregate intrinsic value of exercisable options was approximately $3.4 million at December 31, 2015 and $0 at December 31, 2014. As of December 31, 2015 there remained 5,243,500 shares available to be issued under the Option Plan. The following table summarizes information about fixed stock options under the 2009 Stock Option Plan Options Outstanding Options Exercisable Exercise Prices Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $ 0.18 to 0.25 2,115,000 2.55 $ 0.25 1,421,250 $ 0.22 $ 0.48 to 1.85 421,500 0.41 $ 1.03 226,500 $ 0.07 $ 0.18 to 1.85 2,536,500 2.96 $ 0.38 1,647,750 $ 0.29 2009 Director Stock Option Plan On December 10, 2009 the Company established the 2009 Director Stock Option Plan Number of shares Weighted average exercise price Balance as of January 1, 2014 270,000 0.31 Granted 60,000 0.13 Exercised Expired (165,000 ) Balance as of December 31, 2014 165,000 0.24 Granted 105,000 0.87 Exercised (30,000 ) 0.31 Expired (15,000 ) 0.41 Balance as of December 31, 2015 225,000 $ 0.51 The weighted average grant date fair value of options granted was $0.04 in 2014 and $0.26 in 2015. The aggregate intrinsic value of options outstanding was approximately $0.4 million at December 31, 2015 and $0 at December 31, 2014. The aggregate intrinsic value of exercisable options was approximately $0.4 million at December 31, 2015 and $0 at December 31, 2014. As of December 31, 2015 there remained 670,000 shares available to be issued under the Directors Plan. The following table summarizes information about fixed stock options under the Directors Plan on December 31, 2015. 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 3.3 $ 0.13 45,000 $ 0.13 $ 0.16-0.20 30,000 2.0 $ 0.18 30,000 $ 0.18 $ 0.25-0.26 30,000 1.3 $ 0.26 30,000 $ 0.26 $ 0.35-0.36 15,000 .6 $ 0.36 15,000 $ 0.36 $ 0.18-1.20 105,000 4.6 $ 0.87 105,000 $ 0.87 $ 0.12-1.20 225,000 3.30 $ 0.51 225,000 $ 0.51 The Black-Scholes range of assumptions for the Option Plan and the Directors Plan are shown below: 2015 2014 Assumptions Expected life 2.75 (yrs) - 3.5 (yrs) 2.75 (yrs) - 3.5 (yrs) Expected volatility 41.69% - 45.52 % 46.40% - 48.71 % Risk-free interest rate 0.67% - 1.57 % 0.57% - 1.32 % Expected dividend yield 0.00 % 0.00 % The unrecognized stock based compensation expense related to non-vested stock awards was approximately $79 thousand as of December 31, 2015. This amount will be recognized through the fourth quarter of 2017. |
8. INCOME TAXES
8. INCOME TAXES | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | Income tax expense (benefit) consists of: Current Deferred Total Year Ended December 31, 2014: U.S. federal $ $ $ State and local Foreign 7,080 7,080 $ 7,080 $ $ 7,080 Year Ended December 31, 2015: U.S. federal $ $ $ State and local Foreign 7,363 7,363 $ 7,363 $ $ 7,363 A reconciliation of the expected income tax expense or benefit to actual follows: 2015 2014 Computed "expected" US tax (benefit) at Federal statutory rate $ (283,266 ) $ 41,645 Change resulting from: State and local income taxes, net of federal income tax benefit (55,828 ) Valuation allowance 414,612 (281,039 ) Nondeductible items (68,155 ) 12,063 Expired State Net Operating Losses 234,411 Income tax expense (benefit) $ 7,363 $ 7,080 Temporary differences at December 31 follow: 2015 2014 Deferred income tax assets: Inventories $ 90,879 $ 132,511 Accounts receivable 181,223 143,780 Accrued expenses 43,668 36,621 Net operating loss and tax credit carry forwards 18,272,306 17,863,473 Plant and equipment 590 4,629 Stock compensation 97,464 90,504 Other investment impairments 127,855 127,855 Total deferred income tax assets 18,813,985 18,399,373 Valuation allowance (18,813,985 ) (18,399,373 ) Net deferred tax assets $ $ As of December 31, 2015 the Company had federal net operating loss carry forwards of approximately $50,691,000 which are available to offset future taxable income. They are due to expire in varying amounts from 2018 to 2035. As of December 31, 2015, the Company had Massachusetts state net operating loss carry forwards of approximately $5,097,000 which are available to offset future taxable income. They are due to expire in varying amounts from 2031 through 2035. A valuation allowance has been established for the full amount of deferred income tax assets as management has concluded that it is more-likely than-not that the benefits from such assets will not be realized The Company reviews annually the guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a "more-likely-than-not" recognition threshold. At December 31, 2015 and 2014, the Company did not have any uncertain tax positions. No interest and penalties related to uncertain tax positions were accrued at December 31, 2015 and 2014. The Company files income tax returns in the US and also filed returns in the UK through 2014. The Company no longer files returns in the UK. For returns filed in the US for all years prior to 2011 to the extent the net operating losses were generated, if and when the net operating losses are used, the Internal Revenue Service has the opportunity to then review the underlying returns which created the net operating loss. |
9. SIGNIFICANT CUSTOMERS
9. SIGNIFICANT CUSTOMERS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Risks and Uncertainties [Abstract] | ||
SIGNIFICANT CUSTOMERS | The Company sells its products primarily through high-volume retailers and distributors, Internet service providers, value-added resellers, personal computer 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 Company’s revenues. In the third quarter of 2016, three customers accounted for 86% of the Company’s net sales with the Company’s largest customer accounting for 32% of its net sales. In the first nine months of 2016, three customers accounted for 81% of the Company’s total net sales with the Company’s largest customer accounting for 30% of its net sales. At September 30, 2016 three customers accounted for 88% of the Company’s accounts receivable, with the Company’s largest customer representing 48% of its accounts receivable. In the third quarter of 2015, three customers accounted for 79% of the Company’s total net sales with the Company’s largest customer accounting for 48% of its net sales. In the first nine months of 2015, three customers accounted for 77% of the Company’s total net sales with the Company’s largest customer accounting for 46% of its net sales. At September 30, 2015, three customers accounted for 90% of the Company’s accounts receivable, with the Company’s largest customer representing 61% of its accounts receivable. The Company’s customers generally do not enter into long-term agreements obligating them to purchase products. The Company may not continue to receive significant revenues from any of these or from other large customers. A reduction or delay in orders from any of the Company’s significant customers, or a delay or default in payment by any significant customer, could materially harm the Company’s business and prospects. Because of the Company’s significant customer concentration, its net sales and operating income (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 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 account for a substantial portion of the Companys revenues. In 2015 three customers accounted for 77% of the Companys total net sales with our largest customer accounting for 46% of our net sales. At December 31, 2015, three customers accounted for 93% of our gross accounts receivable, with our largest customer representing 67% of our gross accounts receivable. 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. |
10. SEGMENT AND GEOGRAPHIC INFO
10. SEGMENT AND GEOGRAPHIC INFORMATION | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
SEGMENT AND GEOGRAPHIC INFORMATION | The Company's operations are classified as one reportable segment. Substantially all of the Company's operations and long-lived assets reside primarily in the North America. Net sales information follows: 2014 Percent 2015 Percent North America $ 11,563,956 97 % $ 10,558,167 98 % Outside North America 337,383 3 % 202,175 2 % Total $ 11,901,339 100 % $ 10,790,342 100 % |
11. DEPENDENCE ON KEY SUPPLIERS
11. DEPENDENCE ON KEY SUPPLIERS | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
DEPENDENCE ON KEY SUPPLIERS | The Company participates in the PC peripherals industry, which is characterized by aggressive pricing practices, continually changing customer demand patterns and rapid technological developments. The Company's operating results could be adversely affected should the Company be unable to successfully anticipate customer demand accurately; manage its product transitions, inventory levels and manufacturing process efficiently; distribute its products quickly in response to customer demand; differentiate its products from those of its competitors or compete successfully in the markets for its new products. The Company depends on many third-party suppliers for key components contained in its product offerings. For some of these components, the Company may only use a single source supplier, in part due to the lack of alternative sources of supply. However, in 2015, the Company had two suppliers that provided 85% of the Company's purchased inventory. In 2014 the Company had one supplier that provided 86% of the Company's purchased inventory. |
12. RETIREMENT PLAN
12. RETIREMENT PLAN | 12 Months Ended |
Dec. 31, 2015 | |
Compensation and Retirement Disclosure [Abstract] | |
RETIREMENT PLAN | The Company has a 401(k) retirement savings plan for employees. Under the plan, the Company matches 25% of an employee's contribution, up to a maximum of $350 per employee per year. Company matching contributions charged to expense in 2014 and 2015 were $4,682 and $4,523, respectively. |
13. BANK CREDIT LINES
13. BANK CREDIT LINES | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Notes to Financial Statements | ||
BANK CREDIT LINES | On December 18, 2012, the Company entered into a Financing Agreement with Rosenthal & Rosenthal, Inc. (the “Financing Agreement”). The Financing Agreement originally provided for up to $1.75 million of revolving credit, subject to a borrowing base formula and other terms and conditions. The Financing Agreement continued until November 30, 2014 with automatic renewals from year to year thereafter, unless sooner terminated by either party. The lender has the right to terminate the Financing Agreement at any time on 60 days’ prior written notice. On March 25, 2014, the Company entered into an amendment to the Financing Agreement (the “Amendment”) with an effective date of January 1, 2013. The Amendment clarified the definition of current assets in the Financing Agreement, reduced the size of the revolving credit line to $1.25 million, and revised the financial covenants so that Zoom is required to maintain tangible net worth of not less than $2.0 million and working capital of not less than $1.75 million. On October 29, 2015, the Company entered into a second amendment to the Financing Agreement (the “Second Amendment”). Retroactive to October 1, 2015, the Second Amendment eliminated $2,500 in monthly charges for the Financing Agreement. Effective December 1, 2015, the Second Amendment reduces the effective rate of interest to 2.25% plus an amount equal to the higher of prime rate or 3.25%. On July 19, 2016, the Company entered into a third amendment to the Financing Agreement. The Amendment increased the size of the revolving credit line to $2.5 million effective as of date of the amendment. On September 1, 2016, the Company entered into a fourth amendment to the Financing Agreement. The Amendment increased the size of the revolving credit line to $3.0 million effective with the date of this amendment. The Company is required to calculate its covenant compliance on a quarterly basis. As of September 30, 2016, the Company was in compliance with both its working capital and tangible net worth covenants. At September 30, 2016, the Company’s tangible net worth was approximately $3.1 million, while the Company’s working capital was approximately $2.9 million. | 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, 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 December 31, 2015, the Company was in compliance with both its working capital and tangible net worth covenants. At December 31, 2015, the Companys tangible net worth was approximately $4.6 million, while the Companys working capital was approximately $4.4 million. |
14. STOCKHOLDERS EQUITY
14. STOCKHOLDERS EQUITY | 12 Months Ended |
Dec. 31, 2015 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS EQUITY | The Company raised approximately $3.4 million from a private placement in September, 2015 and incurred issuance costs of approximately $16 thousand resulting in net proceeds of approximately $3.4 million. The Company also raised approximately $269 thousand from a stock rights offering in July 2015 and incurred issuance costs of approximately $40 thousand resulting in net proceeds of approximately $229 thousand. |
15. RECLASSIFICATIONS OUT OF AC
15. RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 12 Months Ended |
Dec. 31, 2015 | |
Equity [Abstract] | |
RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 2015 2014 Accumulated Other Comprehensive Income (Loss) Components : Foreign currency translations: Balance at beginning of period $ $ 364,355 Current period currency translation adjustments (3,621 ) Amounts reclassified on closing of U.K. branch in 2014 (360,734 ) Balance at end of period $ $ Accumulated Other Comprehensive Income (Loss) end of period $ $ |
16. SUBSEQUENT EVENTS
16. SUBSEQUENT EVENTS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Subsequent Events [Abstract] | ||
SUBSEQUENT EVENTS | On October 24, 2016, Zoom entered into stock subscription agreements with investors in connection with a non-brokered private placement of 619,231 unregistered shares of the Company’s common stock, which raised approximately $1.5 million net proceeds. Management of the Company has reviewed subsequent events from September 30, 2016 through the date of filing and has concluded that, except as noted above, there were no subsequent events requiring adjustment to or disclosure in these consolidated financial statements. | Management of the Company has reviewed subsequent events from December 31, 2015 through the date of filing and has concluded that, except as noted below, there were no subsequent events requiring adjustment to or disclosure in these consolidated financial statements. The Company was required to pay a one-time setup fee of $100,000, which was paid on January 4, 2016 under a licensing agreement. |
2. SUMMARY OF SIGNIFICANT ACC24
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Summary Of Significant Accounting Policies Policies | ||
Basis of Presentation and Use of Estimates | The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). All significant intercompany balances and transactions have been eliminated in the consolidation The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. Actual results may differ from those estimates. Significant estimates made by the Company include: 1) allowance for doubtful accounts for accounts receivable (collectability 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) stock based compensation; 4) management plan forecast; 5) and estimated life of certification costs. | |
Cash and Cash Equivalents | All highly liquid investments with original maturities of less than 90 days from the date of purchase are classified as cash equivalents. Cash equivalents consist exclusively of money market funds. The Company has deposits at a limited number of financial institutions with federally insured limits. Balances of cash and cash equivalents at these institutions can be in excess of the insured limits. However, the Company believes that the institutions are financially sound and there is only nominal risk of loss. | |
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 $119,000 and $86,000 at December 31, 2015 and 2014, respectively. | |
Equipment | Equipment is stated at cost, less accumulated depreciation. Depreciation of equipment is provided using the straight-line method over the estimated useful lives of the assets. | |
Impairment of Long-Lived Assets | Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to undiscounted future net cash flows expected to be generated by the asset or asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. | |
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 earnings (loss) per share is computed by dividing net income (loss) 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: 2015 2014 Weighted average shares outstanding used to compute basic earnings (loss) per share 9,470,848 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 9,470,848 7,982,701 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 2,761,500 shares of common stock at December 31, 2015 and 1,855,500 shares of common stock as of December 31, 2014 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 does not sell software. The Company derives its net sales primarily from the sales of hardware products to computer peripherals retailers, computer product distributors, OEMs, and direct to consumers and other channel partners via the Internet. The Company recognizes net hardware sales at the point when the customers take legal ownership of the delivered products. Legal ownership passes to the customer based on the contractual delivery terms specified in signed contracts and purchase orders, which are both used extensively. Many customer contracts or purchase orders specify FOB destination, which means buyer takes delivery of goods once the goods arrive at the buyers dock. When the Company 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 the Companys inventory when it is consigned, and moves out of Company inventory when the item is sold by the retailer. The Company's net sales of hardware are reduced by certain events that 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. These are 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 approximately $322.0 thousand and $354.0 thousand at December 31, 2015 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 approximately $131.3 and $0 thousand at December 31, 2015 and 2014, respectively. The increase in price protection reserve was driven by a decrease in price for certain products in response to a competitors decrease in price for similar products. 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 $0 at both December 31, 2015 and 2014. Additionally, sales and marketing incentive reserves were approximately $22.0 thousand and $15.2 thousand at December 31, 2015 and 2014, respectively. The Companys allowances for doubtful accounts were approximately $8.1 thousand and $12.0 thousand at December 31, 2015 and 2014, respectively. These allowances are included in allowances for accounts receivable on the accompanying consolidated balance sheets. The Company accounts for point-of-sale taxes on a net basis. | |
Fair Value of Financial Instruments | (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. | |
Stock-Based Compensation | Compensation cost for awards is generally recognized over the required service period based on the estimated fair value of the awards on their grant date. Fair value is determined using the Black-Scholes option-pricing model wherein the discount rate is based on published daily treasury interest rates for zero-coupon bonds available from the US Treasury. When not available for expected option lives, the Company has used implied zero-coupon yields available from sources such as Bloomberg. Volatility is based on the historical volatility over a period that is commensurate with the expected life of the option granted. | |
Advertising Costs | Advertising costs are expensed as incurred and reported in selling expense in the accompanying 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 approximately $459.5 thousand in 2015 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. | |
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 $21,475 and $25,069 at December 31, 2015 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 $247.1 thousand in 2015 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 from operations, or cash flows from the adoption of this guidance. In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” Currently, all inventory is measured at the lower of cost or market. ASU 2015-11 changes the measurement principle for inventory from the lower of cost or market to the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. The standard is effective for annual reporting periods beginning after December 15, 2015, which for the Company commenced with the year beginning January 1, 2016. Prospective application is required. The Company does not believe the implementation of this standard has a material impact on the Company’s consolidated financial statements. In August 2015, the issued “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.” The amendments in this update defer the effective date of ASU 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. In March 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in its balance sheet, a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term (the lease asset). For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial condition, results of operations and cash flows. In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation.” ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the simplified areas apply only to nonpublic entities. ASU 2016-09 is effective for public business entities for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. If an entity early adopts ASU 2016-09 in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. Methods of adoption vary according to each of the amendment provisions. The Company is currently evaluating the potential impact that the adoption of ASU 2016-09 may have on its consolidated financial statements. In April 2016, the FASB issued ASU No. 2016-10, "Revenue from Contracts with Customers — Identifying Performance Obligations and Licensing." ASU 2016-10 does not change the core principle of the guidance, rather it clarifies the identification of performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. ASU 2016-10 clarifies the guidance in ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," which is not yet effective. The effective date and transition requirements for ASU 2016-10 are the same as for ASU 2014-09, which was deferred by one year by ASU No.2015-14, "Revenue from Contracts with Customers — Deferral of the Effective Date." Public business entities should adopt the new revenue recognition standard for annual reporting periods beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that year. The Company is currently evaluating the potential impact that the adoption of ASU 2016-10 may have on its consolidated financial statements. In May 2016, the FASB issued ASU No. 2016-12, "Revenue from Contracts with Customers — Narrow- Scope Improvements and Practical Expedients." ASU 2016-12 does not change the core principle of the guidance, rather it affects only certain narrow aspects of Topic 606, including assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. ASU 2016-12 affects the guidance in ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," which is not yet effective. The effective date and transition requirements for ASU 2016-12 are the same as for ASU 2014-09, which was deferred by one year by ASU No. 2015-14, "Revenue from Contracts with Customers —Deferral of the Effective Date." Public business entities should adopt the new revenue recognition standard for annual reporting periods beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that year. The Company is currently evaluating the potential impact that the adoption of ASU 2016-12 may have on its consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments Credit Losses —Measurement of Credit Losses on Financial Instruments." ASU 2016-13 requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for public business entities that are SEC filers for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted in any interim or annual period for fiscal years beginning after December 15, 2018. An entity should apply the amendments in ASU 2016-13 through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (modified-retrospective approach). The Company is currently evaluating the potential impact that the adoption of ASU 2016-13 may have on its consolidated financial statements, however, it does not expect it to have a material effect. | 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 Companys financial condition, results from operations, or cash flows from the adoption of this guidance. In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. Currently, all inventory is measured at the lower of cost or market. ASU 2015-11 changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. The standard is effective for annual reporting periods beginning after December 15, 2015, which for the Company will commence with the year beginning January 1, 2016. Prospective application is required. The Company does not believe the implementation of this standard will have a material impact on the Companys consolidated financial statements. In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendments in this Update defer the effective date of ASU 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASC 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is assessing the impact to the Company's financial condition, results of operations or cash flows from the adoption of this guidance. In March 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the balance sheets, a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term (the lease asset). For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The adoption of this standard is not expected to have a material impact on the Companys consolidated financial condition, results of operations and cash flows. |
Other Assets | Other assets are stated at cost, less accumulated amortization. Certain certification costs incurred that are necessary to market and sell products are capitalized and reported as other assets in the accompanying consolidated balance sheets when the costs are measurable, significant, and whose related products are projected to generate revenue beyond twelve months. These costs are amortized over an eighteen-month period, beginning when the related products are available to be sold. Total certification costs capitalized through December 31, 2015 were $655,000, accumulated amortization was $81,951 at December 31, 2015, and amortization expense was $81,951 in 2015. There were no certification costs capitalized through December 31, 2014 and therefore no related accumulated amortization at December 31, 2014 and no amortization expense in 2014. Expected amortization expense is $238,331 in 2016, $271,384 in 2017, and $63,334 in 2018. |
2. SUMMARY OF SIGNIFICANT ACC25
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Summary Of Significant Accounting Policies Tables | |
Earnings (Loss) Per Common Share | 2015 2014 Weighted average shares outstanding used to compute basic earnings (loss) per share 9,470,848 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 9,470,848 7,982,701 |
4. INVENTORIES (Tables)
4. INVENTORIES (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Inventories Tables | ||
Inventories consist | Inventories consist of : September 30, 2016 December 31, 2015 Materials $ 1,166,501 $ 477,929 Work in process 162,539 –– Finished goods 2,900,030 2,306,681 Total $ 4,229,070 $ 2,784,610 | 2015 2014 Materials $ 477,929 $ 300,739 Finished goods 2,306,681 1,423,768 Total $ 2,784,610 $ 1,724,507 |
5. EQUIPMENT (Tables)
5. EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | |
Equipment | 2015 2014 Estimated Useful lives in years Computer hardware and software $ 209,517 $ 196,070 3 Machinery and equipment 265,446 258,446 5 Molds, tools and dies 244,192 96,557 5 Office furniture and fixtures 39,451 38,938 5 758,606 590,011 Accumulated depreciation (553,474 ) (522,869 ) Equipment, net $ 205,132 $ 67,142 Depreciation expense for year ended $ 39,076 $ 9,048 |
6. COMMITMENTS AND CONTINGENC28
6. COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Contractual Obligation Fiscal Year Maturity Schedule Table | Year ending December 31, 2016: $2,000,000 2017: $3,000,000 2018: $3,500,000 2019: $4,000,000 2020: $4,500,000 | Year ending December 31, 2016: $2,000,000 2017: $2,400,000 2018: $2,600,000 2019: $2,600,000 2020: $2,600,000 |
7. STOCK OPTION PLANS (Tables)
7. STOCK OPTION PLANS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Schedule stock options under the Stock Option Plan | 2015 2014 Assumptions Expected life 2.75 (yrs) - 3.5 (yrs) 2.75 (yrs) - 3.5 (yrs) Expected volatility 41.69% - 45.52 % 46.40% - 48.71 % Risk-free interest rate 0.67% - 1.57 % 0.57% - 1.32 % Expected dividend yield 0.00 % 0.00 % |
2009 Stock Option Plan | |
Plan Activity | Number of Weighted average Balance as of January 1, 2014 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 Granted 1,155,000 0.49 Exercised (256,500 ) 0.36 Expired (52,500 ) 0.16 Balance as of December 31, 2015 2,536,500 $ 0.38 |
Schedule stock options under the Plan | Options Outstanding Options Exercisable Exercise Prices Number Outstanding Weighted Average Weighted Average Number Exercisable Weighted Average $ 0.18 to 0.25 2,115,000 2.55 $ 0.25 1,421,250 $ 0.22 $ 0.48 to 1.85 421,500 0.41 $ 1.03 226,500 $ 0.07 $ 0.18 to 1.85 2,536,500 2.96 $ 0.38 1,647,750 $ 0.29 |
Directors Plan | |
Plan Activity | Number of shares Weighted average exercise price Balance as of January 1, 2014 270,000 0.31 Granted 60,000 0.13 Exercised Expired (165,000 ) Balance as of December 31, 2014 165,000 0.24 Granted 105,000 0.87 Exercised (30,000 ) 0.31 Expired (15,000 ) 0.41 Balance as of December 31, 2015 225,000 $ 0.51 |
Schedule stock options under the Plan | Options Outstanding Options Exercisable Exercise Prices Number Outstanding Weighted Average Remaining Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $ 0.12-0.14 45,000 3.3 $ 0.13 45,000 $ 0.13 $ 0.16-0.20 30,000 2.0 $ 0.18 30,000 $ 0.18 $ 0.25-0.26 30,000 1.3 $ 0.26 30,000 $ 0.26 $ 0.35-0.36 15,000 .6 $ 0.36 15,000 $ 0.36 $ 0.18-1.20 105,000 4.6 $ 0.87 105,000 $ 0.87 $ 0.12-1.20 225,000 3.30 $ 0.51 225,000 $ 0.51 |
8. INCOME TAXES (Tables)
8. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
Schedule of income taxes | Current Deferred Total Year Ended December 31, 2014: U.S. federal $ $ $ State and local Foreign 7,080 7,080 $ 7,080 $ $ 7,080 Year Ended December 31, 2015: U.S. federal $ $ $ State and local Foreign 7,363 7,363 $ 7,363 $ $ 7,363 |
Schedule of income tax reconciliation | 2015 2014 Computed "expected" US tax (benefit) at Federal statutory rate $ (283,266 ) $ 41,645 Change resulting from: State and local income taxes, net of federal income tax benefit (55,828 ) Valuation allowance 414,612 (281,039 ) Nondeductible items (68,155 ) 12,063 Expired State Net Operating Losses 234,411 Income tax expense (benefit) $ 7,363 $ 7,080 |
Schedule of deferred tax assets | 2015 2014 Deferred income tax assets: Inventories $ 90,879 $ 132,511 Accounts receivable 181,223 143,780 Accrued expenses 43,668 36,621 Net operating loss and tax credit carry forwards 18,272,306 17,863,473 Plant and equipment 590 4,629 Stock compensation 97,464 90,504 Other investment impairments 127,855 127,855 Total deferred income tax assets 18,813,985 18,399,373 Valuation allowance (18,813,985 ) (18,399,373 ) Net deferred tax assets $ $ |
10. SEGMENT AND GEOGRAPHIC IN31
10. SEGMENT AND GEOGRAPHIC INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Segment And Geographic Information Tables | |
Company's net sales by geographic region | 2014 Percent 2015 Percent North America $ 11,563,956 97 % $ 10,558,167 98 % Outside North America 337,383 3 % 202,175 2 % Total $ 11,901,339 100 % $ 10,790,342 100 % |
15. RECLASSIFICATIONS OUT OF 32
15. RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Equity [Abstract] | |
RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 2015 2014 Accumulated Other Comprehensive Income (Loss) Components : Foreign currency translations: Balance at beginning of period $ $ 364,355 Current period currency translation adjustments (3,621 ) Amounts reclassified on closing of U.K. branch in 2014 (360,734 ) Balance at end of period $ $ Accumulated Other Comprehensive Income (Loss) end of period $ $ |
2. SUMMARY OF SIGNIFICANT ACC33
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Summary Of Significant Accounting Policies Tables | ||
Weighted average shares outstanding - used to compute basic earnings (loss) per share | 9,470,848 | 7,982,704 |
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 | 9,470,848 | 7,982,704 |
4. INVENTORIES (Details)
4. INVENTORIES (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Inventories Details | |||
Raw materials | $ 1,166,501 | $ 477,929 | $ 300,739 |
Work in process | 162,539 | 0 | |
Finished goods | 2,900,030 | 2,306,681 | 1,423,768 |
Total inventories | $ 4,229,070 | $ 2,784,610 | $ 1,724,507 |
4. INVENTORIES (Details Narrati
4. INVENTORIES (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2016 | |
Inventories Details | |||
Finished goods held by customer | $ 119,100 | $ 85,600 | $ 402,963 |
Provision for inventory reserves | $ 18,078 | $ 81,843 |
5. EQUIPMENT (Details)
5. EQUIPMENT (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2016 | |
Equipment | $ 758,606 | $ 590,011 | |
Accumulated depreciation | (553,474) | (522,869) | |
Equipment, net | 205,132 | 67,142 | $ 173,804 |
Depreciation expense for year ended | 39,076 | 9,048 | |
Computer hardware and software | |||
Equipment | $ 209,517 | 196,070 | |
Estimated Useful lives in years | 3 years | ||
Machinery and equipment | |||
Equipment | $ 265,446 | 258,446 | |
Estimated Useful lives in years | 5 years | ||
Molds, tools and dies | |||
Equipment | $ 244,192 | 96,557 | |
Estimated Useful lives in years | 5 years | ||
Office furniture and fixtures | |||
Equipment | $ 39,451 | $ 38,938 | |
Estimated Useful lives in years | 5 years |
5A. CUSTOMER CONCENTRATIONS (De
5A. CUSTOMER CONCENTRATIONS (Details Narrative) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Three Customers Percentage of Sales | ||||
Percent concentration | 86.00% | 79.00% | 81.00% | 77.00% |
One Customer Percentage of Sales | ||||
Percent concentration | 32.00% | 48.00% | 30.00% | 46.00% |
Three Customers Percentage of Receivables | ||||
Percent concentration | 88.00% | 90.00% | ||
One Customer Percentage of Receivables | ||||
Percent concentration | 48.00% | 61.00% |
6. COMMITMENTS AND CONTINGENC38
6. COMMITMENTS AND CONTINGENCIES (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Commitments And Contingencies Details | ||
2016: | $ 2,000,000 | $ 2,000,000 |
2017: | 3,000,000 | 2,400,000 |
2018: | 3,500,000 | 2,600,000 |
2019: | 4,000,000 | 2,600,000 |
2020: | $ 4,500,000 | $ 2,600,000 |
7. STOCK OPTION PLANS (Details)
7. STOCK OPTION PLANS (Details) - 2009 Stock Option Plan - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Number of shares Outstanding at beginning of period | 1,690,500 | 2,315,000 |
Granted | 1,155,000 | 50,000 |
Exercised | (256,500) | 0 |
Expired | (52,500) | (674,500) |
Number of shares Outstanding end of period | 2,536,500 | 1,690,500 |
Weighted average exercise price | ||
Weighted average exercise price, beginning | $ 0.29 | $ 0.35 |
Granted | 0.49 | 0.12 |
Exercised | 0.36 | 0 |
Expired | 0.16 | 0.49 |
Weighted average exercise price, ending | $ 0.38 | $ 0.29 |
7. STOCK OPTION PLANS (Details
7. STOCK OPTION PLANS (Details 1) | 12 Months Ended |
Dec. 31, 2015$ / sharesshares | |
0.18 to 0.25 | |
Option price range, upper | $ 0.25 |
Option price range, lower | $ 0.18 |
Number of shares Outstanding end of period | shares | 2,115,000 |
Weighted average remaining contractual life | 2 years 6 months 18 days |
Weighted average exercise price, ending | $ 0.25 |
Number Exercisable | shares | 1,421,250 |
Weighted average exercise price | $ 0.22 |
0.48 to 1.85 | |
Option price range, upper | 1.85 |
Option price range, lower | $ 0.48 |
Number of shares Outstanding end of period | shares | 421,500 |
Weighted average remaining contractual life | 4 months 28 days |
Weighted average exercise price, ending | $ 1.03 |
Number Exercisable | shares | 226,500 |
Weighted average exercise price | $ 0.07 |
0.18 to 1.85 | |
Option price range, upper | 1.85 |
Option price range, lower | $ 0.18 |
Number of shares Outstanding end of period | shares | 2,536,500 |
Weighted average remaining contractual life | 2 years 11 months 16 days |
Weighted average exercise price, ending | $ 0.38 |
Number Exercisable | shares | 1,647,750 |
Weighted average exercise price | $ 0.29 |
7. STOCK OPTION PLANS (Detail41
7. STOCK OPTION PLANS (Details 2) - Directors Plan - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Number of shares Outstanding at beginning of period | 165,000 | 270,000 |
Granted | 105,000 | 60,000 |
Exercised | (30,000) | 0 |
Expired | (15,000) | (165,000) |
Number of shares Outstanding end of period | 225,000 | 165,000 |
Weighted average exercise price | ||
Weighted average exercise price, beginning | $ 0.24 | $ 0.31 |
Granted | 0.87 | 0.13 |
Exercised | 0.31 | 0 |
Expired | 0.41 | 0 |
Weighted average exercise price, ending | $ 0.51 | $ 0.24 |
7. STOCK OPTION PLANS (Detail42
7. STOCK OPTION PLANS (Details 3) | 12 Months Ended |
Dec. 31, 2015$ / sharesshares | |
0.12-0.14 | |
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 | 3 years 3 months 18 days |
Weighted average exercise price, ending | $ 0.13 |
Number Exercisable | shares | 45,000 |
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 | 2 years |
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 | 1 year 3 months 18 days |
Weighted average exercise price, ending | $ 0.26 |
Number Exercisable | shares | 30,000 |
Weighted average exercise price | $ 0.26 |
0.35-0.36 | |
Option price range, upper | 0.36 |
Option price range, lower | $ 0.35 |
Number of shares Outstanding end of period | shares | 15,000 |
Weighted average remaining contractual life | 7 months 6 days |
Weighted average exercise price, ending | $ 0.36 |
Number Exercisable | shares | 15,000 |
Weighted average exercise price | $ 0.36 |
0.18-1.20 | |
Option price range, upper | 1.20 |
Option price range, lower | $ 0.18 |
Number of shares Outstanding end of period | shares | 105,000 |
Weighted average remaining contractual life | 4 years 7 months 6 days |
Weighted average exercise price, ending | $ 0.87 |
Number Exercisable | shares | 105,000 |
Weighted average exercise price | $ 0.87 |
0.12-1.20 | |
Option price range, upper | 1.20 |
Option price range, lower | $ 0.12 |
Number of shares Outstanding end of period | shares | 225,000 |
Weighted average remaining contractual life | 3 years 3 months 18 days |
Weighted average exercise price, ending | $ 0.51 |
Number Exercisable | shares | 225,000 |
Weighted average exercise price | $ 0.51 |
7. STOCK OPTION PLANS (Detail43
7. STOCK OPTION PLANS (Details 4) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Expected dividend yield | 0.00% | 0.00% |
Minimum | ||
Expected life | 2 years 9 months | 2 years 9 months |
Expected volatility | 41.69% | 46.40% |
Risk-free interest rate | 0.67% | 0.57% |
Maximum | ||
Expected life | 3 years 6 months | 3 years 6 months |
Expected volatility | 45.52% | 48.71% |
Risk-free interest rate | 1.57% | 1.32% |
8. INCOME TAXES (Details)
8. INCOME TAXES (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
Current tax expense | ||||||
US Federal | $ 0 | $ 0 | ||||
State and local | 0 | 0 | ||||
Foreign | 7,363 | 7,080 | ||||
Total current tax expense | 7,363 | 7,080 | ||||
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 | 7,363 | 7,080 | ||||
Total | $ 2,034 | $ 1,978 | $ 3,312 | $ 5,757 | $ 7,363 | $ 7,080 |
8. INCOME TAXES (Details 1)
8. INCOME TAXES (Details 1) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | ||||||
Computed "expected" US tax (benefit) at Federal statutory rate | $ (283,266) | $ 41,645 | ||||
Change resulting from: | ||||||
State and local income taxes, net of federal income tax benefit | (55,828) | |||||
Valuation allowance | 414,612 | (281,039) | ||||
Non-deductible items | (68,155) | 12,063 | ||||
Expired State Net Operating Losses | 0 | 234,411 | ||||
Income tax expense (benefit) | $ 2,034 | $ 1,978 | $ 3,312 | $ 5,757 | $ 7,363 | $ 7,080 |
8. INCOME TAXES (Details 2)
8. INCOME TAXES (Details 2) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Deferred income tax assets: | ||
Inventories | $ 90,879 | $ 132,511 |
Accounts receivable | 181,223 | 143,780 |
Accrued expenses | 43,668 | 36,621 |
Net operating loss and tax credit carry forwards | 18,272,306 | 17,863,473 |
Plant and equipment | 590 | 4,629 |
Stock compensation | 97,464 | 90,504 |
Other - investment impairments | 127,855 | 127,855 |
Total deferred income tax assets | 18,813,985 | 18,399,373 |
Valuation allowance | (18,813,985) | (18,399,373) |
Net deferred tax assets | $ 0 | $ 0 |
9. SIGNIFICANT CUSTOMERS (Detai
9. SIGNIFICANT CUSTOMERS (Details Narrative) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Three customers percentage of total sales | ||
Percent concentration | 77.00% | 74.00% |
One customer percentage of total sales | ||
Percent concentration | 46.00% | 53.00% |
Three customers percentage of total accounts receivables | ||
Percent concentration | 93.00% | 92.00% |
One customer percentage of total accounts receivables | ||
Percent concentration | 67.00% | 64.00% |
10. SEGMENT AND GEOGRAPHIC IN48
10. SEGMENT AND GEOGRAPHIC INFORMATION (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||||
Net sales, amount | $ 5,990,432 | $ 3,367,838 | $ 12,688,142 | $ 9,019,582 | $ 10,790,342 | $ 11,901,339 |
Net sales, % of total | 100.00% | 100.00% | ||||
North America [Member] | ||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||||
Net sales, amount | $ 10,558,167 | $ 11,563,956 | ||||
Net sales, % of total | 98.00% | 97.00% | ||||
Outside North America [Member] | ||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||||
Net sales, amount | $ 202,175 | $ 337,383 | ||||
Net sales, % of total | 2.00% | 3.00% |
12. RETIREMENT PLAN (Details Na
12. RETIREMENT PLAN (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Retirement Plan Details Narrative | ||
Company matching contributions charged to expense | $ 4,682 | $ 4,523 |
15. RECLASSIFICATIONS OUT OF 50
15. RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Foreign currency translations: | ||
Balance at beginning of period | $ 0 | $ 364,355 |
Current period currency translation adjustments | 0 | (3,621) |
Amounts reclassified on closing of U.K. branch in 2014 | 0 | (360,734) |
Balance at end of period | 0 | 0 |
Accumulated Other Comprehensive Income (Loss) end of period | $ 0 | $ 0 |