UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
or
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 0-18672
ZOOM TELEPHONICS, INC.
(Exact Name of Registrant as Specified in its Charter)
Canada 04-2621506
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
207 South Street, Boston, Massachusetts 02111
- --------------------------------------- -----
(Address of Principal Executive Offices in the U.S.) (Zip Code)
Registrant's Telephone Number, Including Area Code: (617) 423-1072
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [ X ] NO [ ]
The number of shares outstanding of the registrant's Common Stock, No Par
Value, as of November 13, 1998 was 7,474,871 shares.
<PAGE>
ZOOM TELEPHONICS, INC.
INDEX
Part I. Financial Information
Item 1. Consolidated Balance Sheets as of September 30, 1998
and December 31, 1997
Consolidated Statements of Operations for the Three
Months Ending September 30, 1998 and 1997
Consolidated Statements of Operations for the Nine
Months Ending September 30, 1998 and 1997
Consolidated Statements of Cash Flows for the Nine
Months Ending September 30, 1998 and 1997
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II. Other Information
Item 1. Legal Proceedings
Item 6. Exhibits and reports on Form 8-K
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<PAGE>
ZOOM TELEPHONICS, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
9/30/98 12/31/97
ASSETS (Unaudited) (Audited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 18,712,328 $ 11,281,337
Accounts receivable, net of reserves
for doubtful accounts, returns, and allowances of
$5,582,793 at 9/30/98 and $4,518,206 at 12/31/97 8,028,787 13,365,413
Inventories 9,062,308 12,034,349
Refundable income taxes 1,096,298 3,793,963
Deferred income taxes 2,388,189 2,388,189
Prepaid expenses and other assets 277,981 212,989
----------- -----------
Total current assets 39,565,891 43,076,240
Property and equipment, net 3,668,887 3,967,767
Goodwill 1,267,057 1,393,874
Other non-current assets 132,668 77,392
----------- -----------
$44,634,503 $48,515,273
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,329,055 $ 6,204,370
Accrued expenses 306,450 1,808,308
----------- -----------
Total current liabilities 6,635,505 8,012,678
----------- -----------
Stockholders' equity:
Common stock, no par value; 25,000,000 shares authorized; 7,474,871 shares
issued and outstanding at September 30, 1998 and 7,472,371
at December 31, 1997 25,190,579 25,170,267
Retained earnings 12,808,419 15,332,328
----------- -----------
Total stockholders' equity 37,998,998 40,502,595
----------- -----------
$44,634,503 $48,515,273
=========== ===========
See notes to consolidated financial statements
</TABLE>
<PAGE>
ZOOM TELEPHONICS, INC.
Consolidated Statements of Operations
(Unaudited)
Three Months Ending September 30,
---------------------------------
1998 1997
---------- ---------
Net sales $ 14,465,826 $ 13,010,940
Costs of goods sold 11,167,604 11,574,428
-------------- -------------
Gross profit 3,298,222 1,436,512
Operating expenses:
Selling 2,957,122 2,891,884
General and administrative 1,321,849 1,256,689
Research and development 1,209,863 853,342
-------------- -------------
Total operating expenses 5,488,834 5,001,915
-------------- -------------
Income (loss) from operations (2,190,612) (3,565,403)
Other income, net 364,227 147,804
-------------- -------------
Income (loss) before
income tax expense (benefit) (1,826,385) (3,417,599)
Income tax benefit (675,762) (1,266,386)
-------------- ------------
Net income (loss) $ (1,150,623) $ (2,151,213)
============== =============
Income (loss) per common and common
equivalent share:
Basic $ (.15) $ (.29)
============== =============
Diluted $ (.15) $ (.29)
============== =============
Average common and common equivalent
shares outstanding:
Basic 7,474,871 7,472,371
============== =============
Diluted 7,474,871 7,472,371
============== =============
<PAGE>
ZOOM TELEPHONICS, INC.
Consolidated Statements of Operations
(Unaudited)
Nine Months Ending September 30,
---------------------------------
1998 1997
---------- ---------
Net sales $ 45,339,435 $ 42,998,784
Costs of goods sold 34,754,944 40,752,747
------------- -----------
Gross profit 10,584,491 2,246,037
Operating expenses:
Selling 8,636,299 7,870,249
General and administrative 3,562,093 3,686,944
Research and development 3,237,019 3,094,054
------------- ------------
Total operating expenses 15,435,411 14,651,247
------------- ------------
Income (loss) from operations (4,850,920) (12,405,210)
Other income, net 844,715 626,753
------------- ------------
Income (loss) before income
tax expense (benefit) (4,006,205) (11,778,457)
Income tax expense (benefit) (1,482,296) (4,358,858)
-------------- -------------
Net income (loss) $ (2,523,909) $ (7,419,599)
============== ==============
Income (loss) per common and common
equivalent share:
Basic $ (.34) $ (.99)
============== =============
Diluted $ (.34) $ (.99)
============== =============
Average common and common equivalent
shares outstanding:
Basic 7,474,203 7,467,540
============= ============
Diluted 7,474,203 7,467,540
============= ============
<PAGE>
ZOOM TELEPHONICS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Ending September 30,
--------------------------------
1998 1997
-------- -------
Cash flows from operating activities:
Net loss $ (2,523,909) $ (7,419,599)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 900,849 732,968
Deferred income taxes - 1,319
Changes in assets and liabilities:
Accounts receivable, net 5,336,626 12,429,658
Inventories 2,972,041 6,030,363
Refundable income taxes 2,696,856 (3,490,653)
Prepaid expenses and other assets (63,492) (136,469)
Accounts payable and accrued expenses (1,377,173) (4,601,747)
Tax benefit from exercise of non-qualified
stock options 809 78,675
-------------- --------------
Net cash provided by operating activities 7,942,607 3,624,515
-------------- --------------
Cash flows from investing activities:
Additions to licenses (148,000) -
Additions to property and equipment (383,928) (603,929)
-------------- -------------
Net cash used in investing activities (531,928) (603,929)
-------------- --------------
Cash flows from financing activities:
Net repayments under revolving bank line of credit - -
Proceeds from exercise of stock options 20,312 204,232
-------------- --------------
Net cash provided by financing activities 20,312 204,232
-------------- --------------
Net increase in cash and cash equivalents 7,430,991 3,224,818
Cash and cash equivalents, beginning of period 11,281,337 9,172,186
-------------- --------------
Cash and cash equivalents, end of period $ 18,712,328 $ 12,397,004
============== ==============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ - $ -
============== ==============
Income taxes $ - $ -
============== ==============
</TABLE>
<PAGE>
ZOOM TELEPHONICS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements of Zoom
Telephonics, Inc., (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 Article 2 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. These statements should be read in
conjunction with the consolidated financial statements and notes thereto for the
year ending December 31, 1997 included in the Company's 1997 Annual Report on
Form 10-K.
The consolidated balance sheet as of September 30, 1998, the
consolidated statements of operations for the three months and nine months
ending September 30, 1998 and 1997, and the consolidated statements of cash
flows for the nine months ending September 30, 1998 and 1997 are unaudited, but,
in the opinion of management, include all adjustments (consisting of normal,
recurring adjustments) necessary for a fair presentation of results for these
interim periods.
The results of operations for the nine months ending September 30, 1998
are not necessarily indicative of the results to be expected for the entire
fiscal year ending December 31, 1998.
(2) Earnings Per Share
The reconciliation of the loss numerators and denominators of the basic and
diluted net loss per common share computations for the Company's reported net
loss is as follows:
<TABLE>
<CAPTION>
Three months ending September 30, Nine months ending September 30,
1998 1997 1998 1997
------------------ ------------------- ------------------- ------------------
Basic:
<S> <C> <C> <C> <C>
Net loss $ (1,150,623) $ (2,151,213) $ (2,523,909) $ (7,419,599)
============= ============= ============= =============
Weighted average shares
outstanding 7,474,871 7,472,371 7,474,203 7,467,540
========= ========= ========= =========
Net loss per share $ (.15) $ (.29) $ (.34) $ (.99)
============ ============ ============ =============
Diluted:
Net loss $ (1,150,623) $ (2,151,213) $ (2,523,909) $ (7,419,599)
============= ============= ============= =============
Weighted average shares
outstanding 7,474,871 7,472,371 7,474,203 7,467,540
Net effect of dilutive stock
options based on the
Treasury stock method - - - -
using average market price
Weighted average shares
outstanding 7,474,871 7,472,371 7,474,203 7,467,540
========= ========= ========= =========
Net loss per share $ (.15) $ (.29) $ (.34) $ (.99)
============ ============ ============ =============
</TABLE>
(3) Inventories
Inventories consist of the following: 9/30/98 12/31/97
-------- --------
Raw materials $5,113,895 $7,261,914
Work in process 2,733,367 2,542,260
Finished goods 1,215,046 2,230,175
----------- ----------
$9,062,308 $12,034,349
=========== ===========
(4) Stock Options
Proceeds from the exercise of options granted under the Company's stock option
plans and income tax benefits attributable to stock options exercised are
credited to common stock. During the nine months ending September 30, 1998,
options with respect to 2,500 shares were exercised and such exercises resulted
in a tax benefit to the Company of $809.
(5) Bank Credit Facility
The Company's $5 million line of credit discussed in the 1997 10-K was scheduled
for expiration on September 30, 1998. The expiration date has been extended
until January 1,1999. A replacement one year $5 million line of credit is in the
final stage of completion.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Zoom Telephonics, Inc. ("Zoom" or "the Company") recorded net sales
of $14,465,826 and a net loss of $1,150,623 for the Company's third quarter
ending September 30, 1998. Earnings per share improved from a loss of $0.29 for
the third quarter of 1997 to a loss of $0.15 for the third quarter of 1998.
Zoom's net sales for the nine months ending September 30, 1998 were $45,339,435
with a net loss of $2,523,909 or $.34 per share versus net sales of $42,998,784
and a loss of $7,419,599 or $.99 per share for the nine months ending September
30, 1997.
Net sales for the quarter ending September 30, 1998 increased
$1,454,886 or 11.2% from the third quarter of 1997. The Company had strong unit
sales of V.90 standard 56K modems in the third quarter of 1998, contributing to
a total modem unit sales increase of 19% versus the third quarter of 1997.
Average selling prices for all modems sold declined over the same period. This
decline in prices together with the accompanying price protection credits and
the increased cost of consumer rebate programs reduced the dollar sales gain to
the 11.2% for the quarter ending September 30, 1998. The unit sales increase was
also due to the fact that the Company did a better job of meeting requested
third quarter deliveries in 1998 than in 1997. As a result, ending backlog for
the third quarter of 1998 was down compared to the ending backlog for the third
quarter of 1997. This reduction in order backlog along with the recent loss of
sales to the CompUSA account will negatively impact sales for the fourth quarter
ending December 31, 1998 when compared to sales for the quarter ending December
31, 1997, though these effects may be offset by positive business developments.
In the third quarter of 1998 CompUSA accounted for 5.5% of the Company's
revenues.
Net sales for the nine months ending September 30, 1998 increased
$2,340,651 or 5.4% from the nine months ending September 30, 1997 as a result of
strong sales of V.90 standard 56K modems.
Gross margin increased to 22.8% in the third quarter of 1998 from 11.0%
in the quarter ending September 30, 1997. For the nine months ending September
30, 1998 gross margin increased to 23.3% from 5.2% in the nine months ending
September 30, 1997. Although average selling prices for modems declined year
over year, the cost of materials and manufacturing costs, including
obsolescence and scrap expense, declined to a greater extent, yielding increased
gross margins.
Selling expenses during the third quarter of 1998 increased 2.3% to
$2,957,122 or 20.4% of net sales, from $2,891,884 or 22.2% of net sales in the
third quarter of 1997. Selling expenses during the nine months ending September
30, 1998 increased 9.7% to $8,636,299 or 19.0% of net sales from $7,870,249 or
18.3% of net sales in the nine months ending September 30, 1997. The dollar
increase for the nine months ending September 30, 1998 was primarily the result
of increases in cooperative advertising in Zoom's direct sales channel, higher
commission expenses, and added technical support personnel.
During the three and nine month periods of 1998, General and
administrative expenses were relatively unchanged from the same periods in 1997.
General and administrative expenses were $1,321,849 or 9.1% of net sales during
the quarter ending September 30, 1998 compared to $1,256,689 or 9.7% of net
sales in the quarter ending September 30, 1997. General and administrative
expenses were $3,562,093 or 7.9% of net sales during the nine months ending
September 30, 1998 compared to $3,686,944 or 8.6% of net sales in the nine
months ending September 30, 1997.
Research and development expenses increased 41.7% to $1,209,863 or 8.4% of
net sales during the quarter ending September 30,1998 from $853,342 or 6.6% of
net sales in the quarter ending September 30, 1997. Research and development
expenses increased 4.6% to $3,237,019 or 7.1% of net sales during the nine
months ending September 30, 1998 from $3,094,054 or 7.2% of net sales in the
nine months ending September 30, 1997. The increase in expenses was primarily
due to additional personnel consistent with the broadening of the Company's
non-modem and international modem product lines and the integration of Lucent
Technologies modem chipsets into some of the Company's 56K modem product line.
The Company experienced a net loss of $1,150,623 or 8.0% of net sales
during the quarter ending September 30, 1998 compared to a net loss of
$2,151,213 or 16.5% of net sales, in the quarter ending September 30, 1997. For
the nine months ending September 30, 1998 the Company lost $2,523,909 or 5.6% of
net sales, compared to a loss of $7,419,599 or 17.3% of net sales in the nine
months ending September 30, 1997. The improvement was primarily due to the
increase in sales and gross margins.
Liquidity and Capital Resources
Zoom ended the third quarter of 1998 with a strong balance sheet.
Working capital declined during the first nine months to $32,930,386 from
$35,063,562 at December 31, 1997. The current ratio improved to 6.0 from 5.4.
Cash and cash equivalents increased to $18,712,328 from $11,281,337,
particularly due to a reduction in inventories and accounts receivable. In
addition, the Company's has a $5 million line of credit which has an extended
expiration date of January 1, 1999. The company is completing a one year renewal
of this line of credit.
Operating activities provided $7,942,607 in cash during the nine
months ending September 30, 1998. Accounts receivable declined $5,336,626 due to
improved days sales outstanding. Inventory declined $2,972,041 primarily as a
result of the Company's actions to reduce the level of inventories and increased
obsolescence and other inventory reserves. Additional sources of funds included
depreciation and amortization of $900,849 and a decrease of refundable income
taxes of $2,696,856. These sources of cash were partially offset by the net loss
of $2,523,909, a reduction of accounts payable and accrued expenses of
$1,377,173.
Zoom's capital expenditures of $531,928 during the nine months ending
September 30, 1998 included purchases of computer equipment, product licenses,
production equipment, and continuing renovation of its headquarters. Although
the Company does not have any significant capital commitments, it anticipates
that it will continue with modest investments in equipment and in improvements
to its facilities during the year.
During the nine months ending September 30, 1998, financing activities
provided the Company with $20,312 from the exercise of employee and director
stock options.
The Company believes that its existing cash, together with funds
generated from operations and available sources of financing, will be sufficient
to meet normal working capital requirements for at least the next twelve months.
Additional financing may be needed at some point if sales increase significantly
or if losses continue to be incurred.
New Accounting Pronouncements
In December 1997, the Company adopted the Financial Accounting
Standards Board Statement No. 128, "Earnings per Share." (SFAS 128). All
previously reported net income (loss) per share data have been restated to
conform to the provisions of SFAS 128. Under SFAS 128, basic net income (loss)
per share is computed by dividing net income (loss) available to common
stockholders by the weighted average number of common shares for the period.
Diluted net income (loss) per share reflect the maximum dilution that would have
resulted from the assumed exercise and share repurchase related to dilutive
stock options and are computed by dividing net income (loss) by the weighted
average number of common shares and all dilutive securities outstanding.
In June 1997, the Financial Accounting Standards Board issued Statement
130 (SFAS 130), "Reporting Comprehensive Income," which establishes standards
for reporting and display of comprehensive income and its components in a full
set of general-purpose financial statements. Under this concept, all revenues,
expenses, gains and losses recognized during the period are included in income,
regardless of whether they are considered to be the results of operations of the
period. The Company adopted SFAS 130 in March 1998 and it did not have a
material impact on the consolidated financial statements of the Company.
In June 1997, the Financial Accounting Standards Board issued Statement
131 (SFAS 131), "Disclosures about Segments of an Enterprise and Related
Information," which establishes standards for the way that public business
enterprises report selected information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS 131, which
becomes effective for the Company in its year ending December 31, 1998, is
currently not expected to have a material impact on the Company's consolidated
financial statements and disclosures as the Company does not have multiple
reportable operating segments.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" (SOP 98-1), which establishes
guidelines for the costs of all computer software developed or obtained for
internal use. SOP 98-1 is effective for the Company in 1999, and is not expected
to have a material impact on the Company's financial statements.
Year 2000 Compliance
The year 2000 issue is the potential for system and processing failure
of date-related data and the result of computer-controlled systems using two
digits rather than four to define the applicable year. For example, computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. Systems that do not properly recognize
date-sensitive information when the year changes to 2000 could generate system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar ordinary business activities.
The Company is evaluating the year 2000 issue with respect to its
financial and management information systems, its products and its suppliers. At
this point in its assessment, the Company is not currently aware of any year
2000 problems that are reasonably likely to have a material effect on the
Company's business, results of operations or financial condition, without taking
into account the Company's efforts to avoid such problems.
The Company is completing its review of its management and information
systems for year 2000 compliance and has identified application software and
hardware which must be upgraded to become year 2000 compliant. The Company
intends to generally upgrade its management and information systems in
conjunction with its upgrade to become year 2000 compliant by September 1999.
The Company believes that the cost of this upgrade will be approximately
$100,000 to $300,000, the majority of which will be capitalized. There is a risk
that, notwithstanding its internal review, if the Company has not properly
identified all year 2000 compliance issues with respect to its management and
information systems, the Company may not be able to implement all necessary
changes to these systems on a timely basis and within budget. Such a failure
could result in a material disruption to the Company's business, including the
inability to track and timely fill orders, which could have a material adverse
effect on its business, results of operations and financial condition.
The Company has evaluated its current products and believes that they
are year 2000 compliant. The Company has also undertaken a general review of
modems previously sold by it that may continue to be under warranty to determine
whether those products are year 2000 compliant. Based upon its preliminary
assessment, the Company believes that the proper operation of its modems are not
date dependent and therefore should continue to function properly on and after
the year 2000. In order to assure that this is the case, the Company is seeking
information from its major suppliers, particularly of its modem chipsets, to
confirm that they have been year 2000 compliant. The Company has sent a year
2000 Readiness Letter/Questionnaire to its major suppliers and initial responses
from the Company's chipset manufacturers have confirmed the Company's
understanding that the chipsets used by the Company are not date sensitive and
are therefore year 2000 compliant. However, the Company cannot assure that its
chipset manufacturers will provide the Company with accurate information
regarding their year 2000 compliance. Should any critical components
incorporated in the Company's products fail to be year 2000 compliant, such
failure could result in warranty claims and have a material adverse effect on
its business, results of operations and financial condition.
The Company's products and software are often sold to be integrated
into or interface with third party equipment or software. In addition, the
Company often packages its modems for retail sale with software provided by
other vendors. The Company does not alter this software in any way related to
the date. The Company is in the process of seeking information from its software
vendors to assure that the software packaged with its products will be year 2000
compliant, and has sent a year 2000 Readiness Letter/Questionnaire toits major
software suppliers. While it is possible that some of this software may be
adversely affected by the year 2000, the Company is not aware of any packaged
software having this problem. Failure of third-party equipment or software to
operate properly with regard to the year 2000 and thereafter could require the
Company to incur unanticipated expenses to remedy any problems, which could have
a material adverse effect on the Company's business, results of operations and
financial condition.
The Company is also exposed to the risk that it could experience
material shipment delays from its major component suppliers or contract
assemblers or material sales delays from its major customers due to year 2000
issues relating either to their management information or production systems.
The Company has inquired of these suppliers and contract assemblers in an
attempt to ascertain their year 2000 readiness. At this time, the Company is
unable to estimate the nature or extent of any potential adverse impact
resulting from the failure of third parties, such as its suppliers, and contract
assemblers and customers, to achieve year 2000 compliance. Moreover, such third
parties, even if year 2000 compliant, could experience difficulties resulting
from year 2000 issues that may affect their suppliers, service providers and
customers. As a result, although the Company does not currently anticipate that
it will experience any material shipment delays from their major product
suppliers or any material sales delays from its major customers due to year 2000
issues, these third parties could experience year 2000 problems that could have
a material adverse effect on the Company's business, results of operations and
financial condition.
To the extent that the Company does not identify any material
non-compliant year 2000 issues affecting the Company or third parties, such as
the Company's suppliers, service providers and customers, the most reasonably
likely worst case year 2000 scenario is a systemic failure beyond the control of
the Company, such as a prolonged telecommunications or electrical failure, or a
general disruption in United States or global business activities that could
result in a significant economic downturn. The Company believes that the primary
business risks, in the event of such failure or other disruption, would include
but not be limited to, loss of customers or orders, increased operating costs,
inability to obtain inventory on a timely basis, disruptions in product
shipments, or other business interruptions of a material nature, as well as
claims of mismanagement, misrepresentation, or breach of contract, any of which
could have a material adverse effect on the Company's business, results of
operations and financial condition.
Other
A portion of the Company's revenues are subject to the risks associated
with international sales. Although most of the Company's product prices are
denominated in the United States currency, customers in foreign countries
generally evaluate purchases of products such as those sold by the Company on
the purchase price expressed in the customer's currency. Therefore, changes in
foreign currency exchange rates may adversely affect the demand for the
Company's products.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995
Forward-looking statements in this report, including without limitation
statements relating to the adequacy of the Company's resources are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Investors are cautioned that such forward-looking statements involve risks
and uncertainties, including without limitation: overall product demand for 56K
modems or the Company's V.90 standard 56K or K56flex(TM) modems, the renewal of
the Company's line of credit, potential quarterly fluctuations in the Company's
operating results, seasonality of sales, rapid technological change,
competition, the concentration of the Company's customers, the Company's
dependence upon a limited number of principal suppliers for its modem chipsets
and on third-party assemblers, risks associated with inventory management, risk
of product returns and price-protection, sales channel risks, risks associated
with international sales, the ability of the Company to manage its growth, the
Company's reliance on key employees, risks associated with proprietary
technology, and other risks and uncertainties indicated from time to time in the
Company's filings with the Securities and Exchange Commission.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. - Legal Proceedings
No material developments
ITEM 6 - Exhibits and reports on Form 8-K
(a) Exhibit Description
--------- ---------------
27 Financial Data Schedule
(b) No reports on Form 8-K were filed by the Company during the
quarter ending September 30, 1998
<PAGE>
ZOOM TELEPHONICS, INC.
FINANCIAL INFORMATION NOT AUDITED
The preceding financial information, with the exception of the consolidated
balance sheet at December 31, 1997, has not been audited. However, in the
opinion of management, all material adjustments, consisting only of normal
recurring accruals necessary to present a fair statement of the results for
these periods, have been reflected. The results for these periods are not
necessarily indicative of the results for the full fiscal year.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZOOM TELEPHONICS, INC.
Date: November 13, 1998 By: /s/ Frank Manning
--------------------------
Frank B. Manning, President
Date: November 13, 1998 By: /s/ Robert A. Crist
----------------------------
Robert A. Crist, Vice President of Finance
and Chief Financial Officer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> USD
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 18,712,328
<SECURITIES> 0
<RECEIVABLES> 8,028,787
<ALLOWANCES> 5,582,793
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