Zoom Telephonics Q2 Ending 6/30/99 - Company Financial Information

Cambridge Telcom Report, August 2, 1999

Zoom Telephonics, Inc. (NASDAQ:ZOOM), a leading manufacturer of faxmodems and other data communications products, has reported a net loss for the second quarter of 1999 of $719 thousand or $.10 per share, versus a net loss of $1.6 million or $.21 per share for the second quarter of 1998. Zoom reported sales of $15.8 million for its second quarter ending June 30, 1999, up 30 % from $12.2 million for the second quarter of 1998.

Compared to the second quarter of 1998, Zoom's sales increase was caused by a 49% increase in modem unit volume partially offset by a 20% decline in average selling prices. Sales of 56K modem units rose significantly, outweighing the decline in 33.6K/28.8K modem sales.

Zoom ended the quarter with a strong balance sheet, with cash and marketable securities of $9.9 million or $1.32 per share, and stockholders' equity of $4.95 per share.

On April 7, 1999 Zoom Telephonics announced the acquisition of most of the modem assets of Hayes Corporation for $5.3 million in cash. The purchase included the Hayes, Practical Peripherals, Accura, Optima, Ultra, Smartmodem, Century 2, and Cardinal brands and product rights for the USA, Canada, South & Central America, Europe, and the Middle East. The $5.3 million cash payment is reflected in the $9.9 million cash position at 6/30/99. In July 1999 Zoom finalized the purchase of some of the remaining Hayes assets, including Hayes Asia Pacific, for an additional $1.1 million. With the purchase of Hayes Asia Pacific, Zoom now owns the worldwide rights to the Hayes name and the brands listed above. Zoom plans to set up a sales office in Beijing, China in the third quarter of 1999.

Approximately 10% of Zoom's reported sales of $15.8 million for the second quarter of 1999 were Hayes product sales. Hayes had shut down its manufacturing prior to the Zoom purchase of the Hayes assets. The production of key Hayes products was restarted by Zoom in the second quarter of 1999 for European delivery, and very late in the second quarter for sales in the U.S.

Zoom's net loss for the second quarter of 1999 of $719 thousand versus a net loss of $1.6 million for the second quarter of 1998 benefited from a strong gross margin improvement resulting from advantageously negotiated purchases of modem materials and reduced channel price protection and customer rebates. Expenses increased significantly for the same time period as a result of the newly acquired Hayes U.K. organization, increased R&D investment for future broadband products, Hayes goodwill amortization, and increased market development spending for both the Zoom and Hayes brands.

"The Hayes purchase comes at an opportune time for Zoom," said Frank Manning, Zoom's President and CEO. "The strong Hayes brand and products should help Zoom gain market share in the difficult modem market. This should enhance our position in the retail, distributor and VAR channels, which we plan to leverage for sales of DSL and cable modems. We believe that Zoom's technology, brands and market channels will give us a strong competitive position."

For additional information, please contact Investor Relations, Zoom Telephonics, 207 South Street, Boston, Massachusetts 02111, telephone (617)423-1072, fax (617)338-5015, e-mail address Investor@ zoomtel.com. Zoom's World Wide Web site is www.zoom.com.

This press release contains certain forward-looking statements including, without limitation, statements relating to the contribution of Hayes to Zoom's sales, Zoom's potential in the analog modem market, possible expansion and success in the broadband access market, and the company's future performance. These forward-looking statements involve risks and uncertainties, including that there can be no assurance of future opportunities and performance, and other risks and uncertainties indicated from time to time in Zoom's filings with the Securities and Exchange Commission.

                    ZOOM TELEPHONICS, INC.
                  Consolidated Balance Sheets
                           ( 000's )
                          (Unaudited)

                                              JUNE 30,     DEC 31,
                                                1999        1998
                                             (Unaudited)

Assets

Current assets:

        Cash                                 $  4,804    $  5,325
        Marketable securities                   5,132      13,529
        Accounts receivable, net                7,424       7,244
        Inventories                            13,573       8,893
        Deferred income taxes                   4,097       3,290
        Prepaid expenses and other                982         230

                Total current assets           36,012      38,511

Property and equipment, net                     4,053       3,748

Other non-current assets                        3,578       1,301

                                             $ 43,643    $ 43,560


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

        Accounts payable                     $  2,252    $  3,326
        Accrued expenses                        3,662       1,809

                Total current liabilities       5,914       5,135

        Other non-current liabilities             720        --

                Total  liabilities              6,634       5,135

Stockholders' equity:

        Common stock                           25,191      25,191
        Retained earnings                      11,771      13,180
            Foreign currency translation
         income                                    64        --
            Accumulated other comprehensive
         income (loss)                            (17)         54

                Total stockholders' equity     37,009      38,425

                                              $43,643     $43,560


                    ZOOM TELEPHONICS, INC.
               Consolidated Statements of Income
                           ( 000's )
                          (Unaudited)

                                   Three Months Ending
                                  6/30/99     6/30/98

Net sales                        $ 15,838    $ 12,115
Cost of goods sold                  9,970      10,030

    Gross profit                    5,868       2,085

Operating expenses:
    Selling                         3,719       2,835
    General and administrative      1,636         974
    Research and development        1,806       1,060

    Total operating expenses        7,161       4,869

    Operating (loss) profit        (1,293)     (2,784)

Other income, net                     116         281

    Income (loss) before taxes     (1,177)     (2,502)

Taxes on income                      (458)       (930)

    Net income (loss)            $   (719)   $ (1,573)


    Basic                        $  (0.10)   $  (0.21)

    Diluted                      $  (0.10)   $  (0.21)


    Basic                           7,475       7,475

    Diluted                         7,475       7,475