2. Liquidity	6 Months Ended
Jun. 30, 2012
Notes to Financial Statements
Liquidity	Zoom’s cash balance on June 30, 2012 was $63 thousand, down $581 thousand from December 31, 2011. Zoom’s $0.5 million increase in accounts receivable and $0.3 million loss for the first half of 2012 decreased cash. Zoom’s $0.5 million increase in bank debt increased cash allowing Zoom to significantly lower early-pay discounts and thereby reduce the cash associated with early payment of receivables. On June 30, 2012 the Company had working capital of $3.3 million including $63 thousand in cash and cash equivalents. On December 31, 2011 we had working capital of $3.6 million including $644 thousand in cash and cash equivalents. Our current ratio at June 30, 2012 was 2.9 compared to 3.5 at December 31, 2011. The primary reasons for the lower current ratio were Zoom’s loss of $0.3 million for the first half of 2012 and the increase in bank debt of $526 thousand which was primarily used to fund the $497 thousand increase in net accounts receivable in order for the Company to reduce the need for fast-pay discounts and give the Company more operating flexibility. To conserve cash and manage our liquidity, we have implemented cost-cutting initiatives including the reduction of employee headcount and overhead costs. On June 30, 2012 we had a headcount of 32, including 30 employees and 2 contractors compared to 37 as of June 30, 2011. We plan to continue to assess our cost structure as it relates to our revenues and cash position, and we may make further reductions if the actions are deemed necessary. The Company is continuing to develop new products and to take other measures to increase sales. Increasing sales typically results in increased inventory and higher accounts receivable, both of which reduce cash. Zoom has two significant accounts who buy from Zoom on a consignment basis. Consigned inventory tends to result in slow payment to Zoom, since Zoom is only paid after the consigned inventory is sold by Zoom’s customer. The Company has in the past increased its cash by offering fast-pay discounts to certain accounts. In April 2012 we established an asset-based bank line of credit of up to $1 million to reduce the needs for fast pay discounts and to give Zoom more operating flexibility. The amount actually available under the line of credit is contingent on Zoom meeting certain financial metrics and covenants. The Company has had recurring net losses and continues to experience negative cash flows from operations. To conserve cash and manage liquidity, the Company has implemented cost cutting initiatives. However, management does not believe the Company has sufficient resources to fund its normal operations over the next 12 months unless sales or gross margin improves significantly or the Company raises capital. Additional financing may not be available on terms favorable to the Company, or at all. If these funds are not available, the Company may not be able to execute its business plan or take advantage of business opportunities. The ability of the Company to obtain such additional financing and to achieve its operating goals is uncertain. In the event that the Company does not obtain additional capital or is not able to increase cash flow through the increase of sales, there is substantial doubt as to its ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

2. Liquidity

6 Months Ended

Jun. 30, 2012

Zoom’s cash balance on June 30, 2012 was $63 thousand, down $581 thousand from December 31, 2011. Zoom’s $0.5 million increase in accounts receivable and $0.3 million loss for the first half of 2012 decreased cash. Zoom’s $0.5 million increase in bank debt increased cash allowing Zoom to significantly lower early-pay discounts and thereby reduce the cash associated with early payment of receivables.

On June 30, 2012 the Company had working capital of $3.3 million including $63 thousand in cash and cash equivalents. On December 31, 2011 we had working capital of $3.6 million including $644 thousand in cash and cash equivalents. Our current ratio at June 30, 2012 was 2.9 compared to 3.5 at December 31, 2011. The primary reasons for the lower current ratio were Zoom’s loss of $0.3 million for the first half of 2012 and the increase in bank debt of $526 thousand which was primarily used to fund the $497 thousand increase in net accounts receivable in order for the Company to reduce the need for fast-pay discounts and give the Company more operating flexibility.

To conserve cash and manage our liquidity, we have implemented cost-cutting initiatives including the reduction of employee headcount and overhead costs. On June 30, 2012 we had a headcount of 32, including 30 employees and 2 contractors compared to 37 as of June 30, 2011. We plan to continue to assess our cost structure as it relates to our revenues and cash position, and we may make further reductions if the actions are deemed necessary.

The Company is continuing to develop new products and to take other measures to increase sales. Increasing sales typically results in increased inventory and higher accounts receivable, both of which reduce cash. Zoom has two significant accounts who buy from Zoom on a consignment basis. Consigned inventory tends to result in slow payment to Zoom, since Zoom is only paid after the consigned inventory is sold by Zoom’s customer.

The Company has in the past increased its cash by offering fast-pay discounts to certain accounts. In April 2012 we established an asset-based bank line of credit of up to $1 million to reduce the needs for fast pay discounts and to give Zoom more operating flexibility. The amount actually available under the line of credit is contingent on Zoom meeting certain financial metrics and covenants.

The Company has had recurring net losses and continues to experience negative cash flows from operations. To conserve cash and manage liquidity, the Company has implemented cost cutting initiatives. However, management does not believe the Company has sufficient resources to fund its normal operations over the next 12 months unless sales or gross margin improves significantly or the Company raises capital. Additional financing may not be available on terms favorable to the Company, or at all. If these funds are not available, the Company may not be able to execute its business plan or take advantage of business opportunities. The ability of the Company to obtain such additional financing and to achieve its operating goals is uncertain. In the event that the Company does not obtain additional capital or is not able to increase cash flow through the increase of sales, there is substantial doubt as to its ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

- Definition

Disclosure of accounting policy for reporting when there is a substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time (generally a year from the balance sheet date). Disclose: (a) pertinent conditions and events giving rise to the assessment of substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, (b) the possible effects of such conditions and events, (c) management's evaluation of the significance of those conditions and events and any mitigating factors, (d) possible discontinuance of operations, (e) management's plans (including relevant prospective financial information), and (f) information about the recoverability or classification of recorded asset amounts or the amounts or classification of liabilities. If management's plans alleviate the substantial doubt about the entity's ability to continue as a going concern, disclosure of the principal conditions and events that initially raised the substantial doubt about the entity's ability to continue as a going concern would be expected to be considered. Disclose whether operations for the current or prior years generated sufficient cash to cover current obligations, whether waivers were obtained from creditors relating to the company's default under the provisions of debt agreements and possible effects of such conditions and events, such as: whether there is a possible need to obtain additional financing (debt or equity) or to liquidate certain holdings to offset future cash flow deficiencies. Disclose appropriate parent company information when parent is dependent upon remittances from subsidiaries to satisfy its obligations.

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