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 ending March 31, 2004

                                       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 TECHNOLOGIES, INC.
                             ----------------------
             (Exact Name of Registrant as Specified in its Charter)

            Delaware                                         51-0448969
            --------                                         ----------
(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)                      (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 [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2). YES [ ] NO [X]

The number of shares  outstanding  of the  registrant's  Common Stock,  $.01 Par
Value, as of May 7, 2004, was 8,513,041 shares.
<PAGE>


                     ZOOM TECHNOLOGIES, INC. AND SUBSIDIARY
                                      INDEX

Part I. Financial Information                                              Page

  Item 1.      Consolidated Balance Sheets as of March 31, 2004
                      and December 31, 2003 (unaudited)                      3

               Consolidated Statements of Operations for the three months
                      ending  March 31, 2004 and 2003 (unaudited)            4

               Consolidated Statements of Cash Flows for the three
                      months ending March 31, 2004 and 2003 (unaudited)      5

               Notes to Consolidated Financial Statements                   6-8

  Item 2.      Management's Discussion and Analysis of Financial
                      Condition and Results of Operations                   9-19

  Item 3.      Quantitative and Qualitative Disclosures About Market
                      Risk                                                   19

  Item 4.      Controls and Procedures                                     19-20


Part II. Other Information

  Item 6.      Exhibits and Reports on Form 8-K                              20

               Signatures                                                    21

               Exhibit Index                                                 22
<PAGE>
PART I - FINANCIAL INFORMATION


                                    ZOOM TECHNOLOGIES, INC. AND SUBSIDIARY
                                           Consolidated Balance Sheets
                                                   (unaudited)
<TABLE>
<CAPTION>
                                                                March 31, 2004   December 31, 2003
                                                                --------------   -----------------
<S>                                                             <C>              <C>
   Assets

Current assets:
    Cash and cash equivalents                                   $   9,048,942    $   9,904,384
    Accounts receivable, net of reserves for doubtful
       accounts, returns, and allowances of $1,811,169 at
       March 31, 2004 and $1,790,205 at December 31, 2003           4,081,654        3,944,699
    Inventories, net                                                5,568,002        4,771,216
    Prepaid expenses and other current assets                         459,105          434,694
                                                                   ----------       ----------
             Total current assets                                  19,157,703       19,054,993

    Property, plant and equipment, net                              2,828,440        2,918,985
                                                                   ----------       ----------
             Total assets                                       $  21,986,143    $  21,973,978
                                                                   ==========       ==========

   Liabilities and Stockholders' Equity

Current liabilities:
    Current portion of long-term debt                           $     226,358    $     223,833
    Accounts payable                                                1,931,661        2,172,028
    Accrued expenses                                                1,194,148        1,011,910
                                                                   ----------       ----------
             Total current liabilities                              3,352,167        3,407,771

 Long-term debt                                                     5,038,917        5,095,986
                                                                   ----------       ----------
             Total liabilities                                      8,391,084        8,503,757
                                                                   ----------       ----------
Stockholders' equity:
  Common stock, $0.01 par value. Authorized 25,000,000
    shares; issued 8,353,566 shares, outstanding 8,345,166
    at March 31,2003 and issued 8,084,616 shares,
    outstanding 8,076,216 at December 31, 2003                         83,536           80,846
  Additional paid-in capital                                       28,780,744       28,500,421
  Subscriptions receivable due to exercise of stock options           287,191                -
  Retained earnings (accumulated deficit)                         (15,995,895)     (15,438,333)
  Accumulated other comprehensive income (loss)                       446,805          334,609
  Treasury stock                                                       (7,322)          (7,322)
                                                                   ----------       ----------
             Total stockholders' equity                            13,595,059       13,470,221
                                                                   ----------       ----------

             Total liabilities and stockholders' equity         $  21,986,143    $  21,973,978
                                                                   ==========       ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
                                   ZOOM TECHNOLOGIES, INC. AND SUBSIDIARY
                                    Consolidated Statements of Operations
                                                (Unaudited)
<TABLE>
<CAPTION>
                                                                    Three Months Ending
                                                                          March 31,
                                                               -----------------------------
                                                                    2004            2003
                                                                    ----            ----
<S>                                                             <C>             <C>
Net sales                                                       $  7,791,605    $  7,538,513
Costs of goods sold                                                5,479,549       5,393,719
                                                                ------------    ------------
                      Gross profit                                 2,312,056       2,144,794

Operating expenses:
         Selling                                                   1,225,977       1,361,768
         General and administrative                                  953,332         957,796
         Research and development                                    678,219         752,204
                                                                ------------    ------------
                      Total operating expenses                     2,857,528       3,071,768
                                                                ------------    ------------
                      Operating income (loss)                       (545,472)       (926,974)

Other income (expense):
         Interest income                                              24,182          21,311
         Interest (expense)                                          (52,648)        (54,812)
         Other, net                                                   16,376         120,907
                                                                ------------    ------------
                      Total other income (expense), net              (12,090)         87,406
                                                                ------------    ------------
                      Income (loss) before income tax
                        expense                                     (557,562)       (839,568)

Income tax expense (benefit)                                               -               -
                                                                ------------    ------------

                      Net income (loss)                         $   (557,562)   $   (839,568)
                                                                ============    ============

Earnings (loss) per common share:

                      Basic                                     $      (0.07)   $      (0.11)
                                                                ============    ============
                      Diluted                                   $      (0.07)   $      (0.11)
                                                                ============    ============


Weighted average common and common equivalent shares

                      Basic                                        8,136,012       7,853,382
                                                                ============    ============
                      Diluted                                      8,136,012       7,853,382
                                                                ============    ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>

                                ZOOM TECHNOLOGIES, INC. AND SUBSIDIARY
                                 Consolidated Statements of Cash Flows
                                              (Unaudited)
<TABLE>
<CAPTION>
                                                                         Three Months Ending
                                                                               March 31,
                                                                       2004               2003
                                                                -----------------------------------
<S>                                                             <C>                  <C>
Cash flows from operating activities:
    Net income (loss)                                           $    (557,562)      $    (839,568)
    Adjustments to reconcile net income (loss) to net cash
      provided by (used in) operating activities:
      Non-operating gain on refund of deposit                               -             (40,237)
      Depreciation                                                    116,721             145,334
      Changes in operating assets and liabilities:
        Accounts receivable, net                                      (24,938)            486,589
        Inventories, net                                             (796,786)            584,951
        Prepaid expenses and other assets                             (24,411)            585,794
        Accounts payable and accrued expenses                         (58,129)           (786,283)
                                                                    ---------           ---------
           Net cash provided by (used in) operating activities     (1,345,105)            136,580
                                                                    ---------           ---------
Cash flows from investing activities:
Additions to property, plant and equipment                            (26,176)               (594)
                                                                    ---------           ---------
           Net cash provided by (used in) investing activities        (26,176)               (594)
                                                                    ---------           ---------
Cash flows from financing activities:
    Principal payments on long-term debt                              (54,544)            (51,803)
    Proceeds from exercise of stock options                           570,204                   -
    Purchase of Treasury stock                                              -              (5,126)
                                                                    ---------           ---------
           Net cash provided by (used in) financing activities        515,660             (56,929)
                                                                    ---------           ---------
Effect of exchange rate changes on cash                                   179              (1,304)
                                                                    ---------           ---------
Net increase (decrease) in cash                                      (855,442)             77,753

Cash beginning of period                                            9,904,384           7,612,274
                                                                    ---------           ---------
Cash end of period                                              $   9,048,942       $   7,690,027
                                                                    =========           =========
Supplemental disclosures of cash flow information:

    Cash paid during the period for:
    Interest                                                    $      52,648       $      58,090
                                                                    =========           =========
    Income taxes                                                $           -       $           -
                                                                    =========           =========
</TABLE>
   See accompanying notes to consolidated financial statements.
<PAGE>
                ZOOM TECHNOLOGIES, INC. AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

(1)  Summary of Significant Accounting Policies

     (a) Basis of Presentation and Principles of Consolidation

     The  consolidated  financial  statements  of Zoom  Technologies,  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 do not
include all of the information and footnote  disclosures  required by accounting
principles generally accepted in the United States of America.  These statements
should be read in conjunction with the audited consolidated financial statements
and  notes  thereto  for the year  ending  December  31,  2003  included  in the
Company's 2003 Annual Report on Form 10-K.

     The  consolidated  balance  sheet as of March 31,  2004,  the  consolidated
statements  of  operations  for the three months ending March 31, 2004 and 2003,
and the consolidated  statements of cash flows for the three months ending March
31, 2004 and 2003 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 consolidated  financial  statements include the accounts and operations
of the Company's  wholly-owned  subsidiary,  Zoom Telephonics,  Inc., a Delaware
corporation.  All significant  intercompany  accounts and transactions have been
eliminated in consolidation.

     The results of operations  for the periods  presented  are not  necessarily
indicative of the results to be expected for the entire year ending December 31,
2004.

(b)  Stock-Based Compensation

     The Company  accounts for its stock option plans under the  recognition and
measurement  principles  of  Accounting  Principles  Board (APB) Opinion No. 25,
"Accounting  for Stock Issued to  Employees,  and Related  Interpretations."  No
stock-based  compensation  expense is reflected  in net income  (loss) for these
plans,  as all options  granted under these plans had an exercise price equal to
the  market  value of the  underlying  common  stock on the date of  grant.  The
following  table  illustrates  the  effect on net loss and loss per share if the
Company  had  applied  the  fair  value  recognition   provisions  of  Financial
Accounting Standards Board (FASB) Statement No. 123, "Accounting for Stock Based
Compensation", to stock based compensation:
                                                FOR THE THREE MONTHS
                                                   ENDED MARCH 31,
                                                     (UNAUDITED)
                                            ---------------------------
                                                 2004          2003
                                            -------------  ------------
Net income (loss), as reported.........     $   (557,562)  $  (839,568)
Deduct:  Total stock-based employee
Compensation expense determined under
fair value based method for all awards,
 net of related tax effects............         (173,868)     (117,259)
                                            ------------   ------------
Pro forma net income (loss)............     $   (731,430)  $  (956,827)
                                            ============   ============
Income (loss) per share:
Basic and diluted - as reported........     $      (0.07)  $     (0.11)
Basic and diluted - pro forma..........     $      (0.09)  $     (0.12)

(c)  RECENTLY ISSUED ACCOUNTING STANDARDS

     In  January  2003,  the  FASB  issued   Interpretation  No.  46  (FIN  46),
"Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51",
and, in October 2003,  the FASB issued FASB Staff  Position  (FSP) No. FIN 46-6,
"Effective  Date of FASB  Interpretation  46." This staff position  deferred the
effective  date for applying FIN 46 to an interest  held in a Variable  Interest
Entity ("VIE") or potential VIE that was created  before  February 1, 2003 until
the end of the first interim or annual  period  ending after  December 15, 2003,
except  if  the  company  had  already  issued  statements  reflecting  a VIE in
accordance with FIN 46. In December 2003, the FASB issued Interpretation No. 46R
(FIN 46R),  "Consolidation of Variable Interest Entities -- An Interpretation of
ARB No. 51." FIN 46R replaces  FIN 46 and  addresses  consolidation  by business
enterprises of variable interest entities that possess certain  characteristics.
A  variable  interest  entity is  defined as (a) an  ownership,  contractual  or
monetary  interest  in an  entity  where  the  ability  to  influence  financial
decisions  is not  proportional  to the  investment  interest,  or (b) an entity
lacking the invested capital  sufficient to fund future  activities  without the
support of a third party.  FIN 46R establishes  standards for determining  under
what circumstances  VIEs should be consolidated with their primary  beneficiary,
including those to which the usual condition for  consolidation  does not apply.
Adoption  of the  required  sections  of FIN 46, as  modified  and  interpreted,
including  the  provisions  of FIN 46R, did not have any effect on the Company's
consolidated  financial  statements  or  disclosures.  The  Company  adopted the
remaining  sections of this guidance in 2004. The provisions of FIN 46R, did not
have any significant impact on the Company's  consolidated  financial statements
or disclosures.

     In December  2003,  the  Securities  and Exchange  Commission  issued Staff
Accounting  Bulletin No. 104, "Revenue  Recognition" (SAB 104), which supersedes
SAB 101, "Revenue Recognition in Financial  Statements".  The primary purpose of
SAB 104 is to  rescind  accounting  guidance  contained  in SAB 101  related  to
multiple element revenue  arrangements,  which was superseded as a result of the
issuance  of EITF 00-21,  "Accounting  for Revenue  Arrangements  with  Multiple
Deliverables".  While the wording of SAB 104 has changed to reflect the issuance
of EITF 00-21,  the revenue  recognition  principles  of SAB 101 remain  largely
unchanged  by the  issuance of SAB 104.  The  adoption of SAB 104 did not have a
material impact on the Company's consolidated financial statements.

(2)  Liquidity

     On December 31, 2003 Zoom had cash of approximately $9.9 million.  On March
31, 2004 Zoom had cash of  approximately  $9.0 million.  Currently,  the Company
does not have a debt  facility,  and the  Company  cannot  assure  that it could
obtain  one on  acceptable  terms  unless  there  is a change  in the  Company's
circumstances.

     To conserve cash and manage its liquidity,  the Company implemented expense
reductions  throughout  2002,  2003 and the  first  three  months  of 2004.  The
employee  headcount was 185 at December 31, 2002 and 159 at March 31, 2004.  The
Company will continue to assess its cost structure as it relates to its revenues
and cash position in 2004, and may make further  reductions if these actions are
deemed necessary.

     Management  believes  it has  sufficient  resources  to  fund  its  planned
operations over the next 12 months. However if the Company is unable to increase
its revenues,  reduce or otherwise  adequately  control its  expenses,  or raise
capital,  the Company's  longer-term  ability to continue as a going concern and
achieve its intended business objectives could be adversely affected.  See "Risk
Factors" below, for further information with respect to events and uncertainties
that could harm our business, operating results, and financial condition.

(3)  Earnings Per Share

     The  reconciliation  of the  numerators and  denominators  of the basic and
diluted net earnings (loss) per share  computations  for the Company's  reported
net income (loss) is as follows:
                                         Three Months Ending
                                              March 31,
                                     ----------------------------
                                        2004               2003
                                    ------------      -------------
Basic:
   Net income (loss)                $  (557,562)      $  (839,568)
Weighted average shares
   outstanding                        8,136,012         7,853,382
                                    -----------       -----------
Net income (loss) per share         $      (.07)      $      (.11)
                                    ===========       ===========
Diluted:
    Net income (loss)               $  (557,562)      $  (839,568)

Weighted average shares
   outstanding                        8,136,012         7,853,382

Net effect of dilutive stock
   options based on the
   Treasury stock method using
   average market price                       -                 -
                                    -----------       -----------
Weighted average shares
   outstanding                        8,136,012         7,853,382
                                    -----------       -----------
Net income (loss) per share         $      (.07)      $      (.11)
                                    ===========       ===========

     Potential  common  shares  for which  inclusion  would  have the  effect of
increasing diluted earnings per share (i.e., antidilutive) are excluded from the
three months  ending March 31, 2004 and 2003  computations.  Options to purchase
1,518,000  and  1,822,875  shares  of common  stock at March 31,  2004 and 2003,
respectively,  were  outstanding  but not included in the computation of diluted
earnings per share as their effect would be antidilutive.

(4)   Inventories
<TABLE>
<CAPTION>
      Inventories consist of the following:               March 31, 2004        December 31, 2003
                                                          --------------        -----------------
<S>                                                       <C>                     <C>
      Raw materials                                       $   2,161,274           $  1,754,850
      Work in process                                         1,088,788                639,425
      Finished goods                                          2,317,940              2,376,941
                                                             ----------             ----------
      Total Inventories, net                              $   5,568,002           $  4,771,216
                                                             ==========             ==========
</TABLE>
     During  the  three  months  ending  March 31,  2004 and March 31,  2003 the
Company  recorded  lower of cost or  market  write-downs  of zero and  $237,715,
respectively, related to broadband and wireless inventory.

(5)  Comprehensive Income (Loss)

     Statement of Financial  Accounting  Standards ("SFAS") No. 130,  "Reporting
Comprehensive  Income"  establishes  rules  for the  reporting  and  display  of
comprehensive income (loss) and its components; however, it has no impact on the
Company's  net income  (loss).  SFAS No. 130 requires all changes in equity from
non-owner  sources to be included in the  determination of comprehensive  income
(loss).

 The components of comprehensive income (loss), net of tax, are as follows:

                                            Three Months Ending March 31,
                                          ---------------------------------
                                              2004                2003
                                          ------------        ------------
 Net income (loss)                        $  (557,562)        $  (839,568)

 Foreign currency translation
   adjustment                                 112,196             (13,523)
                                          -----------         -----------
 Comprehensive income (loss)              $  (445,366)         $ (853,091)
                                          ===========         ===========

     At March 31, 2004 and December 31, 2003,  Accumulated  other  comprehensive
income (loss) as reported on the Company's  balance sheet is comprised solely of
foreign currency translation adjustments.

(6)  Long-Term Debt

     On January  10, 2001 the  Company  obtained a mortgage  loan for $6 million
secured by the real estate property located at 201 and 207 South Street, Boston,
Massachusetts.  This is a 20-year  direct  reduction  mortgage  with a five-year
balloon due January 10, 2006. The interest rate is fixed for one year,  based on
the one year  Federal  Home Loan Bank  rate  plus 2.5 % per  annum.  The rate is
adjusted on January 10th of each calendar  year  commencing on January 10, 2002.
Zoom's rate was adjusted to 3.99% on January 10, 2004.

(7)  Commitments

     During the three month period  ending March 31, 2004 there were no material
changes to the capital  commitments and  contractual  obligations of the Company
from those disclosed in the Form 10-K for the year ending December 31, 2003.

(8)  Segment and Geographic Information

     The Company's  operations are classified into one reportable  segment.  The
Company's United States and  international net sales for the three months ending
March 31, 2004 and 2003, respectively, were comprised as follows:

                         Three Months            Three Months
                            Ending       % of       Ending         % of
                        March 31, 2004   Total   March 31, 2003   Total

United States              $ 3,779,156    48%     $ 4,579,258      61%
International-UK             2,477,000    32%       2,215,645      29%
International-All Other      1,535,449    20%         743,610      10%
                            -----------  ---      -----------      ---
Total                      $ 7,791,605   100%      $7,538,513     100%
                           ===========   ===      ===========      ===

(9)  Customer Concentrations

     The Company's  fourth largest  customer in the first quarter of 2004,  Best
Buy,  recently advised the Company that they plan to discontinue the sale of the
Company's  dial-up modems  starting around June 2004. This action is being taken
to reduce the amount of shelf space  allocated  to dial-up  modems and  increase
Best Buy's house-brand share of their modem category.

<PAGE>
Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

     The following  discussion and analysis  should be read in conjunction  with
the safe harbor statement and the risk factors contained herein and set forth in
our Annual  Report on Form 10-K for the year ending  December 31, 2003.  Readers
should  also be  cautioned  that  results of any  reported  period are often not
indicative of results for any future period.

OVERVIEW

     Zoom sells  computer  peripheral  products,  principally  dial-up  and ADSL
modems,  to retailers,  distributors,  Internet Service  Providers  (ISPs),  and
Original Equipment Manufacturers (OEMs). We sell our products to these customers
through our direct sales force and through  commissioned sales  representatives.
The majority of our employees work in either our corporate-owned headquarters or
our leased production  facility in Boston,  Massachusetts.  We also have a sales
and support  office in the United  Kingdom  and a support  center in Boca Raton,
Florida.

     Historically, most of Zoom's sales have resulted from the after-market sale
of dial-up modems to retail customers.  These customers  typically either wanted
to add a modem to a  computer  that did not have a modem,  needed  to  replace a
defective  modem or wanted to upgrade to a higher  speed  modem.  Since the vast
majority of retail personal  computers now come with 56K modems  installed,  and
since 56K is the highest speed dial-up modem  available,  the upgrade market has
steadily  declined  over  the  past  few  years.  This  decline,   coupled  with
competition  from broadband  access devices like ADSL and cable modems and lower
selling prices for dial-up modems,  has resulted in a  corresponding  decline in
Zoom's dial-up modem sales.

     Our fourth largest  customer in Q1 2004, Best Buy, has advised us that they
plan to discontinue  the sale of our dial-up modems  starting  around June 2004,
coincident  with  their  reduction  of shelf  space for the  category  and their
introduction of a house brand modem.

     To  mitigate  this  decline,  Zoom  has  made  significant  investments  in
broadband and other  technologies.  The broadband  market has grown rapidly over
the past few years and is expected to continue to grow quickly.  So far Zoom has
been more successful in the ADSL market than in the cable modem market.

     Zoom's product philosophy emphasizes quality, reliability, and low cost. We
therefore continually seek to optimize our product designs and lower our cost of
goods  through  intelligent  design,  aggressive  sourcing,  and  the use of new
technology.  Most of our products  use modem or other  chipsets  purchased  from
outside  vendors.  This lets us take  advantage  of the  extensive  research and
development  capabilities  and  competitiveness  of our  chipset  suppliers  and
reduces our development  time and the associated costs and risks of bringing new
products  to  market.  As a result  of this  approach,  Zoom is able to  quickly
develop new and innovative  products while keeping its research and  development
expense relatively small as a percentage of sales.

     Zoom also out-sources most of its board-level manufacturing, allowing us to
take advantage of the competitive  worldwide  market for contract  manufacturing
services. Subcontract manufacturing frees us from the capital equipment cost and
the inflexibility,  expense, and management burden associated with maintaining a
dedicated workforce for electronics assembly operations.  Packaging, testing and
shipping are typically done at our Boston, Massachusetts manufacturing facility.
This helps to reduce  shipping  costs from our contract  assemblers and gives us
the opportunity to monitor  manufacturing  quality and to efficiently  customize
product for our customers.

     In recent years Zoom has benefited from purchase discount programs with our
major chipset  suppliers.  These  agreements have resulted in reduced unit costs
for our dial-up modems. From the first quarter of 2002 through the first quarter
of 2004, we realized significant  benefits as a result of these agreements,  the
most  significant  of which  expires  during 2004.  Zoom hopes to replace  these
agreements, but our ability to negotiate favorable terms will depend on a number
of factors including our projected volumes,  our ability to reach those volumes,
and the  competitive  landscape  in the  chipset  market.  The  outcome of these
negotiations  could have a  significant  effect on the gross margins of products
that use chipsets covered by the existing agreements.

     Over the past three  years,  our net sales have  declined an average of 16%
per year. In response to the declining  sales  volume,  we reduced  staffing and
overhead  costs.  In  December  31,  2000,  our  total  headcount  of  full-time
employees,  including temporary workers, was 329, which was reduced to 215, 185,
and 159 at year-end 2001, 2002, and 2003,  respectively.  Our headcount on March
31, 2004 was 159.

     In the first quarter of 2004 and the fourth quarter of 2003,  respectively,
our net sales for the  quarter  were up 3.4% and 11.5% over the same  quarter in
the prior year.  The main reason for this  increase was the growth in ADSL modem
sales, which more than offset our declining dial-up modem sales. While we remain
optimistic  about  continued  growth in the ADSL modem area,  our ADSL sales are
currently  concentrated  with a  small  number  of  customers,  so  there  is no
predictable uniformity for our quarterly ADSL sales and our sales may fluctuate.
We are  continuing  our efforts to expand our ADSL  customer base and to use our
strength in ADSL to expand our ADSL  product  line and enter new  markets  later
this year. One new product will  incorporate VoIP capability into an ADSL modem.
We also plan to introduce our own VoIP service  called "Global  Village(TM)"  to
offer free IP-to-IP service, low-cost calling to virtually anyone worldwide, and
unlimited fixed price domestic calling.

     Our cash and cash  equivalents  balance at March 31, 2004 was $9.0 million,
down from $9.9 million at December 31, 2003.  Most of this change  resulted from
the increase of inventories and accounts  receivable,  offset  partially by $0.6
million cash received from the exercise of employee stock options.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The  following  is a  discussion  of what we view as our  more  significant
accounting  policies  and  estimates.  These  policies  and  estimates  are also
described in the notes to our audited  consolidated  financial statements in our
Annual  Report on Form 10-K for the fiscal year ending  December  31,  2003.  As
described  below,  management  judgments and estimates  must be made and used in
connection with the preparation of our consolidated financial statements.  Where
noted,  material  differences  could  result in the amount and timing of our net
sales, costs, and expenses for any period if we made different judgments or used
different estimates.

     REVENUE  (NET  SALES)  RECOGNITION.   We  sell  hardware  products  to  our
customers.  The products include dial-up modems,  embedded modems, cable modems,
PC cameras,  ISDN and ADSL  modems,  telephone  dialers,  and wireless and wired
networking  equipment.  We generally do not sell  software or services We derive
our net sales  primarily  from the sale of  hardware  products  to four types of
customers:

o    computer peripherals retailers,
o    computer product distributors,
o    Internet Service Providers (ISPs), and
o    original equipment manufacturers (OEMs).

     We  recognize  net sales for all four types of  customers at the point when
the customer takes legal  ownership of the delivered  products.  Legal ownership
passes from Zoom to the customer based on the contractual FOB point specified in
signed contracts and purchase orders,  which are both used extensively.  Many of
our customer contracts or purchase orders specify FOB destination. We verify the
delivery date on all significant FOB destination  shipments made during the last
10 business days of each quarter.

     Our net sales to computer products  retailers are reduced by certain events
that  are  characteristic  of the  sales of  hardware  to  computer  peripherals
retailers.  These  events  are  product  returns,  certain  sales and  marketing
incentives, price protection refunds, and consumer and in-store mail-in rebates.
Each of these is  accounted  for as a  reduction  of net sales based on detailed
management  estimates,  which are reconciled to actual  customer or end-consumer
credits on a monthly or quarterly basis.

     Product  Returns.  Products are returned by retail stores and  distributors
for inventory  balancing,  contractual stock rotation  privileges,  and warranty
repair or replacements.  We estimate the sales and cost value of expected future
product returns of previously  sold products.  Our estimates for product returns
are based on recent  historical  trends plus estimates for returns  prompted by,
among other things,  new product  introductions,  announced  stock rotations and
announced customer store closings,  etc.  Management reviews historical returns,
current  economic  trends,  and changes in customer demand and acceptance of our
products  when  estimating  sales  return  allowances.  The  estimate for future
returns is recorded as a reserve against accounts receivable, a reduction of net
sales,  and the  corresponding  change  to  inventory  and  cost of  sales.  The
relationship of quarterly  physical  product returns to quarterly  product sales
has remained relatively stable for many years.

     Price Protection  Refunds. We have a policy of offering price protection to
certain  of our  retailer  and  distributor  customers  for  some  or all  their
inventory.  Under the price protection policies, when we reduce our prices for a
product,  the customer receives a credit for the difference between the original
purchase price and our reduced price for their unsold inventory of that product.
Our estimates for price protection refunds are based on a detailed understanding
and  tracking by  customer  and 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 reduction of net sales and a reserve against accounts receivable.

     Sales and Marketing Incentives.  Many of our retail customers require sales
and marketing support funding, usually set as a percentage of our sales in their
stores.

     Consumer Mail-In and In-Store Rebates and Store Rebates.  Our estimates for
consumer mail-in rebates are based on a detailed  understanding  and tracking by
customer and by sales  program,  supported by actual rebate claims  processed by
the rebate redemption centers plus an accrual for an estimated lag in processing
at the  redemption  centers.  Our  estimates  for store rebates are comprised of
actual credit requests from the eligible customers. The estimate for mail-in and
store  rebates  is  recorded  as a reserve  against  accounts  receivable  and a
reduction  of net  sales  in the same  period  that the  rebate  obligation  was
triggered.

     To ensure that the sales, discounts,  and marketing incentives are recorded
in the proper period, we perform extensive tracking and documenting by customer,
by period, and by type of marketing event. This tracking includes reconciliation
to the accounts  receivable  records for  deductions  taken by our customers for
these discounts and incentives.

     ACCOUNTS  RECEIVABLE  VALUATION.  We establish accounts receivable reserves
equal to the  above-discussed  net sales  adjustments  for  estimates of product
returns,  price  protection  refunds,  and  consumer  and store  rebates.  These
reserves are drawn down as actual credits are issued to the customer's accounts.

     Our bad-debt  write-offs  have not been  significant  during 2001, 2002 and
2003 or 2004 to date.

     INVENTORY  VALUATION  AND COST OF GOODS  SOLD.  Inventory  is  valued  on a
standard cost basis where the material  standards are  periodically  updated for
current  material  pricing.  Reserves for obsolete  inventory are established by
management  based on usability  reviews  performed  each  quarter.  Our reserves
against the inventory of a particular  product  range from 0% to 100%,  based on
management's estimate of the probability that the material will not be consumed.
In the  second  half of 2000,  when  industry  expectations  were  very high for
expansion of the broadband and wireless  markets,  we purchased parts to support
our aggressive forecast for a ramp-up of sales of cable modems, ADSL modems, and
wireless networking products.  The subsequent slow down in the industry resulted
in a significant excess inventory position of materials. During 2001, the market
selling prices for the broadband and wireless  products  declined  significantly
because of an industry-wide oversupply.  Starting in 2001 and to a lesser extent
in 2002 and 2003,  the sales prices for some of the products  dropped  below our
cost and,  accordingly,  we then  valued  our  inventory  on a "lower of cost or
market"  basis.  Our  valuation  process is to compare  our cost to the  selling
prices each quarter,  and if the selling price of a product is less than the "if
completed"  cost of our  inventory,  we write-down  the inventory on a "lower of
cost or market" basis.

     We have entered into supply  arrangements with suppliers of some components
that include price and other concessions,  including no-charge  components,  for
meeting  certain  purchase  requirements  or  commitments.  Under  one of  these
arrangements,  we are  committed  to  purchase  approximately  $8.0  million  of
components over a period of approximately 30-months that commenced on January 1,
2002,  provided  that those  components  were offered at  competitive  terms and
prices.  We  believe  that at March 31,  2004,  we are on track to meet the $8.0
million  commitment  in 2004.  In connection  with this  arrangement,  we became
entitled to receive at least $3.0  million of no-charge  components,  based upon
the supplier's  market price for the components in late 2001 and early 2002, and
other  pricing  concessions  based on our  purchase  volumes.  We received  $1.2
million of these no-charge components in the fourth quarter of 2001. We received
the  remainder of the no-charge  components  in the first  quarter of 2002.  The
favorable  impact  to our  statement  of  operations  is being  calculated  as a
purchase discount over the estimated total number of components acquired through
the 30 month supply  agreement and recognized on a delayed basis as the products
employing the acquired  components  involved in the supply arrangement are sold.
This method of accounting has been consistent each year.

     VALUATION AND IMPAIRMENT OF DEFERRED TAX ASSETS.  As part of the process of
preparing our consolidated  financial statements we are required to estimate our
income tax expense and deferred income tax position.  This process  involves the
estimation of our actual current tax exposure together with assessing  temporary
differences  resulting from differing  treatment of items for tax and accounting
purposes. These differences result in deferred tax assets and liabilities, which
are  included  in our  consolidated  balance  sheet.  We must  then  assess  the
likelihood  that our deferred tax assets will be recovered  from future  taxable
income  and to the  extent we  believe  that  recovery  is not  likely,  we must
establish  a  valuation  allowance.  To the  extent  we  establish  a  valuation
allowance or increase  this  allowance  in a period,  we must include an expense
within the tax provision in the statement of operations.

     Significant  management  judgment is required in determining  our provision
for income taxes and any valuation  allowance  recorded against our net deferred
tax assets.  In 2001, we recorded a $3.8 million income tax charge to reflect an
additional increase in our deferred tax asset valuation allowance.  Management's
decision  to  record  the  valuation   allowance  was  based  on  the  uncertain
recoverability  of our deferred tax asset  balance.  In our first quarter ending
March 31, 2002,  we recorded an  additional  $2.0 million  income tax charge and
valuation  reserve,  which  reduced our net deferred tax asset  balance to zero.
This additional  reserve  reflected our decision to discontinue our specific tax
planning  strategy to sell our  headquarters  building in Boston in light of the
less favorable  market  conditions  for the sale of such building.  At March 31,
2004,  we currently  have a 100%  valuation  allowance  against our deferred tax
assets.  It is management's  estimate that, after  considering all the available
objective  evidence,  historical and  prospective,  with greater weight given to
historical  evidence,  it is more likely than not that these  assets will not be
realized. If we establish a record of continuing profitability, at some point we
will be required to reverse the  valuation  allowance  and restore the  deferred
asset value to the balance  sheet,  recording an equal income tax benefit  which
will increase net income in that period(s).

Results of Operations

     SUMMARY. Net sales were $7.8 million for our first quarter ending March 31,
2004,  up 3.4% from $7.5 million in the first quarter of 2003. We had a net loss
of $0.6  million for the first  quarter of 2004,  compared to a net loss of $0.8
million in the first  quarter of 2003.  Loss per diluted share was $0.07 for the
first quarter of 2004 compared to a loss per diluted share of $.11 for the first
quarter of 2003.

     NET SALES.  Our net sales for the first quarter of 2004 increased 3.4% from
the first quarter of 2003  primarily due to the increase in ADSL modem sales and
the positive currency  translation  impact from converting sales transactions in
Euros and British Pounds to US dollars. These increases were partially offset by
the  decline in dial-up  modem  sales.  Dial-up  modem sales  declined  due to a
decrease of both  dial-up  modem unit sales and dial-up  modem  average  selling
prices,  primarily  resulting  from the  continued  decline of the dial-up modem
after-market.  The increase in ADSL modem sales  represented  our tenth straight
quarterly sales increase in this product category.

     Our net sales in the United States  declined from $4.6 million in the first
quarter of 2003 to $3.8 million in the first quarter of 2004. Our  international
net sales  increased  from $3.0  million  in the first  quarter  of 2003 to $4.0
million in the first quarter of 2004.  These changes reflect our declining sales
of dial-up  modems  worldwide,  our  stronger  ADSL  sales in the  international
markets,  and the  positive  currency  impact on a  significant  portion  of our
international sales.

     GROSS  PROFIT.  Our gross  profit  increased  to $2.3  million in the first
quarter of 2004 from $2.1 million in the first quarter of 2003. Our gross profit
as a percentage of net sales improved to 29.7% in the first quarter of 2004 from
28.5% in the first quarter of 2003. The  improvement in gross profit  percentage
resulted  primarily from product cost reductions and the favorable exchange rate
impact on our international sales.

     OPERATING EXPENSE.  Our operating expense decreased by $0.2 million to $2.9
million or 36.7% of net sales in the first  quarter of 2004 from $3.1 million or
40.7% of net sales in the first  quarter of 2003.  The  decrease of $0.2 million
was  comprised of lower selling  expense of $0.1 million and lower  research and
development expense of $0.1 million.

     Selling Expense.  Selling expense  decreased $.1 million to $1.2 million or
15.7% of net sales in the first  quarter  of 2004 from $1.4  million or 18.1% of
net sales in the first  quarter of 2003.  Selling  expense  was lower  primarily
because of lower personnel costs resulting from employee  headcount  reductions,
reduced marketing costs and reduced product delivery expense.

     General and Administrative Expense.  General and administrative expense was
$1.0  million,  or 12.2%  of net  sales in the  first  quarter  of 2004 and $1.0
million,  or 12.7% of net sales,  in the first quarter of 2003.  Although  total
General and Administrative expense did not change from the first quarter of 2003
to the first quarter of 2004,  there were  increases and decreases in categories
included in total General and Administrative expense. General and administrative
expense increases included higher  unemployment  insurance costs and legal fees.
General and  administrative  expense decreases  included lower medical insurance
claims and depreciation expense.

     Research and development  expense  decreased $.1 million to $0.7 million or
8.7% of net sales in the first quarter of 2004 from $0.8 million or 10.0% of net
sales in the first quarter of 2003.  Research and  development  costs  decreased
primarily  as a result of reduced  personnel  costs and product  approval  fees.
Development and support continues on all of our major product lines.

     OTHER INCOME (EXPENSE).  Other income (expense), net decreased to a loss of
$.01  million in the first  quarter of 2004 from  income of $.09  million in the
first quarter of 2003, primarily due to realized foreign exchange losses.

     INCOME TAX  EXPENSE  (BENEFIT).  We did not  record any tax  expense in the
first quarter of 2004 or the first  quarter of 2003.  The net deferred tax asset
balance at March 31, 2004 is zero.  This  accounting  treatment  is described in
further  detail under the caption  CRITICAL  ACCOUNTING  POLICIES AND  ESTIMATES
above.

Liquidity and Capital Resources

     On March 31, 2004 we had working  capital of $15.8 million,  including $9.0
million in cash and cash equivalents.

     In the first three months of 2004,  operating  activities used $1.3 million
in cash. Our net loss in the first three months of 2004 was $.6 million. Uses of
cash from  operations  included an increase of  inventory  of $.8  million.  The
primary  reason  for the  inventory  increase  was an  increase  in  ADSL  modem
inventory in anticipation of shipments in the second quarter of 2004.

     In the first three months of 2004 financing activities provided $.5 million
of cash,  due  primarily  to receipt of $.6  million  cash from the  exercise of
employee  stock  options,  partially  offset by $.05 million in cash for monthly
principal payments of our $6.0 million mortgage.

     Currently  we do not have a debt  facility,  and we cannot  assure  that we
could  obtain  one  on  acceptable  terms  unless  there  is  a  change  in  our
circumstances.

     To  conserve  cash  and  manage  our  liquidity,   we  implemented  expense
reductions  throughout  2002,  2003 and in the first three  months of 2004.  Our
employee headcount was 185 at December 31, 2002 which has been reduced to 159 at
March 31, 2004. We will  continue to assess our cost  structure as it relates to
our revenues and cash  position in 2004,  and we may make further  reductions if
the actions are deemed necessary.

     Management  believes  we  have  sufficient  resources  to fund  our  normal
operations  over the next 12 months.  However,  if we are unable to increase our
revenues, reduce or otherwise adequately control our expenses, or raise capital,
our longer-term  ability to continue as a going concern and achieve our intended
business objectives could be adversely  affected.  See "Risk Factors" below, for
further information with respect to events and uncertainties that could harm our
business, operating results, and financial condition.

Commitments

     During the three  months  ending  March 31,  2004,  there were no  material
changes  to our  capital  commitments  and  contractual  obligations  from those
disclosed in the Form 10-K for the year ending December 31, 2003.

RECENTLY ISSUED ACCOUNTING STANDARDS

     In  January  2003,  the  FASB  issued   Interpretation  No.  46  (FIN  46),
"Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51",
and, in October 2003,  the FASB issued FASB Staff  Position  (FSP) No. FIN 46-6,
"Effective  Date of FASB  Interpretation  46." This staff position  deferred the
effective  date for applying FIN 46 to an interest  held in a Variable  Interest
Entity ("VIE") or potential VIE that was created  before  February 1, 2003 until
the end of the first interim or annual  period  ending after  December 15, 2003,
except  if  the  company  had  already  issued  statements  reflecting  a VIE in
accordance with FIN 46. In December 2003, the FASB issued Interpretation No. 46R
(FIN 46R),  "Consolidation of Variable Interest Entities -- An Interpretation of
ARB No. 51." FIN 46R replaces  FIN 46 and  addresses  consolidation  by business
enterprises of variable interest entities that possess certain  characteristics.
A  variable  interest  entity is  defined as (a) an  ownership,  contractual  or
monetary  interest  in an  entity  where  the  ability  to  influence  financial
decisions  is not  proportional  to the  investment  interest,  or (b) an entity
lacking the invested capital  sufficient to fund future  activities  without the
support of a third party.  FIN 46R establishes  standards for determining  under
what circumstances  VIEs should be consolidated with their primary  beneficiary,
including those to which the usual condition for  consolidation  does not apply.
Adoption  of the  required  sections  of FIN 46, as  modified  and  interpreted,
including the provisions of FIN 46R, did not have any effect on our consolidated
financial  statements or disclosures.  We adopted the remaining sections of this
guidance in 2004. The provisions of FIN 46R, did not have any significant impact
on our consolidated financial statements or disclosures.

     In December  2003,  the  Securities  and Exchange  Commission  issued Staff
Accounting  Bulletin No. 104, "Revenue  Recognition" (SAB 104), which supersedes
SAB 101, "Revenue Recognition in Financial  Statements".  The primary purpose of
SAB 104 is to  rescind  accounting  guidance  contained  in SAB 101  related  to
multiple element revenue  arrangements,  which was superseded as a result of the
issuance  of EITF 00-21,  "Accounting  for Revenue  Arrangements  with  Multiple
Deliverables".  While the wording of SAB 104 has changed to reflect the issuance
of EITF 00-21,  the revenue  recognition  principles  of SAB 101 remain  largely
unchanged  by the  issuance of SAB 104.  The  adoption of SAB 104 did not have a
material impact on the Company's financial statements.

"Safe Harbor"  Statement under the Private  Securities  Litigation Reform Act of
1995.

     Some  of the  statements  contained  in  this  report  are  forward-looking
statements  within the meaning of Section 27A of the  Securities Act of 1933 and
Section 21E of the Securities  Exchange Act of 1934.  These  statements  involve
known and unknown risks,  uncertainties and other factors which may cause our or
our industry's  actual  results,  performance or  achievements  to be materially
different  from any future  results,  performance or  achievements  expressed or
implied by the forward-looking  statements.  Forward-looking statements include,
but are not limited to  statements  regarding:  Zoom's plans,  expectations  and
intentions, including statements relating to Zoom's prospects and plans relating
to  sales  of our  dial-up,  cable  and  ADSL  modems  and  VoIP  products;  the
anticipated   development   and  timing  of  new  product   introductions;   the
consolidation  in and the decline of the dial-up modem market;  the  anticipated
development of Zoom's markets and sales channels; the level of demand for Zoom's
products;  Zoom's ability to obtain debt or equity  financing;  the  anticipated
impact of Zoom's  cost-cutting  initiatives,  and Zoom's financial  condition or
results of operations.

     In some cases, you can identify forward-looking statements by terms such as
"may," "will," "should," "could," "would,"  "expects,"  "plans,"  "anticipates,"
"believes,"   "estimates,"   "projects,"  "predicts,"  "potential"  and  similar
expressions intended to identify  forward-looking  statements.  These statements
are only  predictions  and involve known and unknown risks,  uncertainties,  and
other  factors  that  may  cause  our  actual   results,   levels  of  activity,
performance, or achievements to be materially different from any future results,
levels of activity,  performance,  or achievements  expressed or implied by such
forward-looking statements. Given these uncertainties you should not place undue
reliance  on  these  forward-looking  statements.  Also,  these  forward-looking
statements  represent our estimates and assumptions  only as of the date of this
report. We expressly  disclaim any obligation or undertaking to release publicly
any updates or  revisions  to any  forward-looking  statement  contained in this
report to  reflect  any  change in our  expectations  or any  change in  events,
conditions or circumstances on which any of our  forward-looking  statements are
based.  Factors  that could cause or  contribute  to  differences  in our future
financial results include those discussed in the risk factors set forth below as
well as those  discussed  elsewhere  in this report and in our filings  with the
Securities  and  Exchange  Commission.  We  qualify  all of our  forward-looking
statements by these cautionary statements.

RISK FACTORS

     This report  contains  forward-looking  statements  that involve  risks and
uncertainties,   such  as  statements  of  our  objectives,   expectations   and
intentions.  The  cautionary  statements  made in this report  should be read as
applicable  to all  forward-looking  statements  wherever  they  appear  in this
report.  Our actual results could differ materially from those discussed herein.
Factors  that  could  cause or  contribute  to such  differences  include  those
discussed below, as well as those discussed elsewhere in this report.

WE MAY  CONTINUE TO INCUR NET LOSSES IF WE ARE UNABLE TO  INCREASE  SALES OF OUR
BROADBAND MODEMS.

     Our net sales  continue  to  decline  primarily  due to the  decline in the
dial-up modem market, decreases in average selling prices of dial-up modems, and
the trend toward faster connection speeds and broadband access products. Despite
numerous cost  reductions  over the last few years,  we have  continued to incur
significant net losses primarily due to our continuous decline in net sales from
dial-up modems.  We believe that the future of our business is largely dependent
on the success of our broadband  modems and other products.  Although we believe
that we have sufficient  resources to fund our planned  operations over the next
year,  if we fail to increase  our net sales of our  broadband  modems and other
products,  our  longer-term  ability  to stay in  business  and to  achieve  our
intended business objectives could be adversely effected.  Our continuing losses
could  also  adversely  affect our  ability  to fund the growth of our  business
should our strategies prove successful.

TO STAY IN BUSINESS WE MAY REQUIRE  FUTURE  ADDITIONAL  FUNDING  WHICH WE MAY BE
UNABLE TO OBTAIN ON FAVORABLE TERMS, IF AT ALL.

     Over the next twelve months,  we may require  additional  financing for our
operations  either  to fund  losses  beyond  those we  anticipate  or to fund an
increase of our inventory  should growth occur.  We currently do not have a debt
facility  from  which  we can  borrow  and  may not be  able  to  obtain  one on
acceptable terms unless we have a change in circumstances.  Additional financing
may not be available  to us on a timely basis if at all, or on terms  acceptable
to us. If we fail to obtain acceptable  additional financing when needed, we may
be  required  to  further  reduce  planned   expenditures   or  forego  business
opportunities,  which could reduce our net sales,  increase our losses, and harm
our business.  Moreover,  additional equity financing could dilute the per share
value of our common stock held by current  shareholders,  while  additional debt
financing  could  restrict  our ability to make  capital  expenditures  or incur
additional indebtedness, all of which would impede our ability to succeed.

OUR CUSTOMER BASE IS CONCENTRATED, AND THE RECENT LOSS OF A SIGNIFICANT CUSTOMER
WILL REDUCE REVENUES AND THE PROFIT CONTRIBUTION OF OUR DIAL-UP MODEM BUSINESS.

     In the first  quarter of 2004,  36% of our net sales were  attributable  to
four  customers,  each of whom accounted for more than 6% of our net sales.  Our
fourth largest  customer in the first quarter of 2004,  Best Buy,  advised us in
April,  2004 that  they plan to  discontinue  the  sales of our  dial-up  modems
starting  around  June 2004.  This action is being taken to reduce the amount of
Best Buy shelf space  allocated  to dial-up  modems and to  increase  Best Buy's
house-brand  share of their  modem  category.  In the first  quarter of 2004 and
2003, respectively, Best Buy accounted for 6.6% and 6.9% of our total net sales.
The loss of Best Buy as a customer,  as well as a loss, reduction of business or
less favorable  terms of sale for any other of our  significant  customers,  may
reduce revenues and negatively impact our dial-up modem business.

OUR NET SALES AND OPERATING  RESULTS HAVE BEEN ADVERSELY  AFFECTED  BECAUSE OF A
DECLINE IN AVERAGE  SELLING  PRICES FOR OUR  DIAL-UP  MODEMS AND  BECAUSE OF THE
DECLINE IN THE RETAIL MARKET FOR DIAL-UP MODEMS.

     The dial-up  modem  industry has been  characterized  by declining  average
selling  prices and a declining  retail market.  The decline in average  selling
prices is due to a number of  factors,  including  technological  change,  lower
component costs,  and competition.  The decline in the size of the retail market
for dial-up  modems is primarily due to the inclusion of dial-up  modems in most
new PCs, and alternatives to dial-up modems  including  broadband  modems.  Less
advantageous  terms of sales,  decreasing  average  selling  prices and  reduced
demand for our dial-up  modems  have  resulted  and may in the future  result in
decreased net sales for dial-up modems, which has been our primary source of net
sales. If we fail to replace  declining revenue from the sales of dial-up modems
with the  sales of our other  products,  including  our  broadband  modems,  our
business and results of operation will be harmed.

WE BELIEVE  THAT OUR FUTURE  SUCCESS WILL DEPEND IN LARGE PART ON OUR ABILITY TO
MORE  SUCCESSFULLY  PENETRATE  THE  BROADBAND  MODEM  MARKETS,  WHICH  HAVE BEEN
CHALLENGING MARKETS WITH SIGNIFICANT BARRIERS TO ENTRY.

     With the shrinking of the dial-up modem market,  we believe that our future
success will depend in large part on our ability to more successfully  penetrate
the cable and ADSL modem  markets.  These  markets have been  challenging,  with
significant  barriers to entry that have  adversely  affected our sales to these
markets.  Although  some  cable  and ADSL  modems  are sold at  retail,  in most
countries  the high  volume  purchases  of these  modems are  concentrated  in a
relatively few large cable,  telecommunications,  and Internet service providers
which  offer  broadband  modem  services  to their  customers.  These  customers
typically  also have  extensive and varied  approval  processes for modems to be
approved for use on their  network.  These  approvals  can be expensive and time
consuming.   Successfully  penetrating  the  broadband  modem  market  therefore
presents a number of challenges including:

o    the current limited retail market for broadband modems;
o    the  relatively  small  number of cable,  telecommunications  and  Internet
     service  provider  customers that make up a substantial  part of the market
     for broadband modems in most countries;
o    the significant  bargaining power of these large volume  purchasers;
o    the time consuming, expensive, uncertain and varied approval process of the
     various cable service providers; and
o    the strong  relationships  with service providers enjoyed by incumbent some
     equipment providers.

     Our sales of  broadband  products  have been  adversely  affected by all of
these  factors.  Sales of our  broadband  products  in European  countries  have
fluctuated  and may  continue to fluctuate  due to  approvals  and delays in the
deployment by service providers of cable and ADSL service in these countries. We
cannot assure that we will be able to successfully penetrate these markets.

OUR EXISTING  INDEBTEDNESS COULD PREVENT US FROM OBTAINING  ADDITIONAL FINANCING
AND HARM OUR LIQUIDITY.

     In January 2001 we obtained a $6 million, 20 year direct reduction mortgage
from a bank,  secured by our owned real estate in Boston,  Massachusetts.  As of
March 31, 2004, our outstanding indebtedness was $5.3 million. This mortgage has
a balloon  payment  due in January  2006.  Our  outstanding  indebtedness  could
adversely affect our ability to obtain additional financing for working capital,
acquisitions,  or other purposes.  Our existing  indebtedness could also make us
more vulnerable to economic  downturns and competitive  pressures,  make it more
difficult  to  obtain  additional  debt  financing,  and  adversely  affect  our
liquidity.  In the event of a cash shortfall, we could be forced to reduce other
expenditures to meet our requirements  with respect to our outstanding debt. Our
ability to meet our obligations  will be dependent upon our future  performance,
which will be subject to  financial,  business and other  factors  affecting our
operations.  Many of these  factors are beyond our control.  If we are unable to
generate sufficient cash flow from operations in the future to service our debt,
we may be required to refinance all or a portion of these  obligations or obtain
additional financing in order to stay in business.

OUR  FAILURE  TO MEET  CHANGING  CUSTOMER  REQUIREMENTS  AND  EMERGING  INDUSTRY
STANDARDS WOULD ADVERSELY IMPACT OUR ABILITY TO SELL OUR PRODUCTS.

     The market for PC communications  products and high-speed  broadband access
products is characterized by aggressive pricing practices,  continually changing
customer  demand  patterns,  rapid  technological  advances,  emerging  industry
standards  and  short  product  life  cycles.  In the past  some of our  product
developments  and  enhancements  have taken longer than planned and have delayed
the  availability  of our  products,  which  adversely  affected  our  sales and
profitability  in the past. Any  significant  delays in the future may adversely
impact our  ability to sell our  products,  and our  results of  operations  and
financial condition may be adversely affected. Our future success will depend in
large part upon our ability to:

o    identify and respond to emerging technological trends in the market;
o    develop and  maintain  competitive  products  that meet  changing  customer
     demands;
o    enhance our products by adding innovative  features that  differentiate our
     products from those of our competitors;
o    bring products to market on a timely basis;
o    introduce products that have competitive prices;
o    manage  our  product   transitions,   inventory  levels  and  manufacturing
     processes efficiently; and
o    respond   effectively   to  new   technological   changes  or  new  product
     announcements by others.

     Our product  cycles  tend to be short,  and we may incur  significant  non-
recoverable expenses or devote significant  resources to sales that do not occur
when  anticipated.  Therefore  the  resources we devote to product  development,
sales,  and marketing  may not generate  material net sales for us. In addition,
short product cycles have resulted in and may in the future result in excess and
obsolete  inventory,  which has had and may in the future have an adverse affect
on our results of operations.  In an effort to develop  innovative  products and
technology,   we  have  incurred  and  may  in  the  future  incur   substantial
development,  sales, marketing, and inventory costs. If we are unable to recover
these costs,  our financial  condition and operating  results could be adversely
affected. In addition, if we sell our products at reduced prices in anticipation
of cost  reductions  and we still have higher cost  products in  inventory,  our
business would be harmed and our results of operations  and financial  condition
would be adversely affected.

OUR OPERATING  RESULTS HAVE BEEN ADVERSELY  AFFECTED BECAUSE OF PRICE PROTECTION
PROGRAMS.

     Our operating results have been adversely affected by reductions in average
selling  prices because of credits given to some of our customers as a result of
contractual price protection guarantees.  Specifically, when we reduce the price
for a product,  the customer  receives a credit for the  difference  between the
customer's most recent purchase price and our reduced price for the product, for
all unsold product at the time of the price reduction.  If the amount of credits
we give to our customers  increases by a material amount,  our operating results
could be adversely affected.

WE  MAY  BE  SUBJECT  TO  PRODUCT  RETURNS  RESULTING  FROM  DEFECTS,   OR  FROM
OVERSTOCKING  OF OUR  PRODUCTS.  PRODUCT  RETURNS COULD RESULT IN THE FAILURE TO
ATTAIN MARKET ACCEPTANCE OF OUR PRODUCTS, WHICH WOULD HARM OUR BUSINESS.

     If our products contain undetected defects,  errors, or failures,  we could
face:

o    delays in the development of our products;
o    numerous product returns; and
o    other losses to us or to our customers or end users.

     Any of  these  occurrences  could  also  result  in the loss of or delay in
market  acceptance of our  products,  either of which would reduce our sales and
harm our business.  We are also exposed to the risk of product  returns from our
customers as a result of contractual stock rotation  privileges and our practice
of assisting some of our customers in balancing their inventories.  Overstocking
has in the past led and may in the future lead too higher than normal returns.

OUR FAILURE TO  EFFECTIVELY  MANAGE OUR INVENTORY  LEVELS COULD  MATERIALLY  AND
ADVERSELY AFFECT OUR LIQUIDITY AND HARM OUR BUSINESS.

     During fiscal 2000, in anticipation of future sales of our broadband access
products,  particularly  cable modems, we significantly  increased our inventory
for these products.  We also built up this inventory in response to shortages of
components for these products  earlier in that year. We have also had difficulty
in  generating  significant  orders  for  some  of  our  products,  particularly
broadband  products,  and as a result, we experienced a significant  increase in
our  inventory,  to $21.7  million on December  31,  2000 from $14.3  million on
December 31, 1999. At March 31, 2004 we were able to reduce our inventory levels
to $5.6 million as a result of sales, raw material returns to suppliers, and the
write-down of value of some of our inventory.  Our failure to effectively manage
our  inventory  may  adversely  affect our  liquidity  and increases the risk of
inventory  obsolescence,  a decline in market value of the inventory,  or losses
from theft, fire, or other casualty.

WE MAY BE UNABLE TO PRODUCE  SUFFICIENT  QUANTITIES  OF OUR PRODUCTS  BECAUSE WE
DEPEND ON THIRD PARTY MANUFACTURERS.  IF THESE THIRD PARTY MANUFACTURERS FAIL TO
PRODUCE QUALITY PRODUCTS IN A TIMELY MANNER, OUR ABILITY TO FULFILL OUR CUSTOMER
ORDERS WOULD BE ADVERSELY IMPACTED.

     We use contract  manufacturers  to manufacture  our products.  We use these
third party  manufacturers  to help ensure low costs,  rapid market  entry,  and
reliability.  Any  manufacturing  disruption could impair our ability to fulfill
orders, and failure to fulfill orders would adversely affect our sales. Although
we currently use four contract  manufacturers for the bulk of our purchases,  in
some cases a given product is only provided by one of these companies.  The loss
of the  services  of  any of our  significant  third  party  manufacturers  or a
material  adverse  change in the  business of or our  relationships  with any of
these manufacturers could harm our business. Since third parties manufacture our
products and we expect this to continue in the future,  our success will depend,
in part,  on the  ability of third  parties to  manufacture  our  products  cost
effectively and in sufficient quantities to meet our customer demand.

     We are  subject to the  following  risks  because of our  reliance on third
party manufacturers:

o    reduced management and control of component purchases;
o    reduced control over delivery schedules;
o    reduced control over quality assurance;
o    reduced control over manufacturing yields;
o    limited warranties on products supplied to us;
o    potential increases in prices;
o    interruption  of supplies from  assemblers  as a result of a fire,  natural
     calamity, strike or other significant event; and
o    misappropriation of our intellectual property.

WE MAY BE UNABLE TO PRODUCE  SUFFICIENT  QUANTITIES  OF OUR PRODUCTS  BECAUSE WE
OBTAIN KEY COMPONENTS FROM, AND DEPEND ON, SOLE OR LIMITED-SOURCE SUPPLIERS.

     We obtain certain key parts, components, and equipment from sole or limited
sources of supply. For example, we purchase dial-up and broadband modem chipsets
from  Conexant  Systems and Agere  Systems.  Integrated  circuit  product  areas
covered by one or both companies  include  dial-up  modems,  ADSL modems,  cable
modems,  networking,  routers,  and gateways.  In the past, we have  experienced
delays in receiving  shipments of modem chipsets from our sole source suppliers.
We may experience  similar delays in the future. In addition,  some products may
have other  components  that are available from only one source.  We believe the
market  for  some  components,   including  memory   components,   is  currently
experiencing  shortages and there are increased lead times and higher prices for
these  components.  If we are unable to obtain a sufficient supply of components
from  our  current  sources,  we  could  experience  difficulties  in  obtaining
alternative   sources  or  in  altering   product  designs  to  use  alternative
components.  Resulting  delays or reductions in product  shipments  could damage
relationships  with our  customers  and our  customers  could decide to purchase
products  from our  competitors.  Inability to meet our  customers'  demand or a
decision  by  one or  more  of our  customers  to  purchase  products  from  our
competitors could harm our operating results.

OUR FAILURE TO OBTAIN NEW CHIPSET PURCHASE PROGRAMS WITH CHIPSET SUPPLIERS COULD
REDUCE OUR GROSS PROFIT.

     Our primary dial-up modem chipset purchase agreement,  which includes price
and other concessions for meeting minimum purchase  requirements or commitments,
is due to expire in 2004.  If we are unable to replace  this  agreement  with an
equally favorable chipset purchase  agreement,  our chipset costs could increase
significantly and our gross profit could be adversely affected.

THE  MARKET  FOR  HIGH-SPEED  COMMUNICATIONS  PRODUCTS  AND  SERVICES  HAS  MANY
COMPETING  TECHNOLOGIES  AND,  AS A RESULT,  THE  DEMAND  FOR OUR  PRODUCTS  AND
SERVICES IS UNCERTAIN.

     The market for high-speed communications products and services has a number
of competing technologies. For instance, Internet access can be achieved by:

o    using a standard telephone line and appropriate service for dial-up modems,
     ISDN modems, or ADSL modems, possibly in combination;
o    using a cable modem with a cable TV line and cable modem service;
o    using a router and some type of modem to service the computers connected to
     a local area network; or
o    other approaches, including wireless links to the Internet.

     Although  we   currently   sell   products   that  include  many  of  these
technologies,  the market for high-speed  communication products and services is
fragmented and evolving. The introduction of new products by competitors, market
acceptance  of  products  based  on  new  or  alternative  technologies,  or the
emergence of new industry  standards  could render and have in the past rendered
our products less competitive or obsolete.  If any of these events occur, we may
be unable to sustain or grow our business.  Industry  analysts  believe that the
market for our  dial-up  modems will  continue  to decline.  If we are unable to
increase  demand  for and  sales of our  broadband  modems,  we may be unable to
sustain or grow our business.

WE FACE SIGNIFICANT COMPETITION,  WHICH COULD RESULT IN DECREASED DEMAND FOR OUR
PRODUCTS OR SERVICES.

     We may be unable  to  compete  successfully.  A number  of  companies  have
developed,  or are  expected to develop,  products  that compete or will compete
with our products.  Furthermore,  many of our current and potential  competitors
have  significantly  greater  resources than we do. Intense  competition,  rapid
technological  change  and  evolving  industry  standards  could  result in less
favorable  selling terms to our customers,  decrease  demand for our products or
make our products obsolete.

CHANGES IN CURRENT OR FUTURE LAWS OR  GOVERNMENTAL  REGULATIONS  THAT NEGATIVELY
IMPACT OUR PRODUCTS AND TECHNOLOGIES COULD HARM OUR BUSINESS.

     The  jurisdiction  of the Federal  Communications  Commission,  or the FCC,
extends  to the entire  United  States  communications  industry  including  our
customers and their  products and services that  incorporate  our products.  Our
products  are  also  required  to meet  the  regulatory  requirements  of  other
countries throughout the world where our products are sold. Obtaining government
regulatory  approvals is  time-consuming  and very costly.  In the past, we have
encountered  delays  in the  introduction  of our  products,  such as our  cable
modems, as a result of government certifications.  We may face further delays if
we are unable to comply with governmental regulations. Delays caused by the time
it takes to comply with regulatory  requirements  may result in cancellations or
postponements of product orders or purchases by our customers,  which would harm
our business.

OUR  INTERNATIONAL  OPERATIONS  ARE  SUBJECT  TO A NUMBER OF RISKS  INHERENT  IN
INTERNATIONAL ACTIVITIES.

     Our international  sales continue to represent an increasingly  significant
portion of our sales.  International  sales have increased from 38% of net sales
in 2001 to  approximately  52% of our net  sales in the first  quarter  of 2004.
Currently  our  operations  are  significantly  dependent  on our  international
operations,  particularly  sales of our ADSL modems,  and may be materially  and
adversely affected by many factors including:

o    international   regulatory  and  communications   requirements  and  policy
     changes;
o    pricing of Internet and voice services;
o    bundling of discounted or free equipment with services;
o    favoritism toward local suppliers;
o    delays in the  rollout  of  broadband  services  by cable and ADSL  service
     providers;
o    local language and technical support requirements;
o    difficulties in inventory  management,  accounts receivable  collection and
     the management of distributors or representatives;
o    difficulties in staffing and managing foreign operations;
o    political and economic changes and disruptions;
o    governmental currency controls;
o    shipping costs;
o    currency exchange rate fluctuations; and
o    tariff regulations.

     We anticipate that our  international  sales will continue to account for a
significant  percentage of our net sales. If foreign markets for our current and
future products develop more slowly than currently  expected,  our sales and our
future results of operations may be harmed.

FLUCTUATIONS  IN THE  FOREIGN  CURRENCY  EXCHANGE  RATES IN RELATION TO THE U.S.
DOLLAR COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR OPERATING RESULTS.

     Changes in currency  exchange rates that increase the relative value of the
U.S.  dollar  may  make  it  more  difficult  for  us to  compete  with  foreign
manufacturers  on price, or may otherwise have a material  adverse effect on our
sales and  operating  results.  A significant  increase in our foreign  currency
denominated  sales would  increase our risk  associated  with  foreign  currency
fluctuations.

OUR FUTURE  SUCCESS  WILL  DEPEND ON THE  CONTINUED  SERVICES  OF OUR  EXECUTIVE
OFFICERS AND KEY RESEARCH AND  DEVELOPMENT  PERSONNEL WITH EXPERTISE IN HARDWARE
AND SOFTWARE DEVELOPMENT.

     The loss of any of our executive  officers or key research and  development
personnel,  the inability to attract or retain qualified personnel in the future
or delays in hiring skilled  personnel could harm our business.  Competition for
skilled personnel is significant. We may be unable to attract and retain all the
personnel necessary for the development of our business.  In addition,  the loss
of Frank B. Manning, our president and chief executive officer, or Peter Kramer,
our executive vice  president,  some other member of the management  team, a key
engineer,  or  other  key  contributors,  could  harm  our  relations  with  our
customers, our ability to respond to technological change, and our business.

OUR BUSINESS MAY BE HARMED BY ACQUISITIONS WE MAY COMPLETE IN THE FUTURE.

     We may pursue  acquisitions of related  businesses,  technologies,  product
lines,  or  products.  Our  identification  of suitable  acquisition  candidates
involves risk inherent in assessing the values, strengths, weaknesses, risks and
profitability of acquisition  candidates,  including the effects of the possible
acquisition on our business,  diversion of our management's  attention,  risk of
increased  leverage,  shareholder  dilution,  risk associated with unanticipated
problems, and risks associated with liabilities we assume. If we pursue any such
transaction,  we cannot assure that we would be able to  successfully  negotiate
the terms of such  transaction,  finance such  transaction,  or  integrate  such
business, products or technologies into our existing business and products.

WE MAY HAVE DIFFICULTY PROTECTING OUR INTELLECTUAL PROPERTY.

     Our  ability to compete is heavily  affected  by our ability to protect our
intellectual  property. We rely primarily on trade secret laws,  confidentiality
procedures,  patents,  copyrights,  trademarks,  and licensing  arrangements  to
protect our intellectual  property.  The steps we take to protect our technology
may be  inadequate.  Existing  trade secret,  trademark and copyright laws offer
only limited  protection.  Our patents could be invalidated or circumvented.  We
have more  intellectual  property assets in some countries than we do in others.
In addition, the laws of some foreign countries in which our products are or may
be developed,  manufactured or sold may not protect our products or intellectual
property rights to the same extent as do the laws of the United States. This may
make the  possibility  of piracy of our  technology  and products more likely We
cannot  assure  that the steps that we have taken to  protect  our  intellectual
property will be adequate to prevent misappropriation of our technology.

WE COULD INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.

     Particular  aspects of our  technology  could be found to  infringe  on the
intellectual  property rights or patents of others.  Other companies may hold or
obtain  patents on  inventions  or may  otherwise  claim  proprietary  rights to
technology  necessary to our business.  We cannot predict the extent to which we
may be  required  to seek  licenses.  We  cannot  assure  that the  terms of any
licenses we may be required to seek will be reasonable. We are often indemnified
by our suppliers  relative to certain  intellectual  property rights;  but these
indemnifications do not cover all possible suits, and there is no guarantee that
a relevant indemnification will be honored by the indemnifying company.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We own financial  instruments that are sensitive to market risks as part of
our  investment  portfolio.  The  investment  portfolio  is used to preserve our
capital  until it is required to fund  operations,  including  our  research and
development activities. None of these market-risk sensitive instruments are held
for trading  purposes.  We do not own  derivative  financial  instruments in our
investment  portfolio.  The investment  portfolio contains  instruments that are
subject to the risk of a decline in interest rates.

     Investment Rate Risk - Our investment  portfolio consists entirely of money
market funds, which are subject to interest rate risk. Due to the short duration
and conservative  nature of these  instruments,  we do not believe that it has a
material   exposure  to  interest  rate  risk.  The  20  year  mortgage  of  our
headquarters  building is a variable  rate loan with the interest  rate adjusted
annually.  A 1% change in the  interest  rate  would  result  in a  decrease  or
increase of approximately $53,000 of interest expense per year.

Item 4. CONTROLS AND PROCEDURES

     We maintain  disclosure controls and procedures that are designed to ensure
that information required to be disclosed in our Securities Exchange Act reports
is  recorded,  processed,  summarized  and  reported  within  the  time  periods
specified in the SEC's rules and forms, and that such information is accumulated
and  communicated to our management,  including our Chief Executive  Officer and
Chief Financial  Officer,  as appropriate,  to allow timely decisions  regarding
required  disclosure.  In designing and evaluating  the disclosure  controls and
procedures,  management  recognized that any controls and procedures,  no matter
how well  designed  and  operated,  can provide  only  reasonable  assurance  of
achieving  the  desired  control  objectives,  as ours are  designed  to do, and
management  necessarily  was  required to apply its judgment in  evaluating  the
cost-benefit relationship of possible controls and procedures.

     As of March 31, 2004 we carried out an  evaluation,  under the  supervision
and with the  participation  of our  management,  including our Chief  Executive
Officer and Chief  Financial  Officer,  of the  effectiveness  of the design and
operation  of our  disclosure  controls  and  procedures,  as  defined  in Rules
13a-15(e) and 15d-15(e)  under the Securities  Exchange Act of 1934.  Based upon
that  evaluation,  our  Chief  Executive  Officer  and Chief  Financial  Officer
concluded that our disclosure  controls and procedures are effective in enabling
us to record, process,  summarize and report information required to be included
in our periodic SEC filings within the required time period.

     There have been no changes in our internal control over financial reporting
that  occurred  during the period  covered by this report  that have  materially
affected,  or are reasonably likely to materially  affect,  our internal control
over financial reporting.


PART II - OTHER INFORMATION

Item 6.  Exhibits and reports on Form 8-K

(a)  Exhibits

     31.1 CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
          2002.

     31.2 CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
          2002.

     32.1 CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
          2002.

     32.2 CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
          2002.

(b) Form 8-K

     On February 11, 2004,  the Company  furnished a Current  Report on Form 8-K
relating to its financial  information  for the quarter ended December 31, 2003,
as presented in a press release dated February 11, 2004.

     On February 18, 2004,  the Company  furnished a Current  Report on Form 8-K
announcing potential stock option exercises by members of senior management,  as
presented in a press release dated February 17, 2004.

<PAGE>
                     ZOOM TECHNOLOGIES, INC. AND SUBSIDIARY


                                   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 TECHNOLOGIES, INC.


Date: May 14, 2004     By:  /s/ Frank B. Manning
                               ------------------------------------------
                               Frank B. Manning, President


Date: May 14, 2004     By:  /s/ Robert Crist
                               -------------------------------------------
                               Robert Crist, Vice President of Finance and
                               Chief Financial Officer (Principal Financial
                               and Accounting Officer)

<PAGE>

                                  EXHIBIT INDEX

    Exhibit No.     Description

       31.1         CEO Certification  Pursuant to Section 302 of the  Sarbanes-
                      Oxley Act of 2002

       31.2         CFO Certification  Pursuant to Section 302 of the  Sarbanes-
                      Oxley Act of 2002

       32.1         CEO Certification  Pursuant to Section 906 of the  Sarbanes-
                      Oxley Act of 2002

       32.2         CFO Certification  Pursuant to Section 906 of the  Sarbanes-
                      Oxley Act of 2002