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 September 30, 2003

                                       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 November 4, 2003 was 7,909,266 shares.
<PAGE>


                     ZOOM TECHNOLOGIES, INC. AND SUBSIDIARY
                                      INDEX

Part I. Financial Information                                              Page

  Item 1.      Consolidated Balance Sheets as of September 30, 2003
                      and December 31, 2002 (unaudited)                     3

               Consolidated Statements of Operations for the three and nine
                      Months Ending September 30, 2003 and 2002
                      (unaudited)                                           4

               Consolidated Statements of Cash Flows for the nine
                      Months Ending September 30, 2003 and 2002
                      (unaudited)                                           5

               Notes to Consolidated Financial Statements                  6-10

  Item 2.      Management's Discussion and Analysis of Financial
                      Condition and Results of Operations                 11-22

  Item 3.      Quantitative and Qualitative Disclosures About Market
                      Risk                                                 22

  Item 4.      Controls and Procedures                                    22-23


Part II. Other Information

  Item 6.      Exhibits and Reports on Form 8-K                            23

               Signatures                                                  24

               Exhibit Index                                               25
<PAGE>
PART I - FINANCIAL INFORMATION

                                     ZOOM TECHNOLOGIES, INC. AND SUBSIDIARY
                                           Consolidated Balance Sheets
                                                   (unaudited)
<TABLE>
<CAPTION>
                                                            September 30, 2003   December 31, 2002
                                                            ------------------   -----------------
<S>                                                             <C>              <C>
   Assets

Current assets:
    Cash and cash equivalents                                   $   8,760,836    $   7,612,274
    Accounts receivable, net of reserves for doubtful
       accounts, returns, and allowances of $2,764,324 at
       September 30, 2003 and $2,646,408 at December 31, 2002       4,460,229        3,714,202
    Inventories, net                                                3,799,116        6,782,550
    Prepaid expenses and other current assets                         613,615        1,037,733
                                                                   ----------       ----------
             Total current assets                                  17,633,796       19,146,759

    Property, plant and equipment, net                              3,018,130        3,485,911
                                                                   ----------       ----------
             Total assets                                       $  20,651,926    $  22,632,670
                                                                   ==========       ==========
   Liabilities and Stockholders' Equity

Current liabilities:
    Current portion of long-term debt                           $     221,691    $     191,550
    Accounts payable                                                1,988,504        2,406,843
    Accrued expenses                                                1,047,734        1,207,724
                                                                   ----------       ----------
             Total current liabilities                              3,257,929        3,806,117

 Long-term debt, less current portion                               5,153,023        5,342,057
                                                                   ----------       ----------
             Total liabilities                                      8,410,952        9,148,174
                                                                   ----------       ----------
Stockholders' equity:
  Common stock, $0.01 par value. Authorized 25,000,000 shares;
    issued 7,901,766 shares, outstanding 7,893,366 shares at
    September 30, 2003 and issued 7,860,866 shares,
    outstanding 7,858,266 at December 31,2002                          79,018           78,609
  Additional paid-in capital                                       28,241,914       28,166,606
  Retained earnings (accumulated deficit)                         (16,194,918)     (14,770,278)
  Accumulated other comprehensive income (loss)                       122,282           11,755
  Treasury stock, at cost                                              (7,322)          (2,196)
                                                                   ----------       ----------
             Total stockholders' equity                            12,240,974       13,484,496
                                                                   ----------       ----------
             Total liabilities and stockholders' equity         $  20,651,926    $  22,632,670
                                                                   ==========       ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>

                                  ZOOM TECHNOLOGIES, INC. AND SUBSIDIARY
                                  Consolidated Statements of Operations
                                               (Unaudited)
<TABLE>
<S>                                                         <C>              <C>             <C>             <C>
                                                                Three Months Ending              Nine Months Ending
                                                                   September 30,                     September 30,
                                                            -----------------------------    ---------------------------
                                                                  2003            2002            2003             2002
                                                                  ----            ----            ----             ----
Net sales                                                    $  9,103,652    $ 10,878,334    $ 24,178,829    $ 29,059,126
Costs of goods sold                                             6,145,972       7,707,513      17,316,554      22,115,801
                                                             ------------    ------------    ------------    ------------
            Gross profit                                        2,957,680       3,170,821       6,862,275       6,943,325

Operating expenses:
         Selling                                                1,376,364       1,423,216       3,965,098       4,487,702
         General and administrative                               611,753         824,863       2,412,588       2,587,701
         Research and development                                 659,806         878,901       2,154,979       2,810,385
                                                             ------------    ------------    ------------    ------------
            Total operating expenses                            2,647,923       3,126,980       8,532,665       9,885,788
                                                             ------------    ------------    ------------    ------------
            Operating income (loss)                               309,757          43,841      (1,670,390)     (2,942,463)

Other income (expense):
         Interest income                                           17,017          23,091          61,601          88,603
         Interest (expense)                                       (52,672)        (73,502)       (147,936)       (232,568)
         Equity in losses of affiliate                                 --              --              --         (56,666)
         Other, net                                               131,941          99,012         332,085         294,120
                                                             ------------    ------------    ------------    ------------
            Total other income (expense), net                      96,286          48,601         245,750          93,489
                                                             ------------    ------------    ------------    ------------
            Income (loss) before income tax
                   expense and extraordinary item                 406,043          92,442     (1,424,640)     (2,848,974)

Income tax expense (benefit)                                           --              --              --       2,012,844
                                                             ------------    ------------    ------------    ------------
            Income (loss) before extraordinary
                item                                              406,043          92,442     (1,424,640)      (4,861,818)
            Extraordinary gain on elimination
                of negative goodwill                                   --              --              --         255,287
            Net income (loss)                                $    406,043    $     92,442    $ (1,424,640)   $ (4,606,531)
                                                             ============    ============    ============    ============
Earnings (loss) per common share before extraordinary item:
                        Basic                                $        .05    $        .01    $       (.18)   $       (.62)
                                                             ============    ============    ============    ============
                        Diluted                              $        .05    $        .01    $       (.18)   $       (.62)
                                                             ============    ============    ============    ============
Extraordinary gain on elimination of negative goodwill:
                        Basic and diluted                    $         --    $         --    $         --    $        .03
                                                             ============    ============    ============    ============
Earnings (loss) per common share:
                        Basic                                $        .05    $        .01    $       (.18)   $       (.59)
                                                             ============    ============    ============    ============
                        Diluted                              $        .05    $        .01    $       (.18)   $       (.59)
                                                             ============    ============    ============    ============

Weighted average common and common equivalent shares:
                        Basic                                   7,857,117       7,860,866       7,854,315       7,860,866
                                                             ============    ============    ============    ============
                        Diluted                                 8,081,312       7,862,235       7,854,315       7,860,866
                                                             ============    ============    ============    ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
                                ZOOM TECHNOLOGIES, INC. AND SUBSIDIARY
                                 Consolidated Statements of Cash Flows
                                              (Unaudited)
<TABLE>
<CAPTION>
                                                                        Nine Months Ending
                                                                           September 30,
                                                                      2003               2002
                                                                --------------       -------------
<S>                                                             <C>                  <C>
Cash flows from operating activities:
    Net income (loss)                                           $  (1,424,640)       $ (4,606,531)
    Adjustments to reconcile net income (loss) to net cash
      provided by (used in) operating activities:
      Non-operating gain on refund of deposit                         (40,237)                  -
      Extraordinary gain on elimination of negative
        goodwill                                                            -            (255,287)
      Depreciation and amortization                                   492,451             653,544
      Write-off of net deferred tax assets                                  _           2,012,844
      Equity in losses of affiliate                                         _              56,666
      Changes in operating assets and liabilities:
        Accounts receivable, net                                     (636,410)            332,873
        Inventories, net                                            2,983,434           3,996,801
        Prepaid expenses and other assets                             464,355             508,188
        Accounts payable and accrued expenses                        (578,329)            (49,177)
                                                                    ---------           ---------
           Net cash provided by (used in) operating activities      1,260,624           2,649,921
                                                                    ---------           ---------
Cash flows from investing activities:
Investment in Affiliates                                                    -            (482,700)
Additions to property, plant and equipment                            (24,670)           (138,266)
                                                                    ---------           ---------
           Net cash provided by (used in) investing activities        (24,670)           (620,966)
                                                                    ---------           ---------
Cash flows from financing activities:
    Principal payments on long-term debt                             (158,893)           (304,569)
    Exercise of nonqualified stock options                             75,717                   -
    Purchase of Treasury stock                                         (5,126)                  -
                                                                    ---------           ---------
           Net cash provided by (used in) financing activities        (88,302)           (304,569)
                                                                    ---------           ---------
Effect of exchange rate changes on cash and cash equivalents              910              13,800
                                                                    ---------           ---------
Net increase (decrease) in cash and cash equivalents                1,148,562           1,738,186

Cash and cash equivalents  - beginning of period                    7,612,274           5,252,058
                                                                    ---------           ---------
Cash and cash equivalents - end of period                       $   8,760,836        $  6,990,244
                                                                    =========           =========
Supplemental disclosures of cash flow information:

    Cash paid during the period for:
    Interest                                                    $     163,978        $    235,937
                                                                    =========           =========
    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,  2002  included  in the
Company's 2002 Annual Report on Form 10-K.

     The  consolidated  balance sheet as of September 30, 2003, the consolidated
statements of operations for the three and nine months ending September 30, 2003
and 2002,  and the  consolidated  statements  of cash flows for the nine  months
ending  September  30,  2003 and 2002 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,
2003.

     Certain  amounts for prior  periods  have been  reclassified  to conform to
current year presentations.

     (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  (in  thousands,  except per share
data):
<TABLE>
<CAPTION>
                                                 FOR THE THREE MONTHS           FOR THE NINE MONTHS
                                                 ENDED SEPTEMBER 30,            ENDED SEPTEMBER 30,
                                                     (UNAUDITED)                    (UNAUDITED)
                                            ----------------------------   ----------------------------
                                                 2003           2002           2003           2002
                                            -------------   ------------   -------------   ------------
<S>                                         <C>            <C>            <C>            <C>
Net income (loss), as reported.........     $   406,043    $    92,442    $(1,424,640)   $(4,606,531)
Deduct:  Total stock-based employee
Compensation expense determined under
fair value based method for all awards,
 net of related tax effects............         (43,069)      (279,353)      (265,873)      (829,650)
                                            ------------   ------------   ------------   ------------
Pro forma net income (loss)............     $   362,974    $  (186,911)   $(1,690,513)   $(5,436,181)
                                            ============   ============   ============   ============
Income (loss) per share:
Basic and diluted - as reported........     $      0.05    $      0.01    $     (0.18)   $     (0.59)
Basic - pro forma......................     $      0.05    $     (0.02)   $     (0.22)   $     (0.69)
Diluted - pro forma....................     $      0.04    $     (0.02)   $     (0.22)   $     (0.69)
 </TABLE>
<PAGE>
(c) Recent Accounting Pronouncements

     In January 2003 the FASB issued  Interpretation  No. 46,  "Consolidation of
Variable  Interest  Entities"  ("VIEs").   This  Interpretation   addresses  the
consolidation of variable  interest  entities in which the equity investors lack
one or more of the essential characteristics of a controlling financial interest
or where the  equity  investment  at risk is not  sufficient  for the  entity to
finance  its  activities  without  subordinated  financial  support  from  other
parties.  The Interpretation  applies to VIEs created after January 31, 2003 and
to VIEs in which an interest is acquired after that date. Effective July 1, 2003
it also  applies to VIEs in which an  interest is  acquired  before  February 1,
2003. The Company may apply the Interpretation prospectively,  with a cumulative
effect adjustment as of July 1, 2003 or by restating previously issued financial
statements with a cumulative  effect adjustment as of the beginning of the first
year restated.  The adoption of Interpretation No. 46 did not have any effect on
the Company's consolidated financial statements.

     In May 2003 the FASB issued  SFAS 150,  "Accounting  For Certain  Financial
Instruments  with   Characteristics   of  Both  Liabilities  and  Equity"  which
establishes standards for how an issuer of financial instruments  classifies and
measures certain financial  instruments with characteristics of both liabilities
and equity.  It requires that an issuer classify a financial  instrument that is
within  its  scope as a  liability  (or an asset in some  circumstances)  if, at
inception, the monetary value of the obligation is based solely or predominantly
on a fixed  monetary  amount known at inception,  variations in something  other
than the fair  value of the  issuer's  equity  shares  or  variations  inversely
related to changes in the fair value of the issuer's equity shares. SFAS No. 150
is effective for financial  instruments  entered into or modified  after May 31,
2003 and  otherwise is effective at the  beginning of the first  interim  period
beginning  after June 15, 2003. The adoption of SFAS 150 did not have any impact
on the Company's financial position or results of operations.

     In November  2002,  the FASB's  Emerging  Issues Task Force  finalized EITF
Issue No. 00-21 (EITF 00-21), "Revenue Arrangements with Multiple Deliverables."
EITF 00-21 addresses how to determine whether an arrangement  involving multiple
deliverables  contains  more  than  one  unit of  accounting.  EITF  00-21  also
addresses how arrangement considerations should be measured and allocated to the
separate units of accounting in the  arrangement.  However,  it does not address
when the criteria  for revenue  recognition  are met or provide  guidance on the
appropriate revenue recognition convention for a given unit of accounting.  EITF
00-21 is effective for all revenue  arrangements  entered into in fiscal periods
beginning  after  June 15,  2003,  and  early  application  is  permitted.  Upon
adoption,  entities may elect to either apply EITF 00-21 prospectively or report
the change in accounting as a cumulative-effect  adjustment. The Company adopted
EITF 00-21 in the second  quarter of 2003.  The  adoption  of EITF 00-21 did not
have any impact on the Company's financial position or results of operations.

(2)   Liquidity

     On  December  31,  2002 Zoom had cash of  approximately  $7.6  million.  On
September 30, 2003 Zoom had cash of approximately $8.8 million.  Currently,  the
Company does not have a debt facility, and the Company does not expect to obtain
one on acceptable  terms unless there is improvement in the Company's  operating
performance.

     To conserve cash and manage its liquidity,  the Company implemented expense
reductions  throughout  2002 and  continued  these  reductions in the first nine
months of 2003.  The employee  headcount was 185 at December 31, 2002 and 165 at
September 30, 2003. The Company will continue to assess its cost structure as it
relates  to its  revenues  and  cash  position  in 2003,  and may  make  further
reductions if these actions are deemed necessary.

     During the past several years the Company has experienced  declining demand
for its dial-up  modem  products.  The bundling by PC  manufacturers  of dial-up
modems into computers and the increased popularity of broadband modems lower the
total available  market through the Company's  sales channels.  Because of this,
the  Company's  dial-up  modem sales are  unlikely to grow unless the  Company's
market share grows  significantly,  promotions by the Internet Service Providers
of V.92 grow the market, or the availability of new web acceleration  techniques
grows  the  market.  If the  Company's  dial-up  modem  sales do not  grow,  the
Company's   future  success  will  depend  in  large  part  on  our  ability  to
successfully penetrate the broadband modem market.

     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.

(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:
<TABLE>
                                         Three Months Ending                   Nine Months Ending
                                            September 30,                        September 30,
                                     ----------------------------          --------------------------
                                        2003               2002             2003              2002
                                    ------------      -------------      ----------        -----------
<S>                                 <C>               <C>               <C>               <C>
Basic:
   Net income (loss)                $   406,043       $    92,442       $(1,424,640)      $(4,606,531)

Weighted average shares
   outstanding                        7,857,117         7,860,866         7,854,315         7,860,866
                                    -----------       -----------       -----------       -----------
Net income (loss) per share         $       .05       $       .01       $      (.18)      $      (.59)
                                    ===========       ===========       ===========       ===========
Diluted:
    Net income (loss)               $   406,043       $    92,442       $(1,424,640)      $(4,606,531)

Weighted average shares
   outstanding                        7,857,117         7,860,866         7,854,315         7,860,866

Net effect of dilutive stock
   options based on the
   Treasury stock method using
   average market price                 224,195             1,369                --                --

Weighted average shares
   outstanding                        8,081,312         7,862,235         7,854,315         7,860,866
                                    -----------       -----------       -----------       -----------
Net income (loss) per share         $       .05       $       .01       $      (.18)      $      (.59)
                                    ===========       ===========       ===========       ===========
</TABLE>
     Potential  common  shares  for which  inclusion  would  have the  effect of
increasing diluted earnings per share (i.e., antidilutive) are excluded from the
nine months ending  September 30, 2003  computation.  Options to purchase 35,511
and 14,167 shares of common stock at September 30, 2003 and 2002,  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:             September 30, 2003      December 31, 2002
                                                        ------------------      -----------------
<S>                                                       <C>                     <C>
      Raw materials                                       $   1,440,572           $  2,808,421
      Work in process                                           354,873                673,275
      Finished goods                                          2,003,671              3,300,854
                                                             ----------             ----------
                                                          $   3,799,116           $  6,782,550
                                                             ==========             ==========
</TABLE>
     During the three months  ending  September  30, 2003 and September 30, 2002
the Company  recorded lower of cost or market  write-downs of zero and $301,507,
respectively,  related to broadband and wireless inventory.  For the nine months
ending  September  30,  2003 and  September  30, 2002 the total lower of cost or
market write-downs  recorded were $495,099 and $1,041,059,  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:
<PAGE>
<TABLE>
<CAPTION>
                                          Three Months Ending September 30,       Nine Months Ending September 30,
                                          ---------------------------------       --------------------------------
                                              2003                2002                2003                2002
                                          ------------        ------------        ------------        ------------
<S>                                       <C>                 <C>                 <C>                 <C>
 Net income (loss)                        $   406,043         $    92,442         $(1,424,640)        $(4,606,531)

 Foreign currency translation
   adjustment                                  90,724              62,751             110,527             154,044
                                          -----------         -----------         -----------         -----------
Comprehensive income (loss)               $   496,767         $   155,193         $(1,314,113)        $(4,452,487)
                                          ===========         ===========         ===========         ===========
</TABLE>
(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.
The rate was adjusted to 3.81% on January 10, 2003.

(7)  Commitments

     During  the nine  month  period  ending  September  30,  2003 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,
2002.

     In March 2002 following the  termination  of discussions  pursuant to which
Zoom proposed to purchase a ground lease for a manufacturing facility located at
27 Drydock Avenue, Boston,  Massachusetts (the "Drydock Building"), Zoom pursued
an  arrangement  to  purchase  the  Drydock  Building  in  partnership  with the
following individuals: Frank B. Manning, President and a director of Zoom; Peter
R. Kramer,  Executive  Vice  President and a director of Zoom;  Bruce M. Kramer,
Peter  Kramer's  brother;  and a  third  party.  Under  this  arrangement  these
individuals,  either  directly or through  entities  controlled by them,  joined
together  with the  Company  as of March 29,  2002 to form the Zoom Group LLC, a
Massachusetts  limited  liability company ("Zoom Group") to purchase the Drydock
Building. The Company and each of the investors owned a 20% interest in the Zoom
Group.

     In August 2002 the Zoom Group purchased the Drydock Building for a purchase
price of $6.1 million. The Zoom Group obtained a mortgage of $4.2 million,  less
closing costs and legal fees. Each member of the Zoom Group contributed $482,577
for their share of the investment  plus initial working  capital.  These initial
capital contributions include each member's share of the deposit.

     Under the Zoom Group Operating  Agreement the Company had both the right to
sell its  interest  in the Zoom Group to the other  members of the Zoom Group by
January 5, 2003 for the  Company's  original  purchase  price,  and the right to
purchase the other members' entire  interests in the Zoom Group through December
31, 2005 in accordance with a predetermined  formula. In December 2002 a special
committee  of  Zoom's  board of  directors,  appointed  to  review  the  Drydock
transactions,  determined  that is was advisable and in the best interest of the
Company  to  exercise  its right to sell its  interest  in the Zoom Group to the
remaining  Zoom Group LLC  members.  Accordingly  effective  January 5, 2003 the
Company exercised its right to sell and assign its interest in the Zoom Group to
the remaining  members of the Zoom Group for  approximately  $482,000.  In March
2003 Zoom received the proceeds from the sale of its interest from the remaining
members  of the Zoom  Group.  This  action was taken to  improve  the  Company's
liquidity position and to reduce its exposure to the Boston real estate market.

(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 and nine
months  ending  September  30, 2003 and 2002,  respectively,  were  comprised as
follows:
<TABLE>
<CAPTION>
<PAGE>
                         Three Months            Three Months            Nine months               Nine months
                            Ending      % of       Ending       % of       Ending        % of       Ending       % of
                        Sept 30, 2003   Total   Sept 30, 2002   Total   Sept 30, 2003    Total   Sept 30, 2002   Total
                        -------------   -----   -------------   -----   -------------    -----   -------------   -----
<S>                        <C>           <C>      <C>             <C>    <C>             <C>      <C>            <C>
United States              $ 5,526,123    61%     $ 6,907,214      64%   $14,423,455      60%     $17,775,614     61%
International-UK             2,805,007    31%       3,189,267      29%     7,415,266      30%       8,308,422     29%
International-All Other        772,522     8%         781,853       7%     2,340,108      10%       2,975,090     10%
                            -----------  ---      -----------      ---   -----------     ---      -----------    ---
Total                      $ 9,103,652   100%     $10,878,334     100%   $24,178,829     100%     $29,059,126    100%
                           ===========   ===      ===========      ===   ===========     ===      ===========    ===
</TABLE>
(9) Extraordinary Gain

     In the quarter ending March 31, 2002 the Company  recorded an extraordinary
gain of  $255,287  upon  the  adoption  of SFAS  No.  142  "Goodwill  and  Other
Intangible  Assets" (SFAS 142).  The gain resulted from the  elimination  of the
remaining negative goodwill on the Company's  consolidated balance sheet related
to a previous acquisition, and was recorded in accordance with the provisions of
SFAS 142.
<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, 2002.  Readers
should  also be  cautioned  that  results of any  reported  period are often not
indicative of results for any future period.

Critical Accounting Policies

     The  following  is a  discussion  of what we view as our  more  significant
accounting  policies.  These  policies  are also  described  in the notes to our
consolidated  audited financial statements included in our annual report on Form
10-K for the year ending  December  31,  2002.  As  described  below, management
judgments and estimates must be made and used in connection with the preparation
of our consolidated  financial statements.  Material differences could result in
the amount  and timing of our  revenue  and  expenses  for any period if we made
different judgments or used different estimates.

     Revenue  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 earn a small amount of royalty
revenue.  We derive our revenue primarily from the sales of hardware products to
three types of customers:

o     computer product retailers,
o     computer product distributors, and
o     original equipment manufacturers (OEMs).

     We recognize revenue for all three types of customers at the point when the
customers take 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. Since it would be
impractical to verify ownership  change for each individual  delivery to the FOB
destination  point, we estimate the day the customer  receives delivery based on
our ship date and the  carrier's  published  delivery  schedule  specific to the
freight class and location.

     Our revenues  are reduced by certain  events  which are  characteristic  of
hardware sales to computer product retailers.  These events are product returns,
price protection refunds,  store rebates, and consumer mail-in rebates.  Each of
these is  accounted  for as a reduction of revenue  based on careful  management
estimates which are reconciled to actual  customer or  end-consumer  refunds and
credits on a monthly or quarterly  basis.  The estimates for product returns are
based on recent  historical  trends plus  estimates for returns  prompted by new
product  introductions,  announced  stock  rotations,  announced  customer store
closings, etc. Management analyzes historical returns,  current economic trends,
and changes in customer  demand and  acceptance of our products when  evaluating
the adequacy of sales return  allowances.  Our  estimates  for price  protection
refunds require 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 reserve  against  accounts
receivable and a reduction of current period revenue. Our estimates for consumer
mail-in  rebates are comprised of actual  rebate claims  processed by the rebate
redemption  centers  plus an accrual for an  estimated  lag in  processing.  Our
estimates for store  rebates are  comprised of actual  credit  requests from the
eligible customers.

     To  ensure  that the  discounts  and  sales 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
for product returns,  store rebates,  consumer mail-in rebates, price protection
refunds,  and bad debt.  These  reserves  are drawn down as actual  credits  are
issued  to the  customer's  accounts.  Our  bad-debt  write-offs  have  not been
significant in recent years.

     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 this inventory 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
(See Note 4 to the Consolidated Financial Statements).

     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 the most significant
arrangement we have agreed 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
are required to purchase a minimum percentage,  as measured by unit purchases or
dollar amount of certain  components,  from the supplier over a two-year  period
commencing on January 1, 2002, and we are currently  exceeding that  percentage.
In connection with one of these  arrangements,  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 of
the free  components  is  being  recognized  on a  delayed  basis as a  purchase
discount  over the total  number of  components  acquired  through  the 30 month
supply agreement.

     Valuation and Impairment of Intangible  Assets. We assess the impairment of
our goodwill assets whenever  events or changes in  circumstances  indicate that
the carrying value may not be recoverable.  In the quarter ending March 31, 2002
the Company  recorded an  extraordinary  gain of $255,287,  upon the adoption of
SFAS No.  142  "Goodwill  and Other  Intangible  Assets"  (SFAS  142).  The gain
resulted  from  the  elimination  of  the  remaining  negative  goodwill  on the
Company's consolidated balance sheet related to a previous acquisition,  and was
recorded in accordance with the provisions of SFAS 142.

     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 taxes.  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. At December 31, 2001 a portion
of our net  deferred  tax asset  was  supported  by our  specific  tax  planning
strategy to sell our appreciated  headquarters building in Boston. The amount of
the  projected  tax benefit  from this sale was used to support the $2.0 million
deferred tax asset that  remained on our balance  sheet as of December 31, 2001.
In our first quarter ending March 31, 2002 we recorded an additional $2.0 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.
Due to our continued year-to-date operating losses and the continued uncertainty
regarding the recoverability of our deferred tax assets, no tax benefit has been
provided for in the financial  statements  for the nine months ending  September
30, 2003.  As such,  as of September 30, 2003 our net deferred tax asset balance
is zero.

Results of Operations

     Net sales were $9.1  million for our third  quarter  ending  September  30,
2003,  down 16.3% from $10.9  million in the third  quarter of 2002.  We had net
income of $0.4 million for the third quarter of 2003,  compared to net income of
$0.1  million  in the third  quarter of 2002.  Earnings  per share was $0.05 per
diluted  share for the third  quarter of 2003  compared to earnings of $0.01 per
diluted share for the third quarter of 2002.

     Our Q3 2003 net sales  decrease of 16.3% from Q3 2002 was  primarily due to
decreased dial-up modem sales.  Dial-up modem sales declined  primarily due to a
decrease  of 21% in dial-up  modem  unit  sales,  a 3% decline in dial-up  modem
average selling prices, and higher promotional  consumer rebates. The decline in
dial-up  modem  sales was  partially  offset by a 63%  increase  in sales in our
broadband and other product  categories,  with our strongest  quarterly sales to
date of ADSL modems.

     Net sales were $24.2 million and our net loss was $1.4 million for the nine
months  ending  September  30, 2003 compared to net sales of $29.1 million and a
net loss of $4.6 million for the nine months ending September 30, 2002. Loss per
share was a loss of $.18 per diluted  share for the nine months of 2003 compared
to a loss of $.59 per  diluted  share  for the  nine  months  of 2002.  The $4.9
million net sales decline was  primarily  due to decreased  dial-up modem sales.
Dial-up modem sales  declined  primarily due to a decrease in dial-up modem unit
sales, a decline in dial-up modem average selling prices, and higher promotional
consumer rebates.  The decline in dial-up modem sales was partially offset by an
increase in sales in our broadband and other product categories.

     Our gross profit  decreased to $3.0 million in Q3 2003 from $3.2 million in
Q3 2002.  Our gross profit as a percentage of net sales  improved to 32.5% in Q3
2003 from 29.1% in Q3 2002. The improvement in gross profit percentage  resulted
primarily from lower  inventory  charges for  obsolescence  and lower of cost or
market write-downs.

     Our gross profit for the nine months ending  September 30, 2003 and for the
same period in 2002 was $6.9 million, 28.4% and 23.9% of net sales respectively.
This improvement in gross profit percentage was primarily due to lower inventory
charges for obsolescence and lower of cost or market write-downs.

     Our operating  expenses  decreased by $0.5 million to $2.6 million or 29.1%
of net sales in Q3 2003 from $3.1 million or 28.7% of net sales in Q3 2002.  The
decrease  of $0.5  million  was  comprised  of lower  selling  expenses of $0.05
million,  lower  research and  development  expenses of $0.2 million,  and lower
general  and  administrative  expenses  of $.2  million.  We  have  reduced  our
worldwide  staff to 165  employees on September  30, 2003 from 190  employees on
September  30, 2002.  We also  continue to maintain a temporary  wage freeze and
tight controls on discretionary spending.

     Our operating  expenses  decreased by $1.4 million to $8.5 million or 35.3%
of net sales in the first nine months of 2003 from $9.9  million or 34.0% of net
sales in the first  nine  months  of 2002.  The  decrease  of $1.4  million  was
comprised  of  lower  selling  expenses  of $0.5  million,  lower  research  and
development  expenses of $0.7  million,  and lower  general  and  administrative
expense of $.2 million.

     Selling  expenses in Q3 2003 were relatively  consistent at $1.4 million or
15.1% of net sales  compared  to $1.4  million or 13.1% of net sales in Q3 2002.
Selling expenses were slightly lower primarily  because of lower personnel costs
resulting from employee headcount  reductions,  reduced  commissions and related
sales expenses, and reduced marketing costs.

     Selling expenses in the nine months ending September 30, 2003 decreased $.5
million to $4.0  million or 16.4% of net sales from $4.5 million or 15.4% of net
sales in the nine months ending September 30, 2002.  Selling expenses were lower
primarily  because of lower personnel  costs  resulting from employee  headcount
reductions,   reduced  commissions  and  related  sales  expenses,  and  reduced
marketing costs.

     General and  administrative  expenses decreased $.2 million to $0.6 million
or 6.7% of net  sales in Q3 2003 from  $0.8  million  or 7.6% of net sales in Q3
2002.  General  and  administrative  expenses  were lower  primarily  because of
reduced  legal and audit fees,  favorable bad debt recovery from an old customer
settlement,  reduced personnel costs related to employee  headcount  reductions,
and reduced depreciation and amortization expenses.

     General and  administrative  expenses decreased $.2 million to $2.4 million
or 10.0% of net sales in the first nine months of 2003 from $2.6 million or 8.9%
of net  sales in the  first  nine  months of 2002.  General  and  administrative
expenses  year-over-year  for the first nine months were lower primarily because
of lower depreciation  expense,  reduced business  insurance expense,  and lower
legal fees, partially offset by increased employee-health expenses.

     Research and development  expenses decreased $.2 million to $0.7 million or
7.2% of net sales in Q3 2003 from $0.9  million or 8.1% of net sales in Q3 2002.
Research  and  development  costs  decreased  primarily  as a result of  reduced
personnel costs.  Development and support  continues on all of our major product
lines.

     Research and development  expenses decreased $.6 million to $2.2 million or
8.9% of net sales in the first nine months of 2003 from $2.8  million or 9.7% of
net sales in the first  nine  months of 2002.  Research  and  development  costs
decreased primarily as a result of reduced personnel costs.

     Other income (expense) net improved from income of $0.05 million in Q3 2002
to income of $0.1  million in Q3 2003.  Included in other income  (expense)  are
interest income, interest expense, and other, net.

o    Interest  income.  Interest  income  decreased to $0.017 million in Q3 2003
     from $0.023  million in Q3 2002.  The  decrease was the result of our lower
     earned  interest rate partially  offset by the interest  earned on a higher
     average  invested  cash  balance  during Q3 2003  compared to Q3 2002.  The
     average interest rate earned was  approximately 62 basis points lower in Q3
     2003 than in Q3 2002.
o    Interest  expense.  Interest expense  decreased to $0.05 million in Q3 2003
     from $0.07  million in Q3 2002.  The  interest  expense  decrease is due to
     lower  interest  expense on our $6.0 million  mortgage taken out in January
     2001 on our  headquarters  building.  The interest rate and the outstanding
     balance  were  both  lower in Q3 2003  compared  to Q3 2002.  The  mortgage
     interest rate is adjusted annually in January of each year.
o    Other,  net.  The total income  increased to $0.13  million in Q3 2003 from
     $0.10  million in Q3 2002 due  primarily to the sale of an internet  domain
     name, partially offset by a foreign exchange loss.

     Other income  (expense)  net improved  from income of $0.09  million in the
first nine months of 2002 to income of $0.2  million in the first nine months of
2003. Included in other income (expense) are interest income,  interest expense,
equity in losses of affiliate, and other, net.

o    Interest  income.  Interest income  decreased to $0.06 million in the first
     nine  months of 2003 from $0.09  million in the first nine  months of 2002.
     The  decrease was the result of our lower earned  interest  rate  partially
     offset by the interest  earned on a higher  average  invested  cash balance
     during the first nine  months of 2003  compared to the first nine months of
     2002. The average  interest rate earned was  approximately  56 basis points
     lower in the first  nine  months of 2003 than in the first  nine  months of
     2002.
o    Interest expense.  Interest expense decreased to $0.15 million in the first
     nine  months of 2003 from $0.23  million in the first nine  months of 2002.
     The interest  expense decrease is due to lower interest expense on our $6.0
     million  mortgage taken out in January 2001 on our  headquarters  building.
     The interest rate and the outstanding  balance were both lower in the first
     nine months of 2003 compared to the first nine months of 2002. The mortgage
     interest rate is adjusted annually in January of each year.
o    Equity in losses of affiliate.  Our affiliate losses were zero in the first
     nine months of 2003 and $.06  million in the first nine months of 2002,  as
     our carrying value of the  investment,  which was being accounted for under
     the equity method of accounting, was reduced to zero during Q2 2002.
o    Other,  net. The total income  increased to $0.33 million in the first nine
     months  of 2003  from  $0.24  million  in the  first  nine  months of 2002,
     primarily  due to the sale of an  internet  domain  name and higher  rental
     income from the rental of vacant space in our headquarters facility.

     Income tax  expense was zero for the three  months and nine  months  ending
September 30, 2003 and the three months  ending  September 30, 2002. In the nine
months  ending  September  30, 2002 we recorded  income tax expense in the first
quarter of 2002 of $2.0  million  as a result of an  increase  to our  valuation
reserve  against our net deferred  tax asset  balance of $2.0  million.  The net
deferred  tax asset  balance at  September  30,  2003 is zero.  This  reserve is
discussed in further detail under the caption "Critical Accounting Policies" set
forth herein.

Liquidity and Capital Resources

     On September 30, 2003 we had working  capital of $14.4  million,  including
$8.8 million in cash and cash equivalents.

     In the  first  nine  months of 2003  operating  activities  generated  $1.3
million in cash. Our net loss in the first nine months of 2003 was $1.4 million.
Other uses of cash from operations  included an increase of accounts  receivable
of $0.6 million and a decrease of accounts  payable and accrued expenses of $0.6
million.  Sources of cash from  operations  included a reduction of inventory of
$3.0 million,  depreciation of $0.5 million,  and a decrease in prepaid expenses
of $0.5  million.  The decrease in inventory was primarily the result of reduced
sales  activity  and  improved  inventory  turnover.  The  reduction  of prepaid
expenses  resulted  primarily from the receipt of a payment of $0.48 million for
the sale of our  interest  in the Zoom  Group to the other  members  of the Zoom
Group with the termination of our  participation in the ownership of the Drydock
building.  The Drydock  transaction  is  discussed  in further  detail under the
caption "Commitments and Related Party Transaction" below.

     In the first nine months of 2003 our net cash used in investing  activities
was $0.02 million.  We anticipate that we will continue with modest  investments
in equipment and in improvements to our facilities during the year.

     In the first nine months of 2003 our net cash used in financing  activities
was $.09 million, consisting primarily of principal payments of $0.16 million on
the mortgage on our  headquarters  facility,  partially offset by the receipt of
$0.08 million of cash from the exercise of employee non-qualified stock options.
Our mortgage is a 5-year  balloon  mortgage that is amortized on a 20-year basis
and matures on January  10,  2006.  The  interest  rate is adjusted  annually in
January  of each  year  based on the  Federal  Home Loan Bank rate plus 2.5% per
annum.  In 2002 the interest rate was 4.97%.  As of January 10, 2003 the rate of
interest was changed to 3.81%.

     Currently  we do not have a debt  facility,  and we do not expect to obtain
one on  acceptable  terms  unless  there  is an  improvement  in  our  operating
performance.  However,  we believe we would be able to obtain funds, if and when
required,  by factoring accounts  receivable.  We do not plan to put a factoring
arrangement  in place until and unless it is  necessary  since there would be an
up-front cost to finalize the arrangement.

     To  conserve  cash  and  manage  our  liquidity,   we  implemented  expense
reductions  throughout  2002 and in the first nine months of 2003.  Our employee
headcount  was 185 at  December  31,  2002  which  has  been  reduced  to 165 at
September 30, 2003. We will continue to assess our cost  structure as it relates
to our revenues and cash position in 2003, and we may make further reductions if
the actions are deemed necessary.

     The bundling by PC  manufacturers  of dial-up modems into computers and the
increased  popularity  of  broadband  modems  lower the total  available  market
through  our sales  channels.  Because  of this,  our  dial-up  modem  sales are
unlikely to grow unless our market share grows significantly,  promotions by the
Internet Service Providers of V.92 grow the market,  PC manufacturers  engage in
less  modem  bundling  with PCs,  or the  availability  of new web  acceleration
techniques grows the market.  If our dial-up modem sales do not grow, our future
success will depend in large part on our ability to  successfully  penetrate the
broadband modem market.

     Management  believes  we have  sufficient  resources  to fund  our  planned
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 and nine months  ending  September  30, 2003 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, 2002.

     On April  25,  2003 we agreed to  purchase  substantially  all of the modem
assets of SONICblue  Incorporated,  including the trade names Diamond and Supra,
for  approximately  $495,000,   subject  to  adjustment,  and  certain  end-user
obligations,  including  customer support and firmware  upgrades.  SONICblue,  a
consumer  electronics   manufacturer,   was  involved  in  voluntary  bankruptcy
proceedings  filed under Chapter 11 of the  Bankruptcy  Code.  Our obligation to
purchase the assets was subject to approval of the bankruptcy court, higher bids
in the bankruptcy  court, and customary  closing  conditions.  On June 6, 2003 a
Chapter 11 bankruptcy  auction was held, and we chose not to outbid a higher bid
from a modem  competitor.  In  September  2003,  we  received  the return of our
deposit of $.05 million and a break-up fee of $.03  million,  as approved by the
bankruptcy court.

Related Party Transactions

     In March 2002 following the  termination  of discussions  pursuant to which
Zoom proposed to purchase a ground lease for a manufacturing facility located at
27 Drydock Avenue, Boston,  Massachusetts (the "Drydock Building"), Zoom pursued
an  arrangement  to  purchase  the  Drydock  Building  in  partnership  with the
following individuals: Frank B. Manning, President and a director of Zoom; Peter
R. Kramer,  Executive  Vice  President and a director of Zoom;  Bruce M. Kramer,
Peter  Kramer's  brother;  and a third  party.  Under  this  arrangement,  these
individuals,  either  directly or through  entities  controlled by them,  joined
together  with  us  as of  March  29,  2002  to  form  the  Zoom  Group  LLC,  a
Massachusetts  limited  liability company ("Zoom Group") to purchase the Drydock
Building. Zoom and each of the investors owned a 20% interest in the Zoom Group.
The managers of the Zoom Group are Peter Kramer and the third party.

     In  August,  2002 the Zoom  Group  purchased  the  Drydock  Building  for a
purchase  price of $6.1  million.  The Zoom Group  obtained  a mortgage  of $4.2
million,  less  closing  costs and legal  fees.  Each  member of the Zoom  Group
contributed  $482,577 for their share of the  investment  plus  initial  working
capital.  These initial capital contributions include each member's share of the
deposit.

     Under the Zoom Group Operating  Agreement the Company had both the right to
sell its  interest  in the Zoom Group to the other  members of the Zoom Group by
January 5, 2003 for the  Company's  original  purchase  price,  and the right to
purchase the other members' entire  interests in the Zoom Group through December
31, 2005 in accordance with a predetermined  formula.  Effective January 5, 2003
we  exercised  our  right to sell our  interest  in the Zoom  Group to the other
members of the Zoom Group.  In March 2003 we received the proceeds from the sale
of our interest from the remaining  members of the Zoom Group,  LLC to the value
of $.48  million,  which  represents  the Company's  investment  amount less the
non-refundable  deposit  and the  negotiated  share of losses in the Zoom Group,
plus interest earned on the Company's original deposit. This action was taken to
improve  the  Company's  liquidity  position  and to reduce its  exposure to the
Boston real estate market.

Recently Issued Accounting Standards

     In January 2003 the FASB issued  Interpretation  No. 46,  "Consolidation of
Variable  Interest  Entities"  ("VIEs").   This  Interpretation   addresses  the
consolidation of variable  interest  entities in which the equity investors lack
one or more of the essential characteristics of a controlling financial interest
or where the  equity  investment  at risk is not  sufficient  for the  entity to
finance  its  activities  without  subordinated  financial  support  from  other
parties.  The Interpretation  applies to VIEs created after January 31, 2003 and
to VIEs in which an interest is acquired after that date. Effective July 1, 2003
it also  applies to VIEs in which an  interest is  acquired  before  February 1,
2003. The Company may apply the Interpretation prospectively,  with a cumulative
effect adjustment as of July 1, 2003 or by restating previously issued financial
statements with a cumulative  effect adjustment as of the beginning of the first
year restated.  The adoption of Interpretation No. 46 did not have any effect on
the Company's consolidated financial statements.

     In May 2003 the FASB issued  SFAS 150,  "Accounting  For Certain  Financial
Instruments  with   Characteristics   of  Both  Liabilities  and  Equity"  which
establishes standards for how an issuer of financial instruments  classifies and
measures certain financial  instruments with characteristics of both liabilities
and equity.  It requires that an issuer classify a financial  instrument that is
within  its  scope as a  liability  (or an asset in some  circumstances)  if, at
inception, the monetary value of the obligation is based solely or predominantly
on a fixed  monetary  amount known at inception,  variations in something  other
than the fair  value of the  issuer's  equity  shares  or  variations  inversely
related to changes in the fair value of the issuer's equity shares. SFAS No. 150
is effective for financial  instruments  entered into or modified  after May 31,
2003 and  otherwise is effective at the  beginning of the first  interim  period
beginning  after June 15, 2003. The adoption of SFAS 150 did not have any impact
on our financial position or results of operations.

     In November  2002,  the FASB's  Emerging  Issues Task Force  finalized EITF
Issue No. 00-21 (EITF 00-21), "Revenue Arrangements with Multiple Deliverables."
EITF 00-21 addresses how to determine whether an arrangement  involving multiple
deliverables  contains  more  than  one  unit of  accounting.  EITF  00-21  also
addresses how arrangement considerations should be measured and allocated to the
separate units of accounting in the  arrangement.  However,  it does not address
when the criteria  for revenue  recognition  are met or provide  guidance on the
appropriate revenue recognition convention for a given unit of accounting.  EITF
00-21 is effective for all revenue  arrangements  entered into in fiscal periods
beginning  after  June 15,  2003,  and  early  application  is  permitted.  Upon
adoption,  entities may elect to either apply EITF 00-21 prospectively or report
the change in accounting as a cumulative-effect  adjustment. The Company adopted
EITF 00-21 in the second  quarter of 2003.  The  adoption  of EITF 00-21 did not
have any impact on the Company's financial position or results of operations.

"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,  the anticipated  benefits Zoom
will  receive as a result of V.92 rollout and the  consolidation  in the dial-up
modem markets, the anticipated development of Zoom's markets and sales channels,
the level of demand for Zoom's  products,  the  anticipated  effect that the "no
charge"  components will have on Zoom's  liquidity,  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.

Our revenues have declined and we have incurred significant losses over the last
three years.

     We incurred a net loss of $1.4 million for the nine months ending September
30, 2003, $5.1 million in 2002, $18.3 million in 2001, and $3.1 million in 2000.
Our revenue has declined  from $57.7  million in 2000 to $41.6  million in 2001,
and to $37.3 million in 2002.  Our revenue was $24.2 million for the nine months
ending September 30, 2003.

     We  attribute  the decline of our  business  primarily  to a decline in the
retail dial-up modem market.

     Although we have reduced our operating  expense levels  significantly,  our
revenues  must  increase  or we will  probably  continue  to  incur  total  year
operating  losses.  We cannot  guarantee that our  expenditure  reductions  will
continue or that we will be able to halt the decline in our  revenues.  Although
we believe that we have sufficient resources to fund our planned operations over
the next year, if we fail to increase our revenues,  our longer-term  ability to
stay in  business  and to achieve  our  intended  business  objectives  could be
adversely  effected.  Our continuing losses and use of cash 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 growth in
our inventory and accounts  receivable  should growth occur. We currently do not
have a debt facility from which we can borrow and we do not expect to obtain one
on  acceptable  terms  unless our  operating  performance  improves.  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 revenues,  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 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.  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 revenues 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 as a
standard feature contained in new PCs, and the advent of broadband products.  As
the market for cable and ADSL modems matures and  competition  between cable and
ADSL service  providers  intensifies,  it is likely that there will be increased
retail  distribution of cable and ADSL modems.  While  increased  retail sale of
broadband  modems could increase our sales of these  products,  it could further
reduce demand for our dial-up  modems.  Decreasing  average  selling  prices and
reduced  demand for our dial-up  modems would  result in  decreased  revenue for
dial-up modems, which has been our primary source of revenue.

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 ADSL and cable broadband 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,  the
highest volume  purchasers 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, particularly cable
services providers, also have extensive and varied approval processes for modems
to be approved for use on their network.  These  approvals are  expensive,  time
consuming, and continue to evolve.  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;
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 cable service providers enjoyed by incumbents
     cable equipment providers like Motorola and Scientific Atlanta.

     Our initial sales of broadband products have been adversely affected by all
of  these  factors.  We  cannot  assure  that we  will  be able to  successfully
penetrate these markets.

Our customer base is concentrated and the loss of one or more of our customers
could harm our business.

     Relatively few customers  have  accounted for a significant  portion of our
net sales. In 2002 43% of our net sales were  attributable  to three  customers,
each  of  whom  accounted  for  10%  or  more  of  our  net  sales.  In Q3  2003
approximately 41% of our net sales were attributable to three customers, each of
whom  accounted  for more than 10% of net sales.  Because our  customer  base is
concentrated,  a  loss  of one or  more  of  these  significant  customers  or a
reduction  or  delay in  orders  or a  default  in  payment  from any of our top
customers could  significantly  reduce our sales which would materially harm our
business, results of operations, and financial condition.

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.  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 revenues 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 we gave credits 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. For the first nine months
of 2002 and the first nine months of 2003 we recorded a reduction  of revenue of
$0.3 million and $0.2 million,  respectively,  for customer price protection. 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 to higher than normal returns.

Our failure to  effectively  manage our inventory  levels could  materially  and
adversely affect our liquidity and harm our business.

     During  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.  During 2001 we were able
to reduce  our  inventory  levels  to $11.1  million  as a result of sales,  raw
material  returns  to  suppliers,  and the  write-down  of  value of some of our
inventory.  At  September  30,  2003 our  inventory  level was $3.8  million,  a
reduction of $7.3  million from  December  31, 2001  primarily  attributable  to
reduced inventory purchases attributable to the delivery of no-charge components
from our key component  vendors,  lower inventory  levels to support the reduced
sales  activity in 2002 and the first  nine-months of 2003,  improved  inventory
turnover,  inventory  write-downs  for lower of cost or market  adjustments  and
obsolescence,  and sales of excess broadband and wireless 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 partially 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 six  contract  manufacturers  for  the  bulk of our
purchases,  in some  cases a given  product  is  provided  by only  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    lack of adequate capacity during periods of excess demand;
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 or consigned inventory.

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.  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 satisfy minimum purchase requirements or commitments we have with
our sole  source  suppliers  could  have an  adverse  affect on our  results  of
operations.

     We have entered into supply  arrangements with suppliers of some components
that include price and other concessions,  including no-charge  components,  for
meeting minimum purchase  requirements or commitments.  Our business and results
of  operations  could be  harmed  if we fail to  satisfy  the  minimum  purchase
requirements or commitments contained in our supply arrangements.

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  these  technologies  the
market for  high-speed  communication  products and services is  fragmented  and
unstable,  and in the cases of cable and ADSL modems, the market is dominated by
large cable and telephone service providers. 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.  In addition if
any of one or more of the  alternative  technologies  gain  market  share at the
expense of another  technology,  demand for our products may be reduced,  and 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 decrease demand for
our products or make our products  obsolete.  Our  competitors  by product group
include the following:

o    Dial-up modem  competitors:  Actiontec,  Askey,  Best Data,  Creative Labs,
     Liteon, Intel, Sitecom, and US Robotics.
o    Cable modem  competitors:  Ambit,  D-Link,  Linksys,  Motorola,  Scientific
     Atlanta, Terayon, Thomson, and Toshiba.
o    ADSL modem competitors:  Actiontec,  Alcatel,  Siemens (formerly  Efficient
     Networks), US Robotics, and Westell.

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 accounted for approximately 30% in fiscal 2000, 38%
in fiscal 2001 and approximately 40% in 2002. In Q3 2003 our international sales
accounted for  approximately  39% of our revenues.  Currently our operations are
significantly dependent on our international  operations,  and may be materially
and adversely affected by many factors including:

o    international   regulatory  and  communications   requirements  and  policy
     changes;
o    favoritism toward local suppliers;
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 revenues.  If foreign markets for our current and
future products develop more slowly than currently expected,  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.

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 $58,000 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  September  30,  2003,  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)  No reports on Form 8-K were filed by the Company during the quarter ending
     September 30, 2003.

<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: November 12, 2003     By:  /s/ Frank B. Manning
                               ------------------------------------------
                               Frank B. Manning, President


Date: November 12, 2003     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