UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


                                   (Mark One)
     [X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1998

                                       or

    [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

         For the transition period from ______________ to ______________


                         Commission File Number 0-18672


                             ZOOM TELEPHONICS, INC.
             (Exact Name of Registrant as Specified in its Charter)

             Canada                                             04-2621506
(State or Other Jurisdiction of                             (I.R.S.  Employer
 Incorporation or Organization)                             Identification No.)


207 South Street, Boston, Massachusetts                          02111
---------------------------------------                          -----
(Address of Principal Executive Offices in the U.S.)           (Zip Code)


       Registrant's Telephone Number, Including Area Code: (617) 423-1072

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

YES  [ X ]    NO [    ]


The number of shares  outstanding of the registrant's  Common Stock, No Par
Value, as of November 13, 1998 was 7,474,871 shares.



<PAGE>


                             ZOOM TELEPHONICS, INC.
                                      INDEX


                                                                          

Part I.  Financial Information

  Item 1.  Consolidated Balance Sheets as of September 30, 1998
               and December 31, 1997                                           

           Consolidated Statements of Operations for the Three
               Months Ending September 30, 1998 and 1997                      

           Consolidated Statements of Operations for the Nine
               Months Ending September 30, 1998 and 1997                       

           Consolidated Statements of Cash Flows for the Nine
               Months Ending September 30, 1998 and 1997                        


           Notes to Consolidated Financial Statements                         

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

Part II.  Other Information

  Item 1.  Legal Proceedings                                                    


  Item 6.  Exhibits and reports on Form 8-K                                     



PART I - FINANCIAL INFORMATION

  Item 1.  Financial Statements.


<PAGE>



                             ZOOM TELEPHONICS, INC.
                           Consolidated Balance Sheets
<TABLE>
<CAPTION>  

                                                                                           9/30/98              12/31/97
ASSETS                                                                                   (Unaudited)            (Audited)

Current assets:
<S>                                                                                    <C>                  <C>
     Cash and cash equivalents                                                         $  18,712,328        $  11,281,337
      Accounts receivable, net of reserves
        for doubtful accounts, returns, and allowances of
        $5,582,793 at 9/30/98 and $4,518,206 at 12/31/97                                   8,028,787           13,365,413
     Inventories                                                                           9,062,308           12,034,349
     Refundable income taxes                                                               1,096,298            3,793,963
     Deferred income taxes                                                                 2,388,189            2,388,189
     Prepaid expenses and other assets                                                       277,981              212,989
                                                                                         -----------          -----------
                         Total current assets                                             39,565,891           43,076,240

     Property and equipment, net                                                           3,668,887            3,967,767
     Goodwill                                                                              1,267,057            1,393,874
     Other non-current assets                                                                132,668               77,392
                                                                                         -----------          -----------
                                                                                         $44,634,503          $48,515,273
                                                                                         ===========          ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

     Accounts payable                                                                   $  6,329,055         $  6,204,370
     Accrued expenses                                                                        306,450            1,808,308
                                                                                         -----------          -----------
                         Total current liabilities                                         6,635,505            8,012,678
                                                                                         -----------          -----------
Stockholders' equity:

     Common stock, no par value; 25,000,000 shares authorized;  7,474,871 shares
     issued and outstanding at September 30, 1998 and 7,472,371
     at December 31, 1997                                                                 25,190,579           25,170,267
     Retained earnings                                                                    12,808,419           15,332,328
                                                                                         -----------          -----------

                           Total stockholders' equity                                     37,998,998           40,502,595
                                                                                         -----------          -----------
                                                                                         $44,634,503          $48,515,273
                                                                                         ===========          ===========



                 See notes to consolidated financial statements
</TABLE>

<PAGE>



                             ZOOM TELEPHONICS, INC.
                      Consolidated Statements of Operations
                                   (Unaudited)

                                               Three Months Ending September 30,
                                               ---------------------------------
                                                  1998                 1997
                                               ----------           ---------
Net sales                                  $   14,465,826       $  13,010,940
Costs of goods sold                            11,167,604          11,574,428
                                            --------------       -------------

     Gross profit                               3,298,222           1,436,512

Operating expenses:
     Selling                                    2,957,122           2,891,884
     General and administrative                 1,321,849           1,256,689
     Research and development                   1,209,863             853,342
                                            --------------       -------------

         Total operating expenses               5,488,834           5,001,915
                                            --------------       -------------

     Income (loss) from operations             (2,190,612)         (3,565,403)

Other income,  net                                364,227             147,804
                                            --------------       -------------

     Income (loss) before
         income tax expense (benefit)          (1,826,385)         (3,417,599)

Income tax benefit                               (675,762)         (1,266,386)
                                            --------------        ------------

     Net income (loss)                      $  (1,150,623)       $ (2,151,213)
                                            ==============       =============

Income (loss) per common and common
   equivalent share:

     Basic                                  $        (.15)       $       (.29)
                                            ==============       =============

     Diluted                                $        (.15)       $       (.29)
                                            ==============       =============

Average common and common equivalent
   shares outstanding:

     Basic                                      7,474,871           7,472,371
                                            ==============       =============

     Diluted                                    7,474,871           7,472,371
                                            ==============       =============


<PAGE>



                             ZOOM TELEPHONICS, INC.
                      Consolidated Statements of Operations
                                   (Unaudited)

                                               Nine Months Ending September  30,
                                               ---------------------------------
                                                  1998                1997
                                               ----------           ---------
Net sales                                  $   45,339,435      $   42,998,784
Costs of goods sold                            34,754,944          40,752,747
                                            -------------         -----------

     Gross profit                              10,584,491           2,246,037

Operating expenses:
     Selling                                    8,636,299           7,870,249
     General and administrative                 3,562,093           3,686,944
     Research and development                   3,237,019           3,094,054
                                            -------------        ------------

         Total operating expenses              15,435,411          14,651,247
                                            -------------        ------------

     Income (loss) from operations             (4,850,920)        (12,405,210)

Other income, net                                 844,715             626,753
                                            -------------        ------------

     Income (loss) before income 
       tax expense (benefit)                   (4,006,205)        (11,778,457)

Income tax expense (benefit)                   (1,482,296)         (4,358,858)
                                            --------------       -------------

     Net income (loss)                      $  (2,523,909)      $  (7,419,599)
                                            ==============      ==============

Income (loss) per common and common
   equivalent share:

     Basic                                  $        (.34)       $       (.99)
                                            ==============       =============

     Diluted                                $        (.34)       $       (.99)
                                            ==============       =============

Average common and common equivalent
   shares outstanding:

     Basic                                       7,474,203           7,467,540
                                             =============        ============

     Diluted                                     7,474,203           7,467,540
                                             =============        ============




<PAGE>


                             ZOOM TELEPHONICS, INC.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>
<S>                                                                                <C>                      <C>
                                                                                        Nine Months Ending September 30,
                                                                                        --------------------------------           
                                                                                         1998                   1997
                                                                                         --------               -------

Cash flows from operating activities:
     Net loss                                                                      $  (2,523,909)           $  (7,419,599)
     Adjustments to reconcile net loss to net cash provided by
      operating activities:
      Depreciation and amortization                                                      900,849                  732,968
      Deferred income taxes                                                                    -                    1,319
        Changes in assets and liabilities:
        Accounts receivable, net                                                       5,336,626               12,429,658
        Inventories                                                                    2,972,041                6,030,363
        Refundable income taxes                                                        2,696,856               (3,490,653)
        Prepaid expenses and other assets                                                (63,492)                (136,469)
        Accounts payable and accrued expenses                                         (1,377,173)              (4,601,747)
        Tax benefit from exercise of non-qualified
            stock options                                                                    809                   78,675
                                                                                  --------------           --------------

             Net cash provided by operating activities                                 7,942,607                3,624,515
                                                                                  --------------           --------------

Cash flows from investing activities:
     Additions to licenses                                                              (148,000)                       -
     Additions to property and equipment                                                (383,928)                (603,929)
                                                                                   --------------            -------------

             Net cash used in investing activities                                      (531,928)                (603,929)
                                                                                   --------------           --------------

Cash flows from financing activities:
      Net repayments under revolving bank line of credit                                       -                        -
      Proceeds from exercise of stock options                                             20,312                  204,232
                                                                                  --------------           --------------

             Net cash provided by financing activities                                    20,312                  204,232
                                                                                  --------------           --------------

Net increase in cash and cash equivalents                                              7,430,991                3,224,818

Cash and cash equivalents, beginning of period                                        11,281,337                9,172,186
                                                                                  --------------           --------------

Cash and cash equivalents, end of period                                          $   18,712,328           $   12,397,004
                                                                                  ==============           ==============


Supplemental disclosures of cash flow information:

    Cash paid during the period for:

      Interest                                                                    $            -           $            -
                                                                                  ==============           ==============
      Income taxes                                                                $            -           $            -
                                                                                  ==============           ==============
</TABLE>

<PAGE>


                             ZOOM TELEPHONICS, INC.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)
(1) Basis of Presentation

         The accompanying  unaudited  consolidated  financial statements of Zoom
Telephonics,  Inc., (the "Company") presented herein have been prepared pursuant
to the rules of the Securities and Exchange  Commission for quarterly reports on
Form 10-Q and Article 2 of Regulation S-X. Accordingly,  they do not include all
of the  information  and  footnotes  required by generally  accepted  accounting
principles for complete financial statements. These statements should be read in
conjunction with the consolidated financial statements and notes thereto for the
year ending  December 31, 1997 included in the  Company's  1997 Annual Report on
Form 10-K.
         The   consolidated   balance  sheet  as  of  September  30,  1998,  the
consolidated  statements  of  operations  for the three  months and nine  months
ending  September  30, 1998 and 1997, and the  consolidated  statements of cash
flows for the nine months ending September 30, 1998 and 1997 are unaudited, but,
in the opinion of  management,  include all  adjustments  (consisting of normal,
recurring  adjustments)  necessary for a fair  presentation of results for these
interim periods.
         The results of operations for the nine months ending September 30, 1998
are not  necessarily  indicative  of the results to be  expected  for the entire
fiscal year ending December 31, 1998.

(2)   Earnings Per Share

The  reconciliation  of the loss  numerators and  denominators  of the basic and
diluted net loss per common share  computations  for the Company's  reported net
loss is as follows:
<TABLE>
<CAPTION>  
                                  Three months ending September 30,                  Nine months ending September 30,
                                        1998                  1997                      1998                    1997
                                  ------------------   -------------------       -------------------    ------------------
Basic:
<S>                                 <C>                    <C>                       <C>                   <C>
   Net loss                         $ (1,150,623)          $ (2,151,213)             $ (2,523,909)         $ (7,419,599)
                                    =============          =============             =============         =============

Weighted average shares
   outstanding                          7,474,871              7,472,371                 7,474,203             7,467,540
                                        =========              =========                 =========             =========

Net loss per share                   $      (.15)          $       (.29)              $      (.34)         $       (.99)
                                     ============           ============              ============         ============= 
                                 

Diluted:

    Net loss                        $ (1,150,623)          $ (2,151,213)             $ (2,523,909)         $ (7,419,599)
                                    =============          =============             =============         =============

Weighted average shares
   outstanding                          7,474,871              7,472,371                 7,474,203             7,467,540

Net effect of dilutive stock
   options based on the
   Treasury stock method                 -                      -                         -                     -
   using average market price

Weighted average shares
   outstanding                          7,474,871              7,472,371                 7,474,203             7,467,540
                                        =========              =========                 =========             =========

Net loss per share                   $      (.15)           $      (.29)              $      (.34)         $       (.99)
                                     ============           ============              ============         =============
                             
</TABLE>

(3) Inventories


         Inventories consist of the following:    9/30/98               12/31/97
                                                 --------               --------
                  Raw materials                $5,113,895             $7,261,914
                  Work in process               2,733,367              2,542,260
                  Finished goods                1,215,046              2,230,175
                                              -----------             ----------

                                               $9,062,308            $12,034,349
                                              ===========            ===========



(4) Stock Options

Proceeds from the exercise of options  granted under the Company's  stock option
plans and  income tax  benefits  attributable  to stock  options  exercised  are
credited to common  stock.  During the nine months  ending  September  30, 1998,
options with respect to 2,500 shares were exercised and such exercises  resulted
in a tax benefit to the Company of $809.


(5) Bank Credit Facility

The Company's $5 million line of credit discussed in the 1997 10-K was scheduled
for  expiration on September  30, 1998.  The  expiration  date has been extended
until January 1,1999. A replacement one year $5 million line of credit is in the
final stage of completion.

<PAGE>


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

Results of Operations

           Zoom Telephonics,  Inc. ("Zoom" or "the Company") recorded net sales
of  $14,465,826  and a net loss of $1,150,623  for the  Company's  third quarter
ending September 30, 1998.  Earnings per share improved from a loss of $0.29 for
the third  quarter  of 1997 to a loss of $0.15 for the  third  quarter  of 1998.
Zoom's net sales for the nine months ending  September 30, 1998 were $45,339,435
with a net loss of $2,523,909 or $.34 per share versus net sales of  $42,998,784
and a loss of $7,419,599 or $.99 per share for the nine months ending  September
30, 1997.

            Net  sales for the  quarter  ending  September  30,  1998  increased
$1,454,886 or 11.2% from the third quarter of 1997.  The Company had strong unit
sales of V.90 standard 56K modems in the third quarter of 1998,  contributing to
a total  modem unit  sales  increase  of 19%  versus the third  quarter of 1997.
Average  selling prices for all modems sold declined over the same period.  This
decline in prices together with the accompanying  price  protection  credits and
the increased cost of consumer rebate programs reduced the dollar sales gain to
the 11.2% for the quarter ending September 30, 1998. The unit sales increase was
also due to the fact that the  Company  did a better  job of  meeting  requested
third quarter  deliveries in 1998 than in 1997. As a result,  ending backlog for
the third quarter of 1998 was down compared to the ending  backlog for the third
quarter of 1997.  This  reduction in order backlog along with the recent loss of
sales to the CompUSA account will negatively impact sales for the fourth quarter
ending  December 31, 1998 when compared to sales for the quarter ending December
31, 1997, though these effects may be offset by positive business  developments.
In the  third  quarter  of 1998  CompUSA  accounted  for  5.5% of the  Company's
revenues.

       Net  sales  for the nine  months  ending  September  30,  1998  increased
$2,340,651 or 5.4% from the nine months ending September 30, 1997 as a result of
strong sales of V.90 standard 56K modems.

       Gross margin  increased to 22.8% in the third  quarter of 1998 from 11.0%
in the quarter ending  September 30, 1997. For the nine months ending  September
30, 1998 gross  margin  increased  to 23.3% from 5.2% in the nine months  ending
September 30, 1997.  Although  average  selling prices for modems  declined year
over  year,  the  cost of  materials  and  manufacturing  costs,  including
obsolescence and scrap expense, declined to a greater extent, yielding increased
gross margins.

      Selling  expenses  during  the third  quarter  of 1998  increased  2.3% to
$2,957,122 or 20.4% of net sales,  from  $2,891,884 or 22.2% of net sales in the
third quarter of 1997.  Selling expenses during the nine months ending September
30, 1998 increased  9.7% to $8,636,299 or 19.0% of net sales from  $7,870,249 or
18.3% of net sales in the nine months  ending  September  30,  1997.  The dollar
increase for the nine months ending  September 30, 1998 was primarily the result
of increases in cooperative  advertising in Zoom's direct sales channel,  higher
commission expenses, and added technical support personnel.

      During  the  three  and  nine  month   periods   of  1998,   General   and
administrative expenses were relatively unchanged from the same periods in 1997.
General and administrative  expenses were $1,321,849 or 9.1% of net sales during
the quarter  ending  September  30, 1998  compared to  $1,256,689 or 9.7% of net
sales in the quarter  ending  September  30,  1997.  General and  administrative
expenses  were  $3,562,093  or 7.9% of net sales  during the nine months  ending
September  30,  1998  compared  to  $3,686,944  or 8.6% of net sales in the nine
months ending September 30, 1997.

      Research and development expenses increased 41.7% to $1,209,863 or 8.4% of
net sales during the quarter ending  September  30,1998 from $853,342 or 6.6% of
net sales in the quarter  ending  September 30, 1997.  Research and  development
expenses  increased  4.6% to  $3,237,019  or 7.1% of net sales  during  the nine
months  ending  September  30, 1998 from  $3,094,054 or 7.2% of net sales in the
nine months ending  September  30, 1997.  The increase in expenses was primarily
due to additional personnel consistent with the broadening of the Company's
non-modem and  international  modem product lines and the  integration of Lucent
Technologies modem chipsets into some of the Company's 56K modem product line.

          The Company  experienced a net loss of $1,150,623 or 8.0% of net sales
during  the  quarter  ending  September  30,  1998  compared  to a net  loss  of
$2,151,213 or 16.5% of net sales, in the quarter ending  September 30, 1997. For
the nine months ending September 30, 1998 the Company lost $2,523,909 or 5.6% of
net sales,  compared to a loss of  $7,419,599  or 17.3% of net sales in the nine
months  ending  September  30, 1997.  The  improvement  was primarily due to the
increase in sales and gross margins.


Liquidity and Capital Resources

            Zoom ended the third  quarter of 1998 with a strong  balance  sheet.
Working  capital  declined  during the first  nine  months to  $32,930,386  from
$35,063,562  at December 31, 1997.  The current ratio  improved to 6.0 from 5.4.
Cash  and  cash   equivalents   increased  to  $18,712,328   from   $11,281,337,
particularly  due to a reduction  in  inventories  and accounts  receivable.  In
addition,  the  Company's  has a $5 million line of credit which has an extended
expiration date of January 1, 1999. The company is completing a one year renewal
of this line of credit.

           Operating  activities  provided  $7,942,607  in cash  during the nine
months ending September 30, 1998. Accounts receivable declined $5,336,626 due to
improved days sales outstanding.  Inventory declined  $2,972,041  primarily as a
result of the Company's actions to reduce the level of inventories and increased
obsolescence and other inventory reserves.  Additional sources of funds included
depreciation  and  amortization of $900,849 and a decrease of refundable  income
taxes of $2,696,856. These sources of cash were partially offset by the net loss
of  $2,523,909,  a  reduction  of  accounts  payable  and  accrued  expenses  of
$1,377,173.

        Zoom's capital  expenditures  of $531,928  during the nine months ending
September 30, 1998 included purchases of computer  equipment,  product licenses,
production equipment,  and continuing  renovation of its headquarters.  Although
the Company does not have any significant  capital  commitments,  it anticipates
that it will continue with modest  investments in equipment and in  improvements
to its facilities during the year.

         During the nine months ending September 30, 1998,  financing activities
provided  the Company  with  $20,312  from the exercise of employee and director
stock options.

         The  Company  believes  that its  existing  cash,  together  with funds
generated from operations and available sources of financing, will be sufficient
to meet normal working capital requirements for at least the next twelve months.
Additional financing may be needed at some point if sales increase significantly
or if losses continue to be incurred.

New Accounting Pronouncements

         In  December  1997,  the  Company  adopted  the  Financial   Accounting
Standards  Board  Statement  No.  128,  "Earnings  per Share."  (SFAS 128).  All
previously  reported  net income  (loss) per share  data have been  restated  to
conform to the  provisions of SFAS 128.  Under SFAS 128, basic net income (loss)
per  share is  computed  by  dividing  net  income  (loss)  available  to common
stockholders  by the weighted  average  number of common  shares for the period.
Diluted net income (loss) per share reflect the maximum dilution that would have
resulted  from the assumed  exercise  and share  repurchase  related to dilutive
stock  options and are  computed by dividing  net income  (loss) by the weighted
average number of common shares and all dilutive securities outstanding.

         In June 1997, the Financial Accounting Standards Board issued Statement
130 (SFAS 130),  "Reporting  Comprehensive  Income," which establishes standards
for reporting and display of  comprehensive  income and its components in a full
set of general-purpose  financial statements.  Under this concept, all revenues,
expenses,  gains and losses recognized during the period are included in income,
regardless of whether they are considered to be the results of operations of the
period.  The  Company  adopted  SFAS  130 in  March  1998  and it did not have a
material impact on the consolidated financial statements of the Company.

         In June 1997, the Financial Accounting Standards Board issued Statement
131 (SFAS  131),  "Disclosures  about  Segments  of an  Enterprise  and  Related
Information,"  which  establishes  standards  for the way that  public  business
enterprises  report  selected  information  about  operating  segments in annual
financial  statements  and  requires  that  those  enterprises  report  selected
information   about  operating   segments  in  interim   financial   reports  to
shareholders.  It also  establishes  standards  for  related  disclosures  about
products and services,  geographic  areas and major  customers.  SFAS 131, which
becomes  effective  for the Company in its year ending  December  31,  1998,  is
currently not expected to have a material  impact on the Company's  consolidated
financial  statements  and  disclosures  as the Company  does not have  multiple
reportable operating segments.

         In March 1998, the American  Institute of Certified Public  Accountants
issued  Statement  of  Position  98-1,  "Accounting  for the  Costs of  Computer
Software  Developed or Obtained for Internal Use" (SOP 98-1),  which establishes
guidelines  for the costs of all  computer  software  developed  or obtained for
internal use. SOP 98-1 is effective for the Company in 1999, and is not expected
to have a material impact on the Company's financial statements.

Year 2000 Compliance

         The year 2000 issue is the potential for system and processing  failure
of  date-related  data and the result of  computer-controlled  systems using two
digits rather than four to define the  applicable  year.  For example,  computer
programs  that have  date-sensitive  software may recognize a date using "00" as
the year 1900 rather than the year 2000.  Systems that do not properly recognize
date-sensitive  information  when the year changes to 2000 could generate system
failure or miscalculations causing disruptions of operations,  including,  among
other things, a temporary  inability to process  transactions,  send invoices or
engage in similar ordinary business activities.

         The  Company is  evaluating  the year 2000  issue  with  respect to its
financial and management information systems, its products and its suppliers. At
this point in its  assessment,  the Company is not  currently  aware of any year
2000  problems  that are  reasonably  likely  to have a  material  effect on the
Company's business, results of operations or financial condition, without taking
into account the Company's efforts to avoid such problems.

         The Company is completing its review of its management and  information
systems for year 2000  compliance  and has identified  application  software and
hardware  which must be  upgraded  to become  year 2000  compliant.  The Company
intends  to  generally  upgrade  its  management  and  information   systems  in
conjunction  with its upgrade to become year 2000  compliant by September  1999.
The  Company  believes  that  the  cost of this  upgrade  will be  approximately
$100,000 to $300,000, the majority of which will be capitalized. There is a risk
that,  notwithstanding  its  internal  review,  if the Company has not  properly
identified  all year 2000  compliance  issues with respect to its management and
information  systems,  the Company may not be able to  implement  all  necessary
changes to these  systems on a timely  basis and within  budget.  Such a failure
could result in a material disruption to the Company's  business,  including the
inability to track and timely fill orders,  which could have a material  adverse
effect on its business, results of operations and financial condition.

         The Company has evaluated  its current  products and believes that they
are year 2000  compliant.  The Company has also  undertaken a general  review of
modems previously sold by it that may continue to be under warranty to determine
whether  those  products  are year 2000  compliant.  Based upon its  preliminary
assessment, the Company believes that the proper operation of its modems are not
date dependent and therefore  should continue to function  properly on and after
the year 2000. In order to assure that this is the case,  the Company is seeking
information  from its major  suppliers,  particularly of its modem chipsets,  to
confirm  that they have been year 2000  compliant.  The  Company has sent a year
2000 Readiness Letter/Questionnaire to its major suppliers and initial responses
from  the  Company's   chipset   manufacturers   have  confirmed  the  Company's
understanding  that the chipsets used by the Company are not date  sensitive and
are therefore year 2000 compliant.  However,  the Company cannot assure that its
chipset  manufacturers  will  provide  the  Company  with  accurate  information
regarding   their  year  2000   compliance.   Should  any  critical   components
incorporated  in the  Company's  products fail to be year 2000  compliant,  such
failure could result in warranty  claims and have a material  adverse  effect on
its business, results of operations and financial condition.

         The  Company's  products and  software are often sold to be  integrated
into or  interface  with third party  equipment or  software.  In addition,  the
Company  often  packages  its modems for retail sale with  software  provided by
other  vendors.  The Company does not alter this  software in any way related to
the date. The Company is in the process of seeking information from its software
vendors to assure that the software packaged with its products will be year 2000
compliant, and has sent a year 2000 Readiness  Letter/Questionnaire  toits major
software  suppliers.  While it is  possible  that some of this  software  may be
adversely  affected by the year 2000,  the Company is not aware of any  packaged
software  having this problem.  Failure of third-party  equipment or software to
operate  properly with regard to the year 2000 and thereafter  could require the
Company to incur unanticipated expenses to remedy any problems, which could have
a material adverse effect on the Company's  business,  results of operations and
financial condition.

         The  Company  is also  exposed  to the risk  that it  could  experience
material  shipment  delays  from  its  major  component  suppliers  or  contract
assemblers  or material  sales delays from its major  customers due to year 2000
issues relating either to their  management  information or production  systems.
The Company has  inquired  of these  suppliers  and  contract  assemblers  in an
attempt to ascertain  their year 2000  readiness.  At this time,  the Company is
unable  to  estimate  the  nature  or extent  of any  potential  adverse  impact
resulting from the failure of third parties, such as its suppliers, and contract
assemblers and customers, to achieve year 2000 compliance.  Moreover, such third
parties, even if year 2000 compliant,  could experience  difficulties  resulting
from year 2000 issues that may affect their  suppliers,  service  providers  and
customers.  As a result, although the Company does not currently anticipate that
it will  experience  any  material  shipment  delays  from their  major  product
suppliers or any material sales delays from its major customers due to year 2000
issues,  these third parties could experience year 2000 problems that could have
a material adverse effect on the Company's  business,  results of operations and
financial condition.

         To  the  extent  that  the  Company  does  not  identify  any  material
non-compliant  year 2000 issues affecting the Company or third parties,  such as
the Company's  suppliers,  service providers and customers,  the most reasonably
likely worst case year 2000 scenario is a systemic failure beyond the control of
the Company, such as a prolonged  telecommunications or electrical failure, or a
general  disruption in United States or global  business  activities  that could
result in a significant economic downturn. The Company believes that the primary
business risks, in the event of such failure or other disruption,  would include
but not be limited to, loss of customers or orders,  increased  operating costs,
inability  to  obtain  inventory  on a  timely  basis,  disruptions  in  product
shipments,  or other business  interruptions  of a material  nature,  as well as
claims of mismanagement,  misrepresentation, or breach of contract, any of which
could have a  material  adverse  effect on the  Company's  business,  results of
operations and financial condition.



Other

         A portion of the Company's revenues are subject to the risks associated
with  international  sales.  Although most of the Company's  product  prices are
denominated  in the United  States  currency,  customers  in  foreign  countries
generally  evaluate  purchases of products  such as those sold by the Company on
the purchase price expressed in the customer's currency.  Therefore,  changes in
foreign  currency  exchange  rates  may  adversely  affect  the  demand  for the
Company's products.


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

Forward-looking   statements  in  this  report,   including  without  limitation
statements relating to the adequacy of the Company's resources are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Investors are cautioned that such forward-looking statements involve risks
and uncertainties,  including without limitation: overall product demand for 56K
modems or the Company's V.90 standard 56K or K56flex(TM)  modems, the renewal of
the Company's line of credit,  potential quarterly fluctuations in the Company's
operating   results,   seasonality  of  sales,   rapid   technological   change,
competition,  the  concentration  of  the  Company's  customers,  the  Company's
dependence  upon a limited number of principal  suppliers for its modem chipsets
and on third-party assemblers,  risks associated with inventory management, risk
of product returns and  price-protection,  sales channel risks, risks associated
with  international  sales, the ability of the Company to manage its growth, the
Company's   reliance  on  key  employees,   risks  associated  with  proprietary
technology, and other risks and uncertainties indicated from time to time in the
Company's filings with the Securities and Exchange Commission.


<PAGE>


PART II - OTHER INFORMATION

ITEM 1. - Legal Proceedings

      No material developments





ITEM 6 - Exhibits and reports on Form 8-K

         (a)  Exhibit                       Description                 
             ---------                    ---------------                  
               27                      Financial Data  Schedule                

         (b) No  reports  on Form 8-K were  filed by the  Company  during the
             quarter ending September 30, 1998


<PAGE>


                             ZOOM TELEPHONICS, INC.

                        FINANCIAL INFORMATION NOT AUDITED


The preceding  financial  information,  with the  exception of the  consolidated
balance  sheet at December  31,  1997,  has not been  audited.  However,  in the
opinion of  management,  all  material  adjustments,  consisting  only of normal
recurring  accruals  necessary  to present a fair  statement  of the results for
these  periods,  have been  reflected.  The  results  for these  periods are not
necessarily indicative of the results for the full fiscal year.




                                       SIGNATURES

Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
Company  has  duly  caused  this  report  to be  signed  on  its  behalf  by the
undersigned thereunto duly authorized.

                                           ZOOM TELEPHONICS, INC.


Date: November 13, 1998               By: /s/ Frank Manning
                                          --------------------------
                                          Frank B. Manning, President



Date: November 13, 1998               By: /s/ Robert A. Crist
                                        ----------------------------
                                      Robert A. Crist, Vice President of Finance
                                            and Chief Financial Officer
                                    (Principal Financial and Accounting Officer)