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Commitments and Contingency
 3 Months Ended
Jun. 30, 2013
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingency

NOTE 11 — Commitments and Contingencies

 

Operating Lease

The Company operates its headquarters under a non-cancelable operating lease which provides for the lease by the Company of approximately 37,100 square feet of space in Newark, California. The base rent under the facilities lease was $29,705 per month for the period from July 1, 2012 through June 30, 2013. The base rent increases annually thereafter at a rate of four percent per year for the remaining five years ending June 30, 2018. On December 28, 2012, the Company further amended its commercial building lease agreement to extend the term of the lease to June 30, 2021. The Company’s base rent under the amendment shall be $37,586 per month for the period from July 1, 2018 through June 30, 2019. The base rent increases annually thereafter at a rate of four percent per year for the remaining three years ending June 30, 2022.

 

Future minimum lease payments under all operating leases are as shown below:

 

Annual minimum payments:  Amount
 2013 (July 1, 2013 to December 31, 2013)   $185,358 
 2014    378,130 
 2015    393,255 
 2016    408,986 
 2017 to 2022    2,557,481 
 Total minimum payments   $3,923,210

 

  

Rental expense under all operating leases for the three and six month periods ended June 30, 2013 was $107,093 and $213,850, respectively. Rental expense under all operating leases for the three and six month periods ended June 30, 2012 was $92,419 and $183,629, respectively. The amount of deferred rent at June 30, 2013 and December 31, 2012 was $207,715 and $179,527, respectively.

 

Capital Lease Obligations

The Company leases certain of its equipment under capital leases. The leases are collateralized by the underlying assets. At June 30, 2013 and December 31, 2012, property and equipment with a cost of $87,946 and $73,275, respectively, were subject to such financing arrangements. Related accumulated amortization at June 30, 2013 and December 31, 2012, amounted to $16,971 and $8,380, respectively.

  

Future minimum payments under capital lease and equipment financing arrangements as of June 30, 2013, are as follows:

 

Annual minimum payments:  Amount
2013 (July 1, 2013 to December 31, 2013)  $12,758 
2014   25,516 
2015   25,516 
2016   11,442 
    Total minimum payments   75,232 
Less amount representing interest   (5,394)
    Present value of net minimum payments  69,838 
Short term portion of capital leases   (22,555)
Long term portion of capital leases  $47,283

 

  

Legal Matters

The Company is subject to disputes, claims, requests for indemnification and lawsuits arising in the ordinary course of business. In April 2013, a lawsuit was filed in the State of Delaware against the Company by Wyncomm LLC claiming infringement of a patent involving WiFi technology. They have filed similar lawsuits against a number of other companies. In August 2013, the Company reached a settlement agreement with Wyncomm whereby the Company, its suppliers and customers are granted an irrevocable, worldwide, non-exclusive and non-transferable license to the underlying patent held by Wyncomm. The settlement is not material to the Company’s operations. Under the indemnification provisions of the Company’s customer agreements, the Company routinely agrees to indemnify and defend its customers against infringement of any patent, trademark, copyright, trade secrets, or other intellectual property rights arising from customers’ legal use of the Company’s products or services. The exposure to the Company under these indemnification provisions is generally limited to the total amount paid for the indemnified products. However, certain indemnification provisions potentially expose the Company to losses in excess of the aggregate amount received from the customer. To date, there have been no claims against the Company by its customers pertaining to such indemnification provisions, and no amounts have been recorded.