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Commitments and Contingency
 3 Months Ended
Mar. 31, 2014
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. On December 28, 2012, the Company amended its commercial building lease agreement to extend the term of the lease to June 30, 2022. 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 increased 4% to $30,893 beginning July 1, 2013 through June 30, 2014. The base rent increases annually thereafter at a rate of four percent per year for the remaining term of the lease ending June 30, 2022.

 

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

 

Annual minimum payments: Amount
2014 (April 1, 2014 to December 31, 2014) $      285,451
2015 393,255
2016 408,986
2017 425,345
2018 to 2022 2,132,136
Total minimum payments $   3,645,173

 

 

Rental expense under all operating leases was $107,065 and $106,757, for the three month periods ended March 31, 2014 and 2013, respectively. The amount of related deferred rent at March 31, 2014 and December 31, 2013 was $239,303 and $228,773, respectively.

 

Capital Lease Obligations

 

The Company leases certain of its equipment under capital leases. The leases are collateralized by the underlying assets. At March 31, 2014 and December 31, 2013, property and equipment with a cost of $87,945 were subject to such financing arrangements. Related accumulated amortization at March 31, 2014 and December 31, 2013, amounted to $34,448 and $28,898, respectively.

 

Future minimum payments under capital lease and equipment financing arrangements as of March 31, 2014, are as follows:

 

Annual minimum payments: Amount
2014 (April 1, 2014 to December 31, 2014) $     19,850
2015 26,467
2016 11,916
     Total minimum payments 58,233
Less amount representing interest (4,736)
     Present value of net minimum payments 53,497
Short term portion of capital leases (23,243)
Long term portion of capital leases $     30,254

 

Purchase Commitments

As of March 31, 2014, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of approximately $2,081,000.

 

Legal Matters

The Company is subject to disputes, claims, requests for indemnification and lawsuits arising in the ordinary course of business. 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.