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Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

NOTE 11 — Commitments and Contingencies

Operating Lease

The Company leases office space under a non-cancelable operating lease that provides the Company approximately 37,100 square feet in Newark, California. The lease agreement expires on June 30, 2022. Monthly base rent increases four percent per year annually on July 1^st of each year. Rental expense was $108,538 and $107,098 for the three periods ended March 31, 2016 and 2015, respectively. The Company recorded a deferred rent obligation in accrued liabilities in the amount of $286,020 and $283,053 at March 31, 2016 and December 31, 2015, respectively.

Future minimum lease payments under the operating lease at March 31, 2016 are shown below:

Annual minimum payments:	Amount
2016 (April 1, 2016 to December 31, 2016)	$	308,744
2017		425,345
2018		442,359
2019		460,053
2020 to 2022		1,229,724
Total minimum payments	$	2,866,225

Capital Lease Obligations

The Company leases certain of its equipment under capital leases. The leases are collateralized by the underlying assets. At March 31, 2016 and December 31, 2015, property and equipment with a cost of $124,427 were subject to such financing arrangements. Related accumulated amortization at March 31, 2016 and December 31, 2015, amounted to $9,836 and $28,795, respectively.

Future minimum payments under capital lease and equipment financing arrangements as of March 31, 2016 are as follows:

Annual minimum payments:	Amount
2016 (April 1, 2016 to December 31, 2016)	$	15,724
2017		13,146
2018		9,859
Total minimum payments		38,729
Less amount representing interest		(2,162	)
Present value of net minimum payments		36,567
Short term portion of capital leases		(17,626	)
Long term portion of capital leases	$	18,941

Purchase Commitments

As of March 31, 2016, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of approximately $2,374,000.

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. The Company is currently not a party to any material legal proceedings.

Recently Issued Financial Accounting Standards

From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position, results of operations or cash flows upon adoption.