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Commitments and Contingencies

9 Months Ended

Sep. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

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^stof each year. Rental expense was $109,004 and $327,049 for the three and nine month periods ended September 30, 2016, respectively. Rental expense was $107,352 and $321,950 for the three and nine month periods ended September 30, 2015, respectively. The Company recorded a deferred rent obligation in accrued liabilities in the amount of $287,944 and $283,053 at September 30, 2016 and December 31, 2015, respectively.

Future minimum lease payments under the operating lease at September 30, 2016 are shown below:

Annual minimum payments:	Amount
2016 (October 1, 2016 to December 31, 2016)	$	104,251
2017		425,345
2018		442,359
2019		460,053
2020 to 2022		1,229,724
Total minimum payments	$	2,661,732

Capital Lease Obligations

The Company leases certain of its equipment under capital leases. The leases are collateralized by the underlying assets. At September 30, 2016 and December 31, 2015, property and equipment with a cost of $100,584 and $124,427, respectively, were subject to such financing arrangements. The accumulated depreciation of the assets associated with the capital leases as of September 30, 2016 and December 31, 2015, amounted to $16,167 and $80,150 respectively.

Future minimum payments under capital lease and equipment financing arrangements as of September 30, 2016 are as follows:

Annual minimum payments:	Amount
2016 (October 1, 2016 to December 31, 2016)	$	7,409
2017		30,048
2018		27,607
2019		18,635
2020		9,545
Total minimum payments		93,244
Less amount representing interest		(7,537	)
Present value of net minimum payments		85,707
Short term portion of capital leases		(26,123	)
Long term portion of capital leases	$	59,584

Purchase Commitments

As of September 30, 2016, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of approximately $2,873,000.

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

In May 2014, the FASB issued authoritative guidance amending the FASB Accounting Standards Codification and creating a new Topic 606, Revenue from Contracts with Customers. The new guidance clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP applicable to revenue transactions. This guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The existing industry guidance will be eliminated when the new guidance becomes effective and annual disclosures will be substantially revised. Additional disclosures will also be required under the new standard. In July 2015, the FASB approved a proposal that extended the required implementation date one year to the first quarter of 2018 but also would permit companies to adopt the standard at the original effective date of 2017. Implementation may be either through retrospective application to each period from the first quarter of 2017 or with a cumulative effect adjustment upon adoption in 2018. In April 2016, the FASB issued amendments, ASU No. 2016-10, that clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The standard should be adopted concurrently with adoption of ASU No. 2014-09 which is effective for annual and interim periods beginning after December 15, 2017 with early adoption permitted. We are still assessing the impact of this new standard but anticipate to apply a cumulative effects adjustment on January 1, 2017. Going forward, we will recognize revenue upon shipment less an allowance for estimated returns.

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.