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Commitments and Contingencies

3 Months Ended

Mar. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

NOTE 10 — 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 $108,799 and $108,538 for the three periods ended March 31, 2017 and 2016, respectively. The Company recorded a deferred rent obligation in accrued liabilities in the amount of $285,858 and $286,901 at March 31, 2017 and December 31, 2016, respectively.

Future minimum lease payments under the operating lease at March 31, 2017 are shown below:

Annual minimum payments:	Amount
2017 (April 1, 2017 to December 31, 2017)	$	321,094
2018		442,359
2019		460,053
2020		478,455
2021 to 2022		751,269
Total minimum payments	$	2,453,230

Capital Lease Obligations

The Company leases certain of its equipment under capital leases. The leases are collateralized by the underlying assets. At March 31, 2017 and December 31, 2016, equipment with a cost of $100,584 was subject to such financing arrangements. The accumulated depreciation of the assets associated with the capital leases as of March 31, 2017 and December 31, 2016, amounted to $30,260 and $20,173 respectively.

Future minimum payments under capital lease and equipment financing arrangements as of March 31, 2017 are as follows:

Annual minimum payments:	Amount
2017 (April 1, 2017 to December 31, 2017)	$	22,639
2018		27,607
2019		18,635
2020		9,545
Total minimum payments		78,426
Less amount representing interest		(5,515	)
Present value of net minimum payments		72,911
Short term portion of capital leases		(27,206	)
Long term portion of capital leases	$	45,705

Purchase Commitments

As of March 31, 2017, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of approximately $3,381,000.

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 March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), which simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new guidance removes the present requirement to delay recognition of a windfall tax benefit until it reduces current taxes payable; instead, it is required to be recognized at the time of settlement, subject to normal valuation allowance considerations. We adopted the new standard effective January 1, 2017.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which eliminates the current tests for lease classification under U.S. GAAP and requires lessees to recognize the right-of-use assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. ASU 2016-02 provides that lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. We are assessing the impact that ASU 2016-02 is anticipated to have on our financial statements. We currently expect that most of our operating lease commitments will be subject to the new standard and recognized as lease liabilities and right-of-use assets upon our adoption of ASU 2016-02.

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.