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Note 9 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

NOTE 9 — 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. The Company recognizes operating lease expense on a straight-line basis over the lease term and the operating lease expense for the first quarter of both 2019 and 2018 was $103,208.

The Company adopted ASU 2016-02, Leases (Topic 842) effective January 1, 2019 and restated its reported results in January 2018, including the recognition of additional operating lease right-of-use assets and liabilities. On January 1, 2018, the Company recorded operating lease right-of-use assets and operating lease liabilities in the amount of approximately $1.57 million and $1.85 million, respectively. On March 31, 2019, the balances of right-of-use assets and liabilities for the operating lease are approximately $1.19 million and $1.42 million, respectively, compared to approximately $1.27 million and $1.51 million, respectively, at December 31, 2018.

Cash payments included in the measurement of our operating lease liabilities were $112,758 and $108,421 for the three months ended March 31, 2019 and 2018, respectively.

Future minimum lease payments under the operating lease at March 31, 2019 are shown below:

Annual minimum payments:	Amount
2019 (April 1, 2019 to December 31, 2019)	$	347,295
2020		478,455
2021		497,594
2022 (through June 30, 2022)		253,675
Total minimum payments	$	1,577,019

Finance Leases

The new standard, ASU 2016-02 classifies lessee leases into two types, operating and finance. The Company leases certain of its equipment under finance leases. The leases are collateralized by the underlying assets. At March 31, 2019 and December 31, 2018, equipment with a cost of $100,584 was subject to such financing arrangements. The accumulated depreciation of the assets associated with the finance leases as of March 31, 2019 and December 31, 2018, amounted to $80,552 and $76,546 respectively.

Future minimum payments under finance lease and equipment financing arrangements as of March 31, 2019 are as follows:

Annual minimum payments:	Amount
2019 (April 1, 2019 to December 31, 2019)	$	12,646
2020		8,454
Total minimum payments		21,100
Less amount representing interest		(921	)
Present value of net minimum payments		20,179
Short term portion of capital leases		(15,999	)
Long term portion of capital leases	$	4,180

Purchase Commitments

As of March 31, 2019, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of approximately $4,834,000.

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.