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Note 3 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

NOTE 3 — Commitments and Contingencies

Operating Lease Obligations

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. Rental expense under the operating lease for the years ended December 31, 2019 and 2018 was $412,833.

Cash payments included in the measurement of our operating lease liabilities were $460,053 for 2019, compared to $442,359 for 2018.

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

Annual minimum payments:	Amount
2020	$	478,455
2021		497,594
2022		253,675
Total minimum payments		1,229,724
Less: Present value factor		(253,675	)
Total operating lease liabilities		1,134,349
Less: Current portion of operating lease		(419,288	)
Long-term portion of operating lease	$	715,062

Finance Lease Obligations

The Company leases certain of its equipment under finance leases. The leases are collateralized by the underlying assets. At December 31, 2019 and 2018, property and equipment with costs of $100,584, were subject to such financing arrangements. The accumulated depreciation of the assets associated with the finance leases as of December 31, 2019 and December 31, 2018, amounted to $92,571 and $76,546 respectively.

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

Annual minimum payments:	Amount
2020	$	8,455
Less amount representing interest		(164	)
Present value of net minimum payments	$	8,291
Current portion of finance leases		(8,291	)
Long-term portion of finance leases	$	—

Purchase Commitments

At December 31, 2019, the Company’s non-cancelable purchase commitments for inventory to be used in the ordinary course of business during 2020 were approximately $3,554,000.

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.