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NOTE 11 — Commitments and Contingencies
 6 Months Ended
Jun. 30, 2021
Commitments and Contingencies Disclosure [Abstract]  
NOTE 11 — Commitments and Contingencies

NOTE 11 — 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 1st of each year. In June 2020, the Company also signed a two-year equipment operating lease agreement.

 

In January 2019, the Company adopted ASU 2016-02, Leases (Topic 842) and recognized a right-to-use asset and a lease liability using a discount rate of 6.25% per annum. On June 30, 2021, the balances of right-of-use assets and liabilities for the operating lease were approximately $413,810 and $508,328, respectively, compared to approximately $609,331 and $741,351, respectively, at December 31, 2020.

 

The Newark office space lease expense was $107,218 and $214,437 for the three and six months ended June 30, 2021, respectively.

 

 

Cash payments included in the measurement of the Company’s operating lease liabilities were $126,516 and $253,032 for the three and six months ended June 30, 2021, respectively, compared to $117,268 and $234,537, respectively, for the corresponding prior year periods.

 

Future minimum lease payments under the operating lease at June 30, 2021 are shown below:

 

         
Annual minimum payments:  Amount
2021 (July 1 to December 31, 2021)   262,789 
2022 (through June 30, 2022)   262,789 
Total minimum payments   525,578 
Less: Present value factor   (17,250)
Total operating lease liabilities   508,328 
Less: Current portion of operating lease   (508,328)
Long-term portion of operating lease   —   

 

Purchase Commitments

As of June 30, 2021, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of approximately $10,858,000.

 

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.