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NOTE 11 — Commitments and Contingencies
 9 Months Ended
Sep. 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 on July 1st of each year. In June 2020, the Company also signed a two-year equipment operating lease agreement.

 

 

SOCKET MOBILE, INC. 

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2021

 

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 September 30, 2021, the balances of right-of-use assets and liabilities for the operating lease were approximately $0.31 million and $0.38 million, respectively, compared to approximately $0.61 million and $0.74 million, respectively, at December 31, 2020.

 

The Newark office space lease expense was $103,208 and $309,625 for the three and nine months ended September 30, 2021, respectively.

 

Cash payments included in the measurement of the Company’s operating lease liabilities were $131,395 and $384,427 for the three and nine months ended September 30, 2021, respectively, compared to $123,478 and $356,513, respectively, for the corresponding prior year periods.

 

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

 

      
Annual minimum payments:  Amount
2021 (October 1 to December 31, 2021)   131,395 
2022 (through June 30, 2022)   262,789 
Total minimum payments   394,184 
Less: Present value factor   (10,004)
Total operating lease liabilities   384,180 
Less: Current portion of operating lease   (384,180)
Long-term portion of operating lease   —   

   

Purchase Commitments

As of September 30, 2021, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of approximately $9,697,000.

 

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.

 

 

SOCKET MOBILE, INC. 

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2021