Socket Mobile (SCKT) 10-Q 13 Aug 15 2015 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 07, 2015
Document And Entity Information
Entity Registrant Name	SOCKET MOBILE, INC.
Entity Central Index Key	944,075
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		5,557,623
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2,015

Balance Sheets

Balance Sheets - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 830,224	$ 632,631
Accounts receivable, net	1,946,415	1,896,701
Inventories	621,092	957,327
Prepaid expenses and other current assets	89,626	125,707
Total current assets	3,487,357	3,612,366
Property and equipment:
Machinery and office equipment	2,069,271	2,025,397
Computer equipment	990,505	984,099
Property and equipment, gross	3,059,776	3,009,496
Accumulated depreciation	(2,852,913)	(2,764,964)
Property and equipment, net	206,863	244,532
Goodwill	4,427,000	4,427,000
Other assets	90,918	85,918
Total assets	8,212,138	8,369,816
Current liabilities:
Accounts payable and accrued expenses	2,320,514	3,007,048
Accrued payroll and related expenses	493,494	528,155
Bank line of credit	815,819	815,981
Deferred income on shipments to distributors	972,193	978,555
Related party and other short term notes payable	600,000	600,000
Related party convertible notes payable-current portion	380,696	380,696
Short term portion of deferred service revenue	111,468	131,344
Short term portion of capital leases and deferred rent	24,950	25,102
Total current liabilities	5,719,134	6,466,881
Related party convertible notes payable	371,929	371,929
Long term portion of deferred service revenue	65,503	83,301
Long term portion of capital leases and deferred rent	277,120	275,589
Deferred income taxes	159,244	143,274
Total liabilities	$ 6,592,930	$ 7,340,974
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value: Authorized – 20,000,000 shares, Issued and outstanding – 5,548,030 shares at June 30, 2015 and 5,403,851 shares at December 31, 2014	$ 5,548	$ 5,404
Additional paid-in capital	61,974,710	61,713,995
Accumulated deficit	(60,361,050)	(60,690,557)
Total stockholders’ equity	1,619,208	1,028,842
Total liabilities and stockholders’ equity	$ 8,212,138	$ 8,369,816

Balance Sheets (Parenthetical)

Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
LIABILITIES AND STOCKHOLDERS' EQUITY
Common stock par value	$ 0.001	$ 0.001
Common stock, shares authorized	20,000,000	20,000,000
Common stock, shares issued	5,548,030	5,403,851
Common stock, shares outstanding	5,548,030	5,403,851

Statements of Income

Statements of Income - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Statement [Abstract]
Revenues	$ 4,485,253	$ 4,391,072	$ 8,490,997	$ 8,186,411
Cost of revenues	2,370,284	2,490,507	4,568,390	4,662,786
Gross profit	2,114,969	1,900,565	3,922,607	3,523,625
Operating expenses:
Research and development	550,284	586,371	1,125,335	1,140,057
Sales and marketing	609,308	526,834	1,227,574	1,002,780
General and administrative	466,326	511,827	1,069,552	1,032,750
Total operating expenses	1,625,918	1,625,032	3,422,461	3,175,587
Operating income	489,051	275,533	500,146	348,038
Interest expense and other, net	$ (79,999)	(113,234)	(154,669)	(249,178)
Loss on extinguishment of debt		(61,500)		61,500
Net income before income taxes	$ 409,052	100,799	345,477	37,360
Income tax expense	(7,985)	(7,985)	(15,970)	(15,970)
Net income	$ 401,067	$ 92,814	$ 329,507	$ 21,390
Net income per share:
Basic	$ 0.07	$ 0.02	$ 0.06	$ 0
Diluted	$ 0.07	$ 0.02	$ 0.06	$ 0
Weighted average shares outstanding:
Basic	5,545,270	4,915,710	5,529,429	4,906,803
Diluted	5,911,253	5,162,197	5,960,681	4,961,413

Statements of Cash Flows

Statements of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Operating activities
Net income	$ 329,507	$ 21,390
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	96,455	115,794
Depreciation and amortization	99,697	153,120
Deferred income tax expense	15,970	15,970
Loss on extinguishment of debt		61,500
Changes in operating assets and liabilities:
Accounts receivable	(49,714)	(776,326)
Inventories	336,235	377,332
Prepaid expenses and other current assets	36,081	(111,983)
Other assets	(5,000)
Accounts payable and accrued expenses	(686,534)	208,170
Accrued payroll and related expenses	(34,661)	(1,065)
Deferred income on shipments to distributors	(6,362)	44,768
Deferred service revenue	(37,674)	(5,999)
Change in deferred rent	13,644	21,059
Net cash provided by operating activities	107,644	123,730
Investing activities
Purchases of equipment	(62,028)	(61,900)
Net cash used in investing activities	(62,028)	(61,900)
Financing activities
Payments on capital leases	(12,265)	(11,201)
Proceeds from borrowings under bank line of credit agreement	29,190	1,695,778
Repayments of borrowings under bank line of credit agreement	(29,352)	(1,644,690)
Stock options exercised	33,154	6,993
Warrants exercised	131,250	12,500
Redemption of related party convertible note payable		(25,000)
Net cash provided by financing activities	151,977	34,380
Net increase in cash and cash equivalents	197,593	96,210
Cash and cash equivalents at beginning of period	632,631	606,255
Cash and cash equivalents at end of period	830,224	702,465
Supplemental cash flow information
Cash paid for interest	$ 81,443	$ 190,063

Basis of Presentation

Basis of Presentation	6 Months Ended
	Jun. 30, 2015
Basis Of Presentation
Basis of Presentation	NOTE 1 — Basis of Presentation The accompanying unaudited financial statements of Socket Mobile, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals considered necessary for fair presentation have been included. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future period. These financial statements should be read in conjunction with the audited financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The financial statements in the Company’s annual report on Form 10-K were prepared on a going concern basis. Liquidity and Going Concern The Company was profitable in the quarter and six months ended June 30, 2015. In 2014, the Company generated $0.4 million in net income. Except for fiscal years 2014 and 2004, the Company has incurred significant operating losses in each financial period since inception. As of June 30, 2015, the Company has an accumulated deficit of $60,361,050. The Company’s cash balances at June 30, 2015 were $830,224, including $815,819 advanced on its bank lines of credit. At June 30, 2015, the Company had an additional unused borrowing capacity of approximately $493,000 on its bank lines of credit. The Company’s balance sheet at June 30, 2015 has a current ratio (current assets divided by current liabilities) of 0.61 to 1.0, and a working capital deficit of $2,231,777 (current assets less current liabilities). These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. The Company has taken actions to reduce its expenses and align its cost structure with economic conditions. The Company has the ability to further reduce expenses if necessary. Steps taken by the Company intended to maintain profitability include limited growth of headcount to manage payroll costs, the introduction of new products, and continued close support of its distributors and registered developers whose applications support the use of the Company’s barcode scanning products. The Company believes it will be able to further improve its liquidity and secure additional sources of financing by managing its working capital balances, making use of its bank lines of credit, and raising additional capital as needed including the issuance of additional equity securities. However, there can be no assurance that additional capital will be available on acceptable terms, if at all, and any such terms may be dilutive to existing stockholders. The Company’s bank lines of credit may be terminated by the bank or by the Company at any time. If the Company cannot maintain profitability, it will not be able to support its operations from positive cash flows, and instead will use its existing cash to support operating losses. If the Company is unable to secure the necessary capital for its business, it may need to suspend some or all of its current operations. To maintain revenue growth and profitability, the Company anticipates requirements for cash will include funding of higher receivable and inventory balances, and increased expenses, including an increase of costs relating to new employees to support its growth and increases in salaries, benefits, and related support costs for employees. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the Company’s inability to continue as a going concern.

Summary of Significant Accounti

Summary of Significant Accounting Policies	6 Months Ended
	Jun. 30, 2015
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	NOTE 2 — Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates, and such differences may be material to the financial statements. Cash Equivalents and Fair Value of Financial Instruments The Company considers all highly liquid investments purchased with an original maturity date of 90 days or less at date of purchase to be cash equivalents. At June 30, 2015 and December 31, 2014, all of the Company’s cash and cash equivalents consisted of amounts held in demand and money market deposits in banks. The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, debt and foreign exchange contracts approximate fair value due to the relatively short period of time to maturity.

Inventories

Inventories	6 Months Ended
	Jun. 30, 2015
Inventory Disclosure [Abstract]
Inventories	NOTE 3 — Inventories Inventories consist principally of raw materials and sub-assemblies, which are stated at the lower of cost (first-in, first-out) or market. June 30, December 31, 2015 2014 Raw materials and sub-assemblies $ 602,545 $ 930,886 Finished goods 18,547 26,441 $ 621,092 $ 957,327

Related Party Convertible Notes

Related Party Convertible Notes Payable	6 Months Ended
	Jun. 30, 2015
Related Party Transactions [Abstract]
Related Party Convertible Notes Payable	NOTE 4 — Related Party Convertible Notes Payable Short Term Related Party Convertible Notes Payable Short term related party convertible notes payable at June 30, 2015 and December 31, 2014 were $380,696. The notes were issued on September 4, 2013 to officers and directors of the Company and mature on September 4, 2017. The notes have an interest rate of 8% per annum that compounds quarterly, and contain a holder call provision that became effective on September 4, 2014. Accrued interest convertible into common stock was $59,121 and $42,179 at June 30, 2015 and December 31, 2014, respectively and was included in Accounts Payable and Accrued Expenses. Interest expense for the three and six months ended June 30, 2015 was $8,601and $16,942, respectively. Interest expense for the three and six months ended June 30, 2014 was $7,946 and $15,652, respectively. The notes and accrued interest are convertible into common stock at the option of the holder at $2.44 per share as long as warrants issued on November 19, 2010 are outstanding (warrants expire May 20, 2016) or at $1.25 per share. The convertible notes are secured by all of the assets of the Company and are subordinated to amounts outstanding under the Company’s working capital bank line of credit with the Company’s bank. Long Term Related Party Convertible Notes Payable Long term related party convertible notes payable at June 30, 2015 and December 31, 2014 were $371,929. The notes were issued on September 4, 2013 to the Company’s Chairman and mature on September 4, 2017. The notes have an interest rate of 18% per annum that compounds quarterly. Accrued interest was $140,772 and $97,900 at June 30, 2015 and December 31, 2014, respectively, and was included in Accounts Payable and Accrued Expenses. Interest expense for the three and six months ended June 30, 2015 was $22,020 and $42,873, respectively. Interest expense for the three and six months ended June 30, 2014 was $18,465 and $35,952, respectively. The notes and accrued interest are convertible into common stock at the option of the holder at $2.44 per share as long as warrants issued on November 19, 2010 are outstanding (warrants expire May 20, 2016) or at $1.25 per share. The convertible notes are secured by all of the assets of the Company and are subordinated to amounts outstanding under the Company’s working capital bank line of credit with the Company’s bank.

Related Party and Other Short-T

Related Party and Other Short-Term Notes Payable	6 Months Ended
	Jun. 30, 2015
Related Party Transactions [Abstract]
Related Party and Other Short-Term Notes Payable	NOTE 5 — Related Party and Other Short Term Notes Payable On January 31, 2013, the Company’s Board of Directors approved a subordinated line of credit of up to $1,000,000 including up to $550,000 in advances by the Company’s Chairman. The funds raised are being used for working capital purposes. On June 30, 2015 and December 31, 2014, a total of $600,000 in notes payable were outstanding under this line, of which $450,000 and $50,000 respectively were from the Company’s Chairman and Chief Executive Officer and $100,000 was from an investor. The notes mature on June 1, 2016, are repayable at the Company’s discretion, and have an interest rate of 18% per annum payable monthly in cash. Beginning October 1, 2014, investors may request note repayment. Balances under the line of credit are secured by all of the assets of the Company and are subordinated to amounts outstanding under the Company’s credit facility with its bank. Interest expense for the three and six month periods ended June 30, 2015 related to the line of credit were $26,926 and $53,556, respectively. Interest expense for the three and six month periods ended June 30, 2014 related to the line of credit were $66,867 and $150,439, respectively. On July 31, 2015, the Company repaid the $100,000 note to its investor.

Bank Financing Arrangements

Bank Financing Arrangements	6 Months Ended
	Jun. 30, 2015
Debt Disclosure [Abstract]
Bank Financing Arrangements	NOTE 6 — Bank Financing Arrangements On February 27, 2014, the Company entered into a new credit facility agreement with Bridge Bank (the “Bank”). The credit facility was activated and transfer of the credit facility from the Company’s former bank was completed on March 7, 2014. The initial revolving credit line agreement was for a two year period ending February 27, 2016. On March 23, 2015, the Company signed a Business Financing Modification Agreement by and between the Company and the Bank to extend the expiration date of the revolving credit line agreement for the domestic (U.S. based) portion of the line from February 27, 2016 to February 27, 2017. All other terms and the expiration date of the international portion of the revolving credit line agreement remain unchanged. Under the terms of the credit facility agreement with the Bank, the Company may borrow up to $2.5 million, of which up to $1.5 million is based on qualified receivables from domestic customers and up to $1.0 million is based on qualified receivables from international customers. The Company’s total borrowings under the line may not exceed 50% of the sum of cash plus qualified receivables. Advances against the domestic and international lines are calculated at 70% of qualified receivables. Borrowings under the lines bear an annual interest rate equal to the Bank’s prime rate (minimum of 3.25%) plus 1.5%. The annual interest rate in effect is 4.75% per annum. There is also a collateral handling fee of 0.2% per month of the financed receivables outstanding. The applicable interest and fees are calculated based on the actual amounts borrowed. At June 30, 2015, the effective rate (interest plus all applicable fees) on actual cash advanced is 7.15% per annum. The borrowings under the credit facility are secured by a first priority security interest in the assets of the Company. All advances are at the Bank’s discretion and the Bank is not obligated to make advances. The agreement may be terminated by the Company or by the Bank at any time. The outstanding amounts borrowed under the domestic line at June 30, 2015 were $815,891, and the full amounts of accounts receivable provided as collateral were $1,160,000. There were no amounts borrowed under the international line at June 30, 2015. Total interest expense on the amounts drawn under the Company’s bank credit lines in effect during the three and six months ended June 30, 2015, was $14,621 and $29,190, respectively. Interest expense on the amounts drawn during the three and six months ended June 30, 2014 was $14,981 and $39,010, respectively. Accrued interest related to the amounts outstanding under the Company’s bank lines of credit at June 30, 2015 and December 31, 2014 was $3,820 and $3,981, respectively.

Segment Information and Concent

Segment Information and Concentrations	6 Months Ended
	Jun. 30, 2015
Segment Reporting [Abstract]
Segment Information and Concentrations	NOTE 7 — Segment Information and Concentrations Segment Information The Company operates in one segment—mobile systems solutions for businesses. Mobile systems solutions typically consist of a handheld computer or other mobile device such as a smartphone or tablet, some with data collection peripherals, and third-party vertical applications software. The Company markets its products in the United States and foreign countries through its sales personnel and distributors. Revenues for the geographic areas were as follows: Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Revenues: United States $ 3,575,031 $ 3,616,007 $ 6,408,976 $ 6,298,084 Europe 716,952 489,303 1,400,115 1,234,373 Asia and rest of world 193,270 285,762 681,906 653,954 Total revenues $ 4,485,253 $ 4,391,072 $ 8,490,997 $ 8,186,411 Export revenues are attributable to countries based on the location of the Company’s customers. The Company does not hold long-lived assets in foreign locations. Major Customers Customers who accounted for at least 10% of the Company’s total revenues in the three and six month periods ended June 30, 2015 and 2014 were: Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Ingram Micro Inc. 33 % 35 % 29 % 34 % ScanSource, Inc. 21 % 25 % 20 % 19 % BlueStar, Inc. 21 % 18 % 21 % 17 % Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk include cash, cash equivalents and accounts receivable. The Company invests its cash in demand and money market deposit accounts in banks. To date, the Company has not experienced losses on these investments. The Company’s trade accounts receivables are primarily with distributors. The Company performs ongoing credit evaluations of its customers’ financial condition but the Company generally requires no collateral. Reserves are maintained for potential credit losses, and such losses have been within management’s expectations. Customers who accounted for at least 10% of the Company’s accounts receivable balances at June 30, 2015 and December 31, 2014 were as follows: June 30, December 31, 2015 2014 Company A 35 % 42 % Company B 30 % 25 % Company C 21 % 14 % Concentration of Suppliers Several of the Company’s component parts are produced by a sole or limited number of suppliers. Shortages could occur in these essential materials due to increased demand, or to an interruption of supply. Suppliers may choose to restrict credit terms or require advance payments causing delays in the procurement of essential materials. If the Company was unable to procure certain of such materials, it could have a material adverse effect upon its results. At June 30, 2015 and December 31, 2014, 17% and 22%, respectively, of the Company’s accounts payable balances were concentrated in a single supplier. For the three months ended June 30, 2015, the top two suppliers accounted for 61% of the inventory purchases.

Stock-Based Compensation

Stock-Based Compensation	6 Months Ended
	Jun. 30, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Share-Based Compensation Plan	NOTE 8 — Stock-Based Compensation The Company recognizes the compensation cost in the financial statements for all stock-based awards to employees, including grants of employee stock options, based on the fair value of the awards as of the date that the awards are issued. The fair values of stock options are generally determined using a binomial lattice valuation model that incorporates assumptions about expected volatility, risk-free interest rate, dividend yield, and expected life. Compensation cost for stock-based awards is recognized on a straight-line basis over the vesting period. Total stock-based compensation expense for the three and six months ended June 30, 2015, was $49,887 and $96,455, respectively. Total stock-based compensation expense for the three and six months ended June 30, 2014, was $63,548 and $115,794, respectively. In the three and six months ended June 30, 2015, 37,400 and 238,600 stock options were granted at weighted average per share fair values estimated at $1.38 and $1.57, respectively.

Net Income Per Share Applicable

Net Income Per Share Applicable to Common Stockholders	6 Months Ended
	Jun. 30, 2015
Net income per share:
Net Income Per Share Applicable to Common Stockholders	NOTE 9 — Net Income Per Share Applicable to Common Stockholders The following table sets forth the computation of basic and diluted net income per share: Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Numerator: Net income $ 401,067 $ 92,814 $ 329,507 $ 21,390 Denominator: Weighted average common shares outstanding used in computing net income per share: Basic 5,545,270 4,915,710 5,529,429 4,906,803 Diluted 5,911,253 5,162,197 5,960,681 4,961,413 Net income per share: Basic $ 0.07 $ 0.02 $ 0.06 $ 0.00 Diluted $ 0.07 $ 0.02 $ 0.06 $ 0.00

Income Taxes

Income Taxes	6 Months Ended
	Jun. 30, 2015
Income Tax Disclosure [Abstract]
Taxes	NOTE 10 — Income Taxes Income tax expense during the three and six months ended June 30, 2015 and 2014, and the deferred income tax amounts shown on the Company’s Balance Sheets, is related entirely to the deferred tax liability on the portion of the Company’s goodwill amortized for tax purposes. Due to the indefinite characteristic of this deferred tax liability, it cannot be offset against deferred tax assets. As a result, the Company recognized deferred tax expense of $7,985 and $15,970 in each of the three and six month periods ended June 30, 2015 and 2014. At December 31, 2014, the Company has an unrecognized tax benefit of approximately $730,000, which did not change significantly during the three months ended June 30, 2015. Future changes in the unrecognized tax benefit are unlikely to have an impact on the effective tax rate due to the full valuation allowance recorded on the Company’s deferred tax assets, as realization of the deferred tax assets is dependent upon future taxable income.

Commitments and Contingencies

Commitments and Contingencies	6 Months Ended
	Jun. 30, 2015
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingency	NOTE 11 — 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. Rental expense was $107,098 and $214,598 for the three and six month periods ended June 30, 2015, respectively. Rental expense for the three and six month periods ended June 30, 2014 was $107,403 and $214,468, respectively. The Company recorded a deferred rent obligation in accrued liabilities in the amount of $277,120 and $263,476 at June 30, 2015 and December 31, 2014, respectively. Future minimum lease payments under the operating lease at June 30, 2015 are as shown below: Annual minimum payments: Amount 2015 (July 1, 2015 to December 31, 2015) $ 200,483 2016 408,986 2017 425,345 2018 442,359 2019 to 2022 1,689,777 Total minimum payments $ 3,166,950 Capital Lease Obligations The Company leases certain of its equipment under capital leases. These leases are collateralized by their underlying assets. At June 30, 2015 and December 31, 2014, property and equipment with a cost of $87,945 were subject to such financing arrangements. Related accumulated amortization at June 30, 2015 and December 31, 2014 amounted to $65,435 and $53,761, respectively. Future minimum payments under capital lease and equipment financing arrangements as of June 30, 2015, are as follows: Annual minimum payments: Amount 2015 (July 1, 2015 to December 31, 2015) $ 13,766 2016 12,449 Total minimum payments 26,215 Less amount representing interest (1,265 ) Present value of net minimum payments 24,950 Short term portion of capital leases (24,950 ) Long term portion of capital leases $ — Purchase Commitments As of June 30, 2015, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of approximately $1,689,000. 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. We are currently not a party to any material legal proceedings.

Subsequent Event

Subsequent Event	6 Months Ended
	Jun. 30, 2015
Subsequent Events [Abstract]
Subsequent Event	NOTE 12 — Subsequent Events In early July of 2015, one of the Company’s OEM customers placed a $1.6 million last time buy order expected to be delivered during the fourth quarter of 2015 and the first quarter of 2016. On July 31, 2015, the Company repaid a $100,000 subordinated short term note to its investor.

Summary of Significant Accoun18

Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2015
Accounting Policies [Abstract]
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates, and such differences may be material to the financial statements.
Cash Equivalents and Fair Value of Financial Instruments	Cash Equivalents and Fair Value of Financial Instruments The Company considers all highly liquid investments purchased with an original maturity date of 90 days or less at date of purchase to be cash equivalents. At June 30, 2015 and December 31, 2014, all of the Company’s cash and cash equivalents consisted of amounts held in demand and money market deposits in banks. The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, debt and foreign exchange contracts approximate fair value due to the relatively short period of time to maturity.

Inventories (Tables)

Inventories (Tables)	6 Months Ended
	Jun. 30, 2015
Inventory Disclosure [Abstract]
Inventory components	Inventories consist principally of raw materials and sub-assemblies, which are stated at the lower of cost (first-in, first-out) or market. June 30, December 31, 2015 2014 Raw materials and sub-assemblies $ 602,545 $ 930,886 Finished goods 18,547 26,441 $ 621,092 $ 957,327

Segment Information and Conce20

Segment Information and Concentrations (Tables)	6 Months Ended
	Jun. 30, 2015
Segment Reporting [Abstract]
Revenue by geographic areas	Revenues for the geographic areas were as follows: Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Revenues: United States $ 3,575,031 $ 3,616,007 $ 6,408,976 $ 6,298,084 Europe 716,952 489,303 1,400,115 1,234,373 Asia and rest of world 193,270 285,762 681,906 653,954 Total revenues $ 4,485,253 $ 4,391,072 $ 8,490,997 $ 8,186,411
Major customers accounted for at least 10% of total revenues	Customers who accounted for at least 10% of the Company’s total revenues in the three and six month periods ended June 30, 2015 and 2014 were: Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Ingram Micro Inc. 33 % 35 % 29 % 34 % ScanSource, Inc. 21 % 25 % 20 % 19 % BlueStar, Inc. 21 % 18 % 21 % 17 %
Major customers as a percentage of net accounts receivable balances	Customers who accounted for at least 10% of the Company’s accounts receivable balances at June 30, 2015 and December 31, 2014 were as follows: June 30, December 31, 2015 2014 Company A 35 % 42 % Company B 30 % 25 % Company C 21 % 14 %

Net Income Per Share Applicab21

Net Income Per Share Applicable to Common Stockholders (Tables)	6 Months Ended
	Jun. 30, 2015
Net income per share:
Net income per share applicable to common stockholders	The following table sets forth the computation of basic and diluted net income per share: Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Numerator: Net income $ 401,067 $ 92,814 $ 329,507 $ 21,390 Denominator: Weighted average common shares outstanding used in computing net income per share: Basic 5,545,270 4,915,710 5,529,429 4,906,803 Diluted 5,911,253 5,162,197 5,960,681 4,961,413 Net income per share: Basic $ 0.07 $ 0.02 $ 0.06 $ 0.00 Diluted $ 0.07 $ 0.02 $ 0.06 $ 0.00

Commitments and Contingencies (

Commitments and Contingencies (Tables)	6 Months Ended
	Jun. 30, 2015
Commitments and Contingencies Disclosure [Abstract]
Future minimum payments for operating leases	Future minimum lease payments under the operating lease at June 30, 2015 are as shown below: Annual minimum payments: Amount 2015 (July 1, 2015 to December 31, 2015) $ 200,483 2016 408,986 2017 425,345 2018 442,359 2019 to 2022 1,689,777 Total minimum payments $ 3,166,950
Future minimum payments under capital lease and equipment financing arrangements	Future minimum payments under capital lease and equipment financing arrangements as of June 30, 2015, are as follows: Annual minimum payments: Amount 2015 (July 1, 2015 to December 31, 2015) $ 13,766 2016 12,449 Total minimum payments 26,215 Less amount representing interest (1,265 ) Present value of net minimum payments 24,950 Short term portion of capital leases (24,950 ) Long term portion of capital leases $ —

Liquidity and Going Concern (De

Liquidity and Going Concern (Details Narrative)	Jun. 30, 2015USD ($)	Dec. 31, 2014USD ($)	Jun. 30, 2014USD ($)	Dec. 31, 2013USD ($)
Liquidity And Going Concern Details Narrative
Accumulated deficit	$ 60,361,050
Cash balance	830,224	$ 632,631	$ 702,465	$ 606,255
Total unused borrowing capacity	493,000
Bank line of credit	$ 815,819
Current ratio (current assets divided by current liabilities)	0.61
Working capital deficit	$ 2,231,777

Inventory Components (Details)

Inventory Components (Details) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Inventory, Net, Items Net of Reserve Alternative [Abstract]
Raw materials and sub-assemblies	$ 602,545	$ 930,886
Finished goods	18,547	26,441
Total	$ 621,092	$ 957,327

Related Party Convertible Not25

Related Party Convertible Notes Payable (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Related Party Convertible Notes Payable Details Narrative
Short term related party convertible notes payable	$ 380,696		$ 380,696		$ 380,696
Long term related party convertible notes payable	$ 371,929		$ 371,929		$ 371,929
Conversion price if warrants issued on November 19, 2010 (warrants expire May 20, 2016) are outstanding	$ 2.44		$ 2.44		$ 2.44
Conversion price if warrants issued on November 19, 2010 (warrants expire May 20, 2016) are not outstanding	$ 1.25		$ 1.25		$ 1.25
Annual interest rate on short term convertible notes payable, compounded quarterly	8.00%		8.00%		8.00%
Annual interest rate on long term convertible notes payable, compounded quarterly	18.00%		18.00%		18.00%
Related party convertible notes payable maturity date					Sep. 4, 2017
Accrued interest on short term related party convertible notes payable	$ 59,121		$ 59,121		$ 42,179
Accrued interest on long term related party convertible notes payable	140,772		140,772		$ 97,900
Interest expense on short term related party convertible notes payable	8,601	$ 7,946	16,942	$ 15,652
Interest expense on long term related party convertible notes payable	$ 22,020	$ 18,465	$ 42,873	$ 35,952

Related Party and Other Short T

Related Party and Other Short Term Notes Payable (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended		7 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Jul. 31, 2015	Dec. 31, 2014
Notes payable to Chairman
Maximum amount of note payable	$ 550,000		$ 550,000
Amount outstanding	450,000		450,000			$ 450,000
Notes payable to CEO
Amount outstanding	50,000		$ 50,000			50,000
Related party and other short term notes payable
Subordinated line of credit initiation date			Jan. 31, 2013
Maximum amount of note payable	$ 1,000,000		$ 1,000,000
Annual interest rate payable monthly	18.00%	18.00%	18.00%	18.00%
Maturity date			Jun. 1, 2016
Amount outstanding	$ 600,000		$ 600,000			$ 600,000
Interest expense for notes payable	$ 26,926	$ 66,867	$ 53,556	$ 150,439
Repayment of Other Short-Term Note					$ 100,000

Bank Financing Arrangements (De

Bank Financing Arrangements (Details Narrative) - USD ($)	Mar. 07, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014	Feb. 27, 2014
Line of credit initiation date				Feb. 27, 2014
Aggregate maximum advance amount							$ 2,500,000
Borrowing capacity description				Advances against the domestic and international lines are calculated at 70% of qualified receivables.
Debt reference rate	0.0475			Bank's Prime Rate
Minimum interest rate on debt (as a percent)							3.25%
Basis point added to reference rate of debt							1.50%
Monthly collateral handling fee							0.20%
Effective rate on cash advances							7.15%
Amount outstanding		$ 815,819		$ 815,819		$ 815,981
Interest expense		79,999	$ 113,234	154,669	$ 249,178
Domestic Line of Credit
Aggregate maximum advance amount		1,500,000		1,500,000
Amount outstanding		815,819		815,819
Interest expense		14,621	$ 14,981	29,190	$ 39,010
Accrued interest		$ 3,820		$ 3,820		$ 3,981
Line of credit expiration date		Feb. 27, 2017		Feb. 27, 2017
Foreign Line of Credit
Aggregate maximum advance amount		$ 1,000,000		$ 1,000,000
Line of credit expiration date		Feb. 27, 2016		Feb. 27, 2016

Revenue by Geographic Areas (De

Revenue by Geographic Areas (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenues:	$ 4,485,253	$ 4,391,072	$ 8,490,997	$ 8,186,411
United States
Revenues:	3,575,031	3,616,007	6,408,976	6,298,084
Europe
Revenues:	716,952	489,303	1,400,115	1,234,373
Asia and rest of world
Revenues:	$ 193,270	$ 285,762	$ 681,906	$ 653,954

Major Customers Accounted for a

Major Customers Accounted for at Least 10% of Total Revenues (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Ingram Micro Inc.
Percent of total revenues	33.00%	35.00%	29.00%	34.00%
Threshold percentage for disclosure	10.00%	10.00%	10.00%	10.00%
Scansource, Inc.
Percent of total revenues	21.00%	25.00%	20.00%	19.00%
Threshold percentage for disclosure	10.00%	10.00%	10.00%	10.00%
BlueStar, Inc.
Percent of total revenues	21.00%	18.00%	21.00%	17.00%
Threshold percentage for disclosure	10.00%	10.00%	10.00%	10.00%

Major Customers as a Percentage

Major Customers as a Percentage of Net Accounts Receivable Balances (Details)	Jun. 30, 2015	Dec. 31, 2014
Company A
Percent of net accounts receivable balances	35.00%	42.00%
Threshold percentage for disclosure	10.00%	10.00%
Company B
Percent of net accounts receivable balances	30.00%	25.00%
Threshold percentage for disclosure	10.00%	10.00%
Company C
Percent of net accounts receivable balances	21.00%	14.00%
Threshold percentage for disclosure	10.00%	10.00%

Concentration of Suppliers (Det

Concentration of Suppliers (Details Narrative)	3 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Concentration Of Suppliers Details Narrative
Accounts payable balances with a single supplier	17.00%	22.00%
Percentage of inventory purchases from top two suppliers	61.00%

Stock-Based Compensation (Detai

Stock-Based Compensation (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-based compensation expenses	$ 49,887	$ 63,548	$ 96,455	$ 115,794
Stock options granted	37,400		238,600
Weighted average grant price	$ 1.38		$ 1.57

Net Income Per Share Applicab33

Net Income Per Share Applicable to Common Stockholders (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Numerator:
Net income	$ 401,067	$ 92,814	$ 329,507	$ 21,390
Denominator: Weighted average common shares outstanding used in computing net income per share:
Basic	5,545,270	4,915,710	5,529,429	4,906,803
Diluted	5,911,253	5,162,197	5,960,681	4,961,413
Net income per share:
Basic	$ 0.07	$ 0.02	$ 0.06	$ 0
Diluted	$ 0.07	$ 0.02	$ 0.06	$ 0

Taxes (Details Narrative)

Taxes (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Deferred tax expense	$ 7,985	$ 7,985	$ 15,970	$ 15,970
Unrecognized tax benefit					$ 730,000

Commitments and Contingencies35

Commitments and Contingencies (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Commitments and Contingencies Disclosure [Abstract]
Rental expense for operating lease	$ 107,098	$ 107,403	$ 214,598	$ 214,468
Deferred rent	277,120		277,120		$ 263,476
Capital lease obligations	87,945		87,945		87,945
Capital lease accumulated amortization	65,435		65,435		$ 53,761
Non-cancelable purchase commitments for inventory	$ 1,689,000		$ 1,689,000

Future Minimum Payments For Ope

Future Minimum Payments For Operating Leases (Details)	Jun. 30, 2015USD ($)
Annual minimum payments:
2015 (July 1, 2015 to December 31, 2015)	$ 200,483
2,016	408,986
2,017	425,345
2,018	442,359
2019 to 2022	1,689,777
Total minimum payments	$ 3,166,950

Future Minimum Payments Under C

Future Minimum Payments Under Capital Lease And Equipment Financing Arrangements (Details)	Jun. 30, 2015USD ($)
Annual minimum payments:
2015 (July 1, 2015 to December 31, 2015)	$ 13,766
2,016	12,449
Total minimum payments	26,215
Less amount representing interest	(1,265)
Present value of net minimum payments	24,950
Short term portion of capital leases	(24,950)
Long term portion of capital leases	$ 0

Subsequent Event (Details Narra

Subsequent Event (Details Narrative)	7 Months Ended
	Jul. 31, 2015
Subsequent Events [Abstract]
Subsequent event	In early July of 2015, one of the Company’s OEM customers placed a $1.6 million last time buy order expected to be delivered during the fourth quarter of 2015 and the first quarter of 2016. On July 31, 2015, the Company repaid a $100,000 subordinated short term note to its investor.