Socket Mobile (SCKT) 10-Q 12 Nov 15 2015 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Nov. 05, 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	Sep. 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		5,597,697
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2,015

Balance Sheets

Balance Sheets - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 862,070	$ 632,631
Accounts receivable, net	2,322,230	1,896,701
Inventories, net	972,122	957,327
Prepaid expenses and other current assets	88,016	125,707
Total current assets	4,244,438	3,612,366
Property and equipment:
Machinery and office equipment	2,157,668	2,025,397
Computer equipment	1,090,103	984,099
Property and equipment, gross	3,247,771	3,009,496
Accumulated depreciation	(2,874,006)	(2,764,964)
Property and equipment, net	373,765	244,532
Goodwill	4,427,000	4,427,000
Other assets	90,918	85,918
Total assets	9,136,121	8,369,816
Current liabilities:
Accounts payable and accrued expenses	2,201,890	3,007,048
Accrued payroll and related expenses	517,397	528,155
Bank line of credit	413,212	815,981
Deferred income	1,888,224	978,555
Related party and other short term notes payable	500,000	600,000
Related party convertible notes payable-current portion	380,696	380,696
Short term portion of deferred service revenue	99,493	131,344
Short term portion of capital leases and deferred rent	19,580	25,102
Total current liabilities	6,020,492	6,466,881
Related party convertible notes payable	371,929	371,929
Long term portion of deferred service revenue	52,953	83,301
Long term portion of deferred rent	280,087	275,589
Deferred income taxes	167,229	143,274
Total liabilities	6,892,690	7,340,974
Stockholders’ equity:
Common stock, $0.001 par value: Authorized – 20,000,000 shares, Issued and outstanding – 5,576,705 shares at September 30, 2015 and 5,403,851 shares at December 31, 2014	5,577	5,404
Additional paid-in capital	62,069,129	61,713,995
Accumulated deficit	(59,831,275)	(60,690,557)
Total stockholders’ equity	2,243,431	1,028,842
Total liabilities and stockholders’ equity	$ 9,136,121	$ 8,369,816

Balance Sheets (Parenthetical)

Balance Sheets (Parenthetical) - $ / shares	Sep. 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	5,576,705	5,403,851
Common stock, shares outstanding	5,576,705	5,403,851

Statements of Operations

Statements of Operations - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Income Statement [Abstract]
Revenues	$ 4,517,898	$ 4,921,596	$ 13,008,895	$ 13,108,007
Cost of revenues	2,279,922	2,777,735	6,848,312	7,440,521
Gross profit	2,237,976	2,143,861	6,160,583	5,667,486
Operating expenses:
Research and development	576,284	611,851	1,701,619	1,751,908
Sales and marketing	609,666	545,654	1,837,240	1,548,434
General and administrative	450,783	466,745	1,520,335	1,499,495
Total operating expenses	1,636,733	1,624,250	5,059,194	4,799,837
Operating income	601,243	519,611	1,101,389	867,649
Interest expense and other, net	$ (63,483)	$ (80,506)	$ (218,152)	(329,684)
Loss on extinguishment of debt				(61,500)
Net income before income taxes	$ 537,760	$ 439,105	$ 883,237	476,465
Income tax expense	(7,985)	(7,985)	(23,955)	(23,955)
Net income	$ 529,775	$ 431,120	$ 859,282	$ 452,510
Net income per share:
Basic	$ 0.10	$ 0.09	$ 0.16	$ 0.09
Diluted	$ 0.09	$ 0.08	$ 0.14	$ 0.09
Weighted average shares outstanding:
Basic	5,560,197	4,934,591	5,539,766	4,916,066
Diluted	5,980,382	5,416,574	5,959,951	5,100,344

Statements of Cash Flows

Statements of Cash Flows - USD ($)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Operating activities
Net income	$ 859,282	$ 452,510
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	151,924	164,370
Depreciation and amortization	149,069	196,010
Deferred income tax expense	$ 23,955	23,955
Loss on extinguishment of debt		61,500
Changes in operating assets and liabilities:
Accounts receivable	$ (425,529)	(290,309)
Inventories	(14,795)	239,050
Prepaid expenses and other current assets	37,691	$ (19,435)
Other assets	(5,000)
Accounts payable and accrued expenses	(805,158)	$ (287,262)
Accrued payroll and related expenses	(10,758)	(195,936)
Deferred income	909,669	(138,881)
Deferred service revenue	(62,199)	(40,305)
Change in deferred rent	16,611	28,970
Net cash provided by operating activities	824,762	194,237
Investing activities
Purchases of tooling, capitalized software and equipment	(278,302)	(119,170)
Net cash used in investing activities	(278,302)	(119,170)
Financing activities
Payments on capital leases	(17,635)	(16,994)
Proceeds from borrowings under bank line of credit agreement	136,805	973,927
Repayments of borrowings under bank line of credit agreement	(539,574)	(921,594)
Stock options exercised	72,133	35,399
Warrants exercised	131,250	$ 12,500
Repayment of short term note payable	$ (100,000)
Redemption of related party convertible notes payable		$ (25,000)
Net cash (used in) provided by financing activities	$ (317,021)	58,238
Net increase in cash and cash equivalents	229,439	133,305
Cash and cash equivalents at beginning of period	632,631	606,255
Cash and cash equivalents at end of period	862,070	739,560
Supplemental cash flow information
Cash paid for interest	$ 115,430	$ 237,814

Basis of Presentation

Basis of Presentation	9 Months Ended
	Sep. 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 nine months ended September 30, 2015 and 2014. Net income for the third quarter of 2015 was $529,775, or $0.09 per diluted share, compared to net income of $431,120, or $0.08 per diluted share, in the third quarter of 2014. Net income for the nine months was $859,282, or $0.14 per diluted share, compared to net income of $452,510, or $0.09 per diluted share, for the same period one year ago. The Company’s historical operating losses and declines in the working capital balances are conditions that raise substantial doubt about its ability to continue as a going concern. Except for the nine months ended September 30, 2015 and fiscal years 2014 and 2004, the Company incurred significant operating losses in each financial period since its inception. As of September 30, 2015, the Company has an accumulated deficit of $59,831,275. The Company’s cash balances at September 30, 2015 were $862,070, including $413,212 advanced on its bank lines of credit. The Company’s balance sheet at September 30, 2015 has a current ratio (current assets divided by current liabilities) of 0.7 to 1.0, and a working capital deficit of $1,776,054 (current assets less current liabilities). To improve operating results and maintain profitability, the Company has taken steps including limiting growth of headcount to manage payroll costs, the introduction of new products, and continued close support of its distributors and software application partners whose mobile 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	9 Months Ended
	Sep. 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 three months or less at date of purchase to be cash equivalents. At September 30, 2015 and December 31, 2014, all of the Company’s cash and cash equivalents consisted of amounts held in demand deposits in banks. The aggregate cash balance on deposit in these accounts is insured by the Federal Deposit Insurance Corporation up to $250,000. The Company’s cash balance on deposit in these accounts may, at times, exceed the federally insured limits. The Company has never experienced any losses in such accounts. 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	9 Months Ended
	Sep. 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. Inventories at September 30, 2015 and December 31, 2014 were as follows: September 30, December 31, 2015 2014 Raw materials and sub-assemblies $ 2,172,717 $ 2,153,764 Finished goods 64,590 61,175 Inventory reserves (1,265,185 ) (1,257,612 ) Inventories, net $ 972,122 $ 957,327

Related Party Convertible Notes

Related Party Convertible Notes Payable	9 Months Ended
	Sep. 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 September 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 was $67,990 and $42,179 at September 30, 2015 and December 31, 2014, respectively and was included in Accounts Payable and Accrued Expenses. Interest expense for the three and nine months ended September 30, 2015 was $8,869 and $25,811, respectively. Interest expense for the three and nine months ended September 30, 2014 was $8,193 and $23,845, 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 Note Payable Long term related party convertible note payable at September 30, 2015 and December 31, 2014 was $371,929. Issued to the Company’s Chairman on September 4, 2013 and maturing on September 4, 2017, the note has an interest rate that compounds quarterly of 18% per annum as long as the warrants issued on November 19, 2010 are outstanding (warrants expire May 20, 2016) or 12% per annum thereafter. Principal and accrued interest on the note payable are convertible into common stock at the option of the holder at $2.44 per share if the November 19, 2010 warrants are outstanding or at $1.25 per share. Accrued interest was $164,034 and $97,900 at September 30, 2015 and December 31, 2014, respectively, and was included in Accounts Payable and Accrued Expenses. Interest expense for the three and nine months ended September 30, 2015 was $23,261 and $66,134, respectively. Interest expense for the three and nine months ended September 30, 2014 was $19,506 and $55,457, respectively. The convertible note is secured by all of the assets of the Company and is 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	9 Months Ended
	Sep. 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 were used for working capital purposes. On July 31, 2015, the Company repaid a $100,000 note to an investor. On September 30, 2015, a total of $500,000 in notes payable were outstanding under this line, of which $450,000 and $50,000 respectively were from the Company’s Chairman and Chief

Bank Financing Arrangements

Bank Financing Arrangements	9 Months Ended
	Sep. 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 revolving credit line agreement is for a two year period ending February 27, 2016. 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%. 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 September 30, 2015, the annual interest rate was 4.75% per annum and the effective rate (interest plus all applicable fees) on actual cash advanced was 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. At September 30, 2015, the Company only borrowed under the domestic line for $413,212 and had additional unused borrowing capacity of approximately $1,069,000 on its bank lines of credit. Total interest expense on the amounts drawn under the Company’s bank credit lines in effect during the three and nine months ended September 30, 2015, was $6,373 and $35,562, respectively. Interest expense on the amounts drawn during the three and nine months ended September 30, 2014 was $16,082 and $55,092, respectively. Accrued interest related to the amounts outstanding under the Company’s bank lines of credit at September 30, 2015 and December 31, 2014 was $1,213 and $3,981, respectively.

Segment Information and Concent

Segment Information and Concentrations	9 Months Ended
	Sep. 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, distributors, resellers and vertical industry partners. Revenues for the geographic areas were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Revenues: United States $ 3,698,721 $ 3,681,834 $ 10,107,697 $ 9,980,944 Europe 519,765 945,172 1,919,880 2,165,576 Asia and rest of world 299,412 294,590 981,318 961,487 Total revenues $ 4,517,898 $ 4,921,596 $ 13,008,895 $ 13,108,007 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 nine month periods ended September 30, 2015 and 2014 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Ingram Micro Inc. 30 % 29 % 29 % 32 % BlueStar, Inc. 27 % 15 % 23 % 16 % ScanSource, Inc. 19 % 20 % 20 % 19 % ScanSource Europe SPRL * 12 % * * _____________ * Customer accounted for less than 10% of total revenues for the period 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 deposit accounts in banks. To date, the Company has not experienced losses on the 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 September 30, 2015 and December 31, 2014 were as follows: September 30, December 31, 2015 2014 BlueStar, Inc. 40 % 42 % Ingram Micro Inc. 35 % 25 % ScanSource, Inc. 12 % 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 were unable to procure certain of such materials, it could have a material adverse effect upon its results. At September 30, 2015 and December 31, 2014, 22% and 32%, respectively, of the Company’s accounts payable balances were concentrated with the top two suppliers. For the three months ended September 30, 2015, top two suppliers accounted for 55% of the inventory purchases.

Stock-Based Compensation

Stock-Based Compensation	9 Months Ended
	Sep. 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 nine months ended September 30, 2015 was $55,470 and $151,924, respectively. Total stock-based compensation expense for the three and nine months ended September 30, 2014 was $48,576 and $164,370, respectively. In the three and nine months ended September 30, 2015, 30,000 and 268,600 stock options were granted at weighted average per share fair values estimated at $1.48 and $1.56, respectively.

Net Income Per Share Applicable

Net Income Per Share Applicable to Common Stockholders	9 Months Ended
	Sep. 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 September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Numerator: Net income $ 529,775 $ 431,120 $ 859,282 $ 452,510 Denominator: Weighted average common shares outstanding used in computing net income per share: Basic 5,560,197 4,934,591 5,539,766 4,916,066 Diluted 5,980,382 5,416,574 5,959,951 5,100,344 Net income per share: Basic $ 0.10 $ 0.09 $ 0.16 $ 0.09 Diluted $ 0.09 $ 0.08 $ 0.14 $ 0.09

Taxes

Taxes	9 Months Ended
	Sep. 30, 2015
Income Tax Disclosure [Abstract]
Taxes	NOTE 10 — Taxes Income tax expense during the three and nine months ended September 30, 2015 and 2014, and the deferred income tax amounts shown on the Company’s Balance Sheets, are 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 $23,955, in each of the three and nine month periods ended September 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 September 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	9 Months Ended
	Sep. 30, 2015
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	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. The lease agreement expires on June 30, 2022. Monthly base rent increases four percent per year annually on July 1 st Future minimum lease payments under the operating lease at September 30, 2015 are shown below: Annual minimum payments: Amount 2015 (October 1, 2015 to December 31, 2015) $ 100,242 2016 408,986 2017 425,345 2018 442,359 2019 to 2022 1,689,777 Total minimum payments $ 3,066,709 Capital Lease Obligations The Company leases certain of its equipment under capital leases. The leases are collateralized by the underlying assets. At September 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 September 30, 2015 and December 31, 2014, amounted to $71,272 and $53,761, respectively. Future minimum payments under capital lease and equipment financing arrangements as of September 30, 2015 are as follows: Annual minimum payments: Amount 2015 (October 1, 2015 to December 31, 2015) $ 7,180 2016 13,045 Total minimum payments 20,225 Less amount representing interest (645 ) Present value of net minimum payments 19,580 Short term portion of capital leases (19,580 ) Long term portion of capital leases $ — Purchase Commitments As of September 30, 2015, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of approximately $2,936,000. 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. Recently Issued Financial Accounting Standards The original effective date for ASU 2014-09 would have required the Company to adopt beginning January 1, 2017. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) – Deferral of the Effective Date, which defers the effective date of ASU 2014-09 for one year and permits early adoption as early as the original effective date of ASU 2014-09. Accordingly, the Company may adopt the standard on either January 1, 2017 or 2018. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company is currently evaluating the timing of its adoption and the impact of adopting the new revenue standard on its consolidated financial statements. With the exception of the new standard discussed above, there have been no other recent accounting pronouncements or changes in accounting pronouncements during the nine months ended September 30, 2015, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, that are of significance or potential significance to us.

Summary of Significant Accoun17

Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 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 three months or less at date of purchase to be cash equivalents. At September 30, 2015 and December 31, 2014, all of the Company’s cash and cash equivalents consisted of amounts held in demand deposits in banks. The aggregate cash balance on deposit in these accounts is insured by the Federal Deposit Insurance Corporation up to $250,000. The Company’s cash balance on deposit in these accounts may, at times, exceed the federally insured limits. The Company has never experienced any losses in such accounts. 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)	9 Months Ended
	Sep. 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. Inventories at September 30, 2015 and December 31, 2014 were as follows: September 30, December 31, 2015 2014 Raw materials and sub-assemblies $ 2,172,717 $ 2,153,764 Finished goods 64,590 61,175 Inventory reserves (1,265,185 ) (1,257,612 ) Inventories, net $ 972,122 $ 957,327

Segment Information and Conce19

Segment Information and Concentrations (Tables)	9 Months Ended
	Sep. 30, 2015
Segment Reporting [Abstract]
Revenue by geographic areas	Revenues for the geographic areas were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Revenues: United States $ 3,698,721 $ 3,681,834 $ 10,107,697 $ 9,980,944 Europe 519,765 945,172 1,919,880 2,165,576 Asia and rest of world 299,412 294,590 981,318 961,487 Total revenues $ 4,517,898 $ 4,921,596 $ 13,008,895 $ 13,108,007
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 nine month periods ended September 30, 2015 and 2014 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Ingram Micro Inc. 30 % 29 % 29 % 32 % BlueStar, Inc. 27 % 15 % 23 % 16 % ScanSource, Inc. 19 % 20 % 20 % 19 % ScanSource Europe SPRL * 12 % * * _____________ * Customer accounted for less than 10% of total revenues for the period
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 September 30, 2015 and December 31, 2014 were as follows: September 30, December 31, 2015 2014 BlueStar, Inc. 40 % 42 % Ingram Micro Inc. 35 % 25 % ScanSource, Inc. 12 % 14 %

Net Income Per Share Applicab20

Net Income Per Share Applicable to Common Stockholders (Tables)	9 Months Ended
	Sep. 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 September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Numerator: Net income $ 529,775 $ 431,120 $ 859,282 $ 452,510 Denominator: Weighted average common shares outstanding used in computing net income per share: Basic 5,560,197 4,934,591 5,539,766 4,916,066 Diluted 5,980,382 5,416,574 5,959,951 5,100,344 Net income per share: Basic $ 0.10 $ 0.09 $ 0.16 $ 0.09 Diluted $ 0.09 $ 0.08 $ 0.14 $ 0.09

Commitments and Contingencies (

Commitments and Contingencies (Tables)	9 Months Ended
	Sep. 30, 2015
Commitments and Contingencies Disclosure [Abstract]
Future minimum payments for operating leases	Future minimum lease payments under the operating lease at September 30, 2015 are shown below: Annual minimum payments: Amount 2015 (October 1, 2015 to December 31, 2015) $ 100,242 2016 408,986 2017 425,345 2018 442,359 2019 to 2022 1,689,777 Total minimum payments $ 3,066,709
Future minimum payments under capital lease and equipment financing arrangements	Future minimum payments under capital lease and equipment financing arrangements as of September 30, 2015 are as follows: Annual minimum payments: Amount 2015 (October 1, 2015 to December 31, 2015) $ 7,180 2016 13,045 Total minimum payments 20,225 Less amount representing interest (645 ) Present value of net minimum payments 19,580 Short term portion of capital leases (19,580 ) Long term portion of capital leases $ —

Liquidity and Going Concern (De

Liquidity and Going Concern (Details Narrative)	3 Months Ended		9 Months Ended
	Sep. 30, 2015USD ($)$ / shares	Sep. 30, 2014USD ($)$ / shares	Sep. 30, 2015USD ($)$ / shares	Sep. 30, 2014USD ($)$ / shares	Dec. 31, 2014USD ($)	Dec. 31, 2013USD ($)
Liquidity And Going Concern Details Narrative
Net income	$ 529,775	$ 431,120	$ 859,282	$ 452,510
Diluted Net income per share | $ / shares	$ 0.09	$ 0.08	$ 0.14	$ 0.09
Accumulated deficit	$ 59,831,275		$ 59,831,275
Cash balance	862,070	$ 739,560	862,070	$ 739,560	$ 632,631	$ 606,255
Total unused borrowing capacity	1,069,000		1,069,000
Bank line of credit	$ 413,212		$ 413,212
Current ratio (current assets divided by current liabilities)	0.70		0.70
Working capital deficit	$ 1,776,054		$ 1,776,054

Inventory Components (Details)

Inventory Components (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Inventory, Net, Items Net of Reserve Alternative [Abstract]
Raw materials and sub-assemblies	$ 2,172,717	$ 2,153,764
Finished goods	64,590	61,175
Inventory reserves	(1,265,185)	(1,257,612)
Inventories, net	$ 972,122	$ 957,327

Related Party Convertible Not24

Related Party Convertible Notes Payable (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 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 if warrants issued on November 19, 2010 (warrants expire May 20, 2016) are oustanding	18.00%		18.00%		18.00%
Annual interest rate on long term convertible notes payable, compounded quarterly if warrants issued on November 19, 2010 (warrants expire May 20, 2016) are not oustanding	12.00%		12.00%		12.00%
Related party convertible notes payable maturity date					Sep. 4, 2017
Accrued interest on short term related party convertible notes payable	$ 67,990		$ 67,990		$ 42,179
Accrued interest on long term related party convertible notes payable	164,034		164,034		$ 97,900
Interest expense on short term related party convertible notes payable	8,869	$ 8,193	25,811	$ 23,845
Interest expense on long term related party convertible notes payable	$ 23,261	$ 19,506	$ 66,134	$ 55,457

Related Party and Other Short T

Related Party and Other Short Term Notes Payable (Details Narrative) - USD ($)	3 Months Ended		7 Months Ended	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Jul. 31, 2015	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
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	$ 100,000			$ 100,000		$ 600,000
Interest expense for notes payable	24,214	$ 29,490		77,770	$ 179,929
Repayment of Other Short-Term Note			$ 100,000
Notes payable issued to Chairman
Maximum amount of note payable	550,000			550,000
Amount outstanding	450,000			450,000		450,000
Notes payable issued to CEO
Amount outstanding	$ 50,000			$ 50,000		$ 50,000

Bank Financing Arrangements (De

Bank Financing Arrangements (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Amount outstanding	$ 413,212		$ 413,212		$ 815,981
Interest expense	$ 63,483	$ 80,506	$ 218,152	$ 329,684
Domestic Line of Credit
Line of credit initiation date	Feb. 27, 2014	Feb. 27, 2014	Feb. 27, 2014	Feb. 27, 2014
Aggregate maximum advance amount	$ 1,500,000		$ 1,500,000		$ 1,500,000
Borrowing capacity description	70% of qualified receivables	70% of qualified receivables	70% of qualified receivables	70% of qualified receivables
Debt reference rate	Bank's Prime Rate	Bank's Prime Rate	Bank's Prime Rate	Bank's Prime Rate
Minimum interest rate on debt (as a percent)	3.25%		3.25%		3.25%
Basis point added to reference rate of debt	1.50%		1.50%		1.50%
Monthly collateral handling fee	0.20%		0.20%		0.20%
Effective rate on cash advances	7.15%		7.15%		7.15%
Amount outstanding	$ 413,212		$ 413,212		$ 815,981
Interest expense	6,373	$ 16,082	35,562	$ 55,092
Accrued interest	$ 1,213		$ 1,213		$ 3,981
Line of credit expiration date	Feb. 27, 2017	Feb. 27, 2017	Feb. 27, 2017	Feb. 27, 2017
Foreign Line of Credit
Line of credit initiation date			Feb. 27, 2014
Aggregate maximum advance amount	$ 1,000,000		$ 1,000,000
Borrowing capacity description			70% of qualified receivables
Debt reference rate			Bank's Prime Rate
Minimum interest rate on debt (as a percent)	3.25%		3.25%
Basis point added to reference rate of debt	1.50%		1.50%
Monthly collateral handling fee	0.20%		0.20%
Effective rate on cash advances	7.15%		7.15%
Amount outstanding	$ 413,212		$ 413,212
Accrued interest	$ 0		$ 0
Line of credit expiration date			Feb. 27, 2016

Revenue by Geographic Areas (De

Revenue by Geographic Areas (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Revenues:	$ 4,517,898	$ 4,921,596	$ 13,008,895	$ 13,108,007
United States
Revenues:	3,698,721	3,681,834	10,107,697	9,980,944
Europe
Revenues:	519,765	945,172	1,919,880	2,165,576
Asia and rest of world
Revenues:	$ 299,412	$ 294,590	$ 981,318	$ 961,487

Major Customers Accounted for a

Major Customers Accounted for at Least 10% of Total Revenues (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Ingram Micro Inc.
Percent of total revenues	30.00%	29.00%	29.00%	32.00%
Threshold percentage for disclosure	10.00%	10.00%	10.00%	10.00%
BlueStar, Inc.
Percent of total revenues	27.00%	15.00%	23.00%	16.00%
Threshold percentage for disclosure	10.00%	10.00%	10.00%	10.00%
Scansource, Inc.
Percent of total revenues	19.00%	20.00%	20.00%	19.00%
Threshold percentage for disclosure	10.00%	10.00%	10.00%	10.00%
Scansource Europe SPRL
Percent of total revenues		12.00%
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)	Sep. 30, 2015	Dec. 31, 2014
BlueStar, Inc.
Percent of net accounts receivable balances	40.00%	42.00%
Threshold percentage for disclosure	10.00%	10.00%
Ingram Micro Inc.
Percent of net accounts receivable balances	35.00%	25.00%
Threshold percentage for disclosure	10.00%	10.00%
Scansource, Inc.
Percent of net accounts receivable balances	12.00%	14.00%
Threshold percentage for disclosure	10.00%	10.00%

Concentration of Suppliers (Det

Concentration of Suppliers (Details Narrative)	3 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Concentration Of Suppliers Details Narrative
Accounts payable balances with top two suppliers	22.00%	32.00%
Percentage of inventory purchases from top two suppliers	55.00%

Stock-Based Compensation (Detai

Stock-Based Compensation (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-based compensation expenses	$ 55,470	$ 48,576	$ 151,924	$ 164,370
Stock options granted	30,000		268,600
Weighted average grant price	$ 1.48		$ 1.56

Net Income Per Share Applicab32

Net Income Per Share Applicable to Common Stockholders (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Numerator:
Net income	$ 529,775	$ 431,120	$ 859,282	$ 452,510
Denominator: Weighted average common shares outstanding used in computing net income per share:
Basic	5,560,197	4,934,591	5,539,766	4,916,066
Diluted	5,980,382	5,416,574	5,959,951	5,100,344
Net income per share:
Basic	$ 0.10	$ 0.09	$ 0.16	$ 0.09
Diluted	$ 0.09	$ 0.08	$ 0.14	$ 0.09

Taxes (Details Narrative)

Taxes (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Deferred tax expense	$ 7,985	$ 7,985	$ 23,955	$ 23,955
Unrecognized tax benefit					$ 730,000

Commitments and Contingencies34

Commitments and Contingencies (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Commitments and Contingencies Disclosure [Abstract]
Rental expense for operating lease	$ 107,352	$ 107,249	$ 321,950	$ 321,717
Deferred rent	280,087		280,087		$ 263,476
Capital lease obligations	87,945		87,945		87,945
Capital lease accumulated amortization	71,272		71,272		$ 53,761
Non-cancelable purchase commitments for inventory	$ 2,936,000		$ 2,936,000

Future Minimum Payments For Ope

Future Minimum Payments For Operating Leases (Details)	Sep. 30, 2015USD ($)
Annual minimum payments:
2015 (October 1, 2015 to December 31, 2015)	$ 100,242
2,016	408,986
2,017	425,345
2,018	442,359
2019 to 2022	1,689,777
Total minimum payments	$ 3,066,709

Future Minimum Payments Under C

Future Minimum Payments Under Capital Lease And Equipment Financing Arrangements (Details)	Sep. 30, 2015USD ($)
Annual minimum payments:
2015 (October 1, 2015 to December 31, 2015)	$ 7,180
2,016	13,045
Total minimum payments	20,225
Less amount representing interest	(645)
Present value of net minimum payments	19,580
Short term portion of capital leases	(19,580)
Long term portion of capital leases	$ 0