Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Mar. 13, 2017 | Jun. 30, 2016 | |
Document And Entity Information | |||
Entity Registrant Name | Socket Mobile, Inc. | ||
Entity Central Index Key | 944,075 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
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 Public Float | $ 20,497,689 | ||
Entity Common Stock, Shares Outstanding | 5,938,413 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,016 |
Balance Sheets
Balance Sheets - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 1,319,006 | $ 938,155 |
Accounts receivable, net | 2,866,877 | 2,358,883 |
Inventories, net | 1,537,439 | 1,326,090 |
Prepaid expenses and other current assets | 259,464 | 87,556 |
Total current assets | 5,982,786 | 4,710,684 |
Property and equipment: | ||
Machinery and office equipment | 2,063,221 | 2,124,297 |
Computer equipment | 945,054 | 1,049,234 |
Property and equipment, gross | 3,008,275 | 3,173,531 |
Accumulated depreciation | (2,444,392) | (2,698,828) |
Property and equipment, net | 563,883 | 474,703 |
Goodwill | 4,427,000 | 4,427,000 |
Other assets | 75,918 | 75,918 |
Deferred tax assets | 9,589,408 | |
Total assets | 20,638,995 | 9,688,305 |
Current liabilities: | ||
Accounts payable and accrued expenses | 1,581,226 | 2,214,467 |
Accrued payroll and related expenses | 632,931 | 602,888 |
Net deferred revenue on shipments to distributors | 1,062,642 | 1,004,260 |
Customer deposit | 640,440 | |
Related party and other short term credit line notes payable | 500,000 | |
Related party convertible notes payable - current portion | 752,625 | 380,696 |
Short term portion of deferred service revenue | 47,776 | 85,578 |
Short term portion of capital leases and deferred rent | 39,175 | 24,440 |
Total current liabilities | 4,116,375 | 5,452,769 |
Related party convertible notes payable | 371,929 | |
Long term portion of deferred service revenue | 25,610 | 39,800 |
Long term portion of capital leases and deferred rent | 327,078 | 305,016 |
Deferred tax liability | 175,214 | |
Total liabilities | 4,469,063 | 6,344,728 |
Stockholders’ equity: | ||
Common stock, $0.001 par value: Authorized – 20,000,000 shares, Issued and outstanding – 5,878,405 shares at December 31, 2016 and 5,620,455 shares at December 31, 2015 | 5,878 | 5,620 |
Additional paid-in capital | 62,889,851 | 62,210,842 |
Accumulated deficit | (46,725,797) | (58,872,885) |
Total stockholders’ equity | 16,169,932 | 3,343,577 |
Total liabilities and stockholders’ equity | $ 20,638,995 | $ 9,688,305 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2016 | Dec. 31, 2015 |
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 | 5,878,405 | 5,620,455 |
Common stock, shares outstanding | 5,878,405 | 5,620,455 |
Statements of Income
Statements of Income - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Statement [Abstract] | ||
Revenues | $ 20,787,588 | $ 18,400,182 |
Cost of revenues | 10,353,370 | 9,465,443 |
Gross profit | 10,434,218 | 8,934,739 |
Operating expenses: | ||
Research and development | 2,889,168 | 2,323,005 |
Sales and marketing | 2,774,809 | 2,497,093 |
General and administrative | 2,207,225 | 1,985,804 |
Total operating expenses | 7,871,202 | 6,805,902 |
Operating income | 2,563,016 | 2,128,837 |
Interest expense and other, net | (131,349) | (279,225) |
Net income before income taxes | 2,431,667 | 1,849,612 |
Net income tax benefit (expense) | 9,715,421 | (31,940) |
Net income | $ 12,147,088 | $ 1,817,672 |
Net income per share: | ||
Basic | $ 2.10 | $ 0.33 |
Diluted | $ 1.80 | $ 0.31 |
Weighted average shares outstanding: | ||
Basic | 5,793,245 | 5,554,541 |
Diluted | 6,819,821 | 5,906,236 |
Statements of Stockholders' Equ
Statements of Stockholders' Equity - USD ($) | Common Stock | Additional Paid-In Capital | Retained Earnings / Accumulated Deficit | Total |
Beginning Balance at Dec. 31, 2014 | $ 5,404 | $ 61,713,995 | $ (60,690,557) | $ 1,028,842 |
Beginning Balance (in shares) at Dec. 31, 2014 | 5,403,851 | |||
Exercise of warrants | $ 125 | 131,125 | 131,250 | |
Exercise of warrants (in shares) | 125,271 | |||
Exercise of stock options | $ 91 | 155,858 | $ 155,949 | |
Exercise of stock options (in shares) | 91,333 | (91,333) | ||
Stock-based compensation | 209,864 | $ 209,864 | ||
Net income | 1,817,672 | 1,817,672 | ||
Ending Balance at Dec. 31, 2015 | $ 5,620 | 62,210,842 | (58,872,885) | 3,343,577 |
Ending Balance (in shares) at Dec. 31, 2015 | 5,620,455 | |||
Exercise of warrants | $ 146 | 157,999 | 158,145 | |
Exercise of warrants (in shares) | 146,095 | |||
Exercise of stock options | $ 112 | 178,400 | $ 178,512 | |
Exercise of stock options (in shares) | 111,855 | (111,855) | ||
Stock-based compensation | 342,610 | $ 342,610 | ||
Net income | 12,147,088 | 12,147,088 | ||
Ending Balance at Dec. 31, 2016 | $ 5,878 | $ 62,889,851 | $ (46,725,797) | $ 16,169,932 |
Ending Balance (in shares) at Dec. 31, 2016 | 5,878,405 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Operating activities | ||
Net income | $ 12,147,088 | $ 1,817,672 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Stock-based compensation | 342,610 | 209,864 |
Depreciation | 279,392 | 197,686 |
Changes in deferred taxes | (9,764,622) | 31,940 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (507,994) | (462,182) |
Inventories | (211,349) | (368,763) |
Prepaid expenses and other current assets | (171,908) | 38,151 |
Other assets | 10,000 | |
Accounts payable and accrued expenses | (633,241) | (792,581) |
Accrued payroll and related expenses | 30,043 | 74,733 |
Customer deposit | (640,440) | 640,440 |
Net deferred revenue on shipments to distributors | 58,382 | 25,705 |
Deferred service revenue | (51,992) | (89,267) |
Change in deferred rent | 3,847 | 19,578 |
Net cash provided by operating activities | 879,816 | 1,352,976 |
Investing activities | ||
Purchase of equipment | (304,470) | (391,375) |
Net cash used in investing activities | (304,470) | (391,375) |
Financing activities | ||
Payments on capital leases | (31,152) | (27,295) |
Proceeds from borrowings under bank line of credit agreement | 350,000 | 138,453 |
Repayments of borrowings under bank line of credit agreement | (350,000) | (954,434) |
Stock options exercised | 178,512 | 155,949 |
Warrants exercised | 158,145 | 131,250 |
Repayments of related party and short term credit line notes payable | (500,000) | (100,000) |
Net cash used in financing activities | (194,495) | (656,077) |
Net increase in cash and cash equivalents | 380,851 | 305,524 |
Cash and cash equivalents at beginning of year | 938,155 | 632,631 |
Cash and cash equivalents at end of year | 1,319,006 | 938,155 |
Supplemental cash flow information | ||
Cash paid for interest | 13,261 | 143,067 |
Cash paid for income taxes | 100,988 | |
Supplemental disclosure of non-cash investing activities | ||
Computer equipment purchased under capital lease | 64,102 | 36,482 |
Cashless exercise of warrants | $ 35 |
Note 1 - Organization and Summa
Note 1 - Organization and Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Note 1 - Organization and Summary of Significant Accounting Policies | NOTE 1 — Organization and Summary of Significant Accounting Policies Organization and Business Socket Mobile, Inc. (the “Company”) is a leading producer of data capture products for mobile applications used in mobile point of sale (mPOS), enterprise mobility, asset tracking, control systems, logistics, event management, medical and education. The Company produces a family of data capture products that connect over Bluetooth and work with applications running on smartphones, tablets and mobile computers using operating systems from Apple® (iOS), Google™ (Android™) and Microsoft® (Windows®). The Company focuses on serving the needs of software application developers as the barcode scanner sales are primarily driven by the deployment of barcode enabled mobile applications. In 2016, the Company also offered a family of SoMo® (“ So Mo The Company designs its own products and subcontracts the manufacturing of product components to independent third-party contract manufacturers who are located in the U.S., Mexico, China and Taiwan and who have the equipment, know-how and capacity to manufacture products to the Company’s specifications. Final products are assembled, tested, packaged, and distributed at and from its Newark, California facility. The Company offers its products worldwide through two-tier distribution enabling customers to purchase from a large number of on-line resellers around the world including some application developers. The geographic regions served by the Company include the Americas, Europe, the Middle East, Africa and Asia Pacific. The Company was founded in March 1992 as Socket Communications, Inc. and reincorporated in Delaware in 1995 prior to the Company’s initial public offering in June 1995. The Company began doing business as Socket Mobile, Inc. in January 2007 to better reflect its market focus on the mobile business market, and changed its legal name to Socket Mobile, Inc. in April 2008. The Company’s common stock trades on the NASDAQ Marketplace under the symbol “SCKT.” The Company’s principal executive offices are located at 39700 Eureka Drive, Newark, CA 94560. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements as well as 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 The Company considers all highly liquid investments purchased with a maturity date of 90 days or less at date of purchase to be cash equivalents. As of December 31, 2016 and 2015, all of the Company’s cash and cash equivalents consisted of amounts held in demand deposit accounts in banks. The aggregate cash balance on deposit in these accounts are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company has never experienced any losses in such accounts. Fair Value of Financial Instruments 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. Derivative Financial Instruments The Company's primary objective for holding derivative financial instruments is to manage foreign currency risks. The Company's derivative financial instruments are recorded at fair value and are included in other current assets, other assets, other accrued liabilities or long-term debt depending on the contractual maturity and whether the Company has a gain or loss. The Company's accounting policies for these instruments are based on whether they meet the Company's criteria for designation as hedging transactions, either as cash flow or fair value hedges. A hedge of the exposure to variability in the cash flows of an asset or a liability, or of a forecasted transaction, is referred to as a cash flow hedge. A hedge of the exposure to changes in fair value of an asset or a liability, or of an unrecognized firm commitment, is referred to as a fair value hedge. The criteria for designating a derivative as a hedge include the instrument's effectiveness in risk reduction and, in most cases, a one-to-one matching of the derivative instrument to its underlying transaction. Gains and losses on derivatives that do not qualify for hedge accounting are recognized immediately in earnings. The Company regularly enters into forward foreign currency contracts to reduce exposures related to rate changes in certain foreign currencies. The Company records its forward foreign currency contracts at fair value. At December 31, 2016 and 2015, the Company had no open forward foreign currency contracts. Foreign Currency The functional currency for the Company is the U.S. dollar. However, the Company requires European distributors to purchase products in Euros and pays the expenses of European employees in Euros and British pounds. The Company hedges a significant portion of the European receivables balance denominated in Euros to reduce the foreign currency risk associates with these assets. In 2016, the total net adjustment for the effects of changes in foreign currency on cash balances, collections, payables, and derivatives used to hedge foreign currency risks, was a net loss of $25,500 compared to a net loss of $13,000 in 2015. Accounts Receivable Allowances The Company estimates the amount of uncollectible accounts receivable at the end of each reporting period based on the aging of the receivable balance, current and historical customer trends, and communications with its customers. Amounts are written off only after considerable collection efforts have been made and the amounts are determined to be uncollectible. The following describes activity in the allowance for doubtful accounts for the years ended December 31, 2016 and 2015: Year Balance at Charged to Amounts Balance at 2016 $ 89,058 $ — $ — $ 89,058 2015 $ 89,058 $ — $ — $ 89,058 Inventories Inventories consist principally of raw materials and sub-assemblies stated at the lower of standard cost, which approximates actual costs (first-in, first-out method), or market. Market is defined as replacement cost, but not in excess of estimated net realizable value or less than estimated net realizable value less a normal margin. At the end of each reporting period, the Company compares its inventory on hand to its forecasted requirements for the next nine-month period and reserves the cost of any inventory that is surplus, less any amounts that the Company believes it can recover from the disposal of goods that the Company specifically believes will be saleable past a nine- month horizon. The Company’s sales forecasts are based upon historical trends, communications from customers, and marketing data regarding market trends and dynamics. Changes in the amounts recorded for surplus or obsolete inventory are included in cost of revenue. Inventories, net of write-downs, at December 31, 2016 and 2015 consisted of the following: December 31, 2016 2015 Raw materials and sub-assemblies $ 2,665,185 $ 2,521,585 Finished goods 64,359 39,083 Inventory reserves (1,192,105 ) (1,234,578 ) Inventory, net $ 1,537,439 $ 1,326,090 Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of various payments that the Company has made in advance for goods or services to be received in the future. Prepaid expenses and other current assets at December 31, 2016 and 2015 consisted of the following: December 31, 2016 2015 Prepaid insurance $ 40,307 $ 18,612 Prepaid project development costs 83,600 — Prepaid inventory purchases 43,700 2,031 Other 91,857 66,913 Prepaid expenses and other current assets $ 259,464 $ 87,556 Property and Equipment Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method, over the estimated useful lives of the assets ranging from one to five years. Assets under capital leases are amortized in a manner consistent with the Company’s normal depreciation policy for owned assets, or the remaining lease term as applicable. Depreciation expense in the years ended December 31, 2016 and 2015, was $279,392 and $197,686, respectively. Goodwill Goodwill is tested for impairment annually as of September 30th or more frequently when events or circumstances indicate that the carrying value of the Company's single reporting unit more likely than not exceeds its fair value. The Company performed its annual goodwill impairment analysis as of September 30, 2016. The Company used the two-step test as required to assess goodwill for impairment. The first step of the goodwill impairment test consisted of comparing the carrying value of the reporting unit to its fair value. Management estimated the fair value of the Company's reporting unit using various methods and compared the fair value to the carrying amount (net book value) to ascertain if potential goodwill impairment existed. The Company utilized methods that focused on its ability to produce income ("Income Approach") and the Company’s market capitalization ("Market Capitalization Approach"). Key assumptions utilized in the determination of fair value in step one of the test included the following: the Company's market capitalization; revenue and expense forecasts used in the evaluation were based on trends of historical performance and management's estimate of future performance; cash flows utilized in the discounted cash flow analysis were estimated using a weighted average cost of capital determined to be appropriate for the Company. No impairment of goodwill was recorded in the two years ended December 31, 2016. Deferred Rent The Company operates its headquarters under a non-cancelable operating lease. The Company recognizes rent expense under its lease on a straight-line basis measured over the term of the lease. The excess of accumulated rental expense measured on a straight-lined basis over actual accumulated rent paid is recorded as a liability on the Company’s balance sheet in its short and long term components. Deferred rent at December 31, 2016 and December 31, 2015 was $286,901 and $283,053, respectively. 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 December 31, 2016 and December 31, 2015 were as follows: December 31, 2016 2015 Ingram Micro Inc. 49 % 35 % Bluestar, Inc. 30 % 22 % ScanSource, Inc. * 17 % *Customer accounts for less than 10% of accounts receivable balances 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 December 31, 2016, 15% and 12% of the Company’s accounts payable balances were concentrated with the top two supplier. For the years ended December 31, 2016 and 2015, top two suppliers accounted for 65% and 57%, respectively, of the inventory purchases in each of these years. Revenue Recognition and Deferred Revenue Revenue on sales to customers other than distributors is recognized upon shipment provided that persuasive evidence of a sales arrangement exists, the price is fixed or determinable, title has transferred, collection of resulting receivables is reasonably assured, there are no customer acceptance requirements, and there are no remaining significant obligations. Revenue on sales to distributors where a right of return exists is recognized upon “sell-through,” when products are shipped from the distributor to the distributor’s customer. Revenue related to those products in the Company’s distribution channel at the end of each reporting period which has not sold-through is deferred. The amount of deferred revenue net of related cost of revenue is classified as net deferred revenue on shipments to distributors on the Company’s balance sheet. At December 31, 2016 and December 31, 2015, net deferred revenue on shipments to distributors represented deferred revenues totaling $2,010,441 and $1,925,268, respectively, net of related costs of those revenues of $947,799 and $921,008, respectively. In May 2014, the FASB issued authoritative guidance amending the FASB Accounting Standards Codification and creating a new Topic 606, Revenue from Contracts with Customers. The new guidance clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP applicable to revenue transactions. This guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The existing industry guidance will be eliminated when the new guidance becomes effective and annual disclosures will be substantially revised. Additional disclosures will also be required under the new standard. In July 2015, the FASB approved a proposal that extended the required implementation date one year to the first quarter of 2018 but also would permit companies to adopt the standard at the original effective date of 2017. Implementation may be either through retrospective application to each period from the first quarter of 2017 or with a cumulative effect adjustment upon adoption in 2018. In April 2016, the FASB issued amendments, ASU No. 2016-10, that clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The standard should be adopted concurrently with adoption of ASU No. 2014-09 which is effective for annual and interim periods beginning after December 15, 2017 with early adoption permitted. Effective January 1, 2017, the Company will implement the new revenue recognition policy with the effects being recorded as an adjustment to the return reserve and to the beginning retained deficit on January 1, 2017. As noted above, the current policy relating to sales to distributors defers revenue recognition on products sold to distributors until the products sell out of distributor inventory. As a result, the current policy defers 100% of revenue and cost of revenue until shipped by the distributor even though distributor contractual return rights and actual return experiences are significantly less than 100%. The new policy recognizes revenue on sales to distributors when shipping of product is completed and title transfers to the distributor, less a reserve for estimated product returns (sales and cost of sales) based on historical experience. The effect of the change on January 1, 2017 is a one-time reduction (debit) to net deferred revenue and a one-time improvement (credit) to retained deficit in the amount of $836,000. The Company defers revenue on advance payments from customers when performance obligations have yet to be completed and/or services performed. Such deferred revenue does not include amounts related to products delivered to distributors which have not sold-through to the distributors’ end customers as described above. The Company also earns revenue from its SocketCare services program which provides for extended warranty and accidental breakage coverage for selected products. Service purchased at the time of product purchase provides for coverage in three-year and five-year terms. The Company additionally offers comprehensive coverage and program term extensions. Revenues from the SocketCare services program are recognized ratably over the life of the extended warranty contract. The amount of unrecognized warranty service revenue is classified as deferred service revenue and presented on the Company’s balance sheet in its short and long term components. Warranty The Company’s products typically carry a one year warranty. The Company reserves for estimated product warranty costs at the time revenue is recognized based upon the Company’s historical warranty experience, and additionally for any known product warranty issues. If actual costs differ from initial estimates, the Company records the difference in the period they are identified. Actual claims are charged against the warranty reserve. The following describes activity in the reserves for product warranty costs for the years ended December 31, 2016 and 2015: Year Balance at Additional Warranty Reserves Amounts Balance at 2016 $ 78,871 $ 34,385 $ (34,385 ) $ 78,871 2015 $ 78,871 $ 41,029 $ (41,029 ) $ 78,871 Research and Development Research and development expenditures are charged to operations as incurred. The major components of research and development costs include salaries and employee benefits, stock-based compensation expense, , and allocations of overhead and occupancy costs. The accounting for the costs of computer software to be sold, leased or otherwise marketed, requires the capitalization of certain software development costs subsequent to the establishment of technological feasibility. Based on the Company’s product development process, technological feasibility is established upon the completion of a working model. Costs incurred by the Company between the completion of the working model and the point at which the product is ready for general release have been insignificant. Accordingly, the Company has charged all such costs to research and development expenses in the accompanying statements of income. Advertising Costs Advertising costs are charged to sales and marketing as incurred. The Company incurred $45,303 and $47,287, in advertising costs during 2016 and 2015, respectively. Income Taxes The Company uses the asset and liability method to account for income taxes. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance against deferred tax assets when it is more likely than not that such assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the tax benefit from uncertain tax positions if it is more likely than not that the tax positions will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. It is the Company's policy to include interest and penalties related to tax positions as a component of income tax expense. Shipping and handling costs Shipping and handling costs are included in the cost of revenues in the statement of operations. Net Income Per Share The following table sets forth the reconciliation of basic shares to diluted shares and the computation of basic and diluted net income per share: Years Ended December 31, 2016 2015 Numerator: Net income $ 12,147,088 $ 1,817,672 Convertible note interest 117,421 — Adjusted diluted net income $ 12,264,509 $ 1,817,672 Denominator: Weighted average shares outstanding used in computing net income per share: Basic 5,793,245 5,554,541 Effect of dilutive stock options and convertible notes payable 1,026,576 351,695 Diluted 6,819,821 5,906,236 Net income per share applicable to common stockholders: Basic $ 2.10 $ 0.33 Diluted $ 1.80 $ 0.31 For the 2016 period presented, the diluted shares outstanding include the dilutive effect of assumed conversion of convertible notes and assumed exercise of all in-the-money employee stock options, which is calculated based on the average share price for the 2016 fiscal period using the treasury stock method. Under the treasury stock method, the hypothetically received proceeds from the exercise of in-the-money options and warrants are assumed to be used to repurchase shares. For 2016, options to purchase totaling 1,551,727 shares of the Company’s Common Stock were excluded from the calculation of the diluted earnings per share because the exercise prices were greater than or equal to the average price of the common shares, and therefore their inclusion would have been anti-dilutive. For 2015, options to purchase and shares issuable for convertible notes and related accrued interest, totaling 2,036,520 shares of common stock, have been omitted from the income per share calculation. Stock-Based Compensation Expense The Company has incentive plans that reward employees with stock options. The amount of compensation cost for these stock-based awards is measured 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 which 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. Segment Information Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief executive officer in deciding how to allocate resources and in assessing performance. The Company operates in one segment—mobile systems solutions for businesses. Mobile systems solutions typically consist of mobile devices such as smartphones or tablets, 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 for the years ended December 31, 2016 and 2015 are as follows: Years Ended December 31, Revenues: (in thousands) 2016 2015 United States $ 16,851 $ 14,343 Europe 2,843 2,698 Asia and rest of world 1,094 1,359 $ 20,788 $ 18,400 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 total revenues for the years ended December 31, 2016 and 2015 were as follows: Years Ended December 31, 2016 2015 Ingram Micro Inc. 29 % 29 % BlueStar, Inc. 22 % 22 % Scansource, Inc. 18 % 18 % Recently Issued Financial Accounting Standards In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. Under these amendments, goodwill impairment testing will be performed by comparing the fair value of the reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The new standard is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be applied on a prospective basis. Early adoption is permitted for annual or interim goodwill impairment testing performed after January 1, 2017. We do not presently anticipate that the adoption of ASU 2016-15 will have a material impact on our consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 will be effective for us on January 1, 2018 with early adoption permitted. We do not presently anticipate that the adoption of ASU 2016-15 will have a material impact on our consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which requires companies to record excess tax benefits and deficiencies in income rather than the current requirement to record them through equity. ASU 2016-09 also allows companies the option to recognize forfeitures of share-based awards when they occur rather than the current requirement to make an estimate upon the grant of the awards. ASU 2016-09 will be effective for us on January 1, 2017. Early adoption of ASU 2016-09 will be permitted in any interim or annual period, with any adjustments reflected as of the beginning of the fiscal year of adoption. We do not anticipate that the adoption of ASU 2016-09 will have a material impact on our financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases, which eliminates the current tests for lease classification under U.S. GAAP and requires lessees to recognize the right-of-use assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. ASU 2016-02 provides that lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. We are assessing the impact that ASU 2016-02 is anticipated to have on our consolidated financial statements. We currently expect that most of our operating lease commitments will be subject to the new standard and recognized as lease liabilities and right-of-use assets upon our adoption of ASU 2016-02. In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, which amends the guidance regarding the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, ASU 2016-01 clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. ASU 2016-01 will be effective for us on January 1, 2018. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. Upon adoption of ASU 2016-01, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. We do not presently anticipate that the adoption of ASU 2016-01 will have a material impact on our financial statements. In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which will require all deferred tax assets and deferred tax liabilities to be presented as noncurrent within a classified balance sheet. ASU 2015-17 will be effective for us as of January 1, 2017, with early application permitted. ASU 2015-17 may be applied either prospectively to all deferred tax assets and liabilities or retrospectively to all periods presented. We have elected to early adopt ASU 2015-17 effective December 31, 2016. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. ASU 2015-11 requires that inventory be measured at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Inventory measured using last-in, first-out or the retail inventory method are excluded from the scope of ASU 2015-11 which is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. We do not anticipate that the implementation of ASU 2015-11 will have a material impact on our consolidated financial statements. In May 2014, the FASB issued authoritative guidance amending the FASB Accounting Standards Codification and creating a new Topic 606, Revenue from Contracts with Customers. The new guidance clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP applicable to revenue transactions. This guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The existing industry guidance will be eliminated when the new guidance becomes effective and annual disclosures will be substantially revised. Additional disclosures will also be required under the new standard. In July 2015, the FASB approved a proposal that extended the required implementation date one year to the first quarter of 2018 but also would permit companies to adopt the standard at the original effective date of 2017. Implementation may be either through retrospective application to each period from the first quarter of 2017 or with a cumulative effect adjustment upon adoption in 2018. In April 2016, the FASB issued amendments, ASU No. 2016-10, that clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The standard should be adopted concurrently with adoption of ASU No. 2014-09 which is effective for annual and interim periods beginning after December 15, 2017 with early adoption permitted. We will early adopt the new standard effective January 1, 2017. The effect of the change on January 1, 2017 is a one-time reduction (debit) to net deferred revenue and a one-time improvement (credit) to retained deficit in the amount of $836,000. From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position, results of operations or cash flows. |
Note 2 - Short Term Related Par
Note 2 - Short Term Related Party Convertible Notes Payable | 12 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
Short Term Related Party Convertible Notes Payable | NOTE 2 — Short Term Related Party Convertible Notes Payable The balance of short term convertible notes payable to officers and directors of the company is $752,625 at December 31, 2016. $380,696 of these notes have an original term of four years that accrue interest at 8% per annum compounded quarterly, mature on September 4, 2017, and have a note holder call provision. $371,929 of these notes, previously classified as long term, were classified as a current liability in September 2016 as they now mature within one year on September 4, 2017, have an original term of four years that accrue interest at 18% per annum compounded quarterly through March 30, 2016 and at 12% thereafter, and do not have a note holder call provision. Accrued interest for all convertible notes was $382,808 and $265,387 at December 31, 2016 and December 31, 2015, respectively and was included in Accounts Payable and Accrued Expenses. The notes and accrued interest are convertible into common stock at the option of the holder 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. |
Note 3 - Related Party and Othe
Note 3 - Related Party and Other Short Term Notes Payable | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Related Party and Other Short Term Notes Payable | NOTE 3 — Related Party and Other Short-Term Notes Payable On May 15, 2014, the Company’s Board of Directors approved the issue of subordinated line of credit notes totaling $650,000 to replace subordinated line of credit notes in the same amount matured on June 1, 2014. The replacement subordinated notes were two-year notes maturing on June 1, 2016, were repayable by the Company at any time and had an interest rate of 18% per annum payable monthly in cash. On January 29, 2016, the Company completed repayment of all outstanding credit line notes to the note holders. Interest expenses for 2016 and 2015 related to the line of credit were $7,645 and $100,455, respectively. |
Note 4 - Bank Financing Arrange
Note 4 - Bank Financing Arrangements | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Bank Financing Arrangements | NOTE 4 — Bank Financing Arrangements On February 26, 2016, the Company completed a Business Financing Modification Agreement by and between the Company and Western Alliance Bank (the “Bank) to extend the expiration date of the revolving credit lines for both domestic and international portions to February 27, 2018. Under the terms of the credit facility agreement with the Bank, the Company may borrow up to $2.5 million, of which up to $2.0 million is based on qualified receivables from domestic customers and up to $0.5 million is based on qualified receivables from international customers. In addition, the Company must maintain a minimum liquidity ratio calculated at the end of each month of quick assets (cash plus qualified accounts receivable) to outstanding obligations to the Bank not less than 1.75 to 1.0. 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 0.1% per month of the financed receivables outstanding. The applicable interest and fees are calculated based on the actual amounts borrowed. 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 December 31, 2016, there were no amounts borrowed, and the total borrowing capacity was approximately $1,612,000. Total interest expense on the amounts drawn under the Company’s bank credit lines in effect during the years ended December 31, 2016 and 2015, was $3,000 and $38,494, respectively. On March 20, 2017, the Company completed a Business Financing Modification Agreement by and between the Company and the Bank to extend the expiration date of the revolving credit line for domestic portion to February 27, 2019. The international portion of the credit line was not changed and will expire on February 27, 2018. |
Note 5 - Commitments and Contin
Note 5 - Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 5 — 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 December 31, 2016 are shown below: Annual minimum payments: Amount 2017 $ 425,345 2018 442,359 2019 460,053 2020 478,455 2021 to 2022 751,269 Total minimum payments $ 2,557,481 Rental expense under all operating leases for the years ended December 31, 2016 and 2015 was $435,668 and $430,648, respectively. The amount of deferred rent at December 31, 2016 and December 31, 2015 was $286,901 and $283,053, respectively. Capital Lease Obligations The Company leases certain of its equipment under capital leases. The leases are collateralized by the underlying assets. At December 31, 2016 and 2015, property and equipment with costs of $100,584 and $124,427, respectively, were subject to such financing arrangements. The accumulated depreciation of the assets associated with the capital leases as of December 31, 2016 and December 31, 2015, amounted to $20,173 and $80,150 respectively. Future minimum payments under capital lease and equipment financing arrangements as of December 31, 2016 are as follows: Annual minimum payments: Amount 2017 $ 30,048 2018 27,607 2019 18,635 2020 9,545 Total minimum payments 85,835 Less amount representing interest (6,482 ) Present value of net minimum payments $ 79,353 Short term portion of capital leases (26,663 ) Long term portion of capital leases $ 52,690 Purchase Commitments At December 31, 2016, the Company’s non-cancelable purchase commitments for inventory to be used in the ordinary course of business during the first nine months of 2017 were approximately $2,724,000. 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. |
Note 6 - Share-Based Compensati
Note 6 - Share-Based Compensation Plan | 12 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation Plan | NOTE 6 — Share-Based Compensation Plan Stock Option Plan The Company has one Stock Option Plan in effect in the two years presented: the 2004 Equity Incentive Plan (the “2004 Plan”). The 2004 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock, stock appreciation rights, and performance awards to employees, directors, and consultants of the Company. Upon ratification of the 2004 Plan by the shareholders in June 2004, shares in the 1995 Plan that had been reserved but not issued, as well as any shares issued that would otherwise return to the 1995 Plan as a result of termination of options or repurchase of shares, were added to the shares reserved for issuance under the 2004 Plan. The Company grants incentive stock options and non-statutory stock options at an exercise price per share equal to the fair market value per share of common stock on the date of grant. The vesting and exercise provisions are determined by the Board of Directors, with a maximum term of ten years. The 2004 Plan expires on April 23, 2024. The Company calculates the value of each stock option grant, estimated on the date of grant, using binomial lattice option pricing model. The weighted-average estimated fair value of stock options granted during 2016 and 2015 was $1.93 and $1.58, respectively, using the following weighted-average assumptions: Years Ended December 31, 2016 2015 Risk-free interest rate (%) 1.75 % 2.10 % Dividend yield — — Volatility factor 79.91 % 92.22 % Expected option life (years) 5.6 4.8 The table below presents the information related to stock option activity for the years ended December 31, 2016 and 2015: Years Ended December 31, 2016 2015 Total intrinsic value of stock options exercised $ 178,923 $ 60,056 Cash received from stock option exercises $ 178,512 $ 155,949 Changes in stock options for the years ended December 31, 2016 and 2015 are as follows: Outstanding Options Options Available For Grant Number of Shares Weighted Average Price Per Share Remaining Contractual Term Intrinsic Balance at December 31, 2014 144,378 1,891,058 $ 2.09 Increase in shares authorized 200,000 — Granted (316,600 ) 316,600 $ 2.25 Exercised — (91,333 ) $ 1.71 Canceled 93,972 (93,972 ) $ 2.01 Balance at December 31, 2015 121,750 2,022,353 $ 2.15 Increase in shares authorized 224,818 — Granted (344,450 ) 344,450 $ 2.89 Exercised — (111,855 ) $ 1.60 Canceled 93,863 (93,863 ) $ 2.73 Balance at December 31, 2016 95,981 2,161,085 $ 2.27 5.58 $ 3,401,944 Exercisable 1,638,288 $ 2.23 4.58 2,651,676 Unvested 522,797 $ 2.40 8.67 750,268 The 2004 Plan provides for an annual increase in the number of shares authorized under the plan to be added on the first day of each fiscal year equal to the least amount of 400,000 shares, 4% of the outstanding shares on that date, or an amount as determined by the Board of Directors. On January 1, 2017, 2016, and 2015, a total of 235,136, 224,818, and 191,843 additional shares, respectively, became available for grant from the 2004 Plan. The following table summarizes information about stock options outstanding and exercisable at December 31, 2016: Options Outstanding Options Exercisable Range of Exercise Prices Number of Options Outstanding Weighted Average Remaining Life (Years) Weighted Average Exercise Price Number of Options Exercisable Weighted Average Exercise Price $0.95 - $1.10 369,444 6.58 $ 1.01 306,603 $ 1.02 $1.20 - $1.25 56,000 6.50 $ 1.23 46,583 $ 1.22 $1.50 - $1.82 167,767 5.33 $ 1.71 167,767 $ 1.71 $1.89 - $2.27 477,090 6.50 $ 2.13 347,672 $ 2.08 $2.36 - $2.92 525,638 5.58 $ 2.63 232,617 $ 2.54 $3.04 - $3.54 528,446 3.67 $ 3.09 516,513 $ 3.08 $3.70 - $3.84 35,000 9.42 $ 3.72 18,833 $ 3.71 $6.90 900 1.58 $ 6.90 900 $ 6.90 $10.00 800 0.17 $ 10.00 800 $ 10.00 $0.95 - $10.00 2,161,085 5.58 $ 2.27 1,638,288 $ 2.23 Stock-Based Compensation Expense The stock-based compensation expense included in the Company’s statements of income for the years ended December 31, 2016 and 2015, consisted of the following: Years Ended December 31, Income Statement Classification 2016 2015 Cost of revenues $ 40,929 $ 19,322 Research and development 74,810 40,951 Sales and marketing 87,158 62,898 General and administrative 139,713 86,693 $ 342,610 $ 209,864 As of December 31, 2016, the total remaining unamortized stock-based compensation expense was $757,671, and is expected to be amortized over a weighted average period of 2.67 years. |
Note 7 - Warrants
Note 7 - Warrants | 12 Months Ended |
Dec. 31, 2016 | |
Warrants and Rights Note Disclosure [Abstract] | |
Warrants | NOTE 7 — Warrants The Company has no outstanding warrants at December 31, 2016. |
Note 8 - Shares Reserved
Note 8 - Shares Reserved | 12 Months Ended |
Dec. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Shares Reserved | NOTE 8 — Shares Reserved Common stock reserved for future issuance was as follows: December 31, 2016 2015 Stock option grants outstanding (see Note 6) 2,161,085 2,022,353 Reserved for future stock option grants (see Note 6) 95,981 121,750 Reserved for note conversion (see Note 2) 972,884 977,398 Reserved for exercise of outstanding warrants (see Note 7) — 169,335 3,229,950 3,290,836 |
Note 9 - Retirement Plan
Note 9 - Retirement Plan | 12 Months Ended |
Dec. 31, 2016 | |
Pension and Other Postretirement and Postemployment Benefit Plans, Liabilities, Noncurrent [Abstract] | |
Retirement Plan | NOTE 9 — Retirement Plan The Company has a tax-deferred savings plan, the Socket Mobile, Inc. 401(k) Plan (“401(k) Plan”), for the benefit of qualified employees. The 401(k) Plan is designed to provide employees with an accumulation of funds at retirement. Qualified employees may elect to make contributions to the 401(k) Plan on a monthly basis. No contributions were made by the Company during the years ended December 31, 2016 and 2015. Administrative expenses relating to the 401(k) Plan are not significant. |
Note 10 - Income Taxes
Note 10 - Income Taxes | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Note 10 - Income Taxes | NOTE 10 — Income Taxes Deferred tax benefit at December 31, 2016 is related to the release of valuation allowance against substantially all of the Company's federal and state deferred tax assets as the Company concluded such assets were fully realizable. The need for a valuation allowance requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction-by-jurisdiction basis. In making such assessment, significant weight is given to evidence that can be verified objectively. After the consideration of both positive and negative evidence to assess the recoverability of the Company's net deferred tax assets during the 2016 tax year, the Company determined that it was more likely than not the Company would realize the majority of the value of federal and state deferred tax assets given the current certainties regarding the timing of profits and forecasted future profitability. The Company will continue to monitor the likelihood that it will be able to recover the deferred tax assets in the future. The components of income taxes for the periods ended December 31, 2016 and 2015 are as follows: Years Ended December 31, 2016 2015 Current: Federal $ 12,200 $ — State 37,000 — Total Current 49,200 — Deferred: Federal (8,473,481 ) 31,940 State (1,291,140 ) — Total Deferred (9,764,621 ) 31,940 Income tax (benefit) expense $ (9,715,421 ) $ 31,940 Reconciliation of the statutory federal income tax rate to the Company's effective tax rate: Years Ended December 31, 2016 2015 Federal tax at statutory rate 34.00 % 34.00 % State income tax rate 5.83 % 5.83 % Release of valuation allowance 308.63 % (41.56 %) Provision for taxes 348.46 % (1.73 %) As of December 31, 2016, the Company did not recognize deferred tax assets relating to an excess tax benefit for stock-based compensation deduction of $2,094,000. Unrecognized deferred tax benefits will be accounted for as a credit to additional-paid-in-capital when realized through a reduction in income taxes payable. Deferred income tax reflects the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. At December 31, 2016, the Company released valuation allowance against substantially all deferred tax assets. Significant components of net deferred tax assets are as follows: Years Ended December 31, Deferred tax assets: 2016 2015 Net operating loss carryforwards $ 8,111,000 $ 8,833,000 Credits 755,000 753,000 Capitalized research and development costs 9,000 13,000 Other acquired intangibles 49,000 91,000 Accruals not currently deductible 1,343,000 1,614,000 Depreciation 29,000 5,000 Total deferred tax assets 10,296,000 11,309,000 Valuation allowance for deferred tax assets (464,000 ) (11,279,000 ) Net deferred tax assets 9,832,000 30,000 Deferred tax liability: Acquired intangibles (243,000 ) (205,000 ) Net deferred tax assets (liabilities) $ 9,589,000 $ (175,000 ) As of December 31, 2016, the Company had net operating loss carryforwards for federal income tax purposes of approximately $23,566,000 which will expire at various dates beginning in 2018 and through 2034, and federal research and development tax credits of approximately $464,000, which will expire at various dates beginning in 2018 and through 2036. As of December 31, 2016, the Company had net operating loss carryforwards for state income tax purposes of approximately $13,896,000, which will expire at various dates in 2017 and through 2033, and state research and development tax credits of approximately $291,000, which can be carried forward indefinitely. The Company has determined that utilization of existing net operating losses against future taxable income is not limited by Section 382 of the Internal Revenue Code. Future ownership changes, however, may limit the Company’s ability to fully utilize its existing net operating loss carryforwards against any future taxable income. A reconciliation of the beginning and ending amount of unrecognized tax benefits (“UTBs”), excluding interest and penalties, is as follows: Amount Beginning balance at January 1, 2016 $ 754,000 Decreases in UTBs taken in prior years (38,000 ) Decreases in UTBs taken in current years 39,000 Ending balance at December 31, 2016 $ 755,000 Future changes in the unrecognized tax benefit will have no impact on the effective tax rate due to the existence of the valuation allowance. It is the Company's policy to include interest and penalties related to tax positions as a component of income tax expense. No interest was accrued for the period ended December 31, 2016. The Company estimates that the unrecognized tax benefit will not change significantly within the next twelve months. The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The Company is not currently under audit in any of its jurisdictions where income tax returns are filed. The tax years 1996 to 2015 remain open to examination by the major domestic taxing jurisdictions to which the Company is subject, and for the years 2003 to 2010 for the international taxing jurisdictions to which the Company is subject. |
Note 11 - Subsequent Events
Note 11 - Subsequent Events | 12 Months Ended |
Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 11 — Subsequent Events On March 20, 2017, the Company signed a Business Financing Modification Agreement by and between the Company and Bridge Bank to extend the expiration date of revolving domestic line of credit to February 27, 2019. The international portion of the credit line was not changed and will expire on February 27, 2018. |
Organization and Summary of Sig
Organization and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements as well as 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 | Cash Equivalents The Company considers all highly liquid investments purchased with a maturity date of 90 days or less at date of purchase to be cash equivalents. As of December 31, 2016 and 2015, all of the Company’s cash and cash equivalents consisted of amounts held in demand deposit accounts in banks. The aggregate cash balance on deposit in these accounts are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company has never experienced any losses in such accounts. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments 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. |
Derivative Financial Instruments | Derivative Financial Instruments The Company's primary objective for holding derivative financial instruments is to manage foreign currency risks. The Company's derivative financial instruments are recorded at fair value and are included in other current assets, other assets, other accrued liabilities or long-term debt depending on the contractual maturity and whether the Company has a gain or loss. The Company's accounting policies for these instruments are based on whether they meet the Company's criteria for designation as hedging transactions, either as cash flow or fair value hedges. A hedge of the exposure to variability in the cash flows of an asset or a liability, or of a forecasted transaction, is referred to as a cash flow hedge. A hedge of the exposure to changes in fair value of an asset or a liability, or of an unrecognized firm commitment, is referred to as a fair value hedge. The criteria for designating a derivative as a hedge include the instrument's effectiveness in risk reduction and, in most cases, a one-to-one matching of the derivative instrument to its underlying transaction. Gains and losses on derivatives that do not qualify for hedge accounting are recognized immediately in earnings. The Company regularly enters into forward foreign currency contracts to reduce exposures related to rate changes in certain foreign currencies. The Company records its forward foreign currency contracts at fair value. At December 31, 2016 and 2015, the Company had no open forward foreign currency contracts. |
Foreign Currency | Foreign Currency The functional currency for the Company is the U.S. dollar. However, the Company requires European distributors to purchase products in Euros and pays the expenses of European employees in Euros and British pounds. The Company hedges a significant portion of the European receivables balance denominated in Euros to reduce the foreign currency risk associates with these assets. In 2016, the total net adjustment for the effects of changes in foreign currency on cash balances, collections, payables, and derivatives used to hedge foreign currency risks, was a net loss of $25,500 compared to a net loss of $13,000 in 2015. |
Accounts Receivable Allowances | Accounts Receivable Allowances The Company estimates the amount of uncollectible accounts receivable at the end of each reporting period based on the aging of the receivable balance, current and historical customer trends, and communications with its customers. Amounts are written off only after considerable collection efforts have been made and the amounts are determined to be uncollectible. The following describes activity in the allowance for doubtful accounts for the years ended December 31, 2016 and 2015: Year Balance at Charged to Amounts Balance at 2016 $ 89,058 $ — $ — $ 89,058 2015 $ 89,058 $ — $ — $ 89,058 |
Inventories | Inventories Inventories consist principally of raw materials and sub-assemblies stated at the lower of standard cost, which approximates actual costs (first-in, first-out method), or market. Market is defined as replacement cost, but not in excess of estimated net realizable value or less than estimated net realizable value less a normal margin. At the end of each reporting period, the Company compares its inventory on hand to its forecasted requirements for the next nine-month period and reserves the cost of any inventory that is surplus, less any amounts that the Company believes it can recover from the disposal of goods that the Company specifically believes will be saleable past a nine- month horizon. The Company’s sales forecasts are based upon historical trends, communications from customers, and marketing data regarding market trends and dynamics. Changes in the amounts recorded for surplus or obsolete inventory are included in cost of revenue. Inventories, net of write-downs, at December 31, 2016 and 2015 consisted of the following: December 31, 2016 2015 Raw materials and sub-assemblies $ 2,665,185 $ 2,521,585 Finished goods 64,359 39,083 Inventory reserves (1,192,105 ) (1,234,578 ) Inventory, net $ 1,537,439 $ 1,326,090 |
Prepaid Expenses and Other Current Assets | Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of various payments that the Company has made in advance for goods or services to be received in the future. Prepaid expenses and other current assets at December 31, 2016 and 2015 consisted of the following: December 31, 2016 2015 Prepaid insurance $ 40,307 $ 18,612 Prepaid project development costs 83,600 — Prepaid inventory purchases 43,700 2,031 Other 91,857 66,913 Prepaid expenses and other current assets $ 259,464 $ 87,556 |
Property and Equipment | Property and Equipment Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method, over the estimated useful lives of the assets ranging from one to five years. Assets under capital leases are amortized in a manner consistent with the Company’s normal depreciation policy for owned assets, or the remaining lease term as applicable. Depreciation expense in the years ended December 31, 2016 and 2015, was $279,392 and $197,686, respectively. |
Goodwill | Goodwill Goodwill is tested for impairment annually as of September 30th or more frequently when events or circumstances indicate that the carrying value of the Company's single reporting unit more likely than not exceeds its fair value. The Company performed its annual goodwill impairment analysis as of September 30, 2016. The Company used the two-step test as required to assess goodwill for impairment. The first step of the goodwill impairment test consisted of comparing the carrying value of the reporting unit to its fair value. Management estimated the fair value of the Company's reporting unit using various methods and compared the fair value to the carrying amount (net book value) to ascertain if potential goodwill impairment existed. The Company utilized methods that focused on its ability to produce income ("Income Approach") and the Company’s market capitalization ("Market Capitalization Approach"). Key assumptions utilized in the determination of fair value in step one of the test included the following: the Company's market capitalization; revenue and expense forecasts used in the evaluation were based on trends of historical performance and management's estimate of future performance; cash flows utilized in the discounted cash flow analysis were estimated using a weighted average cost of capital determined to be appropriate for the Company. No impairment of goodwill was recorded in the two years ended December 31, 2016. |
Deferred Rent | Deferred Rent The Company operates its headquarters under a non-cancelable operating lease. The Company recognizes rent expense under its lease on a straight-line basis measured over the term of the lease. The excess of accumulated rental expense measured on a straight-lined basis over actual accumulated rent paid is recorded as a liability on the Company’s balance sheet in its short and long term components. Deferred rent at December 31, 2016 and December 31, 2015 was $286,901 and $283,053, respectively. |
Concentration of Credit Risk | 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 December 31, 2016 and December 31, 2015 were as follows: December 31, 2016 2015 Ingram Micro Inc. 49 % 35 % Bluestar, Inc. 30 % 22 % ScanSource, Inc. * 17 % *Customer accounts for less than 10% of accounts receivable balances |
Concentration of Suppliers | 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 December 31, 2016, 15% and 12% of the Company’s accounts payable balances were concentrated with the top two supplier. For the years ended December 31, 2016 and 2015, top two suppliers accounted for 65% and 57%, respectively, of the inventory purchases in each of these years. |
Revenue Recognition and Deferred Revenue | Revenue Recognition and Deferred Revenue Revenue on sales to customers other than distributors is recognized upon shipment provided that persuasive evidence of a sales arrangement exists, the price is fixed or determinable, title has transferred, collection of resulting receivables is reasonably assured, there are no customer acceptance requirements, and there are no remaining significant obligations. Revenue on sales to distributors where a right of return exists is recognized upon “sell-through,” when products are shipped from the distributor to the distributor’s customer. Revenue related to those products in the Company’s distribution channel at the end of each reporting period which has not sold-through is deferred. The amount of deferred revenue net of related cost of revenue is classified as net deferred revenue on shipments to distributors on the Company’s balance sheet. At December 31, 2016 and December 31, 2015, net deferred revenue on shipments to distributors represented deferred revenues totaling $2,010,441 and $1,925,268, respectively, net of related costs of those revenues of $947,799 and $921,008, respectively. In May 2014, the FASB issued authoritative guidance amending the FASB Accounting Standards Codification and creating a new Topic 606, Revenue from Contracts with Customers. The new guidance clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP applicable to revenue transactions. This guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The existing industry guidance will be eliminated when the new guidance becomes effective and annual disclosures will be substantially revised. Additional disclosures will also be required under the new standard. In July 2015, the FASB approved a proposal that extended the required implementation date one year to the first quarter of 2018 but also would permit companies to adopt the standard at the original effective date of 2017. Implementation may be either through retrospective application to each period from the first quarter of 2017 or with a cumulative effect adjustment upon adoption in 2018. In April 2016, the FASB issued amendments, ASU No. 2016-10, that clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The standard should be adopted concurrently with adoption of ASU No. 2014-09 which is effective for annual and interim periods beginning after December 15, 2017 with early adoption permitted. Effective January 1, 2017, the Company will implement the new revenue recognition policy with the effects being recorded as an adjustment to the return reserve and to the beginning retained deficit on January 1, 2017. As noted above, the current policy relating to sales to distributors defers revenue recognition on products sold to distributors until the products sell out of distributor inventory. As a result, the current policy defers 100% of revenue and cost of revenue until shipped by the distributor even though distributor contractual return rights and actual return experiences are significantly less than 100%. The new policy recognizes revenue on sales to distributors when shipping of product is completed and title transfers to the distributor, less a reserve for estimated product returns (sales and cost of sales) based on historical experience. The effect of the change on January 1, 2017 is a one-time reduction (debit) to net deferred revenue and a one-time improvement (credit) to retained deficit in the amount of $836,000. The Company defers revenue on advance payments from customers when performance obligations have yet to be completed and/or services performed. Such deferred revenue does not include amounts related to products delivered to distributors which have not sold-through to the distributors’ end customers as described above. The Company also earns revenue from its SocketCare services program which provides for extended warranty and accidental breakage coverage for selected products. Service purchased at the time of product purchase provides for coverage in three-year and five-year terms. The Company additionally offers comprehensive coverage and program term extensions. Revenues from the SocketCare services program are recognized ratably over the life of the extended warranty contract. The amount of unrecognized warranty service revenue is classified as deferred service revenue and presented on the Company’s balance sheet in its short and long term components. |
Warranty | Warranty The Company’s products typically carry a one year warranty. The Company reserves for estimated product warranty costs at the time revenue is recognized based upon the Company’s historical warranty experience, and additionally for any known product warranty issues. If actual costs differ from initial estimates, the Company records the difference in the period they are identified. Actual claims are charged against the warranty reserve. The following describes activity in the reserves for product warranty costs for the years ended December 31, 2016 and 2015: Year Balance at Additional Warranty Reserves Amounts Balance at 2016 $ 78,871 $ 34,385 $ (34,385 ) $ 78,871 2015 $ 78,871 $ 41,029 $ (41,029 ) $ 78,871 |
Research and Development | Research and Development Research and development expenditures are charged to operations as incurred. The major components of research and development costs include salaries and employee benefits, stock-based compensation expense, , and allocations of overhead and occupancy costs. The accounting for the costs of computer software to be sold, leased or otherwise marketed, requires the capitalization of certain software development costs subsequent to the establishment of technological feasibility. Based on the Company’s product development process, technological feasibility is established upon the completion of a working model. Costs incurred by the Company between the completion of the working model and the point at which the product is ready for general release have been insignificant. Accordingly, the Company has charged all such costs to research and development expenses in the accompanying statements of income. |
Advertising Costs | Advertising Costs Advertising costs are charged to sales and marketing as incurred. The Company incurred $45,303 and $47,287, in advertising costs during 2016 and 2015, respectively. |
Income Taxes | Income Taxes The Company uses the asset and liability method to account for income taxes. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance against deferred tax assets when it is more likely than not that such assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the tax benefit from uncertain tax positions if it is more likely than not that the tax positions will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. It is the Company's policy to include interest and penalties related to tax positions as a component of income tax expense. |
Shipping and handling costs | Shipping and handling costs Shipping and handling costs are included in the cost of revenues in the statement of operations. |
Net Income Per Share | Net Income Per Share The following table sets forth the reconciliation of basic shares to diluted shares and the computation of basic and diluted net income per share: Years Ended December 31, 2016 2015 Numerator: Net income $ 12,147,088 $ 1,817,672 Convertible note interest 117,421 — Adjusted diluted net income $ 12,264,509 $ 1,817,672 Denominator: Weighted average shares outstanding used in computing net income per share: Basic 5,793,245 5,554,541 Effect of dilutive stock options and convertible notes payable 1,026,576 351,695 Diluted 6,819,821 5,906,236 Net income per share applicable to common stockholders: Basic $ 2.10 $ 0.33 Diluted $ 1.80 $ 0.31 For the 2016 period presented, the diluted shares outstanding include the dilutive effect of assumed conversion of convertible notes and assumed exercise of all in-the-money employee stock options, which is calculated based on the average share price for the 2016 fiscal period using the treasury stock method. Under the treasury stock method, the hypothetically received proceeds from the exercise of in-the-money options and warrants are assumed to be used to repurchase shares. For 2016, options to purchase totaling 1,551,727 shares of the Company’s Common Stock were excluded from the calculation of the diluted earnings per share because the exercise prices were greater than or equal to the average price of the common shares, and therefore their inclusion would have been anti-dilutive. For 2015, options to purchase and shares issuable for convertible notes and related accrued interest, totaling 2,036,520 shares of common stock, have been omitted from the income per share calculation. |
Stock-Based Compensation Expense | Stock-Based Compensation Expense The Company has incentive plans that reward employees with stock options. The amount of compensation cost for these stock-based awards is measured 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 which 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. |
Segment Information | Segment Information Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief executive officer in deciding how to allocate resources and in assessing performance. The Company operates in one segment—mobile systems solutions for businesses. Mobile systems solutions typically consist of mobile devices such as smartphones or tablets, 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 for the years ended December 31, 2016 and 2015 are as follows: Years Ended December 31, Revenues: (in thousands) 2016 2015 United States $ 16,851 $ 14,343 Europe 2,843 2,698 Asia and rest of world 1,094 1,359 $ 20,788 $ 18,400 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 | Major Customers Customers who accounted for at least 10% of total revenues for the years ended December 31, 2016 and 2015 were as follows: Years Ended December 31, 2016 2015 Ingram Micro Inc. 29 % 29 % BlueStar, Inc. 22 % 22 % Scansource, Inc. 18 % 18 % |
Recently Issued Financial Accounting Standards | Recently Issued Financial Accounting Standards In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. Under these amendments, goodwill impairment testing will be performed by comparing the fair value of the reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The new standard is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be applied on a prospective basis. Early adoption is permitted for annual or interim goodwill impairment testing performed after January 1, 2017. We do not presently anticipate that the adoption of ASU 2016-15 will have a material impact on our consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 will be effective for us on January 1, 2018 with early adoption permitted. We do not presently anticipate that the adoption of ASU 2016-15 will have a material impact on our consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which requires companies to record excess tax benefits and deficiencies in income rather than the current requirement to record them through equity. ASU 2016-09 also allows companies the option to recognize forfeitures of share-based awards when they occur rather than the current requirement to make an estimate upon the grant of the awards. ASU 2016-09 will be effective for us on January 1, 2017. Early adoption of ASU 2016-09 will be permitted in any interim or annual period, with any adjustments reflected as of the beginning of the fiscal year of adoption. We do not anticipate that the adoption of ASU 2016-09 will have a material impact on our financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases, which eliminates the current tests for lease classification under U.S. GAAP and requires lessees to recognize the right-of-use assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. ASU 2016-02 provides that lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. We are assessing the impact that ASU 2016-02 is anticipated to have on our consolidated financial statements. We currently expect that most of our operating lease commitments will be subject to the new standard and recognized as lease liabilities and right-of-use assets upon our adoption of ASU 2016-02. In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, which amends the guidance regarding the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, ASU 2016-01 clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. ASU 2016-01 will be effective for us on January 1, 2018. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. Upon adoption of ASU 2016-01, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. We do not presently anticipate that the adoption of ASU 2016-01 will have a material impact on our financial statements. In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which will require all deferred tax assets and deferred tax liabilities to be presented as noncurrent within a classified balance sheet. ASU 2015-17 will be effective for us as of January 1, 2017, with early application permitted. ASU 2015-17 may be applied either prospectively to all deferred tax assets and liabilities or retrospectively to all periods presented. We have elected to early adopt ASU 2015-17 effective December 31, 2016. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. ASU 2015-11 requires that inventory be measured at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Inventory measured using last-in, first-out or the retail inventory method are excluded from the scope of ASU 2015-11 which is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. We do not anticipate that the implementation of ASU 2015-11 will have a material impact on our consolidated financial statements. In May 2014, the FASB issued authoritative guidance amending the FASB Accounting Standards Codification and creating a new Topic 606, Revenue from Contracts with Customers. The new guidance clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP applicable to revenue transactions. This guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The existing industry guidance will be eliminated when the new guidance becomes effective and annual disclosures will be substantially revised. Additional disclosures will also be required under the new standard. In July 2015, the FASB approved a proposal that extended the required implementation date one year to the first quarter of 2018 but also would permit companies to adopt the standard at the original effective date of 2017. Implementation may be either through retrospective application to each period from the first quarter of 2017 or with a cumulative effect adjustment upon adoption in 2018. In April 2016, the FASB issued amendments, ASU No. 2016-10, that clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The standard should be adopted concurrently with adoption of ASU No. 2014-09 which is effective for annual and interim periods beginning after December 15, 2017 with early adoption permitted. We will early adopt the new standard effective January 1, 2017. The effect of the change on January 1, 2017 is a one-time reduction (debit) to net deferred revenue and a one-time improvement (credit) to retained deficit in the amount of $836,000. From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position, results of operations or cash flows. |
Summary of Significant Accounti
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Activities in allowance for doubtful accounts | Year Balance at Charged to Amounts Balance at 2016 $ 89,058 $ — $ — $ 89,058 2015 $ 89,058 $ — $ — $ 89,058 |
Inventory components | December 31, 2016 2015 Raw materials and sub-assemblies $ 2,665,185 $ 2,521,585 Finished goods 64,359 39,083 Inventory reserves (1,192,105 ) (1,234,578 ) Inventory, net $ 1,537,439 $ 1,326,090 |
Prepaid expenses and other current assets | December 31, 2016 2015 Prepaid insurance $ 40,307 $ 18,612 Prepaid project development costs 83,600 — Prepaid inventory purchases 43,700 2,031 Other 91,857 66,913 Prepaid expenses and other current assets $ 259,464 $ 87,556 |
Major customers as a percentage of net accounts receivable balances | December 31, 2016 2015 Ingram Micro Inc. 49 % 35 % Bluestar, Inc. 30 % 22 % ScanSource, Inc. * 17 % *Customer accounts for less than 10% of accounts receivable balances |
Reserves for product warranty costs | Year Balance at Additional Warranty Reserves Amounts Balance at 2016 $ 78,871 $ 34,385 $ (34,385 ) $ 78,871 2015 $ 78,871 $ 41,029 $ (41,029 ) $ 78,871 |
Net income per share applicable to common stockholders | Years Ended December 31, 2016 2015 Numerator: Net income $ 12,147,088 $ 1,817,672 Convertible note interest 117,421 — Adjusted diluted net income $ 12,264,509 $ 1,817,672 Denominator: Weighted average shares outstanding used in computing net income per share: Basic 5,793,245 5,554,541 Effect of dilutive stock options and convertible notes payable 1,026,576 351,695 Diluted 6,819,821 5,906,236 Net income per share applicable to common stockholders: Basic $ 2.10 $ 0.33 Diluted $ 1.80 $ 0.31 |
Revenue by geographic areas | Years Ended December 31, Revenues: (in thousands) 2016 2015 United States $ 16,851 $ 14,343 Europe 2,843 2,698 Asia and rest of world 1,094 1,359 $ 20,788 $ 18,400 |
Major customers accounted for at least 10% of total revenues | Years Ended December 31, 2016 2015 Ingram Micro Inc. 29 % 29 % BlueStar, Inc. 22 % 22 % Scansource, Inc. 18 % 18 % |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future minimum payments for operating leases | Future minimum lease payments under the operating lease at December 31, 2016 are shown below: Annual minimum payments: Amount 2017 $ 425,345 2018 442,359 2019 460,053 2020 478,455 2021 to 2022 751,269 Total minimum payments $ 2,557,481 |
Future minimum payments under capital lease and equipment financing arrangements | Future minimum payments under capital lease and equipment financing arrangements as of December 31, 2016 are as follows: Annual minimum payments: Amount 2017 $ 30,048 2018 27,607 2019 18,635 2020 9,545 Total minimum payments 85,835 Less amount representing interest (6,482 ) Present value of net minimum payments $ 79,353 Short term portion of capital leases (26,663 ) Long term portion of capital leases $ 52,690 |
Share-Based Compensation Plan (
Share-Based Compensation Plan (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock options' weighted average assumptions | The Company calculates the value of each stock option grant, estimated on the date of grant, using binomial lattice option pricing model. The weighted-average estimated fair value of stock options granted during 2016 and 2015 was $1.93 and $1.58, respectively, using the following weighted-average assumptions: Years Ended December 31, 2016 2015 Risk-free interest rate (%) 1.75 % 2.10 % Dividend yield — — Volatility factor 79.91 % 92.22 % Expected option life (years) 5.6 4.8 |
Schedule of stock-based compensation, stock option, activity | The table below presents the information related to stock option activity for the years ended December 31, 2016 and 2015: Years Ended December 31, 2016 2015 Total intrinsic value of stock options exercised $ 178,923 $ 60,056 Cash received from stock option exercises $ 178,512 $ 155,949 |
Stock-based compensation arrangement by stock-based payment award, options, vested and unvested, outstanding and exercisable | Changes in stock options for the years ended December 31, 2016 and 2015 are as follows: Outstanding Options Options Available For Grant Number of Shares Weighted Average Price Per Share Remaining Contractual Term Intrinsic Balance at December 31, 2014 144,378 1,891,058 $ 2.09 Increase in shares authorized 200,000 — Granted (316,600 ) 316,600 $ 2.25 Exercised — (91,333 ) $ 1.71 Canceled 93,972 (93,972 ) $ 2.01 Balance at December 31, 2015 121,750 2,022,353 $ 2.15 Increase in shares authorized 224,818 — Granted (344,450 ) 344,450 $ 2.89 Exercised — (111,855 ) $ 1.60 Canceled 93,863 (93,863 ) $ 2.73 Balance at December 31, 2016 95,981 2,161,085 $ 2.27 5.58 $ 3,401,944 Exercisable 1,638,288 $ 2.23 4.58 2,651,676 Unvested 522,797 $ 2.40 8.67 750,268 |
Schedule of stock-based compensation, shares authorized under stock option plans, by exercise price range | The following table summarizes information about stock options outstanding and exercisable at December 31, 2016: Options Outstanding Options Exercisable Range of Exercise Prices Number of Options Outstanding Weighted Average Remaining Life (Years) Weighted Average Exercise Price Number of Options Exercisable Weighted Average Exercise Price $0.95 - $1.10 369,444 6.58 $ 1.01 306,603 $ 1.02 $1.20 - $1.25 56,000 6.50 $ 1.23 46,583 $ 1.22 $1.50 - $1.82 167,767 5.33 $ 1.71 167,767 $ 1.71 $1.89 - $2.27 477,090 6.50 $ 2.13 347,672 $ 2.08 $2.36 - $2.92 525,638 5.58 $ 2.63 232,617 $ 2.54 $3.04 - $3.54 528,446 3.67 $ 3.09 516,513 $ 3.08 $3.70 - $3.84 35,000 9.42 $ 3.72 18,833 $ 3.71 $6.90 900 1.58 $ 6.90 900 $ 6.90 $10 800 0.17 $ 10.00 800 $ 10.00 $0.95 - $10.00 2,161,085 5.58 $ 2.27 1,638,288 $ 2.23 |
Schedule of employee service stock-based compensation, allocation of recognized period costs | The stock-based compensation expense included in the Company’s statements of income for the years ended December 31, 2016 and 2015, consisted of the following: Years Ended December 31, Income Statement Classification 2016 2015 Cost of revenues $ 40,929 $ 19,322 Research and development 74,810 40,951 Sales and marketing 87,158 62,898 General and administrative 139,713 86,693 $ 342,610 $ 209,864 |
Shares Reserved (Tables)
Shares Reserved (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Common stock reserved for future issuance | Common stock reserved for future issuance was as follows: December 31, 2016 2015 Stock option grants outstanding (see Note 6) 2,161,085 2,022,353 Reserved for future stock option grants (see Note 6) 95,981 121,750 Reserved for note conversion (see Note 2) 972,884 977,398 Reserved for exercise of outstanding warrants (see Note 7) — 169,335 3,229,950 3,290,836 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income Tax (Benefit) Expense | Deferred tax benefit at December 31, 2016 is related to the release of valuation allowance against substantially all of the Company's federal and state deferred tax assets as the Company concluded such assets were fully realizable. The need for a valuation allowance requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction-by-jurisdiction basis. In making such assessment, significant weight is given to evidence that can be verified objectively. After the consideration of both positive and negative evidence to assess the recoverability of the Company's net deferred tax assets during the 2016 tax year, the Company determined that it was more likely than not the Company would realize the majority of the value of federal and state deferred tax assets given the current certainties regarding the timing of profits and forecasted future profitability. The Company will continue to monitor the likelihood that it will be able to recover the deferred tax assets in the future. The components of income taxes for the periods ended December 31, 2016 and 2015 are as follows: Years Ended December 31, 2016 2015 Current: Federal $ 12,200 $ — State 37,000 — Total Current 49,200 — Deferred: Federal (8,473,481 ) 31,940 State (1,291,140 ) — Total Deferred (9,764,621 ) 31,940 Income tax (benefit) expense $ (9,715,421 ) $ 31,940 |
Schedule of Effective Income Tax Rate Reconciliation | Reconciliation of the statutory federal income tax rate to the Company's effective tax rate: Years Ended December 31, 2016 2015 Federal tax at statutory rate 34.00 % 34.00 % State income tax rate 5.83 % 5.83 % Release of valuation allowance 308.63 % (41.56 %) Provision for taxes 348.46 % (1.73 %) |
Schedule of Deferred Tax Assets and Liabilities | Deferred income tax reflects the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. At December 31, 2016, the Company released valuation allowance against substantially all deferred tax assets. Significant components of net deferred tax assets are as follows: Years Ended December 31, Deferred tax assets: 2016 2015 Net operating loss carryforwards $ 8,111,000 $ 8,833,000 Credits 755,000 753,000 Capitalized research and development costs 9,000 13,000 Other acquired intangibles 49,000 91,000 Accruals not currently deductible 1,343,000 1,614,000 Depreciation 29,000 5,000 Total deferred tax assets 10,296,000 11,309,000 Valuation allowance for deferred tax assets (464,000 ) (11,279,000 ) Net deferred tax assets 9,832,000 30,000 Deferred tax liability: Acquired intangibles (243,000 ) (205,000 ) Net deferred tax assets (liabilities) $ 9,589,000 $ (175,000 ) |
Schedule of Unrecognized tax benefits ("UTBs") | A reconciliation of the beginning and ending amount of unrecognized tax benefits (“UTBs”), excluding interest and penalties, is as follows: Amount Beginning balance at January 1, 2016 $ 754,000 Decreases in UTBs taken in prior years (38,000 ) Decreases in UTBs taken in current years 39,000 Ending balance at December 31, 2016 $ 755,000 |
Foreign Currency (Details Narra
Foreign Currency (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Gain (Loss) on Foreign Currency Fair Value Hedge Ineffectiveness, Disclosures [Abstract] | ||
Loss on foreign currency | $ (25,500) | $ (13,000) |
Activities in allowance for dou
Activities in allowance for doubtful accounts (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Accounts Receivable, Net [Abstract] | ||
Balance at Beginning of Year | $ 89,058 | $ 89,058 |
Charged to Costs and Expenses | ||
Amounts Written Off | ||
Balance at End of Year | $ 89,058 | $ 89,058 |
Inventory Components (Details)
Inventory Components (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Inventory Disclosure [Abstract] | ||
Raw materials and sub-assemblies | $ 2,665,185 | $ 2,521,585 |
Finished goods | 64,359 | 39,083 |
Inventory reserves | (1,192,105) | (1,234,578) |
Inventories, net | $ 1,537,439 | $ 1,326,090 |
Prepaid Expenses and Other Curr
Prepaid Expenses and Other Current Assets (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid insurance | $ 40,307 | $ 18,612 |
Prepaid project development costs | 83,600 | |
Prepaid inventory purchases | 43,700 | 2,031 |
Other | 91,857 | 66,913 |
Prepaid expenses and other current assets | $ 259,464 | $ 87,556 |
Depreciation Expense (Details N
Depreciation Expense (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Depreciation, Depletion and Amortization [Abstract] | ||
Depreciation expense | $ 279,392 | $ 197,686 |
Major Customers as a Percentage
Major Customers as a Percentage of Net Accounts Receivable Balances (Details) | Dec. 31, 2016 | Dec. 31, 2015 |
Ingram Micro Inc. | ||
Percent of net accounts receivable balances | 49.00% | 35.00% |
Threshold percentage for disclosure | 10.00% | 10.00% |
BlueStar, Inc. | ||
Percent of net accounts receivable balances | 30.00% | 22.00% |
Threshold percentage for disclosure | 10.00% | 10.00% |
ScanSource, Inc. | ||
Percent of net accounts receivable balances | 17.00% | |
Threshold percentage for disclosure | 10.00% | 10.00% |
Concentration of Suppliers (Det
Concentration of Suppliers (Details Narrative) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Concentration Risks, Types, No Concentration Percentage [Abstract] | ||
Accounts payable balance with top supplier | 15.00% | |
Accounts payable balance with number two supplier | 12.00% | |
Percentage of inventory purchases from top two suppliers | 65.00% | 57.00% |
Deferred Revenue (Details Narra
Deferred Revenue (Details Narrative) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Deferred Revenue Disclosure [Abstract] | ||
Deferred income on shipments to distributors | $ 2,010,441 | $ 1,925,268 |
Costs of deferred income | $ 947,799 | $ 921,008 |
Warranty (Details Narrative)
Warranty (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Product Warranties Disclosures [Abstract] | ||
Balance at Beginning of Year | $ 78,871 | $ 78,871 |
Additional warranty reserves | 34,385 | 41,029 |
Amounts charged to reserves | (34,385) | (41,029) |
Balance at End of Year | $ 78,871 | $ 78,871 |
Advertising Costs (Details Narr
Advertising Costs (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Advertising Costs Details Narrative | ||
Advertising costs | $ 45,303 | $ 47,287 |
Net income per share (Details)
Net income per share (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Numerator: | ||
Net income | $ 12,147,088 | $ 1,817,672 |
Convertible note interest | 117,421 | |
Adjusted diluted net income | $ 12,264,509 | $ 1,817,672 |
Denominator: Weighted average common shares outstanding used in computing net income per share: | ||
Basic | 5,793,245 | 5,554,541 |
Effect of dilutive stock options and convertible notes payable | 1,026,576 | 351,695 |
Diluted | 6,819,821 | 5,906,236 |
Net income per share applicable to common stockholders: | ||
Basic | $ 2.10 | $ 0.33 |
Diluted | $ 1.80 | $ 0.31 |
Revenue by geographic areas (De
Revenue by geographic areas (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
United States | ||
Revenues: (in thousands) | $ 16,851 | $ 14,343 |
Europe | ||
Revenues: (in thousands) | 2,843 | 2,698 |
Asia and rest of world | ||
Revenues: (in thousands) | 1,094 | 1,359 |
Total | ||
Revenues: (in thousands) | $ 20,788 | $ 18,400 |
Major customers accounted for a
Major customers accounted for at least 10% of total revenues (Details) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Ingram Micro Inc. | ||
Percent of total revenues | 29.00% | 29.00% |
Threshold percentage for disclosure | 10.00% | 10.00% |
BlueStar, Inc. | ||
Percent of total revenues | 22.00% | 22.00% |
Threshold percentage for disclosure | 10.00% | 10.00% |
ScanSource, Inc. | ||
Percent of total revenues | 18.00% | 18.00% |
Threshold percentage for disclosure | 10.00% | 10.00% |
Short Term Related Party Conver
Short Term Related Party Convertible Notes Payable (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Short term related party convertible notes payable | $ 752,625 | $ 380,696 |
Long term related party convertible notes payable | $ 371,929 | |
Annual interest rate on short term convertible notes payable, compounded quarterly | 8.00% | |
Annual interest rate on long term convertible notes payable, compounded quarterly | 18.00% | |
Related party convertible notes payable maturity date | Sep. 4, 2017 | Sep. 4, 2017 |
Accrued interest on related party convertible notes payable | $ 382,808 | $ 265,387 |
Short Term Notes Payable to Officers and Directors | ||
Short term related party convertible notes payable | 380,696 | |
Long term related party convertible notes payable | ||
Conversion price | $ 1.25 | |
Annual interest rate on short term convertible notes payable, compounded quarterly | 8.00% | |
Short Term Notes Payable to Chairman | ||
Short term related party convertible notes payable | $ 371,929 | |
Long term related party convertible notes payable | ||
Conversion price | $ 1.25 | |
Annual interest rate on short term convertible notes payable, compounded quarterly | 12.00% |
Related Party and Other Short T
Related Party and Other Short Term Credit Line Notes Payable (Details Narrative) - USD ($) | May 15, 2014 | Dec. 31, 2016 | Dec. 31, 2015 |
Related Party Transactions [Abstract] | |||
Annual interest rate payable monthly | 18.00% | ||
Maturity date | Jan. 29, 2016 | ||
Related party short term notes payable | $ 650,000 | $ 500,000 | |
Interest expense | $ 7,645 | $ 100,455 |
Bank Financing Arrangements (De
Bank Financing Arrangements (Details Narrative) - USD ($) | Mar. 20, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Remaining borrowing capacity | $ 1,612,000 | ||
Domestic Line of Credit | |||
Aggregate maximum advance amount | $ 2,000,000 | ||
Borrowing capacity description | 70% of qualified receivables | ||
Debt reference rate | Bank's Prime Rate | ||
Minimum interest rate on debt (as a percent) | 3.25% | ||
Basis point added to reference rate of debt | 1.50% | ||
Monthly collateral handling fee | 0.10% | ||
Interest expense | $ 3,000 | $ 38,494 | |
Line of credit expiration date | Feb. 27, 2019 | ||
Foreign Line of Credit | |||
Aggregate maximum advance amount | $ 500,000 | ||
Borrowing capacity description | 70% of qualified receivables | ||
Debt reference rate | Bank's Prime Rate | ||
Minimum interest rate on debt (as a percent) | 3.25% | ||
Basis point added to reference rate of debt | 1.50% | ||
Monthly collateral handling fee | 0.10% | ||
Line of credit expiration date | Feb. 27, 2018 |
Commitments and Contingencies40
Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rental expense for operating lease | $ 435,668 | $ 430,648 |
Deferred rent | 286,901 | 283,053 |
Non-cancelable purchase commitments for inventory | 2,724,000 | |
Original cost of equipment under capital leases | 100,584 | 124,427 |
Capital lease accumulated depreciation | $ 20,173 | $ 80,150 |
Future Minimum Payments For Ope
Future Minimum Payments For Operating Leases (Details) | Dec. 31, 2016USD ($) |
Annual minimum payments: | |
2,017 | $ 425,345 |
2,018 | 442,359 |
2,019 | 460,053 |
2,020 | 478,455 |
2021 to 2022 | 751,269 |
Total minimum payments | $ 2,557,481 |
Future Minimum Payments Under C
Future Minimum Payments Under Capital Lease And Equipment Financing Arrangements (Details) | Dec. 31, 2016USD ($) |
Annual minimum payments: | |
2,017 | $ 30,048 |
2,018 | 27,607 |
2,019 | 18,635 |
2,020 | 9,545 |
Total minimum payments | 85,835 |
Less amount representing interest | (6,482) |
Present value of net minimum payments | 79,353 |
Short term portion of capital leases | (26,663) |
Long term portion of capital leases | $ 52,690 |
Stock options' weighted average
Stock options' weighted average assumptions and grant date fair values (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk-free interest rate (%) | 1.75% | 2.10% |
Dividend yield | ||
Volatility factor | 79.91% | 92.22% |
Expected option life (years) | 5 years 7 months 6 days | 4 years 9 months 18 days |
Weighted average grant date fair value | $ 1.93 | $ 1.58 |
Activity of stock options exerc
Activity of stock options exercised (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total intrinsic value of stock options exercised | $ 178,923 | $ 60,056 |
Cash received from stock option exercises | $ 178,512 | $ 155,949 |
2004 Plan Options Available for
2004 Plan Options Available for Grant (Details) - shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
2004 Plan Options Available for Grant | ||
Balance at January 1 | 121,750 | 144,378 |
Increase in shares authorized | 224,818 | 200,000 |
Granted | (344,450) | (316,600) |
Canceled | (93,863) | (93,972) |
Balance at December 31 | 95,981 | 121,750 |
2004 Plan Outstanding Options R
2004 Plan Outstanding Options Rollforward (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Shares | ||
Balance at January 1 | 2,022,353 | 1,891,058 |
Granted | 344,450 | 316,600 |
Exercised | (111,855) | (91,333) |
Canceled | (93,863) | (93,972) |
Balance at December 31 | 2,161,085 | 2,022,353 |
Exercisable | 1,638,288 | |
Unvested | 522,797 | |
Weighted Average Exercise Price | ||
Balance at January 1 | $ 2.15 | $ 2.09 |
Granted | 2.89 | 2.25 |
Exercised | 1.60 | 1.71 |
Canceled | 2.73 | 2.01 |
Balance at December 31 | 2.27 | $ 2.15 |
Exercisable | 2.23 | |
Unvested | $ 2.40 | |
Outstanding, Remaining contractual term | 5 years 6 months 29 days | |
Outstanding, Intrinsic value | $ 3,401,944 | |
Exercisable, Remaining contractual term | 4 years 6 months 29 days | |
Exercisable, Intrinsic value | $ 2,651,676 | |
Unvested, Remaining contractual term | 8 years 8 months 2 days | |
Unvested, Intrinsic value | $ 750,268 |
2004 Plan outstanding and exerc
2004 Plan outstanding and exercisable options by price range (Details) | 12 Months Ended |
Dec. 31, 2016$ / sharesshares | |
Weighted average remaining life (in yrs.) | 5 years 6 months 29 days |
Price Range $0.95 - $1.10 | |
Range of exercise | $ 0.95 |
Range of exercise | $ 1.10 |
Number outstanding options | shares | 369,444 |
Weighted average remaining life (in yrs.) | 6 years 6 months 29 days |
Weighted average exercise price (US$ per share) | $ 1.01 |
Number exercisable options | shares | 306,603 |
Weighted average exercise price | $ 1.02 |
Price Range $1.20 - $1.25 | |
Range of exercise | 1.20 |
Range of exercise | $ 1.25 |
Number outstanding options | shares | 56,000 |
Weighted average remaining life (in yrs.) | 6 years 6 months |
Weighted average exercise price (US$ per share) | $ 1.23 |
Number exercisable options | shares | 46,583 |
Weighted average exercise price | $ 1.22 |
Price Range $1.50 - $1.82 | |
Range of exercise | 1.50 |
Range of exercise | $ 1.82 |
Number outstanding options | shares | 167,767 |
Weighted average remaining life (in yrs.) | 5 years 3 months 29 days |
Weighted average exercise price (US$ per share) | $ 1.71 |
Number exercisable options | shares | 167,767 |
Weighted average exercise price | $ 1.71 |
Price Range $1.89 - $2.27 | |
Range of exercise | 1.89 |
Range of exercise | $ 2.27 |
Number outstanding options | shares | 477,090 |
Weighted average remaining life (in yrs.) | 6 years 6 months |
Weighted average exercise price (US$ per share) | $ 2.13 |
Number exercisable options | shares | 347,672 |
Weighted average exercise price | $ 2.08 |
Price Range $2.36 - $2.92 | |
Range of exercise | 2.36 |
Range of exercise | $ 2.92 |
Number outstanding options | shares | 525,638 |
Weighted average remaining life (in yrs.) | 5 years 6 months 29 days |
Weighted average exercise price (US$ per share) | $ 2.63 |
Number exercisable options | shares | 232,617 |
Weighted average exercise price | $ 2.54 |
Price Range $3.04 - $3.54 | |
Range of exercise | 3.04 |
Range of exercise | $ 3.54 |
Number outstanding options | shares | 528,446 |
Weighted average remaining life (in yrs.) | 3 years 8 months 2 days |
Weighted average exercise price (US$ per share) | $ 3.09 |
Number exercisable options | shares | 516,513 |
Weighted average exercise price | $ 3.08 |
Price Range $3.70 - $3.84 | |
Range of exercise | 3.70 |
Range of exercise | $ 3.84 |
Number outstanding options | shares | 35,000 |
Weighted average remaining life (in yrs.) | 9 years 5 months 1 day |
Weighted average exercise price (US$ per share) | $ 3.72 |
Number exercisable options | shares | 18,833 |
Weighted average exercise price | $ 3.71 |
Price Range $6.90 | |
Range of exercise | 6.90 |
Range of exercise | $ 6.90 |
Number outstanding options | shares | 900 |
Weighted average remaining life (in yrs.) | 1 year 6 months 29 days |
Weighted average exercise price (US$ per share) | $ 6.90 |
Number exercisable options | shares | 900 |
Weighted average exercise price | $ 6.90 |
Price Range $10.00 | |
Range of exercise | 10 |
Range of exercise | $ 10 |
Number outstanding options | shares | 800 |
Weighted average remaining life (in yrs.) | 2 months 1 day |
Weighted average exercise price (US$ per share) | $ 10 |
Number exercisable options | shares | 800 |
Weighted average exercise price | $ 10 |
Price Range $0.95 - $10.00 | |
Range of exercise | 0.95 |
Range of exercise | $ 10 |
Number outstanding options | shares | 2,161,085 |
Weighted average remaining life (in yrs.) | 5 years 6 months 29 days |
Weighted average exercise price (US$ per share) | $ 2.27 |
Number exercisable options | shares | 1,638,288 |
Weighted average exercise price | $ 2.23 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Stock-based compensation expenses | $ 342,610 | $ 209,864 |
Total remaining unamortized stock-based compensation cost not yet recognized | $ 757,671 | |
Total compensation cost not yet recognized, Period for recognition | 2 years 8 months 2 days | |
Cost of revenues | ||
Stock-based compensation expenses | $ 40,929 | 19,322 |
Research and development | ||
Stock-based compensation expenses | 74,810 | 40,951 |
Sales and marketing | ||
Stock-based compensation expenses | 87,158 | 62,898 |
General and administrative | ||
Stock-based compensation expenses | $ 139,713 | $ 86,693 |
Common stock reserved for futur
Common stock reserved for future issuance (Details) - shares | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock option grants outstanding (see Note 6) | 2,161,085 | 2,022,353 | 1,891,058 |
Reserved for future stock option grants (see Note 6) | 95,981 | 121,750 | |
Reserved for note conversion (see Note 2) | 972,884 | 977,398 | |
Reserved for exercise of outstanding warrants (see Note 7) | 169,335 | ||
Total common stock reserved for future issuance | 3,229,950 | 3,290,836 |
Schedule of Income Tax Expense
Schedule of Income Tax Expense (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | ||
Federal, Current | $ 12,200 | |
State, Current | 37,000 | |
Total, Current | 49,200 | |
Federal, Deferred | (8,473,481) | 31,940 |
State, Deferred | (1,291,141) | |
Total, Deferred | (9,764,622) | 31,940 |
Income tax (benefit) expense | $ (9,715,421) | $ 31,940 |
Schedule of Effective Income Ta
Schedule of Effective Income Tax Rate Reconciliation (Details) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | ||
Federal tax at statutory rate | 34.00% | 34.00% |
State income tax rate | 5.83% | 5.83% |
Release of valuation allowance | 308.63% | (41.56%) |
Provision for taxes | 348.46% | (1.73%) |
Schedule of Deferred Tax Assets
Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 8,111,000 | $ 8,833,000 |
Credits | 755,000 | 753,000 |
Capitalized research and development costs | 9,000 | 18,000 |
Other acquired intangibles | 49,000 | 91,000 |
Accruals not currently deductible | 1,343,000 | 1,614,000 |
Depreciation | 29,000 | 5,000 |
Total deferred tax assets | 10,296,000 | 11,309,000 |
Valuation allowance for deferred tax assets | (464,000) | (11,279,000) |
Net deferred tax assets | 9,832,000 | 30,000 |
Deferred tax liability: | ||
Acquired intangibles | (243,000) | (205,000) |
Net deferred tax assets (liabilities) | $ 9,589,000 | $ (175,000) |
Schedule of Unrecognized Tax Be
Schedule of Unrecognized Tax Benefits (Details) | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Income Tax Disclosure [Abstract] | |
Beginning balance at January 1, 2016 | $ 754,000 |
Decreases in UTBs taken in prior years | (38,000) |
Decreases in UTBs taken in current years | 39,000 |
Ending balance at December 31, 2016 | $ 755,000 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) | Dec. 31, 2016USD ($) |
Income Tax Disclosure [Abstract] | |
Unrecognized deferred tax benefits for stock-based compensation deduction | $ 2,094,000 |
Federal net operating loss carryforwards | 23,566,000 |
Deferred federal income research and development credits | 464,000 |
Net operating loss carryforwards for state income tax purposes | 13,896,000 |
State research and development tax credits | $ 291,000 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) | 3 Months Ended |
Mar. 20, 2017 | |
Subsequent Events [Abstract] | |
Subsequent events | On March 20, 2017, the Company signed a Business Financing Modification Agreement by and between the Company and Bridge Bank to extend the expiration date of revolving domestic line of credit to February 27, 2019. The international portion of the credit line was not changed and will expire on February 27, 2018. |