Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 04, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Socket Mobile, Inc. | |
Entity Central Index Key | 944,075 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 5,878,980 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,018 |
Condensed Statements of Operati
Condensed Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||
Revenues | $ 3,981,055 | $ 5,622,093 |
Cost of revenues | 1,916,786 | 2,709,399 |
Gross profit | 2,064,269 | 2,912,694 |
Operating expenses: | ||
Research and development | 946,746 | 796,608 |
Sales and marketing | 737,856 | 759,248 |
General and administrative | 664,704 | 688,804 |
Total operating expenses | 2,349,306 | 2,244,660 |
Operating income (loss) | (285,037) | 668,034 |
Interest expense, net | (19,919) | (29,676) |
Net income (loss) before income taxes | (304,956) | 638,358 |
Income tax expense (benefit) | (79,927) | 252,551 |
Net income (loss) | $ (225,029) | $ 385,807 |
Net income (loss) per share: | ||
Basic | $ (0.03) | $ 0.07 |
Diluted | $ (0.03) | $ 0.05 |
Weighted average shares outstanding: | ||
Basic | 6,744,108 | 5,912,088 |
Diluted | 6,744,108 | 7,771,210 |
Condensed Balance Sheets (Unaud
Condensed Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 2,074,854 | $ 3,379,508 |
Accounts receivable, net | 2,925,056 | 2,687,325 |
Inventories, net | 2,279,248 | 2,198,266 |
Prepaid expenses and other current assets | 309,689 | 385,508 |
Deferred cost on shipments to distributors | 168,279 | 204,405 |
Total current assets | 7,757,126 | 8,855,012 |
Property and equipment: | ||
Machinery and office equipment | 2,100,794 | 2,052,091 |
Computer equipment | 942,389 | 851,823 |
Property and equipment, gross | 3,043,183 | 2,903,914 |
Accumulated depreciation | (2,304,011) | (2,241,010) |
Property and equipment, net | 739,172 | 662,904 |
Goodwill | 4,427,000 | 4,427,000 |
Other long-term assets | 267,750 | 271,650 |
Deferred tax assets | 5,717,407 | 5,637,480 |
Total assets | 18,908,455 | 19,854,046 |
Current liabilities: | ||
Accounts payable and accrued expenses | 1,217,121 | 1,112,234 |
Accrued payroll and related expenses | 539,401 | 630,999 |
Deferred revenue on shipments to distributors | 398,837 | 492,611 |
Current portion of deferred service revenue | 32,704 | 31,536 |
Term loan – current portion | 3,375,000 | |
Current portion of capital leases and deferred rent | 56,845 | 55,382 |
Total current liabilities | 5,619,908 | 2,322,762 |
Long-term portion of deferred service revenue | 32,974 | 29,447 |
Long-term portion of capital leases and deferred rent | 257,649 | 271,414 |
Term loan - long-term portion | 625,000 | |
Total liabilities | 6,535,531 | 2,623,623 |
Commitments and contingencies | ||
Stockholders’ equity: | ||
Common stock, $0.001 par value: Authorized – 20,000,000 shares, Issued and outstanding – 5,878,980 shares at March 31, 2018 and 7,011,128 shares at December 31, 2017 | 5,879 | 7,011 |
Additional paid-in capital | 60,146,282 | 64,777,620 |
Accumulated deficit | (47,779,237) | (47,554,208) |
Total stockholders’ equity | 12,372,924 | 17,230,423 |
Total liabilities and stockholders’ equity | $ 18,908,455 | $ 19,854,046 |
Condensed Balance Sheets (Paren
Condensed Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2018 | Dec. 31, 2017 |
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 | 5,878,980 | 7,011,128 |
Common stock, shares outstanding | 5,878,980 | 7,011,128 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Operating activities | ||
Net income (loss) | $ (225,029) | $ 385,807 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Stock-based compensation | 112,133 | 95,697 |
Depreciation and amortization | 91,394 | 78,788 |
Changes in deferred taxes | (79,927) | 239,552 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (237,731) | (488,191) |
Inventories | (80,982) | (304,673) |
Prepaid expenses and other current assets | 76,255 | (68,389) |
Accounts payable and accrued expenses | 104,887 | 353,237 |
Accrued payroll and related expenses | (91,598) | (83,921) |
Net deferred revenue on shipments to distributors | (57,648) | 40,323 |
Deferred service revenue | 4,695 | (6,351) |
Change in deferred rent | (5,213) | (1,043) |
Net cash (used in) provided by operating activities | (388,764) | 240,836 |
Investing activities | ||
Purchases of equipment | (164,198) | (83,519) |
Net cash used in investing activities | (164,198) | (83,519) |
Financing activities | ||
Payments on capital leases | (7,089) | (6,441) |
Proceeds from term loan advance | 4,000,000 | |
Common stock repurchase and related expenses | (5,019,748) | |
Stock options exercised | 275,145 | 152,463 |
Net cash (used in) provided by financing activities | (751,692) | 146,022 |
Net increase (decrease) in cash and cash equivalents | (1,304,654) | 303,339 |
Cash and cash equivalents at beginning of period | 3,379,508 | 1,319,006 |
Cash and cash equivalents at end of period | 2,074,854 | 1,622,345 |
Supplemental disclosure of cash flow information | ||
Cash paid for interest | $ 353 | $ 968 |
Note 1 - Basis of Presentation
Note 1 - Basis of Presentation | 3 Months Ended |
Mar. 31, 2018 | |
Notes to Financial Statements | |
Basis or Presentation | NOTE 1 — Basis of Presentation The accompanying unaudited condensed financial statements of Socket Mobile, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals considered necessary for fair presentation have been included. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future period. These financial statements should be read in conjunction with the audited financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. |
Note 2 - Summary of Significant
Note 2 - Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 2 — Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates, and such differences may be material to the financial statements. Cash Equivalents and Fair Value of Financial Instruments The Company considers all highly liquid investments purchased with a maturity date of 90 days or less at date of purchase to be cash equivalents. At March 31, 2018 and December 31, 2017, 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’s cash balance on deposit in these accounts may, at times, exceed the federally insured limits. The Company has never experienced any losses in such accounts. The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, debt and foreign exchange contracts approximate fair value due to the relatively short period of time to maturity. Revenue Recognition and Deferred Revenue On January 1, 2017, we adopted ASU No. 2014-09 (now ASC 606 “Revenue from Contracts with Customers”) and implemented a new revenue recognition policy. Instead of deferring 100% of revenue and cost of revenue until products are sold by distributors, 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). The reserves are based on estimates of future returns calculated from actual return history plus knowledge of pending returns outside of the norm. Actual return history is approximately 17% of the channel inventory, primarily from stock rotations. On January 1, 2017, the Company recorded a one-time reduction (debit) to net deferred revenue in the amount of $836,000 less the deferred tax effects of $333,000 for a net improvement in retained deficit of $503,000. At March 31, 2018, the deferred revenue and deferred cost on shipments to distributors were $398,837 and $168,279, respectively, compared to $492,611 and $204,405, respectively, at December 31, 2017. |
Note 3 - Inventories
Note 3 - Inventories | 3 Months Ended |
Mar. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Inventories | NOTE 3 — Inventories Inventories consist principally of raw materials and sub-assemblies, which are stated at the lower of cost (first-in, first-out) or market. Inventories at March 31, 2018 and December 31, 2017 were as follows: March 31, December 31, 2018 2017 Raw materials and sub-assemblies $ 3,079,027 $ 3,016,327 Finished goods 72,531 67,120 Inventory reserves (872,310 ) (885,181 ) Inventory, net $ 2,279,248 $ 2,198,266 |
Note 4 - Short-Term Related Par
Note 4 - Short-Term Related Party Convertible Notes Payable | 3 Months Ended |
Mar. 31, 2018 | |
Related Party Transactions [Abstract] | |
Short-Term Related Party Convertible Notes Payable | NOTE 4 — Short-Term Related Party Convertible Notes Payable The Company’s Subordinated Convertible Notes of $752,625 matured on September 4, 2017. At the option of the note holders, note payable principal and accrued interest totaling $1,216,109 was converted into 972,884 shares of common stock at a conversion rate of $1.25 per share. The conversion reduces current liabilities and increases stockholders’ equity by $1,216,109. These 4-year notes were originally issued on September 4, 2013 to officers and directors of the company and converted into common stock at maturity pursuant to the terms of the notes. Accrued interest for all convertible notes was $411,517 at March 31, 2017 and was included in Accounts Payable and Accrued Expenses. Interest expense for the three months ended March 31, 2017 was $28,709. |
Note 5 - Bank Financing Arrange
Note 5 - Bank Financing Arrangements | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Bank Financing Arrangements | NOTE 5 — Bank Financing Arrangements On January 31, 2018, the Company entered into an Amended and Restated Business Financing Agreement (the “Financing Agreement”) with Western Alliance Bank (the “Bank), that provides for a $2.5 million revolving line of credit and a $4.0 million term loan that the Company may use to repurchase shares of common stock. Pursuant to the revolving line of credit, the Company is permitted to borrow up to the lesser of $2.5 million or 80% of eligible accounts receivables. Amounts outstanding under the line of credit bear interest at the “U.S. Prime Rate” published by the Wall Street Journal plus 0.75%. Interest is payable monthly on the line of credit, and the principal is due upon the maturity date of January 31, 2020. Amounts outstanding under the term loan bear interest at the “U.S. Prime Rate” published by the Wall Street Journal plus 1.75%. Following a three-month interest only period, the term loan is payable in 45 equal monthly installments of principal and interest. The loans are secured by all of our present and future assets, including intellectual property and general intangibles. Termination of the revolving line of credit or term loan prior to its termination date may be subject to early termination fees, subject to certain exceptions. Amounts repaid or prepaid under the term loan may not be reborrowed. At the end of each quarter through the quarter ending December 31, 2018, the Company is required to prepay outstanding term loan principal in an amount equal to 25% of excess cash flow, as set forth in the Financing Agreement, for the most recent quarter ended. The Company is also obligated to pay customary fees for a loan facility of this size and type. The Financing Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company’s ability to, among other things, grant liens, make investments, incur indebtedness, merge or consolidate, dispose of assets, make acquisitions, pay dividends or make distributions, repurchase stock, enter into transactions with affiliates and enter into restrictive agreements, in each case subject to customary exceptions for a credit facility of this size and type. The Company is also required to maintain compliance with an asset coverage ratio measured monthly, which requirements increase during the term of the Financing Agreement, a fixed charge coverage ratio of no less than 1.75 to 1.0, measured quarterly, and a total funded debt to trailing twelve months EBITDA multiple of not more than 1.75 to 1.0, measured monthly. The Financing Agreement also contains customary events of default including, among others, payment defaults, breaches of covenants, bankruptcy and insolvency events, cross defaults with certain material indebtedness, judgment defaults, and breaches of representations and warranties. Upon an event of default, the Bank may declare all or a portion of the Company’s outstanding obligations payable to be immediately due and payable and exercise other rights and remedies provided for under the Financing Agreement. During the existence of an event of default, interest on the obligations could be increased. On March 1, 2018, the Company received proceeds of $4.0 million under the provisions of the term loan for a common stock repurchase. On March 9, 2018, the Company completed a tender offer to purchase and retire 1,250,000 shares of common stock from multiple investors at a purchase price of $3.90 per share, for an aggregate cost of approximately $4.9 million, excluding fees and expenses relating to the tender offer. Interest expense on the term loan in Q1 2018 was $21,806. Accrued interest related to the amounts outstanding under the term loan at March 31, 2018 was also $21,806. No amounts were drawn under the Company’s bank credit lines during the three months ended March 31, 2018 and 2017. At March 31, 2018, the total borrowing capacity was approximately $2,055,000. As of March 31, 2018, the Company failed to comply with the Fixed Charge Coverage ratio and Total Funded Debt to EBITDA ratio. The Company subsequently paid down the term loan from $4.0 million at March 31, 2018 to approximately $1.4 million at May 1 st |
Note 6 - Segment Information an
Note 6 - Segment Information and Concentrations | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Segment Information and Concentrations | NOTE 6 — Segment Information and Concentrations Segment Information The Company operates in the mobile barcode scanning and RFID/NFC data capture market. Mobile scanning typically consists of mobile devices such as smartphones or tablets, with mobile scanning peripherals for data collection, and third-party vertical applications software. The Company distributes its products in the United States and foreign countries primarily through distributors and resellers. The Company markets its products primarily through application developers whose applications are designed to work with Company’s products. Revenues for the geographic areas for three months ended March 31, 2018 and 2017 were as follows: Three Months Ended March 31, Revenues: 2018 2017 United States $ 3,004,970 $ 4,341,648 Europe 643,749 1,099,682 Asia and rest of world 332,336 180,763 Total revenues $ 3,981,055 $ 5,622,093 Export revenues are attributable to countries based on the location of the Company’s customers. The Company does not hold long-lived assets in foreign locations. Major Customers Customers who accounted for at least 10% of the Company’s total revenues for the three months ended March 31, 2018 and 2017 were as follows: Three Months Ended March 31, 2018 2017 Ingram Micro, Inc. 32 % 45 % BlueStar, Inc. 23 % 15 % ScanSource, Inc. * 14 % ScanSource Europe SPRL * 11 % _____________ * Customer accounted for less than 10% of total revenues for the period Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk include cash, cash equivalents and accounts receivable. The Company invests its cash in demand deposit accounts in banks. To date, the Company has not experienced losses on the investments. The Company’s trade accounts receivable 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 March 31, 2018 and December 31, 2017 were as follows: March 31, December 31, 2018 2017 Ingram Micro Inc. 40 % 37 % BlueStar, Inc. 31 % 23 % ScanSource, Inc. * 10 % Ingram Micro Pan Europe GmbH * 10 % _____________ *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. For the three months ended March 31, 2018 and 2017, top two suppliers accounted for 44% and 60%, respectively, of the inventory purchases. |
Note 7 - Stock-Based Compensati
Note 7 - Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | NOTE 7 — Stock-Based Compensation The Company recognizes the compensation cost in the financial statements for all stock-based awards to employees, including grants of employee stock options, based on the fair value of the awards as of the date that the awards are issued. The fair values of stock options are generally determined using a binomial lattice valuation model 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. Total stock-based compensation expense for the three months ended March 31, 2018 and 2017, was $112,133 and $95,697, respectively. No stock options were granted during the first quarter of 2018. |
Note 8 - Net Income (Loss) Per
Note 8 - Net Income (Loss) Per Share Applicable to Common Stockholders | 3 Months Ended |
Mar. 31, 2018 | |
Income Statement [Abstract] | |
Net Income (Loss) Per Share Applicable to Common Stockholders | NOTE 8 — Net Income (Loss) Per Share Applicable to Common Stockholders The following table sets forth the computation of basic and diluted net income per share: Three Months Ended March 31, 2018 2017 Numerator: Net income (loss) $ (225,029 ) $ 385,807 Convertible note interest — 28,709 Adjusted diluted net income(loss) $ (225,029 ) $ 414,516 Denominator: Weighted average shares outstanding used in computing net income (loss) per share: Basic 6,744,108 5,912,088 Effect of dilutive stock options and convertible notes payable — 1,859,122 Diluted 6,744,108 7,771,210 Net income (loss) per share applicable to common stockholders: Basic $ (0.03 ) $ 0.07 Diluted $ (0.03 ) $ 0.05 |
Note 9 - Taxes
Note 9 - Taxes | 3 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Taxes | NOTE 9 — Taxes The Tax Cuts and Jobs Act of 2017, effective on January 1, 2018, eliminates alternative minimum taxes and lowers the U.S. federal corporate income tax from 34% to 21%. In the first quarter of 2018, the Company recorded a deferred tax benefit of approximately $80,000 based on the expectation of at least a breakeven in its full year’s results. In the same quarter a year ago, the Company recorded an income expense of approximately $253,000 which included deferred tax expense of $240,000, federal alternative minimum tax expense of $10,000, and state alternative minimum tax expense of $3,000. |
Note 10 - Commitments and Conti
Note 10 - Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 10 — 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 March 31, 2018 are shown below: Annual minimum payments: Amount 2018 (April 1, 2018 to December 31, 2018) $ 333,938 2019 460,053 2020 478,455 2021 497,594 2022 (through June 30, 2022) 253,675 Total minimum payments $ 2,023,715 Capital Lease Obligations The Company leases certain of its equipment under capital leases. The leases are collateralized by the underlying assets. At March 31, 2018 and December 31, 2017, equipment with a cost of $100,584 was subject to such financing arrangements. The accumulated depreciation of the assets associated with the capital leases as of March 31, 2018 and December 31, 2017, amounted to $58,446 and $51,400 respectively. Future minimum payments under capital lease and equipment financing arrangements as of March 31, 2018 are as follows: Annual minimum payments: Amount 2018 (April 1, 2018 to December 31, 2018) $ 19,457 2019 17,893 2020 9,164 Total minimum payments 46,514 Less amount representing interest (1,195 ) Present value of net minimum payments 45,319 Short term portion of capital leases (22,982 ) Long term portion of capital leases $ 22,337 Purchase Commitments As of March 31, 2018, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of approximately $2,740,000. Legal Matters The Company is subject to disputes, claims, requests for indemnification and lawsuits arising in the ordinary course of business. Under the indemnification provisions of the Company’s customer agreements, the Company routinely agrees to indemnify and defend its customers against infringement of any patent, trademark, copyright, trade secrets, or other intellectual property rights arising from customers’ legal use of the Company’s products or services. The exposure to the Company under these indemnification provisions is generally limited to the total amount paid for the indemnified products. However, certain indemnification provisions potentially expose the Company to losses in excess of the aggregate amount received from the customer. To date, there have been no claims against the Company by its customers pertaining to such indemnification provisions, and no amounts have been recorded. The Company is currently not a party to any material legal proceedings. Recently Issued Financial Accounting Standards In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. This ASU adds SEC paragraphs pursuant to the SEC Staff Accounting Bulletin No. 118, which expresses the view of the staff regarding application of Topic 740, Income Taxes, in the reporting period that includes December 22, 2017 - the date on which the Tax Cuts and Jobs Act was signed into law. This ASU is effective for annual and interim periods beginning after December 15, 2018. The Company is in the process of assessing the impact of this guidance on its condensed financial statements. 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 upon adoption. |
Note 11 - Subsequent Events
Note 11 - Subsequent Events | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 11 — Subsequent Events Subsequent to March 31, 2018, 227,700 stock options at a weighted average grant price of $2.94 per share have been granted from the 2004 Plan. |
Summary of Significant Accounti
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Use of estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates, and such differences may be material to the financial statements. |
Cash Equivalents and Fair Value of Financial Instruments | Cash Equivalents and Fair Value of Financial Instruments The Company considers all highly liquid investments purchased with a maturity date of 90 days or less at date of purchase to be cash equivalents. At March 31, 2018 and December 31, 2017, 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’s cash balance on deposit in these accounts may, at times, exceed the federally insured limits. The Company has never experienced any losses in such accounts. The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, debt and foreign exchange contracts approximate fair value due to the relatively short period of time to maturity. |
Revenue Recognition and Deferred Revenue | Revenue Recognition and Deferred Revenue On January 1, 2017, we adopted ASU No. 2014-09 (now ASC 606 “Revenue from Contracts with Customers”) and implemented a new revenue recognition policy. Instead of deferring 100% of revenue and cost of revenue until products are sold by distributors, 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). The reserves are based on estimates of future returns calculated from actual return history plus knowledge of pending returns outside of the norm. Actual return history is approximately 17% of the channel inventory, primarily from stock rotations. On January 1, 2017, the Company recorded a one-time reduction (debit) to net deferred revenue in the amount of $836,000 less the deferred tax effects of $333,000 for a net improvement in retained deficit of $503,000. At March 31, 2018, the deferred revenue and deferred cost on shipments to distributors were $398,837 and $168,279, respectively, compared to $492,611 and $204,405, respectively, at December 31, 2017. |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Inventory components | Inventories consist principally of raw materials and sub-assemblies, which are stated at the lower of cost (first-in, first-out) or market. Inventories at March 31, 2018 and December 31, 2017 were as follows: March 31, December 31, 2018 2017 Raw materials and sub-assemblies $ 3,079,027 $ 3,016,327 Finished goods 72,531 67,120 Inventory reserves (872,310 ) (885,181 ) Inventory, net $ 2,279,248 $ 2,198,266 |
Segment Information and Concent
Segment Information and Concentrations (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Revenue by geographic areas | Segment Information The Company operates in the mobile barcode scanning and RFID/NFC data capture market. Mobile scanning typically consists of mobile devices such as smartphones or tablets, with mobile scanning peripherals for data collection, and third-party vertical applications software. The Company distributes its products in the United States and foreign countries primarily through distributors and resellers. The Company markets its products primarily through application developers whose applications are designed to work with Company’s products. Revenues for the geographic areas for three months ended March 31, 2018 and 2017 were as follows: Three Months Ended March 31, Revenues: 2018 2017 United States $ 3,004,970 $ 4,341,648 Europe 643,749 1,099,682 Asia and rest of world 332,336 180,763 Total revenues $ 3,981,055 $ 5,622,093 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 accounted for at least 10% of total revenues | Major Customers Customers who accounted for at least 10% of the Company’s total revenues for the three months ended March 31, 2018 and 2017 were as follows: Three Months Ended March 31, 2018 2017 Ingram Micro, Inc. 32 % 45 % BlueStar, Inc. 23 % 15 % ScanSource, Inc. * 14 % ScanSource Europe SPRL * 11 % _____________ * Customer accounted for less than 10% of total revenues for the period |
Major customers accounted for at least 10% of net accounts receivable balances | Customers who accounted for at least 10% of the Company’s accounts receivable balances at March 31, 2018 and December 31, 2017 were as follows: March 31, December 31, 2018 2017 Ingram Micro Inc. 40 % 37 % BlueStar, Inc. 31 % 23 % ScanSource, Inc. * 10 % Ingram Micro Pan Europe GmbH * 10 % _____________ *Customer accounts for less than 10% of accounts receivable balances |
Net Income (Loss) Per Shares Ap
Net Income (Loss) Per Shares Applicable To Common Stockholders (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Net income (loss) per share: | |
Net Income (Loss) Per Shares Applicable To Common Stockholders | The following table sets forth the computation of basic and diluted net income per share: Three Months Ended March 31, 2018 2017 Numerator: Net income (loss) $ (225,029 ) $ 385,807 Convertible note interest — 28,709 Adjusted diluted net income(loss) $ (225,029 ) $ 414,516 Denominator: Weighted average shares outstanding used in computing net income (loss) per share: Basic 6,744,108 5,912,088 Effect of dilutive stock options and convertible notes payable — 1,859,122 Diluted 6,744,108 7,771,210 Net income (loss) per share applicable to common stockholders: Basic $ (0.03 ) $ 0.07 Diluted $ (0.03 ) $ 0.05 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future minimum payments for operating leases | Future minimum lease payments under the operating lease at March 31, 2018 are shown below: Annual minimum payments: Amount 2018 (April 1, 2018 to December 31, 2018) $ 333,938 2019 460,053 2020 478,455 2021 497,594 2022 (through June 30, 2022) 253,675 Total minimum payments $ 2,023,715 |
Future minimum payments under capital lease and equipment financing arrangements | Future minimum payments under capital lease and equipment financing arrangements as of March 31, 2018 are as follows: Annual minimum payments: Amount 2018 (April 1, 2018 to December 31, 2018) $ 19,457 2019 17,893 2020 9,164 Total minimum payments 46,514 Less amount representing interest (1,195 ) Present value of net minimum payments 45,319 Short term portion of capital leases (22,982 ) Long term portion of capital leases $ 22,337 |
Inventory Components (Details)
Inventory Components (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Raw materials and sub-assemblies | $ 3,079,027 | $ 3,016,327 |
Finished goods | 72,531 | 67,120 |
Inventory reserves | (872,310) | (885,181) |
Inventories, net | $ 2,279,248 | $ 2,198,266 |
Short-Term Related Party Conver
Short-Term Related Party Convertible Notes Payable (Details Narrative) - USD ($) | Sep. 04, 2017 | Mar. 31, 2017 |
Accrued interest on related party convertible notes payable | $ 411,517 | |
Interest expense on related party convertible notes payable | $ 28,709 | |
Issuance of common stock upon maturity of convertible notes, value | $ 1,216,109 | |
Issuance of common stock upon maturity of convertible notes (shares) | 972,884 | |
Related Party Convertible Notes Payable to Officers and Directors | ||
Short-term related party convertible notes payable | $ 752,625 | |
Conversion price | $ 1.25 |
Bank Financing Arrangements (De
Bank Financing Arrangements (Details Narrative) - USD ($) | Jan. 31, 2018 | Mar. 31, 2018 | May 01, 2018 | Mar. 01, 2018 |
Remaining borrowing capacity | $ 2,055,000 | |||
Domestic Line of Credit | ||||
Aggregate maximum advance amount | $ 2,000,000 | |||
Borrowing capacity description | 80% of qualified receivables | |||
Debt reference rate | U.S. Prime Rate | |||
Basis point added to reference rate of debt | 0.75% | |||
Line of credit expiration date | Jan. 31, 2020 | |||
Foreign Line of Credit | ||||
Aggregate maximum advance amount | $ 500,000 | |||
Borrowing capacity description | 80% of qualified receivables | |||
Debt reference rate | U.S. Prime Rate | |||
Basis point added to reference rate of debt | 0.75% | |||
Line of credit expiration date | Jan. 31, 2020 | |||
Term Loan for Stock Repurchase | ||||
Borrowing capacity description | Payable over 48 months | |||
Debt reference rate | U.S. Prime Rate | |||
Basis point added to reference rate of debt | 1.75% | |||
Term loan amount | $ 4,000,000 | |||
Term loan amount outstanding | $ 1,411,111 | $ 4,000,000 | ||
Interest expense on term loan | 21,806 | |||
Accrued interest on term loan | $ 21,806 |
Revenues By Geographic Areas (D
Revenues By Geographic Areas (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenues: | $ 3,981,055 | $ 5,622,093 |
United States | ||
Revenues: | 3,004,970 | 4,341,648 |
Europe | ||
Revenues: | 643,749 | 1,099,682 |
Asia and rest of world | ||
Revenues: | $ 332,336 | $ 180,763 |
Major Customers Accounted for a
Major Customers Accounted for at Least 10% of Total Revenues (Details) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Ingram Micro, Inc. | ||
Percent of total revenues | 32.00% | 45.00% |
Threshold percentage for disclosure | 10.00% | 10.00% |
BlueStar, Inc. | ||
Percent of total revenues | 23.00% | 15.00% |
Threshold percentage for disclosure | 10.00% | 10.00% |
ScanSource, Inc. | ||
Percent of total revenues | 14.00% | |
Threshold percentage for disclosure | 10.00% | 10.00% |
ScanSource Europe SPRL | ||
Percent of total revenues | 11.00% | |
Threshold percentage for disclosure | 10.00% | 10.00% |
Major Customers Accounted for27
Major Customers Accounted for at Least 10% of Net Accounts Receivable Balances (Details) | Mar. 31, 2018 | Dec. 31, 2017 |
Ingram Micro, Inc. | ||
Percent of net accounts receivable balances | 40.00% | 37.00% |
Threshold percentage for disclosure | 10.00% | 10.00% |
BlueStar, Inc. | ||
Percent of net accounts receivable balances | 31.00% | 23.00% |
Threshold percentage for disclosure | 10.00% | 10.00% |
ScanSource, Inc. | ||
Percent of net accounts receivable balances | 10.00% | |
Threshold percentage for disclosure | 10.00% | 10.00% |
Ingram Micro Pan Europe GmbH | ||
Percent of net accounts receivable balances | 10.00% | |
Threshold percentage for disclosure | 10.00% | 10.00% |
Concentration of Suppliers (Det
Concentration of Suppliers (Details Narrative) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Risks and Uncertainties [Abstract] | ||
Percentage of inventory purchases from top two suppliers | 44.00% | 60.00% |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Stock-based compensation expenses | $ 112,133 | $ 95,697 |
Net Income (Loss) Per Share App
Net Income (Loss) Per Share Applicable to Common Stockholders (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Numerator: | ||
Net income (loss) | $ (225,029) | $ 385,807 |
Convertible note interest | 28,709 | |
Adjusted diluted net income (loss) | $ (225,029) | $ 414,516 |
Denominator: Weighted average common shares outstanding used in computing net income (loss) per share: | ||
Basic | 6,744,108 | 5,912,088 |
Effect of dilutive stock options and convertible notes payable | 1,859,122 | |
Diluted | 6,744,108 | 7,771,210 |
Net income (loss) per share applicable to common stockholders: | ||
Basic | $ (0.03) | $ 0.07 |
Diluted | $ (0.03) | $ 0.05 |
Taxes (Details Narrative)
Taxes (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Deferred tax expense (benefit) | $ (79,927) | $ 239,552 |
Federal alternative minimum tax expense | 10,000 | |
State alternative minimum tax expense | 2,999 | |
Income tax expense (benefit) | $ (79,927) | $ 252,551 |
Commitments and Contingencies32
Commitments and Contingencies (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |||
Rental expense for operating lease | $ 110,067 | $ 108,799 | |
Deferred rent | 269,175 | $ 274,388 | |
Non-cancelable purchase commitments for inventory | 2,740,000 | ||
Original cost of equipment under capital leases | 100,584 | 100,584 | |
Capital lease accumulated depreciation | $ 58,446 | $ 51,400 |
Future Minimum Payments for Ope
Future Minimum Payments for Operating Lease (Details) | Mar. 31, 2018USD ($) |
Annual minimum payments: | |
2018 (April 1, 2018 to December 31, 2018) | $ 333,938 |
2,019 | 460,053 |
2,020 | 478,455 |
2,021 | 497,594 |
2022 (through June 30, 2022) | 253,675 |
Total minimum payments | $ 2,023,715 |
Future Minimum Payments Under C
Future Minimum Payments Under Capital Lease and Equipment Financing Arrangements (Details) | Mar. 31, 2018USD ($) |
Annual minimum payments: | |
2018 (April 1, 2018 to December 31, 2018) | $ 19,457 |
2,019 | 17,893 |
2,020 | 9,164 |
Total minimum payments | 46,514 |
Less amount representing interest | (1,195) |
Present value of net minimum payments | 45,319 |
Short term portion of capital leases | (22,982) |
Long term portion of capital leases | $ 22,337 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent to March 31, 2018, 227,700 stock options at a weighted average grant price of $2.94 per share have been granted from the 2004 Plan. |