Socket Mobile (SCKT) 10-Q 11 May 18 2018 Q1 Quarterly report Financial data

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.