Socket Mobile (SCKT) 10-Q 14 Nov 18 2018 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 07, 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	Sep. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity's Reporting Status Current?	Yes
Is Entity Emerging Growth Company?	false
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Common Stock, Shares Outstanding		5,883,109
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2,018

Condensed Statements of Operati

Condensed Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Statement [Abstract]
Revenues	$ 4,136,593	$ 5,475,475	$ 12,309,979	$ 16,903,173
Cost of revenues	1,959,956	2,429,036	5,937,026	7,834,378
Gross profit	2,176,637	3,046,439	6,372,953	9,068,795
Operating expenses:
Research and development	884,497	873,830	2,748,310	2,529,210
Sales and marketing	738,804	737,276	2,210,499	2,238,081
General and administrative	584,256	659,575	1,874,069	1,949,673
Total operating expenses	2,207,557	2,270,681	6,832,878	6,716,964
Operating income (loss)	(30,920)	775,758	(459,925)	2,351,831
Interest expense, net	(31,919)	(20,892)	(99,819)	(81,246)
Net income (loss) before income taxes	(62,839)	754,866	(559,744)	2,270,585
Income tax benefit (expense)	17,582	(340,765)	151,216	(980,754)
Net income (loss)	$ (45,257)	$ 414,101	$ (408,528)	$ 1,289,831
Net income (loss) per share:
Basic	$ (0.01)	$ 0.07	$ (0.07)	$ 0.21
Diluted	$ (0.01)	$ 0.06	$ (0.07)	$ 0.19
Weighted average shares outstanding:
Basic	5,883,109	6,261,460	6,166,017	6,047,869
Diluted	5,883,109	7,129,633	6,166,017	6,936,210

Condensed Balance Sheets (Unaud

Condensed Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 1,324,230	$ 3,379,508
Accounts receivable, net	2,531,672	2,687,325
Inventories, net	1,893,213	2,198,266
Prepaid expenses and other current assets	313,850	385,508
Deferred cost on shipments to distributors	195,932	204,405
Total current assets	6,258,897	8,855,012
Property and equipment:
Machinery and office equipment	2,270,135	2,052,091
Computer equipment	976,262	851,823
Property and equipment, gross	3,246,397	2,903,914
Accumulated depreciation	(2,485,206)	(2,241,010)
Property and equipment, net	761,191	662,904
Goodwill	4,427,000	4,427,000
Other long-term assets	246,960	271,650
Deferred tax assets	5,788,695	5,637,480
Total assets	17,482,743	19,854,046
Current liabilities:
Accounts payable and accrued expenses	1,207,471	1,112,234
Accrued payroll and related expenses	528,765	630,999
Deferred revenue on shipments to distributors	479,361	492,611
Current portion of deferred service revenue	31,573	31,536
Lines of credit	1,526,690
Term loan-current portion	500,000
Current portion of capital leases and deferred rent	58,110	55,382
Total current liabilities	4,331,970	2,322,762
Long-term portion of deferred service revenue	27,490	29,447
Long-term portion of capital leases and deferred rent	224,034	271,414
Term loan-long-term portion	458,333
Total liabilities	5,041,827	2,623,623
Stockholders’ equity:
Common stock, $0.001 par value: Authorized – 20,000,000 shares, Issued and outstanding – 5,883,109 shares at September 30, 2018 and 7,011,128 shares at December 31, 2017	5,883	7,011
Additional paid-in capital	60,397,769	64,777,620
Accumulated deficit	(47,962,736)	(47,554,208)
Total stockholders’ equity	12,440,916	17,230,423
Total liabilities and stockholders’ equity	$ 17,482,743	$ 19,854,046

Condensed Balance Sheets (Paren

Condensed Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 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	5,883,109	7,011,128
Common stock, shares outstanding	5,883,109	7,011,128

Condensed Statements of Cash Fl

Condensed Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Operating activities
Net income (loss)	$ (408,528)	$ 1,289,831
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock-based compensation	361,674	315,237
Depreciation and amortization	314,770	236,059
Change in deferred taxes	(151,215)	926,464
Changes in operating assets and liabilities:
Accounts receivable	155,653	(547,020)
Inventories	305,053	(708,850)
Prepaid expenses and other current assets	71,658	(186,482)
Other assets	435	12,881
Accounts payable and accrued expenses	91,850	(9,478)
Accrued payroll and related expenses	(102,234)	2,997
Net deferred income on shipments to distributors	(4,777)	109,011
Customer deposit		56,700
Deferred service revenue	(1,920)	(8,749)
Change in deferred rent	(19,976)	(7,299)
Net cash provided by operating activities	612,443	1,481,302
Investing activities
Purchases of equipment	(388,802)	(196,190)
Net cash used in investing activities	(388,802)	(196,190)
Financing activities
Payments on capital leases	(21,289)	(19,921)
Proceeds from borrowings under bank line of credit agreement	9,416,353
Repayments of borrowings under bank line of credit agreement	(7,889,663)
Proceeds from bank term loan	4,000,000
Repayments of bank term loan	(3,041,667)
Common stock repurchases and related expenses	(5,021,830)
Stock options exercised	279,177	282,826
Net cash (used in) provided by financing activities	(2,278,919)	262,905
Net change in cash and cash equivalents	(2,055,278)	1,548,017
Cash and cash equivalents at beginning of period	3,379,508	1,319,006
Cash and cash equivalents at end of period	1,324,230	2,867,023
Supplemental disclosure of cash flow information
Cash paid for interest	86,754	2,339
Supplemental disclosure of non-cash investing and financing activities
Conversion of notes payable and accrued interest into common stock		$ 1,216,109

Note 1 - Basis of Presentation

Note 1 - Basis of Presentation	9 Months Ended
	Sep. 30, 2018
Notes to Financial Statements
Basis of Presentation	NOTE 1 — Basis of Presentation The accompanying unaudited financial statements of Socket Mobile, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals considered necessary for fair presentation have been included. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future period. These financial statements should be read in conjunction with the audited financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

Note 2 - Summary of Significant

Note 2 - Summary of Significant Accounting Policies	9 Months Ended
	Sep. 30, 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 September 30, 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 The Company adopted the new revenue recognition policy (ASC 606 “Revenue from Contracts with Customers”) effective January 1, 2017. 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 18% 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 September 30, 2018, the deferred revenue and deferred cost on shipments to distributors were approximately $479,000 and $196,000 respectively, compared to approximately $493,000 and $204,000, respectively, at December 31, 2017. Recently Issued Financial Accounting Standards In August 2018, the FASB issued Accounting Standards Update (ASU) 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in ASU 2018-13 apply to all entities that are required GAAP, to make disclosures about recurring or nonrecurring fair value measurements. ASU 2018-13 removes, modifies, and adds certain disclosure requirements in ASC 820, Fair Value Measurement. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2018-13 on its condensed financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other-Internal-Use Software (“ASU 2018-15”), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2018-15 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.

Note 3 - Inventories

Note 3 - Inventories	9 Months Ended
	Sep. 30, 2018
Inventory Disclosure [Abstract]
Note 3 - Inventories	NOTE 3 — Inventories Inventories consist principally of raw materials and sub-assemblies, which are stated at the lower of cost (first-in, first-out) or market. Inventories at September 30, 2018 and December 31, 2017 were as follows: September 30, December 31, 2018 2017 Raw materials and sub-assemblies $ 2,705,323 $ 3,016,327 Finished goods 58,635 67,120 Inventory reserves (870,745 ) (885,181 ) Inventories, net $ 1,893,213 $ 2,198,266

Note 4 - Short Term Related Par

Note 4 - Short Term Related Party Convertible Notes Payable	9 Months Ended
	Sep. 30, 2018
Related Party Transactions [Abstract]
Note 4 - 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 reduced current liabilities and increased 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. Interest expense on these convertible notes for the three and nine months ended September 30, 2017 was $22,179 and $80,676, respectively.

Note 5 - Bank Financing Arrange

Note 5 - Bank Financing Arrangements	9 Months Ended
	Sep. 30, 2018
Debt Disclosure [Abstract]
Note 5 - Bank Financing Arrangements	NOTE 5 — Bank Financing Arrangements Third Financing Agreement On January 31, 2018, the Company entered into an Amended and Restated Business Financing Agreement (the “Third 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 (see “Forth Financing Agreement” and “Fifth Financing Agreement” for subsequent changes affecting the term loan and financial covenants). The loans are secured by all of the Company’s 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 Third 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 Third 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 (unrestricted cash maintained with the Bank plus Eligible Receivables, divided by the total amount of the Obligations) 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 Third 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. On April 12, 2018, the Company advised the Bank that its operating results for the quarter ended March 31, 2018 were not expected to be in compliance with two financial covenants, the first a Fixed Charge Coverage Ratio and the second a Total Funded Debt to EBITDA ratio. The Company reported the non-compliance in its Form 10-Q for the quarter ended March 31, 2018. The Bank verbally agreed to forbear the events of default subject to further modification of the Financing Agreement. The Company subsequently paid down the term loan from $4.0 million at March 31, 2018 to $1.0 million at June 30, 2018. The paydowns were made from its cash and revolving lines of credit. Fourth Financing Agreement On June 4, 2018, the Company entered into an Amended and Restated Business Financing Agreement (the “Fourth Financing Agreement”) with the Bank. In the Fourth Financing Agreement, the Bank recognizes the repayment of the outstanding term loan balance to $1.0 million by June 30, 2018. The remaining balance is repayable in 24 equal monthly installments. The Fixed Charge Coverage Ratio is replaced with a commitment to maintain cash plus available credit at or above the term loan balance. The Total Funded Debt to EBITDA ratio and the excess cash flow application provisions that were designed to accelerate the pay down of the term loan balance are removed. The Bank permanently waived the defaults resulting from March 31, 2018 results when paydown of the term loan balance to $1.0 million by June 30, 2018 was achieved. In the Fourth Financing Agreement, the Company is required to maintain compliance with the Asset Coverage Ratio measured monthly. Fifth Financing Agreement On July 30, 2018, the Company entered into an Amended and Restated Business Financing Agreement (the “Fifth Financing Agreement”) with the Bank. The Company is required to maintain daily cash plus available credit at or above 90% of the outstanding principal balance of the term loan until the Asset Coverage Ratio is at 1.25 to 1.0. The minimum Asset Coverage Ratio increased to 1.2 to 1.0 on October 1, 2018. From December 31, 2018 onwards, the ratio will increase to 1.25 to 1.0. The Company was in complete compliance with all the required covenants during Q3 2018. On September 30, 2018, the sum of Company’s unrestricted cash on deposit with the Bank plus availability was $1.62 million, $0.76 million more than 90% of the outstanding principal balance of the term loan, or $0.86 million, and the Asset Coverage Ratio was 1.48 to 1.0. During the nine months ended September 30, 2018, the total amount borrowed under the term loan was $4.0 million and total repayments was $3.04 million. Total amount borrowed under the domestic and international lines was $9.416 million and the total repayments was $7.89 million. Amounts outstanding under the term loan and bank credit facilities at September 30, 2018 are as follows: September 30, 2018 Term loan 958,333 Less: current-portion of term loan (500,000 ) Long-term portion of term loan $ 458,333 September 30, 2018 Lines of credit -domestic line 1,233,584 Lines of credit -EXIM line 293,106 Total lines of credit $ 1,526,690 Interest expense on the term loan for three and nine months ended September 30, 2018 was $19,459 and $76,188, respectively. Interest expense on the amounts drawn under the Company’s bank credit lines during the three and nine months ended September 30, 2018 was $12,483 and $26,880, respectively. Accrued interest payable related to the amounts outstanding under the term loan and bank credit facilities at September 30, 2018 was $9,244.

Note 6 - Segment Information an

Note 6 - Segment Information and Concentrations	9 Months Ended
	Sep. 30, 2018
Segment Reporting [Abstract]
Note 6 - Segment Information and Concentrations	NOTE 6 — Segment Information and Concentrations Segment Information The Company operates in the mobile data capture market. Mobile data capture typically consists of mobile devices such as smartphones or tablets, with the Company’s mobile scanning and RFID/NFC 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 and nine-month periods ended September 30, 2018 and 2017 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Revenues: United States $ 3,256,758 $ 4,430,409 $ 9,573,354 $ 13,438,873 Europe 533,414 711,057 1,816,803 2,642,265 Asia and rest of world 346,421 334,009 919,822 822,035 Total revenues $ 4,136,593 $ 5,475,475 $ 12,309,979 $ 16,903,173 Export revenues are attributable to countries based on the location of the Company’s customers. The Company does not hold long-lived assets in foreign locations. Major Customers Customers who accounted for at least 10% of the Company’s total revenues in the three and nine-month periods ended September 30, 2018 and 2017 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Ingram Micro Inc. 30 % 40 % 32 % 39 % BlueStar, Inc. 25 % 20 % 23 % 17 % ScanSource, Inc. 11 % 10 % 10 % 17 % _____________ * Customer accounted for less than 10% of total revenues for the period Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk include cash, cash equivalents and accounts receivable. The Company invests its cash in demand deposit accounts in banks. To date, the Company has not experienced losses on the investments. The Company’s trade accounts receivables are primarily with distributors. The Company performs ongoing credit evaluations of its customers’ financial condition, but the Company generally requires no collateral. Reserves are maintained for potential credit losses, and such losses have been within management’s expectations. Customers who accounted for at least 10% of the Company’s net accounts receivable balances at September 30, 2018 and December 31, 2017 were as follows: September 30, December 31, 2018 2017 Ingram Micro Inc. 40 % 37 % BlueStar, Inc. 26 % 23 % ScanSource, Inc. * 10 % Ingram Micro Pan Europe GmbH * 10 % _____________ * Customer accounted for less than 10% of total 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 September 30, 2018 and December 31, 2017, 32% and 22%, respectively, of the Company’s accounts payable balances were concentrated with two suppliers. During the nine-month periods ended September 30, 2018 and 2017, the top two suppliers accounted for 49% and 53%, respectively, of the inventory purchases.

Note 7 - Stock-Based Compensati

Note 7 - Stock-Based Compensation	9 Months Ended
	Sep. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Note 7 - 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 that incorporates assumptions about expected volatility, risk-free interest rate, dividend yield, and expected life. Compensation cost for stock-based awards is recognized on a straight-line basis over the vesting period. Total stock-based compensation expense for the three and nine months ended September 30, 2018, was $130,698 and $361,674, respectively. Total stock-based compensation expense for the three and nine months ended September 30, 2017 was $112,151 and $315,237, respectively. No stock options were granted in Q3 2018. During the nine months ended September 30, 2018, 259,700 stock options were granted at an estimated weighted average per share fair value of $1.65.

Note 8 - Net Income (Loss) Per

Note 8 - Net Income (Loss) Per Share Applicable to Common Stockholders	9 Months Ended
	Sep. 30, 2018
Income Statement [Abstract]
Note 8 - 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 (loss) per share: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Numerator: Net income (loss) $ (45,257 ) $ 414,101 $ (408,528 ) $ 1,289,831 Denominator: Weighted average common shares outstanding used in computing net income (loss) per share: Basic 5,883,109 6,261,460 6,166,017 6,047,869 Effect of dilutive stock options — 868,173 — 888,341 Diluted 5,883,109 7,129,633 6,166,017 6,936,210 Net income (loss) per share applicable to common stockholders: Basic $ (0.01 ) $ 0.07 $ (0.07 ) $ 0.21 Diluted $ (0.01 ) $ 0.06 $ (0.07 ) $ 0.19 In the three and nine months ended September 30, 2018, 2,358,059 stock options were excluded in the calculation of diluted net loss per share because their effect would be anti-dilutive.

Note 9 - Taxes

Note 9 - Taxes	9 Months Ended
	Sep. 30, 2018
Income Tax Disclosure [Abstract]
Note 9 - 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%. Net loss in the three and nine months ended September 30, 2018 resulted in a setup of additional deferred tax assets with a 20- year expiration. Net operating loss carryforwards do not begin expiring until the end of 2023 if not used. The Company expects a return to profitable operating results and full utilization of the NOL benefits. In the three and nine months ended September 30, 2018, the Company recorded deferred tax benefits of $17,582 and $151,216, respectively. In the same periods one year ago, the Company recorded income tax expenses of $340,765 and $980,754, respectively.

Note 10 - Commitments and Conti

Note 10 - Commitments and Contingencies	9 Months Ended
	Sep. 30, 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 annually on July 1 st Future minimum lease payments under the operating lease at September 30, 2018 are shown below: Annual minimum payments: Amount 2018 (October 1, 2018 to December 31, 2018) $ 112,758 2019 460,053 2020 478,455 2021 497,594 2022 (through June 30, 2022) 253,675 Total minimum payments $ 1,802,535 Capital Lease Obligations The Company leases certain of its equipment under capital leases. The leases are collateralized by the underlying assets. At September 30, 2018 and December 31, 2017, property and 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 September 30, 2018 and December 31, 2017, amounted to $72,539 and $51,400 respectively. Future minimum payments under capital lease and equipment financing arrangements as of September 30, 2018 are as follows: Annual minimum payments: Amount 2018 (October 1, 2018 to December 31, 2018) $ 4,192 2019 16,838 2020 8,454 Total minimum payments 29,484 Less amount representing interest (1,752 ) Present value of net minimum payments 27,732 Short term portion of capital leases (15,400 ) Long term portion of capital leases $ 12,332 Purchase Commitments As of September 30, 2018, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of approximately $5,139,000. 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.

Summary of Significant Accounti

Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 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 September 30, 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 The Company adopted the new revenue recognition policy (ASC 606 “Revenue from Contracts with Customers”) effective January 1, 2017. 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 18% 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 September 30, 2018, the deferred revenue and deferred cost on shipments to distributors were approximately $479,000 and $196,000 respectively, compared to approximately $493,000 and $204,000, respectively, at December 31, 2017.
Recently Issued Financial Accounting Standards	Recently Issued Financial Accounting Standards In August 2018, the FASB issued Accounting Standards Update (ASU) 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in ASU 2018-13 apply to all entities that are required GAAP, to make disclosures about recurring or nonrecurring fair value measurements. ASU 2018-13 removes, modifies, and adds certain disclosure requirements in ASC 820, Fair Value Measurement. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2018-13 on its condensed financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other-Internal-Use Software (“ASU 2018-15”), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2018-15 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.

Inventories (Tables)

Inventories (Tables)	9 Months Ended
	Sep. 30, 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 September 30, 2018 and December 31, 2017 were as follows: September 30, December 31, 2018 2017 Raw materials and sub-assemblies $ 2,705,323 $ 3,016,327 Finished goods 58,635 67,120 Inventory reserves (870,745 ) (885,181 ) Inventories, net $ 1,893,213 $ 2,198,266

Bank Financing Arrangements (Ta

Bank Financing Arrangements (Tables)	9 Months Ended
	Sep. 30, 2018
Debt Disclosure [Abstract]
Term loan and bank credit line balances	Amounts outstanding under the term loan and bank credit facilities at September 30, 2018 are as follows: September 30, 2018 Term loan 958,333 Less: current-portion of term loan (500,000 ) Long-term portion of term loan $ 458,333 September 30, 2018 Lines of credit -domestic line 1,233,583 Lines of credit -EXIM line 293,106 Total lines of credit $ 1,526,690

Segment Information and Concent

Segment Information and Concentrations (Tables)	9 Months Ended
	Sep. 30, 2018
Segment Reporting [Abstract]
Revenue by geographic areas	Revenues for the geographic areas for three and nine-month periods ended September 30, 2018 and 2017 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Revenues: United States $ 3,256,758 $ 4,430,409 $ 9,573,354 $ 13,438,873 Europe 533,414 711,057 1,816,803 2,642,265 Asia and rest of world 346,421 334,009 919,822 822,035 Total revenues $ 4,136,593 $ 5,475,475 $ 12,309,979 $ 16,903,173
Major customers accounted for at least 10% of total revenues	Customers who accounted for at least 10% of the Company’s total revenues in the three and nine-month periods ended September 30, 2018 and 2017 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Ingram Micro Inc. 30 % 40 % 32 % 39 % BlueStar, Inc. 25 % 20 % 23 % 17 % ScanSource, Inc. 11 % 10 % 10 % 17 % _____________ * 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 net accounts receivable balances at September 30, 2018 and December 31, 2017 were as follows: September 30, December 31, 2018 2017 Ingram Micro Inc. 40 % 37 % BlueStar, Inc. 26 % 23 % ScanSource, Inc. * 10 % Ingram Micro Pan Europe GmbH. * 10 % _____________ * Customer accounted for less than 10% of total accounts receivable balances

Net Income (Loss) Per Share App

Net Income (Loss) Per Share Applicable to Common Stockholders (Tables)	9 Months Ended
	Sep. 30, 2018
Income Statement [Abstract]
Net Income (Loss) Per Shares Applicable To Common Stockholders	The following table sets forth the computation of basic and diluted net income (loss) per share: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Numerator: Net income (loss) $ (45,257 ) $ 414,101 $ (408,528 ) $ 1,289,831 Denominator: Weighted average common shares outstanding used in computing net income (loss) per share: Basic 5,883,109 6,261,460 6,166,017 6,047,869 Effect of dilutive stock options — 868,173 — 888,341 Diluted 5,883,109 7,129,633 6,166,017 6,936,210 Net income (loss) per share applicable to common stockholders: Basic $ (0.01 ) $ 0.07 $ (0.07 ) $ 0.21 Diluted $ (0.01 ) $ 0.06 $ (0.07 ) $ 0.19

Commitments and Contingencies (

Commitments and Contingencies (Tables)	9 Months Ended
	Sep. 30, 2018
Commitments and Contingencies Disclosure [Abstract]
Future minimum payments for operating leases	Future minimum lease payments under the operating lease at September 30, 2018 are shown below: Annual minimum payments: Amount 2018 (October 1, 2018 to December 31, 2018) $ 112,758 2019 460,053 2020 478,455 2021 497,594 2022 (through June 30, 2022) 253,675 Total minimum payments $ 1,802,535
Future minimum payments under capital lease and equipment financing arrangements	Future minimum payments under capital lease and equipment financing arrangements as of September 30, 2018 are as follows: Annual minimum payments: Amount 2018 (October 1, 2018 to December 31, 2018) $ 4,192 2019 16,838 2020 8,454 Total minimum payments 29,484 Less amount representing interest (1,752 ) Present value of net minimum payments 27,732 Short term portion of capital leases (15,400 ) Long term portion of capital leases $ 12,332

Inventory Components (Details)

Inventory Components (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Inventory Disclosure [Abstract]
Raw materials and sub-assemblies	$ 2,705,323	$ 3,016,327
Finished goods	58,635	67,120
Inventory reserves	(870,745)	(885,181)
Inventories, net	$ 1,893,213	$ 2,198,266

Short Term Related Party Conver

Short Term Related Party Convertible Notes Payable (Details Narrative) - USD ($)	Sep. 04, 2017	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Interest expense on related party convertible notes payable		$ 22,179		$ 80,676
Issuance of common stock upon maturity of convertible notes, value	$ 1,216,109			$ 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	Sep. 30, 2018	Sep. 30, 2018
Accrued interest payable		$ 9,244	$ 9,244
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
Amount borrowed			9,416,000
Amount repaid			7,890,000
Interest expense		9,712	22,428
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
Interest expense		2,771	4,452
Term Loan for Stock Repurchase
Aggregate maximum advance amount	$ 4,000,000
Borrowing capacity description	Payable over 48 months
Debt reference rate	U.S. Prime Rate
Basis point added to reference rate of debt	1.75%
Amount outstanding		958,333	958,333
Amount borrowed			4,000,000
Amount repaid			3,041,667
Interest expense		$ 19,459	$ 76,188

Amounts Outstanding under Bank

Amounts Outstanding under Bank Term Loan (Detail) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Debt Disclosure [Abstract]
Term loan balance	$ 958,333
Less: current-portion of term loan	(500,000)
Long-term portion of term loan	$ 458,333

Amounts Outstanding under Ban_2

Amounts Outstanding under Bank Lines of Credit (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Debt Disclosure [Abstract]
Lines of credit - domestic line	$ 1,233,584
Lines of credit - EXIM line	293,106
Total lines of credit	$ 1,526,690

Revenues By Geographic Areas (D

Revenues By Geographic Areas (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Revenues:	$ 4,136,593	$ 5,475,475	$ 12,309,979	$ 16,903,173
United States
Revenues:	3,256,758	4,430,409	9,573,354	13,438,873
Europe
Revenues:	533,414	711,057	1,816,803	2,642,265
Asia and rest of world
Revenues:	$ 346,421	$ 334,009	$ 919,822	$ 822,035

Major Customers Accounted for a

Major Customers Accounted for at Least 10% of Total Revenues (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Ingram Micro, Inc.
Percent of total revenues	30.00%	40.00%	32.00%	39.00%
Threshold percentage for disclosure	10.00%	10.00%	10.00%	10.00%
BlueStar, Inc.
Percent of total revenues	25.00%	20.00%	23.00%	17.00%
Threshold percentage for disclosure	10.00%	10.00%	10.00%	10.00%
ScanSource, Inc.
Percent of total revenues	11.00%	10.00%	10.00%	17.00%
Threshold percentage for disclosure	10.00%	10.00%	10.00%	10.00%

Major Customers Accounted for_2

Major Customers Accounted for at Least 10% of Net Accounts Receivable Balances (Details)	Sep. 30, 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	26.00%	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)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Risks and Uncertainties [Abstract]
Accounts payable balances with top two suppliers	32.00%		22.00%
Percentage of inventory purchases from top two suppliers	49.00%	53.00%

Stock-Based Compensation (Detai

Stock-Based Compensation (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-based compensation expenses	$ 130,698	$ 112,151	$ 361,674	$ 315,237
Stock options granted			259,700
Weighted average per share fair value			$ 1.65

Net Income (Loss) per Share A_2

Net Income (Loss) per Share Applicable to Common Stockholders (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Numerator:
Net income (loss)	$ (45,257)	$ 414,101	$ (408,528)	$ 1,289,831
Denominator: Weighted average common shares outstanding used in computing net income (loss) per share:
Basic	5,883,109	6,261,460	6,166,017	6,047,869
Effect of dilutive stock options		868,173		888,341
Diluted	5,883,109	7,129,633	6,166,017	6,936,210
Net income (loss) per share applicable to common stockholders:
Basic	$ (0.01)	$ 0.07	$ (0.07)	$ 0.21
Diluted	$ (0.01)	$ 0.06	$ (0.07)	$ 0.19

Stock Options Excluded from Cal

Stock Options Excluded from Calculation of Diluted Net Loss Per Share (Details Narrative) - shares	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018
Net income (loss) per share:
Stock Options Excluded from Calculation of Diluted Net Loss Per Share	2,358,059	2,358,059

Taxes (Details)

Taxes (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Tax Disclosure [Abstract]
Income tax expense (benefit)	$ (17,582)	$ 340,765	$ (151,216)	$ 980,754

Commitments and Contingencies_2

Commitments and Contingencies (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
Rental expense for operating lease	$ 109,285	$ 108,473	$ 329,203	$ 326,509
Deferred rent	254,412		254,412		$ 274,388
Non-cancelable purchase commitments for inventory	5,139,000		5,139,000
Original cost of equipment under capital leases	100,584		100,584		100,584
Capital lease accumulated depreciation	$ 72,539		$ 72,539		$ 51,400

Future Minimum Payments for Ope

Future Minimum Payments for Operating Lease (Detail)	Sep. 30, 2018USD ($)
Annual minimum payments:
2018 (October 1, 2018 to December 31, 2018)	$ 112,758
2,019	460,053
2,020	478,455
2,021	497,594
2022 (through June 30, 2022)	253,675
Total minimum payments	$ 1,802,535

Future Minimum Payments Under C

Future Minimum Payments Under Capital Lease and Equipment Financing Arrangements (Details)	Sep. 30, 2018USD ($)
Annual minimum payments:
2018 (October 1, 2018 to December 31, 2018)	$ 4,192
2,019	16,838
2,020	8,454
Total minimum payments	29,484
Less amount representing interest	(1,752)
Present value of net minimum payments	27,732
Short term portion of capital leases	(15,400)
Long term portion of capital leases	$ 12,332