Socket Mobile (SCKT) 10-Q 14 Aug 19 2019 Q2 Quarterly report Financial data

Cover

Cover - shares	6 Months Ended
	Jun. 30, 2019	Aug. 08, 2019
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2019
Current Fiscal Year End Date	--12-31
Entity File Number	1-13810
Entity Registrant Name	SOCKET MOBILE, INC.
Entity Central Index Key	0000944075
Entity Tax Identification Number	94-3155066
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	39700 Eureka Drive
Entity Address, City or Town	Newark
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94560
Local Phone Number	510-933-3000
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		5,999,653
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2019

Condensed Statements of Operati

Condensed Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
Revenues	$ 5,060,105	$ 4,192,331	$ 9,688,696	$ 8,173,386
Cost of revenues	2,430,464	2,060,284	4,659,213	3,977,070
Gross profit	2,629,641	2,132,047	5,029,483	4,196,316
Operating expenses:
Research and development	997,483	917,067	1,891,219	1,863,813
Sales and marketing	771,097	733,839	1,527,011	1,471,695
General and administrative	643,215	625,109	1,346,397	1,289,813
Total operating expenses	2,411,795	2,276,015	4,764,627	4,625,321
Operating income (loss)	217,846	(143,968)	264,856	(429,005)
Interest expense, net	(29,307)	(47,981)	(57,808)	(67,900)
Net income (loss) before income taxes	188,539	(191,949)	207,048	(496,905)
Income tax expense (benefit)	68,749	(53,707)	75,419	(133,634)
Net income (loss)	$ 119,790	$ (138,242)	$ 131,629	$ (363,271)
Net income (loss) per share:
Basic	$ 0.02	$ (0.02)	$ 0.02	$ (0.06)
Diluted	$ 0.02	$ (0.02)	$ 0.02	$ (0.06)
Weighted average shares outstanding:
Basic	5,999,159	5,880,296	5,969,666	6,309,816
Diluted	6,271,507	5,880,296	6,203,889	6,309,816

Condensed Balance Sheets

Condensed Balance Sheets - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 1,015,708	$ 1,084,991
Accounts receivable, net	2,917,602	2,367,177
Inventories, net	2,395,333	2,272,328
Prepaid expenses and other current assets	576,629	307,832
Deferred cost on shipments to distributors	245,634	165,024
Total current assets	7,150,906	6,197,352
Property and equipment:
Machinery and office equipment	2,141,541	2,188,835
Computer equipment	1,094,659	992,531
Property and equipment, gross	3,236,200	3,181,366
Accumulated depreciation	(2,555,906)	(2,492,154)
Property and equipment, net	680,294	689,212
Goodwill	4,427,000	4,427,000
Other long-term assets	225,109	236,565
Deferred tax assets	5,706,319	5,780,938
Operating lease right-of-use asset	1,104,096	1,265,648
Total assets	19,293,724	18,596,715
Current liabilities:
Accounts payable and accrued expenses	1,422,621	1,533,456
Accrued payroll and related expenses	646,115	512,307
Deferred revenue on shipments to distributors	584,750	396,974
Short term portion of deferred service revenue	36,902	33,644
Bank lines of credit	1,829,974	1,316,778
Term loan – current portion	500,000	500,000
Operating lease – current portion	397,208	376,160
Finance lease – current portion	16,307	15,697
Total current liabilities	5,433,877	4,685,016
Long-term portion of deferred service revenue	48,799	31,291
Long-term portion of term loan	83,333	333,333
Long-term portion of operating lease	932,651	1,134,350
Long-term portion of finance lease		8,290
Total liabilities	6,498,660	6,192,280
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value: Authorized – 20,000,000 shares, Issued and outstanding – 5,999,159 shares at June 30, 2019 and 5,883,109 shares at December 31, 2018	5,999	5,883
Additional paid-in capital	60,782,785	60,523,901
Accumulated deficit	(47,993,720)	(48,125,349)
Total stockholders’ equity	12,795,064	12,404,435
Total liabilities and stockholders’ equity	$ 19,293,724	$ 18,596,715

Condensed Balance Sheets (Paren

Condensed Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
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	5,999,159	5,883,109
Common stock, shares outstanding	5,999,159	5,883,109

Condensed Statements of Cash Fl

Condensed Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Operating activities
Net income (loss)	$ 131,629	$ (363,271)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock-based compensation	259,000	230,976
Depreciation and amortization	217,664	197,554
Changes in deferred taxes	74,619	(133,634)
Changes in operating assets and liabilities:
Accounts receivable	(550,425)	379,102
Inventories	(123,005)	(14,674)
Prepaid expenses and other current assets	(278,629)	88,290
Accounts payable and accrued expenses	(110,835)	180,782
Accrued payroll and related expenses	133,808	(117,051)
Net deferred income on shipments to distributors	107,166	(28,129)
Deferred service revenue	20,766	(939)
Net change in operating lease	(19,099)	(10,425)
Net cash (used in) provided by operating activities	(137,341)	408,581
Investing activities
Purchases of equipment	(187,458)	(269,942)
Net cash used in investing activities	(187,458)	(269,942)
Financing activities
Payments on financing leases	(7,680)	(14,242)
Proceeds from borrowings under bank line of credit agreement	8,754,000	5,716,353
Repayments of borrowings under bank line of credit agreement	(8,240,804)	(4,181,291)
Proceeds from bank term loan		4,000,000
Repayments of bank term loan	(250,000)	(3,000,000)
Common stock repurchases and related expenses		(5,021,830)
Stock options exercised		279,177
Net cash (used in) provided by financing activities	255,516	(2,221,833)
Net decrease in cash and cash equivalents	(69,283)	(2,083,194)
Cash and cash equivalents at beginning of period	1,084,991	3,379,508
Cash and cash equivalents at end of period	1,015,708	1,296,314
Supplemental disclosure of cash flow information
Cash paid for interest	$ 54,528	$ 56,749

Condensed Shareholders Equity (

Condensed Shareholders Equity (Unaudited) - USD ($)	Common Stock	Additional Paid-In Capital	Retained Earnings / Accumulated Deficit	Total
Beginning Balance at Dec. 31, 2017	$ 7,011	$ 64,777,620	$ (47,554,208)	$ 17,230,423
Beginning Balance (in shares) at Dec. 31, 2017	7,011,128
Restricted stock grants	118	275,145		275,623
Restricted stock grants (in shares)	$ 117,852
Cost of tender offer	$ (1,250)	$ (5,018,616)		$ (5,019,866)
Cost of tender offer (in shares)	(1,250,000)
Stock-based compensation		$ 112,133
Net income (loss)			$ (225,029)	$ (225,029)
Ending Balance at Mar. 31, 2018	$ 5,879
Ending Balance (in shares) at Mar. 31, 2018	5,878,980	60,146,282	(47,779,237)	12,372,924
Beginning Balance at Dec. 31, 2017	$ 7,011	$ 64,777,620	$ (47,554,208)	$ 17,230,423
Beginning Balance (in shares) at Dec. 31, 2017	7,011,128
Net income (loss)				(363,271)
Ending Balance at Jun. 30, 2018	$ 5,883	$ 60,267,071	$ (47,917,479)	$ 12,355,475
Ending Balance (in shares) at Jun. 30, 2018	5,883,109
Beginning Balance at Mar. 31, 2018	$ 5,879
Beginning Balance (in shares) at Mar. 31, 2018	5,878,980	60,146,282	(47,779,237)	12,372,924
Exercise of stock options	$ 4	$ 4,032		$ 4,036
Exercise of stock options (in shares)	4,129
Cost of tender offer		(2,086)		(2,086)
Stock-based compensation		118,843		118,843
Net income (loss)			$ (138,242)	(138,242)
Ending Balance at Jun. 30, 2018	$ 5,883	$ 60,267,071	$ (47,917,479)	12,355,475
Ending Balance (in shares) at Jun. 30, 2018	5,883,109
Beginning Balance at Dec. 31, 2018				12,404,435
Stock-based compensation				259,000
Net income (loss)				131,629
Ending Balance at Jun. 30, 2019				$ 12,795,064

Note 1 - Basis of Presentation

Note 1 - Basis of Presentation	6 Months Ended
	Jun. 30, 2019
Notes to Financial Statements
Basis of 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, 2018.

Note 2 - Summary of Significant

Note 2 - Summary of Significant Accounting Policies	6 Months Ended
	Jun. 30, 2019
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 June 30, 2019 and December 31, 2018, 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, the Company adopted 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, primarily from stock rotations, plus knowledge of pending returns outside of the norm. Leases In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires a lessee to recognize a liability representing future lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For operating leases, a lessee is required to recognize at inception a right-of-use asset and a lease liability equal to the net present value of the lease payments, with lease expense recognized over the lease term on a straight-line basis. For leases with a term of twelve months or less, ASU 2016-02 allows a reporting entity to make an accounting policy election to not recognize a right-of-use asset and a lease liability, and to recognize lease expense on a straight-line basis. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company adopted ASU 2016-02 effective January 1, 2019, which had no impact on the Company’s Statements of Operations. The most significant impact was the recognition of right-of-use assets and liabilities for the operating lease. Adoption of the standard required the Company to restate the reported results in its earliest comparable period, January 1, 2018, including the recognition of additional operating lease right-of-use assets and liabilities. As a result, there was an increase in assets and corresponding liabilities of approximately $1.57 million on January 1, 2018. At June 30, 2019, the balances of right-of-use assets and liabilities for the operating lease are approximately $1.10 million and $1.33 million, respectively, compared to approximately $1.27 million and $1.51 million, respectively, at December 31, 2018. Recently Issued Financial Accounting Standards 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 is not expected to have a significant impact on the Company’s 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 3 - Inventories

Note 3 - Inventories	6 Months Ended
	Jun. 30, 2019
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 June 30, 2019 and December 31, 2018 were as follows: June 30, December 31, 2019 2018 Raw materials and sub-assemblies $ 3,118,418 $ 2,785,154 Finished goods 145,076 335,335 Inventory reserves (868,161 ) (848,161 ) Inventories, net $ 2,395,333 $ 2,272,328

Note 4 - Bank Financing Arrange

Note 4 - Bank Financing Arrangements	6 Months Ended
	Jun. 30, 2019
Debt Disclosure [Abstract]
Bank Financing Arrangements	NOTE 4 — Bank Financing Arrangements 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%. The loans are secured by all of our present and future assets, including intellectual property and general intangibles. 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 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. On June 4, 2018, the Company entered into the Fourth Amended and Restated Business Financing Agreement with the Bank. The Bank recognized 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 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. On July 30, 2018, the Company entered into the Fifth Amended and Restated Business Financing Agreement with the Bank. The Company was 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 1.25 to 1.0 from December 31, 2018 onwards. On June 14, 2019, the Company entered into the Sixth Amended and Restated Business Financing Agreement with the Bank. The Bank waived the default which occurred for the month ended April 30, 2019 when the Company’s Asset Coverage Ratio was 1.13 to 1.00, instead of the required 1.25 to 1.00. The Bank also increased the Eligible Receivable threshold for Ingram Micro from 50% to 60% of domestic receivables, and from 35% to 50% of all receivables (including both domestic and foreign receivables). The Asset Coverage Ratio was 1.57 to 1.00 on June 30, 2019. During the three months and six months ended June 30, 2019, total repayments of the term loan was $125,000 and $250,000. Total amount borrowed under the domestic and international lines was $8,754,000 and the total repayments was $8,240,804. Amounts outstanding under the term loan and bank credit facilities at June 30, 2019 are as follows: June 30, 2019 Long-term portion of term loan 83,333 Current-portion of term loan 500,000 Term loan $ 583,333 June 30, 2019 Lines of credit -domestic line 1,438,595 Lines of credit -EXIM line 391,379 Total lines of credit $ 1,829,974 Interest expense on the term loan for three and six months ended June 30, 2019 was $13,350 and $29,194, respectively. Interest expense on the amounts drawn under the Company’s bank credit lines during the three and six months ended June 30, 2019 was $15,984 and $28,677. Accrued interest payable related to the amounts outstanding under the term loan and bank credit facilities at June 30, 2019 was $16,491.

Note 5 - Segment Information an

Note 5 - Segment Information and Concentrations	6 Months Ended
	Jun. 30, 2019
Segment Reporting [Abstract]
Segment Information and Concentrations	NOTE 5 — 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 or 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, resellers, and online. 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, 2019 and 2018 were as follows: Three Months Ended March 31, Revenues: 2019 2018 United States $ 3,677,801 $ 3,004,970 Europe 492,992 643,749 Asia and rest of world 457,799 332,336 Total revenues $ 4,628,592 $ 3,981,055 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, 2019 and 2018 were as follows: Three Months Ended March 31, 2019 2018 Ingram Micro, Inc. 42 % 32 % BlueStar, Inc. 21 % 23 % 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 and the Company has not experienced losses on the investments. The Company’s trade accounts receivables are primarily with distributors. The Company performs ongoing credit evaluations of its customers’ financial condition, but the Company generally requires no collateral. Reserves are maintained for potential credit losses, and such losses have been within management’s expectations. Customers who accounted for at least 10% of the Company’s accounts receivable balances at March 31, 2019 and December 31, 2018 were as follows: March 31, December 31, 2019 2018 Ingram Micro Inc. 49 % 41 % BlueStar, Inc. 26 % 19 % 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, 2019 and 2018, two suppliers accounted for 45% and 44%, respectively, of the inventory purchases. At March 31, 2019 and December 31, 2018, 38% and 35%, respectively, of the Company’s accounts payable balances were concentrated with two suppliers.

Note 6 - Stock-Based Compensati

Note 6 - Stock-Based Compensation	6 Months Ended
	Jun. 30, 2019
Share-based Payment Arrangement [Abstract]
Stock-Based Compensation	NOTE 6 — Stock-Based Compensation The Company recognizes the compensation cost in the financial statements for all stock-based awards to employees, including grants of stock options and restricted stock units, based on the fair value of the awards as of the date that the awards are issued. Compensation cost for stock-based awards is recognized on a straight-line basis over the vesting period. 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. On February 15, 2019, 165,600 shares were granted to executive officers, selected employees and consultants as stock option refresher grants. On February 15, 2019, the Company also granted 116,050 restricted stock units (“RSUs”) to employees. Each RSU represents the right to receive one share of the Company’s common stock upon vesting. The fair value of these RSUs was calculated based upon the Company’s closing stock price on the date of grant. These RSUs are with service-based vesting provisions and vest over four years: 15% on February 15, 2020, 20% on February 15, 2021, 25% on February 15, 2022, and 40% on February 15, 2023. The shares are issued in the name of each employee but held in an escrow account by the Company’s transfer agent, American Stock Transfer & Trust. As they vest, the shares will be issued to the individual either electronically or as certificates as instructed by the individual. Each individual has voting rights while shares are unvested. The share totals are included in primary earnings per share. The expense of these RSUs is recognized on a straight-line basis over the vesting period. Total stock-based compensation expense for the three months and six months ended June 30, 2019, was $137,035 and $259,000, respectively.

Note 7 - Net Income (Loss) Per

Note 7 - Net Income (Loss) Per Share Applicable to Common Stockholders	6 Months Ended
	Jun. 30, 2019
Income Statement [Abstract]
Net Income (Loss) Per Share Applicable to Common Stockholders	NOTE 7 — 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 Six Months Ended 2019 2018 2019 2018 Numerator: Net income (loss) $ 119,790 $ (138,242 ) $ 131,629 $ (363,271 ) Denominator: Weighted average shares Basic 5,999,159 5,880,296 5,969,666 6,309,816 Effect of dilutive stock options 272,348 — 234,223 — Diluted 6,271,507 5,880,296 6,203,889 6,309,816 Net income (loss) per share applicable to common stockholders: Basic $ 0.02 $ (0.02 ) $ 0.02 $ (0.06 ) Diluted $ 0.02 $ (0.02 ) $ 0.02 $ (0.06 ) In the three and six months ended June 30, 2019, 2,185,351 and 2,223,476, respectively, stock options were excluded in the calculation of diluted net loss per share because their effect would be anti-dilutive. In the three and six months ended June 30, 2018, 2,359,034 stock options were excluded in the calculation of diluted net loss per share because their effect would be anti-dilutive.

Note 8 - Income Taxes

Note 8 - Income Taxes	6 Months Ended
	Jun. 30, 2019
Income Tax Disclosure [Abstract]
Taxes	NOTE 8 — Income 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 three and six months ended June 30, 2019, the Company recorded deferred tax expenses of $68,749 and $75,419, respectively. In the same periods a year ago, the Company recorded income tax benefits of $53,707 and $133,634, respectively, with the expectation of a return to profitable operating results and full utilization of the Company’s Net Operating Loss carryforwards.

Note 9 - Commitments and Contin

Note 9 - Commitments and Contingencies	6 Months Ended
	Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	NOTE 9 — Commitments and Contingencies Operating Lease Obligations 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 The Company recognizes operating lease expense on a straight-line basis over the lease term. Cash payments included in the measurement of our operating lease liabilities were $112,758 and $225,516 for the three- and six-month periods ended June 30, 2019, respectively, compared to $108,421 and $216,843, respectively, for the same periods a year ago. Future minimum lease payments under the operating lease at June 30, 2019 are as shown below: Annual minimum payments: Amount 2019 (July 1, 2019 to December 31, 2019) $ 234,537 2020 478,455 2021 497,594 2022 (through June 30, 2022) 253,675 Total minimum payments $ 1,464,261 Financing Lease Obligations The new standard, ASU 2016-02 classifies lessee leases into two types, operating and finance. The Company leases certain of its equipment under finance leases. These leases are collateralized by their underlying assets. At June 30, 2019 and December 31, 2018, equipment with a cost of $100,584 was subject to such financing arrangements. The accumulated depreciation of the assets associated with the financing leases as of June 30, 2019 and December 31, 2018, amounted to $84,558 and $76,546 respectively. Future minimum payments under finance lease and equipment financing arrangements as of June 30, 2019 are as follows: Annual minimum payments: Amount 2019 (July 1, 2019 to December 31, 2019) $ 8,454 2020 8,454 Total minimum payments 16,908 Less amount representing interest (602 ) Present value of net minimum payments 16,306 Short term portion of financing leases (16,306 ) Long term portion of financing leases $ — Purchase Commitments As of June 30, 2019, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of approximately $5,495,000. Legal Matters The Company is subject to disputes, claims, requests for indemnification and lawsuits arising in the ordinary course of business. Under the indemnification provisions of the Company’s customer agreements, the Company routinely agrees to indemnify and defend its customers against infringement of any patent, trademark, copyright, trade secrets, or other intellectual property rights arising from customers’ legal use of the Company’s products or services. The exposure to the Company under these indemnification provisions is generally limited to the total amount paid for the indemnified products. However, certain indemnification provisions potentially expose the Company to losses in excess of the aggregate amount received from the customer. To date, there have been no claims against the Company by its customers pertaining to such indemnification provisions, and no amounts have been recorded. The Company is currently not a party to any material legal proceedings.

Note 10 - Subsequent Events

Note 10 - Subsequent Events	6 Months Ended
	Jun. 30, 2019
Notes to Financial Statements
Subsequent Events	NOTE 10 — Subsequent Events The Company has evaluated events from June 30, 2019 through the date the financial statements were issued. There were no subsequent events that need disclosure.

Summary of Significant Accounti

Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2019
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 June 30, 2019 and December 31, 2018, 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, the Company adopted 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, primarily from stock rotations, plus knowledge of pending returns outside of the norm.
Leases	Leases In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires a lessee to recognize a liability representing future lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For operating leases, a lessee is required to recognize at inception a right-of-use asset and a lease liability equal to the net present value of the lease payments, with lease expense recognized over the lease term on a straight-line basis. For leases with a term of twelve months or less, ASU 2016-02 allows a reporting entity to make an accounting policy election to not recognize a right-of-use asset and a lease liability, and to recognize lease expense on a straight-line basis. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company adopted ASU 2016-02 effective January 1, 2019, which had no impact on the Company’s Statements of Operations. The most significant impact was the recognition of right-of-use assets and liabilities for the operating lease. Adoption of the standard required the Company to restate the reported results in its earliest comparable period, January 1, 2018, including the recognition of additional operating lease right-of-use assets and liabilities. As a result, there was an increase in assets and corresponding liabilities of approximately $1.57 million on January 1, 2018. At June 30, 2019, the balances of right-of-use assets and liabilities for the operating lease are approximately $1.10 million and $1.33 million, respectively, compared to approximately $1.27 million and $1.51 million, respectively, at December 31, 2018.
Recently Issued Financial Accounting Standards	Recently Issued Financial Accounting Standards 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 is not expected to have a significant impact on the Company’s 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.

Inventories (Tables)

Inventories (Tables)	6 Months Ended
	Jun. 30, 2019
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 June 30, 2019 and December 31, 2018 were as follows: June 30, December 31, 2019 2018 Raw materials and sub-assemblies $ 3,118,418 $ 2,785,154 Finished goods 145,076 335,335 Inventory reserves (868,161 ) (848,161 ) Inventories, net $ 2,395,333 $ 2,272,328

Bank Financing Arrangements (Ta

Bank Financing Arrangements (Tables)	6 Months Ended
	Jun. 30, 2019
Debt Disclosure [Abstract]
Term loan and bank credit line balances	Amounts outstanding under the term loan and bank credit facilities at June 30, 2019 are as follows: June 30, 2019 Long-term portion of term loan 83,333 Current-portion of term loan 500,000 Term loan $ 583,333 June 30, 2019 Lines of credit -domestic line 1,438,595 Lines of credit -EXIM line 391,379 Total lines of credit $ 1,829,974

Segment Information and Concent

Segment Information and Concentrations (Tables)	6 Months Ended
	Jun. 30, 2019
Segment Reporting [Abstract]
Revenue by geographic areas	Revenues by geographic area for three and six months ended June 30, 2019 and 2018 were as follows: Three Months Ended Six Months Ended Revenues: 2019 2018 2019 2018 Americas $ 3,975,771 $ 3,311,626 $ 7,653,571 $ 6,316,596 Europe 604,931 639,640 1,097,923 1,283,389 Asia Pacific 479,403 241,065 937,202 573,401 Total revenues $ 5,060,105 $ 4,192,331 $ 9,688,696 $ 8,173,386
Major customers accounted for at least 10% of total revenues	Customers who accounted for at least 10% of the Company’s total revenues for the three and six-month periods ended June 30, 2019 and 2018 were: Three Months Ended Six Months Ended 2019 2018 2019 2018 Ingram Micro Inc. 41 % 33 % 42 % 32 % BlueStar, Inc. 18 % 22 % 19 % 22 % ScanSource, Inc. * 10 % * 10 % _____________ * 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 June 30, 2019 and December 31, 2018 were as follows: June 30, December 31, 2019 2018 Ingram Micro Inc. 48 % 41 % BlueStar, Inc. 17 % 19 %

Net Income (Loss) Per Share App

Net Income (Loss) Per Share Applicable to Common Stockholders (Tables)	6 Months Ended
	Jun. 30, 2019
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 Six Months Ended 2019 2018 2019 2018 Numerator: Net income (loss) $ 119,790 $ (138,242 ) $ 131,629 $ (363,271 ) Denominator: Weighted average shares Basic 5,999,159 5,880,296 5,969,666 6,309,816 Effect of dilutive stock options 272,348 — 234,223 — Diluted 6,271,507 5,880,296 6,203,889 6,309,816 Net income (loss) per share applicable to common stockholders: Basic $ 0.02 $ (0.02 ) $ 0.02 $ (0.06 ) Diluted $ 0.02 $ (0.02 ) $ 0.02 $ (0.06 )

Commitments and Contingencies (

Commitments and Contingencies (Tables)	6 Months Ended
	Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract]
Future minimum payments for operating leases	Future minimum lease payments under the operating lease at June 30, 2019 are as shown below: Annual minimum payments: Amount 2019 (July 1, 2019 to December 31, 2019) $ 234,537 2020 478,455 2021 497,594 2022 (through June 30, 2022) 253,675 Total minimum payments $ 1,464,261
Future minimum payments under financing lease and equipment financing arrangements	Future minimum payments under finance lease and equipment financing arrangements as of June 30, 2019 are as follows: Annual minimum payments: Amount 2019 (July 1, 2019 to December 31, 2019) $ 8,454 2020 8,454 Total minimum payments 16,908 Less amount representing interest (602 ) Present value of net minimum payments 16,306 Short term portion of financing leases (16,306 ) Long term portion of financing leases $ —

Inventory Components (Details)

Inventory Components (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Raw materials and sub-assemblies	$ 3,118,418	$ 2,785,154
Finished goods	145,076	335,335
Inventory reserves	(868,161)	(848,161)
Inventories, net	$ 2,395,333	$ 2,272,328

Bank Financing Arrangements (De

Bank Financing Arrangements (Details Narrative) - USD ($)	Jan. 31, 2018	Jun. 30, 2019	Jun. 30, 2019
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
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		$ 583,333	$ 583,333
Amount repaid		125,000	250,000
Interest expense		13,350	29,194
Line of Credit Facilities
Amount outstanding		1,929,974	1,929,974
Amount borrowed			8,754,000
Amount repaid			8,240,804
Interest expense		15,984	28,677
Accrued interest payable		16,491	16,491
Remaining borrowing capacity		$ 194,000	$ 194,000

Amounts Outstanding under Bank

Amounts Outstanding under Bank Term Loan (Detail) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Notes to Financial Statements
Long-term portion of term loan	$ 83,333	$ 333,333
Current-portion of term loan	500,000	$ 500,000
Term loan balance	$ 583,333

Amounts Outstanding under Ban_2

Amounts Outstanding under Bank Lines of Credit (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Debt Disclosure [Abstract]
Lines of credit - domestic line	$ 1,438,595
Lines of credit - EXIM line	391,379
Total lines of credit	$ 1,829,974	$ 1,316,778

Revenues By Geographic Areas (D

Revenues By Geographic Areas (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues: (in thousands)	$ 5,060,105	$ 4,192,331	$ 9,688,696	$ 8,173,386
Asia Pacific
Revenues: (in thousands)	479,403	241,065	937,202	573,401
Americas
Revenues: (in thousands)	3,795,771	3,311,626	7,653,571	6,316,596
Europe
Revenues: (in thousands)	$ 604,931	$ 639,640	$ 1,097,923	$ 1,283,389

Major Customers Accounted for a

Major Customers Accounted for at Least 10% of Total Revenues (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Ingram Micro Inc.
Percent of total revenues	41.00%	33.00%	42.00%	32.00%
BlueStar, Inc.
Percent of total revenues	18.00%	22.00%	19.00%	22.00%
ScanSource, Inc.
Percent of total revenues		10.00%		10.00%

Major Customers as a Percentage

Major Customers as a Percentage of Net Accounts Receivable Balances (Details)	Jun. 30, 2019	Dec. 31, 2018
Ingram Micro Inc.
Percent of net accounts receivable balances	48.00%	41.00%
Threshold percentage for disclosure	10.00%	10.00%
BlueStar, Inc.
Percent of net accounts receivable balances	17.00%	19.00%
Threshold percentage for disclosure	10.00%	10.00%

Concentration of Suppliers (Det

Concentration of Suppliers (Details Narrative)	3 Months Ended
	Jun. 30, 2019
Risks and Uncertainties [Abstract]
Accounts payable balances with three suppliers	23.00%
Percentage of inventory purchases from top three suppliers	53.00%

Stock-Based Compensation (Detai

Stock-Based Compensation (Details Narrative) - USD ($)	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019
Notes to Financial Statements
Stock-based compensation expenses	$ 137,035		$ 118,843		$ 259,000
Stock options granted		165,600
Restricted stock granted		116,050		275,623

Net Income (Loss) per Share A_2

Net Income (Loss) per Share Applicable to Common Stockholders (Details) - USD ($)	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Numerator:
Net income (loss)	$ 119,790	$ 11,839	$ (138,242)	$ (225,029)	$ 131,629	$ (363,271)
Denominator: Weighted average common shares outstanding used in computing net income (loss) per share:
Basic	5,999,159		5,880,296		5,969,666	6,309,816
Effect of dilutive stock options	272,348				234,223
Diluted	6,271,507		5,880,296		6,203,889	6,309,816
Net income (loss) per share applicable to common stockholders:
Basic	$ 0.02		$ (0.02)		$ 0.02	$ (0.06)
Diluted	$ 0.02		$ (0.02)		$ 0.02	$ (0.06)

Stock Options Excluded from Cal

Stock Options Excluded from Calculation of Diluted Net Loss Per Share (Details Narrative) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net income (loss) per share:
Stock Options Excluded from Calculation of Diluted Net Income (Loss) Per Share	2,185,351	2,359,034	2,223,476	2,359,034

Taxes (Details)

Taxes (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Tax Disclosure [Abstract]
Income tax expense (benefit)	$ 68,749	$ (53,707)	$ 75,419	$ (133,634)

Commitments and Contingencies_2

Commitments and Contingencies (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]
Operating lease expense	$ 103,208	$ 103,208	$ 206,416	$ 206,416
Operating lease cash payments	112,758	$ 108,421	225,516	$ 216,843
Non-cancelable purchase commitments for inventory	5,495,000		5,495,000
Original cost of equipment under finance leases	100,584		100,584		$ 100,584
Finance lease accumulated depreciation	$ 84,558		$ 84,558		$ 76,546

Future Minimum Payments for Ope

Future Minimum Payments for Operating Lease (Detail)	Jun. 30, 2019USD ($)
Annual minimum payments:
2019 (July 1, 2019 to December 31, 2019)	$ 234,537
2020	478,455
2021	497,594
2022 (through June 30, 2022)	253,675
Total minimum payments	$ 1,464,261

Future Minimum Payments Under C

Future Minimum Payments Under Capital Lease And Equipment Financing Arrangements (Details)	Jun. 30, 2019USD ($)
Annual minimum payments:
2019 (July 1, 2019 to December 31, 2019)	$ 8,454
2020	8,454
Total minimum payments	16,908
Less amount representing interest	(602)
Present value of net minimum payments	16,306
Short term portion of capital leases	(16,306)
Long term portion of capital leases	$ 0

Subsequent Events (Details Narr

Subsequent Events (Details Narrative)	6 Months Ended
	Jun. 30, 2019
Subsequent Events [Abstract]
Subsequent events	The Company has evaluated events from June 30, 2019 through the date the financial statements were issued. There were no subsequent events that need disclosure.