NOTES
TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
June
30, 2021
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, 2020.
We
continue to monitor developments of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic to our business, operating
results, cash flows, liquidity and financial condition will be primarily driven by the severity and duration of the pandemic, the impact
of new strains and variants of the coronavirus, the pandemic’s impact on the global economy and the administration and effectiveness
of vaccines. Those primary drivers are beyond our knowledge and control, and as a result, it is difficult to predict the cumulative impact
that the pandemic will have on our future sales, operating results, cash flows and financial condition. Furthermore, the impact to our
business, operating results, cash flows, liquidity and financial condition may be further adversely impacted if the COVID-19 global pandemic
continues to exist or worsens for a prolonged period of time.
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, 2021 and December 31, 2020, 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.
SOCKET
MOBILE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
June
30, 2021
Revenue
Recognition and Deferred Revenue
With
the adoption of ASC 606 “Revenue from Contracts with Customers” in January 2017, the Company recognizes revenue on sales
to distributors when shipping of product is completed and title transfers to 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. At June 30, 2021, the deferred revenue and deferred cost on shipments
to distributors were $529,973 and $179,267, respectively, compared to $450,591 and $170,016, respectively, at December 31, 2020.
The
Company also earns revenue from its SocketCare extended warranty program, which provides extended warranty and accidental breakage coverage
for selected products. For the quarters ended June 30, 2021 and 2020, SocketCare revenue was approximately $6,700 and $8,600, respectively.
A SocketCare warranty purchased at the time of product purchase provides for coverage in either a three-year or a five-year term. The
Company additionally offers comprehensive coverage and warranty term extensions. Revenues from SocketCare services are recognized ratably
over the life of the extended warranty contract. The amount of unrecognized SocketCare service revenue is classified as deferred service
revenue and presented on the Company’s balance sheet in its short- and long-term components. At June 30, 2021, the balance of unrecognized
SocketCare service revenue was approximately $40,800.
Cost
of Sales and Gross Margins
Cost
of sales primarily consists of the costs to manufacture our products, including the costs of materials, contract manufacturing, shipping
costs, personnel and related expenses including stock-based compensation, equipment and facility expenses, warranty costs and inventory
excess and obsolete provisions. The factors that impact our gross margins are the cost of materials, the mix of products and the extent
to which we are able to efficiently utilize our manufacturing capacity.
Leases
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 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. The Company
adopted ASU 2016-02 effective January 1, 2019. At June 30, 2021, the balances of right-of-use assets and liabilities for the operating
lease were$413,810 and $508,328, respectively, compared to $609,331 and $741,351, respectively,
at December 31, 2020.
Goodwill
In
January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.
The amendments in this update eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is
performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the
amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the
total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax-deductible goodwill on the carrying
amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable.
SOCKET
MOBILE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
June
30, 2021
The
Company tests its goodwill for impairment annually as of September 30th or more frequently when events or circumstances indicate that
the carrying value of the Company’s single reporting unit more likely than not exceeds its fair value.
No
impairment of goodwill was recorded in the quarter ended June 30, 2021.
Recently
Issued Financial Accounting Standards
From
time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies and 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 — Acquisition of Intangible Assets
On
February 26, 2021, the Company entered into the 2021 Technology Transfer Agreement with SpringCard SAS (“SpringCard”). SpringCard
is a market leader at the forefront of innovative electronic design and development. Its contactless and wireless solutions support a
wide range of customers, from large international corporations to locally focused companies.
Under
the 2021 Technology Transfer Agreement, the Company acquired an irrevocable, perpetual, non-exclusive, transferable, worldwide, unlimited,
unrestricted, royalty-free, fully paid-up right and license to SpringCard’s Contactless Technology Package for use in the Company’s
Contactless Reader/Writer products, D600 and S550. SpringCard received 184,332 shares of the Company’s common stock, subject to
a collar, and a 10-year warrant to purchase up to an aggregate of 50,000 shares of the Company’s common stock at the price of $10.85
per share in four equal lots of 12,500 shares each, with each lot exercisable on or after January 1st of 2022, 2023, 2024 and 2025, respectively,
until the expiration date of warrant. The common stock was issued on March 29, 2021. The fair value of intangible assets acquired is
based on the closing stock price of $7.65 on March 29, 2021. On April 20, 2021, the Company agreed to pay SpringCard the sum of $192,293
to resolve all issues that have arisen due to clerical issues in the implementation of the 2021 Technology Transfer Agreement. The Company
and SpringCard both agreed that, with this payment, the Company shall have no further financial obligation to SpringCard under the 2021
Technology Transfer Agreement.
The
Unaudited Condensed Balance Sheets include the intangible assets of the acquired technology at the initial value of $1,877,609.
SOCKET
MOBILE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
June
30, 2021
The
SpringCard intangible assets will be amortized over their estimated useful lives of fifteen years on a straight-line basis, which commenced
on April 1, 2021. The estimated future amortization of intangible assets is as follows:
Fiscal Year
|
Amount
|
2021 (July 1, 2021 to December 31, 2021)
|
|
$
|
63,648
|
|
2022
|
|
|
127,296
|
|
2023
|
|
|
127,296
|
|
2024
|
|
|
127,296
|
|
2025
|
|
|
127,296
|
|
Thereafter
|
|
|
1,304,777
|
|
Total
|
|
$
|
1,877,609
|
|
NOTE
4 — 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, 2021 and December 31, 2020 were as follows:
|
|
June 30,
|
|
December 31,
|
|
|
2021
|
|
2020
|
Raw materials and sub-assemblies
|
|
$
|
4,429,107
|
|
|
$
|
3,642,377
|
|
Finished goods
|
|
|
396,346
|
|
|
|
281,104
|
|
Inventory reserves
|
|
|
805,943
|
|
|
|
727,639
|
|
Inventory, net
|
|
$
|
4,019,510
|
|
|
$
|
3,195,842
|
|
NOTE
5 — Bank Financing Arrangements
The
Company initially entered into a Business Financing Agreement with Western Alliance Bank (the “Bank”), an Arizona corporation,
on February 27, 2014, and this agreement has been amended and extended through the years.
Seventh
Financing Agreement
On
January 8, 2020, the Company entered into the Seventh Amended and Restated Business Financing Agreement with the Bank which extends the
maturity date of the Company’s revolving line of credit to January 31, 2022.
Eighth
Financing Agreement
On
August 28, 2020, the Company entered into the Eighth Amended and Restated Business Financing Agreement with the Bank. The Bank consented
to the issuance of subordinated debt in the amount less than $2,000,000, at the annual interest rate less than 10% and maturing no sooner
than 3 years.
SOCKET
MOBILE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
June
30, 2021
Amended
and Restated Business Financing Agreement
On
January 29, 2021, the Company entered into an Amended and Restated Business Financing Agreement (the “Financing Agreement”)
with the Bank. The agreement increased the Domestic Line of Credit to $3,000,000,
including a $2,000,000 revolving facility and $1,000,000
nonformula loan. The $1,000,000 nonformula
loan was enrolled in the CalCap Collateral Support Program and advanced on February 16, 2021. The Company will make a principal reduction
payment of $125,000, plus all accrued but unpaid interest on the 30th day of each of April, July, October and January. The Financing
Agreement also extended the maturity date of both the Domestic and EXIM Line of Credit to January 31, 2023.
Amounts
outstanding under the CalCap loan at June 30, 2021 are as follows:
|
|
|
|
|
June 30, 2021
|
Current portion of CalCap loan
|
|
$
|
500,000
|
|
Long-term portion of CalCap loan
|
|
|
375,000
|
|
CalCap loan
|
|
$
|
875,000
|
|
During
the six months ended June 30, 2020, total repayment of the term loan, initiated in March 2018, was $250,000. Total amount borrowed under
the domestic and international lines was $4,630,000 and the total repayment was $5,592.449.
Interest
expense on the CalCap loan for the three and six months ended June 30, 2021 was $11,580 and $17,552, respectively. Accrued interest payable
related to the amounts outstanding under the CalCap loan at June 30, 2021 was $2,431. Interest expense on the term loan for the three
and six months ended June 30, 2020 was $1,896 and $5,922, respectively. Interest expense on the amounts drawn under the Company’s
bank credit lines during the three and six months ended June 30, 2020 was $3,783 and $19,384, respectively.
NOTE
6 — Secured Subordinated Convertible Notes Payable
On
August 31, 2020, the Company completed a secured subordinated convertible note financing of $1,530,000, including $1,350,000 from officers,
directors, and their family members. Because the financing involved such parties related to the Company, a special committee of the Board
comprising the Board’s disinterested directors approved the financing.
The
funds raised are used to increase the Company’s working capital balances. The notes have a three-year term that accrue
interest at 10% per annum and mature on August 30, 2023. The interest on the notes is payable quarterly in cash. The holder of each
note may require the Company to repay the principal amount of the note plus accrued interest at any time after August 31, 2021. The
principal amount of each note is convertible at any time, at the option of the holder, into shares of the Company’s common
stock at a conversion price of $1.46 per share, which was the market closing price of the common stock on August 28, 2020. The notes
did not contain a beneficial conversion feature because the conversion price is higher than the market closing price on the date of
the notes payable. The notes are secured by the assets of the Company and are subordinated to amounts outstanding under the
Company’s working capital bank line of credit with Western Alliance Bank.
SOCKET
MOBILE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
June
30, 2021
Total
issuance costs associated with the financing are $96,515, and the costs are presented in the balance sheet as a direct deduction from
the original notes payable balance of $1,530,000 as a contra-liability. The issuance costs are amortized over three years, the term of
the notes payable, and the amortization expense is reported as interest expense. The amortization of debt discount for six months ended
June 30, 2021 was $16,546. The remaining debt discount of $71,697 will be amortized through August 30, 2023.
During
the six months ended June 30, 2021, two noteholders elected to convert note principal of $130,000 into shares of the Company’s
common stock at the conversion price.
Total
interest expense recognized related to the convertible notes for the three and six months ended June 30, 2021 was $43,177 and $87,721,
respectively.
NOTE
7 — 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 and resellers. The Company
markets its products primarily through application developers whose applications are designed to work with the Company’s products.
Revenues
by geographic areas for the three and six months ended June 30, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Revenues:
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
4,753,436
|
|
|
$
|
2,242,225
|
|
|
$
|
8,316,490
|
|
|
$
|
5,385,634
|
|
Europe
|
|
|
875,945
|
|
|
|
200,012
|
|
|
|
1,653,526
|
|
|
|
815,541
|
|
Asia Pacific
|
|
|
323,509
|
|
|
|
272,787
|
|
|
|
795,853
|
|
|
|
734,535
|
|
Total revenues
|
|
$
|
5,952,890
|
|
|
$
|
2,715,024
|
|
|
$
|
10,765,869
|
|
|
$
|
6,935,710
|
|
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.
SOCKET
MOBILE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
June
30, 2021
Major
Customers
Customers
who accounted for at least 10% of the Company’s total revenues for the three and six months ended June 30, 2021 and 2020 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Ingram Micro Inc.
|
|
|
27
|
%
|
|
|
29
|
%
|
|
|
26
|
%
|
|
|
33
|
%
|
BlueStar, Inc.
|
|
|
32
|
%
|
|
|
25
|
%
|
|
|
31
|
%
|
|
|
20
|
%
|
ScanSource, Inc.
|
|
|
12
|
%
|
|
|
14
|
%
|
|
|
10
|
%
|
|
|
10
|
%
|
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 June 30, 2021 and December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
2021
|
|
2020
|
BlueStar, Inc.
|
|
|
33
|
%
|
|
|
29
|
%
|
Ingram Micro Inc.
|
|
|
26
|
%
|
|
|
34
|
%
|
ScanSource, Inc.
|
|
|
26
|
%
|
|
|
13
|
%
|
Bluestar Europe Distribution BV
|
|
|
—
|
*
|
|
|
11
|
%
|
*
|
Customer accounted for less than 10% of the Company 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 due to an interruption of supply. Suppliers may choose to restrict credit terms or require advance
payments causing delays in the procurement of essential materials. The Company’s inability to procure certain materials could have
a material adverse effect on the Company’s results. For the three months ended June 30, 2021 and 2020, the top two suppliers accounted
for 46% and 54%, respectively, of inventory purchases. As of June 30, 2021 and December 31, 2020, 19% and 15%, respectively, of the Company’s
accounts payable balances were concentrated with a single supplier.
NOTE
8 — 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, 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. There were 182,000 stock options granted during the six months
ended June 30, 2021, compared to 37,000 stock options for the six months ended June 30, 2020.
SOCKET
MOBILE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
June
30, 2021
The
shares of restricted stock are issued to employees and consultants and are held in escrow by the Company until the shares vest on the
schedule of 15% after year one, 20% after year two, 25% after year three and 40% after year four, subject to the employees and consultants
being a continuing service provider on each of the vesting dates. If the service or employment is terminated, unvested shares revert
to the Company. Shares are registered at grant, so share owners may vote at the annual stockholder meeting. Shares of restricted stock
are granted at zero cost basis. Compensation cost of the restricted stock is recognized on a straight-line basis over the 4-year vesting
period. For the six months ended June 30, 2021 and 2020, the Company awarded 302,425 and 293,000 shares of restricted stock, respectively.
As of June 30, 2021, there were 742,131 shares of restricted stock outstanding. Due to the existence of restrictions on sale or transfer
until the shares vest, the Company does not count the shares of restricted stock as issued and outstanding shares until they vest.
Total
stock-based compensation expense for the three and six months ended June 30, 2021 was $172,008 and $320,780, respectively, compared to
expense of $131,369 and $263,434 in the corresponding periods a year ago.
NOTE
9 — Net Income (Loss) Per Share
The
following table sets forth the reconciliation of basic shares to diluted shares and the computation of basic and diluted net income (loss)
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
2,627,107
|
|
|
$
|
(768,023
|
)
|
|
$
|
2,830,009
|
|
|
$
|
(858,350
|
)
|
Net income (loss) allocated to restricted stock award
|
|
|
226,630
|
|
|
|
(45,890
|
)
|
|
|
243,205
|
|
|
|
(40,262
|
)
|
Adjusted net income (loss)
for basic earnings per share
|
|
$
|
2,400,477
|
|
|
$
|
(722,133
|
)
|
|
$
|
2,586,804
|
|
|
$
|
(818,088
|
)
|
Convertible note interest
|
|
|
43,177
|
|
|
|
—
|
|
|
|
88,755
|
|
|
|
—
|
|
Adjusted net income (loss) for diluted earnings per share
|
|
$
|
2,443,654
|
|
|
$
|
(722,133
|
)
|
|
$
|
2,675,559
|
|
|
$
|
(818,088
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator::
Weighted average shares outstanding used in computing net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
7,128,768
|
|
|
|
6,009,383
|
|
|
|
6,808,339
|
|
|
|
6,011,695
|
|
Effect of dilutive stock options
|
|
|
819,680
|
|
|
|
—
|
|
|
|
826,387
|
|
|
|
—
|
|
Effect of convertible note weighted shares
|
|
|
958,904
|
|
|
|
—
|
|
|
|
958,904
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
8,907,352
|
|
|
|
6,009,383
|
|
|
|
8,593,630
|
|
|
|
6,011,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share applicable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.34
|
|
|
$
|
(0.13
|
)
|
|
$
|
0.38
|
|
|
$
|
(0.14
|
)
|
Diluted
|
|
$
|
0.27
|
|
|
$
|
(0.13
|
)
|
|
$
|
0.31
|
|
|
$
|
(0.14
|
)
|
SOCKET
MOBILE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
June
30, 2021
In
the three and six months ended June 30, 2021, 45,000 stock options and 50,000 warrants were excluded in the calculation of diluted net
income per share as their effect would have been anti-dilutive.
In
the three and six months ended June 30, 2020, 2,259,937 stock options and 394,506 shares of restricted stock were excluded in the calculation
of diluted net loss per share because their effect would have been anti-dilutive.
NOTE
10 — Income Taxes
In
the first half of 2021, the differences between the financial income and taxable income included a tax deduction of $7.97 million resulting
from the disqualified disposition of incentive stock options and stock-based compensation of $320,780, which resulted in a taxable
loss of $6.69 million. The Company recorded a net income tax benefit of approximately $1.9 million for the first half of 2021 with the
expectation of full utilization of its net operating loss carryforwards.
The
Company recorded no deferred tax benefit for the losses in the six months ended June 30, 2020.
NOTE
11 — 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 1st
of each year. In June 2020, the Company also signed a two-year equipment operating lease agreement.
In
January 2019, the Company adopted ASU 2016-02, Leases (Topic 842) and recognized a right-to-use asset and a lease liability using a
discount rate of 6.25% per annum. On June 30, 2021, the balances of right-of-use assets and liabilities for the operating lease were
approximately $413,810
and $508,328, respectively, compared to approximately
$609,331 and $741,351,
respectively, at December 31, 2020.
The
Newark office space lease expense was $107,218 and $214,437 for the three and six months ended June 30, 2021, respectively.
SOCKET
MOBILE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
June
30, 2021
Cash
payments included in the measurement of the Company’s operating lease liabilities were $126,516 and $253,032 for the three and
six months ended June 30, 2021, respectively, compared to $117,268 and $234,537, respectively, for the corresponding prior year periods.
Future
minimum lease payments under the operating lease at June 30, 2021 are shown below:
|
|
|
|
|
Annual minimum payments:
|
|
Amount
|
2021 (July 1 to December 31, 2021)
|
|
|
262,789
|
|
2022 (through June 30, 2022)
|
|
|
262,789
|
|
Total minimum payments
|
|
|
525,578
|
|
Less: Present value factor
|
|
|
(17,250
|
)
|
Total operating lease liabilities
|
|
|
508,328
|
|
Less: Current portion of operating lease
|
|
|
(508,328
|
)
|
Long-term portion of operating lease
|
|
|
—
|
|
Purchase
Commitments
As
of June 30, 2021, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of
approximately $10,858,000.
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
12 — Subsequent Events
The
Company evaluated subsequent events and transactions that occurred between July 1, 2021 through the date of this report, the date that
the unaudited condensed financial statements were issued. Other than described below, the Company did not identify any subsequent
events that would have required adjustment or disclosure in the unaudited condensed financial statements.
4,000
shares of restricted stock were granted from the 2004 Equity Incentive Plan.
The
Company issued 35,129 shares of common stock upon the exercise of stock options.