Cover
Cover - shares | 3 Months Ended | |
Mar. 31, 2023 | May 09, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Mar. 31, 2023 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2023 | |
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 | 40675 Encyclopedia | |
Entity Address, City or Town | Fremont | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 94538 | |
City Area Code | (510) | |
Local Phone Number | 933-3000 | |
Title of 12(b) Security | Common stock, $0.001 Par Value per Share | |
Trading Symbol | SCKT | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 7,130,853 |
Condensed Statements Of Operati
Condensed Statements Of Operations - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Income Statement [Abstract] | ||
Revenues | $ 4,312,178 | $ 6,293,002 |
Cost of revenues | 2,239,691 | 3,165,340 |
Gross profit | 2,072,487 | 3,127,662 |
Operating expenses: | ||
Research and development | 1,247,119 | 1,053,606 |
Sales and marketing | 1,006,792 | 899,880 |
General and administrative | 773,988 | 710,472 |
Total operating expenses | 3,027,899 | 2,663,958 |
Operating income (loss) | (955,412) | 463,704 |
Interest expense, net | (38,008) | (45,606) |
Other income | ||
Net income (loss) before income taxes | (993,420) | 418,098 |
Income tax expense | 76,165 | |
Net income (loss) | $ (993,420) | $ 341,933 |
Net income (loss) per share: | ||
Basic | $ (0.12) | $ 0.04 |
Diluted | $ (0.12) | $ 0.04 |
Weighted average shares outstanding: | ||
Basic | 7,106,746 | 7,234,163 |
Diluted | 7,106,746 | 7,724,357 |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Current assets: | ||
Cash and cash equivalents | $ 2,963,308 | $ 3,623,469 |
Accounts receivable, net | 2,494,713 | 2,659,861 |
Inventories, net | 5,659,930 | 5,601,691 |
Prepaid expenses and other current assets | 556,352 | 617,188 |
Deferred cost on shipments to distributors | 273,718 | 266,327 |
Total current assets | 11,948,021 | 12,768,536 |
Property and equipment: | ||
Machinery and office equipment | 1,842,599 | 1,533,087 |
Computer equipment | 2,871,714 | 2,715,121 |
Property, plant, and equipment, gross | 4,714,313 | 4,248,208 |
Accumulated depreciation | (2,752,101) | (2,590,999) |
Property and equipment, net | 1,962,212 | 1,657,209 |
Intangible assets, net | 1,654,841 | 1,693,927 |
Other long-term assets | 250,239 | 250,239 |
Deferred tax assets | 8,668,419 | 8,668,419 |
Operating lease right-of-use asset | 3,443,826 | 3,559,658 |
Total assets | 27,927,558 | 28,597,988 |
Current liabilities: | ||
Accounts payable and accrued expenses | 2,180,911 | 1,665,028 |
Accrued payroll and related expenses | 598,501 | 742,541 |
Deferred revenue on shipments to distributors | 647,977 | 594,793 |
Short term portion of deferred service revenue | 21,816 | 22,599 |
Note Payable – current portion | 125,000 | |
Subordinated convertible notes payable, net of discount | 148,382 | 147,409 |
Subordinated convertible notes payable, net of discount - related party | 1,237,830 | 1,230,530 |
Operating lease – current portion | 454,660 | 444,529 |
Total current liabilities | 5,290,077 | 4,972,429 |
Long-term portion of deferred service revenue | 12,183 | 11,767 |
Long-term portion of operating lease | 3,175,848 | 3,292,035 |
Total liabilities | 8,478,108 | 8,276,231 |
Commitments and contingencies | ||
Stockholders’ equity: | ||
Common Stock, Value, Issued | 7,130 | 7,090 |
Additional paid-in capital | 67,487,148 | 67,157,650 |
Treasury stock | (1,037,988) | (829,563) |
Accumulated deficit | (47,006,840) | (46,013,420) |
Total stockholders’ equity | 19,449,450 | 20,321,757 |
Total liabilities and stockholders’ equity | $ 27,927,558 | $ 28,597,988 |
Condensed Balance Sheets (Paren
Condensed Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2023 | Dec. 31, 2022 |
Statement of Financial Position [Abstract] | ||
Common Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 20,000,000 | 20,000,000 |
Common Stock, Shares, Issued | 7,489,201 | 7,355,967 |
Common Stock, Shares, Outstanding | 7,129,951 | 7,089,676 |
Condensed Statements of Stockho
Condensed Statements of Stockholders' Equity - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Treasury Stock, Common [Member] | Retained Earnings [Member] | Total |
Beginning balance, value at Dec. 31, 2021 | $ 7,184 | $ 66,139,630 | $ (46,100,351) | $ 20,046,463 | |
Shares, Outstanding, Beginning Balance at Dec. 31, 2021 | 7,183,874 | ||||
Vesting of restricted stocks | $ 91 | (91) | |||
Vesting of restricted stocks | 91,134 | ||||
Restricted stock retired for tax withholding | $ (26) | (115,189) | (115,215) | ||
Restricted stock retired for tax withholding | (26,157) | ||||
Exercise of stock option | $ 24 | 39,508 | 39,532 | ||
Exercise of stock options | 24,200 | ||||
Stock-based compensation | 223,446 | 223,446 | |||
Net income | 341,933 | 341,933 | |||
Ending balance, value at Mar. 31, 2022 | $ 7,273 | 66,287,304 | (45,758,418) | 20,536,159 | |
Shares, Outstanding, Ending Balance at Mar. 31, 2022 | 7,273,051 | ||||
Beginning balance, value at Dec. 31, 2022 | $ 7,090 | 67,157,650 | $ (829,563) | (46,013,420) | 20,321,757 |
Shares, Outstanding, Beginning Balance at Dec. 31, 2022 | 7,089,676 | 266,291 | |||
Vesting of restricted stocks | $ 148 | (148) | |||
Vesting of restricted stocks | 147,972 | ||||
Restricted stock retired for tax withholding | $ (54) | 54 | |||
Restricted stock retired for tax withholding | (53,647) | ||||
Exercise of stock option | $ 39 | 33,666 | 33,705 | ||
Exercise of stock options | 38,909 | ||||
Stock-based compensation | 295,833 | 295,833 | |||
Treasury shares purchased | $ (93) | 93 | $ (208,425) | (208,425) | |
Treasury shares purchased | (92,959) | ||||
Treasury Stock, Shares, Acquired | 92,959 | ||||
Net income | (993,420) | (993,420) | |||
Ending balance, value at Mar. 31, 2023 | $ 7,130 | $ 67,487,148 | $ (1,037,988) | $ (47,006,840) | $ 19,449,450 |
Shares, Outstanding, Ending Balance at Mar. 31, 2023 | 7,129,951 | 359,250 |
Condensed Statements Of Cash Fl
Condensed Statements Of Cash Flows - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Operating activities | ||
Net income (loss) | $ (993,420) | $ 341,933 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Stock-based compensation | 295,833 | 223,446 |
Depreciation and amortization | 200,189 | 201,739 |
Amortization of debt discount | 8,273 | 8,273 |
Deferred tax benefits | 76,165 | |
Amortization of operating lease ROU asset | 115,832 | 104,422 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 165,148 | (870,177) |
Inventories | (58,239) | (59,049) |
Prepaid expenses and other current assets | 60,836 | (93,445) |
Other assets | (222,249) | |
Accounts payable and accrued expenses | 515,883 | 36,134 |
Accrued payroll and related expenses | (144,040) | (52,284) |
Net deferred revenue on shipments to distributors | 45,793 | (29,908) |
Deferred service revenue | (367) | 10,637 |
Net change in operating lease liability | (106,056) | (128,050) |
Net cash (used in) provided by operating activities | 105,665 | (452,413) |
Investing activities | ||
Purchases of equipment and intangible assets | (466,106) | (134,919) |
Net cash used in investing activities | (466,106) | (134,919) |
Financing activities | ||
Common stocks repurchased and related expenses | (208,425) | |
Repayments of note payable | (125,000) | (125,000) |
Proceeds from stock options exercised | 33,705 | 39,532 |
Net cash used in financing activities | (299,720) | (85,468) |
Net (decrease) increase in cash and cash equivalents | (660,161) | (672,800) |
Cash and cash equivalents at beginning of period | 3,623,469 | 6,095,886 |
Cash and cash equivalents at end of period | 2,963,308 | 5,423,086 |
Supplemental disclosure of cash flow information | ||
Cash paid for interest | 36,030 | 49,460 |
Non-cash investing and financing activities | ||
Payroll tax liability for retired restricted stock | $ 115,215 |
NOTE 1 _ Basis of Presentation
NOTE 1 — Basis of Presentation | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
NOTE 1 — 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, 2022. |
NOTE 2 _ Summary of Significant
NOTE 2 — Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
NOTE 2 — 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. In response to recent volatility in the financial markets in March 2023, the Company entered into an Insured Cash Sweep (“ICS”) Deposit Placement Agreement with IntraFi Network LLC facilitated by its bank, Bridge Bank - a division of Western Alliance Bank. The ICS program provides the Company’s demand or savings products with access to unlimited FDIC insurance, which helps the Company to keep the full amount of the deposit on its balance sheet and provides additional security during times of market uncertainty. As of March 31, 2023, and December 31, 2022, all of the Company’s cash and cash equivalents consisted of amounts held in demand deposit accounts in banks. 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, and debt approximate fair value due to the relatively short period of time to maturity. Revenue Recognition and Deferred Revenue 647,977 273,718 594,793 266,327 SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 31, 2023 The Company also earns revenue from its SocketCare extended warranty program, which provides extended warranty and accidental breakage coverage for selected products. Customers can purchase a SocketCare warranty at the time of product purchase, which provides coverage for a three-year or a five-year term. Revenues from SocketCare services are recognized ratably over the life of the extended warranty contract. For the quarters ended March 31, 2023 and 2022, SocketCare revenue was approximately $ 5,600 5,400 34,000 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 affect 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. On March 31, 2023, the balances of right-of-use assets and liabilities for the operating lease were $ 3,443,826 3,630,508 3,559,658 3,736,564 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 _ Intangible Assets
NOTE 3 — Intangible Assets | 3 Months Ended |
Mar. 31, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
NOTE 3 — Intangible Assets | NOTE 3 — Intangible Assets In 2021, the Company entered into the Technology Transfer Agreement with SpringCard SAS (“SpringCard”). The Unaudited Condensed Balance Sheets include the intangible assets of the acquired technology at the carrying amount, net of amortization of $ 1,654,841 SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 31, 2023 The intangible assets are amortized on a straight-line basis over their estimated useful lives of fifteen years, beginning on April 1, 2021. As of March 31, 2023, the estimated future amortization of these intangible assets is as follows: Fiscal Year Amount 2023 (April 1, 2023 to December 31, 2023) $ 95,472 2024 127,296 2025 127,296 2026 127,296 2027 127,296 Thereafter 1,050,185 Total $ 1,654,841 |
NOTE 4 _ Inventories
NOTE 4 — Inventories | 3 Months Ended |
Mar. 31, 2023 | |
Inventory Disclosure [Abstract] | |
NOTE 4 — Inventories | 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 on March 31, 2023 and December 31, 2022 were as follows: March 31, December 31, 2023 2022 Raw materials and sub-assemblies $ 6,346,897 $ 6,193,453 Finished goods 193,976 289,181 Inventory reserves (880,943 ) (880,943 ) Inventory, net $ 5,659,930 $ 5,601,691 |
NOTE 5 _ Bank Financing Arrange
NOTE 5 — Bank Financing Arrangements | 3 Months Ended |
Mar. 31, 2023 | |
Debt Disclosure [Abstract] | |
NOTE 5 — Bank Financing Arrangements | 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. Amended and Restated Business Financing Agreement On January 29, 2021 $2.0 $1.0 SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 31, 2023 First Business Financing Modification Agreement On February 9, 2022, the Company entered into the First Business Financing Modification Agreement with the Bank. The Bank consented to the share repurchase program of up to $1.8 million. Future audit of accounts receivables will be performed once every twelve months. The Bank increased the credit limit for business credit cards to $250,000. Second Business Financing Modification Agreement and Waiver of Defaults On January 25, 2023, the Company entered into the Second Business Financing Modification Agreement and Waiver of Defaults with the Bank which extended the maturity date of the Company’s revolving lines of credit to January 31, 2025. The outstanding balance of the CalCap Loan, which was $125,000 $1,138 The Company did not borrow any amounts on its bank credit lines as of March 31, 2023 and December 31, 2022. |
NOTE 6 _ Secured Subordinated C
NOTE 6 — Secured Subordinated Convertible Notes Payable | 3 Months Ended |
Mar. 31, 2023 | |
Debt Disclosure [Abstract] | |
NOTE 6 — Secured Subordinated Convertible Notes Payable | NOTE 6 — Secured Subordinated Convertible Notes Payable On August 31, 2020, the Company completed a secured subordinated convertible note financing of $1,530,000 $1,350,000 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% $1.46 $96,515 $1,530,000 On November 16, 2022, the Company and the requisite holders of the outstanding notes entered into a Secured Subordinated Convertible Note Extension Agreement (the “Extension Agreement”), which extended the maturity date of the notes from August 30, 2023 to August 30, 2024. All other terms and conditions of the notes remain unchanged and in full force and effect. SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 31, 2023 Total interest expenses recognized related to the convertible note were $42,793 |
NOTE 7 _ Segment Information an
NOTE 7 — Segment Information and Concentrations | 3 Months Ended |
Mar. 31, 2023 | |
Segment Reporting [Abstract] | |
NOTE 7 — Segment Information and Concentrations | 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 months ended March 31, 2023 and 2022 were as follows: Three Months Ended March 31, Revenues: 2023 2022 United States $ 3,138,653 $ 4,882,773 Europe 542,527 697,971 Asia and rest of world 630,998 712,258 Total revenues $ 4,312,178 $ 6,293,002 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, 2023 and 2022 were as follows: Three Months Ended March 31, 2023 2022 Ingram Micro, Inc. 23 % 27 % BlueStar, Inc. 20 % 20 % ScanSource, Inc. * 19 % *Customer accounted for less than 10% of the Company’s total revenue 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% SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 31, 2023 March 31, December 31, 2023 2022 Ingram Micro Inc. 28 % 14 % BlueStar, Inc. 27 % 46 % ScanSource, Inc. 15 % 11 % Nippon Primex, Inc. * 14 % *Customer accounted for less than 10% of the Company’s 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 March 31, 2023 and 2022, the top three suppliers accounted for 55% 53% 26% 31% |
NOTE 8 _ Stock-Based Compensati
NOTE 8 — Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
NOTE 8 — Stock-Based Compensation | 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 no 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 three months ended March 31, 2023 and 2022, the Company awarded 402,370 233,800 1,070,434 SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 31, 2023 Total stock-based compensation expenses for the three months ended March 31, 2023 and 2022, were $295,833 $223,446 |
NOTE 9 _ Net Income Per Share
NOTE 9 — Net Income Per Share | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
NOTE 9 — Net Income Per Share | NOTE 9 — Net Income Per Share The following table sets forth the reconciliation of basic shares to diluted shares and the computation of basic and diluted net income per share: Three Months Ended March 31, 2023 2022 Numerator: Net income (loss) $ (993,420) $ 341,933 Net income allocated to restricted stock award 121,264 31,752 Adjusted net income (loss) before interest for diluted earnings per share $ (872,156) $ 310,181 Denominator: Weighted average shares Basic 7,106,746 7,234,163 Effect of dilutive stock options — 490,194 Diluted 7,106,746 7,724,357 Net income (loss) per share applicable to common stockholders: Basic $ (0.12) $ 0.04 Diluted $ (0.12) $ 0.04 In the three months ended March 31, 2023, the shares used in computing diluted net loss per share do not include 1,262,027 50,000 In the three months ended March 31, 2022, the shares used in computing diluted net loss per share do not include 287,928 50,000 SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 31, 2023 |
NOTE 10 _ Income Taxes
NOTE 10 — Income Taxes | 3 Months Ended |
Mar. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
NOTE 10 — Income Taxes | NOTE 10 — Income Taxes The Company did not record an income tax expense of in Q1 2023 compared to $76,165 |
NOTE 11 _ Commitments and Conti
NOTE 11 — Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
NOTE 11 — Commitments and Contingencies | NOTE 11 — Commitments and Contingencies Operating Lease Obligations On May 1, 2022, the Company commenced a lease agreement for approximately 35,913 square feet at 40675 Encyclopedia Circle in Fremont, California. This serves as the location for the Company’s Corporate Headquarters, including office space and manufacturing. The Company pays a base monthly rent in the amount of $50,278 commencing on the first day of the fourth full month of the lease term. Base monthly rent increases annually on May 1 st The Company accounted for the lease as an operating lease under ASC 842 using the bank loan interest rate in effect on May 1, 2022 at 5.0% to discount future lease payments. The lease term expires on July 31, 2029, with a one-time option to renew for a period of five years. The renewal period is not included in the measurement of the leases as the Company is not reasonably certain of exercising it. In July 2022, the Company also signed a two-year equipment operating lease agreement and the future lease payments are discounted at the interest rate of 5.5%. The operating lease expense under existing agreement was allocated in cost of goods sold and operating costs based on department headcount and amounted to $162,108 $107,218 On March 31, 2023, the balances of right-of-use assets and liabilities for the operating lease were approximately $ 3.44 3.63 3.56 3.74 Cash payments included in the measurement of the Company’s operating lease liabilities were $153,181 $132,010 Future minimum lease payments under the operating lease on March 31, 2023 are shown below: Annual minimum payments: Amount 2023 (April 1 through December 31, 2023) 469,062 2024 636,860 2025 652,883 2026 672,470 2027 692,644 Thereafter 1,139,070 Total minimum payments 4,262,989 Less: Present value factor (632,481 ) Total operating lease liabilities 3,630,508 Less: Current portion of operating lease (454,660 ) Long-term portion of operating lease $ 3,175,848 SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 31, 2023 Purchase Commitments As of March 31, 2023, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of approximately $ 9,095,000 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 2 _ Summary of Significa_2
NOTE 2 — Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2023 | |
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. In response to recent volatility in the financial markets in March 2023, the Company entered into an Insured Cash Sweep (“ICS”) Deposit Placement Agreement with IntraFi Network LLC facilitated by its bank, Bridge Bank - a division of Western Alliance Bank. The ICS program provides the Company’s demand or savings products with access to unlimited FDIC insurance, which helps the Company to keep the full amount of the deposit on its balance sheet and provides additional security during times of market uncertainty. As of March 31, 2023, and December 31, 2022, all of the Company’s cash and cash equivalents consisted of amounts held in demand deposit accounts in banks. 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, and debt approximate fair value due to the relatively short period of time to maturity. |
Revenue Recognition and Deferred Revenue | Revenue Recognition and Deferred Revenue 647,977 273,718 594,793 266,327 SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 31, 2023 The Company also earns revenue from its SocketCare extended warranty program, which provides extended warranty and accidental breakage coverage for selected products. Customers can purchase a SocketCare warranty at the time of product purchase, which provides coverage for a three-year or a five-year term. Revenues from SocketCare services are recognized ratably over the life of the extended warranty contract. For the quarters ended March 31, 2023 and 2022, SocketCare revenue was approximately $ 5,600 5,400 34,000 |
Cost of Sales and Gross Margins | 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 affect 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 | 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. On March 31, 2023, the balances of right-of-use assets and liabilities for the operating lease were $ 3,443,826 3,630,508 3,559,658 3,736,564 |
Recently Issued Financial Accounting Standards | 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 _ Intangible Assets (Tab
NOTE 3 — Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Estimated future amortization of intangible assets | Fiscal Year Amount 2023 (April 1, 2023 to December 31, 2023) $ 95,472 2024 127,296 2025 127,296 2026 127,296 2027 127,296 Thereafter 1,050,185 Total $ 1,654,841 |
NOTE 4 _ Inventories (Tables)
NOTE 4 — Inventories (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Inventory Disclosure [Abstract] | |
Inventories | March 31, December 31, 2023 2022 Raw materials and sub-assemblies $ 6,346,897 $ 6,193,453 Finished goods 193,976 289,181 Inventory reserves (880,943 ) (880,943 ) Inventory, net $ 5,659,930 $ 5,601,691 |
NOTE 7 _ Segment Information _2
NOTE 7 — Segment Information and Concentrations (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Segment Reporting [Abstract] | |
Revenue by Geographic Area | Three Months Ended March 31, Revenues: 2023 2022 United States $ 3,138,653 $ 4,882,773 Europe 542,527 697,971 Asia and rest of world 630,998 712,258 Total revenues $ 4,312,178 $ 6,293,002 |
Customers who accounted for at least 10% of the Company's total revenues | Three Months Ended March 31, 2023 2022 Ingram Micro, Inc. 23 % 27 % BlueStar, Inc. 20 % 20 % ScanSource, Inc. * 19 % *Customer accounted for less than 10% of the Company’s total revenue |
Customers who accounted for at least 10% of the Company's accounts receivable balances | March 31, December 31, 2023 2022 Ingram Micro Inc. 28 % 14 % BlueStar, Inc. 27 % 46 % ScanSource, Inc. 15 % 11 % Nippon Primex, Inc. * 14 % *Customer accounted for less than 10% of the Company’s accounts receivable balances |
NOTE 9 _ Net Income Per Share (
NOTE 9 — Net Income Per Share (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
Reconciliation of basic shares to diluted shares and the computation of basic and diluted net income per share | Three Months Ended March 31, 2023 2022 Numerator: Net income (loss) $ (993,420) $ 341,933 Net income allocated to restricted stock award 121,264 31,752 Adjusted net income (loss) before interest for diluted earnings per share $ (872,156) $ 310,181 Denominator: Weighted average shares Basic 7,106,746 7,234,163 Effect of dilutive stock options — 490,194 Diluted 7,106,746 7,724,357 Net income (loss) per share applicable to common stockholders: Basic $ (0.12) $ 0.04 Diluted $ (0.12) $ 0.04 |
NOTE 11 _ Commitments and Con_2
NOTE 11 — Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future minimum lease payments under the operating lease in effect as of September 30, 2022 | Annual minimum payments: Amount 2023 (April 1 through December 31, 2023) 469,062 2024 636,860 2025 652,883 2026 672,470 2027 692,644 Thereafter 1,139,070 Total minimum payments 4,262,989 Less: Present value factor (632,481 ) Total operating lease liabilities 3,630,508 Less: Current portion of operating lease (454,660 ) Long-term portion of operating lease $ 3,175,848 |
NOTE 2 _ Summary of Significa_3
NOTE 2 — Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
Product Information [Line Items] | |||
Deferred Revenue, Current | $ 647,977 | $ 594,793 | |
Deferred Costs and Other Assets | 273,718 | 266,327 | |
Revenues | 4,312,178 | $ 6,293,002 | |
Operating Lease, Right-of-Use Asset | 3,443,826 | 3,559,658 | |
Operating Lease, Liability | 3,630,508 | $ 3,736,564 | |
Service [Member] | |||
Product Information [Line Items] | |||
Revenues | 5,600 | $ 5,400 | |
Deferred Revenue | $ 34,000 |
Estimated future amortization o
Estimated future amortization of intangible assets (Details) | Mar. 31, 2023 USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
$ 95,472 | |
127,296 | |
127,296 | |
127,296 | |
127,296 | |
1,050,185 | |
$ 1,654,841 |
NOTE 3 _ Intangible Assets (Det
NOTE 3 — Intangible Assets (Details Narrative) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Intangible Assets, Net (Excluding Goodwill) | $ 1,654,841 | $ 1,693,927 |
Inventories (Details)
Inventories (Details) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Inventory Disclosure [Abstract] | ||
Raw materials and sub-assemblies | $ 6,346,897 | $ 6,193,453 |
Finished goods | 193,976 | 289,181 |
Inventory reserves | $ (880,943) | $ (880,943) |
NOTE 5 _ Bank Financing Arran_2
NOTE 5 — Bank Financing Arrangements (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2021 | Feb. 01, 2023 | Jan. 29, 2021 | |
Line of Credit Facility [Line Items] | |||||
Line of Credit Facility, Initiation Date | Jan. 29, 2021 | ||||
Notes Payable to Bank | $ 125,000 | ||||
Interest Expense | $ 38,008 | $ 45,606 | |||
Domestic Revolving Facility [Member] | |||||
Line of Credit Facility [Line Items] | |||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 2,000,000 | ||||
Term Loan [Member] | |||||
Line of Credit Facility [Line Items] | |||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 1,000,000 | ||||
Interest Expense | $ 1,138 |
NOTE 6 _ Secured Subordinated_2
NOTE 6 — Secured Subordinated Convertible Notes Payable (Details Narrative) - USD ($) | 3 Months Ended | 36 Months Ended | ||||
Mar. 31, 2023 | Mar. 31, 2022 | Sep. 30, 2020 | Aug. 30, 2023 | Aug. 31, 2020 | Aug. 28, 2020 | |
Debt Instrument [Line Items] | ||||||
Secured Subordinated Convertible Notes Issued | $ 1,530,000 | |||||
Subordinated Borrowing, Interest Rate | 10% | |||||
Debt Instrument, Convertible, Conversion Price | $ 1.46 | |||||
Payments of Debt Issuance Costs | $ 96,515 | |||||
[custom:InterestOnConvertibleDebt] | $ 42,793 | $ 42,793 | ||||
Related Party [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Secured Subordinated Convertible Notes Issued | $ 1,350,000 |
Revenue by Geographic Area (Det
Revenue by Geographic Area (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
revenues | $ 4,312,178 | $ 6,293,002 |
Americas [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
revenues | 3,138,653 | 4,882,773 |
EMEA [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
revenues | 542,527 | 697,971 |
Asia Pacific [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
revenues | $ 630,998 | $ 712,258 |
Customers who accounted for at
Customers who accounted for at least 10% of the Company's total revenues (Details) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Ingram Micro [Member] | ||
Revenue, Major Customer [Line Items] | ||
BlueStar, Inc. | 0.23 | 0.27 |
Blue Star [Member] | ||
Revenue, Major Customer [Line Items] | ||
BlueStar, Inc. | 0.20 | 0.20 |
Scan Source [Member] | ||
Revenue, Major Customer [Line Items] | ||
BlueStar, Inc. | 0.19 |
Customers who accounted for a_2
Customers who accounted for at least 10% of the Company's accounts receivable balances (Details) | Mar. 31, 2023 | Dec. 31, 2022 |
Ingram Micro [Member] | ||
Revenue, Major Customer [Line Items] | ||
ScanSource, Inc. | 0.28 | 0.14 |
Blue Star [Member] | ||
Revenue, Major Customer [Line Items] | ||
ScanSource, Inc. | 0.27 | 0.46 |
Scan Source [Member] | ||
Revenue, Major Customer [Line Items] | ||
ScanSource, Inc. | 0.15 | 0.11 |
Nippon Primex [Member] | ||
Revenue, Major Customer [Line Items] | ||
ScanSource, Inc. | 0.14 |
NOTE 7 _ Segment Information _3
NOTE 7 — Segment Information and Concentrations (Details Narrative) | 3 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
Revenue, Major Customer [Line Items] | |||
Threshold percentage of accounts receivable for disclosure | 10% | 10% | |
Supplier Concentration Risk [Member] | |||
Revenue, Major Customer [Line Items] | |||
Percentage of inventory purchases from top three suppliers | 55% | 53% | |
Accounts payable balances with top two suppliers | 26% | 31% |
NOTE 8 _ Stock-Based Compensa_2
NOTE 8 — Stock-Based Compensation (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Share-Based Payment Arrangement [Abstract] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Net of Forfeitures | 0 | 0 |
Stock Issued During Period, Shares, Restricted Stock Award, Gross | 402,370 | 233,800 |
Common Stock, Other Shares, Outstanding | 1,070,434 | |
Share-Based Payment Arrangement, Noncash Expense | $ 295,833 | $ 223,446 |
Reconciliation of basic shares
Reconciliation of basic shares to diluted shares and the computation of basic and diluted net income per share (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Numerator: | ||
Net income (loss) | $ (993,420) | $ 341,933 |
Net income allocated to restricted stock award | 121,264 | 31,752 |
Adjusted net income (loss) before interest for diluted earnings per share | $ (872,156) | $ 310,181 |
Weighted average shares outstanding used in computing net income (loss) per share: | ||
Basic | 7,106,746 | 7,234,163 |
Effect of dilutive stock options | 490,194 | |
Diluted | 7,106,746 | 7,724,357 |
Net income (loss) per share applicable to common stockholders: | ||
Basic | $ (0.12) | $ 0.04 |
Diluted | $ (0.12) | $ 0.04 |
NOTE 9 _ Net Income Per Share_2
NOTE 9 — Net Income Per Share (Details Narrative) - shares | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Equity Option [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 1,262,027 | 287,928 |
Warrant [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 50,000 | 50,000 |
NOTE 10 _ Income Taxes (Details
NOTE 10 — Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Income Tax Disclosure [Abstract] | ||
Income Tax Expense (Benefit) | $ 76,165 |
Future minimum lease payments u
Future minimum lease payments under the operating lease in effect as of September 30, 2022 (Details) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Annual minimum payments: | ||
2023 (April 1 through December 31, 2023) | $ 469,062 | |
2024 | 636,860 | |
2025 | 652,883 | |
2026 | 672,470 | |
2027 | 692,644 | |
Thereafter | 1,139,070 | |
Total minimum payments | 4,262,989 | |
Less: Present value factor | (632,481) | |
Total operating lease liabilities | 3,630,508 | $ 3,736,564 |
Less: Current portion of operating lease | (454,660) | (444,529) |
Long-term portion of operating lease | $ 3,175,848 | $ 3,292,035 |
NOTE 11 _ Commitments and Con_3
NOTE 11 — Commitments and Contingencies (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |||
Operating Lease, Expense | $ 162,108 | $ 107,218 | |
Operating Lease, Right-of-Use Asset | 3,443,826 | $ 3,559,658 | |
Operating Lease, Liability | 3,630,508 | $ 3,736,564 | |
Operating Lease, Payments | 153,181 | $ 132,010 | |
Purchase Obligation, to be Paid, Year One | $ 9,095,000 |