Cover
Cover - USD ($) | 12 Months Ended | ||
Dec. 31, 2023 | Mar. 22, 2024 | Jun. 30, 2023 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Annual Report | true | ||
Document Period End Date | Dec. 31, 2023 | ||
Document Fiscal Period Focus | FY | ||
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 Circle | ||
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 Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
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 Public Float | $ 8,420,685 | ||
Entity Common Stock, Shares Outstanding | 7,547,327 | ||
Auditor Name | Sadler, Gibb & Associates, LLC | ||
Auditor Location | Draper, UT | ||
Auditor Firm ID | 3627 |
Balance Sheets
Balance Sheets - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Current assets: | ||
Cash and cash equivalents | $ 2,826,630 | $ 3,623,469 |
Accounts receivable, net | 1,699,696 | 2,659,861 |
Inventories, net | 5,409,047 | 5,601,691 |
Prepaid expenses and other current assets | 440,730 | 617,188 |
Deferred cost on shipments to distributors | 322,580 | 266,327 |
Total current assets | 10,698,683 | 12,768,536 |
Property and equipment: | ||
Machinery and office equipment | 2,700,759 | 1,533,087 |
Computer equipment | 3,631,945 | 2,715,121 |
Property and equipment, gross | 6,332,704 | 4,248,208 |
Accumulated depreciation | (3,299,503) | (2,590,999) |
Property and equipment, net | 3,033,201 | 1,657,209 |
Intangible assets, net | 1,559,369 | 1,693,927 |
Other long-term assets | 249,715 | 250,239 |
Deferred tax assets | 10,112,419 | 8,668,419 |
Operating lease right-of-use asset | 3,088,087 | 3,559,658 |
Total assets | 28,741,474 | 28,597,988 |
Current liabilities: | ||
Accounts payable and accrued expenses | 1,605,231 | 1,665,028 |
Accrued payroll and related expenses | 579,974 | 742,541 |
Deferred revenue on shipments to distributors | 825,670 | 594,793 |
Short term portion of deferred service revenue | 19,885 | 22,599 |
Notes payable – current portion | 125,000 | |
Subordinated convertible notes payable, net of discount | 150,000 | 147,409 |
Subordinated convertible notes payable, net of discount-related party | 2,835,864 | 1,230,530 |
Operating lease – current portion | 483,161 | 444,529 |
Total current liabilities | 6,499,785 | 4,972,429 |
Long-term portion of operating lease | 2,808,872 | 3,292,035 |
Long-term portion of deferred service revenue | 12,813 | 11,767 |
Total liabilities | 9,321,470 | 8,276,231 |
Commitments and contingencies | ||
Stockholders’ equity: | ||
Common Stock, Value, Issued | 7,336 | 7,090 |
Additional paid-in capital | 68,383,230 | 67,157,650 |
Treasury stock, at cost (359,250 and 266,291 shares at December 31, 2023 and December 31, 2022, respectively) | (1,037,988) | (829,563) |
Accumulated deficit | (47,932,574) | (46,013,420) |
Total stockholders’ equity | 19,420,004 | 20,321,757 |
Total liabilities and stockholders’ equity | $ 28,741,474 | $ 28,597,988 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2023 | Dec. 31, 2022 |
Statement of Financial Position [Abstract] | ||
Common Stock, Par or Stated Value Per Share | $ 0.001 | |
Common Stock, Shares Authorized | 20,000,000 | |
Common Stock, Shares, Issued | 7,695,371 | 7,355,967 |
Common Stock, Shares, Outstanding | 7,336,121 | 7,089,676 |
Treasury Stock, Common, Shares | 359,250 | 266,291 |
Statements of Operations
Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Income Statement [Abstract] | ||
Revenues | $ 17,033,593 | $ 21,237,768 |
Cost of revenues | 8,570,739 | 10,871,312 |
Gross profit | 8,462,854 | 10,366,456 |
Operating expenses: | ||
Research and development | 4,831,905 | 4,362,119 |
Sales and marketing | 4,016,373 | 3,638,113 |
General and administrative | 2,735,569 | 2,812,243 |
Total operating expenses | 11,583,847 | 10,812,475 |
Operating loss | (3,120,993) | (446,019) |
Interest expense, net | (242,161) | (175,050) |
Net loss before income taxes | (3,363,154) | (621,069) |
Income tax benefit | 1,444,000 | 708,000 |
Net income (loss) | $ (1,919,154) | $ 86,931 |
Net income (loss) per share: | ||
Basic | $ (0.27) | $ 0.01 |
Fully diluted | $ (0.27) | $ 0.01 |
Weighted average shares outstanding: | ||
Basic | 7,230,074 | 7,184,847 |
Fully diluted | 7,230,074 | 7,532,924 |
Statements of Stockholders' Equ
Statements of Stockholders' Equity - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Treasury Stock, Common [Member] | Retained Earnings [Member] | Total |
Balance on December 31, 2022 at Dec. 31, 2021 | $ 7,184 | $ 66,139,630 | $ (46,100,351) | $ 20,046,463 | |
Beginning balance, shares at Dec. 31, 2021 | 7,183,874 | ||||
Vesting of restricted stocks | $ 92 | (92) | |||
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures | 92,734 | ||||
Restricted stock retired for tax withholding | $ (26) | (132,489) | (132,515) | ||
Share-Based Payment Arrangement, Shares Withheld for Tax Withholding Obligation | (26,831) | ||||
Exercise of stock options | $ 106 | 151,643 | 151,749 | ||
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Exercises in Period | 106,190 | ||||
Stock-based compensation | 998,692 | 998,692 | |||
Treasury shares purchased | $ (266) | 266 | $ (829,563) | (829,563) | |
Stock Repurchased During Period, Shares | (266,291) | ||||
Treasury Stock, Shares, Acquired | 266,291 | ||||
Net loss | 86,931 | 86,931 | |||
Balance on December 31, 2023 at Dec. 31, 2022 | $ 7,090 | 67,157,650 | (829,563) | (46,013,420) | $ 20,321,757 |
Common Stock, Shares, Outstanding, Ending Balance at Dec. 31, 2022 | 7,089,676 | 7,089,676 | |||
Vesting of restricted stocks | $ 256 | (256) | |||
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures | 255,687 | ||||
Restricted stock retired for tax withholding | $ (56) | (143,315) | (143,371) | ||
Share-Based Payment Arrangement, Shares Withheld for Tax Withholding Obligation | (55,192) | ||||
Exercise of stock options | $ 139 | 212,676 | $ 212,815 | ||
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Exercises in Period | 138,909 | 25,000 | |||
Stock-based compensation | 1,156,382 | $ 1,156,382 | |||
Treasury shares purchased | $ (93) | 93 | $ (208,425) | (208,425) | |
Stock Repurchased During Period, Shares | (92,959) | ||||
Treasury Stock, Shares, Acquired | 92,959 | ||||
Net loss | (1,919,154) | (1,919,154) | |||
Balance on December 31, 2023 at Dec. 31, 2023 | $ 7,336 | $ 68,383,230 | $ (1,037,988) | $ (47,392,574) | $ 19,420,004 |
Common Stock, Shares, Outstanding, Ending Balance at Dec. 31, 2023 | 7,336,121 | 7,336,121 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Operating activities | ||
Net income (loss) | $ (1,919,154) | $ 86,931 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Stock-based compensation | 1,156,382 | 998,692 |
Depreciation and amortization | 922,438 | 765,659 |
Deferred tax benefits | (1,444,000) | (708,000) |
Amortization of debt discount | 25,473 | 33,091 |
Amortization of operating lease ROU asset | 471,571 | 513,692 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 960,165 | (83,621) |
Inventories | 192,644 | (447,167) |
Prepaid expenses and other current assets | 176,458 | (222,027) |
Other assets | 524 | (160,791) |
Accounts payable and accrued expenses | (59,797) | (504,027) |
Accrued payroll and related expenses | (162,567) | (82,968) |
Net deferred revenue on shipments to distributors | 174,624 | 80,208 |
Deferred service revenue | (1,668) | 2,957 |
Net change in operating lease liability | (444,531) | (384,044) |
Net cash (used in) provided by operating activities | 48,562 | (111,415) |
Investing activities | ||
Purchases of PP&E including software and website development | (2,163,872) | (1,183,188) |
Net cash used in investing activities | (2,163,872) | (1,183,188) |
Financing activities | ||
Common stock repurchased and related expenses | (208,425) | (829,563) |
Proceeds from note payable | 1,582,452 | |
Repayments of note payable | $ (125,000) | $ (500,000) |
Acquisition of common stock for tax withholding obligations | (143,371) | |
Proceeds from stock options exercised | $ 212,815 | $ 151,749 |
Net cash (used in) provided by financing activities | 1,318,471 | (1,177,814) |
Net decrease in cash and cash equivalents | (796,839) | (2,472,417) |
Cash and cash equivalents at beginning of year | 3,623,469 | 6,095,886 |
Cash and cash equivalents at end of year | 2,826,630 | 3,623,469 |
Supplemental disclosure of cash flow information | ||
Cash paid for interest | 207,510 | 160,945 |
Supplemental disclosure of non-cash activities | ||
Payroll tax liability for retired restricted stock | 158,314 | |
Operating lease inception cost | $ 3,862,511 |
NOTE 1 _ Organization and Summa
NOTE 1 — Organization and Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
NOTE 1 — Organization and Summary of Significant Accounting Policies | NOTE 1 — Organization and Summary of Significant Accounting Policies Organization and Business Socket Mobile, Inc. (the “Company”) is a leading provider of data capture and delivery solutions for mobile applications used in Retail, Commercial Services, Industrial & Manufacturing, Transportation & Logistics, and Health Care. Our products include data capture devices that utilize Bluetooth or RFID/NFC technology, designed to interface with applications running on smartphones, tablets and mobile computers. These applications operate on diverse operating systems, including Apple® (iOS), Google™ (Android™) and Microsoft® (Windows®). Additionally, the Company offers camera-based barcode scanning software. The Company focuses on serving the needs of software application providers, with our sales primarily driven by the deployment of barcode and RFID/NFC enabled mobile applications. The Company designs its own products and subcontracts the manufacturing of product components to independent third-party contract manufacturers who are in the U.S., Mexico, Singapore, China, Malaysia and Taiwan and who have the equipment, know-how and capacity to manufacture products to the Company’s specifications. Final products are assembled, tested, packaged, and distributed at and from its Fremont, California facility. In addition to its own online stores, the Company offers its products worldwide through two-tier distribution, allowing customers to purchase from numerous online resellers worldwide, including some application providers. The geographic regions served by the Company include the Americas, Europe, Asia Pacific and Africa. The Company was founded in March 1992 as Socket Communications, Inc. and reincorporated in Delaware in 1995 prior to the Company’s initial public offering in June 1995. The Company began doing business as Socket Mobile, Inc. in January 2007 to better reflect its market focus on the mobile business market, and changed its legal name to Socket Mobile, Inc. in April 2008. The Company’s common stock trades on the NASDAQ Marketplace under the symbol “SCKT.” The Company’s principal executive offices are located at 40675 Encyclopedia Circle, Fremont, CA 94538. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements as well as 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 and Cash Equivalents 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 March 2023, the Company entered into an Insured Cash Sweep (“ICS”) Deposit Placement Agreement with IntraFi Network LLC through its bank, Bridge Bank – a division of Western Alliance Bank. The ICS program allows the Company’s demand or savings products to benefit from unlimited FDIC insurance, which helps the Company maintain the entire deposit on its balance sheet and provides additional security during times of market uncertainty. As of December 31, 2023, the Company’s cash was held in demand deposit accounts under FDIC insurance through the ICS program. The Company has never experienced any losses in its funds in bank accounts. SOCKET MOBILE, INC. Fair Value of Financial Instruments The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable and foreign exchange contracts is close to their fair value due to the relatively short period of time to maturity. Foreign Currency The functional currency for the Company is the U.S. dollar. However, the Company requires European distributors to purchase products in Euros and British pounds and pays the expenses of European employees in Euros and British pounds. In 2023, the total net adjustment for the effects of changes in foreign currency on cash balances, collections, and payables was a net gain of $12,550 $41,300 Accounts Receivable Allowances Trade accounts receivables are recorded at the net invoice value and are not interest bearing. The Company estimates the amount of uncollectible accounts receivable at the end of each reporting period based on the aging of the receivable balance, current and historical customer trends, and communications with its customers. Amounts are written off only after considerable collection efforts have been made and the amounts are determined to be uncollectible. The following table describes the activity in the allowance for doubtful accounts for the years ended December 31, 2023 and 2022: Year Balance at Charged to Amounts Balance at 2023 $ 40,651 $ — $ — $ 40,651 2022 $ 40,651 $ — $ — $ 40,651 Inventories Inventories consist principally of raw materials and sub-assemblies stated at the lower of standard cost, which approximates actual costs (first-in, first-out method), or market. Market is defined as replacement cost, but not in excess of estimated net realizable value or less than estimated net realizable value less a normal margin. We purchase or have manufactured the component parts by our engineering bill of materials. The timing and quantity of our purchases are based on order forecast, the lead time requirements of our vendors, and economic order quantities. At the end of each reporting period, the Company compares its inventory on hand to its forecasted requirements for the next twelve-month period and reserves the cost of any inventory that is surplus, less any amounts that the Company believes it can recover from the disposal of goods or that the Company specifically believes will be saleable past a twelve-month horizon. The Company’s sales forecasts are based upon historical trends, communications from customers, and marketing data regarding market trends and dynamics. Changes in the amounts recorded for surplus or obsolete inventory are included in cost of revenue. Inventories, net of write-downs, at December 31, 2023 and 2022 consisted of the following: December 31, 2023 2022 Raw materials and sub-assemblies $ 5,839,176 $ 6,193,453 Finished goods 500,814 289,181 Inventory reserves (930,943 ) (880,943 ) Inventory, net $ 5,409,047 $ 5,601,691 SOCKET MOBILE, INC. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of various payments that the Company has made in advance for goods or services to be received in the future. Prepaid expenses and other current assets at December 31, 2023 and 2022 consisted of the following: December 31, 2023 2022 Prepaid insurance $ 75,626 $ 92,644 Product certification costs 75,604 87,293 Prepaid inventory purchases 123,736 196,512 Prepaid maintenance contracts and other prepaid expenses 165,764 240,739 Prepaid expenses and other current assets $ 440,730 $ 617,188 Property and Equipment Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method, over the estimated useful lives of the assets ranging from one to five years. Computer software and hardware are amortized over two to three years, while machinery and equipment are typically amortized over three years. Manufacturing tooling is amortized over a span of two to three years, and improvements to leasehold are amortized over the remaining lease term. Assets under finance leases are amortized in a manner consistent with the Company’s normal depreciation policy for owned assets, or the remaining lease term as applicable. Depreciation expenses in the years ended December 31, 2023 and 2022, were $787,881 and $594,793 , respectively. Intangible Assets The Company’s intangible assets consist of completed technologies and acquired license rights. Intangible assets are amortized over their estimated useful lives based upon the estimated economic value derived from the related intangible assets. Amortization is computed using the straight-line method over the estimated useful lives of the assets. For the years ended December 31, 2023 and 2022, the amortization expenses of intangible assets were $127,296 Impairment of Long-Lived Assets The Company reviews its long-lived assets for impairment annually and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future net undiscounted cash flows expected to be generated by the asset. If such assets are impaired, the impairment recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. For the years ended December 31, 2023 and 2022, we did not recognize any impairment loss of its long-lived assets. Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk include cash, cash equivalents and accounts receivable. The Company invests its cash in demand deposit accounts in banks. To date, the Company has not experienced losses on investments. SOCKET MOBILE, INC. The Company’s trade accounts receivable is 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 as of December 31, 2023 and December 31, 2022 were as follows: December 31, 2023 2022 Ingram Micro Inc. 20 % 14 % Synnex Corporation 14 % * ScanSource, Inc. 13 % 11 % Nippon Primex, Inc. 11 % 14 % Bluestar, Inc. * 46 % * 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 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. As of December 31, 2023, 27% 55% 56% Revenue Recognition and Deferred Revenue With the adoption of ASC 606 “Revenue from Contracts with Customers” in 2017, the Company 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. As of December 31, 2023, the deferred revenue and deferred cost on shipments to distributors were approximately $825,670 $322,580 $594,793 $266,327 The Company generally recognizes revenues on sales to customers other than distributors upon shipment provided that contract with the customer is identified, performance obligations in the contract are satisfied, and the price is determined. Most of our customers other than distributors do not have a right of return except under warranty. The Company also generates revenue through its SocketCare services program, which offers extended warranty and accidental breakage coverage for select products. For the year ended December 31, 2023 and 2022, the SocketCare revenues were approximately $21,400 $22,000 $32,698 $34,366 SOCKET MOBILE, INC. 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 The Company adopted ASU 2016-02 effective January 1, 2019. On May 1, 2022, the Company entered into a building lease agreement for its corporate headquarters located in Fremont, CA. As of December 31, 2023, the balances of right-of-use assets and liabilities for the operating leases were approximately $3.09 $3.29 $3.56 $3.74 Warranty The Company’s products typically carry a one-year warranty. The Company reserves for estimated product warranty costs at the time revenue is recognized based upon the Company’s historical warranty experience, and additionally for any known product warranty issues. If actual costs differ from initial estimates, the Company records the difference in the period they are identified. Actual claims are charged against the warranty reserve. The following table describes activity in the reserves for product warranty costs for the years ended December 31, 2023 and 2022: Year Balance at Additional Warranty Reserves Amounts Balance at 2023 $ 78,871 $ 13,417 $ (13,417 ) $ 78,871 2022 $ 78,871 $ 14,475 $ (14,475 ) $ 78,871 Research and Development Research and development expenditures are charged to operations as incurred. The major components of research and development costs include salaries and employee benefits, stock-based compensation expense, third party development costs including consultants and outside services, and allocations of overhead and occupancy costs. In 2023, these costs amounted to $4.83 $4.36 Software Development Costs Costs incurred to develop computer software to be sold or otherwise marketed are charged to expense until technological feasibility of the product has been established. Once technological feasibility has been established, computer software development costs (consisting primarily of internal labor costs) are capitalized and reported at the lower of amortized cost or estimated realizable value. Purchased software development cost is recorded at cost. When a product is ready for general release, its capitalized costs are amortized on a product-by-product basis. The annual amortization is the straight-line method over the remaining estimated economic life (a period of three to five years) of the product. Amortization of capitalized software development costs is included in the cost of revenues line on the statements of operations. If the future revenue of a product is less than anticipated, impairment of the related unamortized development costs could occur, which could impact the Company’s results of operations. Amortization expense on software development costs included in costs of revenues for 2023 and 2022 were $7,262 and $43,572 , respectively. The amount of unamortized capitalized software costs as of December 31, 2023 and 2022 were zero and $7,262, respectively. SOCKET MOBILE, INC. Advertising Costs Advertising costs are charged to sales and marketing as incurred. The Company incurred $23,827 $31,146 Income Taxes We account for income taxes under the asset and liability method under ASC 740 which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. Shipping and Handling Costs Shipping and handling costs are included in the cost of revenues in the statement of operations. SOCKET MOBILE, INC. Earnings (Loss) Per Share The basic computation of earnings (loss) per share is based on the weighted average number of shares outstanding during the period presented in accordance with Accounting Standards Codification (“ASC”) 260, “Earnings Per Share”. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the common stock equivalents which would arise from the exercise of stock options and warrants outstanding using the treasury stock method and the average market price per share during the period. Common stock equivalents are not included in the diluted earnings per share calculation when their effect is anti-dilutive. 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: Years Ended December 31, 2023 2022 Numerator: Net income (loss) $ (1,919,154 ) $ 86,931 Net income (loss) allocated to restricted stock award — (8,820 ) Adjusted net income (loss) for basic earnings per share $ (1,919,154 ) $ 78,111 Convertible note interest — — Adjusted net income (loss) before interest for diluted earnings per share $ (1,919,154 ) $ 78,111 Denominator: Weighted average shares outstanding used in computing net income (loss) per share: Basic 7,230,074 7,184,847 Dilutive impact of stock compensation awards — 348,077 Fully diluted 7,230,074 7,532,924 Net income (loss) per share applicable to common stockholders: Basic $ (0.27 ) $ 0.01 Fully diluted $ (0.27 ) $ 0.01 In 2023, the shares used in computing diluted net loss per share do not include 1,151,114 stock options, 991,199 shares of unvested restricted stocks, 50,000 warrants, and 2,152,934 shares for convertible notes as their effects are anti-dilutive. In 2022, the shares used in computing diluted net income per share do not include 342,765 stock options that were out of the money under the treasury stock method approach, along with 844,976 shares of unvested restricted stocks. Furthermore, 958,904 shares for convertible notes are excluded as their anti-dilutive effects, stemming from the convertible note interest exceeding the earnings per share. Stock-Based Compensation Expense The Company has incentive plans that reward employees with stock options and shares of restricted stocks. The amount of compensation cost for these stock-based awards is measured based on the fair value of the awards as of the grant date. The fair values of stock options are generally determined using a binomial lattice valuation model which incorporates assumptions about expected volatility, risk-free interest rate, dividend yield, and expected life. Compensation cost for stock-based awards is recognized on a straight-line basis over the vesting period, which is usually the service period. Segment Information Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief executive officer in deciding how to allocate resources and in assessing performance. The Company operates in the mobile barcode scanning and RFID reader/writer market. Mobile scanning typically consists of mobile devices such as smartphones or tablets, with mobile scanning peripherals for data collection, and third-party vertical applications software. The Company distributes its products in the United States and foreign countries primarily through distributors and resellers. The Company markets its products primarily through application providers whose applications are designed to work with Company’s products. SOCKET MOBILE, INC. Revenues for the geographic areas for the years ended December 31, 2023 and 2022 are as follows: Years Ended December 31, Revenues: (in thousands) 2023 2022 United States $ 12,539 $ 15,765 Europe 2,426 2,612 Asia and rest of world 2,069 2,861 Total $ 17,034 $ 21,238 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 total revenues for the years ended December 31, 2023 and 2022 were as follows: Years Ended December 31, 2023 2022 Ingram Micro Inc. 22% 26% BlueStar, Inc. 22% 24% ScanSource, Inc. 14% 11% *Customer accounted for less than 10% of total revenues Recently Issued Financial Accounting Standards In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments," which changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The ASU replaces the "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost. For trade and other receivables, held-to-maturity debt securities, contract assets, loans and other instruments, entities are now required to use a new forward-looking "expected loss" model that generally will result in the earlier recognition of allowances for losses. The Company began reporting on topics required by ASU 2016-13 for the year ended December 31, 2023. The adoption did not have a material impact on the Company's financial position or results of operations. 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 all other recently issued accounting standards are not expected to have a material impact on the Company’s financial position or results of operations upon adoption. |
NOTE 2 _ Intangible Assets
NOTE 2 — Intangible Assets | 12 Months Ended |
Dec. 31, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
NOTE 2 — Intangible Assets | NOTE 2 — Intangible Assets In 2021, the Company entered into the Technology Transfer Agreement with SpringCard SAS (“SpringCard”), a market leader at the forefront of innovative electronic design and development. Its contactless and wireless solutions support a wide range of customers, ranging from large multinational corporations to locally focused businesses. As of December 31, 2023, our Balance Sheets reflect the intangible assets of the acquired technology at a net carrying amount of $1,559,369 The anticipated future amortization of these intangible assets as of December 31, 2023, is as follows: Fiscal Year Amount 2024 127,296 2025 127,296 2026 127,296 2027 127,296 2028 127,296 Thereafter 922,889 Total $ 1,559,369 |
NOTE 3 _ Bank Financing Arrange
NOTE 3 — Bank Financing Arrangements | 12 Months Ended |
Dec. 31, 2023 | |
Debt Disclosure [Abstract] | |
NOTE 3 — Bank Financing Arrangements | NOTE 3 — 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, the Company entered into an Amended and Restated Business Financing Agreement (the “Financing Agreement”) with the Bank. The Financing Agreement increased the Company’s Domestic Line of Credit to $3.0 million, including a $2.0 million revolving facility and a $1.0 million nonformula loan. The $1.0 million nonformula loan was enrolled in the CalCap Collateral Support Program (the “CalCap Loan”) 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 Line of Credit and EXIM Line of Credit to January 31, 2023. First Business Financing Modification Agreement On February 9, 2022, the Company and the Bank executed the First Business Financing Modification Agreement. Under the terms of the agreement, the Bank consented to the share repurchase program of up to $1.8 million. Additionally, the Bank will now conduct future audits of accounts receivable annually. The Bank has also raised 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. Third Business Financing Modification Agreement and Waiver of Defaults On May 26, 2023, the Company entered into the Third Business Financing Modification Agreement, Waiver of Defaults and Consent with the Bank. Under the terms of the agreement, the Bank agreed to waive the default resulting from the Company’s failure to meet the minimum adjusted EBITDA requirement in the quarter ended March 31, 2023. Additionally, the Bank granted its consent for the issuance of additional subordinated debt in May 2023. Waiver of Defaults On October 30, 2023, the Company entered into the Waiver of Default with the Bank. As part of the agreement, the bank waived the default resulting from the Company’s failure to meet the minimum adjusted EBITDA requirement in the quarter ended September 30, 2023. Interest expense on the CalCap Loan for twelve months ended December 31, 2022 was $19,355. Accrued interest payable related to the amounts outstanding under the CalCap Loan as of December 31, 2022 was $372 There were no amounts borrowed at year end on the Company’s bank credit lines as of December 31, 2023 and December 31, 2022. |
NOTE 4 _ Secured Subordinated C
NOTE 4 — Secured Subordinated Convertible Notes Payable | 12 Months Ended |
Dec. 31, 2023 | |
Debt Disclosure [Abstract] | |
NOTE 4 — Secured Subordinated Convertible Notes Payable | NOTE 4 — 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 accrues interest at 10% $1.46 $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”), extending the maturity date of the notes from August 30, 2023 to August 30, 2024. All other terms and conditions of the notes remain in full force and effect. The amortization of debt discount was $25,473 $33,091 On May 26, 2023, the Company completed a secured subordinated convertible note financing of $1,600,000 SOCKET MOBILE, INC. Total interest expenses recognized related to the convertible note were $262,102 $173,091 |
NOTE 5 _ Commitments and Contin
NOTE 5 — Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
NOTE 5 — Commitments and Contingencies | NOTE 5 — Commitments and Contingencies Operating Lease Obligations In February 2022, the Company entered into a lease agreement for approximately 35,913 square feet at 40675 Encyclopedia Circle in Fremont, California. This location serves as the Company’s Corporate Headquarters, including office space and manufacturing. The base monthly rent in the amount of $50,278, subject to annual increases of 3%. 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%. As of December 31, 2023, the balances of right-of-use assets and liabilities were approximately $3.09 $3.29 $3.56 $3.74 The operating lease expense under the existing agreement was allocated in cost of goods sold and operating costs based on department headcount and amounted to $648,434 $646,821 Cash payments included in the measurement of our existing operating lease liabilities were $622,243 $517,174 Future minimum lease payments under the existing operating lease as of December 31, 2023 are shown below: Annual minimum payments: Amount 2024 636,861 2025 652,883 2026 672,470 2027 692,644 2028 713,423 Thereafter 425,646 Total minimum payments 3,793,927 Less: Present value factor (501,894 ) Total operating lease liabilities 3,292,033 Less: Current portion of operating lease (483,161 ) Long-term portion of operating lease $ 2,808,872 SOCKET MOBILE, INC. Purchase Commitments On December 31, 2023, the Company’s non-cancelable purchase commitments for inventory to be used in the ordinary course of business during 2024 were approximately $5,821,000 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 6 _ Stock-Based Compensati
NOTE 6 — Stock-Based Compensation Plan | 12 Months Ended |
Dec. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
NOTE 6 — Stock-Based Compensation Plan | NOTE 6 — Stock-Based Compensation Plan Stock-Based Compensation Program The Company has one share-based compensation plan in effect in the two years presented: the 2004 Equity Incentive Plan (the “2004 Plan”). The 2004 Plan allows for the grant of incentive stock options, non-statutory stock options, restricted stock, stock appreciation rights, and performance awards to employees, directors, and consultants of the Company. Stock options are granted at an exercise price per share equal to the fair market value per share of common stock on the date of grant. Restricted stocks are granted at zero cost. The vesting and exercise provisions are determined by the Board of Directors, with a maximum term of ten years. The termination date of 2004 Plan was approved to extend from April 23, 2024 to April 23, 2034 at our annual meeting of shareholders in June 2022. The 2004 Plan allows for an annual increase in the number of shares authorized under the plan to be added on the first day of each fiscal year equal to the least amount of 400,000 shares, 4% of the outstanding shares on that date, or an amount as determined by the Board of Directors. On January 1, 2024 and 2023, a total of 293,445 and 283,587 additional shares, respectively, became available for grant from the 2004 Plan. Stock-Based Compensation Information The stock-based compensation expense included in the Company’s statements of income for the years ended December 31, 2023 and 2022, consisted of the following: Years Ended December 31, Income Statement Classification 2023 2022 Cost of revenues $ 137,116 $ 119,456 Research and development 358,632 313,904 Sales and marketing 295,704 251,862 General and administrative 364,930 313,470 Stock-based compensation expenses $ 1,156,382 $ 998,692 SOCKET MOBILE, INC. As of December 31, 2023, the remaining unamortized stock-based compensation expense was $1,922,788 and is expected to be amortized over a weighted average period of 2.4 Stock Options – $1.74 Years Ended December 31, 2023 2022 Risk-free interest rate (%) — 3.22 % Dividend yield — — Volatility factor — 105.44 % Expected option life (years) — 2.0 The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant; the dividend yield is calculated as the ratio of dividends paid per share of common stock to the stock price on the date of grant; the expected life is based on historical and expected exercise behavior; and volatility is based on the historical volatility of the Company’s stock price over the expected life of the option. The table below presents the information related to stock option activity for the years ended December 31, 2023 and 2022: Years Ended December 31, 2023 2022 Total intrinsic value of stock options exercised $ (11,982 ) $ 164,176 Cash received from stock option exercises $ 212,815 $ 151,749 SOCKET MOBILE, INC. The following summarizes stock option activity under the 2004 Plan as of and for the years ended December 31, 2023 and 2022: Outstanding Options Number of Shares Weighted Average Exercise Price Per Share Remaining Contractual Term Intrinsic Balance as of December 31, 2021 1,378,122 $ 2.81 Granted 49,000 $ 3.03 Exercised (106,190 ) $ 1.43 Canceled (24,210 ) $ 3.12 Balance as of December 31, 2022 1,296,722 $ 2.93 Granted — $ — Exercised (138,909 ) $ 1.53 Canceled (6,698 ) $ 1.46 Balance as of December 31, 2023 1,151,115 $ 3.11 4.75 $ 8,210 Exercisable 1,068,449 $ 2.88 4.50 $ 8,210 Unvested 82,666 $ 6.08 7.58 $ 0 Stock options outstanding as of December 31, 2023 are summarized below: Options Outstanding Options Exercisable Range of Exercise Prices Number of Options Outstanding Weighted Average Remaining Life (Years) Weighted Average Exercise Price Number of Options Exercisable Weighted Average Exercise Price $0.95 - $1.25 86,000 2.92 $ 1.09 86,000 $ 1.09 $1.59 - $1.90 147,825 3.33 $ 1.87 147,825 $ 1.87 $2.00 - $2.32 329,196 4.92 $ 2.30 329,196 $ 2.30 $2.40 - $2.75 138,775 3.42 $ 2.63 138,775 $ 2.63 $2.93 - $2.95 106,991 4.75 $ 2.93 104,658 $ 2.93 $3.05 - $4.22 160,253 4.50 $ 3.82 153,253 $ 3.85 $4.49 - $8.58 182,075 7.42 $ 6.39 108,742 $ 6.34 $0.95 - $8.58 1,151,115 4.75 $ 3.11 1,068,449 $ 2.88 Restricted stock – The following summarizes information related to restricted stock activity under the 2004 Plan for the years ended December 31, 2023 and 2022: Number of Restricted Stocks Weighted Unvested as of December 31, 2021 646,125 $ 2.18 Granted 330,700 $ 3.82 Vested (111,719 ) $ 2.11 Forfeited (20,130 ) $ 2.29 Unvested as of December 31, 2022 844,976 $ 2.84 Granted 463,720 $ 2.30 Vested (286,062 ) $ 2.02 Forfeited (31,435 ) $ 2.66 Unvested as December 31, 2023 991,199 $ 2.83 |
NOTE 7 _ Shares Reserved
NOTE 7 — Shares Reserved | 12 Months Ended |
Dec. 31, 2023 | |
Note 7 Shares Reserved | |
NOTE 7 — Shares Reserved | NOTE 7 — Shares Reserved Common stock reserved for future issuance was as follows: December 31, 2023 2022 Stock option grants outstanding (see Note 6) 1,151,115 1,296,722 Secured subordinated convertible notes (see Note 4) 2,152,934 958,904 Stock warrants issued to SpringCard SAS (see Note 2) 50,000 50,000 Reserved for future grants 459,950 453,798 3,813,999 2,759,424 |
NOTE 8 _ Retirement Plan
NOTE 8 — Retirement Plan | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
NOTE 8 — Retirement Plan | NOTE 8 — Retirement Plan The Company has a tax-deferred savings plan, the Socket Mobile, Inc. 401(k) Plan (“401(k) Plan”), for the benefit of qualified employees. The 401(k) Plan is designed to provide employees with an accumulation of funds at retirement. Qualified employees may elect to make contributions to the 401(k) Plan monthly. The Company provides a match to employees’ 401(k) savings at 3% of employees’ contribution, up to $100 per month. For the years ended December 31,2023 and 2022, total company matching contributions amounted to $50,950 and $49,200, respectively. Administrative expenses relating to the 401(k) Plan are not significant. |
NOTE 9 _ Income Taxes
NOTE 9 — Income Taxes | 12 Months Ended |
Dec. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
NOTE 9 — Income Taxes | NOTE 9 — Income Taxes The Company's entire pretax income / (loss) for the years ended December 31, 2023 and December 31, 2022 was from its U.S. domestic operations. The components of income taxes for the periods ended December 31, 2023 and 2022 are as follows: Years Ended December 31, 2023 2022 Current: Federal $ — $ — State — — Total Current — — Deferred: Federal (967,300 ) (313,000 ) State (476,700 ) (395,000 ) Total Deferred $ (1,444,000 ) $ (708,000 ) Income tax benefit $ (1,444,000 ) $ (708,000 ) SOCKET MOBILE, INC. A reconciliation of the statutory federal income tax rate to the Company's effective tax rate is as follows: Years Ended December 31, 2023 2022 Income at US statutory rate 21.0 % 21.0 % State taxes, net of federal benefit 13.9 % 62.6 % Valuation allowance 0.5 % 18.1 % Stock compensation -0.8 % -11.2 % Tax credits 0.3 % -21.1 % Other 8.6 % 44.8 % Provision for taxes 42.8 % 114.1 % The principal components of deferred tax assets and (liabilities) are as follows for the period ended: December 31, Deferred tax assets: 2023 2022 Net operating loss carryforwards $ 6,201,000 $ 5,906,000 Tax credits 891,000 901,000 Accruals & reserves 1,118,000 951,000 Lease liabilities 920,000 1,043,000 Depreciation 12,000 45,000 Share-based compensation 229,000 190,000 Capitalized Research Costs 2,078,000 1,105,000 Total deferred tax assets 10,449,000 10,141,000 Valuation allowance (446,000 ) (464,000 ) Net deferred tax assets 11,003,000 9,677,000 Deferred tax liabilities: Amortization (29,000 ) (11,000 ) ROU assets (864,000 ) (996,000 ) Net deferred tax asset (liability) $ 10,110,000 $ 8,670,000 As of December 31, 2023, the Company had U.S. Federal net operating loss carryforwards of $21.7 $23.6 As of December 31, 2023, the Company had U.S. Federal research and development credit carryforwards of $0.4 $0.6 SOCKET MOBILE, INC. As of December 31, 2023, the Company is in a net deferred tax asset position. The deferred tax assets consist principally of net operating loss carryforwards. The future realization of the tax benefits from existing temporary differences and tax attributes ultimately depends on the existence of sufficient taxable income. In assessing the realization of the deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company also considers past operating results, projected future taxable income, and tax planning strategies in making this assessment. As of December 31, 2023, after consideration of all available evidence, both positive and negative, the Company continues to maintain a valuation allowance against the Company's deferred tax assets for U.S. Federal R&D tax credits because they are more likely than not to expire unused. The net change in the total valuation allowance for the years ended December 31, 2023 and 2022 was a decrease of $200,000 for both years, respectively. On August 9, 2022 and August 16, 2022, the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and the Inflation Reduction Act (IRA) were signed into law by the US President, respectively. The new legislation contains many tax provisions, however none had an impact to the Company's financials. The future realization of the Company's net operating loss carryforwards and other tax attributes may also be limited by the change in ownership rules under the U.S. Internal Revenue Code Section 382. Under Section 382, if a corporation undergoes an ownership change (as defined), the corporation’s ability to utilize its net operating loss carryforwards and other tax attributes to offset income may be limited. The Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes. The following table summarizes the activity related to the Company's unrecognized tax benefits: Amount Balance as of January 1, 2021 $ 1,153,000 Increases (decreases) for current year tax provisions 23,000 Increases (decreases) for prior year tax provisions (160,000 ) Decreases for expiration of statute of limitations — Settlements — Balance as of December 31, 2022 1,016,000 Increases (decreases) for current year tax provisions 24,000 Increases (decreases) for prior year tax provisions (31,000 ) Decreases for expiration of statute of limitations — Settlements — Balance as of December 31, 2023 $ 1,009,000 The Company files income tax returns in the U.S. federal jurisdiction and in California, and therefore subject to tax examination by couple taxing authorities. The Company is not currently under examination, and is not aware of any issues under review that could result in significant payments, accruals or material deviation from its tax positions. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state tax authorities to the extent utilized in a future period. As of December 31, 2023, the tax years from 2020 to present remain open to examination by relevant taxing jurisdictions to which the Company is subject. However, to the extent the Company utilizes net operating losses from years prior to 2020, the statute remains open to the extent of the net operating losses or other credits that are utilized. SOCKET MOBILE, INC. The calculation and assessment of the Company's tax exposures generally involve the uncertainties in the application of complex tax laws and regulations for federal and state jurisdictions. A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation, on the basis of the technical merits. As of December 31, 2023 and 2022, the Company had $1.0 $1.0 |
NOTE 10 _ Subsequent Events
NOTE 10 — Subsequent Events | 12 Months Ended |
Dec. 31, 2023 | |
Subsequent Events [Abstract] | |
NOTE 10 — Subsequent Events | NOTE 10 — Subsequent Events Other than described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the audited financial statements. 441,750 $1.09 The Company has issued 25,000 |
NOTE 1 _ Organization and Sum_2
NOTE 1 — Organization and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
Organization and Business | Organization and Business Socket Mobile, Inc. (the “Company”) is a leading provider of data capture and delivery solutions for mobile applications used in Retail, Commercial Services, Industrial & Manufacturing, Transportation & Logistics, and Health Care. Our products include data capture devices that utilize Bluetooth or RFID/NFC technology, designed to interface with applications running on smartphones, tablets and mobile computers. These applications operate on diverse operating systems, including Apple® (iOS), Google™ (Android™) and Microsoft® (Windows®). Additionally, the Company offers camera-based barcode scanning software. The Company focuses on serving the needs of software application providers, with our sales primarily driven by the deployment of barcode and RFID/NFC enabled mobile applications. The Company designs its own products and subcontracts the manufacturing of product components to independent third-party contract manufacturers who are in the U.S., Mexico, Singapore, China, Malaysia and Taiwan and who have the equipment, know-how and capacity to manufacture products to the Company’s specifications. Final products are assembled, tested, packaged, and distributed at and from its Fremont, California facility. In addition to its own online stores, the Company offers its products worldwide through two-tier distribution, allowing customers to purchase from numerous online resellers worldwide, including some application providers. The geographic regions served by the Company include the Americas, Europe, Asia Pacific and Africa. The Company was founded in March 1992 as Socket Communications, Inc. and reincorporated in Delaware in 1995 prior to the Company’s initial public offering in June 1995. The Company began doing business as Socket Mobile, Inc. in January 2007 to better reflect its market focus on the mobile business market, and changed its legal name to Socket Mobile, Inc. in April 2008. The Company’s common stock trades on the NASDAQ Marketplace under the symbol “SCKT.” The Company’s principal executive offices are located at 40675 Encyclopedia Circle, Fremont, CA 94538. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements as well as 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 and Cash Equivalents | Cash and Cash Equivalents 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 March 2023, the Company entered into an Insured Cash Sweep (“ICS”) Deposit Placement Agreement with IntraFi Network LLC through its bank, Bridge Bank – a division of Western Alliance Bank. The ICS program allows the Company’s demand or savings products to benefit from unlimited FDIC insurance, which helps the Company maintain the entire deposit on its balance sheet and provides additional security during times of market uncertainty. As of December 31, 2023, the Company’s cash was held in demand deposit accounts under FDIC insurance through the ICS program. The Company has never experienced any losses in its funds in bank accounts. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable and foreign exchange contracts is close to their fair value due to the relatively short period of time to maturity. |
Foreign Currency | Foreign Currency The functional currency for the Company is the U.S. dollar. However, the Company requires European distributors to purchase products in Euros and British pounds and pays the expenses of European employees in Euros and British pounds. In 2023, the total net adjustment for the effects of changes in foreign currency on cash balances, collections, and payables was a net gain of $12,550 $41,300 |
Accounts Receivable Allowances | Accounts Receivable Allowances Trade accounts receivables are recorded at the net invoice value and are not interest bearing. The Company estimates the amount of uncollectible accounts receivable at the end of each reporting period based on the aging of the receivable balance, current and historical customer trends, and communications with its customers. Amounts are written off only after considerable collection efforts have been made and the amounts are determined to be uncollectible. The following table describes the activity in the allowance for doubtful accounts for the years ended December 31, 2023 and 2022: Year Balance at Charged to Amounts Balance at 2023 $ 40,651 $ — $ — $ 40,651 2022 $ 40,651 $ — $ — $ 40,651 |
Inventories | Inventories Inventories consist principally of raw materials and sub-assemblies stated at the lower of standard cost, which approximates actual costs (first-in, first-out method), or market. Market is defined as replacement cost, but not in excess of estimated net realizable value or less than estimated net realizable value less a normal margin. We purchase or have manufactured the component parts by our engineering bill of materials. The timing and quantity of our purchases are based on order forecast, the lead time requirements of our vendors, and economic order quantities. At the end of each reporting period, the Company compares its inventory on hand to its forecasted requirements for the next twelve-month period and reserves the cost of any inventory that is surplus, less any amounts that the Company believes it can recover from the disposal of goods or that the Company specifically believes will be saleable past a twelve-month horizon. The Company’s sales forecasts are based upon historical trends, communications from customers, and marketing data regarding market trends and dynamics. Changes in the amounts recorded for surplus or obsolete inventory are included in cost of revenue. Inventories, net of write-downs, at December 31, 2023 and 2022 consisted of the following: December 31, 2023 2022 Raw materials and sub-assemblies $ 5,839,176 $ 6,193,453 Finished goods 500,814 289,181 Inventory reserves (930,943 ) (880,943 ) Inventory, net $ 5,409,047 $ 5,601,691 |
Prepaid Expenses and Other Current Assets | Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of various payments that the Company has made in advance for goods or services to be received in the future. Prepaid expenses and other current assets at December 31, 2023 and 2022 consisted of the following: December 31, 2023 2022 Prepaid insurance $ 75,626 $ 92,644 Product certification costs 75,604 87,293 Prepaid inventory purchases 123,736 196,512 Prepaid maintenance contracts and other prepaid expenses 165,764 240,739 Prepaid expenses and other current assets $ 440,730 $ 617,188 |
Property and Equipment | Property and Equipment Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method, over the estimated useful lives of the assets ranging from one to five years. Computer software and hardware are amortized over two to three years, while machinery and equipment are typically amortized over three years. Manufacturing tooling is amortized over a span of two to three years, and improvements to leasehold are amortized over the remaining lease term. Assets under finance leases are amortized in a manner consistent with the Company’s normal depreciation policy for owned assets, or the remaining lease term as applicable. Depreciation expenses in the years ended December 31, 2023 and 2022, were $787,881 and $594,793 , respectively. |
Intangible Assets | Intangible Assets The Company’s intangible assets consist of completed technologies and acquired license rights. Intangible assets are amortized over their estimated useful lives based upon the estimated economic value derived from the related intangible assets. Amortization is computed using the straight-line method over the estimated useful lives of the assets. For the years ended December 31, 2023 and 2022, the amortization expenses of intangible assets were $127,296 |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Company reviews its long-lived assets for impairment annually and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future net undiscounted cash flows expected to be generated by the asset. If such assets are impaired, the impairment recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. For the years ended December 31, 2023 and 2022, we did not recognize any impairment loss of its long-lived assets. |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk include cash, cash equivalents and accounts receivable. The Company invests its cash in demand deposit accounts in banks. To date, the Company has not experienced losses on investments. SOCKET MOBILE, INC. The Company’s trade accounts receivable is 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 as of December 31, 2023 and December 31, 2022 were as follows: December 31, 2023 2022 Ingram Micro Inc. 20 % 14 % Synnex Corporation 14 % * ScanSource, Inc. 13 % 11 % Nippon Primex, Inc. 11 % 14 % Bluestar, Inc. * 46 % * Customer accounted for less than 10% of the Company’s accounts receivable balances |
Concentration of Suppliers | |
Revenue Recognition and Deferred Revenue | Revenue Recognition and Deferred Revenue With the adoption of ASC 606 “Revenue from Contracts with Customers” in 2017, the Company 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. As of December 31, 2023, the deferred revenue and deferred cost on shipments to distributors were approximately $825,670 $322,580 $594,793 $266,327 The Company generally recognizes revenues on sales to customers other than distributors upon shipment provided that contract with the customer is identified, performance obligations in the contract are satisfied, and the price is determined. Most of our customers other than distributors do not have a right of return except under warranty. The Company also generates revenue through its SocketCare services program, which offers extended warranty and accidental breakage coverage for select products. For the year ended December 31, 2023 and 2022, the SocketCare revenues were approximately $21,400 $22,000 $32,698 $34,366 |
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 The Company adopted ASU 2016-02 effective January 1, 2019. On May 1, 2022, the Company entered into a building lease agreement for its corporate headquarters located in Fremont, CA. As of December 31, 2023, the balances of right-of-use assets and liabilities for the operating leases were approximately $3.09 $3.29 $3.56 $3.74 |
Warranty | Warranty The Company’s products typically carry a one-year warranty. The Company reserves for estimated product warranty costs at the time revenue is recognized based upon the Company’s historical warranty experience, and additionally for any known product warranty issues. If actual costs differ from initial estimates, the Company records the difference in the period they are identified. Actual claims are charged against the warranty reserve. The following table describes activity in the reserves for product warranty costs for the years ended December 31, 2023 and 2022: Year Balance at Additional Warranty Reserves Amounts Balance at 2023 $ 78,871 $ 13,417 $ (13,417 ) $ 78,871 2022 $ 78,871 $ 14,475 $ (14,475 ) $ 78,871 |
Research and Development | Research and Development Research and development expenditures are charged to operations as incurred. The major components of research and development costs include salaries and employee benefits, stock-based compensation expense, third party development costs including consultants and outside services, and allocations of overhead and occupancy costs. In 2023, these costs amounted to $4.83 $4.36 |
Software Development Costs | Software Development Costs Costs incurred to develop computer software to be sold or otherwise marketed are charged to expense until technological feasibility of the product has been established. Once technological feasibility has been established, computer software development costs (consisting primarily of internal labor costs) are capitalized and reported at the lower of amortized cost or estimated realizable value. Purchased software development cost is recorded at cost. When a product is ready for general release, its capitalized costs are amortized on a product-by-product basis. The annual amortization is the straight-line method over the remaining estimated economic life (a period of three to five years) of the product. Amortization of capitalized software development costs is included in the cost of revenues line on the statements of operations. If the future revenue of a product is less than anticipated, impairment of the related unamortized development costs could occur, which could impact the Company’s results of operations. Amortization expense on software development costs included in costs of revenues for 2023 and 2022 were $7,262 and $43,572 , respectively. The amount of unamortized capitalized software costs as of December 31, 2023 and 2022 were zero and $7,262, respectively. |
Advertising Costs | Advertising Costs Advertising costs are charged to sales and marketing as incurred. The Company incurred $23,827 $31,146 |
Income Taxes | Income Taxes We account for income taxes under the asset and liability method under ASC 740 which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. |
Shipping and Handling Costs | Shipping and Handling Costs Shipping and handling costs are included in the cost of revenues in the statement of operations. |
Earnings (Loss) Per Share | Earnings (Loss) Per Share The basic computation of earnings (loss) per share is based on the weighted average number of shares outstanding during the period presented in accordance with Accounting Standards Codification (“ASC”) 260, “Earnings Per Share”. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the common stock equivalents which would arise from the exercise of stock options and warrants outstanding using the treasury stock method and the average market price per share during the period. Common stock equivalents are not included in the diluted earnings per share calculation when their effect is anti-dilutive. 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: Years Ended December 31, 2023 2022 Numerator: Net income (loss) $ (1,919,154 ) $ 86,931 Net income (loss) allocated to restricted stock award — (8,820 ) Adjusted net income (loss) for basic earnings per share $ (1,919,154 ) $ 78,111 Convertible note interest — — Adjusted net income (loss) before interest for diluted earnings per share $ (1,919,154 ) $ 78,111 Denominator: Weighted average shares outstanding used in computing net income (loss) per share: Basic 7,230,074 7,184,847 Dilutive impact of stock compensation awards — 348,077 Fully diluted 7,230,074 7,532,924 Net income (loss) per share applicable to common stockholders: Basic $ (0.27 ) $ 0.01 Fully diluted $ (0.27 ) $ 0.01 In 2023, the shares used in computing diluted net loss per share do not include 1,151,114 stock options, 991,199 shares of unvested restricted stocks, 50,000 warrants, and 2,152,934 shares for convertible notes as their effects are anti-dilutive. In 2022, the shares used in computing diluted net income per share do not include 342,765 stock options that were out of the money under the treasury stock method approach, along with 844,976 shares of unvested restricted stocks. Furthermore, 958,904 shares for convertible notes are excluded as their anti-dilutive effects, stemming from the convertible note interest exceeding the earnings per share. |
Stock-Based Compensation Expense | |
Segment Information | Segment Information Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief executive officer in deciding how to allocate resources and in assessing performance. The Company operates in the mobile barcode scanning and RFID reader/writer market. Mobile scanning typically consists of mobile devices such as smartphones or tablets, with mobile scanning peripherals for data collection, and third-party vertical applications software. The Company distributes its products in the United States and foreign countries primarily through distributors and resellers. The Company markets its products primarily through application providers whose applications are designed to work with Company’s products. SOCKET MOBILE, INC. Revenues for the geographic areas for the years ended December 31, 2023 and 2022 are as follows: Years Ended December 31, Revenues: (in thousands) 2023 2022 United States $ 12,539 $ 15,765 Europe 2,426 2,612 Asia and rest of world 2,069 2,861 Total $ 17,034 $ 21,238 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 | Major Customers Customers who accounted for at least 10% of total revenues for the years ended December 31, 2023 and 2022 were as follows: Years Ended December 31, 2023 2022 Ingram Micro Inc. 22% 26% BlueStar, Inc. 22% 24% ScanSource, Inc. 14% 11% *Customer accounted for less than 10% of total revenues |
Recently Issued Financial Accounting Standards | Recently Issued Financial Accounting Standards In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments," which changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The ASU replaces the "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost. For trade and other receivables, held-to-maturity debt securities, contract assets, loans and other instruments, entities are now required to use a new forward-looking "expected loss" model that generally will result in the earlier recognition of allowances for losses. The Company began reporting on topics required by ASU 2016-13 for the year ended December 31, 2023. The adoption did not have a material impact on the Company's financial position or results of operations. 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 all other recently issued accounting standards are not expected to have a material impact on the Company’s financial position or results of operations upon adoption. |
NOTE 5 _ Commitments and Cont_2
NOTE 5 — Commitments and Contingencies (Policies) | 12 Months Ended |
Dec. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Operating Lease Obligations | Operating Lease Obligations In February 2022, the Company entered into a lease agreement for approximately 35,913 square feet at 40675 Encyclopedia Circle in Fremont, California. This location serves as the Company’s Corporate Headquarters, including office space and manufacturing. The base monthly rent in the amount of $50,278, subject to annual increases of 3%. 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%. As of December 31, 2023, the balances of right-of-use assets and liabilities were approximately $3.09 $3.29 $3.56 $3.74 The operating lease expense under the existing agreement was allocated in cost of goods sold and operating costs based on department headcount and amounted to $648,434 $646,821 Cash payments included in the measurement of our existing operating lease liabilities were $622,243 $517,174 Future minimum lease payments under the existing operating lease as of December 31, 2023 are shown below: Annual minimum payments: Amount 2024 636,861 2025 652,883 2026 672,470 2027 692,644 2028 713,423 Thereafter 425,646 Total minimum payments 3,793,927 Less: Present value factor (501,894 ) Total operating lease liabilities 3,292,033 Less: Current portion of operating lease (483,161 ) Long-term portion of operating lease $ 2,808,872 |
Purchase Commitments | Purchase Commitments On December 31, 2023, the Company’s non-cancelable purchase commitments for inventory to be used in the ordinary course of business during 2024 were approximately $5,821,000 |
Legal Matters | 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 6 _ Stock-Based Compensa_2
NOTE 6 — Stock-Based Compensation Plan (Policies) | 12 Months Ended |
Dec. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Stock-Based Compensation Program | Stock-Based Compensation Program The Company has one share-based compensation plan in effect in the two years presented: the 2004 Equity Incentive Plan (the “2004 Plan”). The 2004 Plan allows for the grant of incentive stock options, non-statutory stock options, restricted stock, stock appreciation rights, and performance awards to employees, directors, and consultants of the Company. Stock options are granted at an exercise price per share equal to the fair market value per share of common stock on the date of grant. Restricted stocks are granted at zero cost. The vesting and exercise provisions are determined by the Board of Directors, with a maximum term of ten years. The termination date of 2004 Plan was approved to extend from April 23, 2024 to April 23, 2034 at our annual meeting of shareholders in June 2022. The 2004 Plan allows for an annual increase in the number of shares authorized under the plan to be added on the first day of each fiscal year equal to the least amount of 400,000 shares, 4% of the outstanding shares on that date, or an amount as determined by the Board of Directors. On January 1, 2024 and 2023, a total of 293,445 and 283,587 additional shares, respectively, became available for grant from the 2004 Plan. |
Stock-Based Compensation Information | Stock-Based Compensation Information The stock-based compensation expense included in the Company’s statements of income for the years ended December 31, 2023 and 2022, consisted of the following: Years Ended December 31, Income Statement Classification 2023 2022 Cost of revenues $ 137,116 $ 119,456 Research and development 358,632 313,904 Sales and marketing 295,704 251,862 General and administrative 364,930 313,470 Stock-based compensation expenses $ 1,156,382 $ 998,692 SOCKET MOBILE, INC. As of December 31, 2023, the remaining unamortized stock-based compensation expense was $1,922,788 and is expected to be amortized over a weighted average period of 2.4 Stock Options – $1.74 Years Ended December 31, 2023 2022 Risk-free interest rate (%) — 3.22 % Dividend yield — — Volatility factor — 105.44 % Expected option life (years) — 2.0 The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant; the dividend yield is calculated as the ratio of dividends paid per share of common stock to the stock price on the date of grant; the expected life is based on historical and expected exercise behavior; and volatility is based on the historical volatility of the Company’s stock price over the expected life of the option. The table below presents the information related to stock option activity for the years ended December 31, 2023 and 2022: Years Ended December 31, 2023 2022 Total intrinsic value of stock options exercised $ (11,982 ) $ 164,176 Cash received from stock option exercises $ 212,815 $ 151,749 SOCKET MOBILE, INC. The following summarizes stock option activity under the 2004 Plan as of and for the years ended December 31, 2023 and 2022: Outstanding Options Number of Shares Weighted Average Exercise Price Per Share Remaining Contractual Term Intrinsic Balance as of December 31, 2021 1,378,122 $ 2.81 Granted 49,000 $ 3.03 Exercised (106,190 ) $ 1.43 Canceled (24,210 ) $ 3.12 Balance as of December 31, 2022 1,296,722 $ 2.93 Granted — $ — Exercised (138,909 ) $ 1.53 Canceled (6,698 ) $ 1.46 Balance as of December 31, 2023 1,151,115 $ 3.11 4.75 $ 8,210 Exercisable 1,068,449 $ 2.88 4.50 $ 8,210 Unvested 82,666 $ 6.08 7.58 $ 0 Stock options outstanding as of December 31, 2023 are summarized below: Options Outstanding Options Exercisable Range of Exercise Prices Number of Options Outstanding Weighted Average Remaining Life (Years) Weighted Average Exercise Price Number of Options Exercisable Weighted Average Exercise Price $0.95 - $1.25 86,000 2.92 $ 1.09 86,000 $ 1.09 $1.59 - $1.90 147,825 3.33 $ 1.87 147,825 $ 1.87 $2.00 - $2.32 329,196 4.92 $ 2.30 329,196 $ 2.30 $2.40 - $2.75 138,775 3.42 $ 2.63 138,775 $ 2.63 $2.93 - $2.95 106,991 4.75 $ 2.93 104,658 $ 2.93 $3.05 - $4.22 160,253 4.50 $ 3.82 153,253 $ 3.85 $4.49 - $8.58 182,075 7.42 $ 6.39 108,742 $ 6.34 $0.95 - $8.58 1,151,115 4.75 $ 3.11 1,068,449 $ 2.88 Restricted stock – The following summarizes information related to restricted stock activity under the 2004 Plan for the years ended December 31, 2023 and 2022: Number of Restricted Stocks Weighted Unvested as of December 31, 2021 646,125 $ 2.18 Granted 330,700 $ 3.82 Vested (111,719 ) $ 2.11 Forfeited (20,130 ) $ 2.29 Unvested as of December 31, 2022 844,976 $ 2.84 Granted 463,720 $ 2.30 Vested (286,062 ) $ 2.02 Forfeited (31,435 ) $ 2.66 Unvested as December 31, 2023 991,199 $ 2.83 |
NOTE 1 _ Organization and Sum_3
NOTE 1 — Organization and Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
Activities in allowance for doubtful accounts | Year Balance at Charged to Amounts Balance at 2023 $ 40,651 $ — $ — $ 40,651 2022 $ 40,651 $ — $ — $ 40,651 |
Inventory Components | December 31, 2023 2022 Raw materials and sub-assemblies $ 5,839,176 $ 6,193,453 Finished goods 500,814 289,181 Inventory reserves (930,943 ) (880,943 ) Inventory, net $ 5,409,047 $ 5,601,691 |
Prepaid Expenses and Other Current Assets | December 31, 2023 2022 Prepaid insurance $ 75,626 $ 92,644 Product certification costs 75,604 87,293 Prepaid inventory purchases 123,736 196,512 Prepaid maintenance contracts and other prepaid expenses 165,764 240,739 Prepaid expenses and other current assets $ 440,730 $ 617,188 |
Customers who accounted for at least 10% of the Company's accounts receivable balances | December 31, 2023 2022 Ingram Micro Inc. 20 % 14 % Synnex Corporation 14 % * ScanSource, Inc. 13 % 11 % Nippon Primex, Inc. 11 % 14 % Bluestar, Inc. * 46 % * Customer accounted for less than 10% of the Company’s accounts receivable balances |
Warranty | Year Balance at Additional Warranty Reserves Amounts Balance at 2023 $ 78,871 $ 13,417 $ (13,417 ) $ 78,871 2022 $ 78,871 $ 14,475 $ (14,475 ) $ 78,871 |
Net Inome (Loss) Per Share Applicable to Common Stockholders | Years Ended December 31, 2023 2022 Numerator: Net income (loss) $ (1,919,154 ) $ 86,931 Net income (loss) allocated to restricted stock award — (8,820 ) Adjusted net income (loss) for basic earnings per share $ (1,919,154 ) $ 78,111 Convertible note interest — — Adjusted net income (loss) before interest for diluted earnings per share $ (1,919,154 ) $ 78,111 Denominator: Weighted average shares outstanding used in computing net income (loss) per share: Basic 7,230,074 7,184,847 Dilutive impact of stock compensation awards — 348,077 Fully diluted 7,230,074 7,532,924 Net income (loss) per share applicable to common stockholders: Basic $ (0.27 ) $ 0.01 Fully diluted $ (0.27 ) $ 0.01 |
Revenues for geographic areas (in $'000) | Years Ended December 31, Revenues: (in thousands) 2023 2022 United States $ 12,539 $ 15,765 Europe 2,426 2,612 Asia and rest of world 2,069 2,861 Total $ 17,034 $ 21,238 |
Customers who accounted for at least 10% of total revenues | Years Ended December 31, 2023 2022 Ingram Micro Inc. 22% 26% BlueStar, Inc. 22% 24% ScanSource, Inc. 14% 11% *Customer accounted for less than 10% of total revenues |
NOTE 2 _ Intangible Assets (Tab
NOTE 2 — Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
Estimated future amortization of intangible assets | Fiscal Year Amount 2024 127,296 2025 127,296 2026 127,296 2027 127,296 2028 127,296 Thereafter 922,889 Total $ 1,559,369 |
NOTE 5 _ Commitments and Cont_3
NOTE 5 — Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future minimum lease payments | Annual minimum payments: Amount 2024 636,861 2025 652,883 2026 672,470 2027 692,644 2028 713,423 Thereafter 425,646 Total minimum payments 3,793,927 Less: Present value factor (501,894 ) Total operating lease liabilities 3,292,033 Less: Current portion of operating lease (483,161 ) Long-term portion of operating lease $ 2,808,872 |
NOTE 6 _ Stock-Based Compensa_3
NOTE 6 — Stock-Based Compensation Plan (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of employee service stock-based compensation, allocation of recognized period costs | Years Ended December 31, Income Statement Classification 2023 2022 Cost of revenues $ 137,116 $ 119,456 Research and development 358,632 313,904 Sales and marketing 295,704 251,862 General and administrative 364,930 313,470 Stock-based compensation expenses $ 1,156,382 $ 998,692 |
Stock options' weighted average assumptions and grant date fair values | Years Ended December 31, 2023 2022 Risk-free interest rate (%) — 3.22 % Dividend yield — — Volatility factor — 105.44 % Expected option life (years) — 2.0 |
Activity of stock options exercised | Years Ended December 31, 2023 2022 Total intrinsic value of stock options exercised $ (11,982 ) $ 164,176 Cash received from stock option exercises $ 212,815 $ 151,749 |
NOTE 7 _ Shares Reserved (Table
NOTE 7 — Shares Reserved (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Note 7 Shares Reserved | |
Common stock reserved for future issuance | December 31, 2023 2022 Stock option grants outstanding (see Note 6) 1,151,115 1,296,722 Secured subordinated convertible notes (see Note 4) 2,152,934 958,904 Stock warrants issued to SpringCard SAS (see Note 2) 50,000 50,000 Reserved for future grants 459,950 453,798 3,813,999 2,759,424 |
NOTE 9 _ Income Taxes (Tables)
NOTE 9 — Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income Tax Expense | Years Ended December 31, 2023 2022 Current: Federal $ — $ — State — — Total Current — — Deferred: Federal (967,300 ) (313,000 ) State (476,700 ) (395,000 ) Total Deferred $ (1,444,000 ) $ (708,000 ) Income tax benefit $ (1,444,000 ) $ (708,000 ) |
Schedule of Effective Income Tax Rate Reconciliation | Years Ended December 31, 2023 2022 Income at US statutory rate 21.0 % 21.0 % State taxes, net of federal benefit 13.9 % 62.6 % Valuation allowance 0.5 % 18.1 % Stock compensation -0.8 % -11.2 % Tax credits 0.3 % -21.1 % Other 8.6 % 44.8 % Provision for taxes 42.8 % 114.1 % |
Schedule of Deferred Tax Assets and Liabilities (Details | December 31, Deferred tax assets: 2023 2022 Net operating loss carryforwards $ 6,201,000 $ 5,906,000 Tax credits 891,000 901,000 Accruals & reserves 1,118,000 951,000 Lease liabilities 920,000 1,043,000 Depreciation 12,000 45,000 Share-based compensation 229,000 190,000 Capitalized Research Costs 2,078,000 1,105,000 Total deferred tax assets 10,449,000 10,141,000 Valuation allowance (446,000 ) (464,000 ) Net deferred tax assets 11,003,000 9,677,000 Deferred tax liabilities: Amortization (29,000 ) (11,000 ) ROU assets (864,000 ) (996,000 ) Net deferred tax asset (liability) $ 10,110,000 $ 8,670,000 |
Disclsoure - Schedule of Unrecognized Tax Benefits | Amount Balance as of January 1, 2021 $ 1,153,000 Increases (decreases) for current year tax provisions 23,000 Increases (decreases) for prior year tax provisions (160,000 ) Decreases for expiration of statute of limitations — Settlements — Balance as of December 31, 2022 1,016,000 Increases (decreases) for current year tax provisions 24,000 Increases (decreases) for prior year tax provisions (31,000 ) Decreases for expiration of statute of limitations — Settlements — Balance as of December 31, 2023 $ 1,009,000 |
Activities in allowance for dou
Activities in allowance for doubtful accounts (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Accounting Policies [Abstract] | ||
Balance at Beginning of Year | $ 40,651 | $ 40,651 |
Charged to Costs and Expenses | ||
Amounts Written Off | ||
Balance at End of Year | $ 40,651 | $ 40,651 |
Inventory Components (Details)
Inventory Components (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Accounting Policies [Abstract] | ||
Raw materials and sub-assemblies | $ 5,839,176 | $ 6,193,453 |
Finished goods | 500,814 | 289,181 |
Inventory reserves | (930,943) | (880,943) |
Inventory, net | $ 5,409,047 | $ 5,601,691 |
Prepaid Expenses and Other Curr
Prepaid Expenses and Other Current Assets (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Accounting Policies [Abstract] | ||
Prepaid insurance | $ 75,626 | $ 92,644 |
Product certification costs | 75,604 | 87,293 |
Prepaid inventory purchases | 123,736 | 196,512 |
Prepaid maintenance contracts and other prepaid expenses | 165,764 | 240,739 |
Prepaid expenses and other current assets | $ 440,730 | $ 617,188 |
Customers who accounted for at
Customers who accounted for at least 10% of the Company's accounts receivable balances (Details) | Dec. 31, 2023 | Dec. 31, 2022 |
Ingram Micro [Member] | ||
Bluestar, Inc. | 20 | 14 |
Synnex [Member] | ||
Bluestar, Inc. | 14 | |
Scan Source [Member] | ||
Bluestar, Inc. | 13 | 11 |
Nippon Primex [Member] | ||
Bluestar, Inc. | 11 | 14 |
Blue Star [Member] | ||
Bluestar, Inc. | 46 |
Warranty (Details)
Warranty (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Accounting Policies [Abstract] | ||
Balance at Beginning of Year | $ 78,871 | $ 78,871 |
Additional Warranty Reserves | 13,417 | 14,475 |
Amounts Charged to Reserves | (13,417) | (14,475) |
Balance at End of Year | $ 78,871 | $ 78,871 |
Net Inome (Loss) Per Share Appl
Net Inome (Loss) Per Share Applicable to Common Stockholders (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Numerator: | ||
Net income (loss) | $ (1,919,154) | $ 86,931 |
Net income (loss) allocated to restricted stock award | (8,820) | |
Adjusted net income (loss) for basic earnings per share | (1,919,154) | 78,111 |
Convertible note interest | ||
Adjusted net income (loss) before interest for diluted earnings per share | $ (1,919,154) | $ 78,111 |
Denominator: Weighted average shares outstanding used in computing net income (loss) per share: | ||
Basic | 7,230,074 | 7,184,847 |
Dilutive impact of stock compensation awards | 348,077 | |
Fully diluted | 7,230,074 | 7,532,924 |
Net income (loss) per share applicable to common stockholders: | ||
Basic | $ (0.27) | $ 0.01 |
Fully diluted | $ (0.27) | $ 0.01 |
Revenues for geographic areas (
Revenues for geographic areas (in $'000) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Americas [Member] | ||
Asia and rest of world | $ 12,539 | $ 15,765 |
Total | 12,539 | 15,765 |
EMEA [Member] | ||
Asia and rest of world | 2,426 | 2,612 |
Total | 2,426 | 2,612 |
Asia Pacific [Member] | ||
Asia and rest of world | 2,069 | 2,861 |
Total | 2,069 | 2,861 |
Total [Member] | ||
Asia and rest of world | 17,034 | 21,238 |
Total | $ 17,034 | $ 21,238 |
Customers who accounted for a_2
Customers who accounted for at least 10% of total revenues (Details) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Ingram Micro [Member] | ||
ScanSource, Inc. | 0.22 | 0.26 |
Blue Star [Member] | ||
ScanSource, Inc. | 0.22 | 0.24 |
Scan Source [Member] | ||
ScanSource, Inc. | 0.14 | 0.11 |
NOTE 1 _ Organization and Sum_4
NOTE 1 — Organization and Summary of Significant Accounting Policies (Details Narrative) | 12 Months Ended | |
Dec. 31, 2023 USD ($) shares | Dec. 31, 2022 USD ($) shares | |
Product Information [Line Items] | ||
Gain (Loss) on Foreign Currency Fair Value Hedge Derivatives | $ 12,550 | $ 41,300 |
[custom:DepreciationExpense] | 787,881 | 594,793 |
Amortization of Intangible Assets | $ 127,296 | 127,296 |
Accounts payable balances with top supplier | 0.27 | |
Deferred Revenue, Current | $ 825,670 | 594,793 |
Deferred Costs and Other Assets | 322,580 | 266,327 |
[custom:ServiceRevenues] | 21,400 | 22,000 |
Deferred Revenue | 32,698 | 34,366 |
Operating Lease, Right-of-Use Asset | 3,088,087 | 3,559,658 |
Operating Lease, Liability | 3,292,033 | 3,740,000 |
Research and Development Expense | 4,831,905 | 4,362,119 |
Capitalized Computer Software, Amortization | 7,262 | 43,572 |
Advertising Expense | $ 23,827 | $ 31,146 |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | shares | 1,151,114 | 342,765 |
Supplier Concentration Risk [Member] | ||
Product Information [Line Items] | ||
Inventory purchases were from top two suppliers | 55% | 56% |
Estimated future amortization o
Estimated future amortization of intangible assets (Details) | Dec. 31, 2023 USD ($) |
Business Combination and Asset Acquisition [Abstract] | |
$ 127,296 | |
127,296 | |
127,296 | |
127,296 | |
127,296 | |
922,889 | |
$ 1,559,369 |
NOTE 2 _ Intangible Assets (Det
NOTE 2 — Intangible Assets (Details Narrative) | Dec. 31, 2023 USD ($) |
Business Combination and Asset Acquisition [Abstract] | |
Finite-Lived Intangible Assets, Net | $ 1,559,369 |
NOTE 3 _ Bank Financing Arran_2
NOTE 3 — Bank Financing Arrangements (Details Narrative) | Dec. 31, 2022 USD ($) |
Term Loan [Member] | |
Line of Credit Facility [Line Items] | |
Interest Payable | $ 372 |
NOTE 4 _ Secured Subordinated_2
NOTE 4 — Secured Subordinated Convertible Notes Payable (Details Narrative) - USD ($) | 12 Months Ended | 48 Months Ended | ||||
Dec. 31, 2023 | Dec. 31, 2022 | Aug. 30, 2024 | May 26, 2023 | Aug. 31, 2020 | Aug. 28, 2020 | |
Debt Instrument [Line Items] | ||||||
Secured Subordinated Convertible Notes Issued | $ 1,600,000 | $ 1,530,000 | ||||
Subordinated Borrowing, Interest Rate | 10% | |||||
Debt Instrument, Convertible, Conversion Price | $ 1.46 | |||||
Amortization of Debt Discount (Premium) | $ 25,473 | $ 33,091 | ||||
Debt Instrument, Unamortized Discount (Premium), Net | 33,091 | |||||
[custom:InterestOnConvertibleDebt] | $ 262,102 | $ 173,091 | ||||
Related Party [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Secured Subordinated Convertible Notes Issued | $ 1,350,000 |
Future minimum lease payments (
Future minimum lease payments (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Annual minimum payments: | ||
2024 | $ 636,861 | |
2025 | 652,883 | |
2026 | 672,470 | |
2027 | 692,644 | |
2028 | 713,423 | |
Thereafter | 425,646 | |
Total minimum payments | 3,793,927 | |
Less: Present value factor | (501,894) | |
Total operating lease liabilities | 3,292,033 | $ 3,740,000 |
Less: Current portion of operating lease | (483,161) | (444,529) |
Long-term portion of operating lease | $ 2,808,872 | $ 3,292,035 |
NOTE 5 _ Commitments and Cont_4
NOTE 5 — Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Operating Lease, Right-of-Use Asset | $ 3,088,087 | $ 3,559,658 |
Operating Lease, Liability | 3,292,033 | 3,740,000 |
Operating Lease, Expense | 648,434 | 646,821 |
Operating Lease, Payments | 622,243 | $ 517,174 |
Purchase Obligation, to be Paid, Year One | $ 5,821,000 |
Schedule of employee service st
Schedule of employee service stock-based compensation, allocation of recognized period costs (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
General and administrative | $ 1,156,382 | $ 998,692 |
Stock-based compensation expenses | 1,156,382 | 998,692 |
Cost Of Revenue [Member] | ||
General and administrative | 137,116 | 119,456 |
Stock-based compensation expenses | 137,116 | 119,456 |
Research And Development [Member] | ||
General and administrative | 358,632 | 313,904 |
Stock-based compensation expenses | 358,632 | 313,904 |
Sales And Marketing [Member] | ||
General and administrative | 295,704 | 251,862 |
Stock-based compensation expenses | 295,704 | 251,862 |
General And Administrative [Member] | ||
General and administrative | 364,930 | 313,470 |
Stock-based compensation expenses | $ 364,930 | $ 313,470 |
Stock options' weighted average
Stock options' weighted average assumptions and grant date fair values (Details) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Share-Based Payment Arrangement [Abstract] | ||
Risk-free interest rate (%) | 3.22% | |
Dividend yield | ||
Volatility factor | 105.44% | |
Expected option life (years) | 2 years |
Activity of stock options exerc
Activity of stock options exercised (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Total intrinsic value of stock options exercised | $ (11,982) | $ 164,176 |
Cash received from stock option exercises | $ 212,815 | $ 151,749 |
Exercised (in shares) | (25,000) | |
Equity Option [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Balance as of December 31, 2021 (in shares) | 1,378,122 | |
Balance as of December 31, 2022 (in $ per share) | $ 2.93 | $ 2.81 |
Granted (in shares) | 49,000 | |
Granted (in $ per share) | $ 3.03 | |
Exercised (in shares) | (138,909) | (106,190) |
Exercised (in $ per share) | $ 1.53 | $ 1.43 |
Canceled (in shares) | (6,698) | (24,210) |
Canceled (in $ per share) | $ 1.46 | $ 3.12 |
Balance as of December 31, 2022 (in shares) | 1,296,722 | |
Balance as of December 31, 2023 (in shares) | 1,151,115 | 1,296,722 |
Balance as of December 31, 2023 (in $ per share) | $ 3.11 | $ 2.93 |
Exercisable (in shares) | 1,068,449 | |
Exercisable (in $ per share) | $ 2.88 | |
Unvested (in shares) | 82,666 | |
Unvested (in $ per share) | $ 6.08 |
NOTE 6 _ Stock-Based Compensa_4
NOTE 6 — Stock-Based Compensation Plan (Details Narrative) - $ / shares | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Share-Based Payment Arrangement [Abstract] | ||
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition | 2 years 4 months 24 days | |
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 1.74 |
Common stock reserved for futur
Common stock reserved for future issuance (Details) - shares | Dec. 31, 2023 | Dec. 31, 2022 |
Share-Based Payment Arrangement, Option [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Reserved for future grants | 1,151,115 | 1,296,722 |
Subordinated Convertible Note [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Reserved for future grants | 2,152,934 | 958,904 |
Warrant To Purchase Common Stock [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Reserved for future grants | 50,000 | 50,000 |
Treasury Stock Reserved For Future Grants [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Reserved for future grants | 459,950 | 453,798 |
Schedule of Income Tax Expense
Schedule of Income Tax Expense (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Income Tax Disclosure [Abstract] | ||
Federal | ||
State | ||
Total Current | ||
Federal | (967,300) | (313,000) |
State | (476,700) | (395,000) |
Total Deferred | (1,444,000) | (708,000) |
Income tax benefit | $ (1,444,000) | $ (708,000) |
Schedule of Effective Income Ta
Schedule of Effective Income Tax Rate Reconciliation (Details) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Income Tax Disclosure [Abstract] | ||
Income at US statutory rate | 21% | 21% |
State taxes, net of federal benefit | 13.90% | 62.60% |
Valuation allowance | 0.50% | 18.10% |
Stock compensation | (0.80%) | (11.20%) |
Tax credits | 0.30% | (21.10%) |
Other | 8.60% | 44.80% |
Provision for taxes | 42.80% | 114.10% |
Schedule of Deferred Tax Assets
Schedule of Deferred Tax Assets and Liabilities (Details - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 6,201,000 | $ 5,906,000 |
Tax credits | 891,000 | 901,000 |
Accruals & reserves | 1,118,000 | 951,000 |
Lease liabilities | 920,000 | 1,043,000 |
Depreciation | 12,000 | 45,000 |
Share-based compensation | 229,000 | 190,000 |
Capitalized Research Costs | 2,078,000 | 1,105,000 |
Total deferred tax assets | 10,449,000 | 10,141,000 |
Valuation allowance | (446,000) | (464,000) |
Net deferred tax assets | 11,003,000 | 9,677,000 |
Deferred tax liabilities: | ||
Amortization | (29,000) | (11,000) |
ROU assets | (864,000) | (996,000) |
Net deferred tax asset (liability) | $ 10,110,000 | $ 8,670,000 |
Disclsoure - Schedule of Unreco
Disclsoure - Schedule of Unrecognized Tax Benefits (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | ||
Balance of December 31, 2022 | $ 1,016,000 | |
Increases (dereases) for current year tax provisions | 24,000 | $ 23,000 |
Unrecognized Tax Benefits, Decrease Resulting from Prior Period Tax Positions | (31,000) | (160,000) |
Balance as of December 31, 2023 | $ 1,009,000 | $ 1,153,000 |
NOTE 9 _ Income Taxes (Details
NOTE 9 — Income Taxes (Details Narrative) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 |
Income Tax Disclosure [Abstract] | |||
Deferred Tax Assets, Operating Loss Carryforwards, Domestic | $ 21,700,000 | ||
Deferred Tax Assets, Operating Loss Carryforwards, State and Local | 23,600,000 | ||
[custom:DeferredTaxAssetsTaxCreditCarryforwardsResearchFederal-0] | 400,000 | ||
[custom:DeferredTaxAssetsTaxCreditCarryforwardsResearchStateAndLocal-0] | 600,000 | ||
Unrecognized Tax Benefits | $ 1,009,000 | $ 1,016,000 | $ 1,153,000 |
NOTE 10 _ Subsequent Events (De
NOTE 10 — Subsequent Events (Details Narrative) - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 22, 2024 | Dec. 31, 2023 | |
Subsequent Events [Abstract] | ||
Stock Issued During Period, Shares, Restricted Stock Award, Gross | 441,750 | |
Employee Stock Ownership Plan (ESOP), Weighted Average Purchase Price of Shares Purchased | $ 1.09 | |
Shares issued for the exercise of stock options | 25,000 |