UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 2024

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period ___________________ to _____________________.

Commission file number 1-13810

SOCKET MOBILE, INC.

(Exact name of registrant as specified in its charter)

Delaware		94-3155066
(State of incorporation)		(IRS Employer Identification No.)

40675 Encyclopedia, Fremont, CA 94538

(Address of principal executive offices including zip code)

(510) 933-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.001 Par Value per Share	SCKT	NASDAQ

Indicate by check mark whether the registrant (1) has ﬁled all reports required to be ﬁled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to ﬁle such reports), and (2) has been subject to such ﬁling requirements for the past 90 days. YES [ X ] NO [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES [ X ] NO [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]

Smaller reporting company [X] Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X]

The number of shares of Common Stock ($0.001 par value) outstanding as of May 9, 2024 was 7,546,938 shares.

INDEX

	PAGE NO.
Part I. Financial Information

Item 1. Financial Statements (Unaudited):

Condensed Statements of Operations – Three Months Ended March 31, 2024 and 2023 (Unaudited)	1

Condensed Balance Sheets - March 31, 2024 (Unaudited) and December 31, 2023	2

Condensed Statements of Stockholders’ Equity – Three Months Ended March 31, 2024 and 2023 (Unaudited)	3

Condensed Statements of Cash Flows - Three Months Ended March 31, 2024 and 2023 (Unaudited)	4

Notes to Condensed Financial Statements (Unaudited)	5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3. Quantitative and Qualitative Disclosures about Market Risk	20

Item 4. Controls and Procedures	21

Part II. Other Information

Item 1A. Risk Factors	22

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 6. Exhibits	33

Signatures	34


	Three Months Ended March 31,
	2024			2023

Revenues	$	4,977,797		$	4,312,178

Cost of revenues		2,473,040			2,239,691

Gross profit		2,504,757			2,072,487

Operating expenses:
Research and development		1,208,082			1,247,119
Sales and marketing		1,031,271			1,006,792
General and administrative		750,579			773,988
Total operating expenses		2,989,932			3,027,899

Operating loss		(485,175	)		(955,412	)

Interest expense, net		(72,240	)		(38,008	)

Net loss before income taxes		(557,415	)		(993,420	)
Income tax expense		—			—

Net loss	$	(557,415	)	$	(993,420	)

Net loss per share:

Basic	$	(0.07	)	$	(0.12	)
Diluted	$	(0.07	)	$	(0.12	)

Weighted average shares outstanding:

Basic		7,441,745			7,106,746
Diluted		7,441,745			7,106,746


		March 31, 2024 (Unaudited)			December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	2,771,848		$	2,826,630
Accounts receivable, net		2,073,041			1,699,696
Inventories, net		5,413,426			5,409,047
Prepaid expenses and other current assets		380,208			440,730
Deferred cost on shipments to distributors		362,914			322,580
Total current assets		11,001,437			10,698,683

Property and equipment:
Machinery and office equipment		2,669,429			2,700,759
Computer equipment		3,646,916			3,631,945
		6,316,345			6,332,704
Accumulated depreciation		(3,519,975	)		(3,299,503	)
Property and equipment, net		2,796,370			3,033,201

Intangible assets, net		1,527,545			1,559,369
Other long-term assets		248,714			249,715
Deferred tax assets		10,112,419			10,112,419
Operating lease right-of-use asset		2,975,526			3,088,087
Total assets	$	28,662,011		$	28,741,474


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	1,749,116		$	1,605,231
Accrued payroll and related expenses		636,464			579,974
Deferred revenue on shipments to distributors		911,630			825,670
Short term portion of deferred service revenue		19,767			19,885
Subordinated convertible notes payable, net of discount		150,000			150,000
Subordinated convertible notes payable, net of discount-related party		2,837,326			2,835,864
Operating lease – current portion		494,390			483,161
Total current liabilities		6,798,693			6,499,785

Long-term portion of deferred service revenue		13,945			12,813
Long-term portion of operating lease		2,690,334			2,808,872
Total liabilities		9,502,972			9,321,470

Commitments and contingencies		—			—
Stockholders’ equity:
Common stock, $0.001 par value: Authorized – 20,000,000 shares, Issued 7,906,577 and outstanding 7,547,327 at March 31, 2024; Issued 7,695,371 and outstanding 7,336,121 at December 31, 2023		7,547			7,336
Additional paid-in capital		68,679,469			68,383,230
Treasury stock		(1,037,988	)		(1,037,988	)
Accumulated deficit		(48,489,989	)		(47,932,574	)
Total stockholders’ equity		19,159,039			19,420,004
Total liabilities and stockholders’ equity	$	28,662,011		$	28,741,474


					Additional											Total
	Common Stock				Paid-In			Treasury Stock					Accumulated			Stockholders’
	Shares		Amount		Capital			Shares		Amount			Deficit			Equity
Balance at December 31, 2023		7,336,121	$	7,336	$	68,383,230			359,250	$	(1,037,988	)	$	(47,932,574	)	$	19,420,004
Vesting of restricted stocks		186,206		186		(186	)		—		—			—			—
Restricted stock retired for tax withholding		—		—		—			—		—			—			—
Exercise of stock option		25,000		25		23,725			—		—			—			23,750
Stock-based compensation		—		—		272,700			—		—			—			272,700
Treasury shares purchased		—		—		—			—		—			—			—
Net loss		—		—		—			—		—			(557,415	)		(557,415	)
Balance at March 31, 2024		7,547,327	$	7,547	$	68,679,469			359,250	$	(1,037,988	)	$	(48,489,989	)	$	19,159,039


Fiscal Year		Amount
	2024 (April 1, 2024 to December 31, 2024)	$	95,472
	2025		127,296
	2026		127,296
	2027		127,296
	2028		127,296
	Thereafter		922,889
		$	1,527,545


	March 31,			December 31,
	2024			2023
Raw materials and sub-assemblies	$	6,058,394		$	5,839,176
Finished goods		315,975			500,814
Inventory reserves		(960,943	)		(930,943	)
Inventory, net	$	5,413,426		$	5,409,047


	Three Months Ended March 31,
Revenues:	2024		2023
United States	$	3,558,315	$	3,138,653
Europe		595,076		542,527
Asia and rest of world		824,406		630,998
Total revenues	$	4,977,797	$	4,312,178


Annual minimum payments:	Amount
2024 (April 1 through December 31, 2024)		481,718
2025		657,164
2026		676,751
2027		692,644
2028		713,423
2029		425,646
Total minimum payments		3,647,346
Less: Present value factor		(462,622	)
Total operating lease liabilities		3,184,724
Less: Current portion of operating lease		(494,390	)
Long-term portion of operating lease	$	2,690,334

	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1 to 3 years		4 to 5 years		More than 5 years

Unconditional purchase obligations with contract manufacturers	$	5,403,000	$	5,316,000	$	87,000	$	—	$	—
Operating lease		3,639,000		642,000		1,335,000		1,416,000		246,000
Total contractual obligations	$	9,042,000	$	5,958,000	$	1,422,000	$	1,416,000	$	246,000


Exhibit Number	Exhibit Description

31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101**	XBRL Document


Date: May 14, 2024	/s/ Kevin J. Mills
	Kevin J. Mills
	President and Chief Executive Officer
	(Duly Authorized Officer and Principal Executive Officer)


	Three Months Ended March 31,
	2024			2023
BlueStar, Inc.		23	%		20	%
Ingram Micro, Inc.		16	%		23	%
Synnex Corporation		14	%		-	*
Nippon Primex, Inc.		13	%		-	*
*Customer accounted for less than 10% of the Company’s total revenue


	March 31,			December 31,
	2024			2023
BlueStar, Inc.		23	%		-	*
Ingram Micro Inc.		20	%		20	%
Synnex Corporation		13	%		14	%
Nippon Primex, Inc.		12	%		11	%
ScanSource, Inc.		11	%		13	%
* Customer accounted for less than 10% of the Company’s accounts receivable balances


Date: May 14, 2024	/s/ Lynn Zhao
	Lynn Zhao
	Vice President of Finance and Administration and Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer)

SEC Form 10-Q filed by Socket Mobile Inc.