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 June 30, 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 Circle, 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 August 9, 2024 was 7,598,849 shares.

INDEX

			PAGE NO.
Part I. Financial Information

Item 1. Financial Statements (Unaudited):

Condensed Statements of Operations – Three Months and Six Months Ended June 30, 2024 and 2023 (Unaudited)			1

Condensed Balance Sheets - June 30, 2024 (Unaudited) and December 31, 2023			2

Condensed Statements of Stockholders’ Equity – Three Months and Six Months Ended June 30, 2024 and 2023 (Unaudited)			3

Condensed Statements of Cash Flows - Six Months Ended June 30, 2024 and 2023 (Unaudited)			5

Notes to Condensed Financial Statements (Unaudited)			6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			16

Item 3. Quantitative and Qualitative Disclosures about Market Risk			23

Item 4. Controls and Procedures			23

Part II. Other Information

Item 1A. Risk Factors			25

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			35

Item 6. Exhibits			35

Signatures			36

SOCKET MOBILE, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023

Revenues	$	5,081,398		$	5,117,157		$	10,059,195		$	9,429,335

Cost of revenues		2,497,067			2,465,594			4,970,108			4,705,285

Gross profit		2,584,331			2,651,563			5,089,087			4,724,050

Operating expenses:
Research and development		1,231,953			1,189,930			2,440,035			2,437,049
Sales and marketing		1,154,245			1,004,579			2,185,516			2,011,371
General and administrative		733,276			748,609			1,483,854			1,522,597
Total operating expenses		3,119,474			2,943,118			6,109,405			5,971,017

Operating loss		(535,143	)		(291,555	)		(1,020,318	)		(1,246,967	)

Interest expense, net		(72,488	)		(55,261	)		(144,728	)		(93,269	)

Net loss before income taxes		(607,631	)		(346,816	)		(1,165,046	)		(1,340,236	)

Income tax expense		—			(166,000	)		—			(166,000	)

Net loss	$	(607,631	)	$	(512,816	)	$	(1,165,046	)	$	(1,506,236	)

Net loss per share:

Basic	$	(0.08	)	$	(0.06	)	$	(0.16	)	$	(0.18	)
Diluted	$	(0.08	)	$	(0.06	)	$	(0.16	)	$	(0.18	)

Weighted average shares outstanding:

Basic		7,571,940			7,163,608			7,511,378			7,135,149
Diluted		7,571,940			7,163,608			7,511,378			7,135,149


	June 30, 2024 (Unaudited)			December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	2,116,921		$	2,826,630
Accounts receivable, net		2,550,219			1,699,696
Inventories, net		5,186,030			5,409,047
Prepaid expenses and other current assets		561,821			440,730
Deferred cost on shipments to distributors		247,145			322,580
Total current assets		10,662,136			10,698,683

Property and equipment:
Machinery and office equipment		2,677,561			2,700,759
Computer equipment		3,582,404			3,631,945
		6,259,965			6,332,704
Accumulated depreciation		(3,588,676	)		(3,299,503	)
Property and equipment, net		2,671,289			3,033,201

Intangible assets, net		1,495,721			1,559,369
Other long-term assets		248,715			249,715
Deferred tax assets		10,112,419			10,112,419
Operating lease right-of-use asset		2,853,267			3,088,087
Total assets	$	28,043,547		$	28,741,474


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	1,803,697		$	1,605,231
Accrued payroll and related expenses		733,669			579,974
Deferred revenue on shipments to distributors		592,199			825,670
Short term portion of deferred service revenue		19,654			19,885
Subordinated convertible notes payable, net of discount		150,000			150,000
Subordinated convertible notes payable, net of discount-related party		2,838,789			2,835,864
Operating lease – current portion		505,407			483,161
Total current liabilities		6,643,415			6,499,785

Long-term portion of deferred service revenue		14,786			12,813
Long-term portion of operating lease		2,559,204			2,808,872
Total liabilities		9,217,405			9,321,470

Commitments and contingencies		—			—
Stockholders’ equity:
Common stock, $0.001 par value: authorized 20,000,000 shares, 7,956,368 issued and 7,597,118 outstanding at June 30, 2024, and 7,695,371 shares issued and 7,336,121 shares outstanding at December 31, 2023		7,597			7,336
Additional paid-in capital		68,954,153			68,383,230
Treasury stock		(1,037,988	)		(1,037,988	)
Accumulated deficit		(49,097,620	)		(47,932,574	)
Total stockholders’ equity		18,826,142			19,420,004
Total liabilities and stockholders’ equity	$	28,043,547		$	28,741,474


	Common Stock						Additional Paid-In			Treasury Stock					Accumulated			Total 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 stock		256,787			257			(257	)		—		—			—			—
Restricted stock retired for tax withholding		(70,581	)		(71	)		71			—		—			—			—
Exercise of stock options		25,000			25			23,725			—		—			—			23,750
Stock-based compensation		—			—			272,700			—		—			—			272,700
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
Vesting of restricted stock		50,300			50			(50	)		—		—			—			—
Restricted stock retired for tax withholding		(509	)		—			—			—		—			—			—
Stock-based compensation		—			—			274,734			—		—			—			274,734
Net loss		—			—			—			—		—			(607,631	)		(607,631	)
Balance at June 30, 2024		7,597,118		$	7,597		$	68,954,153			359,250	$	(1,037,988	)	$	(49,097,620	)	$	18,826,142


	Six Months Ended June 30,
	2024			2023
Operating activities
Net loss	$	(1,165,046	)	$	(1,506,236	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		547,434			602,249
Depreciation and amortization		520,595			418,549
Amortization of debt discount		2,925			17,033
Amortization of operating lease ROU Asset		243,050			233,003
Deferred tax benefits		—			166,000
Changes in operating assets and liabilities:
Accounts receivable		(850,523	)		(540,561	)
Inventories		223,017			92,541
Prepaid expenses and other current assets		(121,091	)		(546	)
Other assets		1,000			(24,289	)
Accounts payable and accrued expenses		198,466			173,401
Accrued payroll and related expenses		153,696			(142,244	)
Net deferred revenue on shipments to distributors		(158,036	)		201,214
Deferred service revenue		1,742			(1,829	)
Net change in operating lease liability		(235,653	)		(216,467	)
Net cash used in operating activities		(638,424	)		(528,182	)
Investing activities
Purchases of equipment and computer hardware and software		(167,835	)		(1,103,592	)
Proceeds from tenant improvements allowance		72,800			—
Net cash used in investing activities		(95,035	)		(1,103,592	)
Financing activities
Common stocks repurchased and related expenses		—			(208,425	)
Proceeds from note payable		—			1,582,452
Repayments of note payable		—			(125,000	)
Proceeds from stock options exercised		23,750			190,315
Net cash provided by financing activities		23,750			1,439,342
Net decrease in cash and cash equivalents		(709,709	)		(192,432	)
Cash and cash equivalents at beginning of period		2,826,630			3,623,469
Cash and cash equivalents at end of period	$	2,116,921		$	3,431,037
Supplemental disclosure of cash flow information
Cash paid for interest	$	179,589		$	70,934
Cash paid for income taxes	$	—		$	—
Supplemental disclosure of non-cash activities
Property acquired under operating lease	$	8,230		$	—


Fiscal Year	Amount
2024 (July 1, 2024 to December 31, 2024)	$ 63,648
2025	127,296
2026	127,296
2027	127,296
2028	127,296
Thereafter	922,889
Total	$ 1,495,721


	June 30,			December 31,
	2024			2023
Raw materials and sub-assemblies	$	5,850,099		$	5,839,176
Finished goods		296,874			500,814
Inventory reserves		(960,943	)		(930,943	)
Inventory, net	$	5,186,030		$	5,409,047


Annual minimum payments:	Amount
2024 (July 2024 through December 31, 2024)		322,181
2025		657,164
2026		676,750
2027		692,644
2028		713,423
2029		425,647
Total minimum payments		3,487,809
Less: Present value factor		(423,198	)
Total operating lease liabilities		3,064,611
Less: Current portion of operating lease		(505,407	)
Long-term portion of operating lease	$	2,559,204

	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	$	5,381,000	$	5,294,000	$	87,000	$	—	$	—
Operating lease		3,488,000		648,000		1,351,000		1,427,000		62,000
Total contractual obligations	$	8,869,000	$	5,942,000	$	1,438,000	$	1,427,000	$	62,000


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


	June 30,			December 31,
	2024			2023
BlueStar, Inc.		58	%		*
Ingram Micro Inc.		12	%		20	%
ScanSource, Inc.		*			13	%
Synnex Corporation		*			14	%
Nippon Primex, Inc.		*			11	%


Date: August 13, 2024	/s/ Kevin J. Mills
	Kevin J. Mills
	President and Chief Executive Officer
	(Duly Authorized Officer and Principal Executive Officer)


Date: August 13, 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.