Cover
Cover - USD ($) | 12 Months Ended | ||
Dec. 31, 2021 | Mar. 25, 2022 | Jun. 30, 2021 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2021 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2021 | ||
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 | 39700 Eureka Drive | ||
Entity Address, City or Town | Newark | ||
Entity Address, State or Province | CA | ||
Entity Address, Postal Zip Code | 94560 | ||
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 | $ 35,357,359 | ||
Entity Common Stock, Shares Outstanding | 7,273,051 | ||
Auditor Name | Sadler, Gibb & Associates, LLC | ||
Auditor Location | Draper, UT | ||
Auditor Firm ID | 3627 |
Balance Sheets
Balance Sheets - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 6,095,886 | $ 2,121,763 |
Accounts receivable, net | 2,576,240 | 2,112,514 |
Inventories, net | 5,154,524 | 3,195,842 |
Prepaid expenses and other current assets | 395,161 | 335,386 |
Deferred cost on shipments to distributors | 158,977 | 170,016 |
Total current assets | 14,380,788 | 7,935,521 |
Property and equipment | ||
Machinery and office equipment | 2,436,897 | 2,286,268 |
Computer equipment | 1,909,895 | 1,412,030 |
Property and equipment, gross | 4,346,792 | 3,698,298 |
Accumulated depreciation | (3,277,979) | (2,850,635) |
Property and equipment, net | 1,068,813 | 847,663 |
Intangible assets, net | 1,813,961 | |
Other long-term assets | 140,281 | 159,039 |
Deferred tax assets | 7,960,419 | 6,057,690 |
Operating lease right-of-use asset | 210,839 | 609,331 |
Total assets | 25,575,101 | 15,609,244 |
Current liabilities: | ||
Accounts payable and accrued expenses | 2,169,055 | 1,372,701 |
Accrued payroll and related expenses | 692,994 | 375,511 |
Deferred revenue on shipments to distributors | 407,235 | 450,591 |
Short term portion of deferred service revenue | 17,128 | 25,522 |
Notes payable – current portion | 500,000 | |
Subordinated convertible notes payable, net of discount | 143,514 | 169,619 |
Subordinated convertible notes payable, net of discount-related party | 1,201,334 | 1,272,138 |
Operating lease – current portion | 258,097 | 483,254 |
Total current liabilities | 5,389,357 | 4,149,336 |
Long-term portion of note payable | 125,000 | |
Long term portion of operating lease | 258,097 | |
Long-term portion of deferred service revenue | 14,281 | 28,794 |
Total liabilities | 5,528,638 | 4,436,227 |
Commitments and contingencies | ||
Stockholders’ equity: | ||
Common stock, $0.001 par value: Authorized – 20,000,000 shares, Issued and outstanding – 7,183,874 shares at December 31, 2021 and 6,102,630 shares at December 31, 2020 | 7,184 | 6,103 |
Additional paid-in capital | 66,139,630 | 61,733,522 |
Accumulated deficit | (46,100,351) | (50,566,608) |
Total stockholders’ equity | 20,046,463 | 11,173,017 |
Total liabilities and stockholders’ equity | $ 25,575,101 | $ 15,609,244 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2021 | Dec. 31, 2020 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.001 | |
Common stock, authorized | 20,000,000 | |
Common stock, issued and outstanding | 7,183,874 | 6,102,630 |
Common stock, issued | 7,183,874 | 6,102,630 |
Statements of Operations
Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Income Statement [Abstract] | ||
Revenues | $ 23,199,061 | $ 15,700,036 |
Cost of revenues | 10,762,617 | 7,365,135 |
Gross profit | 12,436,444 | 8,334,901 |
Operating expenses: | ||
Research and development | 3,964,599 | 3,140,104 |
Sales and marketing | 3,002,573 | 2,848,549 |
General and administrative | 2,771,891 | 2,269,819 |
Goodwill impairment charges | 4,427,000 | |
Total operating expenses | 9,739,063 | 12,685,472 |
Operating income (loss) | 2,697,381 | (4,350,571) |
Interest expense, net | (198,935) | (97,488) |
Other income | 65,082 | 60,000 |
Extinguishment of debt | 1,058,700 | |
Net income (loss) before income taxes | 2,563,528 | (3,329,359) |
Income tax benefit (expense) | 1,902,729 | 50,578 |
Net income (loss) | $ 4,466,257 | $ (3,278,601) |
Net income (loss) per share: | ||
Basic | $ 0.58 | $ (0.51) |
Fully diluted | $ 0.48 | $ (0.51) |
Weighted average shares outstanding: | ||
Basic | 6,991,194 | 6,036,310 |
Fully diluted | 8,923,487 | 6,036,310 |
Statements of Stockholders' Equ
Statements of Stockholders' Equity - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Beginning balance, value at Dec. 31, 2019 | $ 6,018 | $ 61,066,971 | $ (47,288,007) | $ 13,784,982 |
Common Stock, Shares, Outstanding, Beginning Balance at Dec. 31, 2019 | 6,017,674 | |||
Repurchase of common stock | $ (5) | (8,475) | (8,480) | |
Cancellation of restricted stock | $ (10) | 10 | ||
Stock Issued During Period, Shares, Restricted Stock Award, Forfeited | (9,745) | |||
Exercise of stock options | $ 100 | 167,965 | 168,065 | |
Exercise of stock options (in shares) | 100,239 | |||
Stock-based compensation | 507,051 | 507,051 | ||
Net income | (3,278,601) | (3,278,601) | ||
Conversion of convertible note | ||||
Ending balance, value at Dec. 31, 2020 | $ 6,103 | 61,733,522 | (50,566,608) | $ 11,173,017 |
Common Stock, Shares, Outstanding, Ending Balance at Dec. 31, 2020 | 6,102,630 | 6,102,630 | ||
Repurchase of common stock | $ (1) | (2,396) | $ (2,937) | |
Cancellation of restricted stock | $ (15) | 15 | ||
Stock Issued During Period, Shares, Restricted Stock Award, Forfeited | (14,128) | |||
Exercise of stock options | $ 782 | 1,898,779 | 1,899,561 | |
Exercise of stock options (in shares) | 782,633 | |||
Stock-based compensation | 693,425 | 693,425 | ||
Net income | 4,466,257 | 4,466,257 | ||
Vesting of restricted stock | 40 | (40) | ||
Conversion of convertible note | $ 89 | 129,911 | 130,000 | |
Stock Issued During Period, Shares, Conversion of Convertible Securities | 89,040 | |||
Issuance of common stock for intangible assets | $ 184 | 1,686,956 | 1,687,140 | |
Stock Issued During Period, Shares, Acquisitions | 184,332 | |||
Ending balance, value at Dec. 31, 2021 | $ 7,184 | $ 66,139,630 | $ (46,100,351) | $ 20,046,463 |
Common Stock, Shares, Outstanding, Ending Balance at Dec. 31, 2021 | 7,183,874 | 7,183,874 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Operating activities | ||
Net income (loss) | $ 4,466,257 | $ (3,278,601) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Stock-based compensation | 693,425 | 507,051 |
Depreciation and amortization | 759,158 | 596,900 |
Deferred tax benefits | (1,902,729) | |
Forgiveness of PPP loan | (1,058,700) | |
Amortization of debt discount | 33,091 | 11,030 |
Goodwill impairment charges | 4,427,000 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (463,726) | 724,492 |
Inventories | (1,958,682) | (16,934) |
Prepaid expenses and other current assets | (59,774) | (23,259) |
Other non-current assets | (24,813) | |
Accounts payable and accrued expenses | 424,566 | (712,147) |
Accrued payroll and related expenses | 317,483 | (190,839) |
Net deferred revenue on shipments to distributors | (32,317) | (96,631) |
Deferred service revenue | (22,907) | (19,295) |
Net change in operating lease | (84,762) | (65,622) |
Net cash provided by operating activities | 2,144,270 | 804,445 |
Investing activities | ||
Purchase of equipment | (691,771) | (536,481) |
Net cash used in investing activities | (691,771) | (536,481) |
Financing activities | ||
Payments on operating leases | 8,291 | |
Common stock repurchase and related expenses | (2,937) | (8,480) |
Proceeds from borrowings under bank line of credit agreement | 5,630,000 | |
Repayments of borrowings under bank line of credit agreement | (7,042,449) | |
Repayments of bank term loan | (333,333) | |
Proceeds from note payable | 1,000,000 | 1,208,700 |
Repayments of note payable | (375,000) | (150,000) |
Proceeds from subordinated convertible notes payable, net of discount | 168,321 | |
Proceeds from subordinated convertible notes payable, net of discount-related party | 1,262,406 | |
Stock options exercised | 1,899,561 | 168,065 |
Net cash provided by financing activities | 2,521,624 | 894,939 |
Net increase (decrease) in cash and cash equivalents | 3,974,123 | 1,162,903 |
Cash and cash equivalents at beginning of year | 2,121,763 | 958,860 |
Cash and cash equivalents at end of year | 6,095,886 | 2,121,763 |
Supplemental cash flow information | ||
Cash paid for interest | 176,091 | 94,417 |
Cash paid for income taxes | 6,289 | 4,918 |
Non-cash investing and financing activities | ||
Conversion of note payable | 130,000 | |
Acquisition of intangible assets | $ 1,909,433 |
NOTE 1 _ Organization and Summa
NOTE 1 — Organization and Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2021 | |
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 manufacturer of data capture products for mobile applications used in Retail, Commercial Services, Industrial & Manufacturing, Transportation & Logistics, and Health Care. The Company produces a family of data capture products that connect over Bluetooth and work with applications running on smartphones, tablets and mobile computers using operating systems from Apple® (iOS), Google™ (Android™) and Microsoft® (Windows®). The Company focuses on serving the needs of software application providers as our sales are 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 Newark, California facility. The Company offers its products worldwide through two-tier distribution enabling customers to purchase from a large number of on-line resellers around the world 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 39700 Eureka Drive, Newark, CA 94560. 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. SOCKET MOBILE, INC. NOTES TO 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. As of December 31, 2021 and 2020, all of the Company’s cash and cash equivalents consisted of amounts held in demand deposit accounts in banks. The aggregate cash balance on deposit in these accounts are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company’s cash balance on deposit in these accounts may, at times, exceed the federally insured limits. The Company has never experienced any losses in such accounts. Fair Value of Financial Instruments The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable and foreign exchange contracts approximate 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. The Company hedges a significant portion of the European receivables balance denominated in Euros to reduce the foreign currency risk associates with these assets. In 2021, the total net adjustment for the effects of changes in foreign currency on cash balances, collections, payables, and derivatives used to hedge foreign currency risks, was a net loss of $ 31,100 10,700 Accounts Receivable Allowances 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 describes activity in the allowance for doubtful accounts for the years ended December 31, 2021 and 2020: Year Balance at Charged to Amounts Balance at 2021 $ 40,651 $ — $ — $ 40,651 2020 $ 40,651 $ — $ — $ 40,651 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS 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. At the end of each reporting period, the Company compares its inventory on hand to its forecasted requirements for the next nine-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 nine- 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, 2021 and 2020 consisted of the following: December 31, 2021 2020 Raw materials and sub-assemblies $ 5,757,869 $ 3,642,377 Finished goods 277,598 281,104 Inventory reserves (880,943 ) (727,639 ) Inventory, net $ 5,154,524 $ 3,195,842 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, 2021 and 2020 consisted of the following: December 31, 2021 2020 Prepaid insurance $ 94,923 $ 82,296 Product certification costs 61,557 75,592 Prepaid inventory purchases 131,635 93,859 Prepaid maintenance contracts and other prepaid expenses 107,046 83,639 Prepaid expenses and other current assets $ 395,161 $ 335,386 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. 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 expense in the years ended December 31, 2021 and 2020, was $ 620,115 553,328 Goodwill As of September 30, 2020, the Company experienced a triggering event due to a drop in its stock price, which had been negatively impacted by the economic downturn caused by COVID-19 pandemic and performed a quantitative analysis for potential impairment of its goodwill. The Company’s fair value measurement approach combines the income approach, which estimates fair value based upon projections of future revenues, expenses, and cash flows discounted to its present value, and market valuation technique. The income valuation technique uses estimates and assumptions including the projected future cash flows, discount rate reflecting the risk attributable to the Company, perpetual growth rate, and projected future economic and market conditions. Under the market approach, the principal assumption included an estimate for a control premium. As a result of the analysis, the Company determined the carrying value exceeded its fair value and recorded a non-cash goodwill impairment charge of $ 4,427,000 No SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS 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 the investments. The Company’s trade accounts receivables are primarily with distributors. The Company performs ongoing credit evaluations of its customers’ financial condition, but the Company generally requires no collateral. Reserves are maintained for potential credit losses, and such losses have been within management’s expectations. Customers who accounted for at least 10% of the Company’s accounts receivable balances as of December 31, 2021 and December 31, 2020 were as follows: December 31, 2021 2020 Ingram Micro, Inc. 28 % 34 % ScanSource, Inc. 24 % 13 % BlueStar, Inc. 21 % 29 % Bluestar Europe Distribution BV — * 11 % * Customer accounted for less than 10% of the Company accounts receivable balances Concentration of Suppliers Several of the Company’s component parts are produced by a sole or limited number of suppliers. Shortages could occur in these essential materials due to increased demand, or 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, 2021, 20 54 64 Revenue Recognition and Deferred Revenue On January 1, 2017, the Company adopted ASC 606 “Revenue from Contracts with Customers” and implemented a new revenue recognition policy. Instead of deferring 100% of revenue and cost of revenue until products are sold by distributors, the new policy 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. On December 31, 2021, the deferred revenue and deferred cost on shipments to distributors were approximately $ 407,235 158,977 450,591 170,016 The Company also earns revenue from its SocketCare services program which provides for extended warranty and accidental breakage coverage for selected products. For the year ended December 31, 2021 and 2020, the SocketCare revenue was $ 26,000 35,000 31,409 54,316 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS Cost of Sales and Gross Margins Cost of sales primarily consists of the costs to manufacture our products, including the costs of materials, contract manufacturing, shipping costs, personnel and related expenses including stock-based compensation, equipment and facility expenses, warranty costs and inventory excess and obsolete provisions. The factors that impact our gross margins are the cost of materials, the mix of products and the extent to which we are able to efficiently utilize our manufacturing capacity. Leases In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires a lessee to recognize a liability representing future lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For operating leases, a lessee is required to recognize at inception a right-of-use asset and a lease liability equal to the net present value of the lease payments, with lease expense recognized over the lease term on a straight-line basis. For leases with a term of twelve months or less, ASU 2016-02 allows a reporting entity to make an accounting policy election to not recognize a right-of-use asset and a lease liability, and to recognize lease expense on a straight-line basis. The Company adopted ASU 2016-02 effective January 1, 2019. As of December 31, 2021,the balances of right-of-use assets and liabilities for the existing operating leases were approximately $ 210,839 and $ 258,097 , respectively, compared to approximately $ 609,331 , and $ 741,351 , respectively, on December 31, 2020. In February 2022, the Company entered into a 87-month lease agreement in Fremont, CA. The new space is approximately 35,913 square feet and will serve as the location for the Company’s new Corporate Headquarters, including office space and manufacturing. The Company will account for this lease as an operating lease under ASC 842, “Leases.”. 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 describes activity in the reserves for product warranty costs for the years ended December 31, 2021 and 2020: Year Balance at Additional Warranty Reserves Amounts Balance at 2021 $ 78,871 $ 13,910 $ (13,910 ) $ 78,871 2020 $ 78,871 $ 73,734 $ (73,734 ) $ 78,871 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS 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, , and allocations of overhead and occupancy 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 2021 and 2020 was $ 43,572 Advertising Costs Advertising costs are charged to sales and marketing as incurred. The Company incurred $ 13,627 19,863 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. SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS 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. Net Income (Loss) Per Share The following table sets forth the reconciliation of basic shares to diluted shares and the computation of basic and diluted net income (loss) per share: Years Ended December 31, 2021 2020 Numerator: Net income (loss) $ 4,466,257 $ (3,278,601 ) Net income (loss) allocated to restricted stock award (380,547 ) 188,375 Adjusted net income (loss) for basic earnings per share $ 4,085,710 $ (3,090,223 ) Convertible note interest 175,876 — Adjusted net income (loss) before interest for diluted earnings per share $ 4,261,586 $ (2,571,114 ) Denominator: Weighted average shares outstanding used in computing net income (loss) per share: Basic 6,991,194 6,036,310 Fully diluted 8,923,487 6,036,310 Net income (loss) per share applicable to common stockholders: Basic $ 0.58 $ (0.51 ) Fully diluted $ 0.48 $ (0.51 ) In 2021, the shares used in computing diluted net income per share do not include 691,125 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS 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 date that the awards are issued. 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. 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. Revenues for the geographic areas for the years ended December 31, 2021 and 2020 are as follows: Years Ended December 31, Revenues: (in thousands) 2021 2020 United States $ 17,455 $ 12,137 Europe 3,493 2,209 Asia and rest of world 2,251 1,354 Total $ 23,199 $ 15,700 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, 2021 and 2020 were as follows: Years Ended December 31, 2021 2020 Ingram Micro, Inc. 30 % 31 % BlueStar, Inc. 23 % 23 % ScanSource, Inc. 11 % — * * Customer accounted for less than 10% of the Company’s total revenues SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS Recently Issued Financial Accounting Standards In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles of ASC 740. The amendments also improve consistent application of and simplify GAAP for other areas of ASC 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. Depending on the amendment, adoption may be applied on a retrospective, modified retrospective, or prospective basis. The Company adopted ASU 2019-12 as of January 1, 2021 and it did not have an impact on the Company's financial statements. 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 _ Acquisition of Intangi
NOTE 2 — Acquisition of Intangible Assets | 12 Months Ended |
Dec. 31, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
NOTE 2 — Acquisition of Intangible Assets | NOTE 2 — Acquisition of Intangible Assets On February 26, 2021, the Company entered into the 2021 Technology Transfer Agreement with SpringCard SAS (“SpringCard”). SpringCard is a market leader at the forefront of innovative electronic design and development. Its contactless and wireless solutions support a wide range of customers, from large international corporations to locally focused companies. Under the 2021 Technology Transfer Agreement, the Company acquired an irrevocable, perpetual, non-exclusive, transferable, worldwide, unlimited, unrestricted, royalty-free, fully paid-up right and license to SpringCard’s Contactless Technology Package for use in the Company’s Contactless Reader/Writer products, D600 and S550. SpringCard received 184,332 shares of the Company’s common stock, subject to a collar, and a 10-year warrant to purchase up to an aggregate of 50,000 shares of the Company’s common stock at the price of $10.85 per share in four equal lots of 12,500 shares each, with each lot exercisable on or after January 1st of 2022, 2023, 2024 and 2025, respectively, until the expiration date of the warrant. The common stock was issued on March 29, 2021. The fair value of intangible assets acquired is based on the closing stock price of $7.65 on March 29, 2021. On April 20, 2021, the Company agreed to pay SpringCard the sum of $192,293 to resolve all issues that have arisen due to clerical issues in the implementation of the 2021 Technology Transfer Agreement. The Company and SpringCard both agreed that, with this payment, the Company shall have no further financial obligation to SpringCard under the 2021 Technology Transfer Agreement. The Condensed Balance Sheets include the intangible assets of the acquired technology at the carrying amount, net of amortization of $ 1,813,961 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS The SpringCard intangible assets will be amortized over their estimated useful lives of fifteen years on a straight-line basis, which commenced on April 1, 2021. The estimated future amortization of intangible assets is as follows: Fiscal Year Amount 2022 $ 127,296 2023 127,296 2024 127,296 2025 127,296 Thereafter 1,304,777 Total $ 1,813,961 |
NOTE 3 _ Bank Financing Arrange
NOTE 3 — Bank Financing Arrangements | 12 Months Ended |
Dec. 31, 2021 | |
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. Seventh Financing Agreement On January 8, 2020, the Company entered into the Seventh Business Financing Modification Agreement with the Bank which extended the maturity date of the Company’s revolving line of credit to January 31, 2022. Eighth Financing Agreement On August 28, 2020, the Company entered into the Eighth Business Financing Modification Agreement and Consent with the Bank. The Bank consented to the issuance of subordinated debt in an amount less than $2,000,000, at an annual interest rate of less than 10%, such debt maturing in no sooner than 3 years. Amended and Restated Business Financing Agreement On January 29, 2021 2.0 1.0 January 31, 2023 First Financing Agreement On February 9, 2022, the Company entered into the First Business Financing Modification Agreement with the Bank. The Bank consented to the share repurchase program of up to $1.8 million. Future audit of accounts receivables will be performed once every twelve months. The Bank increased the credit limit for business credit cards to $250,000. SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS Amounts outstanding under the CalCap Loan as of December 31, 2021 are as follows: December 30, 2021 Current portion of CalCap Loan $ 500,000 Long-term portion of CalCap Loan 125,000 CalCap Loan $ 625,000 Interest expense on the CalCap Loan for twelve months ended December 31, 2021 was $36,302. Accrued interest payable related to the amounts outstanding under the CalCap Loan as of December 31, 2021 was $1,858. During the twelve months ended December 31, 2020, total repayment of the term loan, initiated in March 2018 (the “Term Loan”), was $333,333. The total amount borrowed under the domestic and international lines of credit was $5,630,000 and the total repayment was $7,042.449. Interest expense on the Term Loan for the twelve months ended December 31, 2020 was $6,152. Interest expense on the amounts drawn under the Company’s bank credit lines during the twelve months ended December 31, 2020 was $20,461. There were no amounts borrowed at year end on the Company’s bank credit lines as of December 31, 2021 and December 31, 2020. |
NOTE 4 _ Secured Subordinated C
NOTE 4 — Secured Subordinated Convertible Notes Payable | 12 Months Ended |
Dec. 31, 2021 | |
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, including $1,350,000 from officers, directors, and family members. Because the Financing involved such parties related to the Company, a special committee of the Board comprising the Board’s disinterested directors approved the Financing. The funds raised are used to increase the Company’s working capital balances. The notes have a three-year term that accrue interest at 10% per annum and mature on August 30, 2023. The interest on the notes is payable quarterly in cash. The holder of each note may require the Company to repay the principal amount of the note plus accrued interest at any time after August 31, 2021. The principal amount of each note is convertible at any time, at the option of the holder, into shares of the Company’s common stock at a conversion price of $1.46 per share, which was the market closing price of the common stock on Friday, August 28, 2020, the closing date of the financing. The notes did not contain a beneficial conversion feature because the conversion price is higher than the market closing price on the date of the notes payable. The notes are secured by the assets of the Company and are subordinated to amounts outstanding under the Company’s working capital bank line of credit with Western Alliance Bank. Total issuance costs associated with the financing is $96,515, and the costs are presented in the balance sheet as a direct deduction from the notes payable balance of $1,530,000 as a contra-liability. The issuance costs are amortized over three years, the term of the notes payable, and the amortization expense is reported as interest expense. The amortization of debt discount was $33,091 and $11,030 for the year ended December 31, 2021 and 2020, respectively. The remaining debt discount of $55,152 will be amortized through August 30, 2023. SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS Total interest expenses recognized related to the convertible note were $174,842 and $62,172 for the years ended December 31, 2021 and 2020, respectively. During the year ended December 31, 2021, two noteholders elected to convert note principal of $130,000 into shares of the Company’s common stock, $0.001 par value per shares, at the conversion price. |
NOTE 5 _ Commitments and Contin
NOTE 5 — Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
NOTE 5 — Commitments and Contingencies | NOTE 5 — Commitments and Contingencies Operating Lease Obligations The Company leases office space under a non-cancelable operating lease that provides the Company approximately 37,100 square feet in Newark, California. The lease agreement expires on June 30, 2022. In February 2022, the Company entered into a 87 35,913 The operating lease expense under existing agreement was allocated in cost of goods sold and operating costs based on department headcount and amounted to $ 428,873 418,909 On December 31, 2021, the balances of right-of-use assets and liabilities for the existing operating leases were approximately $ 210,839 and $ 258,097 , respectively, compared to approximately $ 609,331 , and $ 741,351 , respectively, on December 31, 2020. Cash payments included in the measurement of our existing operating lease liabilities were $ 515,822 478,461 Future minimum lease payments under the existing operating lease as of December 31, 2021 are shown below: Annual minimum payments: Amount 2022 262,789 Total minimum payments 262,789 Less: Imputed interest (4,692 ) Total operating lease liabilities 258,097 Less: Current portion of operating lease (258,097 ) Long-term portion of operating lease $ — Purchase Commitments On December 31, 2021, the Company’s non-cancelable purchase commitments for inventory to be used in the ordinary course of business during 2022 were approximately $ 11,911,000 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS 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, 2021 | |
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 provides 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. Upon ratification of the 2004 Plan by the shareholders in June 2004, shares in the 1995 Plan that had been reserved but not issued, as well as any shares issued that would otherwise return to the 1995 Plan as a result of termination of options or repurchase of shares, were added to the shares reserved for issuance under the 2004 Plan. The Company grants incentive stock options and restricted stock at an exercise price per share equal to the fair market value per share of common stock on the date of grant. The vesting and exercise provisions are determined by the Board of Directors, with a maximum term of ten years. The 2004 Plan expires on April 23, 2024. The 2004 Plan provides 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, 2021 and 2020, a total of 244,105 and 240,707 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, 2021 and 2020, consisted of the following: Years Ended December 31, Income Statement Classification 2021 2020 Cost of revenues $ 96,254 $ 86,649 Research and development 218,559 137,537 Sales and marketing 166,266 121,802 General and administrative 212,346 161,063 Stock-based compensation expenses $ 693,425 $ 507,051 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS As of December 31, 2021, the remaining unamortized stock-based compensation expense was $ 1,843,981 3.2 Stock Options – 4.46 0.50 Years Ended December 31, 2021 2020 Risk-free interest rate (%) 1.64 % 0.68 % Dividend yield — — Volatility factor 102.26 % 43.62 % Expected option life (years) 3.9 7.4 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, 2021 and 2020: Years Ended December 31, 2021 2020 Total intrinsic value of stock options exercised $ 9,985,639 $ 167,882 Cash received from stock option exercises $ 1,899,561 $ 168,065 The following summarizes stock option activity under the 2004 Plan as of and for the years ended December 31, 2021 and 2020: Outstanding Options Number of Shares Weighted Average Exercise Price Per Share Remaining Contractual Term Intrinsic Balance as of December 31, 2019 2,392,786 $ 2.40 Granted 37,000 $ 1.08 Exercised (100,239 ) $ 1.68 Canceled (334,741 ) $ 2.84 Balance as of December 31, 2020 1,994,806 $ 2.42 Granted 182,000 $ 6.39 Exercised (782,633 ) $ 2.43 Canceled (16,051 ) $ 2.41 Balance as of December 31, 2021 1,378,122 $ 2.81 4.50 $ 2,174,052 Exercisable 1,027,508 $ 2.36 9.92 $ 1,824,936 Unvested 350,614 $ 4.16 9.83 $ 349,116 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS Stock options outstanding as of December 31, 2021 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. - $1.25 226,438 2.67 $ 1.07 218,730 $ 1.07 $1.50 - $1.90 217,825 5.50 $ 1.84 169,826 $ 1.84 $2.00 - $2.32 359,196 6.50 $ 2.29 246,921 $ 2.28 $2.36 - $2.75 149,475 5.08 $ 2.61 145,725 $ 2.61 $2.92 - $2.93 116,824 6.25 $ 2.93 101,650 $ 2.93 $3.70 - $4.49 126,365 5.25 $ 4.08 126,365 $ 4.08 $5.00 - $8.58 182,000 9.92 $ 6.39 18,292 $ 6.47 $0.95 - $8.58 1,378,123 4.50 $ 2.81 1,027,509 $ 2.36 As of December 31, 2021, the remaining unamortized stock option compensation expense was $ 839,317 3.66 Restricted stock – SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS The following summarizes information related to restricted stock activity under the 2004 Plan for the years ended December 31, 2021 and 2020: Number of Weighted Unvested as of December 31, 2019 110,071 $ 1.94 Granted 392,680 $ 1.50 Vested (17,306 ) $ 1.94 Forfeited (43,245 ) $ 1.65 Unvested as of December 31, 2020 442,200 $ 1.58 Granted 312,112 $ 2.89 Vested (59,659 ) $ 1.65 Forfeited (48,528 ) $ 2.00 Unvested as December 31, 2021 646,125 $ 3.32 As of December 31, 2021, the remaining unamortized restricted stock compensation expense was $ 1,004,664 2.83 |
NOTE 7 _ Shares Reserved
NOTE 7 — Shares Reserved | 12 Months Ended |
Dec. 31, 2021 | |
Note 7 Shares Reserved | |
NOTE 7 — Shares Reserved | NOTE 7 — Shares Reserved Common stock reserved for future issuance was as follows: December 31, 2021 2020 Stock option grants outstanding (see Note 6) 1,378,122 1,994,806 Secured subordinated convertible notes (see Note 4) 958,904 1,047,945 Stock warrants issued to SpringCard SAS (see Note 2) 50,000 — 2004 Equity Incentive Plan 208,681 393,351 2,595,707 3,436,102 |
NOTE 8 _ Retirement Plan
NOTE 8 — Retirement Plan | 12 Months Ended |
Dec. 31, 2021 | |
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 on a monthly basis. Effective September 1, 2019, the Company started to provide a match to employees’ 401(k) savings at 3% of employees’ contribution up to $100 per month. Administrative expenses relating to the 401(k) Plan are not significant. |
NOTE 9 _ Income Taxes
NOTE 9 — Income Taxes | 12 Months Ended |
Dec. 31, 2021 | |
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, 2021 and December 31, 2020 was from its U.S. domestic operations. SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS The components of income taxes for the periods ended December 31, 2021 and 2020 are as follows: Years Ended December 31, 2021 2020 Current: Federal $ — $ (55,676 ) State — 4,918 Total Current — (50,758 ) Deferred: Federal (1,354,991 ) — State (547,738 ) — Total Deferred (1,902,729 ) — Income tax (benefit) expense $ (1,902,729 ) $ — A reconciliation of the statutory federal income tax rate to the Company's effective tax rate is as follows: Years Ended December 31, 2021 2020 Income at US statutory rate 21.0 % 21.0 % State taxes, net of federal benefit -11.2 % -1.9 % Goodwill impairment 0.0 % -27.9 % PPP loan forgiveness 0.0 % 6.7 % Valuation allowance 0.7 % 2.4 % Stock compensation -50.2 % -1.8 % NOL true up -1.2 % 0.0 % Tax credits -2.5 % 1.0 % Other -2.2 % -0.5 % Provision for taxes 45.6 % 0 % The principal components of deferred tax assets and (liabilities) are as follows for the period ended: December 31, Deferred tax assets: 2021 2020 Net operating loss carryforwards $ 6,390,000 $ 4,330,000 Tax credits 1,032,000 948,000 Amortization — 37,000 Accruals & reserves 786,000 560,000 Lease liabilities 70,000 200,000 Depreciation 167,000 140,000 Share-based compensation 154,000 — Total deferred tax assets 8,599,000 6,215,000 Valuation allowance (577,000 ) (545,000 ) Net deferred tax assets 8,022,000 5,670,000 Deferred tax liabilities: Amortization 3,000 — ROU assets 59,000 163,000 Net deferred tax asset (liability) $ 7,960,000 $ 5,507,000 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS As of December 31, 2021, the Company had U.S. federal net operating loss carryforwards of $ 25.2 15.7 As of December 31, 2021, the Company had U.S. federal research and development credit carryforwards of $ 1.2 1.2 million As of December 31, 2021, the Company is in a net deferred tax asset position before valuation allowance. 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, 2021, after consideration of all available evidence, both positive and negative, the Company continues to maintain a full valuation allowance against the Company’s deferred tax assets related to 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, 2021 and 2020 was an increase of less than $0.1 million and a decrease of less than $0.1 million, respectively. 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 (“Section 382”). Under Section 382, if a corporation undergoes an ownership change (as defined in Section 382), 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, 2020 $ 1,019,000 Increases (decreases) for current year tax provisions 77,000 Increases (decreases) for prior year tax provisions (32,000 ) Decreases for expiration of statute of limitations — Settlements — Balance as of December 31, 2020 1,064,000 Increases (decreases) for current year tax provisions 115,000 Increases (decreases) for prior year tax provisions (26,000 ) Decreases for expiration of statute of limitations — Settlements — Balance as of December 31, 2021 $ 1,153,000 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS The Company files income tax returns in the U.S. federal jurisdiction and in California, and is therefore subject to tax examination by two 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, 2021, the tax years from 2018 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 2018, the statute remains open to the extent of the net operating losses or other credits that are utilized. 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, 2021 and 2020, the Company had 1,153,000 and $ 1,064,000 , respectively, of unrecognized tax benefits. Of the $1.2 million as of December 31, 2021, $1.2 million if recognized would affect the effective tax rate. In addition, the Company believes it is reasonably possible that its unrecognized tax benefits will not change significantly within the next twelve months. As of December 31, 2021 and 2020, the Company has not accrued any interest and penalties related to uncertain tax positions. The Company has elected to recognize accrued interest and penalties, if any, related to uncertain tax positions in tax expense in its financial statements. |
NOTE 10 _ Subsequent Events
NOTE 10 — Subsequent Events | 12 Months Ended |
Dec. 31, 2021 | |
Subsequent Events [Abstract] | |
NOTE 10 — Subsequent Events | NOTE 10 — Subsequent Events In January 2022, the Company’s Board of Directors authorized a share repurchase program of up to $1.8 million. The Company has entered into a share repurchase arrangement with a financial institution during the trading window. In February 2022, the Company entered into an operating lease agreement for an approximately 35,913 square foot facility in Fremont, California where it will move its office and manufacturing operations. The lease agreement is for a base term of 87 months and a monthly rent obligation of $50,278.20, subject to annual increases of 3%. The lease commences on May 1, 2022 and the Company is provided with three months of free rent. On February 1, 2022, 233,800 shares of restricted stocks at a price of $3.77 per share have been granted from the 2004 Equity Incentive Plan subsequent to December 31, 2021. The shares include annual refresher grants to all continuing employees with a weighting reflecting the level of responsibility and performance of the employee and initial grants to three newly hired employees. As of March 25, 2022, the Company has issued 24,200 shares of common stock for the exercise of stock options. |
NOTE 1 _ Organization and Sum_2
NOTE 1 — Organization and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2021 | |
Accounting Policies [Abstract] | |
Organization and Business | Organization and Business Socket Mobile, Inc. (the “Company”) is a leading manufacturer of data capture products for mobile applications used in Retail, Commercial Services, Industrial & Manufacturing, Transportation & Logistics, and Health Care. The Company produces a family of data capture products that connect over Bluetooth and work with applications running on smartphones, tablets and mobile computers using operating systems from Apple® (iOS), Google™ (Android™) and Microsoft® (Windows®). The Company focuses on serving the needs of software application providers as our sales are 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 Newark, California facility. The Company offers its products worldwide through two-tier distribution enabling customers to purchase from a large number of on-line resellers around the world 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 39700 Eureka Drive, Newark, CA 94560. |
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. As of December 31, 2021 and 2020, all of the Company’s cash and cash equivalents consisted of amounts held in demand deposit accounts in banks. The aggregate cash balance on deposit in these accounts are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company’s cash balance on deposit in these accounts may, at times, exceed the federally insured limits. The Company has never experienced any losses in such accounts. |
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 approximate 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. The Company hedges a significant portion of the European receivables balance denominated in Euros to reduce the foreign currency risk associates with these assets. In 2021, the total net adjustment for the effects of changes in foreign currency on cash balances, collections, payables, and derivatives used to hedge foreign currency risks, was a net loss of $ 31,100 10,700 |
Accounts Receivable Allowances | Accounts Receivable Allowances 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 describes activity in the allowance for doubtful accounts for the years ended December 31, 2021 and 2020: Year Balance at Charged to Amounts Balance at 2021 $ 40,651 $ — $ — $ 40,651 2020 $ 40,651 $ — $ — $ 40,651 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS |
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. At the end of each reporting period, the Company compares its inventory on hand to its forecasted requirements for the next nine-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 nine- 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, 2021 and 2020 consisted of the following: December 31, 2021 2020 Raw materials and sub-assemblies $ 5,757,869 $ 3,642,377 Finished goods 277,598 281,104 Inventory reserves (880,943 ) (727,639 ) Inventory, net $ 5,154,524 $ 3,195,842 |
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. 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 expense in the years ended December 31, 2021 and 2020, was $ 620,115 553,328 |
Goodwill | Goodwill As of September 30, 2020, the Company experienced a triggering event due to a drop in its stock price, which had been negatively impacted by the economic downturn caused by COVID-19 pandemic and performed a quantitative analysis for potential impairment of its goodwill. The Company’s fair value measurement approach combines the income approach, which estimates fair value based upon projections of future revenues, expenses, and cash flows discounted to its present value, and market valuation technique. The income valuation technique uses estimates and assumptions including the projected future cash flows, discount rate reflecting the risk attributable to the Company, perpetual growth rate, and projected future economic and market conditions. Under the market approach, the principal assumption included an estimate for a control premium. As a result of the analysis, the Company determined the carrying value exceeded its fair value and recorded a non-cash goodwill impairment charge of $ 4,427,000 No |
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 the investments. The Company’s trade accounts receivables are primarily with distributors. The Company performs ongoing credit evaluations of its customers’ financial condition, but the Company generally requires no collateral. Reserves are maintained for potential credit losses, and such losses have been within management’s expectations. Customers who accounted for at least 10% of the Company’s accounts receivable balances as of December 31, 2021 and December 31, 2020 were as follows: December 31, 2021 2020 Ingram Micro, Inc. 28 % 34 % ScanSource, Inc. 24 % 13 % BlueStar, Inc. 21 % 29 % Bluestar Europe Distribution BV — * 11 % * Customer accounted for less than 10% of the Company accounts receivable balances |
Concentration of Suppliers | |
Revenue Recognition and Deferred Revenue | Revenue Recognition and Deferred Revenue On January 1, 2017, the Company adopted ASC 606 “Revenue from Contracts with Customers” and implemented a new revenue recognition policy. Instead of deferring 100% of revenue and cost of revenue until products are sold by distributors, the new policy 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. On December 31, 2021, the deferred revenue and deferred cost on shipments to distributors were approximately $ 407,235 158,977 450,591 170,016 The Company also earns revenue from its SocketCare services program which provides for extended warranty and accidental breakage coverage for selected products. For the year ended December 31, 2021 and 2020, the SocketCare revenue was $ 26,000 35,000 31,409 54,316 |
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 impact our gross margins are the cost of materials, the mix of products and the extent to which we are able to efficiently utilize our manufacturing capacity. |
Leases | Leases In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires a lessee to recognize a liability representing future lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For operating leases, a lessee is required to recognize at inception a right-of-use asset and a lease liability equal to the net present value of the lease payments, with lease expense recognized over the lease term on a straight-line basis. For leases with a term of twelve months or less, ASU 2016-02 allows a reporting entity to make an accounting policy election to not recognize a right-of-use asset and a lease liability, and to recognize lease expense on a straight-line basis. The Company adopted ASU 2016-02 effective January 1, 2019. As of December 31, 2021,the balances of right-of-use assets and liabilities for the existing operating leases were approximately $ 210,839 and $ 258,097 , respectively, compared to approximately $ 609,331 , and $ 741,351 , respectively, on December 31, 2020. In February 2022, the Company entered into a 87-month lease agreement in Fremont, CA. The new space is approximately 35,913 square feet and will serve as the location for the Company’s new Corporate Headquarters, including office space and manufacturing. The Company will account for this lease as an operating lease under ASC 842, “Leases.”. |
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 describes activity in the reserves for product warranty costs for the years ended December 31, 2021 and 2020: Year Balance at Additional Warranty Reserves Amounts Balance at 2021 $ 78,871 $ 13,910 $ (13,910 ) $ 78,871 2020 $ 78,871 $ 73,734 $ (73,734 ) $ 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, , and allocations of overhead and occupancy costs. |
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 2021 and 2020 was $ 43,572 |
Advertising Costs | Advertising Costs Advertising costs are charged to sales and marketing as incurred. The Company incurred $ 13,627 19,863 |
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. SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS 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. |
Net Income (Loss) Per Share | Net Income (Loss) Per Share The following table sets forth the reconciliation of basic shares to diluted shares and the computation of basic and diluted net income (loss) per share: Years Ended December 31, 2021 2020 Numerator: Net income (loss) $ 4,466,257 $ (3,278,601 ) Net income (loss) allocated to restricted stock award (380,547 ) 188,375 Adjusted net income (loss) for basic earnings per share $ 4,085,710 $ (3,090,223 ) Convertible note interest 175,876 — Adjusted net income (loss) before interest for diluted earnings per share $ 4,261,586 $ (2,571,114 ) Denominator: Weighted average shares outstanding used in computing net income (loss) per share: Basic 6,991,194 6,036,310 Fully diluted 8,923,487 6,036,310 Net income (loss) per share applicable to common stockholders: Basic $ 0.58 $ (0.51 ) Fully diluted $ 0.48 $ (0.51 ) In 2021, the shares used in computing diluted net income per share do not include 691,125 |
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. Revenues for the geographic areas for the years ended December 31, 2021 and 2020 are as follows: Years Ended December 31, Revenues: (in thousands) 2021 2020 United States $ 17,455 $ 12,137 Europe 3,493 2,209 Asia and rest of world 2,251 1,354 Total $ 23,199 $ 15,700 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, 2021 and 2020 were as follows: Years Ended December 31, 2021 2020 Ingram Micro, Inc. 30 % 31 % BlueStar, Inc. 23 % 23 % ScanSource, Inc. 11 % — * * Customer accounted for less than 10% of the Company’s total revenues |
Recently Issued Financial Accounting Standards | Recently Issued Financial Accounting Standards In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles of ASC 740. The amendments also improve consistent application of and simplify GAAP for other areas of ASC 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. Depending on the amendment, adoption may be applied on a retrospective, modified retrospective, or prospective basis. The Company adopted ASU 2019-12 as of January 1, 2021 and it did not have an impact on the Company's financial statements. 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, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Operating Lease Obligations | Operating Lease Obligations The Company leases office space under a non-cancelable operating lease that provides the Company approximately 37,100 square feet in Newark, California. The lease agreement expires on June 30, 2022. In February 2022, the Company entered into a 87 35,913 The operating lease expense under existing agreement was allocated in cost of goods sold and operating costs based on department headcount and amounted to $ 428,873 418,909 On December 31, 2021, the balances of right-of-use assets and liabilities for the existing operating leases were approximately $ 210,839 and $ 258,097 , respectively, compared to approximately $ 609,331 , and $ 741,351 , respectively, on December 31, 2020. Cash payments included in the measurement of our existing operating lease liabilities were $ 515,822 478,461 Future minimum lease payments under the existing operating lease as of December 31, 2021 are shown below: Annual minimum payments: Amount 2022 262,789 Total minimum payments 262,789 Less: Imputed interest (4,692 ) Total operating lease liabilities 258,097 Less: Current portion of operating lease (258,097 ) Long-term portion of operating lease $ — |
Purchase Commitments | Purchase Commitments On December 31, 2021, the Company’s non-cancelable purchase commitments for inventory to be used in the ordinary course of business during 2022 were approximately $ 11,911,000 |
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 1 _ Organization and Sum_3
NOTE 1 — Organization and Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Accounting Policies [Abstract] | |
Activities in allowance for doubtful accounts | Year Balance at Charged to Amounts Balance at 2021 $ 40,651 $ — $ — $ 40,651 2020 $ 40,651 $ — $ — $ 40,651 |
Inventory Components | December 31, 2021 2020 Raw materials and sub-assemblies $ 5,757,869 $ 3,642,377 Finished goods 277,598 281,104 Inventory reserves (880,943 ) (727,639 ) Inventory, net $ 5,154,524 $ 3,195,842 |
Prepaid Expenses and Other Current Assets | December 31, 2021 2020 Prepaid insurance $ 94,923 $ 82,296 Product certification costs 61,557 75,592 Prepaid inventory purchases 131,635 93,859 Prepaid maintenance contracts and other prepaid expenses 107,046 83,639 Prepaid expenses and other current assets $ 395,161 $ 335,386 |
Concentration of Credit Risk | December 31, 2021 2020 Ingram Micro, Inc. 28 % 34 % ScanSource, Inc. 24 % 13 % BlueStar, Inc. 21 % 29 % Bluestar Europe Distribution BV — * 11 % |
Warranty | Year Balance at Additional Warranty Reserves Amounts Balance at 2021 $ 78,871 $ 13,910 $ (13,910 ) $ 78,871 2020 $ 78,871 $ 73,734 $ (73,734 ) $ 78,871 |
Net Income (Loss) per Share Applicable to Common Stockholders | Years Ended December 31, 2021 2020 Numerator: Net income (loss) $ 4,466,257 $ (3,278,601 ) Net income (loss) allocated to restricted stock award (380,547 ) 188,375 Adjusted net income (loss) for basic earnings per share $ 4,085,710 $ (3,090,223 ) Convertible note interest 175,876 — Adjusted net income (loss) before interest for diluted earnings per share $ 4,261,586 $ (2,571,114 ) Denominator: Weighted average shares outstanding used in computing net income (loss) per share: Basic 6,991,194 6,036,310 Fully diluted 8,923,487 6,036,310 Net income (loss) per share applicable to common stockholders: Basic $ 0.58 $ (0.51 ) Fully diluted $ 0.48 $ (0.51 ) |
Revenues for geographic areas (in $'000) | Years Ended December 31, Revenues: (in thousands) 2021 2020 United States $ 17,455 $ 12,137 Europe 3,493 2,209 Asia and rest of world 2,251 1,354 Total $ 23,199 $ 15,700 |
Customers who accounted for at least 10% of total revenues | Years Ended December 31, 2021 2020 Ingram Micro, Inc. 30 % 31 % BlueStar, Inc. 23 % 23 % ScanSource, Inc. 11 % — * * Customer accounted for less than 10% of the Company’s total revenues |
NOTE 2 _ Acquisition of Intan_2
NOTE 2 — Acquisition of Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
Amortization | Fiscal Year Amount 2022 $ 127,296 2023 127,296 2024 127,296 2025 127,296 Thereafter 1,304,777 Total $ 1,813,961 |
NOTE 3 _ Bank Financing Arran_2
NOTE 3 — Bank Financing Arrangements (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Debt Disclosure [Abstract] | |
CalCap loan balance | December 30, 2021 Current portion of CalCap Loan $ 500,000 Long-term portion of CalCap Loan 125,000 CalCap Loan $ 625,000 |
NOTE 5 _ Commitments and Cont_3
NOTE 5 — Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future minimum lease payments | Annual minimum payments: Amount 2022 262,789 Total minimum payments 262,789 Less: Imputed interest (4,692 ) Total operating lease liabilities 258,097 Less: Current portion of operating lease (258,097 ) Long-term portion of operating lease $ — |
NOTE 6 _ Stock-Based Compensa_2
NOTE 6 — Stock-Based Compensation Plan (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of employee service stock-based compensation, allocation of recognized period costs | Years Ended December 31, Income Statement Classification 2021 2020 Cost of revenues $ 96,254 $ 86,649 Research and development 218,559 137,537 Sales and marketing 166,266 121,802 General and administrative 212,346 161,063 Stock-based compensation expenses $ 693,425 $ 507,051 |
Stock options' weighted average assumptions and grant date fair values | Years Ended December 31, 2021 2020 Risk-free interest rate (%) 1.64 % 0.68 % Dividend yield — — Volatility factor 102.26 % 43.62 % Expected option life (years) 3.9 7.4 |
Activity of stock options exercised | Years Ended December 31, 2021 2020 Total intrinsic value of stock options exercised $ 9,985,639 $ 167,882 Cash received from stock option exercises $ 1,899,561 $ 168,065 |
2004 Plan outstanding and exercisable options by price range | 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. - $1.25 226,438 2.67 $ 1.07 218,730 $ 1.07 $1.50 - $1.90 217,825 5.50 $ 1.84 169,826 $ 1.84 $2.00 - $2.32 359,196 6.50 $ 2.29 246,921 $ 2.28 $2.36 - $2.75 149,475 5.08 $ 2.61 145,725 $ 2.61 $2.92 - $2.93 116,824 6.25 $ 2.93 101,650 $ 2.93 $3.70 - $4.49 126,365 5.25 $ 4.08 126,365 $ 4.08 $5.00 - $8.58 182,000 9.92 $ 6.39 18,292 $ 6.47 $0.95 - $8.58 1,378,123 4.50 $ 2.81 1,027,509 $ 2.36 |
Restricted Stock | Number of Weighted Unvested as of December 31, 2019 110,071 $ 1.94 Granted 392,680 $ 1.50 Vested (17,306 ) $ 1.94 Forfeited (43,245 ) $ 1.65 Unvested as of December 31, 2020 442,200 $ 1.58 Granted 312,112 $ 2.89 Vested (59,659 ) $ 1.65 Forfeited (48,528 ) $ 2.00 Unvested as December 31, 2021 646,125 $ 3.32 |
NOTE 7 _ Shares Reserved (Table
NOTE 7 — Shares Reserved (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Note 7 Shares Reserved | |
Common stock reserved for future issuance | December 31, 2021 2020 Stock option grants outstanding (see Note 6) 1,378,122 1,994,806 Secured subordinated convertible notes (see Note 4) 958,904 1,047,945 Stock warrants issued to SpringCard SAS (see Note 2) 50,000 — 2004 Equity Incentive Plan 208,681 393,351 2,595,707 3,436,102 |
NOTE 9 _ Income Taxes (Tables)
NOTE 9 — Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income Tax Expense | Years Ended December 31, 2021 2020 Current: Federal $ — $ (55,676 ) State — 4,918 Total Current — (50,758 ) Deferred: Federal (1,354,991 ) — State (547,738 ) — Total Deferred (1,902,729 ) — Income tax (benefit) expense $ (1,902,729 ) $ — |
Schedule of Effective Income Tax Rate Reconciliation | Years Ended December 31, 2021 2020 Income at US statutory rate 21.0 % 21.0 % State taxes, net of federal benefit -11.2 % -1.9 % Goodwill impairment 0.0 % -27.9 % PPP loan forgiveness 0.0 % 6.7 % Valuation allowance 0.7 % 2.4 % Stock compensation -50.2 % -1.8 % NOL true up -1.2 % 0.0 % Tax credits -2.5 % 1.0 % Other -2.2 % -0.5 % Provision for taxes 45.6 % 0 % |
Schedule of Deferred Tax Assets and Liabilities | December 31, Deferred tax assets: 2021 2020 Net operating loss carryforwards $ 6,390,000 $ 4,330,000 Tax credits 1,032,000 948,000 Amortization — 37,000 Accruals & reserves 786,000 560,000 Lease liabilities 70,000 200,000 Depreciation 167,000 140,000 Share-based compensation 154,000 — Total deferred tax assets 8,599,000 6,215,000 Valuation allowance (577,000 ) (545,000 ) Net deferred tax assets 8,022,000 5,670,000 Deferred tax liabilities: Amortization 3,000 — ROU assets 59,000 163,000 Net deferred tax asset (liability) $ 7,960,000 $ 5,507,000 |
Schedule of Unrecognized Tax Benefits | Amount Balance as of January 1, 2020 $ 1,019,000 Increases (decreases) for current year tax provisions 77,000 Increases (decreases) for prior year tax provisions (32,000 ) Decreases for expiration of statute of limitations — Settlements — Balance as of December 31, 2020 1,064,000 Increases (decreases) for current year tax provisions 115,000 Increases (decreases) for prior year tax provisions (26,000 ) Decreases for expiration of statute of limitations — Settlements — Balance as of December 31, 2021 $ 1,153,000 |
Activities in allowance for dou
Activities in allowance for doubtful accounts (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
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, 2021 | Dec. 31, 2020 |
Accounting Policies [Abstract] | ||
Raw materials and sub-assemblies | $ 5,757,869 | $ 3,642,377 |
Finished goods | 277,598 | 281,104 |
Inventory reserves | (880,943) | (727,639) |
Inventory, net | $ 5,154,524 | $ 3,195,842 |
Prepaid Expenses and Other Curr
Prepaid Expenses and Other Current Assets (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Accounting Policies [Abstract] | ||
Prepaid insurance | $ 94,923 | $ 82,296 |
Product certification costs | 61,557 | 75,592 |
Prepaid inventory purchases | 131,635 | 93,859 |
Prepaid maintenance contracts and other prepaid expenses | 107,046 | 83,639 |
Prepaid expenses and other current assets | $ 395,161 | $ 335,386 |
Concentration of Credit Risk (D
Concentration of Credit Risk (Details) | Dec. 31, 2021 | Dec. 31, 2020 |
Ingram Micro [Member] | ||
Bluestar Europe Distribution BV | 0.28 | 0.34 |
Scan Source [Member] | ||
Bluestar Europe Distribution BV | 0.24 | 0.13 |
Blue Star [Member] | ||
Bluestar Europe Distribution BV | 0.21 | 0.29 |
Bluestar Europe [Member] | ||
Bluestar Europe Distribution BV | 0.11 |
Warranty (Details)
Warranty (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Accounting Policies [Abstract] | ||
Standard and Extended Product Warranty Accrual, Beginning Balance | $ 78,871 | $ 78,871 |
Standard and Extended Product Warranty Accrual, Increase for Warranties Issued | 13,910 | 73,734 |
Product Warranty Expense | (13,910) | (73,734) |
Standard and Extended Product Warranty Accrual, Ending Balance | $ 78,871 | $ 78,871 |
Net Income (Loss) per Share App
Net Income (Loss) per Share Applicable to Common Stockholders (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Numerator: | ||
Net income (loss) | $ 4,466,257 | $ (3,278,601) |
Net income (loss) allocated to restricted stock award | (380,547) | 188,375 |
Adjusted net income (loss) for basic earnings per share | 4,085,710 | (3,090,223) |
Convertible note interest | 175,876 | |
Adjusted net income (loss) before interest for diluted earnings per share | $ 4,261,586 | $ (2,571,114) |
Denominator: Weighted average shares outstanding used in computing net income (loss) per share: | ||
Basic | 6,991,194 | 6,036,310 |
Fully diluted | 8,923,487 | 6,036,310 |
Net income (loss) per share applicable to common stockholders: | ||
Basic | $ 0.58 | $ (0.51) |
Fully diluted | $ 0.48 | $ (0.51) |
Revenues for geographic areas (
Revenues for geographic areas (in $'000) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Americas [Member] | ||
Total | $ 17,455 | $ 12,137 |
EMEA [Member] | ||
Total | 3,493 | 2,209 |
Asia Pacific [Member] | ||
Total | 2,251 | 1,354 |
Total [Member] | ||
Total | $ 23,199 | $ 15,700 |
Customers who accounted for at
Customers who accounted for at least 10% of total revenues (Details) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Ingram Micro [Member] | ||
ScanSource, Inc. | 30 | 31 |
Blue Star [Member] | ||
ScanSource, Inc. | 23 | 23 |
Scan Source [Member] | ||
ScanSource, Inc. | 11 |
NOTE 1 _ Organization and Sum_4
NOTE 1 — Organization and Summary of Significant Accounting Policies (Details Narrative) | 12 Months Ended | |
Dec. 31, 2021USD ($) | Dec. 31, 2020USD ($)shares | |
Product Information [Line Items] | ||
Gain (Loss) on Foreign Currency Fair Value Hedge Derivatives | $ 31,100 | $ 10,700 |
[custom:DepreciationExpense] | 620,115 | 553,328 |
Goodwill and Intangible Asset Impairment | 0 | 4,427,000 |
Deferred Revenue, Current | 407,235 | 450,591 |
Deferred Costs and Other Assets | 158,977 | 170,016 |
[custom:ServiceRevenues] | 26,000 | 35,000 |
Operating Lease, Right-of-Use Asset | 210,839 | 609,331 |
Operating Lease, Liability | 258,097 | 741,351 |
Capitalized Computer Software, Amortization | 43,572 | |
Advertising Expense | 13,627 | $ 19,863 |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | shares | 691,125 | |
Service [Member] | ||
Product Information [Line Items] | ||
Deferred Revenue | $ 31,409 | $ 54,316 |
Supplier Concentration Risk [Member] | ||
Product Information [Line Items] | ||
Accounts payable balances from top two suppliers | 0.20 | |
Perrcentage of inventory purchases from top three suppliers | 54.00% | 64.00% |
Amortization (Details)
Amortization (Details) | Dec. 31, 2021USD ($) |
Business Combination and Asset Acquisition [Abstract] | |
$ 127,296 | |
127,296 | |
127,296 | |
127,296 | |
1,304,777 | |
$ 1,813,961 |
NOTE 2 _ Acquisition of Intan_3
NOTE 2 — Acquisition of Intangible Assets (Details Narrative) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Business Combination and Asset Acquisition [Abstract] | ||
Intangible Assets, Net (Excluding Goodwill) | $ 1,813,961 |
CalCap loan balance (Details)
CalCap loan balance (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Debt Disclosure [Abstract] | ||
Current portion of CalCap Loan | $ 500,000 | |
Long-term portion of CalCap Loan | 125,000 | |
CalCap Loan | $ 625,000 |
NOTE 3 _ Bank Financing Arran_3
NOTE 3 — Bank Financing Arrangements (Details Narrative) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2021 | Jan. 29, 2021 | |
Line of Credit Facility [Line Items] | ||
Line of Credit Facility, Initiation Date | Jan. 29, 2021 | |
Line of Credit Facility, Expiration Date | Jan. 31, 2023 | |
Term Loan [Member] | ||
Line of Credit Facility [Line Items] | ||
Aggregate maximum advance amount (in million) | $ 1 | |
Domestic Revolving Facility [Member] | ||
Line of Credit Facility [Line Items] | ||
Aggregate maximum advance amount (in million) | $ 2 |
Future minimum lease payments (
Future minimum lease payments (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Commitments and Contingencies Disclosure [Abstract] | ||
2022 | $ 262,789 | |
Total minimum payments | 262,789 | |
Less: Imputed interest | (4,692) | |
Total operating lease liabilities | 258,097 | $ 741,351 |
Less: Current portion of operating lease | (258,097) | (483,254) |
Long-term portion of operating lease | $ 258,097 |
NOTE 5 _ Commitments and Cont_4
NOTE 5 — Commitments and Contingencies (Details Narrative) | 12 Months Ended | ||
Dec. 31, 2021USD ($) | Dec. 31, 2020USD ($) | Feb. 04, 2022ft² | |
Commitments and Contingencies Disclosure [Abstract] | |||
New Lease Term | 87 months | ||
Area of land | ft² | 35,913 | ||
Operating Lease, Expense | $ 428,873 | $ 418,909 | |
Operating Lease, Right-of-Use Asset | 210,839 | 609,331 | |
Operating Lease, Liability | 258,097 | 741,351 | |
Operating Lease, Payments | 515,822 | $ 478,461 | |
Purchase Obligation, to be Paid, Year One | $ 11,911,000 |
Schedule of employee service st
Schedule of employee service stock-based compensation, allocation of recognized period costs (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Stock-based compensation expenses | $ 693,425 | $ 507,051 |
Cost Of Revenue [Member] | ||
Stock-based compensation expenses | 96,254 | 86,649 |
Research And Development [Member] | ||
Stock-based compensation expenses | 218,559 | 137,537 |
Sales And Marketing [Member] | ||
Stock-based compensation expenses | 166,266 | 121,802 |
General And Administrative [Member] | ||
Stock-based compensation expenses | $ 212,346 | $ 161,063 |
Stock options' weighted average
Stock options' weighted average assumptions and grant date fair values (Details) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | ||
Risk-free interest rate (%) | 1.64% | 0.68% |
Dividend yield | ||
Volatility factor | 102.26% | 43.62% |
Expected option life (years) | 3 years 10 months 24 days | 7 years 4 months 24 days |
Activity of stock options exerc
Activity of stock options exercised (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total intrinsic value of stock options exercised | $ 9,985,639 | $ 167,882 |
Cash received from stock option exercises | $ 1,899,561 | $ 168,065 |
Equity Option [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Balance as of December 31, 2020 (in shares) | 1,994,806 | 2,392,786 |
Balance at December 31, 2020 (in $ per share) | $ 2.42 | $ 2.40 |
Granted (in shares) | 182,000 | 37,000 |
Granted | $ 6.39 | $ 1.08 |
Exercised (in Shares) | (782,633) | (100,239) |
Exercised | $ 2.43 | $ 1.68 |
Cancelled (in shares) | (16,051) | (334,741) |
Canceled | $ 2.41 | $ 2.84 |
Balance as of December 31, 2021 (in shares) | 1,378,122 | 1,994,806 |
Balance as of December 31, 2021 (in $ per shares) | $ 2.81 | $ 2.42 |
Outstanding, Remaining contractual term | 4 years 6 months | |
Outstanding, Intrinsic value | $ 2,174,052 | |
Exercisable (in shares) | 1,027,508 | |
Exercisable | $ 2.36 | |
Exercisable, Remaining contractual term | 9 years 11 months 1 day | |
Exercisable, Intrinsic value | $ 1,824,936 | |
Unvested (in shares) | 350,614 | |
Unvested | $ 4.16 | |
Unvested, Remaining contractual term | 9 years 9 months 29 days | |
Unvested, Intrinsic value | $ 349,116 |
NOTE 6 _ Stock-Based Compensa_3
NOTE 6 — Stock-Based Compensation Plan (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount | $ 1,843,981 | |
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition | 3 years 2 months 12 days | |
Weighted average grant date fair value | $ 4.46 | $ 0.50 |
Equity Option [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount | $ 839,317 | |
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition | 3 years 7 months 28 days | |
Restricted Stock [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount | $ 1,004,664 | |
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition | 2 years 9 months 29 days |
Common stock reserved for futur
Common stock reserved for future issuance (Details) - shares | Dec. 31, 2021 | Dec. 31, 2020 |
A 2004 Equity Incentive Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
2004 Equity Incentive Plan | 208,681 | 393,351 |
Share-based Payment Arrangement, Option [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
2004 Equity Incentive Plan | 1,378,122 | 1,994,806 |
Subordinated Convertible Note [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
2004 Equity Incentive Plan | 958,904 | 1,047,945 |
Warrant To Purchase Common Stock [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
2004 Equity Incentive Plan | 50,000 |
Schedule of Income Tax Expense
Schedule of Income Tax Expense (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | ||
Federal | $ (55,676) | |
State | 4,918 | |
Total Current | (50,758) | |
Federal | (1,354,991) | |
State | (547,738) | |
Total Deferred | (1,902,729) | |
Income tax (benefit) expense | $ (1,902,729) |
Schedule of Effective Income Ta
Schedule of Effective Income Tax Rate Reconciliation (Details) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | ||
Income at US statutory rate | 21.00% | 21.00% |
State taxes, net of federal benefit | (11.20%) | (1.90%) |
Goodwill impairment | 0.00% | (27.90%) |
PPP loan forgiveness | 0.00% | 6.70% |
Valuation allowance | 0.70% | 2.40% |
Stock compensation | (50.20%) | (1.80%) |
NOL true up | (1.20%) | 0.00% |
Tax credits | (2.50%) | 1.00% |
Other | (2.20%) | (0.50%) |
Provision for taxes | 45.60% | 0.00% |
Schedule of Deferred Tax Assets
Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 6,390,000 | $ 4,330,000 |
Tax credits | 1,032,000 | 948,000 |
Amortization | 37,000 | |
Accruals & reserves | 786,000 | 560,000 |
Lease liabilities | 70,000 | 200,000 |
Depreciation | 167,000 | 140,000 |
Share-based compensation | 154,000 | |
Total deferred tax assets | 8,599,000 | 6,215,000 |
Valuation allowance | (577,000) | (545,000) |
Net deferred tax assets | 8,022,000 | 5,670,000 |
Deferred tax liabilities: | ||
Amortization | 3,000 | |
ROU assets | 59,000 | 163,000 |
Net deferred tax asset (liability) | $ 7,960,000 | $ 5,507,000 |
Schedule of Unrecognized Tax Be
Schedule of Unrecognized Tax Benefits (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | ||
Balance as of January 1, 2020 | $ 1,064,000 | $ 1,019,000 |
Increase (decrease) for currnt year tax provisions | 115,000 | 77,000 |
Unrecognized Tax Benefits, Decrease Resulting from Prior Period Tax Positions | (26,000) | (32,000) |
Unrecognized Tax Benefits, Ending Balance | $ 1,153,000 | $ 1,064,000 |
NOTE 9 _ Income Taxes (Details
NOTE 9 — Income Taxes (Details Narrative) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Income Tax Disclosure [Abstract] | |||
Deferred Tax Assets, Operating Loss Carryforwards, Domestic | $ 25,200,000 | ||
Deferred Tax Assets, Operating Loss Carryforwards, State and Local | 15,700,000 | ||
[custom:DeferredTaxAssetsTaxCreditCarryforwardsResearchFederal-0] | 1,200,000 | ||
[custom:DeferredTaxAssetsTaxCreditCarryforwardsResearchStateAndLocal-0] | 120,000,000,000 | ||
Unrecognized Tax Benefits | $ 1,153,000 | $ 1,064,000 | $ 1,019,000 |
Uncategorized Items - k10-20215
Label | Element | Value |
Common Stock [Member] | ||
Stock Repurchased and Retired During Period, Shares | us-gaap_StockRepurchasedAndRetiredDuringPeriodShares | (5,538) |