Cover
Cover - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Mar. 24, 2023 | Jun. 30, 2022 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2022 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2022 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity File Number | 1-13810 | ||
Entity Registrant Name | SOCKET MOBILE, INC. | ||
Entity Central Index Key | 0000944075 | ||
Entity Tax Identification Number | 94-3155066 | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Address, Address Line One | 40675 Encyclopedia Circle | ||
Entity Address, City or Town | Fremont | ||
Entity Address, State or Province | CA | ||
Entity Address, Postal Zip Code | 94538 | ||
City Area Code | (510) | ||
Local Phone Number | 933-3000 | ||
Title of 12(b) Security | Common stock, $0.001 Par Value per Share | ||
Trading Symbol | SCKT | ||
Security Exchange Name | NASDAQ | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 18,377,320 | ||
Entity Common Stock, Shares Outstanding | 7,123,999 | ||
Auditor Name | Sadler, Gibb & Associates, LLC | ||
Auditor Location | Draper, UT | ||
Auditor Firm ID | 3627 |
Balance Sheets
Balance Sheets - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 3,623,469 | $ 6,095,886 |
Accounts receivable, net | 2,659,861 | 2,576,240 |
Inventories, net | 5,601,691 | 5,154,524 |
Prepaid expenses and other current assets | 617,188 | 395,161 |
Deferred cost on shipments to distributors | 266,327 | 158,977 |
Total current assets | 12,768,536 | 14,380,788 |
Property and equipment: | ||
Machinery and office equipment | 1,533,087 | 2,436,897 |
Computer equipment | 2,715,121 | 1,909,895 |
Property and equipment, gross | 4,248,208 | 4,346,792 |
Accumulated depreciation | (2,590,999) | (3,277,979) |
Property and equipment, net | 1,657,209 | 1,068,813 |
Intangible assets, net | 1,693,927 | 1,813,961 |
Other long-term assets | 250,239 | 140,281 |
Deferred tax assets | 8,668,419 | 7,960,419 |
Operating lease right-of-use asset | 3,559,658 | 210,839 |
Total assets | 28,597,988 | 25,575,101 |
Current liabilities: | ||
Accounts payable and accrued expenses | 1,665,028 | 2,169,055 |
Accrued payroll and related expenses | 742,541 | 692,994 |
Deferred revenue on shipments to distributors | 594,793 | 407,235 |
Short term portion of deferred service revenue | 22,599 | 17,128 |
Notes payable – current portion | 125,000 | 500,000 |
Subordinated convertible notes payable, net of discount | 147,409 | 143,514 |
Subordinated convertible notes payable, net of discount-related party | 1,230,530 | 1,201,334 |
Operating lease – current portion | 444,529 | 258,097 |
Total current liabilities | 4,972,429 | 5,389,357 |
Long-term portion of note payable | 125,000 | |
Long-term portion of operating lease | 3,292,035 | |
Long-term portion of deferred service revenue | 11,767 | 14,281 |
Total liabilities | 8,276,231 | 5,528,638 |
Commitments and contingencies | ||
Stockholders’ equity: | ||
Common stock, $0.001 par value: Authorized – 20,000,000 shares, Issued and outstanding – 7,089,676 shares at December 31, 2022 and 7,183,874 shares at December 31, 2021 | 7,090 | 7,184 |
Additional paid-in capital | 67,157,650 | 66,139,630 |
Treasury stock | (829,563) | |
Accumulated deficit | (46,013,420) | (46,100,351) |
Total stockholders’ equity | 20,321,757 | 20,046,463 |
Total liabilities and stockholders’ equity | $ 28,597,988 | $ 25,575,101 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2022 | Dec. 31, 2021 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.001 | |
Common stock, authorized | 20,000,000 | |
Common stock, issued | 7,089,676 | 7,183,874 |
Common stock, outstanding | 7,089,676 | 7,183,874 |
Statements of Operations
Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Income Statement [Abstract] | ||
Revenues | $ 21,237,768 | $ 23,199,061 |
Cost of revenues | 10,871,312 | 10,762,617 |
Gross profit | 10,366,456 | 12,436,444 |
Operating expenses: | ||
Research and development | 4,362,119 | 3,964,599 |
Sales and marketing | 3,638,113 | 3,002,573 |
General and administrative | 2,812,243 | 2,771,891 |
Total operating expenses | 10,812,475 | 9,739,063 |
Operating income (loss) | (446,019) | 2,697,381 |
Interest expense, net | (175,050) | (198,935) |
Other income | 65,082 | |
Net income (loss) before income taxes | (621,069) | 2,563,528 |
Income tax benefit | 708,000 | 1,902,729 |
Net income | $ 86,931 | $ 4,466,257 |
Net income (loss) per share: | ||
Basic | $ 0.01 | $ 0.58 |
Fully diluted | $ 0.01 | $ 0.48 |
Weighted average shares outstanding: | ||
Basic | 7,184,847 | 6,991,194 |
Fully diluted | 7,532,924 | 8,923,487 |
Statements of Stockholders' Equ
Statements of Stockholders' Equity - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Treasury Stock [Member] | Retained Earnings [Member] | Total |
Balance on December 31, 2021 at Dec. 31, 2020 | $ 6,103 | $ 61,733,522 | $ (50,566,608) | $ 11,173,017 | |
Beginning balance, shares at Dec. 31, 2020 | 6,102,630 | ||||
Vesting of restricted stocks | $ 40 | (40) | |||
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures | 40,125 | ||||
Repurchase of common stock | (2,937) | (2,937) | |||
Stock Repurchased and Retired During Period, Shares | (758) | ||||
Cancellation of restricted stock | $ (14) | 14 | |||
Stock Issued During Period, Shares, Restricted Stock Award, Forfeited | (14,128) | ||||
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 | ||||
Exercise of stock options | $ 782 | 1,898,779 | 1,899,561 | ||
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Exercises in Period | 782,633 | ||||
Stock-based compensation | 693,425 | 693,425 | |||
Net income | 4,466,257 | 4,466,257 | |||
Balance on December 31, 2022 at Dec. 31, 2021 | $ 7,184 | 66,139,630 | (46,100,351) | $ 20,046,463 | |
Beginning balance, shares at Dec. 31, 2021 | 7,183,874 | 7,183,874 | |||
Vesting of restricted stocks | $ 92 | (92) | |||
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures | 92,734 | ||||
Conversion of convertible note | |||||
Exercise of stock options | $ 106 | 151,643 | 151,749 | ||
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Exercises in Period | 106,190 | ||||
Stock-based compensation | 998,692 | 998,692 | |||
Net income | 86,931 | 86,931 | |||
Restricted stock retired for tax withholding | $ (26) | (132,489) | (132,515) | ||
Share-Based Payment Arrangement, Shares Withheld for Tax Withholding Obligation | (26,831) | ||||
Treasury shares purchased | $ (266) | 266 | $ (829,563) | (829,563) | |
Stock Repurchased During Period, Shares | (266,291) | ||||
Treasury Stock, Shares, Acquired | 266,291 | ||||
Balance on December 31, 2022 at Dec. 31, 2022 | $ 7,090 | $ 67,157,650 | $ (829,563) | $ (46,013,420) | $ 20,321,757 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Operating activities | ||
Net income | $ 86,931 | $ 4,466,257 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Stock-based compensation | 998,692 | 693,425 |
Depreciation and amortization | 765,659 | 759,158 |
Deferred tax benefits | (708,000) | (1,902,729) |
Amortization of debt discount | 33,091 | 33,091 |
Amortization of operating lease ROU asset | 513,692 | 398,492 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (83,621) | (463,726) |
Inventories | (447,167) | (1,958,682) |
Prepaid expenses and other current assets | (222,027) | (59,774) |
Other assets | (160,791) | (24,813) |
Accounts payable and accrued expenses | (504,027) | 424,566 |
Accrued payroll and related expenses | (82,968) | 317,483 |
Net deferred revenue on shipments to distributors | 80,208 | (32,317) |
Deferred service revenue | 2,957 | (22,907) |
Net change in operating lease liability | (384,044) | (483,254) |
Net cash (used in) provided by operating activities | (111,415) | 2,144,270 |
Investing activities | ||
Purchase of equipment | (1,183,188) | (691,771) |
Net cash used in investing activities | (1,183,188) | (691,771) |
Financing activities | ||
Common stocks repurchased and related expenses | (829,563) | (2,937) |
Proceeds from note payable | 1,000,000 | |
Repayments of note payable | (500,000) | (375,000) |
Stock options exercised | 151,749 | 1,899,561 |
Net cash (used in) provided by financing activities | (1,177,814) | 2,521,624 |
Net increase (decrease) in cash and cash equivalents | (2,472,417) | 3,974,123 |
Cash and cash equivalents at beginning of year | 6,095,886 | 2,121,763 |
Cash and cash equivalents at end of year | 3,623,469 | 6,095,886 |
Supplemental disclosure of cash flow information | ||
Cash paid for interest | 160,945 | 176,091 |
Cash paid for income taxes | 6,289 | |
Supplemental disclosure of non-cash activities | ||
Payroll tax liability for retired restricted stock | 158,314 | |
Property acquired under operating lease | 3,862,511 | |
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, 2022 | |
Accounting Policies [Abstract] | |
NOTE 1 — Organization and Summary of Significant Accounting Policies | NOTE 1 — Organization and Summary of Significant Accounting Policies Organization and Business Socket Mobile, Inc. (the “Company”) is a leading provider of data capture and delivery solutions for mobile applications used in Retail, Commercial Services, Industrial & Manufacturing, Transportation & Logistics, and Health Care. 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 Fremont, California facility. The Company offers its products worldwide through two-tier distribution enabling customers to purchase from a large number of online 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 40675 Encyclopedia Circle, Fremont, CA 94538. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates, and such differences may be material to the financial statements. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with a maturity date of 90 days or less at date of purchase to be cash equivalents. As of December 31, 2022 and 2021, 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. As of December 31, 2022, the Company’s cash and cash equivalents of $250,000 were insured by FDIC and of $3,373,469 were not insured by FDIC. The Company has never experienced any losses in such accounts. In light of recent volatility in the financial markets, the Company entered into an ICS Deposit Placement Agreement with IntraFi Network LLC through its own bank, Bridge Bank, a division of Western Alliance Bank. The ICS program offers its customers’ demand or savings products with access to unlimited FDIC insurance, thereby helping the Company retain the full amount of the deposit on its balance sheet. SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS 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. In 2022, the total net adjustment for the effects of changes in foreign currency on cash balances, collections, and payables was a net loss of $ 41,300 31,100 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, 2022 and 2021: Year Balance at Charged to Amounts Balance at 2022 $ 40,651 $ — $ — $ 40,651 2021 $ 40,651 $ — $ — $ 40,651 Inventories Inventories consist principally of raw materials and sub-assemblies stated at the lower of standard cost, which approximates actual costs (first-in, first-out method), or market. Market is defined as replacement cost, but not in excess of estimated net realizable value or less than estimated net realizable value less a normal margin. 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, 2022 and 2021 consisted of the following: December 31, 2022 2021 Raw materials and sub-assemblies $ 6,193,453 $ 5,757,869 Finished goods 289,181 277,598 Inventory reserves (880,943 ) (880,943 ) Inventory, net $ 5,601,691 $ 5,154,524 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS 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, 2022 and 2021 consisted of the following: December 31, 2022 2021 Prepaid insurance $ 92,644 $ 94,923 Product certification costs 87,293 61,557 Prepaid inventory purchases 196,512 131,635 Prepaid maintenance contracts and other prepaid expenses 240,739 107,046 Prepaid expenses and other current assets $ 617,188 $ 395,161 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 expenses in the years ended December 31, 2022 and 2021, were $ 594,793 620,115 Intangible Assets The Company’s intangible assets consist of completed technologies and acquired license rights. Intangible assets are amortized over their estimated useful lives based upon the estimated economic value derived from the related intangible assets. Amortization is computed using the straight-line method over the estimated useful lives of the assets. For the years ended December 31, 2022 and 2021, the amortization expenses of intangible assets were $ 127,296 95,472 Impairment of Long-Lived Assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. For the years ended December 31, 2022 and 2021, we did not recognize any impairment loss of its long-lived assets. Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk include cash, cash equivalents and accounts receivable. The Company invests its cash in demand deposit accounts in banks. To date, the Company has not experienced losses on the investments. The Company’s trade accounts receivable is primarily with distributors. The Company performs ongoing credit evaluations of its customers’ financial condition, but the Company generally requires no collateral. Reserves are maintained for potential credit losses, and such losses have been within management’s expectations. Customers who accounted for at least 10% of the Company’s accounts receivable balances as of December 31, 2022 and December 31, 2021 were as follows: December 31, 2022 2021 Bluestar, Inc. 46 % 21 % Ingram Micro Inc. 14 % 28 % Nippon Primex, Inc. 14 % * ScanSource, Inc. 11 % 24 % * Customer accounted for less than 10% of the Company’s accounts receivable balances Concentration of Suppliers Several of the Company’s component parts are produced by a sole or limited number of suppliers. Shortages could occur in these essential materials due to increased demand, or to an interruption of supply. Suppliers may choose to restrict credit terms or require advance payments causing delays in the procurement of essential materials. If the Company were unable to procure certain of such materials, it could have a material adverse effect upon its results. As of December 31, 2022, 31 46 % of inventory purchases. SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS 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, 2022, the deferred revenue and deferred cost on shipments to distributors were approximately $ 594,793 266,327 407,235 158,977 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, 2022 and 2021, the SocketCare revenue was approximately $ 22,000 26,000 34,366 31,409 Cost of Sales and Gross Margins Cost of sales primarily consists of the costs to manufacture our products, including the costs of materials, contract manufacturing, shipping costs, personnel and related expenses including stock-based compensation, equipment and facility expenses, warranty costs and inventory excess and obsolete provisions. The factors that affect our gross margins are the cost of materials, the mix of products and the extent to which we are able to efficiently utilize our manufacturing capacity. Leases In February 2016, the 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. On May 1, 2022, the Company entered into a building lease agreement for its corporate headquarters located in Fremont, CA. As of December 31, 2022, the balances of right-of-use assets and liabilities for the operating leases were approximately $ 3.56 3.74 0.21 0.26 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS 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, 2022 and 2021: Year Balance at Additional Warranty Reserves Amounts Balance at 2022 $ 78,871 $ 14,475 $ (14,475 ) $ 78,871 2021 $ 78,871 $ 13,910 $ (13,910 ) $ 78,871 Research and Development Research and development expenditures are charged to operations as incurred. The major components of research and development costs include salaries and employee benefits, stock-based compensation expense, , 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 2022 and 2021 was $ 43,572 Advertising Costs Advertising costs are charged to sales and marketing as incurred. The Company incurred $ 31,146 13,627 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. SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. Shipping and Handling Costs Shipping and handling costs are included in the cost of revenues in the statement of operations. 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, 2022 2021 Numerator: Net income $ 86,931 $ 4,466,257 Net income allocated to restricted stock award (8,820 ) (380,547 ) Adjusted net income for basic earnings per share $ 78,111 $ 4,085,710 Convertible note interest — 175,876 Adjusted net income before interest for diluted earnings per share $ 78,111 $ 4,261,586 Denominator: Weighted average shares outstanding used in computing net income per share: Basic 7,184,847 6,991,194 Fully diluted 7,532,924 8,923,487 Net income per share applicable to common stockholders: Basic $ 0.01 $ 0.58 Fully diluted $ 0.01 $ 0.48 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS In 2022, the shares used in computing diluted net income per share do not include 342,765 691,125 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, 2022 and 2021 are as follows: Years Ended December 31, Revenues: (in thousands) 2022 2021 United States $ 15,765 $ 17,455 Europe 2,612 3,493 Asia and rest of world 2,861 2,251 Total $ 21,238 $ 23,199 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, 2022 and 2021 were as follows: Years Ended December 31, 2022 2021 Ingram Micro Inc. 26 % 30 % BlueStar, Inc. 24 % 23 % ScanSource, Inc. 11 % 11 % 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. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be affected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 was effective for annual and interim periods beginning after December 15, 2019, and early adoption was permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This Update deferred the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. This Update is not expected to have a significant 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, 2022 | |
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. SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS 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 $ 1,686,665 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 2023 $ 127,296 2024 127,296 2025 127,296 2026 127,296 2027 127,296 Thereafter 1,050,185 Total $ 1,686,665 |
NOTE 3 _ Bank Financing Arrange
NOTE 3 — Bank Financing Arrangements | 12 Months Ended |
Dec. 31, 2022 | |
Debt Disclosure [Abstract] | |
NOTE 3 — Bank Financing Arrangements | NOTE 3 — Bank Financing Arrangements The Company initially entered into a Business Financing Agreement with Western Alliance Bank (the “Bank”), an Arizona corporation, on February 27, 2014, and this agreement has been amended and extended through the years. Amended and Restated Business Financing Agreement On January 29, 2021, the Company entered into an Amended and Restated Business Financing Agreement (the “Financing Agreement”) with the Bank. The Financing Agreement increased the Company’s Domestic Line of Credit to $3.0 million, including a $ 2.0 1.0 January 31, 2023 First Business Financing Modification Agreement On February 9, 2022, the Company entered into the First Business Financing Modification Agreement with the Bank. The Bank consented to the share repurchase program of up to $1.8 million. Future audit of accounts receivables will be performed once every twelve months. The Bank increased the credit limit for business credit cards to $250,000. SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS Second Business Financing Modification Agreement and Waiver of Defaults On January 25, 2023, the Company entered into the Second Business Financing Modification Agreement and Waiver of Defaults with the Bank which extended the maturity date of the Company’s revolving lines of credit to January 31, 2025. Amounts outstanding under the CalCap Loan as of December 31, 2022 are as follows: December 31, 2022 Current portion of CalCap Loan $ 125,000 CalCap Loan $ 125,000 Interest expense on the CalCap Loan for twelve months ended December 31, 2022 was $ 19,355 372 There were no amounts borrowed at year end on the Company’s bank credit lines as of December 31, 2022 and December 31, 2021. |
NOTE 4 _ Secured Subordinated C
NOTE 4 — Secured Subordinated Convertible Notes Payable | 12 Months Ended |
Dec. 31, 2022 | |
Debt Disclosure [Abstract] | |
NOTE 4 — Secured Subordinated Convertible Notes Payable | NOTE 4 — Secured Subordinated Convertible Notes Payable On August 31, 2020, the Company completed a secured subordinated convertible note financing of $ 1,530,000 1,350,000 The funds raised are used to increase the Company’s working capital balances. The notes have a three-year term that accrue interest at 10 1.46 96,515 1,530,000 On November 16, 2022, the Company and the requisite holders of the outstanding notes entered into a Secured Subordinated Convertible Note Extension Agreement (the “Extension Agreement”), extending the maturity date of the notes from August 30, 2023 to August 30, 2024. All other terms and conditions of the notes remain in full force and effect. SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS The amortization of debt discount was $ 33,091 22,061 Total interest expenses recognized related to the convertible note were $ 173,091 174,842 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, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
NOTE 5 — Commitments and Contingencies | NOTE 5 — Commitments and Contingencies Operating Lease Obligations The Company’s lease agreement for the office space in Newark, California expired on June 30, 2022. On May 1, 2022, the Company commenced a lease agreement for approximately 35,913 square feet at 40675 Encyclopedia Circle in Fremont, California. This serves as the location for the Company’s Corporate Headquarters, including office space and manufacturing. The Company will pay a base monthly rent in the amount of $50,278 commencing on the first day of the fourth full month of the lease term. Base monthly rent will increase annually on May 1 st The Company accounted for the lease as an operating lease under ASC 842 using the bank loan interest rate in effect on May 1, 2022 at 5.0% to discount future lease payments. The lease term expires on July 31, 2029, with a one-time option to renew for a period of five years. The renewal period is not included in the measurement of the leases as the Company is not reasonably certain of exercising it. In July 2022, the Company also signed a two-year equipment operating lease agreement and the future lease payments are discounted at the interest rate of 5.5%. As of December 31, 2022, the balances of right-of-use assets and liabilities were approximately $ 3.56 3.74 0.21 0.26 The operating lease expense under existing agreement was allocated in cost of goods sold and operating costs based on department headcount and amounted to $ 646,821 428,873 Cash payments included in the measurement of our existing operating lease liabilities were $ 517,174 515,822 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS Future minimum lease payments under the existing operating lease as of December 31, 2022 are shown below: Annual minimum payments: Amount 2023 621,394 2024 636,861 2025 652,883 2026 672,470 2027 692,644 Thereafter 1,139,070 Total minimum payments 4,415,322 Less: Present value factor (678,758 ) Total operating lease liabilities 3,736,564 Less: Current portion of operating lease (444,529 ) Long-term portion of operating lease $ 3,292,035 Purchase Commitments On December 31, 2022, the Company’s non-cancelable purchase commitments for inventory to be used in the ordinary course of business during 2023 were approximately $ 8,674,000 Legal Matters The Company is subject to disputes, claims, requests for indemnification and lawsuits arising in the ordinary course of business. Under the indemnification provisions of the Company’s customer agreements, the Company routinely agrees to indemnify and defend its customers against infringement of any patent, trademark, copyright, trade secrets, or other intellectual property rights arising from customers’ legal use of the Company’s products or services. The exposure to the Company under these indemnification provisions is generally limited to the total amount paid for the indemnified products. However, certain indemnification provisions potentially expose the Company to losses in excess of the aggregate amount received from the customer. To date, there have been no claims against the Company by its customers pertaining to such indemnification provisions, and no amounts have been recorded. The Company is currently not a party to any material legal proceedings. |
NOTE 6 _ Stock-Based Compensati
NOTE 6 — Stock-Based Compensation Plan | 12 Months Ended |
Dec. 31, 2022 | |
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 termination date of 2004 Plan was approved to extend from April 23, 2024 to April 23, 2034 at our annual meeting of shareholders in June 2022. The 2004 Plan 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, 2023 and 2022, a total of 283,587 and 287,355 additional shares, respectively, became available for grant from the 2004 Plan. SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS Stock-Based Compensation Information The stock-based compensation expense included in the Company’s statements of income for the years ended December 31, 2022 and 2021, consisted of the following: Years Ended December 31, Income Statement Classification 2022 2021 Cost of revenues $ 119,456 $ 96,254 Research and development 313,904 218,559 Sales and marketing 251,862 166,266 General and administrative 313,470 212,346 Stock-based compensation expenses $ 998,692 $ 693,425 As of December 31, 2022, the remaining unamortized stock-based compensation expense was $ 2,149,926 2.7 Stock Options – 1.74 4.46 Years Ended December 31, 2022 2021 Risk-free interest rate (%) 3.22 % 1.64 % Dividend yield — — Volatility factor 105.44 % 102.26 % Expected option life (years) 2.0 3.9 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, 2022 and 2021: Years Ended December 31, 2022 2021 Total intrinsic value of stock options exercised $ 164,176 $ 9,985,639 Cash received from stock option exercises $ 151,749 $ 1,899,561 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS The following summarizes stock option activity under the 2004 Plan as of and for the years ended December 31, 2022 and 2021: Outstanding Options Number of Shares Weighted Average Exercise Price Per Share Remaining Contractual Term Intrinsic 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 Granted 49,000 $ 3.03 Exercised (106,190) $ 1.43 Canceled (24,210) $ 3.12 Balance as of December 31, 2022 1,296,722 $ 2.93 5.33 $ 148,165 Exercisable 1,096,381 $ 2.61 4.83 $ 147,896 Unvested 200,341 $ 4.71 8.17 $ 269 Outstanding, Remaining contractual term (in years) 5.33 Outstanding, Intrinsic Value 148,165 Exercisable, Remaining Contractual term (in years) 4.83 Exercisable, Intrinsic Value 147,896 Unvested, Remaining contractual term (in years) 8.17 Unvested, Intrinsic Value 269 Stock options outstanding as of December 31, 2022 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 - $1.25 150,338 2.50 $ 1.06 150,338 $ 1.06 $1.50 - $1.90 207,825 4.42 $ 1.85 198,851 $ 1.85 $2.00 - $2.32 349,196 5.75 $ 2.30 304,286 $ 2.29 $2.40 - $2.75 138,775 4.42 $ 2.63 138,775 $ 2.63 $2.93 - $2.95 107,824 5.75 $ 2.93 100,324 $ 2.93 $3.05 - $4.22 160,690 5.50 $ 3.82 130,690 $ 3.99 $4.49 - $8.58 182,074 8.42 $ 6.39 73,117 $ 6.23 $0.95 - $8.58 1,296,722 5.33 $ 2.93 1,096,381 $ 2.61 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, 2022 and 2021: Number of Restricted Stocks Weighted 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 of December 31, 2021 646,125 $ 2.18 Granted 330,700 $ 3.82 Vested (111,719 ) $ 2.11 Forfeited (20,130 ) $ 2.29 Unvested as December 31, 2022 844,976 $ 2.84 |
NOTE 7 _ Shares Reserved
NOTE 7 — Shares Reserved | 12 Months Ended |
Dec. 31, 2022 | |
Note 7 Shares Reserved | |
NOTE 7 — Shares Reserved | NOTE 7 — Shares Reserved Common stock reserved for future issuance was as follows: December 31, 2022 2021 Stock option grants outstanding (see Note 6) 1,296,722 1,378,122 Secured subordinated convertible notes (see Note 4) 958,904 958,904 Stock warrants issued to SpringCard SAS (see Note 2) 50,000 50,000 Reserved for future grants (including 266,291 treasury shares) 453,798 208,681 2,759,424 2,595,707 |
NOTE 8 _ Retirement Plan
NOTE 8 — Retirement Plan | 12 Months Ended |
Dec. 31, 2022 | |
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. The Company provides 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, 2022 | |
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, 2022 and December 31, 2021 was from its U.S. domestic operations. The components of income taxes for the periods ended December 31, 2022 and 2021 are as follows: Years Ended December 31, 2022 2021 Current: Federal $ — $ — State — — Total Current — — Deferred: Federal (313,000 ) (1,354,991 ) State (395,000 ) (547,738 ) Total Deferred (708,000 ) (1,902,729 ) Income tax benefit $ (708,000 ) $ (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, 2022 2021 Income at US statutory rate 21.0 % 21.0 % State taxes, net of federal benefit 62.6 % -11.2 % Valuation allowance 18.1 % 0.7 % Stock compensation -11.2 % -50.2 % NOL true up — -1.2 % Tax credits -21.1 % 2.5 % Other 44.8 % -2.2 % Provision for taxes 114.1 % 45.6 % The principal components of deferred tax assets and (liabilities) are as follows for the period ended: December 31, Deferred tax assets: 2022 2021 Net operating loss carryforwards $ 5,906,000 $ 6,390,000 Tax credits 901,000 1,032,000 Accruals & reserves 951,000 786,000 Lease liabilities 1,043,000 70,000 Depreciation 45,000 167,000 Share-based compensation 190,000 154,000 Capitalized Research Costs 1,105,000 154,000 Total deferred tax assets 10,141,000 8,599,000 Valuation allowance (464,000 ) (577,000 ) Net deferred tax assets 9,677,000 8,022,000 Deferred tax liabilities: Amortization (11,000 ) (3,000 ) ROU assets (996,000 ) (59,000 ) Net deferred tax asset (liability) $ 8,670,000 $ 7,960,000 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS As of December 31, 2022, the Company had U.S. Federal net operating loss carryforwards of $ 22.5 16.9 As of December 31, 2022, the Company had U.S. Federal research and development credit carryforwards of $ 0.5 0.6 As of December 31, 2022, 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, 2022, 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, 2022 and 2021 was a decrease of less than $0.1 million and an increase of less than $0.1 million, respectively. On August 9, 2022 and August 16, 2022, the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and the Inflation Reduction Act (IRA) were signed into law by the US President, respectively. The new legislation contains many tax provisions, however none had an impact to the Company's financials. The future realization of the Company's net operating loss carryforwards and other tax attributes may also be limited by the change in ownership rules under the U.S. Internal Revenue Code Section 382. Under Section 382, if a corporation undergoes an ownership change (as defined), the corporation’s ability to utilize its net operating loss carryforwards and other tax attributes to offset income may be limited. The Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes. The following table summarizes the activity related to the Company's unrecognized tax benefits: Amount Balance as of January 1, 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 Increases (decreases) for current year tax provisions 23,000 Increases (decreases) for prior year tax provisions (160,000) Decreases for expiration of statute of limitations — Settlements — Balance as of December 31, 2022 $ 1,016,000 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, 2022, the tax years from 2019 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 2019, 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, 2022 and 2021, the Company had $ 1.0 1.2 |
NOTE 10 _ Subsequent Events
NOTE 10 — Subsequent Events | 12 Months Ended |
Dec. 31, 2022 | |
Subsequent Events [Abstract] | |
NOTE 10 — Subsequent Events | NOTE 10 — Subsequent Events The Company evaluated subsequent events and transactions that occurred between January 1, 2023 through March 24, 2023. Other than described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the audited financial statements. 402,370 The Company has issued 29,195 89,197 On March 13, 2023, the Company entered into an ICS Deposit Placement Agreement with IntraFi Network LLC through its own bank, Bridge Bank, a division of Western Alliance Bank. The ICS program offers its customers’ demand or savings products with access to unlimited FDIC insurance, thereby helping the Company retain the full amount of the deposit on its balance sheet. Not Applicable. Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal control can provide only reasonable assurances with respect to financial statement preparation. Further, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework Based on our assessment using those criteria, we believe that, as of December 31, 2022, our internal control over financial reporting is effective. This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which exempts non-accelerated filers from Section 404(b) of the Sarbanes-Oxley Act of 2002. Changes in Internal Control Over Financial Reporting There was no change in our internal control over financial reporting that occurred during the last fiscal quarter covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. None. Not applicable. Item 10. Directors, Executive Officers and Corporate Governance The information required hereunder is incorporated by reference from our Proxy Statement to be filed in connection with our annual meeting of stockholders to be held on Item 11. Executive Compensation The information required hereunder is incorporated by reference from our Proxy Statement to be filed in connection with our annual meeting of stockholders to be held on Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain information required hereunder is incorporated by reference from our Proxy Statement to be filed in connection with our annual meeting of stockholders to be held on The following table provides information as of December 31, 2022 about our common stock that may be issued under the Company’s existing equity compensation plans. For additional information about the stock-based compensation plans see Note 6, Stock-Based Compensation Plan, of the Notes to Financial Statements included in this Annual Report on Form 10-K. Number of securities to be issued upon exercise of outstanding options Weighted average exercise price of outstanding options Number of securities remaining available for future issuance under equity compensation plans Equity compensation plans approved by security holders (1) 1,296,722 $ 2.93 453,798 (1) Consists of the 2004 Equity Incentive Plan. Pursuant to an affirmative vote by security holders in June 2004, an annual increase in the number of shares authorized under the 2004 Equity Incentive Plan is added on the first day of each fiscal year equal to the least of (a) 400,000 shares, (b) four percent of the total outstanding shares of the Company’s common stock on that date, or (c) a lesser amount as determined by the Board of Directors. As a result, a total of 283,587 shares became available for grant under the 2004 Equity Incentive Plan on January 1, 2023, in addition to those set forth in the table above. Certain information required hereunder is incorporated by reference from our Proxy Statement to be filed in connection with our annual meeting of stockholders to be held on Certain information required hereunder is incorporated by reference from our Proxy Statement to be filed in connection with our annual meeting of stockholders to be held on June 7, 2023. (a) Documents filed as part of this report: 1. All financial statements. INDEX TO FINANCIAL STATEMENTS PAGE Report of Independent Registered Public Accounting Firm 29 Balance Sheets 31 Statements of Income 32 Statements of Stockholders' Equity 33 Statements of Cash Flows 34 Notes to Financial Statements 35 2. Financial statement schedules. All financial statement schedules are omitted because they are not applicable or not required or because the required information is included in the financial statements or notes herein. 3. Exhibits. See Index to Exhibits on page 58. The Exhibits listed on the accompanying Index to Exhibits are filed or incorporated by reference as part of this report. (b) Exhibits: See Index to Exhibits on page 58. The Exhibits listed on the accompanying Index to Exhibits are filed or incorporated by reference as part of this report. Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SOCKET MOBILE, INC. Registrant Date: March 30, 2023 /s/ Kevin J. Mills Kevin J. Mills President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Kevin J. Mills Kevin J. Mills March 30, 2023 /s/ Charlie Bass Chairman of the Board March 30, 2023 /s/ Lynn Zhao Vice President of Finance and Administration and Chief Financial Officer (Principal Financial and Accounting Officer) and Director March 30, 2023 /s/ Bill Parnell Director March 30, 2023 /s/ Brenton E. MacDonald. Director March 30, 2023 /s/ David W. Dunlap Director March 30, 2023 /s/ Ivan Lazarev Director March 30, 2023 /s/ Laura Weinstein Director March 30, 2023 Exhibit Number Description 3.1 (1) Amended and Restated Certificate of Incorporation. 3.2 Certificate of Amendment to the Restated Certificate, as filed June 20, 2013. 3.3 (2) Bylaws, as amended February 17, 2008. 4.1 (3) Form of Secured Subordinated Convertible Note issued August 31, 2020. 10.1 (4) Form of Indemnification Agreement entered into between the Company and its directors and officers. 10.2 (5)* 2004 Equity Incentive Plan and forms of agreement thereunder. 10.3 (6)* Form of Management Incentive Variable Compensation Plan between the Company and certain eligible participants. 10.4 (7) Standard Industrial/Commercial Multi-Tenant Lease by and between Del Norte Farms, Inc. and the Company dated October 24, 2006 (assigned to Newark Eureka Industrial Capital, LLC September 17, 2007). 10.5 (8) Second Amendment to Standard Industrial/Commercial Multi-Lessee Lease – Net dated August 30, 2010. 10.6 (9) Third Amendment to Standard Industrial/Commercial Multi-Tenant Lease – Net dated December 28, 2012. 10.7 (10) Warrants for the Purchase of Shares of Common Stock Issued November 19, 2010 to the Investor and the Placement Agent in connection with a private placement. 10.8 (11) Loan and Security Agreement dated February 27, 2014 by and between the Company and Bridge Bank, National Association. 10.9 (12) Form of Employment Agreement dated May 1, 2017 between the Company and the officers of the Company. 10.10 (13) Business Financing Modification Agreement dated February 26, 2016 by and between the Company and Western Alliance Bank, an Arizona corporation. 10.11 (14) Business Financing Modification Agreement dated March 20, 2017 by and between the Company and Western Alliance Bank, an Arizona corporation. 10.12 (15) Business Financing Modification Agreement dated January 31, 2018 by and between the Company and Western Alliance Bank, an Arizona corporation. 10.13 (16) Tender Offer Statement to purchase up to 1,250,000 shares of common stock at a price not greater than $4.25 nor less than $3.75 per share. 10.14 (17) Business Financing Modification Agreement dated June 4, 2018 by and between the Company and Western Alliance Bank, an Arizona corporation. 10.15 (18) Business Financing Modification Agreement dated January 8, 2020 by and between the Company and Western Alliance Bank, an Arizona corporation. 10.16 (19) Amended and Restated Business Financing Agreement dated January 29, 2021 by and between the Company and Western Alliance Bank, an Arizona corporation. 10.17 First Business Financing Modification Agreement dated February 9, 2022 by and between the Company and Western Alliance Bank, an Arizona corporation. 10.18 (20) Second Business Financing Modification Agreement and Waiver of Defaults dated January 25, 2023 by and between the Company and Western Alliance Bank, an Arizona corporation. 10.19 (21) 2021 Technology Transfer Agreement, dated as of February 26, 2021, by and between the Company and SpringCard SAS 10.20 (22) Secured Subordinated Convertible Note Extension Agreement, effective as of November 16, 2022 11.1 Computation of Earnings per Share (see Statements of Operations in Item 8). 14.1 (23) Code of Business Conduct and Ethics. 23.1 Consent of Sadler Gibb & Associates, LLC, Independent Registered Public Accounting Firm. 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101 Inline XBRL Document. 104 Cover Page Interactive Data File. _________ * Executive compensation plan or arrangement. (1) Incorporated by reference to exhibits filed with the Company’s Form 10-K filed on March 16, 2009 (2) Incorporated by reference to exhibits filed with the Company’s Form 8-K filed on February 20, 2008. (3) Incorporated by reference to exhibits filed with the Company’s Form 8-K filed on September 1, 2020. (4) Incorporated by reference to exhibits filed with the Company’s Form 8-K filed on March 8, 2012. (5) Incorporated by reference to Appendix C filed with the Company’s Form DEF 14A filed on April 29, 2004 and Item 4 on Form 8-K filed on June 5, 2013 reporting extension of the Plan to April 23, 2024. (6) Incorporated by reference to Appendix B filed with the Company’s Form DEF 14A filed on March 16, 2011. (7) Incorporated by reference to exhibits filed with the Company’s Form 10-Q filed on November 13, 2006. (8) Incorporated by reference to exhibits filed with the Company’s Form 8-K filed on August 30, 2010. (9) Incorporated by reference to exhibits filed with the Company’s Form 8-K filed on January 4, 2013. (10) Incorporated by reference to exhibits filed with the Company’s Form 8-K filed on November 19, 2010. (11) Incorporated by reference to exhibits filed with the Company’s Form 8-K filed on March 7, 2014. (12) Incorporated by reference to exhibits filed with the Company’s Form 8-K filed on May 4, 2017. (13) Incorporated by reference to exhibits filed with the Company’s Form 8-K filed on March 3, 2016. (14) Incorporated by reference to exhibits filed with the Company’s Form 8-K filed on March 21, 2017. (15) Incorporated by reference to exhibits filed with the Company’s Form 8-K filed on February 2, 2018. (16) Incorporated by reference to the Company’s Schedule TO filed on February 2, 2018. (17) Incorporated by reference to exhibits filed with the Company’s Form 8-K filed on June 8, 2018. (18) Incorporated by reference to exhibits filed with the Company’s Form 8-K filed on January 14, 2020. (19) Incorporated by reference to exhibits filed with the Company’s Form 8-K filed on February 3, 2021. (20) Incorporated by reference to exhibits filed with the Company’s Form 8-K filed on January 25, 2023. (21) Incorporated by reference to exhibits filed with the Company’s Form 8-K filed on March 4, 2021. (22) Incorporated by reference to exhibits filed with the Company’s Form 8-K filed on November 16, 2022. (23) Incorporated by reference to exhibits filed with the Company’s Form 10-K filed on March 10, 2006. |
NOTE 1 _ Organization and Sum_2
NOTE 1 — Organization and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
Organization and Business | Organization and Business Socket Mobile, Inc. (the “Company”) is a leading provider of data capture and delivery solutions for mobile applications used in Retail, Commercial Services, Industrial & Manufacturing, Transportation & Logistics, and Health Care. 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 Fremont, California facility. The Company offers its products worldwide through two-tier distribution enabling customers to purchase from a large number of online 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 40675 Encyclopedia Circle, Fremont, CA 94538. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates, and such differences may be material to the financial statements. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments purchased with a maturity date of 90 days or less at date of purchase to be cash equivalents. As of December 31, 2022 and 2021, 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. As of December 31, 2022, the Company’s cash and cash equivalents of $250,000 were insured by FDIC and of $3,373,469 were not insured by FDIC. The Company has never experienced any losses in such accounts. In light of recent volatility in the financial markets, the Company entered into an ICS Deposit Placement Agreement with IntraFi Network LLC through its own bank, Bridge Bank, a division of Western Alliance Bank. The ICS program offers its customers’ demand or savings products with access to unlimited FDIC insurance, thereby helping the Company retain the full amount of the deposit on its balance sheet. |
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. In 2022, the total net adjustment for the effects of changes in foreign currency on cash balances, collections, and payables was a net loss of $ 41,300 31,100 |
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, 2022 and 2021: Year Balance at Charged to Amounts Balance at 2022 $ 40,651 $ — $ — $ 40,651 2021 $ 40,651 $ — $ — $ 40,651 |
Inventories | Inventories Inventories consist principally of raw materials and sub-assemblies stated at the lower of standard cost, which approximates actual costs (first-in, first-out method), or market. Market is defined as replacement cost, but not in excess of estimated net realizable value or less than estimated net realizable value less a normal margin. 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, 2022 and 2021 consisted of the following: December 31, 2022 2021 Raw materials and sub-assemblies $ 6,193,453 $ 5,757,869 Finished goods 289,181 277,598 Inventory reserves (880,943 ) (880,943 ) Inventory, net $ 5,601,691 $ 5,154,524 |
Prepaid Expenses and Other Current Assets | Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of various payments that the Company has made in advance for goods or services to be received in the future. Prepaid expenses and other current assets at December 31, 2022 and 2021 consisted of the following: December 31, 2022 2021 Prepaid insurance $ 92,644 $ 94,923 Product certification costs 87,293 61,557 Prepaid inventory purchases 196,512 131,635 Prepaid maintenance contracts and other prepaid expenses 240,739 107,046 Prepaid expenses and other current assets $ 617,188 $ 395,161 |
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 expenses in the years ended December 31, 2022 and 2021, were $ 594,793 620,115 |
Intangible Assets | Intangible Assets The Company’s intangible assets consist of completed technologies and acquired license rights. Intangible assets are amortized over their estimated useful lives based upon the estimated economic value derived from the related intangible assets. Amortization is computed using the straight-line method over the estimated useful lives of the assets. For the years ended December 31, 2022 and 2021, the amortization expenses of intangible assets were $ 127,296 95,472 |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. For the years ended December 31, 2022 and 2021, we did not recognize any impairment loss of its long-lived assets. |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk include cash, cash equivalents and accounts receivable. The Company invests its cash in demand deposit accounts in banks. To date, the Company has not experienced losses on the investments. The Company’s trade accounts receivable is primarily with distributors. The Company performs ongoing credit evaluations of its customers’ financial condition, but the Company generally requires no collateral. Reserves are maintained for potential credit losses, and such losses have been within management’s expectations. Customers who accounted for at least 10% of the Company’s accounts receivable balances as of December 31, 2022 and December 31, 2021 were as follows: December 31, 2022 2021 Bluestar, Inc. 46 % 21 % Ingram Micro Inc. 14 % 28 % Nippon Primex, Inc. 14 % * ScanSource, Inc. 11 % 24 % * Customer accounted for less than 10% of the Company’s accounts receivable balances |
Concentration of Suppliers | |
Revenue Recognition and Deferred Revenue | Revenue Recognition and Deferred Revenue 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, 2022, the deferred revenue and deferred cost on shipments to distributors were approximately $ 594,793 266,327 407,235 158,977 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, 2022 and 2021, the SocketCare revenue was approximately $ 22,000 26,000 34,366 31,409 |
Cost of Sales and Gross Margins | Cost of Sales and Gross Margins Cost of sales primarily consists of the costs to manufacture our products, including the costs of materials, contract manufacturing, shipping costs, personnel and related expenses including stock-based compensation, equipment and facility expenses, warranty costs and inventory excess and obsolete provisions. The factors that affect our gross margins are the cost of materials, the mix of products and the extent to which we are able to efficiently utilize our manufacturing capacity. |
Leases | Leases In February 2016, the 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. On May 1, 2022, the Company entered into a building lease agreement for its corporate headquarters located in Fremont, CA. As of December 31, 2022, the balances of right-of-use assets and liabilities for the operating leases were approximately $ 3.56 3.74 0.21 0.26 |
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, 2022 and 2021: Year Balance at Additional Warranty Reserves Amounts Balance at 2022 $ 78,871 $ 14,475 $ (14,475 ) $ 78,871 2021 $ 78,871 $ 13,910 $ (13,910 ) $ 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 2022 and 2021 was $ 43,572 |
Advertising Costs | Advertising Costs Advertising costs are charged to sales and marketing as incurred. The Company incurred $ 31,146 13,627 |
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. SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. |
Shipping and Handling Costs | Shipping and Handling Costs Shipping and handling costs are included in the cost of revenues in the statement of operations. |
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, 2022 2021 Numerator: Net income $ 86,931 $ 4,466,257 Net income allocated to restricted stock award (8,820 ) (380,547 ) Adjusted net income for basic earnings per share $ 78,111 $ 4,085,710 Convertible note interest — 175,876 Adjusted net income before interest for diluted earnings per share $ 78,111 $ 4,261,586 Denominator: Weighted average shares outstanding used in computing net income per share: Basic 7,184,847 6,991,194 Fully diluted 7,532,924 8,923,487 Net income per share applicable to common stockholders: Basic $ 0.01 $ 0.58 Fully diluted $ 0.01 $ 0.48 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS In 2022, the shares used in computing diluted net income per share do not include 342,765 691,125 |
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, 2022 and 2021 are as follows: Years Ended December 31, Revenues: (in thousands) 2022 2021 United States $ 15,765 $ 17,455 Europe 2,612 3,493 Asia and rest of world 2,861 2,251 Total $ 21,238 $ 23,199 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, 2022 and 2021 were as follows: Years Ended December 31, 2022 2021 Ingram Micro Inc. 26 % 30 % BlueStar, Inc. 24 % 23 % ScanSource, Inc. 11 % 11 % |
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. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be affected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 was effective for annual and interim periods beginning after December 15, 2019, and early adoption was permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This Update deferred the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. This Update is not expected to have a significant 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, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Operating Lease Obligations | Operating Lease Obligations The Company’s lease agreement for the office space in Newark, California expired on June 30, 2022. On May 1, 2022, the Company commenced a lease agreement for approximately 35,913 square feet at 40675 Encyclopedia Circle in Fremont, California. This serves as the location for the Company’s Corporate Headquarters, including office space and manufacturing. The Company will pay a base monthly rent in the amount of $50,278 commencing on the first day of the fourth full month of the lease term. Base monthly rent will increase annually on May 1 st The Company accounted for the lease as an operating lease under ASC 842 using the bank loan interest rate in effect on May 1, 2022 at 5.0% to discount future lease payments. The lease term expires on July 31, 2029, with a one-time option to renew for a period of five years. The renewal period is not included in the measurement of the leases as the Company is not reasonably certain of exercising it. In July 2022, the Company also signed a two-year equipment operating lease agreement and the future lease payments are discounted at the interest rate of 5.5%. As of December 31, 2022, the balances of right-of-use assets and liabilities were approximately $ 3.56 3.74 0.21 0.26 The operating lease expense under existing agreement was allocated in cost of goods sold and operating costs based on department headcount and amounted to $ 646,821 428,873 Cash payments included in the measurement of our existing operating lease liabilities were $ 517,174 515,822 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS Future minimum lease payments under the existing operating lease as of December 31, 2022 are shown below: Annual minimum payments: Amount 2023 621,394 2024 636,861 2025 652,883 2026 672,470 2027 692,644 Thereafter 1,139,070 Total minimum payments 4,415,322 Less: Present value factor (678,758 ) Total operating lease liabilities 3,736,564 Less: Current portion of operating lease (444,529 ) Long-term portion of operating lease $ 3,292,035 |
Purchase Commitments | Purchase Commitments On December 31, 2022, the Company’s non-cancelable purchase commitments for inventory to be used in the ordinary course of business during 2023 were approximately $ 8,674,000 |
Legal Matters | Legal Matters The Company is subject to disputes, claims, requests for indemnification and lawsuits arising in the ordinary course of business. Under the indemnification provisions of the Company’s customer agreements, the Company routinely agrees to indemnify and defend its customers against infringement of any patent, trademark, copyright, trade secrets, or other intellectual property rights arising from customers’ legal use of the Company’s products or services. The exposure to the Company under these indemnification provisions is generally limited to the total amount paid for the indemnified products. However, certain indemnification provisions potentially expose the Company to losses in excess of the aggregate amount received from the customer. To date, there have been no claims against the Company by its customers pertaining to such indemnification provisions, and no amounts have been recorded. The Company is currently not a party to any material legal proceedings. |
NOTE 6 _ Stock-Based Compensa_2
NOTE 6 — Stock-Based Compensation Plan (Policies) | 12 Months Ended |
Dec. 31, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Stock-Based Compensation Program | Stock-Based Compensation Program The Company has one share-based compensation plan in effect in the two years presented: the 2004 Equity Incentive Plan (the “2004 Plan”). The 2004 Plan 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 termination date of 2004 Plan was approved to extend from April 23, 2024 to April 23, 2034 at our annual meeting of shareholders in June 2022. The 2004 Plan 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, 2023 and 2022, a total of 283,587 and 287,355 additional shares, respectively, became available for grant from the 2004 Plan. |
Stock-Based Compensation Information | Stock-Based Compensation Information The stock-based compensation expense included in the Company’s statements of income for the years ended December 31, 2022 and 2021, consisted of the following: Years Ended December 31, Income Statement Classification 2022 2021 Cost of revenues $ 119,456 $ 96,254 Research and development 313,904 218,559 Sales and marketing 251,862 166,266 General and administrative 313,470 212,346 Stock-based compensation expenses $ 998,692 $ 693,425 As of December 31, 2022, the remaining unamortized stock-based compensation expense was $ 2,149,926 2.7 Stock Options – 1.74 4.46 Years Ended December 31, 2022 2021 Risk-free interest rate (%) 3.22 % 1.64 % Dividend yield — — Volatility factor 105.44 % 102.26 % Expected option life (years) 2.0 3.9 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, 2022 and 2021: Years Ended December 31, 2022 2021 Total intrinsic value of stock options exercised $ 164,176 $ 9,985,639 Cash received from stock option exercises $ 151,749 $ 1,899,561 SOCKET MOBILE, INC. NOTES TO FINANCIAL STATEMENTS The following summarizes stock option activity under the 2004 Plan as of and for the years ended December 31, 2022 and 2021: Outstanding Options Number of Shares Weighted Average Exercise Price Per Share Remaining Contractual Term Intrinsic 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 Granted 49,000 $ 3.03 Exercised (106,190) $ 1.43 Canceled (24,210) $ 3.12 Balance as of December 31, 2022 1,296,722 $ 2.93 5.33 $ 148,165 Exercisable 1,096,381 $ 2.61 4.83 $ 147,896 Unvested 200,341 $ 4.71 8.17 $ 269 Outstanding, Remaining contractual term (in years) 5.33 Outstanding, Intrinsic Value 148,165 Exercisable, Remaining Contractual term (in years) 4.83 Exercisable, Intrinsic Value 147,896 Unvested, Remaining contractual term (in years) 8.17 Unvested, Intrinsic Value 269 Stock options outstanding as of December 31, 2022 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 - $1.25 150,338 2.50 $ 1.06 150,338 $ 1.06 $1.50 - $1.90 207,825 4.42 $ 1.85 198,851 $ 1.85 $2.00 - $2.32 349,196 5.75 $ 2.30 304,286 $ 2.29 $2.40 - $2.75 138,775 4.42 $ 2.63 138,775 $ 2.63 $2.93 - $2.95 107,824 5.75 $ 2.93 100,324 $ 2.93 $3.05 - $4.22 160,690 5.50 $ 3.82 130,690 $ 3.99 $4.49 - $8.58 182,074 8.42 $ 6.39 73,117 $ 6.23 $0.95 - $8.58 1,296,722 5.33 $ 2.93 1,096,381 $ 2.61 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, 2022 and 2021: Number of Restricted Stocks Weighted 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 of December 31, 2021 646,125 $ 2.18 Granted 330,700 $ 3.82 Vested (111,719 ) $ 2.11 Forfeited (20,130 ) $ 2.29 Unvested as December 31, 2022 844,976 $ 2.84 |
NOTE 1 _ Organization and Sum_3
NOTE 1 — Organization and Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
Activities in allowance for doubtful accounts | Year Balance at Charged to Amounts Balance at 2022 $ 40,651 $ — $ — $ 40,651 2021 $ 40,651 $ — $ — $ 40,651 |
Inventory Components | December 31, 2022 2021 Raw materials and sub-assemblies $ 6,193,453 $ 5,757,869 Finished goods 289,181 277,598 Inventory reserves (880,943 ) (880,943 ) Inventory, net $ 5,601,691 $ 5,154,524 |
Prepaid Expenses and Other Current Assets | December 31, 2022 2021 Prepaid insurance $ 92,644 $ 94,923 Product certification costs 87,293 61,557 Prepaid inventory purchases 196,512 131,635 Prepaid maintenance contracts and other prepaid expenses 240,739 107,046 Prepaid expenses and other current assets $ 617,188 $ 395,161 |
Customers who accounted for at least 10% of the Company's accounts receivable balances | December 31, 2022 2021 Bluestar, Inc. 46 % 21 % Ingram Micro Inc. 14 % 28 % Nippon Primex, Inc. 14 % * ScanSource, Inc. 11 % 24 % * Customer accounted for less than 10% of the Company’s accounts receivable balances |
Warranty | Year Balance at Additional Warranty Reserves Amounts Balance at 2022 $ 78,871 $ 14,475 $ (14,475 ) $ 78,871 2021 $ 78,871 $ 13,910 $ (13,910 ) $ 78,871 |
Net Inome (Loss) Per Share Applicable to Common Stockholders | Years Ended December 31, 2022 2021 Numerator: Net income $ 86,931 $ 4,466,257 Net income allocated to restricted stock award (8,820 ) (380,547 ) Adjusted net income for basic earnings per share $ 78,111 $ 4,085,710 Convertible note interest — 175,876 Adjusted net income before interest for diluted earnings per share $ 78,111 $ 4,261,586 Denominator: Weighted average shares outstanding used in computing net income per share: Basic 7,184,847 6,991,194 Fully diluted 7,532,924 8,923,487 Net income per share applicable to common stockholders: Basic $ 0.01 $ 0.58 Fully diluted $ 0.01 $ 0.48 |
Revenues for geographic areas (in $'000) | Years Ended December 31, Revenues: (in thousands) 2022 2021 United States $ 15,765 $ 17,455 Europe 2,612 3,493 Asia and rest of world 2,861 2,251 Total $ 21,238 $ 23,199 |
Customers who accounted for at least 10% of total revenues | Years Ended December 31, 2022 2021 Ingram Micro Inc. 26 % 30 % BlueStar, Inc. 24 % 23 % ScanSource, Inc. 11 % 11 % |
NOTE 2 _ Acquisition of Intan_2
NOTE 2 — Acquisition of Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Business Combination and Asset Acquisition [Abstract] | |
Estimated future amortization of intangible assets | Fiscal Year Amount 2023 $ 127,296 2024 127,296 2025 127,296 2026 127,296 2027 127,296 Thereafter 1,050,185 Total $ 1,686,665 |
NOTE 3 _ Bank Financing Arran_2
NOTE 3 — Bank Financing Arrangements (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Debt Disclosure [Abstract] | |
CalCap loan balance | December 31, 2022 Current portion of CalCap Loan $ 125,000 CalCap Loan $ 125,000 |
NOTE 5 _ Commitments and Cont_3
NOTE 5 — Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future minimum lease payments | Annual minimum payments: Amount 2023 621,394 2024 636,861 2025 652,883 2026 672,470 2027 692,644 Thereafter 1,139,070 Total minimum payments 4,415,322 Less: Present value factor (678,758 ) Total operating lease liabilities 3,736,564 Less: Current portion of operating lease (444,529 ) Long-term portion of operating lease $ 3,292,035 |
NOTE 6 _ Stock-Based Compensa_3
NOTE 6 — Stock-Based Compensation Plan (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of employee service stock-based compensation, allocation of recognized period costs | Years Ended December 31, Income Statement Classification 2022 2021 Cost of revenues $ 119,456 $ 96,254 Research and development 313,904 218,559 Sales and marketing 251,862 166,266 General and administrative 313,470 212,346 Stock-based compensation expenses $ 998,692 $ 693,425 |
Stock options' weighted average assumptions and grant date fair values | Years Ended December 31, 2022 2021 Risk-free interest rate (%) 3.22 % 1.64 % Dividend yield — — Volatility factor 105.44 % 102.26 % Expected option life (years) 2.0 3.9 |
Activity of stock options exercised | Years Ended December 31, 2022 2021 Total intrinsic value of stock options exercised $ 164,176 $ 9,985,639 Cash received from stock option exercises $ 151,749 $ 1,899,561 |
NOTE 7 _ Shares Reserved (Table
NOTE 7 — Shares Reserved (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Note 7 Shares Reserved | |
Common stock reserved for future issuance | December 31, 2022 2021 Stock option grants outstanding (see Note 6) 1,296,722 1,378,122 Secured subordinated convertible notes (see Note 4) 958,904 958,904 Stock warrants issued to SpringCard SAS (see Note 2) 50,000 50,000 Reserved for future grants (including 266,291 treasury shares) 453,798 208,681 2,759,424 2,595,707 |
NOTE 9 _ Income Taxes (Tables)
NOTE 9 — Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income Tax Expense | Years Ended December 31, 2022 2021 Current: Federal $ — $ — State — — Total Current — — Deferred: Federal (313,000 ) (1,354,991 ) State (395,000 ) (547,738 ) Total Deferred (708,000 ) (1,902,729 ) Income tax benefit $ (708,000 ) $ (1,902,729 ) |
Schedule of Effective Income Tax Rate Reconciliation | Years Ended December 31, 2022 2021 Income at US statutory rate 21.0 % 21.0 % State taxes, net of federal benefit 62.6 % -11.2 % Valuation allowance 18.1 % 0.7 % Stock compensation -11.2 % -50.2 % NOL true up — -1.2 % Tax credits -21.1 % 2.5 % Other 44.8 % -2.2 % Provision for taxes 114.1 % 45.6 % |
Schedule of Deferred Tax Assets and Liabilities | December 31, Deferred tax assets: 2022 2021 Net operating loss carryforwards $ 5,906,000 $ 6,390,000 Tax credits 901,000 1,032,000 Accruals & reserves 951,000 786,000 Lease liabilities 1,043,000 70,000 Depreciation 45,000 167,000 Share-based compensation 190,000 154,000 Capitalized Research Costs 1,105,000 154,000 Total deferred tax assets 10,141,000 8,599,000 Valuation allowance (464,000 ) (577,000 ) Net deferred tax assets 9,677,000 8,022,000 Deferred tax liabilities: Amortization (11,000 ) (3,000 ) ROU assets (996,000 ) (59,000 ) Net deferred tax asset (liability) $ 8,670,000 $ 7,960,000 |
Disclsoure - Schedule of Unrecognized Tax Benefits | Amount Balance as of January 1, 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 Increases (decreases) for current year tax provisions 23,000 Increases (decreases) for prior year tax provisions (160,000) Decreases for expiration of statute of limitations — Settlements — Balance as of December 31, 2022 $ 1,016,000 |
Activities in allowance for dou
Activities in allowance for doubtful accounts (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Accounting Policies [Abstract] | ||
Balance at Beginning of Year | $ 40,651 | $ 40,651 |
Charged to Costs and Expenses | ||
Amounts Written Off | ||
Balane at End of Year | $ 40,651 | $ 40,651 |
Inventory Components (Details)
Inventory Components (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Accounting Policies [Abstract] | ||
Raw materials and sub-assemblies | $ 6,193,453 | $ 5,757,869 |
Finished goods | 289,181 | 277,598 |
Inventory reserves | (880,943) | (880,943) |
Inventory, net | $ 5,601,691 | $ 5,154,524 |
Prepaid Expenses and Other Curr
Prepaid Expenses and Other Current Assets (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Accounting Policies [Abstract] | ||
Prepaid insurance | $ 92,644 | $ 94,923 |
Product certification costs | 87,293 | 61,557 |
Prepaid inventory purchases | 196,512 | 131,635 |
Prepaid maintenance contracts and other prepaid expenses | 240,739 | 107,046 |
Prepaid expenses and other current assets | $ 617,188 | $ 395,161 |
Customers who accounted for at
Customers who accounted for at least 10% of the Company's accounts receivable balances (Details) | Dec. 31, 2022 | Dec. 31, 2021 |
Blue Star [Member] | ||
ScanSource, Inc. | 0.46 | 0.21 |
Ingram Micro [Member] | ||
ScanSource, Inc. | 0.14 | 0.28 |
Nippon Primex [Member] | ||
ScanSource, Inc. | 0.14 | |
Scan Source [Member] | ||
ScanSource, Inc. | 0.11 | 0.24 |
Warranty (Details)
Warranty (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
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 | 14,475 | 13,910 |
Product Warranty Expense | (14,475) | (13,910) |
Standard and Extended Product Warranty Accrual, Ending Balance | $ 78,871 | $ 78,871 |
Net Inome (Loss) Per Share Appl
Net Inome (Loss) Per Share Applicable to Common Stockholders (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Numerator: | ||
Net income | $ 86,931 | $ 4,466,257 |
Net income allocated to restricted stock award | (8,820) | (380,547) |
Adjusted net income for basic earnings per share | 78,111 | 4,085,710 |
Convertible note interest | 175,876 | |
Adjusted net income before interest for diluted earnings per share | $ 78,111 | $ 4,261,586 |
Denominator: Weighted average shares outstanding used in computing net income per share: | ||
Basic | 7,184,847 | 6,991,194 |
Fully diluted | 7,532,924 | 8,923,487 |
Net income per share applicable to common stockholders: | ||
Basic | $ 0.01 | $ 0.58 |
Fully diluted | $ 0.01 | $ 0.48 |
Revenues for geographic areas (
Revenues for geographic areas (in $'000) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Americas [Member] | ||
Total | $ 15,765 | $ 17,455 |
EMEA [Member] | ||
Total | 2,612 | 3,493 |
Asia Pacific [Member] | ||
Total | 2,861 | 2,251 |
Total [Member] | ||
Total | $ 21,238 | $ 23,199 |
Customers who accounted for a_2
Customers who accounted for at least 10% of total revenues (Details) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Ingram Micro [Member] | ||
ScanSource, Inc. | 0.26 | 0.30 |
Blue Star [Member] | ||
ScanSource, Inc. | 0.24 | 0.23 |
Scan Source [Member] | ||
ScanSource, Inc. | 0.11 | 0.11 |
NOTE 1 _ Organization and Sum_4
NOTE 1 — Organization and Summary of Significant Accounting Policies (Details Narrative) | 12 Months Ended | |
Dec. 31, 2022 USD ($) shares | Dec. 31, 2021 USD ($) shares | |
Product Information [Line Items] | ||
Gain (Loss) on Foreign Currency Fair Value Hedge Derivatives | $ 41,300 | $ 31,100 |
[custom:DepreciationExpense] | 594,793 | 620,115 |
Amortization of Intangible Assets | 127,296 | 95,472 |
Deferred Revenue, Current | 594,793 | 407,235 |
Deferred Costs and Other Assets | 266,327 | 158,977 |
[custom:ServiceRevenues] | 22,000 | 26,000 |
Operating Lease, Right-of-Use Asset | 3,559,658 | 210,839 |
Operating Lease, Liability | 3,736,564 | 260,000 |
Capitalized Computer Software, Amortization | 43,572 | 43,572 |
Advertising Expense | $ 31,146 | $ 13,627 |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | shares | 342,765 | 691,125 |
Service [Member] | ||
Product Information [Line Items] | ||
Deferred Revenue | $ 34,366 | $ 31,409 |
Supplier Concentration Risk [Member] | ||
Product Information [Line Items] | ||
Accounts payable balance with top two suppliers | 0.31 | |
Percentage of inventory pruchases from top two suppliers | 46% | 46% |
Estimated future amortization o
Estimated future amortization of intangible assets (Details) | Dec. 31, 2022 USD ($) |
Business Combination and Asset Acquisition [Abstract] | |
2023 | $ 127,296 |
2024 | 127,296 |
2025 | 127,296 |
2026 | 127,296 |
2027 | 127,296 |
Thereafter | 1,050,185 |
Total | $ 1,686,665 |
NOTE 2 _ Acquisition of Intan_3
NOTE 2 — Acquisition of Intangible Assets (Details Narrative) | Dec. 31, 2022 USD ($) |
Business Combination and Asset Acquisition [Abstract] | |
Finite-Lived Intangible Assets, Net | $ 1,686,665 |
CalCap loan balance (Details)
CalCap loan balance (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Debt Disclosure [Abstract] | ||
Current portion of CalCap Loan | $ 125,000 | $ 500,000 |
CalCap Loan | $ 125,000 |
NOTE 3 _ Bank Financing Arran_3
NOTE 3 — Bank Financing Arrangements (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Jan. 29, 2021 | |
Line of Credit Facility [Line Items] | |||
Line of Credit Facility, Expiration Date | Jan. 31, 2023 | ||
Interest Expense | $ 175,050 | $ 198,935 | |
Domestic Revolving Facility [Member] | |||
Line of Credit Facility [Line Items] | |||
Aggregate maximum advance amount | $ 2,000,000 | ||
Term Loan [Member] | |||
Line of Credit Facility [Line Items] | |||
Aggregate maximum advance amount | $ 1,000,000 | ||
Interest Expense | 19,355 | ||
Interest Payable | $ 372 |
NOTE 4 _ Secured Subordinated_2
NOTE 4 — Secured Subordinated Convertible Notes Payable (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | 48 Months Ended | |||
Sep. 30, 2020 | Dec. 31, 2022 | Dec. 31, 2021 | Aug. 30, 2024 | Aug. 31, 2020 | Aug. 28, 2020 | |
Debt Instrument [Line Items] | ||||||
Secured Subordinated Convertible Notes Issued | $ 1,530,000 | |||||
Subordinated Borrowing, Interest Rate | 10% | |||||
Debt Instrument, Convertible, Conversion Price | $ 1.46 | |||||
Payments of Debt Issuance Costs | $ 96,515 | |||||
Amortization of Debt Discount (Premium) | $ 33,091 | $ 33,091 | ||||
Debt Instrument, Unamortized Discount (Premium), Net | 22,061 | |||||
[custom:InterestOnConvertibleDebt] | $ 173,091 | $ 174,842 | ||||
Related Party [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Secured Subordinated Convertible Notes Issued | $ 1,350,000 |
Future minimum lease payments (
Future minimum lease payments (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Annual minimum payments: | ||
2023 | $ 621,394 | |
2024 | 636,861 | |
2025 | 652,883 | |
2026 | 672,470 | |
2027 | 692,644 | |
Thereafter | 1,139,070 | |
Total minimum payments | 4,415,322 | |
Less: Present value factor | (678,758) | |
Total operating lease liabilities | 3,736,564 | $ 260,000 |
Less: Current portion of operating lease | (444,529) | (258,097) |
Long-term portion of operating lease | $ 3,292,035 |
NOTE 5 _ Commitments and Cont_4
NOTE 5 — Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Operating Lease, Right-of-Use Asset | $ 3,559,658 | $ 210,839 |
Operating Lease, Liability | 3,736,564 | 260,000 |
Operating Lease, Expense | 646,821 | 428,873 |
Operating Lease, Payments | 517,174 | $ 515,822 |
Purchase Obligation, to be Paid, Year One | $ 8,674,000 |
Schedule of employee service st
Schedule of employee service stock-based compensation, allocation of recognized period costs (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Stock-based compensation expenses | $ 998,692 | $ 693,425 |
Cost Of Revenue [Member] | ||
Stock-based compensation expenses | 119,456 | 96,254 |
Research And Development [Member] | ||
Stock-based compensation expenses | 313,904 | 218,559 |
Sales And Marketing [Member] | ||
Stock-based compensation expenses | 251,862 | 166,266 |
General And Administrative [Member] | ||
Stock-based compensation expenses | $ 313,470 | $ 212,346 |
Stock options' weighted average
Stock options' weighted average assumptions and grant date fair values (Details) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Share-Based Payment Arrangement [Abstract] | ||
Risk-free interest rate (%) | 3.22% | 1.64% |
Dividend yield | ||
Volatility factor | 105.44% | 102.26% |
Expected option life (years) | 2 years | 3 years 10 months 24 days |
Activity of stock options exerc
Activity of stock options exercised (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 24, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Total intrinsic value of stock options exercised | $ 164,176 | $ 9,985,639 | |
Cash received from stock option exercises | $ 151,749 | $ 1,899,561 | |
Exercised (in shares) | (29,195) | ||
Equity Option [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Balance as of December 31, 2021 (in shares) | 1,296,722 | 1,378,122 | |
Balance as of December 31, 2021 (in $ per share) | $ 2.93 | $ 2.81 | $ 2.42 |
Granted (in shares) | 49,000 | 182,000 | |
Granted | $ 3.03 | $ 6.39 | |
Exercised (in shares) | (106,190) | (782,633) | |
Exercised | $ 1.43 | $ 2.43 | |
Canceled (in shares) | (24,210) | (16,051) | |
Canceled | $ 3.12 | $ 2.41 | |
Balance as of December 31, 2022 | 1,296,722 | ||
Balance as of December 31, 2022 (in $ per share) | $ 2.93 | $ 2.81 | |
Exercisable (in shares) | 1,096,381 | ||
Exercisable | $ 2.61 | ||
Unvested (in shares) | 200,341 | ||
Unvested | $ 4.71 | ||
Outstanding, Remaining contractual term (in years) | 5 years 3 months 29 days | ||
Outstanding, Intrinsic Value | $ 148,165 | ||
Exercisable, Remaining Contractual term (in years) | 4 years 9 months 29 days | ||
Exercisable, Intrinsic Value | $ 147,896 | ||
Unvested, Remaining contractual term (in years) | 8 years 2 months 1 day | ||
Unvested, Intrinsic Value | $ 269 |
NOTE 6 _ Stock-Based Compensa_4
NOTE 6 — Stock-Based Compensation Plan (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Share-Based Payment Arrangement [Abstract] | ||
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount | $ 2,149,926 | |
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition | 2 years 8 months 12 days | |
Weighted average grant date fair value | $ 1.74 | $ 4.46 |
Common stock reserved for futur
Common stock reserved for future issuance (Details) - shares | Dec. 31, 2022 | Dec. 31, 2021 |
Share-Based Payment Arrangement, Option [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Reserved for future grants (including 266,291 treasury shares) | 1,296,722 | 1,378,122 |
Subordinated Convertible Note [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Reserved for future grants (including 266,291 treasury shares) | 958,904 | 958,904 |
Warrant To Purchase Common Stock [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Reserved for future grants (including 266,291 treasury shares) | 50,000 | 50,000 |
Treasury Stock Reserved For Future Grants [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Reserved for future grants (including 266,291 treasury shares) | 453,798 | 208,681 |
Schedule of Income Tax Expense
Schedule of Income Tax Expense (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | ||
Federal | ||
State | ||
Total Current | ||
Federal | (313,000) | (1,354,991) |
State | (395,000) | (547,738) |
Total Deferred | (708,000) | (1,902,729) |
Income tax benefit | $ (708,000) | $ (1,902,729) |
Schedule of Effective Income Ta
Schedule of Effective Income Tax Rate Reconciliation (Details) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | ||
Income at US statutory rate | 21% | 21% |
State taxes, net of federal benefit | 62.60% | (11.20%) |
Valuation allowance | 18.10% | 0.70% |
Stock compensation | (11.20%) | (50.20%) |
NOL true up | (1.20%) | |
Tax credits | (21.10%) | 2.50% |
Other | 44.80% | (2.20%) |
Provision for taxes | 114.10% | 45.60% |
Schedule of Deferred Tax Assets
Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 5,906,000 | $ 6,390,000 |
Tax credits | 901,000 | 1,032,000 |
Accruals & reserves | 951,000 | 786,000 |
Lease liabilities | 1,043,000 | 70,000 |
Depreciation | 45,000 | 167,000 |
Share-based compensation | 190,000 | 154,000 |
Capitalized Research Costs | 1,105,000 | 154,000 |
Total deferred tax assets | 10,141,000 | 8,599,000 |
Valuation allowance | (464,000) | (577,000) |
Net deferred tax assets | 9,677,000 | 8,022,000 |
Deferred tax liabilities: | ||
Amortization | (11,000) | (3,000) |
ROU assets | (996,000) | (59,000) |
Net deferred tax asset (liability) | $ 8,670,000 | $ 7,960,000 |
Disclsoure - Schedule of Unreco
Disclsoure - Schedule of Unrecognized Tax Benefits (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | ||
Balance as of December 31, 2021 | $ 1,153,000 | $ 1,064,000 |
Unrecognized Tax Benefits, Increase Resulting from Current Period Tax Positions | 23,000 | 115,000 |
Unrecognized Tax Benefits, Decrease Resulting from Prior Period Tax Positions | (160,000) | $ (26,000) |
Balance as of December 31, 2022 | $ 1,016,000 |
NOTE 9 _ Income Taxes (Details
NOTE 9 — Income Taxes (Details Narrative) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2019 |
Income Tax Disclosure [Abstract] | |||
Deferred Tax Assets, Operating Loss Carryforwards, Domestic | $ 22,500,000 | ||
Deferred Tax Assets, Operating Loss Carryforwards, State and Local | 16,900,000 | ||
[custom:DeferredTaxAssetsTaxCreditCarryforwardsResearchFederal-0] | 500,000 | ||
[custom:DeferredTaxAssetsTaxCreditCarryforwardsResearchStateAndLocal-0] | 600,000 | ||
Unrecognized Tax Benefits | $ 1,016,000 | $ 1,153,000 | $ 1,064,000 |
NOTE 10 _ Subsequent Events (De
NOTE 10 — Subsequent Events (Details Narrative) | 3 Months Ended |
Mar. 24, 2023 shares | |
Subsequent Events [Abstract] | |
Stock Issued During Period, Shares, Restricted Stock Award, Gross | 402,370 |
Shares issued for exercise of stock options | 29,195 |
Stock Repurchased During Period, Shares | 89,197 |
Uncategorized Items - k10-2022.
Label | Element | Value |
Equity Option [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Outstanding, Number | us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber | 1,994,806 |