SEC Form 10-Q filed by Socket Mobile Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(X)

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

For the quarterly period ended March 31, 2022

( )

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

For the transition period ___________________ to _____________________.

Commission file number 1-13810

SOCKET MOBILE, INC.

(Exact name of registrant as specified in its charter)

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

39700 Eureka Drive, Newark, CA 94560

(Address of principal executive offices including zip code)

(510) 933-3000

(Registrant’s telephone number, including area code)

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

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

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

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

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

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

Smaller reporting company [X] Emerging growth company [ ]

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

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

The number of shares of Common Stock ($0.001 par value) outstanding as of May 9, 2022 was 7,200,451 shares.

INDEX

		PAGE NO.
Part I. Financial Information

Item 1. Financial Statements (Unaudited):

Condensed Statements of Operations – Three Months Ended March 31, 2022 and 2021 (Unaudited)		1

Condensed Balance Sheets - March 31, 2022 (Unaudited) and December 31, 2021		2

Condensed Statements of Stockholders’ Equity – Three Months Ended March 31, 2022 and 2021 (Unaudited)		3

Condensed Statements of Cash Flows - Three Months Ended March 31, 2022 and 2021 (Unaudited)		4

Notes to Condensed Financial Statements (Unaudited)		5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15

Item 3. Quantitative and Qualitative Disclosures about Market Risk		21

Item 4. Controls and Procedures		22

Part II. Other Information

Item 1A. Risk Factors		23

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		34

Item 6. Exhibits		34

Signatures		35


	Three Months Ended March 31,
	2022			2021

Revenues	$	6,293,002		$	4,812,979

Cost of revenues		3,165,340			2,238,936

Gross profit		3,127,662			2,574,043

Operating expenses:
Research and development		1,053,606			931,034
Sales and marketing		899,880			660,462
General and administrative		710,472			740,537
Total operating expenses		2,663,958			2,332,033

Operating income		463,704			242,010

Interest expense, net		(45,606	)		(48,701	)
Other income		—			10,082

Net income before income taxes		418,098			203,391
Income tax expense		76,165			489

Net income	$	341,933		$	202,902

Net income per share:

Basic	$	0.04		$	0.03
Diluted	$	0.04		$	0.03

Weighted average shares outstanding:

Basic		7,234,163			6,484,391
Diluted		7,724,357			7,305,988


	March 31, 2022 (Unaudited)			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	5,423,086		$	6,095,886
Accounts receivable, net		3,446,417			2,576,240
Inventories, net		5,213,573			5,154,524
Prepaid expenses and other current assets		488,606			395,161
Deferred cost on shipments to distributors		152,418			158,977
Total current assets		14,724,100			14,380,788

Property and equipment:
Machinery and office equipment		2,440,287			2,436,897
Computer equipment		1,996,488			1,909,895
Property, plant, and equipment, gross		4,436,775			4,346,792
Accumulated depreciation		(3,392,065	)		(3,277,979	)
Property and equipment, net		1,044,710			1,068,813

Intangible assets, net		1,782,137			1,813,961
Other long-term assets		351,637			140,281
Deferred tax assets		7,884,254			7,960,419
Operating lease right-of-use asset		106,417			210,839
Total assets	$	25,893,255		$	25,575,101


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	2,205,189		$	2,169,055
Accrued payroll and related expenses		755,925			692,994
Deferred revenue on shipments to distributors		370,768			407,235
Short term portion of deferred service revenue		21,390			17,128
Note Payable – current portion		500,000			500,000
Subordinated convertible notes payable, net of discount		144,487			143,514
Subordinated convertible notes payable, net of discount-related party		1,208,634			1,201,334
Operating lease – current portion		130,047			258,097
Total current liabilities		5,336,440			5,389,357

Long-term portion of deferred service revenue		20,656			14,281
Long-term portion of note payable		—			125,000
Total liabilities		5,357,096			5,528,638

Commitments and contingencies		—			—
Stockholders’ equity:
Common stock, $0.001 par value: Authorized – 20,000,000 shares, Issued and outstanding – 7,273,051 shares at March 31, 2022 and 7,183,874 shares at December 31, 2021		7,273			7,184
Additional paid-in capital		66,287,304			66,139,630
Accumulated deficit		(45,758,418	)		(46,100,351	)
Total stockholders’ equity		20,536,159			20,046,463
Total liabilities and stockholders’ equity	$	25,893,255		$	25,575,101


							Additional						Total
	Common Stock						Paid-In			Accumulated			Stockholders’
	Shares			Amount			Capital			Deficit			Equity
Balance at December 31, 2021		7,183,874		$	7,184		$	66,139,630		$	(46,100,351	)	$	20,046,463
Vesting of restricted stocks		91,134			91			(91	)		—			—
Restricted stock retired for tax withholding		(26,157	)		(26	)		(115,189	)		—			(115,215	)
Exercise of stock option		24,200			24			39,508			—			39,532
Stock-based compensation		—			—			223,446			—			223,446
Net income		—			—			—			341,933			341,933
Balance at March 31, 2022		7,273,051		$	7,273		$	66,287,304		$	(45,758,418	)	$	20,536,159

Fiscal Year		Amount
2022 (April 1, 2022 to December 31, 2022)	$	95,472
2023		127,296
2024		127,296
2025		127,296
2026		127,296
Thereafter		1,177,481
Total	$	1,782,137


	March 31,			December 31,
	2022			2021
Raw materials and sub-assemblies	$	5,774,323		$	5,757,869
Finished goods		320,193			277,598
Inventory reserves		(880,943	)		(880,943	)
Inventory, net	$	5,213,573		$	5,154,524


	March 31, 2022
Current portion of CalCap Loan	$	500,000
Long-term portion of CalCap Loan		—
CalCap Loan	$	500,000


	Three Months Ended March 31,
Revenues:	2022		2021
United States	$	4,882,773	$	3,563,055
Europe		697,971		777,580
Asia and rest of world		712,258		472,344
Total revenues	$	6,293,002	$	4,812,979


Annual minimum payments:	Amount
2022 (through June 30, 2022)		131,395
Total minimum payments		131,395
Less: Present value factor		(1,348	)
Total operating lease liabilities		130,047
Less: Current portion of operating lease		(130,047	)
Long-term portion of operating lease		—

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

Unconditional purchase obligations with contract manufacturers	$	13,137,000	$	12,456,000	$	681,000	$	—	$	—
Operating lease		131,000		131,000		—		—		—
Total contractual obligations	$	13,268,000	$	12,587,000	$	681,000	$	—	$	—


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


	March 31,			December 31,
	2022			2021
Ingram Micro Inc.		22	%		28	%
ScanSource, Inc.		33	%		24	%
BlueStar, Inc.		22	%		21	%


Date: May 16, 2022	/s/ Kevin J. Mills
	Kevin J. Mills
	President and Chief Executive Officer
	(Duly Authorized Officer and Principal Executive Officer)


Date: May 16, 2022	/s/ Lynn Zhao
	Lynn Zhao
	Vice President of Finance and Administration and Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer)

Three Months Ended March 31,

Ingram Micro, Inc.

BlueStar, Inc.

ScanSource, Inc.