Socket Mobile Inc. filed SEC Form 8-K: Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligation, Unregistered Sales of Equity Securities, Financial Statements and Exhibits
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Item 1.01. Entry into a Material Definitive Agreement.
On August 21, 2024, Socket Mobile, Inc. (the “Company”) completed a secured subordinated convertible note financing of $1,000,000 (the “Financing”). The proceeds of the Financing will be used to increase the Company’s working capital balances.
The secured subordinated convertible notes (the “Notes”) have a three-year term and will mature August 21, 2027. The interest rate on the Notes is 10% per year, payable quarterly in cash. The holder of each Note may require the Company to repay the principal amount of the Note plus accrued interest at any time after August 21, 2025. The Notes are secured by the assets of the Company and are subordinated to the Company’s debts with Western Alliance Bank, its senior lender. The principal amount of each Note is convertible at any time, at the option of the holder, into shares of the Company’s common stock (“Common Stock”) at a conversion price of $0.9515 per share. Failure to pay the principal payment or any interest payment (with 5 days delinquency) when due are events of default under the Notes. The Company will use reasonable efforts to prepare and file and cause to be declared effective pursuant to the Securities Act of 1933, as amended, no later than November 30, 2024, a Registration Statement to provide for resales of the shares of Common Stock issuable upon conversion of the Notes.
Certain Relationships
Charlie Bass, Chairman of the Company’s Board of Directors (the “Board”); Bill Parnell, the Company’s Board director; Enrico Mills, the adult son of Kevin Mills, the Company’s CEO and a Board director; Jason Wu, the Company’s Controller; Eric Glaenzer, the Company’s CTO participated in the Financing. Because the Financing involved such parties related to the Company, a special committee of the Board comprising the Board’s disinterested directors approved the Financing.
The foregoing description of the Notes does not purport to be complete and is qualified in its entirety by reference to the full text of the Form of the Secured Subordinated Convertible Note, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference. The press release announcing the Financing is attached hereto as Exhibit 99.1 and incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
The information set forth in Item 1.01 of this Current Report on Form 8-K that relates to the issuance of the Notes and the resulting incurrence of debt is incorporated by reference into this Item 2.03.
Item 3.02. Unregistered Sales of Equity Securities.
The information set forth in Item 1.01 of this Current Report on Form 8-K that relates to the Notes is incorporated by reference into this Item 3.02.
The Common Stock issuable upon conversion of the Notes is not currently registered under the Securities Act. The Notes, and the Common Stock issuable upon conversion thereof, are being issued to accredited investors in reliance upon exemptions from registration under Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder. These securities may not be offered or sold in the United States absent registration under, or an exemption from, the Securities Act and any applicable state securities laws.
Item 9.01 Financial Statements and Exhibits.
| Exhibit No. | Description | |
| 10.1 | Form of Secured Subordinated Convertible Note | |
| 99.1 | Socket Mobile, Inc. Press Release, dated August 22, 2024 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SOCKET MOBILE, INC. | |||
| By: | /s/ Lynn Zhao | ||
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Name: Lynn Zhao Vice President, Finance and Administration and Chief Financial Officer | |||
Date: August 22, 2024