Socket Mobile (SCKT) 10-Q15 May 232023 Q1 Quarterly reportFinancial data

Company Profile

Cover

Cover - shares	3 Months Ended
Cover - shares	Mar. 31, 2023	May 09, 2023
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Mar. 31, 2023
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2023
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
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 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 Common Stock, Shares Outstanding		7,130,853

Condensed Statements Of Operati

Condensed Statements Of Operations - USD ($)	3 Months Ended
Condensed Statements Of Operations - USD ($)	Mar. 31, 2023	Mar. 31, 2022
Income Statement [Abstract]
Revenues	$ 4,312,178	$ 6,293,002
Cost of revenues	2,239,691	3,165,340
Gross profit	2,072,487	3,127,662
Operating expenses:
Research and development	1,247,119	1,053,606
Sales and marketing	1,006,792	899,880
General and administrative	773,988	710,472
Total operating expenses	3,027,899	2,663,958
Operating income (loss)	(955,412)	463,704
Interest expense, net	(38,008)	(45,606)
Other income
Net income (loss) before income taxes	(993,420)	418,098
Income tax expense		76,165
Net income (loss)	$ (993,420)	$ 341,933
Net income (loss) per share:
Basic	$ (0.12)	$ 0.04
Diluted	$ (0.12)	$ 0.04
Weighted average shares outstanding:
Basic	7,106,746	7,234,163
Diluted	7,106,746	7,724,357

Condensed Balance Sheets

Condensed Balance Sheets - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 2,963,308	$ 3,623,469
Accounts receivable, net	2,494,713	2,659,861
Inventories, net	5,659,930	5,601,691
Prepaid expenses and other current assets	556,352	617,188
Deferred cost on shipments to distributors	273,718	266,327
Total current assets	11,948,021	12,768,536
Property and equipment:
Machinery and office equipment	1,842,599	1,533,087
Computer equipment	2,871,714	2,715,121
Property, plant, and equipment, gross	4,714,313	4,248,208
Accumulated depreciation	(2,752,101)	(2,590,999)
Property and equipment, net	1,962,212	1,657,209
Intangible assets, net	1,654,841	1,693,927
Other long-term assets	250,239	250,239
Deferred tax assets	8,668,419	8,668,419
Operating lease right-of-use asset	3,443,826	3,559,658
Total assets	27,927,558	28,597,988
Current liabilities:
Accounts payable and accrued expenses	2,180,911	1,665,028
Accrued payroll and related expenses	598,501	742,541
Deferred revenue on shipments to distributors	647,977	594,793
Short term portion of deferred service revenue	21,816	22,599
Note Payable – current portion		125,000
Subordinated convertible notes payable, net of discount	148,382	147,409
Subordinated convertible notes payable, net of discount - related party	1,237,830	1,230,530
Operating lease – current portion	454,660	444,529
Total current liabilities	5,290,077	4,972,429
Long-term portion of deferred service revenue	12,183	11,767
Long-term portion of operating lease	3,175,848	3,292,035
Total liabilities	8,478,108	8,276,231
Commitments and contingencies
Stockholders’ equity:
Common Stock, Value, Issued	7,130	7,090
Additional paid-in capital	67,487,148	67,157,650
Treasury stock	(1,037,988)	(829,563)
Accumulated deficit	(47,006,840)	(46,013,420)
Total stockholders’ equity	19,449,450	20,321,757
Total liabilities and stockholders’ equity	$ 27,927,558	$ 28,597,988

Condensed Balance Sheets (Paren

Condensed Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Common Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Common Stock, Shares Authorized	20,000,000	20,000,000
Common Stock, Shares, Issued	7,489,201	7,355,967
Common Stock, Shares, Outstanding	7,129,951	7,089,676

Condensed Statements of Stockho

Condensed Statements of Stockholders' Equity - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock, Common [Member]	Retained Earnings [Member]	Total
Beginning balance, value at Dec. 31, 2021	$ 7,184	$ 66,139,630		$ (46,100,351)	$ 20,046,463
Shares, Outstanding, Beginning Balance at Dec. 31, 2021	7,183,874
Vesting of restricted stocks	$ 91	(91)
Vesting of restricted stocks	91,134
Restricted stock retired for tax withholding	$ (26)	(115,189)			(115,215)
Restricted stock retired for tax withholding	(26,157)
Exercise of stock option	$ 24	39,508			39,532
Exercise of stock options	24,200
Stock-based compensation		223,446			223,446
Net income				341,933	341,933
Ending balance, value at Mar. 31, 2022	$ 7,273	66,287,304		(45,758,418)	20,536,159
Shares, Outstanding, Ending Balance at Mar. 31, 2022	7,273,051
Beginning balance, value at Dec. 31, 2022	$ 7,090	67,157,650	$ (829,563)	(46,013,420)	20,321,757
Shares, Outstanding, Beginning Balance at Dec. 31, 2022	7,089,676		266,291
Vesting of restricted stocks	$ 148	(148)
Vesting of restricted stocks	147,972
Restricted stock retired for tax withholding	$ (54)	54
Restricted stock retired for tax withholding	(53,647)
Exercise of stock option	$ 39	33,666			33,705
Exercise of stock options	38,909
Stock-based compensation		295,833			295,833
Treasury shares purchased	$ (93)	93	$ (208,425)		(208,425)
Treasury shares purchased	(92,959)
Treasury Stock, Shares, Acquired			92,959
Net income				(993,420)	(993,420)
Ending balance, value at Mar. 31, 2023	$ 7,130	$ 67,487,148	$ (1,037,988)	$ (47,006,840)	$ 19,449,450
Shares, Outstanding, Ending Balance at Mar. 31, 2023	7,129,951		359,250

Condensed Statements Of Cash Fl

Condensed Statements Of Cash Flows - USD ($)	3 Months Ended
Condensed Statements Of Cash Flows - USD ($)	Mar. 31, 2023	Mar. 31, 2022
Operating activities
Net income (loss)	$ (993,420)	$ 341,933
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock-based compensation	295,833	223,446
Depreciation and amortization	200,189	201,739
Amortization of debt discount	8,273	8,273
Deferred tax benefits		76,165
Amortization of operating lease ROU asset	115,832	104,422
Changes in operating assets and liabilities:
Accounts receivable	165,148	(870,177)
Inventories	(58,239)	(59,049)
Prepaid expenses and other current assets	60,836	(93,445)
Other assets		(222,249)
Accounts payable and accrued expenses	515,883	36,134
Accrued payroll and related expenses	(144,040)	(52,284)
Net deferred revenue on shipments to distributors	45,793	(29,908)
Deferred service revenue	(367)	10,637
Net change in operating lease liability	(106,056)	(128,050)
Net cash (used in) provided by operating activities	105,665	(452,413)
Investing activities
Purchases of equipment and intangible assets	(466,106)	(134,919)
Net cash used in investing activities	(466,106)	(134,919)
Financing activities
Common stocks repurchased and related expenses	(208,425)
Repayments of note payable	(125,000)	(125,000)
Proceeds from stock options exercised	33,705	39,532
Net cash used in financing activities	(299,720)	(85,468)
Net (decrease) increase in cash and cash equivalents	(660,161)	(672,800)
Cash and cash equivalents at beginning of period	3,623,469	6,095,886
Cash and cash equivalents at end of period	2,963,308	5,423,086
Supplemental disclosure of cash flow information
Cash paid for interest	36,030	49,460
Non-cash investing and financing activities
Payroll tax liability for retired restricted stock		$ 115,215

NOTE 1 _ Basis of Presentation

NOTE 1 — Basis of Presentation	3 Months Ended
NOTE 1 — Basis of Presentation	Mar. 31, 2023
Accounting Policies [Abstract]
NOTE 1 — Basis of Presentation	NOTE 1 Basis of Presentation The accompanying unaudited condensed financial statements of Socket Mobile, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals considered necessary for fair presentation have been included. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future period. These financial statements should be read in conjunction with the audited financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

NOTE 2 _ Summary of Significant

NOTE 2 — Summary of Significant Accounting Policies	3 Months Ended
NOTE 2 — Summary of Significant Accounting Policies	Mar. 31, 2023
Accounting Policies [Abstract]
NOTE 2 — Summary of Significant Accounting Policies	NOTE 2 — Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and 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 Equivalents and Fair Value of Financial Instruments 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. In response to recent volatility in the financial markets in March 2023, the Company entered into an Insured Cash Sweep (“ICS”) Deposit Placement Agreement with IntraFi Network LLC facilitated by its bank, Bridge Bank - a division of Western Alliance Bank. The ICS program provides the Company’s demand or savings products with access to unlimited FDIC insurance, which helps the Company to keep the full amount of the deposit on its balance sheet and provides additional security during times of market uncertainty. As of March 31, 2023, and December 31, 2022, all of the Company’s cash and cash equivalents consisted of amounts held in demand deposit accounts in banks. The Company has never experienced any losses in such accounts. The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, and debt approximate fair value due to the relatively short period of time to maturity. Revenue Recognition and Deferred Revenue 647,977 273,718 594,793 266,327 SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 31, 2023 The Company also earns revenue from its SocketCare extended warranty program, which provides extended warranty and accidental breakage coverage for selected products. Customers can purchase a SocketCare warranty at the time of product purchase, which provides coverage for a three-year or a five-year term. Revenues from SocketCare services are recognized ratably over the life of the extended warranty contract. For the quarters ended March 31, 2023 and 2022, SocketCare revenue was approximately $ 5,600 5,400 34,000 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 Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 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 March 31, 2023, the balances of right-of-use assets and liabilities for the operating lease were $ 3,443,826 3,630,508 3,559,658 3,736,564 Recently Issued Financial Accounting Standards From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position, results of operations or cash flows upon adoption.

NOTE 3 _ Intangible Assets

NOTE 3 — Intangible Assets	3 Months Ended
NOTE 3 — Intangible Assets	Mar. 31, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
NOTE 3 — Intangible Assets	NOTE 3 — Intangible Assets In 2021, the Company entered into the Technology Transfer Agreement with SpringCard SAS (“SpringCard”). The Unaudited Condensed Balance Sheets include the intangible assets of the acquired technology at the carrying amount, net of amortization of $ 1,654,841 SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 31, 2023 The intangible assets are amortized on a straight-line basis over their estimated useful lives of fifteen years, beginning on April 1, 2021. As of March 31, 2023, the estimated future amortization of these intangible assets is as follows: Fiscal Year Amount 2023 (April 1, 2023 to December 31, 2023) $ 95,472 2024 127,296 2025 127,296 2026 127,296 2027 127,296 Thereafter 1,050,185 Total $ 1,654,841

NOTE 4 _ Inventories

NOTE 4 — Inventories	3 Months Ended
NOTE 4 — Inventories	Mar. 31, 2023
Inventory Disclosure [Abstract]
NOTE 4 — Inventories	NOTE 4 — Inventories Inventories consist principally of raw materials and sub-assemblies, which are stated at the lower of cost (first-in, first-out) or market. Inventories on March 31, 2023 and December 31, 2022 were as follows: March 31, December 31, 2023 2022 Raw materials and sub-assemblies $ 6,346,897 $ 6,193,453 Finished goods 193,976 289,181 Inventory reserves (880,943 ) (880,943 ) Inventory, net $ 5,659,930 $ 5,601,691

NOTE 5 _ Bank Financing Arrange

NOTE 5 — Bank Financing Arrangements	3 Months Ended
NOTE 5 — Bank Financing Arrangements	Mar. 31, 2023
Debt Disclosure [Abstract]
NOTE 5 — Bank Financing Arrangements	NOTE 5 — 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 $2.0 $1.0 SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 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. 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. The outstanding balance of the CalCap Loan, which was $125,000 $1,138 The Company did not borrow any amounts on its bank credit lines as of March 31, 2023 and December 31, 2022.

NOTE 6 _ Secured Subordinated C

NOTE 6 — Secured Subordinated Convertible Notes Payable	3 Months Ended
NOTE 6 — Secured Subordinated Convertible Notes Payable	Mar. 31, 2023
Debt Disclosure [Abstract]
NOTE 6 — Secured Subordinated Convertible Notes Payable	NOTE 6 — 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”), which extended the maturity date of the notes from August 30, 2023 to August 30, 2024. All other terms and conditions of the notes remain unchanged and in full force and effect. SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 31, 2023 Total interest expenses recognized related to the convertible note were $42,793

NOTE 7 _ Segment Information an

NOTE 7 — Segment Information and Concentrations	3 Months Ended
NOTE 7 — Segment Information and Concentrations	Mar. 31, 2023
Segment Reporting [Abstract]
NOTE 7 — Segment Information and Concentrations	NOTE 7 — Segment Information and Concentrations Segment Information The Company operates in the mobile barcode scanning and RFID/NFC data capture market. Mobile scanning typically consists of mobile devices such as smartphones or tablets, with mobile scanning or NFC 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 developers whose applications are designed to work with the Company’s products. Revenues by geographic areas for the three months ended March 31, 2023 and 2022 were as follows: Three Months Ended March 31, Revenues: 2023 2022 United States $ 3,138,653 $ 4,882,773 Europe 542,527 697,971 Asia and rest of world 630,998 712,258 Total revenues $ 4,312,178 $ 6,293,002 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 the Company’s total revenues for the three months ended March 31, 2023 and 2022 were as follows: Three Months Ended March 31, 2023 2022 Ingram Micro, Inc. 23 % 27 % BlueStar, Inc. 20 % 20 % ScanSource, Inc. * 19 % Customer accounted for less than 10% of the Company’s total revenue 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 and the Company has not experienced losses on the investments. The Company’s trade accounts receivables are primarily with distributors. The Company performs ongoing credit evaluations of its customers’ financial condition, but the Company generally requires no collateral. Reserves are maintained for potential credit losses, and such losses have been within management’s expectations. Customers who accounted for at least 10% SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 31, 2023 March 31, December 31, 2023 2022 Ingram Micro Inc. 28 % 14 % BlueStar, Inc. 27 % 46 % ScanSource, Inc. 15 % 11 % Nippon Primex, Inc. 14 % *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 due to an interruption of supply. Suppliers may choose to restrict credit terms or require advance payments causing delays in the procurement of essential materials. The Company’s inability to procure certain materials could have a material adverse effect on the Company’s results. For the three months ended March 31, 2023 and 2022, the top three suppliers accounted for 55% 53% 26% 31%

NOTE 8 _ Stock-Based Compensati

NOTE 8 — Stock-Based Compensation	3 Months Ended
NOTE 8 — Stock-Based Compensation	Mar. 31, 2023
Share-Based Payment Arrangement [Abstract]
NOTE 8 — Stock-Based Compensation	NOTE 8 — Stock-Based Compensation The Company recognizes the compensation cost in the financial statements for all stock-based awards to employees, including grants of stock options and restricted stock, based on the fair value of the awards as of the date that the awards are issued. Compensation cost for stock-based awards is recognized on a straight-line basis over the vesting period. 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. There were no The shares of restricted stock are issued to employees and consultants and are held in escrow by the Company until the shares vest on the schedule of 15% after year one, 20% after year two, 25% after year three and 40% after year four, subject to the employees and consultants being a continuing service provider on each of the vesting dates. If the service or employment is terminated, unvested shares revert to the Company. Shares are registered at grant, so share owners may vote at the annual stockholder meeting. Shares of restricted stock are granted at zero cost basis. Compensation cost of the restricted stock is recognized on a straight-line basis over the 4-year vesting period. For the three months ended March 31, 2023 and 2022, the Company awarded 402,370 233,800 1,070,434 SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 31, 2023 Total stock-based compensation expenses for the three months ended March 31, 2023 and 2022, were $295,833 $223,446

NOTE 9 _ Net Income Per Share

NOTE 9 — Net Income Per Share	3 Months Ended
NOTE 9 — Net Income Per Share	Mar. 31, 2023
Accounting Policies [Abstract]
NOTE 9 — Net Income Per Share	NOTE 9 — Net Income Per Share The following table sets forth the reconciliation of basic shares to diluted shares and the computation of basic and diluted net income per share: Three Months Ended March 31, 2023 2022 Numerator: Net income (loss) $ (993,420) $ 341,933 Net income allocated to restricted stock award 121,264 31,752 Adjusted net income (loss) before interest for diluted earnings per share $ (872,156) $ 310,181 Denominator: Weighted average shares Basic 7,106,746 7,234,163 Effect of dilutive stock options — 490,194 Diluted 7,106,746 7,724,357 Net income (loss) per share applicable to common stockholders: Basic $ (0.12) $ 0.04 Diluted $ (0.12) $ 0.04 In the three months ended March 31, 2023, the shares used in computing diluted net loss per share do not include 1,262,027 50,000 In the three months ended March 31, 2022, the shares used in computing diluted net loss per share do not include 287,928 50,000 SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 31, 2023

NOTE 10 _ Income Taxes

NOTE 10 — Income Taxes	3 Months Ended
NOTE 10 — Income Taxes	Mar. 31, 2023
Income Tax Disclosure [Abstract]
NOTE 10 — Income Taxes	NOTE 10 — Income Taxes The Company did not record an income tax expense of in Q1 2023 compared to $76,165

NOTE 11 _ Commitments and Conti

NOTE 11 — Commitments and Contingencies	3 Months Ended
NOTE 11 — Commitments and Contingencies	Mar. 31, 2023
Commitments and Contingencies Disclosure [Abstract]
NOTE 11 — Commitments and Contingencies	NOTE 11 — Commitments and Contingencies Operating Lease Obligations 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 pays 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 increases 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%. The operating lease expense under existing agreement was allocated in cost of goods sold and operating costs based on department headcount and amounted to $162,108 $107,218 On March 31, 2023, the balances of right-of-use assets and liabilities for the operating lease were approximately $ 3.44 3.63 3.56 3.74 Cash payments included in the measurement of the Company’s operating lease liabilities were $153,181 $132,010 Future minimum lease payments under the operating lease on March 31, 2023 are shown below: Annual minimum payments: Amount 2023 (April 1 through December 31, 2023) 469,062 2024 636,860 2025 652,883 2026 672,470 2027 692,644 Thereafter 1,139,070 Total minimum payments 4,262,989 Less: Present value factor (632,481 ) Total operating lease liabilities 3,630,508 Less: Current portion of operating lease (454,660 ) Long-term portion of operating lease $ 3,175,848 SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 31, 2023 Purchase Commitments As of March 31, 2023, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of approximately $ 9,095,000 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 2 _ Summary of Significa_2

NOTE 2 — Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2023
Accounting Policies [Abstract]
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and 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 Equivalents and Fair Value of Financial Instruments	Cash Equivalents and Fair Value of Financial Instruments 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. In response to recent volatility in the financial markets in March 2023, the Company entered into an Insured Cash Sweep (“ICS”) Deposit Placement Agreement with IntraFi Network LLC facilitated by its bank, Bridge Bank - a division of Western Alliance Bank. The ICS program provides the Company’s demand or savings products with access to unlimited FDIC insurance, which helps the Company to keep the full amount of the deposit on its balance sheet and provides additional security during times of market uncertainty. As of March 31, 2023, and December 31, 2022, all of the Company’s cash and cash equivalents consisted of amounts held in demand deposit accounts in banks. The Company has never experienced any losses in such accounts. The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, and debt approximate fair value due to the relatively short period of time to maturity.
Revenue Recognition and Deferred Revenue	Revenue Recognition and Deferred Revenue 647,977 273,718 594,793 266,327 SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) March 31, 2023 The Company also earns revenue from its SocketCare extended warranty program, which provides extended warranty and accidental breakage coverage for selected products. Customers can purchase a SocketCare warranty at the time of product purchase, which provides coverage for a three-year or a five-year term. Revenues from SocketCare services are recognized ratably over the life of the extended warranty contract. For the quarters ended March 31, 2023 and 2022, SocketCare revenue was approximately $ 5,600 5,400 34,000
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 Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 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 March 31, 2023, the balances of right-of-use assets and liabilities for the operating lease were $ 3,443,826 3,630,508 3,559,658 3,736,564
Recently Issued Financial Accounting Standards	Recently Issued Financial Accounting Standards From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position, results of operations or cash flows upon adoption.

NOTE 3 _ Intangible Assets (Tab

NOTE 3 — Intangible Assets (Tables)	3 Months Ended
NOTE 3 — Intangible Assets (Tables)	Mar. 31, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
Estimated future amortization of intangible assets	Fiscal Year Amount 2023 (April 1, 2023 to December 31, 2023) $ 95,472 2024 127,296 2025 127,296 2026 127,296 2027 127,296 Thereafter 1,050,185 Total $ 1,654,841

NOTE 4 _ Inventories (Tables)

NOTE 4 — Inventories (Tables)	3 Months Ended
NOTE 4 — Inventories (Tables)	Mar. 31, 2023
Inventory Disclosure [Abstract]
Inventories	March 31, December 31, 2023 2022 Raw materials and sub-assemblies $ 6,346,897 $ 6,193,453 Finished goods 193,976 289,181 Inventory reserves (880,943 ) (880,943 ) Inventory, net $ 5,659,930 $ 5,601,691

NOTE 7 _ Segment Information _2

NOTE 7 — Segment Information and Concentrations (Tables)	3 Months Ended
NOTE 7 — Segment Information and Concentrations (Tables)	Mar. 31, 2023
Segment Reporting [Abstract]
Revenue by Geographic Area	Three Months Ended March 31, Revenues: 2023 2022 United States $ 3,138,653 $ 4,882,773 Europe 542,527 697,971 Asia and rest of world 630,998 712,258 Total revenues $ 4,312,178 $ 6,293,002
Customers who accounted for at least 10% of the Company's total revenues	Three Months Ended March 31, 2023 2022 Ingram Micro, Inc. 23 % 27 % BlueStar, Inc. 20 % 20 % ScanSource, Inc. * 19 % *Customer accounted for less than 10% of the Company’s total revenue
Customers who accounted for at least 10% of the Company's accounts receivable balances	March 31, December 31, 2023 2022 Ingram Micro Inc. 28 % 14 % BlueStar, Inc. 27 % 46 % ScanSource, Inc. 15 % 11 % Nippon Primex, Inc. * 14 % *Customer accounted for less than 10% of the Company’s accounts receivable balances

NOTE 9 _ Net Income Per Share (

NOTE 9 — Net Income Per Share (Tables)	3 Months Ended
NOTE 9 — Net Income Per Share (Tables)	Mar. 31, 2023
Accounting Policies [Abstract]
Reconciliation of basic shares to diluted shares and the computation of basic and diluted net income per share	Three Months Ended March 31, 2023 2022 Numerator: Net income (loss) $ (993,420) $ 341,933 Net income allocated to restricted stock award 121,264 31,752 Adjusted net income (loss) before interest for diluted earnings per share $ (872,156) $ 310,181 Denominator: Weighted average shares Basic 7,106,746 7,234,163 Effect of dilutive stock options — 490,194 Diluted 7,106,746 7,724,357 Net income (loss) per share applicable to common stockholders: Basic $ (0.12) $ 0.04 Diluted $ (0.12) $ 0.04

NOTE 11 _ Commitments and Con_2

NOTE 11 — Commitments and Contingencies (Tables)	3 Months Ended
NOTE 11 — Commitments and Contingencies (Tables)	Mar. 31, 2023
Commitments and Contingencies Disclosure [Abstract]
Future minimum lease payments under the operating lease in effect as of September 30, 2022	Annual minimum payments: Amount 2023 (April 1 through December 31, 2023) 469,062 2024 636,860 2025 652,883 2026 672,470 2027 692,644 Thereafter 1,139,070 Total minimum payments 4,262,989 Less: Present value factor (632,481 ) Total operating lease liabilities 3,630,508 Less: Current portion of operating lease (454,660 ) Long-term portion of operating lease $ 3,175,848

NOTE 2 _ Summary of Significa_3

NOTE 2 — Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Product Information [Line Items]
Deferred Revenue, Current	$ 647,977		$ 594,793
Deferred Costs and Other Assets	273,718		266,327
Revenues	4,312,178	$ 6,293,002
Operating Lease, Right-of-Use Asset	3,443,826		3,559,658
Operating Lease, Liability	3,630,508		$ 3,736,564
Service [Member]
Product Information [Line Items]
Revenues	5,600	$ 5,400
Deferred Revenue	$ 34,000

Estimated future amortization o

Estimated future amortization of intangible assets (Details)	Mar. 31, 2023 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
	$ 95,472
	127,296
	127,296
	127,296
	127,296
	1,050,185
	$ 1,654,841

NOTE 3 _ Intangible Assets (Det

NOTE 3 — Intangible Assets (Details Narrative) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
Intangible Assets, Net (Excluding Goodwill)	$ 1,654,841	$ 1,693,927

Inventories (Details)

Inventories (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Inventory Disclosure [Abstract]
Raw materials and sub-assemblies	$ 6,346,897	$ 6,193,453
Finished goods	193,976	289,181
Inventory reserves	$ (880,943)	$ (880,943)

NOTE 5 _ Bank Financing Arran_2

NOTE 5 — Bank Financing Arrangements (Details Narrative) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2021	Feb. 01, 2023	Jan. 29, 2021
Line of Credit Facility [Line Items]
Line of Credit Facility, Initiation Date			Jan. 29, 2021
Notes Payable to Bank				$ 125,000
Interest Expense	$ 38,008	$ 45,606
Domestic Revolving Facility [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity					$ 2,000,000
Term Loan [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity					$ 1,000,000
Interest Expense	$ 1,138

NOTE 6 _ Secured Subordinated_2

NOTE 6 — Secured Subordinated Convertible Notes Payable (Details Narrative) - USD ($)	3 Months Ended			36 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Sep. 30, 2020	Aug. 30, 2023	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
[custom:InterestOnConvertibleDebt]	$ 42,793	$ 42,793
Related Party [Member]
Debt Instrument [Line Items]
Secured Subordinated Convertible Notes Issued					$ 1,350,000

Revenue by Geographic Area (Det

Revenue by Geographic Area (Details) - USD ($)	3 Months Ended
Revenue by Geographic Area (Details) - USD ($)	Mar. 31, 2023	Mar. 31, 2022
Revenues from External Customers and Long-Lived Assets [Line Items]
revenues	$ 4,312,178	$ 6,293,002
Americas [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
revenues	3,138,653	4,882,773
EMEA [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
revenues	542,527	697,971
Asia Pacific [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
revenues	$ 630,998	$ 712,258

Customers who accounted for at

Customers who accounted for at least 10% of the Company's total revenues (Details)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Ingram Micro [Member]
Revenue, Major Customer [Line Items]
BlueStar, Inc.	0.23	0.27
Blue Star [Member]
Revenue, Major Customer [Line Items]
BlueStar, Inc.	0.20	0.20
Scan Source [Member]
Revenue, Major Customer [Line Items]
BlueStar, Inc.	0.19

Customers who accounted for a_2

Customers who accounted for at least 10% of the Company's accounts receivable balances (Details)	Mar. 31, 2023	Dec. 31, 2022
Ingram Micro [Member]
Revenue, Major Customer [Line Items]
ScanSource, Inc.	0.28	0.14
Blue Star [Member]
Revenue, Major Customer [Line Items]
ScanSource, Inc.	0.27	0.46
Scan Source [Member]
Revenue, Major Customer [Line Items]
ScanSource, Inc.	0.15	0.11
Nippon Primex [Member]
Revenue, Major Customer [Line Items]
ScanSource, Inc.	0.14

NOTE 7 _ Segment Information _3

NOTE 7 — Segment Information and Concentrations (Details Narrative)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Revenue, Major Customer [Line Items]
Threshold percentage of accounts receivable for disclosure	10%		10%
Supplier Concentration Risk [Member]
Revenue, Major Customer [Line Items]
Percentage of inventory purchases from top three suppliers	55%	53%
Accounts payable balances with top two suppliers	26%		31%

NOTE 8 _ Stock-Based Compensa_2

NOTE 8 — Stock-Based Compensation (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Share-Based Payment Arrangement [Abstract]
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Net of Forfeitures	0	0
Stock Issued During Period, Shares, Restricted Stock Award, Gross	402,370	233,800
Common Stock, Other Shares, Outstanding	1,070,434
Share-Based Payment Arrangement, Noncash Expense	$ 295,833	$ 223,446

Reconciliation of basic shares

Reconciliation of basic shares to diluted shares and the computation of basic and diluted net income per share (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Numerator:
Net income (loss)	$ (993,420)	$ 341,933
Net income allocated to restricted stock award	121,264	31,752
Adjusted net income (loss) before interest for diluted earnings per share	$ (872,156)	$ 310,181
Weighted average shares outstanding used in computing net income (loss) per share:
Basic	7,106,746	7,234,163
Effect of dilutive stock options		490,194
Diluted	7,106,746	7,724,357
Net income (loss) per share applicable to common stockholders:
Basic	$ (0.12)	$ 0.04
Diluted	$ (0.12)	$ 0.04

NOTE 9 _ Net Income Per Share_2

NOTE 9 — Net Income Per Share (Details Narrative) - shares	3 Months Ended
NOTE 9 — Net Income Per Share (Details Narrative) - shares	Mar. 31, 2023	Mar. 31, 2022
Equity Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	1,262,027	287,928
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	50,000	50,000

NOTE 10 _ Income Taxes (Details

NOTE 10 — Income Taxes (Details Narrative) - USD ($)	3 Months Ended
NOTE 10 — Income Taxes (Details Narrative) - USD ($)	Mar. 31, 2023	Mar. 31, 2022
Income Tax Disclosure [Abstract]
Income Tax Expense (Benefit)		$ 76,165

Future minimum lease payments u

Future minimum lease payments under the operating lease in effect as of September 30, 2022 (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Annual minimum payments:
2023 (April 1 through December 31, 2023)	$ 469,062
2024	636,860
2025	652,883
2026	672,470
2027	692,644
Thereafter	1,139,070
Total minimum payments	4,262,989
Less: Present value factor	(632,481)
Total operating lease liabilities	3,630,508	$ 3,736,564
Less: Current portion of operating lease	(454,660)	(444,529)
Long-term portion of operating lease	$ 3,175,848	$ 3,292,035

NOTE 11 _ Commitments and Con_3

NOTE 11 — Commitments and Contingencies (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract]
Operating Lease, Expense	$ 162,108	$ 107,218
Operating Lease, Right-of-Use Asset	3,443,826		$ 3,559,658
Operating Lease, Liability	3,630,508		$ 3,736,564
Operating Lease, Payments	153,181	$ 132,010
Purchase Obligation, to be Paid, Year One	$ 9,095,000