Core Viewpoint - Socket Mobile, Inc. is set to release its second quarter 2025 financial results on July 31, 2025, and will host a conference call to discuss these results [1] Group 1: Financial Results Announcement - The financial results for the second quarter of 2025 will be announced at the close of the market on July 31, 2025 [1] - A conference call to discuss the financial results will take place at 5 p.m. Eastern Time (2 p.m. Pacific Time) on the same day [1] Group 2: Accessing the Conference Call - Investors can access the live conference call through a provided link or by dialing a toll-free number within the U.S. [2] Group 3: Company Overview - Socket Mobile is a leading provider of data capture and delivery solutions, focusing on enhancing productivity in workforce mobilization [3] - The company's revenue is primarily generated from third-party barcode-enabled mobile applications that integrate its cordless barcode scanners and contactless reader/writers [3] - Key markets for Socket Mobile include specialty retail, field service, digital ID, transportation, and manufacturing [3]

Financing Details - Socket Mobile, Inc. completed a secured subordinated convertible note financing of $1,500,000 to increase working capital [1] - The notes have a three-year term, maturing on May 30, 2028, with a 10% interest rate payable quarterly in cash [2] - The principal amount of each note is convertible into shares of the Company's common stock at a conversion price of $1.07 per share [2] Participants - Key participants in the financing include the Chairman, CEO, CFO, and other board members of the Company [3] Company Overview - Socket Mobile is a provider of data capture and delivery solutions, primarily serving markets such as specialty retail, field service, digital ID, transportation, and manufacturing [5] - The Company's revenue is driven by third-party barcode-enabled mobile applications that integrate its cordless barcode scanners and contactless readers/writers [5]

FORM 10-Q Filing Information This section provides general filing details for Socket Mobile, Inc.'s Q1 2025 Form 10-Q report [General Information](index=1&type=section&id=General%20Information) This section outlines the filing details for Socket Mobile, Inc.'s Q1 2025 Form 10-Q, including its NASDAQ listing and filer classification - The report is a Quarterly Report on Form 10-Q for the period ended **March 31, 2025**[2](index=2&type=chunk) - Socket Mobile, Inc. (SCKT) is incorporated in Delaware and listed on **NASDAQ**[2](index=2&type=chunk)[3](index=3&type=chunk) - The registrant is classified as a **non-accelerated filer** and a **smaller reporting company**[4](index=4&type=chunk) - As of May 5, 2025, there were **7,921,521 shares of Common Stock outstanding**[4](index=4&type=chunk) Table of Contents This section provides an overview of the report's structure, detailing its two main parts and their respective items [Report Index](index=3&type=section&id=Report%20Index) This index details the 10-Q report's structure, separating it into Part I (Financial Information) and Part II (Other Information) with page references - The report is structured into **Part I: Financial Information** and **Part II: Other Information**[6](index=6&type=chunk) - Part I includes Financial Statements, Management's Discussion and Analysis, Market Risk Disclosures, and Controls and Procedures[6](index=6&type=chunk) - Part II covers Risk Factors, Unregistered Sales of Equity Securities, Use of Proceeds, and Exhibits[6](index=6&type=chunk) PART I. FINANCIAL INFORMATION This section presents the unaudited condensed financial statements and management's discussion and analysis for the quarter ended March 31, 2025 [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section provides Socket Mobile, Inc.'s unaudited condensed financial statements for Q1 2025, including operations, balance sheets, equity, cash flows, and explanatory notes [Condensed Statements of Operations](index=4&type=section&id=Condensed%20Statements%20of%20Operations) The company reported a net loss of **$994,140** for Q1 2025, a significant increase from the prior year, driven by a **20% revenue decline** and higher operating loss Condensed Statements of Operations Summary | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Revenues | $3,965,920 | $4,977,797 | | Cost of revenues | $1,968,026 | $2,473,040 | | Gross profit | $1,997,894 | $2,504,757 | | Total operating expenses | $2,891,567 | $2,989,932 | | Operating loss | $(893,673) | $(485,175) | | Net loss | $(994,140) | $(557,415) | | Net loss per share (Basic) | $(0.13) | $(0.07) | | Net loss per share (Diluted) | $(0.13) | $(0.07) | - Revenues decreased by **20%** from **$4,977,797** in Q1 2024 to **$3,965,920** in Q1 2025[9](index=9&type=chunk) - Operating loss widened from **$(485,175)** in Q1 2024 to **$(893,673)** in Q1 2025[9](index=9&type=chunk) [Condensed Balance Sheets](index=5&type=section&id=Condensed%20Balance%20Sheets) Total assets slightly decreased to **$27.16 million** as of March 31, 2025, with increased current assets, accounts receivable, and inventories, alongside changes in liabilities and equity Condensed Balance Sheets Summary | Item | March 31, 2025 (Unaudited) | December 31, 2024 | | :----------------------------------- | :------------------------- | :------------------ | | **ASSETS** | | | | Cash and cash equivalents | $1,706,690 | $2,491,964 | | Accounts receivable, net | $2,061,294 | $1,588,095 | | Inventories, net | $5,281,030 | $4,941,500 | | Total current assets | $9,822,295 | $9,595,217 | | Property and equipment, net | $2,532,502 | $2,787,301 | | Intangible assets, net | $1,400,249 | $1,432,073 | | Total assets | $27,159,317 | $27,345,781 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Total current liabilities | $7,762,078 | $6,887,813 | | Total liabilities | $9,922,337 | $9,185,286 | | Total stockholders' equity | $17,236,980 | $18,160,495 | - Cash and cash equivalents decreased by **$785,274** from December 31, 2024, to March 31, 2025[11](index=11&type=chunk) - Accounts receivable, net, increased by **$473,199**, and inventories, net, increased by **$339,530**[11](index=11&type=chunk) - Total liabilities increased by **$737,051**, while total stockholders' equity decreased by **$923,515**[11](index=11&type=chunk) [Condensed Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity decreased to **$17.24 million** by March 31, 2025, primarily due to a **$994,140 net loss**, partially offset by stock-based compensation Stockholders' Equity Changes (Q1 2025) | Item | Amount | | :-------------------------- | :------------- | | Balance at December 31, 2024 | $18,160,495 | | Stock-based compensation | $70,625 | | Net loss | $(994,140) | | Balance at March 31, 2025 | $17,236,980 | - The net loss of **$(994,140)** was the primary driver of the decrease in stockholders' equity[13](index=13&type=chunk) - Vesting of restricted stocks added **421,190 shares** to common stock, while **73,833 restricted shares** were retired for tax withholding[13](index=13&type=chunk) [Condensed Statements of Cash Flows](index=7&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Net cash and cash equivalents decreased by **$785,274** in Q1 2025, primarily due to increased cash usage in operating and investing activities compared to Q1 2024 Condensed Statements of Cash Flows Summary | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(732,970) | $(94,890) | | Net cash (used in) provided by investing activities | $(52,304) | $16,358 | | Net cash provided by financing activities | $0 | $23,750 | | Net decrease in cash and cash equivalents | $(785,274) | $(54,782) | | Cash and cash equivalents at end of period | $1,706,690 | $2,771,848 | - Net cash used in operating activities increased substantially from **$(94,890)** in Q1 2024 to **$(732,970)** in Q1 2025[15](index=15&type=chunk) - Investing activities shifted from providing **$16,358** in Q1 2024 to using **$(52,304)** in Q1 2025[15](index=15&type=chunk) [Notes to Condensed Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20Condensed%20Financial%20Statements%20(Unaudited)) These notes provide essential context and detailed breakdowns for the condensed financial statements, covering accounting policies, assets, liabilities, financing, and commitments [NOTE 1 — Basis of Presentation](index=8&type=section&id=NOTE%201%20%E2%80%94%20Basis%20of%20Presentation) Interim financial statements are unaudited, prepared under GAAP for interim reporting, and do not include all disclosures required for complete annual statements - Interim financial statements are **unaudited** and prepared under **GAAP** for interim reporting, not full annual disclosures[17](index=17&type=chunk) - Management considers all adjustments, consisting only of normal recurring accruals, necessary for fair presentation[17](index=17&type=chunk) [NOTE 2 — Summary of Significant Accounting Policies](index=8&type=section&id=NOTE%202%20%E2%80%94%20Summary%20of%20Significant%20Accounting%20Policies) This note details key accounting policies, including estimates, cash equivalents, revenue recognition, and the company's exit from the ICS program in December 2024 - The company exited the **Insured Cash Sweep (ICS) Deposit Placement Agreement** in **December 2024** due to improved market conditions and to achieve cost savings[19](index=19&type=chunk) - Revenue from product sales is recognized upon shipment and title transfer, less a reserve for estimated product returns[21](index=21&type=chunk) - SocketCare extended warranty revenue is recognized ratably over the life of the extended warranty contract[22](index=22&type=chunk) Deferred Revenue and Cost on Shipments to Distributors | Item | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Deferred revenue on shipments to distributors | $365,523 | $392,543 | | Deferred cost on shipments to distributors | $154,624 | $142,939 | [NOTE 3 — Intangible Assets](index=9&type=section&id=NOTE%203%20%E2%80%94%20Intangible%20Assets) Intangible assets, primarily from a 2021 technology transfer agreement, totaled **$1,400,249** as of March 31, 2025, amortized over fifteen years with a quarterly expense of **$31,824** - Intangible assets, net, were **$1,400,249** as of **March 31, 2025**, primarily from a 2021 Technology Transfer Agreement with SpringCard SAS[26](index=26&type=chunk)[27](index=27&type=chunk) - Intangible assets are amortized on a **straight-line basis** over their estimated useful lives of **fifteen years**[27](index=27&type=chunk) Estimated Future Amortization of Intangible Assets | Fiscal Year | Amount | | :-------------------------------- | :------- | | 2025 (April 1 - December 31) | $95,472 | | 2026 | $127,296 | | 2027 | $127,296 | | 2028 | $127,296 | | 2029 | $127,296 | | Thereafter | $795,593 | | **Total** | **$1,400,249** | - Amortization expense was **$31,824** for the three months ended March 31 in both 2025 and 2024[29](index=29&type=chunk) [NOTE 4 — Inventories](index=10&type=section&id=NOTE%204%20%E2%80%94%20Inventories) Inventories, net, increased to **$5,281,030** as of March 31, 2025, primarily driven by an increase in raw materials and sub-assemblies Inventories, Net | Item | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Raw materials and sub-assemblies | $6,177,081 | $5,716,202 | | Finished goods | $154,892 | $221,241 | | Inventory reserves | $(1,050,943) | $(995,943) | | **Inventory, net** | **$5,281,030** | **$4,941,500** | - Raw materials and sub-assemblies increased by **$460,879** from December 31, 2024, to March 31, 2025[30](index=30&type=chunk) [NOTE 5 — Bank Financing Arrangements](index=10&type=section&id=NOTE%205%20%E2%80%94%20Bank%20Financing%20Arrangements) The company's bank financing includes a renewed **$3.0 million** domestic credit line with Western Alliance Bank, maturing April 30, 2026, with no outstanding borrowings as of March 31, 2025 - The Seventh Business Financing Modification Agreement (April 21, 2025) renewed a **$3.0 million** domestic credit line and extended its maturity to **April 30, 2026**[36](index=36&type=chunk) - The advance rate was raised to up to **80%** of eligible domestic receivables, and the allowance for subordinated debt increased to **$5.5 million**[36](index=36&type=chunk) - No amounts were borrowed on the Company's bank credit lines as of **March 31, 2025**, and **December 31, 2024**[37](index=37&type=chunk) [NOTE 6 — Secured Subordinated Convertible Notes Payable](index=11&type=section&id=NOTE%206%20%E2%80%94%20Secured%20Subordinated%20Convertible%20Notes%20Payable) The company holds multiple secured subordinated convertible notes totaling **$4.0 million**, accruing **10% annual interest** and convertible into common stock, with maturities ranging from 2025 to 2027 - Outstanding secured subordinated convertible notes include **$1.4 million** (from 2020, extended to **August 30, 2025**), **$1.6 million** (from May 2023, maturing **May 26, 2026**), and **$1.0 million** (from August 2024, maturing **August 21, 2027**)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[45](index=45&type=chunk) - All convertible notes accrue interest at an annual rate of **10%**, payable quarterly in cash[39](index=39&type=chunk)[42](index=42&type=chunk)[45](index=45&type=chunk) Interest Expense and Debt Discount Amortization | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Amortization of debt discount | $3,646 | $1,462 | | Total interest expense related to convertible note | $102,276 | $76,257 | [NOTE 7 — Segment Information and Concentrations](index=13&type=section&id=NOTE%207%20%E2%80%94%20Segment%20Information%20and%20Concentrations) The company operates globally in mobile barcode scanning and RFID/NFC data capture, experiencing revenue declines across all regions in Q1 2025, with the US as the largest market and BlueStar, Inc. as a significant customer - The company operates in the mobile barcode scanning and RFID/NFC data capture market, distributing products globally primarily through distributors and resellers[47](index=47&type=chunk) Revenues by Geographic Areas | Region | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------ | :-------------------------------- | :-------------------------------- | | United States | $3,060,782 | $3,558,315 | | Europe | $546,078 | $595,076 | | Asia and rest of world | $359,060 | $824,406 | | **Total revenues** | **$3,965,920** | **$4,977,797** | Major Customers (Revenue Concentration) | Customer | Q1 2025 Revenue % | Q1 2024 Revenue % | | :--------------- | :---------------- | :---------------- | | BlueStar, Inc. | 31% | 23% | | Ingram Micro, Inc. | 11% | 16% | | Synnex Corporation | 10% | 14% | | Nippon Primex, Inc. | * (<10%) | 13% | Major Customers (Accounts Receivable Concentration) | Customer | March 31, 2025 % | December 31, 2024 % | | :--------------- | :--------------- | :------------------ | | BlueStar, Inc. | 47% | 32% | | Ingram Micro Inc. | 15% | 15% | | Synnex Corporation | 13% | * (<10%) | | ScanSource, Inc. | 12% | 19% | - The top two suppliers accounted for **42%** of inventory purchases for Q1 2025 (**40%** for Q1 2024)[52](index=52&type=chunk) [NOTE 8 — Stock-Based Compensation](index=15&type=section&id=NOTE%208%20%E2%80%94%20Stock-Based%20Compensation) Stock-based compensation expense decreased significantly to **$70,625** in Q1 2025, with **606,293 restricted shares** awarded and no stock options granted Stock-Based Compensation Expenses | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Stock-based compensation expenses | $70,625 | $272,700 | - The company awarded **606,293 shares** of restricted stock in Q1 2025, compared to **442,750 shares** in Q1 2024[56](index=56&type=chunk) - No stock options were granted for the three months ended **March 31, 2025 and 2024**[55](index=55&type=chunk) [NOTE 9 — Net Loss Per Share](index=15&type=section&id=NOTE%209%20%E2%80%94%20Net%20Loss%20Per%20Share) Basic and diluted net loss per share was **$(0.13)** for Q1 2025, with anti-dilutive securities excluded from diluted EPS calculations for both periods Net Loss Per Share | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss | $(994,140) | $(557,415) | | Basic net loss per share | $(0.13) | $(0.07) | | Diluted net loss per share | $(0.13) | $(0.07) | | Weighted average shares outstanding (Basic) | 7,829,484 | 7,441,745 | | Weighted average shares outstanding (Diluted) | 7,829,484 | 7,441,745 | - Anti-dilutive securities (stock options, warrants, and convertible notes) were excluded from diluted net loss per share calculations for both **Q1 2025** and **Q1 2024**[60](index=60&type=chunk)[61](index=61&type=chunk) [NOTE 10 — Income Taxes](index=17&type=section&id=NOTE%2010%20%E2%80%94%20Income%20Taxes) No income tax expense was recorded in Q1 2025 or Q1 2024, with a deferred tax asset of **$10,663,419** primarily from net operating loss carryforwards - No income tax expense was recorded for the three months ended **March 31, 2025**, or **2024**[62](index=62&type=chunk) - The deferred tax asset, primarily representing future income tax savings from net operating loss carryforwards, was valued at **$10,663,419** on **March 31, 2025**[94](index=94&type=chunk) [NOTE 11 — Commitments and Contingencies](index=17&type=section&id=NOTE%2011%20%E2%80%94%20Commitments%20and%20Contingencies) This note details operating lease obligations totaling **$3,004,537** and non-cancelable inventory purchase commitments of approximately **$4.43 million** - Operating lease obligations for the corporate headquarters and equipment totaled approximately **$2.69 million** as of **March 31, 2025**[68](index=68&type=chunk)[70](index=70&type=chunk) Future Minimum Lease Payments (Operating Lease) as of March 31, 2025 | Period | Amount | | :-------------------------------- | :------- | | 2025 (April 1 through December 31) | $496,073 | | 2026 | $676,751 | | 2027 | $692,644 | | 2028 | $713,423 | | 2029 | $425,646 | | **Total minimum payments** | **$3,004,537** | - Non-cancelable purchase commitments for inventory amounted to approximately **$4,433,000** as of **March 31, 2025**[71](index=71&type=chunk) [NOTE 12 — Subsequent Events](index=18&type=section&id=NOTE%2012%20%E2%80%94%20Subsequent%20Events) No subsequent events requiring adjustment or disclosure were identified in the unaudited condensed financial statements - No subsequent events requiring adjustment or disclosure were identified[73](index=73&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 financial performance, liquidity, and capital resources, highlighting revenue decline, increased operating loss, and product overview, alongside critical accounting estimates and forward-looking statements - The discussion includes forward-looking statements regarding future financial condition, operating activities, market acceptance, and product development[74](index=74&type=chunk) - Actual results and outcomes may differ materially from forecasts due to various risks and uncertainties, including economic volatility and product component availability[74](index=74&type=chunk) [The Company and its Products](index=19&type=section&id=The%20Company%20and%20its%20Products) Socket Mobile provides data capture solutions, including barcode scanning and RFID/NFC devices, for mobile applications, with product design, subcontracted manufacturing, and final assembly in Fremont, CA - Socket Mobile is a leading provider of data capture and delivery solutions for workforce mobilization, including barcode scanning and RFID/NFC technologies[76](index=76&type=chunk) - Products work with applications on smartphones, mobile computers, and tablets using **iOS**, **Android**, and **Windows** operating systems[76](index=76&type=chunk) - The company designs its own products, subcontracts manufacturing globally, and performs final assembly, testing, and distribution from its **Fremont, California facility**[85](index=85&type=chunk) [XtremeScan family](index=20&type=section&id=XtremeScan%20family) The XtremeScan family provides rugged iPhone cases with integrated 1D/2D data readers for industrial use, with new iXG and iXS Series released in March 2025 - XtremeScan products combine rugged iPhone protection with high-performance **1D/2D data readers** for extreme industrial work environments[77](index=77&type=chunk) - The XtremeScan iXG and iXS Series, powered by **iOS 18.3** and featuring a fully integrated **iPhone 16e**, were released in **March 2025**[77](index=77&type=chunk) [SocketCam family](index=20&type=section&id=SocketCam%20family) The SocketCam family offers camera-based barcode scanning software (C820 and C860) for iOS and Android, with C860 providing advanced capabilities for challenging conditions - SocketCam **C820 (free)** and **C860 (advanced)** are camera-based barcode scanning software for **iOS** and **Android**[78](index=78&type=chunk) - The C860 offers superior performance for damaged barcodes and poor lighting conditions[78](index=78&type=chunk) [DuraScan® Family](index=20&type=section&id=DuraScan%C2%AE%20Family) The DuraScan family offers IP54-rated durable companion, attachable, and wearable scanners for challenging environments, including the D762 with extended range and DW930/DW940 wearable models - DuraScan products are **IP54-rated durable scanners** (700, 800, and Wearable Series) for challenging environments[79](index=79&type=chunk) - The newly introduced **D762** enhances the lineup with an extended scanning range of up to **14 feet**[79](index=79&type=chunk) - DuraScan Wear **DW930 & DW940** are wearable scanners designed for hands-free operation in industries like warehousing and manufacturing[79](index=79&type=chunk) [SocketScan family](index=21&type=section&id=SocketScan%20family) The SocketScan family offers compact QR code readers, colorful 1D/2D companion scanners, and attachable 1D/2D scanners, with the S860 supporting MRZ scanning for travel documents - SocketScan offers compact **QR code readers (S320)**, colorful **1D/2D companion scanners (700 Series)**, and attachable/stand-alone **1D/2D scanners (800 Series)**[81](index=81&type=chunk) - The **S860 model** includes **MRZ (machine-readable zone)** support for scanning passports, visas, and other travel documents[81](index=81&type=chunk) [DuraSled Family](index=21&type=section&id=DuraSled%20Family) The DuraSled family provides durable barcode scanning sleds that combine a phone with a scanner for one-handed use, offering impact protection and robust charging for Apple and Samsung devices - DuraSled products are barcode scanning sleds designed for durability, combining a phone with a scanner for a one-handed solution[81](index=81&type=chunk) - DuraSled protects phones from impact damage and provides a robust charging solution, compatible with **Apple** and **Samsung** devices[81](index=81&type=chunk) [NFC & RFID Contactless Reader/Writer](index=21&type=section&id=NFC%20%26%20RFID%20Contactless%20Reader%2FWriter) This product line includes D600, S550, and S370 for NFC & RFID contactless reading/writing, with the S370 supporting QR code and NFC-based credentials like mDL - The product line consists of the **D600**, **S550**, and **S370** for NFC & RFID contactless reading/writing[82](index=82&type=chunk) - The **S370** supports both barcode scanning and NFC reading/writing technologies, including the **Mobile Driver's License (mDL) standard**[82](index=82&type=chunk) [Software Developer Kit (CaptureSDK)](index=21&type=section&id=Software%20Developer%20Kit%20(CaptureSDK)) CaptureSDK supports all Socket Mobile data capture devices with a single integration, enabling app providers to manage data, control placement, and integrate with various software environments - CaptureSDK supports all data capture devices with a single integration, allowing app providers to modify captured data and control user feedback[83](index=83&type=chunk) - It supports the built-in camera in smartphones/tablets for data collection and integrates with **Swift Package Manager**, **Maven**, **NuGet**, **MAUI**, **ReactNative**, **Java**, **JavaScript**, and **Flutter**[83](index=83&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Q1 2025 revenues declined **20%** to **$4.0 million** due to weaker demand, while gross margin remained at **50.4%**, and net loss widened to **$(994,140)** [Revenues](index=22&type=section&id=Revenues) Total revenues for Q1 2025 declined by **20%** to approximately **$4.0 million**, primarily due to weaker demand in domestic and international markets Total Revenues | Period | Amount | | :-------------------------- | :----------- | | Q1 2025 | $4.0 million | | Q1 2024 | $5.0 million | | **Change** | **-20%** | - The decrease is primarily attributed to weaker demand in both domestic and international markets and reduced purchasing activity from key customers[87](index=87&type=chunk) [Gross Margins](index=22&type=section&id=Gross%20Margins) Gross profit margin slightly increased to **50.4%** in Q1 2025, demonstrating effective cost control despite lower revenue Gross Profit Margin | Period | Margin | | :-------------------------- | :----- | | Q1 2025 | 50.4% | | Q1 2024 | 50.3% | - The slight increase in gross margin demonstrates effective cost control and operational efficiency despite lower revenue[88](index=88&type=chunk) [Research and Development Expense](index=22&type=section&id=Research%20and%20Development%20Expense) R&D expenses decreased by **6%** to approximately **$1,132,000** in Q1 2025, primarily due to reduced headcount and lower equity expense Research and Development Expense | Period | Amount | | :-------------------------- | :----------- | | Q1 2025 | $1,132,000 | | Q1 2024 | $1,208,000 | | **Change** | **-6%** | - The reduction is primarily due to a decrease in headcount and lower equity expense from cancelled grants[89](index=89&type=chunk) [Sales and Marketing Expense](index=23&type=section&id=Sales%20and%20Marketing%20Expense) Sales and marketing expenses increased by **7%** to approximately **$1,106,000** in Q1 2025, primarily driven by higher headcount Sales and Marketing Expense | Period | Amount | | :-------------------------- | :----------- | | Q1 2025 | $1,106,000 | | Q1 2024 | $1,031,000 | | **Change** | **+7%** | - The increase was primarily driven by higher headcount[90](index=90&type=chunk) [General and Administrative Expense](index=23&type=section&id=General%20and%20Administrative%20Expense) G&A expenses decreased by **13%** to approximately **$653,000** in Q1 2025, mainly due to a decrease in equity expenses from cancelled grants General and Administrative Expense | Period | Amount | | :-------------------------- | :----------- | | Q1 2025 | $653,000 | | Q1 2024 | $751,000 | | **Change** | **-13%** | - The reduction was primarily due to a decrease in equity expenses resulting from the cancellation of old grants[91](index=91&type=chunk) [Interest Expense, Net of Interest Income](index=23&type=section&id=Interest%20Expense,%20Net%20of%20Interest%20Income) Net interest expense increased to approximately **$100,000** in Q1 2025, primarily from secured subordinated convertible notes, with no outstanding credit line balances Interest Expense, Net | Period | Amount | | :-------------------------- | :----------- | | Q1 2025 | $100,000 | | Q1 2024 | $72,000 | - Interest expenses in both periods were related to interest on secured subordinated convertible notes payable[92](index=92&type=chunk) - There were no outstanding balances of credit lines during the first three months of **2025** or **2024**[92](index=92&type=chunk) [Income Taxes](index=23&type=section&id=Income%20Taxes) No income tax expense was recorded in Q1 2025 or Q1 2024, with a **$10,663,419 deferred tax asset** from NOLs, potentially impacted by future ownership changes - No income tax expense was recorded for the first quarter of **2025** or **2024**[94](index=94&type=chunk) - The deferred tax asset, primarily representing future income tax savings from net operating loss carryforwards, was valued at **$10,663,419** on **March 31, 2025**[94](index=94&type=chunk) - Utilization of existing net operating losses is not limited by **Section 382**, but future ownership changes may limit the ability to fully utilize them[95](index=95&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) Cash used in operating activities significantly increased to **$732,970** in Q1 2025, driven by higher net loss, increased accounts receivable, and inventory levels, with no cash from financing activities Net Cash Flow Summary | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(732,970) | $(94,890) | | Net cash (used in) provided by investing activities | $(52,304) | $16,358 | | Net cash provided by financing activities | $0 | $23,750 | | **Net decrease in cash and cash equivalents** | **$(785,274)** | **$(54,782)** | - The increased cash outflow from operating activities in Q1 2025 was primarily driven by higher net loss, increases in accounts receivable due to customer payment delays, and higher inventory levels resulting from slower sales[96](index=96&type=chunk) [Critical Accounting Estimates](index=24&type=section&id=Critical%20Accounting%20Estimates) The company's financial statements rely on critical accounting estimates for revenue recognition, inventory, stock-based compensation, income taxes, and goodwill, where actual results may differ materially - Critical accounting policies subject to estimates include Revenue Recognition and Accounts Receivable Reserves, Inventory Valuation, Stock-Based Compensation, Income Taxes, and Valuation of Goodwill[99](index=99&type=chunk) - Estimates are based on historical experience and reasonable judgment, but actual results could differ materially[99](index=99&type=chunk) [Contractual Obligations](index=24&type=section&id=Contractual%20Obligations) Total contractual obligations as of March 31, 2025, amounted to **$7,437,000**, primarily comprising purchase obligations and operating lease liabilities Contractual Cash Obligations (as of March 31, 2025) | 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 | $4,433,000 | $4,281,000 | $152,000 | $0 | $0 | | Operating lease | $3,004,000 | $662,000 | $1,378,000 | $964,000 | $0 | | **Total contractual obligations** | **$7,437,000** | **$4,943,000** | **$1,530,000** | **$964,000** | **$0** | [Off-Balance Sheet Arrangements](index=25&type=section&id=Off-Balance%20Sheet%20Arrangements) The company reported no off-balance sheet arrangements as of March 31, 2025, as defined in Item 303 of Regulation S-K - The company had no off-balance sheet arrangements as of **March 31, 2025**[102](index=102&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's market risk exposure, focusing on interest rate fluctuations from its variable-rate credit line and foreign currency exchange rate changes [Interest Rate Risk](index=25&type=section&id=Interest%20Rate%20Risk) The company's interest rate risk primarily stems from its variable-rate bank credit line facilities, where rate increases could lead to higher interest expense - The company's exposure to market risk from changes in interest rates primarily relates to its bank credit line facilities[103](index=103&type=chunk) - Borrowings under these facilities bear interest at a variable rate based on the lender's prime rate (subject to a minimum of **4.25%**) plus **0.75%**[103](index=103&type=chunk) [Foreign Currency Risk](index=25&type=section&id=Foreign%20Currency%20Risk) The company faces foreign currency risk from Euro and British pound transactions; a **10% adverse change** would decrease net income by **$45,600**, with an actual Q1 2025 net loss of **$12,200** - The company's European distributors purchase products in **Euros**, and European employees' expenses are paid in **Euros** and **British pounds**, creating foreign currency risk[104](index=104&type=chunk) - A **10% adverse change** in exchange rates would have resulted in a decrease in net income of approximately **$45,600** for Q1 2025[104](index=104&type=chunk) - The actual net adjustment for the effects of changes in foreign currency on cash balances, collections, payables, and derivatives was a net loss of approximately **$12,200** for Q1 2025[104](index=104&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting during Q1 2025 [Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures](index=26&type=section&id=Conclusion%20Regarding%20the%20Effectiveness%20of%20Disclosure%20Controls%20and%20Procedures) The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, ensuring timely and accurate reporting - Management, with the participation of the CEO and CFO, concluded that disclosure controls and procedures were effective as of **March 31, 2025**[105](index=105&type=chunk) [Changes in Internal Control Over Financial Reporting](index=26&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during Q1 2025 - There was no change in internal control over financial reporting that materially affected, or is reasonably likely to materially affect, internal control over financial reporting during **Q1 2025**[106](index=106&type=chunk) PART II. OTHER INFORMATION This section details other information, including risk factors, unregistered sales of equity securities, and exhibits, providing crucial context beyond the financial statements [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various risks and uncertainties, including global economic conditions, supply chain disruptions, competition, and operational challenges, that could materially affect the company's business - Potential investors should carefully consider the described risks and uncertainties, as they could materially adversely affect the company's business, financial condition, or results of operations[109](index=109&type=chunk) [Recent tariff developments could negatively impact our supply chain, costs, and financial performance](index=27&type=section&id=Recent%20tariff%20developments%20could%20negatively%20impact%20our%20supply%20chain,%20costs,%20and%20financial%20performance) Increased U.S. tariffs on Chinese goods could raise manufacturing and supply chain costs, potentially impacting gross margins and product delivery due to component sourcing - Recent U.S. tariffs on Chinese goods could increase manufacturing and supply chain costs, potentially affecting gross margins and profitability[110](index=110&type=chunk) - Potential delays or disruptions in critical components due to tariff-related trade restrictions could impact product manufacturing and delivery[110](index=110&type=chunk) [We may not return to profitability](index=27&type=section&id=We%20may%20not%20return%20to%20profitability) Returning to profitability depends on business growth, App provider support, and successful new product development; failure could lead to continued losses and potential operational suspension - Returning to profitability requires achieving continued business growth, supporting App providers, and developing successful new products[111](index=111&type=chunk) - Failure to achieve profitability could lead to using existing cash for operating losses and potential suspension of operations if additional capital is not secured[111](index=111&type=chunk) [We may require additional capital in the future, but that capital may not be available on reasonable terms, if at all, or on terms that would not cause substantial dilution to investors' stock holdings](index=28&type=section&id=We%20may%20require%20additional%20capital%20in%20the%20future,%20but%20that%20capital%20may%20not%20be%20available%20on%20reasonable%20terms,%20if%20at%20all,%20or%20on%20terms%20that%20would%20not%20cause%20substantial%20dilution%20to%20investors'%20stock%20holdings) Additional capital may be required for growth or operating losses, but its availability on reasonable terms or without substantial dilution to investors is uncertain - Additional capital may be required to fund growth or operating losses, but its availability on reasonable terms or without substantial dilution is uncertain[113](index=113&type=chunk) - Capital requirements are highly dependent on factors beyond the company's control, such as market acceptance of products and delays in application deployments[113](index=113&type=chunk) [In order to maintain the availability of our bank lines of credit we must remain in compliance with the covenants as specified under the terms of the credit agreements and the bank may exercise discretion in making advances to us](index=28&type=section&id=In%20order%20to%20maintain%20the%20availability%20of%20our%20bank%20lines%20of%20credit%20we%20must%20remain%20in%20compliance%20with%20the%20covenants%20as%20specified%20under%20the%20terms%20of%20the%20credit%20agreements%20and%20the%20bank%20may%20exercise%20discretion%20in%20making%20advances%20to%20us) Maintaining bank credit lines requires covenant compliance, with bank discretion on advances; default could trigger immediate repayment and increased interest rates, impacting liquidity - Compliance with covenants in credit agreements is required to maintain the availability of bank lines of credit[114](index=114&type=chunk) - The bank may exercise discretion in making advances, and an event of default could trigger immediate repayment and increased interest rates[114](index=114&type=chunk) [If app providers are not successful in their efforts to develop, market and sell the applications into which our software and products are incorporated, we may not achieve our sales projections](index=28&type=section&id=If%20app%20providers%20are%20not%20successful%20in%20their%20efforts%20to%20develop,%20market%20and%20sell%20the%20applications%20into%20which%20our%20software%20and%20products%20are%20incorporated,%20we%20may%20not%20achieve%20our%20sales%20projections) Sales projections depend on app providers' success in developing, marketing, and selling integrated applications; delays or ineffective marketing could adversely affect revenue - Sales of data capture products are application-driven and dependent on app providers successfully developing, marketing, and selling integrated solutions[115](index=115&type=chunk) - Delays in application development, competing applications, or unsuccessful marketing by app providers could adversely affect revenue projections[115](index=115&type=chunk) [A deterioration in global economic conditions may have adverse impacts on our business and financial condition in ways that we currently cannot predict and may limit our ability to raise additional funds](index=29&type=section&id=A%20deterioration%20in%20global%20economic%20conditions%20may%20have%20adverse%20impacts%20on%20our%20business%20and%20financial%20condition%20in%20ways%20that%20we%20currently%20cannot%20predict%20and%20may%20limit%20our%20ability%20to%20raise%20additional%20funds) Deteriorating global economic conditions, including geopolitical events, could unpredictably impact business, financial condition, and cash flows, limiting capital raising ability - Deteriorating global economic conditions, including geopolitical tensions, may unpredictably impact business and financial condition[117](index=117&type=chunk) - A severe prolonged economic downturn could limit the ability to raise additional capital on acceptable terms[117](index=117&type=chunk) [Failure to maintain effective internal controls could have a material adverse effect on our business, operating results, and stock price](index=29&type=section&id=Failure%20to%20maintain%20effective%20internal%20controls%20could%20have%20a%20material%20adverse%20effect%20on%20our%20business,%20operating%20results,%20and%20stock%20price) Failure to maintain effective internal controls could materially harm business, operating results, and stock price by undermining financial reporting and investor confidence - Failure to maintain adequate internal controls could prevent reliable financial reporting and fraud prevention[118](index=118&type=chunk) - This could harm business and operating results, lead to a loss of investor confidence, and significantly reduce stock price[118](index=118&type=chunk) [Despite security protections, our business records and information could be hacked by unauthorized personnel](index=29&type=section&id=Despite%20security%20protections,%20our%20business%20records%20and%20information%20could%20be%20hacked%20by%20unauthorized%20personnel) Despite security protections, sophisticated unauthorized attempts could bypass controls, potentially compromising business records and information - Sophisticated tools could bypass existing controls and procedures, risking unauthorized access to business records and information[119](index=119&type=chunk) [Deferred tax assets comprise a significant portion of our assets and are dependent upon future tax profitability to realize the benefits](index=29&type=section&id=Deferred%20tax%20assets%20comprise%20a%20significant%20portion%20of%20our%20assets%20and%20are%20dependent%20upon%20future%20tax%20profitability%20to%20realize%20the%20benefits) Realization of significant deferred tax assets is contingent on achieving sufficient future tax profitability; failure to do so would result in a recognized loss - Realization of deferred tax assets is dependent on generating sufficient future tax profitability[120](index=120&type=chunk) - If sufficient profitability is not achieved, the tax savings represented by deferred tax assets may not be realized, leading to a recognized loss[120](index=120&type=chunk) [We may be unable to manufacture our products because we are dependent on a limited number of qualified suppliers for our components](index=30&type=section&id=We%20may%20be%20unable%20to%20manufacture%20our%20products%20because%20we%20are%20dependent%20on%20a%20limited%20number%20of%20qualified%20suppliers%20for%20our%20components) Dependence on a limited number of component suppliers creates risks of shortages, delays, or unfavorable credit terms, potentially disrupting manufacturing and materially affecting financial results - Reliance on a limited number of component suppliers creates risks of shortages, delays, or restricted credit terms[122](index=122&type=chunk) - Inability to procure essential materials could require reducing operations and materially adversely affect financial results[122](index=122&type=chunk) [If we fail to develop and introduce new products rapidly and successfully, we will not be able to compete effectively, and our ability to generate sufficient revenues will be negatively affected](index=30&type=section&id=If%20we%20fail%20to%20develop%20and%20introduce%20new%20products%20rapidly%20and%20successfully,%20we%20will%20not%20be%20able%20to%20compete%20effectively,%20and%20our%20ability%20to%20generate%20sufficient%20revenues%20will%20be%20negatively%20affected) Failure to rapidly and successfully develop new products incorporating latest technologies and standards will impair competitiveness and negatively affect revenue generation - Failure to develop and introduce new products rapidly and successfully, incorporating the latest technologies and conforming to new standards, will impair competitiveness and revenue generation[123](index=123&type=chunk) - The development process is lengthy and costly, and short product life cycles for mobile devices necessitate frequent upgrades and introductions[124](index=124&type=chunk) [We may not be able to collect receivables from customers who experience financial difficulties](index=30&type=section&id=We%20may%20not%20be%20able%20to%20collect%20receivables%20from%20customers%20who%20experience%20financial%20difficulties) Inability to collect receivables from thinly capitalized distributors facing financial difficulties could lead to increased credit losses and necessitate higher reserves - Accounts receivable are primarily with distributors, many of whom may be thinly capitalized and prone to failure in adverse market conditions[125](index=125&type=chunk) - Financial difficulties of customers could lead to increased difficulty in collecting receivables and necessitate higher reserves for uncollectible accounts[125](index=125&type=chunk) [We could face increased competition in the future, which would adversely affect our financial performance](index=31&type=section&id=We%20could%20face%20increased%20competition%20in%20the%20future,%20which%20would%20adversely%20affect%20our%20financial%20performance) Increased competition from larger players, intense price pressure, and integrated mobile device functions could lead to price reductions, reduced margins, and loss of market share - The market is very competitive, with some competitors having greater financial, marketing, and technical resources[127](index=127&type=chunk)[131](index=131&type=chunk) - Intense price competition and the offering of products with built-in competing functions by mobile device manufacturers pose significant risks[131](index=131&type=chunk) - Increased competition could lead to price reductions, fewer customer orders, reduced margins, and loss of market share[127](index=127&type=chunk) [If we do not correctly anticipate demand for our products, our operating results will suffer](index=31&type=section&id=If%20we%20do%20not%20correctly%20anticipate%20demand%20for%20our%20products,%20our%20operating%20results%20will%20suffe) Inaccurate demand forecasting can lead to adverse operating results, including excess inventory and write-downs from under-forecasting, or higher costs and unmet demand from over-forecasting - Lower than forecasted demand can lead to excess inventory, write-downs, and reductions in cash balances[128](index=128&type=chunk) - Demand exceeding forecasts can result in higher production costs, lower profit margins, and inability to meet customer demand due to supplier limitations[129](index=129&type=chunk) [We rely primarily on distributors to distribute our products, and our sales would suffer if any of these distributors stopped distributing our products effectively](index=31&type=section&id=We%20rely%20primarily%20on%20distributors%20to%20distribute%20our%20products,%20and%20our%20sales%20would%20suffer%20if%20any%20of%20these%20distributors%20stopped%20distributing%20our%20products%20effectively) Sales are highly dependent on a few distributors, with **Ingram Micro** and **BlueStar** accounting for **42%** of Q1 2025 sales, posing risks of ineffective distribution or contract termination - Sales are highly dependent on a limited number of distributors; **Ingram Micro** and **BlueStar** together represented approximately **42%** of worldwide sales in Q1 2025[130](index=130&type=chunk) - Risks include distributor inventory build-up, product returns, and the potential for distributors to terminate nonexclusive agreements on short notice or offer competitive product lines[130](index=130&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) [We depend on alliances and other business relationships with third parties, and a disruption in these relationships would hinder our ability to develop and sell our products](index=32&type=section&id=We%20depend%20on%20alliances%20and%20other%20business%20relationships%20with%20third%20parties,%20and%20a%20disruption%20in%20these%20relationships%20would%20hinder%20our%20ability%20to%20develop%20and%20sell%20our%20products) Reliance on strategic alliances with mobile application market participants is crucial; disruptions, such as partners developing competing products or terminating collaborations, would hinder product development and sales - Strategic alliances with leading participants in the mobile applications market are crucial for product development and marketing[134](index=134&type=chunk) - Partners may revoke commitment, develop competing products, or terminate collaborations, which could delay product development or lead to loss of customers[134](index=134&type=chunk) - Collaborations with operating system providers like **Apple**, **Google**, and **Microsoft** are not guaranteed and can be terminated for various reasons[135](index=135&type=chunk) [Our intellectual property and proprietary rights may be insufficient to protect our competitive position](index=33&type=section&id=Our%20intellectual%20property%20and%20proprietary%20rights%20may%20be%20insufficient%20to%20protect%20our%20competitive%20position) Intellectual property protection through patents, copyrights, trademarks, and trade secrets may be insufficient against unauthorized use or design-arounds, especially in certain foreign countries - Reliance on patent, copyright, trademark, and trade secret laws may not provide meaningful protection against unauthorized use, independent development, or design-arounds[137](index=137&type=chunk)[138](index=138&type=chunk) - Effective intellectual property protection may be unavailable or limited in certain foreign countries[139](index=139&type=chunk) [We may become subject to claims of intellectual property rights infringement, which could result in substantial liability](index=33&type=section&id=We%20may%20become%20subject%20to%20claims%20of%20intellectual%20property%20rights%20infringement,%20which%20could%20result%20in%20substantial%20liability) The company faces risks of costly and disruptive intellectual property infringement claims, where adverse determinations could result in substantial liabilities and costs - The company may face intellectual property infringement claims from competitors or other entities, which can be complex, costly, and disruptive[140](index=140&type=chunk)[142](index=142&type=chunk) - Adverse determinations in intellectual property litigation could subject the company to significant liabilities and costs[142](index=142&type=chunk) [New industry standards may require us to redesign our products, which could substantially increase our operating expenses](index=34&type=section&id=New%20industry%20standards%20may%20require%20us%20to%20redesign%20our%20products,%20which%20could%20substantially%20increase%20our%20operating%20expenses) Evolving industry standards necessitate continuous product redesign, and unanticipated changes could render products incompatible, substantially increasing operating expenses and affecting business - Evolving industry standards require continuous identification and compliance to ensure product interoperability and competitiveness[144](index=144&type=chunk) - Unanticipated changes in standards could render products incompatible and require significant redesign investments, increasing operating expenses[144](index=144&type=chunk) [Undetected flaws and defects in our products may disrupt product sales and result in expensive and time-consuming remedial action](index=34&type=section&id=Undetected%20flaws%20and%20defects%20in%20our%20products%20may%20disrupt%20product%20sales%20and%20result%20in%20expensive%20and%20time-consuming%20remedial%20action) Undetected product flaws or defects could disrupt sales, lead to recalls and negative publicity, and require expensive, time-consuming corrective actions, adversely affecting business - Undetected flaws and defects in products may disrupt sales, require recalls, and cause unfavorable publicity[145](index=145&type=chunk) - Efforts to identify and correct errors and make design changes can be expensive and time-consuming, adversely affecting business and operating results[145](index=145&type=chunk) [The loss of one or more of our senior personnel could harm our existing business](index=34&type=section&id=The%20loss%20of%20one%20or%20more%20of%20our%20senior%20personnel%20could%20harm%20our%20existing%20business) The loss of key officers and senior managers, crucial for future success, could adversely affect the company's ability to compete due to intense talent competition - The company's future success depends on the continued service of key officers and senior managers, many with over **twenty years of employment**[146](index=146&type=chunk) - Competition for officers and senior managers is intense, and the loss of one or more could adversely affect the company's ability to compete[146](index=146&type=chunk) [The expensing of stock options and restricted stocks will continue to reduce our operating results such that we may find it necessary to change our business practices to attract and retain employees](index=34&type=section&id=The%20expensing%20of%20stock%20options%20and%20restricted%20stocks%20will%20continue%20to%20reduce%20our%20operating%20results%20such%20that%20we%20may%20find%20it%20necessary%20to%20change%20our%20business%20practices%20to%20attract%20and%20retain%20employees) Expensing stock options and restricted stocks negatively impacts net income, potentially requiring changes in compensation practices that could affect talent attraction and retention - Expensing employee stock options and restricted stocks adversely affects net income and earnings per share, making profitability harder to achieve[147](index=147&type=chunk) - This may require reducing stock option/restricted stock grants or increasing cash compensation, potentially affecting talent retention[147](index=147&type=chunk) [If we are unable to attract and retain highly skilled sales and marketing and product development personnel, our ability to develop and market new products and product enhancements will be adversely affected](index=35&type=section&id=If%20we%20are%20unable%20to%20attract%20and%20retain%20highly%20skilled%20sales%20and%20marketing%20and%20product%20development%20personnel,%20our%20ability%20to%20develop%20and%20market%20new%20products%20and%20product%20enhancements%20will%20be%20adversely%20affected) Inability to attract and retain highly skilled sales, marketing, and product development personnel could adversely affect revenue growth and new product development due to intense competition and capital limitations - Ability to achieve increased revenues and develop new products depends on attracting and retaining highly skilled sales, marketing, and product development personnel[148](index=148&type=chunk) - Intense competition for such personnel and limitations in capital to fund costs could adversely affect these capabilities[148](index=148&type=chunk) [Our operating results could be harmed by economic, political, regulatory and other risks associated with export sales](index=35&type=section&id=Our%20operating%20results%20could%20be%20harmed%20by%20economic,%20political,%20regulatory%20and%20other%20risks%20associated%20with%20export%20sales) Export sales face risks from longer payment cycles, regulatory changes, foreign operational difficulties, political instability, and foreign currency fluctuations, potentially harming operating results - Export sales are subject to risks such as longer payment cycles, regulatory changes, foreign operational difficulties, adverse tax consequences, and political instability[149](index=149&type=chunk)[150](index=150&type=chunk) - An increase in the U.S. dollar's value relative to the **Euro** or **British pound** could make products less competitive and result in foreign currency losses[149](index=149&type=chunk) [Our facilities or operations could be adversely affected by events outside our control, suchs as natural disasters or health epidemics](index=36&type=section&id=Our%20facilities%20or%20operations%20could%20be%20adversely%20affected%20by%20events%20outside%20our%20control,%20suchs%20as%20natural%20disasters%20or%20health%20epidemics) Events beyond control, such as natural disasters, health epidemics, or geopolitical instability, could damage facilities, disrupt operations, and materially impact business and financial condition - Natural disasters (e.g., earthquakes), health epidemics, or geopolitical instability could seriously damage facilities or disrupt production and shipment of products[151](index=151&type=chunk) - Such events could incur expenses or delays, materially adversely impacting the business, operating results, and financial condition[151](index=151&type=chunk) [Our quarterly operating results may fluctuate in future periods, which could cause our stock price to decline](index=36&type=section&id=Our%20quarterly%20operating%20results%20may%20fluctuate%20in%20future%20periods,%20which%20could%20cause%20our%20stock%20price%20to%20decline) Quarterly operating results are expected to fluctuate due to demand, new products, competition, and economic conditions, with unanticipated declines potentially causing stock price drops - Quarterly operating results are expected to fluctuate due to factors such as demand, customer order timing, new product introductions, competition, and economic conditions[152](index=152&type=chunk)[154](index=154&type=chunk) - Unanticipated declines or delays in orders can cause significant variations in operating results, potentially leading to an adverse effect on the common stock market price[153](index=153&type=chunk) [The sale of a substantial number of shares of our common stock could cause the market price of our common stock to decline](index=37&type=section&id=The%20sale%20of%20a%20substantial%20number%20of%20shares%20of%20our%20common%20stock%20could%20cause%20the%20market%20price%20of%20our%20common%20stock%20to%20decline) The sale of a substantial number of common shares in the public market, including those from exercised options or vested restricted stock, could adversely affect the market price of the company's common stock - Sales of a substantial number of common stock shares in the public market could adversely affect the market price[155](index=155&type=chunk) - As of **May 5, 2025**, **7,921,521 shares** of common stock were outstanding, with **1,114,698 shares** subject to outstanding options and **1,135,517 shares** of restricted stock outstanding[156](index=156&type=chunk)[157](index=157&type=chunk) [Volatility in the trading price of our common stock could negatively impact the price of our common stock](index=37&type=section&id=Volatility%20in%20the%20trading%20price%20of%20our%20common%20stock%20could%20negatively%20impact%20the%20price%20of%20our%20common%20stock) The common stock has experienced low trading volumes and significant price fluctuations, with broad market volatility, especially in high-technology stocks, potentially further impacting its trading price - The common stock price fluctuated between a high of **$1.72** and a low of **$0.91** from **January 1, 2024**, through **May 5, 2025**[158](index=158&type=chunk) - Low trading volumes mean relatively small purchases and sales can significantly affect the stock price[158](index=158&type=chunk) - Broad market fluctuations, particularly in high-technology stocks, may adversely affect the trading price of the common stock[158](index=158&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds for the period - No unregistered sales of equity securities or use of proceeds were reported[159](index=159&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including CEO and CFO certifications and the XBRL Document - Exhibits include certifications of the Chief Executive Officer and Chief Financial Officer (**31.1, 31.2, 32.1**) and the **XBRL Document (101)**[159](index=159&type=chunk) [Signatures](index=39&type=section&id=Signatures) The report was signed by Kevin J. Mills, President and CEO, and Lynn Zhao, VP of Finance and CFO, on May 8, 2025 - The report was signed by **Kevin J. Mills**, President and Chief Executive Officer, and **Lynn Zhao**, Vice President of Finance and Administration and Chief Financial Officer[165](index=165&type=chunk) - The signing date for the report was **May 8, 2025**[165](index=165&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $4 million, a decrease of 20% compared to Q1 2024, which was $5 million [4][18] - Gross margin for Q1 2025 was 50.4%, slightly down from 51% in Q1 2024 [4][18] - Operating loss for Q1 2025 was $900,000, compared to a loss of $500,000 in Q1 2024 [4][18] - Adjusted EBITDA loss for Q1 2025 was $485,000, down from a positive EBITDA of $40,000 in Q1 2024 [18] - Diluted loss per share in Q1 2025 was $0.13, compared to $0.07 in Q1 2024 [18] Business Line Data and Key Metrics Changes - The industrial segment showed initial positive signs, with increased interest from various sectors including warehousing, logistics, and manufacturing [5][10] - The company launched the Xtreme iXG and iXS Series, entering the $27 billion mobile handheld computing market [12][14] Market Data and Key Metrics Changes - The company sources approximately 30% of materials from Mexico, 20% from Taiwan, and 10% from China, indicating a significant international supply chain [6][7] - Retail business is expected to remain stable until market conditions improve, while industrial business is anticipated to grow primarily in the U.S. [8][5] Company Strategy and Development Direction - The company aims to diversify its business beyond retail by expanding into the ruggedized scanning market [11][12] - Investments in customer and developer experience are expected to enhance partnerships and broaden the customer base [15] Management's Comments on Operating Environment and Future Outlook - Management noted that uncertainty in the market has hindered deployments and routine business, impacting revenue [5] - The company anticipates achieving positive EBITDA results for Q2 and profitable operating levels in the second half of the year [9] Other Important Information - The company ended Q1 2025 with a cash balance of $1.7 million and renewed a $3 million domestic bank credit line [19] Q&A Session Summary - There were no questions during the Q&A session [20]

Socket Mobile (SCKT) Q1 2025 Earnings Call April 24, 2025 05:00 PM ET Company Participants Kevin Mills - President and CEODave Holmes - Chief Business OfficerLynn Zhao - CFO, VP of Finance & Administration, Secretary and Management Director Operator Welcome to Socket Mobile Inc. Q1 twenty twenty five Earnings Call. My name is Paul, and I will be your operator for today's call. Before we begin, I'd like to remind everyone that this conference call may contain forward looking statements within the meaning of ...

Exhibit 99.1 Socket Mobile Reports First Quarter 2025 Results FREMONT, Calif., – April 24, 2025 – Socket Mobile, Inc. (NASDAQ: SCKT), a leading provider of data capture and delivery solutions for enhanced workplace productivity, today reported financial results that are determined in accordance with generally accepted accounting principles in the United States ("GAAP") for the three months ended March 31, 2025. First Quarter 2025 Financial Highlights: "Our first quarter revenue came in lower than projected, ...

Core Viewpoint - Socket Mobile, Inc. reported a decline in revenue for Q1 2025, attributed to weaker demand both domestically and internationally compared to the same period last year. However, the company has begun shipping new XtremeScan products, marking a significant step into the industrial barcode market valued at $27 billion [3][4]. Financial Performance - Revenue for Q1 2025 was $3.966 million, a 20% decrease from $4.978 million in Q1 2024 and an 18% sequential decrease from $4.8 million in the previous quarter [7]. - Gross margin was 50.4%, slightly up from 50.3% in the prior year's quarter but down from 51% in the preceding quarter [7]. - Operating expenses totaled $2.892 million, down from $2.990 million in the prior year [7]. - The operating loss was $0.894 million, compared to a loss of $0.485 million in the prior year's quarter [7]. - Cash balances decreased to approximately $1.707 million from $2.492 million as of December 31, 2024 [7]. Product Development - The company launched the XtremeScan iXG and iXS Series, which are integrated with iOS 18.3 and designed to function as handheld computers with advanced barcode scanning capabilities [3]. - These new products aim to enhance data capture and operational efficiency for frontline workers [3]. Market Strategy - The company is actively monitoring the tariff landscape and its potential impact on supply chain and cost structure, indicating a commitment to strategic sourcing and pricing adjustments [4]. - Future strategies and product developments will be discussed in an upcoming conference call [4].

Company Overview - Socket Mobile, Inc. is a leading provider of data capture and delivery solutions aimed at enhancing productivity in workforce mobilization [3] - The company's revenue is primarily driven by the deployment of third-party barcode-enabled mobile applications that integrate its cordless barcode scanners and contactless reader/writers [3] - Key markets for Socket Mobile include specialty retail, field service, digital ID, transportation, and manufacturing [3] Upcoming Financial Results - Socket Mobile will release its first quarter 2025 financial results on April 24, 2025, at the close of the market [1] - A conference call to discuss these results will take place at 5 p.m. Eastern Time (2 p.m. Pacific Time) on the same day [1] Accessing the Conference Call - Investors can access the live conference call via a provided link or by dialing a toll-free number within the U.S. [2]

FREMONT, Calif., April 8, 2025 /PRNewswire/ -- Socket Mobile, Inc. (NASDAQ: SCKT), a leading provider of data capture solutions, today announced its entry into the $27 billion mobile handheld computing market with the launch of the XtremeScan™ iXG and iXS Series, powered by iOS 18.3. The market is projected to grow to $40 billion by 2034, driven by rising demand for mobile solutions in industrial environments.In response to growing demand, Socket Mobile's new iXG and iXS Series represent a breakthrough in t ...

Product Offerings - The company offers a range of cordless data capture devices utilizing barcode scanning and RFID/NFC technologies, compatible with Apple, Google, and Microsoft operating systems [17]. - The XtremeScan product line, introduced in 2024, includes devices designed for industrial environments, enhancing durability and battery life, targeting the underserved BYOD market [18]. - The SocketCam family includes the C820 and C860, with the C860 providing advanced scanning capabilities for damaged barcodes and poor lighting conditions, catering to diverse customer needs [19]. - The DuraScan family features rugged NFC & RFID readers and companion scanners, designed for durability in warehousing, manufacturing, and distribution [20]. - The CaptureSDK simplifies integration for app developers, allowing customization of data capture capabilities and supporting various development tools and frameworks [23]. Financial Performance - Revenue for 2024 was $18.8 million, an increase of 10% compared to $17.0 million for 2023, driven by growth in serving retail POS app providers [125]. - Gross margins on revenue increased to 50.4% in 2024 from 49.7% in 2023, attributed to higher production volumes [126]. - Total revenues for 2024 increased to $18,762,520, representing a 10.2% growth from $17,033,593 in 2023 [161]. - Gross profit for 2024 was $9,451,409, up from $8,462,854 in 2023, indicating a gross margin improvement [161]. - Operating loss narrowed to $(2,462,501) in 2024 compared to $(3,120,993) in 2023, reflecting better operational efficiency [161]. - Net loss for 2024 was $(2,242,350), compared to $(1,919,154) in 2023, with net loss per share at $(0.30) for both years [161]. Market and Competition - The company’s revenue is primarily driven by sales of barcode scanners integrated into mobile Point of Sale applications, with expectations for growth in mobile application markets [31]. - The company faces competition in the camera-based scanning market but offers flexible pricing models to encourage adoption among app partners and end users [39]. - The market for the company's products is characterized by rapidly changing technology and short product life cycles, necessitating timely development and introduction of new products [56]. - The company’s financial performance may be adversely affected by increased competition and price reductions in the market [60]. Operational Aspects - The company distributes products through a worldwide network, including major distributors like Ingram Micro and Amazon, enhancing product availability [34]. - The company’s agreements with distributors are generally nonexclusive and may be terminated on short notice, impacting sales growth [65]. - The company relies on a limited number of qualified suppliers for components, which poses risks of shortages or delays [55]. - The company relies on strategic alliances with key players in the mobile applications market, which may be revoked or lead to competition, potentially delaying product development and customer acquisition [67]. Research and Development - Significant resources have been allocated to research and development for compatibility with operating systems like iOS, Android, and Windows, diverting funds from other projects [68]. - Research and development expenses were approximately $4.7 million in 2024, a decrease of approximately $111,000, or 2%, compared to $4.8 million in 2023 [127]. - Research and development expenses as a percentage of revenue were 25% in 2024, down from 28% in 2023, indicating a focus on maintaining a leadership position in product innovation [128]. Employee and Organizational Structure - The total employee headcount was 59 as of December 31, 2024, compared to 61 in 2023, with 22 in sales, marketing, and customer service [44]. - Sales and marketing expenses in 2024 were approximately $4.4 million, an increase of approximately 10% compared to $4.0 million in 2023, primarily due to increased employee numbers and salary adjustments [129]. - General and administrative expenses in 2024 were $2.78 million, an increase of approximately $44,000 or 2% compared to $2.74 million in 2023, influenced by foreign currency fluctuations [130]. Legal and Compliance - The company has not experienced any material legal proceedings, indicating a stable legal environment [100]. - The company’s ability to maintain effective internal controls is crucial for reliable financial reporting and preventing fraud [52]. - The company may face claims of intellectual property infringement, which could result in substantial liabilities due to aggressive industry litigation [72]. Currency and Financial Risks - The company’s export sales are primarily in Euros and British pounds, making it vulnerable to currency fluctuations that could affect competitiveness [81]. - An adverse change of 10% in foreign exchange rates could have resulted in a decrease in net income of approximately $36,000 for the fourth quarter of 2024 if unprotected [142]. Stock and Equity - As of March 20, 2025, the company had 7,952,988 shares of common stock outstanding, with substantial shares freely tradable in the public market [88]. - The common stock price fluctuated between $1.72 and $0.91 from January 1, 2024, indicating potential volatility influenced by various external factors [90]. - The company reported a total stockholders' equity of $18,160,495 in 2024, down from $19,420,004 in 2023, primarily due to accumulated deficit increases [159]. Cash Flow and Financing - Net cash used in operating activities was $521,485 for 2024, compared to net cash provided by operating activities of $48,562 for 2023 [109]. - Financing activities in 2024 provided approximately $0.9 million, down from approximately $1.3 million in 2023, with significant proceeds from convertible notes [110]. - The company had no outstanding drawings against the existing $2.5 million revolving credit facility as of December 31, 2024 [111].