Financial Performance and Results - Revenue for Q1 2024 increased to $4.98 million, up 15.4% from $4.31 million in Q1 2023[9] - Net loss for Q1 2024 improved to $557,415, compared to a net loss of $993,420 in Q1 2023[9] - Gross profit for Q1 2024 rose to $2.50 million, up 20.8% from $2.07 million in Q1 2023[9] - Operating expenses decreased to $2.99 million in Q1 2024, down 1.3% from $3.03 million in Q1 2023[9] - Net loss for Q1 2024 was $557,415, compared to $993,420 in Q1 2023[62] - General and administrative expenses in the first quarter of 2024 were approximately $751,000, a 3% decrease from the same quarter of 2023[96] - Interest expense, net of interest income, was approximately $72,000 in the first quarter of 2024 compared to $38,000 in the first quarter of 2023[97] Cash Flow and Liquidity - Cash and cash equivalents at the end of Q1 2024 stood at $2.77 million, down slightly from $2.83 million at the end of 2023[10] - Net cash used in operating activities for Q1 2024 was $94,890, compared to net cash provided by operating activities of $105,665 in Q1 2023[19] - Net cash provided by financing activities for the three months ended March 31, 2024 was $23,750, compared to net cash used in financing activities of $299,720 in the comparable period a year ago[103] Balance Sheet and Assets - Total assets at the end of Q1 2024 were $28.66 million, slightly down from $28.74 million at the end of 2023[10] - Total stockholders' equity at the end of Q1 2024 was $19.16 million, down from $19.42 million at the end of 2023[14] - Inventory, net as of March 31, 2024, was $5,413,426, compared to $5,409,047 as of December 31, 2023[35] - Right-of-use assets and liabilities for the operating lease were $2,975,526 and $3,184,724, respectively, as of March 31, 2024[29] - Right-of-use assets and liabilities for the operating lease were approximately $2.98 million and $3.18 million, respectively, as of March 31, 2024[71] Revenue and Sales - Deferred revenue on shipments to distributors increased to $911,630 in Q1 2024, up from $825,670 at the end of 2023[25] - SocketCare revenue for Q1 2024 was approximately $5,100, compared to $5,600 in Q1 2023[27] - Unrecognized SocketCare service revenue as of March 31, 2024, was approximately $33,700, up from $32,700 as of December 31, 2023[27] - BlueStar, Inc. accounted for 23% of total revenue in Q1 2024, up from 20% in Q1 2023[54] - BlueStar, Inc. accounted for 23% of accounts receivable as of March 31, 2024, up from less than 10% as of December 31, 2023[55] Risks and Challenges - Global economic deterioration may adversely impact the company's business and financial condition, potentially limiting its ability to raise additional funds[117] - The company may not return to profitability due to challenges in achieving growth, supporting App providers, and developing new products[118] - Future capital requirements may lead to substantial dilution of investors' stock holdings if additional capital is not available on reasonable terms[119] - The company's ability to maintain bank lines of credit depends on compliance with credit agreement covenants, and the bank may exercise discretion in making advances[120] - Sales projections may not be achieved if App providers fail to successfully develop, market, and sell applications incorporating the company's products[121] - Failure to maintain effective internal controls could harm the company's business, operating results, and stock price[122] - Demand forecasting challenges may lead to excess inventories, write-downs, or reduced cash balances if demand is lower than expected[133] - Rapid increases in production to meet unexpected demand could result in higher costs and lower profit margins[134] - Export sales are subject to risks such as currency fluctuations, regulatory changes, and political instability, particularly in Europe[153] Stock and Market Performance - The company's stock price experienced significant volatility, fluctuating between $2.48 and $0.90 from January 1, 2023, to the report date[162] Leases and Commitments - The company renewed its equipment operating lease agreement in January 2024, expiring on December 31, 2026, with an interest rate of 9.25%[68] - Operating lease expense for the three-month periods ended March 31, 2024 and 2023 was $161,682 and $162,108, respectively[69] - Future minimum lease payments under the operating lease on March 31, 2024 total $3,647,346[72] - Non-cancelable purchase commitments for inventory as of March 31, 2024 were approximately $5,403,000[73] Financing and Debt - The company completed a secured subordinated convertible note financing of $1,600,000 on May 26, 2023, with a 10% annual interest rate[49] Suppliers and Inventory - Top three suppliers accounted for 54% and 55% of inventory purchases for the three months ended March 31, 2024 and 2023, respectively[56] - Accounts payable balances concentrated with top three suppliers were 28% and 40% as of March 31, 2024 and December 31, 2023, respectively[56] Product and Technology - The company's SocketCam C860 offers advanced scanning capabilities, including swift and accurate reading of damaged barcodes and exceptional performance in poor lighting conditions[81] Compensation and Expenses - Stock-based compensation for Q1 2024 was $272,700, compared to $295,833 in Q1 2023[19] - Intangible assets amortization expense was $31,824 for both Q1 2024 and Q1 2023[34]

Financial Data and Key Metrics Changes - In Q1 2024, the company reported revenue of $5 million, a 15% increase compared to $4.3 million in Q1 2023, and a 13% increase sequentially from $4.4 million in the preceding quarter [32][45] - The net loss for Q1 2024 was $72,000 or $0.07 per share, an improvement from a net loss of $993,000 or $0.12 per share in Q1 2023 [28] - EBITDA for Q1 2024 was $40,000, an improvement from negative $459,000 in Q1 2023 [28] - Gross margin reached 50.3%, up from 48.1% in the prior year's quarter but down from 52.8% in the preceding quarter [36] Business Line Data and Key Metrics Changes - The company is focusing on promoting its newer products, including the SocketCam and XtremeScan series, which are designed for industrial applications [25][26] - The SocketCam product line includes both free and subscription versions, catering to different user needs and generating recurring revenue streams as users upgrade [34] Market Data and Key Metrics Changes - The company is expanding into the industrial market, targeting Apple premium resellers and emphasizing the ruggedization of its products for harsh environments [77] - Initial customer feedback on new products has been positive, with expectations for deployments to begin contributing to revenue in Q3 2024 [44] Company Strategy and Development Direction - The company aims to transform into a more comprehensive data capture company by investing in innovation and expanding its product offerings [25] - The strategy includes leveraging partnerships with app developers to integrate the company's SDK, enhancing the value proposition for end users [11][34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, expecting to see meaningful contributions from new deployments in the second half of the year [24] - The company anticipates maintaining EBITDA positivity in Q2 and moving towards profitable operating levels in the second half of the year [56] Other Important Information - The annual financial audit expenses typically occur in the first half of the year, impacting financial results [28] - The company has a cash balance of approximately $2.8 million and inventory levels similar to the previous year [29] Q&A Session Summary Question: How do the new products impact previous revenue? - Management clarified that new products do not displace current business but rather expand capabilities into parallel markets [39][48] Question: What is the projected revenue for the next 12 months? - Management expects to exceed $20 million in revenue for the year, building on last year's $19 million [40] Question: Is there a share repurchase program in place? - Currently, there is no repurchase plan due to insufficient cash position [49] Question: What is the percentage of revenue derived from the online store in Q1? - Approximately 17% of revenue in the U.S. came from the online store [57] Question: Where does the company provide added value? - The core value lies in capturing data in the physical world and transporting it to the application world, simplifying the process for app developers [58]

Exhibit 99.1 Socket Mobile Reports First Quarter 2024 Results FREMONT, Calif., – May 1, 2024 – 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, 2024. First Quarter 2024 Financial Highlights: " Our first quarter results were in line with our expectati ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) Socket Mobile offers Bluetooth-connected data capture solutions for mobile applications in diverse sectors - The company provides data capture solutions, including barcode scanners and NFC/RFID readers, for mobile applications in sectors like point of sale (POS), commercial services, asset tracking, and healthcare[14](index=14&type=chunk) - Socket Mobile's primary products are cordless data capture devices (barcode scanners, RFID/NFC readers) that connect via Bluetooth to iOS, Android, and Windows devices, offering the CaptureSDK for app developer integration[18](index=18&type=chunk) - The company designs its products and subcontracts manufacturing to third parties globally, with final assembly, testing, and distribution occurring at its Fremont, CA facility[28](index=28&type=chunk) - The company's growth is driven by the increasing adoption of mobile applications for smartphones and tablets in business, which creates demand for its data capture products[29](index=29&type=chunk) [Risk Factors](index=8&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from economic uncertainty, profitability challenges, supply chain dependencies, and intense competition - The company may not return to profitability and might require additional capital in the future, which may not be available on reasonable terms[52](index=52&type=chunk)[53](index=53&type=chunk) - Sales are highly dependent on application providers successfully integrating and marketing Socket Mobile's products within their own solutions[56](index=56&type=chunk) - The company relies on a limited number of suppliers for components, exposing it to risks of shortages or delays[60](index=60&type=chunk) - A significant portion of sales depends on a limited number of distributors, with Ingram Micro® and BlueStar together accounting for approximately **44%** and **50%** of worldwide sales in 2023 and 2022, respectively[69](index=69&type=chunk) - The business depends on strategic alliances with mobile operating system providers like Apple, Google, and Microsoft, who are not obligated to continue their collaboration[72](index=72&type=chunk)[73](index=73&type=chunk) - The loss of key senior managers, many of whom have over twenty years of service, could adversely affect the company's ability to compete[83](index=83&type=chunk) [Unresolved Staff Comments](index=17&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments to report - None[98](index=98&type=chunk) [Cybersecurity](index=17&type=section&id=Item%201C.%20Cybersecurity) The company's cybersecurity program, led by the CTO and overseen by the board, manages risks with no material business impact to date - The cybersecurity program is led by the Chief Technology Officer (CTO), who reports to the CEO, and is overseen by the board of directors[100](index=100&type=chunk)[102](index=102&type=chunk) - The company engages external experts to evaluate and test its risk management systems and requires annual cybersecurity training for all employees[101](index=101&type=chunk) - To date, cybersecurity risks have not materially affected the company's business, strategy, or financial condition, with only minor incidents reported[103](index=103&type=chunk) [Properties](index=17&type=section&id=Item%202.%20Properties) The company leases a 35,913 sq-ft facility in Fremont, CA, for its headquarters and manufacturing under an 87-month operating lease - The company leases a **35,913 sq-ft** facility in Fremont, CA for its office and manufacturing operations under an **87-month** lease starting February 2022, with a monthly rent of **$50,278** subject to **3%** annual increases[104](index=104&type=chunk) [Legal Proceedings](index=17&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings - The company is not currently involved in any material legal proceedings[105](index=105&type=chunk) [Mine Safety Disclosures](index=18&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[106](index=106&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=19&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under "SCKT", does not pay dividends, and repurchased shares in Q1 2023 - The company's common stock is traded on the NASDAQ under the symbol "SCKT", and the company has not paid dividends nor anticipates paying them in the foreseeable future[108](index=108&type=chunk) Share Repurchase Activity (Q1 2023) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 3, 2023 to Mar 29, 2023 | 92,959 | $2.24 | [Selected Financial Data](index=20&type=section&id=Item%206.%20Selected%20Financial%20Data) The company reported 2023 revenues of **$17.0 million** and a net loss of **$1.9 million**, contrasting with 2022 revenues of **$21.2 million** Selected Financial Data (2019-2023) | (Amounts in thousands, except per share) | 2023 | 2022 | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $17,034 | $21,238 | $23,199 | $15,700 | $19,253 | | **Gross profit** | $8,463 | $10,366 | $12,436 | $8,335 | $10,101 | | **Net income (loss)** | $(1,919) | $87 | $4,466 | $(3,279) | $287 | | **Basic net income (loss) per share** | $(0.27) | $0.01 | $0.58 | $(0.51) | $0.05 | | **Total assets** | $28,742 | $28,598 | $25,575 | $15,609 | $20,009 | | **Total stockholders' equity** | $19,420 | $20,322 | $20,046 | $11,173 | $13,785 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2023, revenue decreased by **20%** to **$17.0 million**, resulting in an operating loss of **$3.1 million**, despite a gross margin improvement - Net cash provided by operating activities was **$48,562** in 2023, a significant improvement from net cash used of **$111,415** in 2022[116](index=116&type=chunk) - The company believes its existing cash, available borrowing capacity on its **$2.5 million** revolving credit facility, and funds from operations are sufficient to meet anticipated capital requirements[118](index=118&type=chunk)[119](index=119&type=chunk) Results of Operations (2023 vs. 2022) | Metric (in millions) | 2023 | 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $17.0 | $21.2 | $(4.2) | -20% | | **Gross Profit** | $8.5 | $10.4 | $(1.9) | -18% | | **Gross Margin** | 49.7% | 48.8% | +0.9pp | N/A | | **R&D Expenses** | $4.8 | $4.4 | $0.4 | +11% | | **Sales & Marketing** | $4.0 | $3.6 | $0.4 | +10% | | **G&A Expenses** | $2.7 | $2.8 | $(0.1) | -3% | Contractual Obligations as of Dec 31, 2023 | Contractual Obligations | Total | < 1 year | 1 to 3 years | 4 to 5 years | > 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Unconditional purchase obligations | $5,821,000 | $5,734,000 | $87,000 | $— | $— | | Operating leases | $3,794,000 | $637,000 | $1,325,000 | $1,406,000 | $426,000 | | **Total** | **$9,615,000** | **$6,371,000** | **$1,412,000** | **$1,406,000** | **$426,000** | [Quantitative and Qualitative Disclosures about Market Risk](index=27&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces interest rate and foreign currency risks, with a hypothetical **10%** adverse exchange rate change impacting Q4 2023 net income by **$36,000** - Interest rate risk exposure is primarily from the bank term loan and credit line facilities, which have variable rates based on the lender's prime rate, though there were no outstanding balances at the moment[149](index=149&type=chunk) - The company has foreign currency risk as it requires European distributors to pay in Euros and British pounds, where a **10%** adverse change in exchange rates would have resulted in a decrease in net income of approximately **$36,000** for Q4 2023[150](index=150&type=chunk) [Financial Statements and Supplementary Data](index=28&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Audited financial statements show a **$1.9 million** net loss in 2023, an unqualified auditor opinion, and stable total assets at **$28.7 million** - The independent auditor, Sadler, Gibb & Associates, LLC, issued an unqualified opinion on the financial statements, identifying the Deferred Tax Asset Valuation Allowance Assessment and the Long-Lived Asset Impairment Assessment as critical audit matters[152](index=152&type=chunk)[157](index=157&type=chunk)[159](index=159&type=chunk) Balance Sheet Summary (in thousands) | | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $10,699 | $12,769 | | **Total Assets** | $28,741 | $28,598 | | **Total Current Liabilities** | $6,500 | $4,972 | | **Total Liabilities** | $9,321 | $8,276 | | **Total Stockholders' Equity** | $19,420 | $20,322 | Statement of Operations Summary (in thousands) | | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | **Revenues** | $17,034 | $21,238 | | **Gross Profit** | $8,463 | $10,366 | | **Operating Loss** | $(3,121) | $(446) | | **Net Income (Loss)** | $(1,919) | $87 | | **Basic EPS** | $(0.27) | $0.01 | - Major customers accounting for over **10%** of total revenues in 2023 were Ingram Micro Inc. (**22%**), BlueStar, Inc. (**22%**), and ScanSource, Inc. (**14%**)[220](index=220&type=chunk) - As of December 31, 2023, the company had **$3.0 million** in outstanding secured subordinated convertible notes, with conversion prices of **$1.46** and **$1.34** per share[235](index=235&type=chunk)[237](index=237&type=chunk) - As of December 31, 2023, the company had U.S. Federal net operating loss carryforwards of **$21.7 million** and state net operating loss carryforwards of **$23.6 million**[265](index=265&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=53&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This item is not applicable to the company - Not Applicable[277](index=277&type=chunk) [Controls and Procedures](index=53&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no material changes reported - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[278](index=278&type=chunk) - Management assessed internal control over financial reporting using the COSO framework and concluded that it was effective as of December 31, 2023[280](index=280&type=chunk)[281](index=281&type=chunk) - There were no changes in internal control over financial reporting during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, these controls[283](index=283&type=chunk) [Other Information](index=54&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - None[284](index=284&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=54&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[285](index=285&type=chunk) Part III [Directors, Executive Compensation, Security Ownership, and Related Matters](index=55&type=section&id=Items%2010-14) Information for Items 10-14, covering directors, executive compensation, and security ownership, is incorporated by reference from the upcoming Proxy Statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on May 15, 2024[288](index=288&type=chunk)[289](index=289&type=chunk)[290](index=290&type=chunk)[292](index=292&type=chunk)[293](index=293&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2023) | Plan Category | Number of securities to be issued upon exercise of outstanding options | Weighted-average exercise price of outstanding options | Number of securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 1,151,114 | $3.11 | 459,950 | Part IV [Exhibits, Financial Statement Schedules](index=56&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements and provides an index of exhibits filed with or incorporated by reference into the Form 10-K - All required financial statements are included in the report, and financial statement schedules are omitted because they are not applicable or the required information is included elsewhere[295](index=295&type=chunk)[296](index=296&type=chunk) - An index of exhibits is provided, listing various corporate documents, agreements, and certifications filed as part of the report[301](index=301&type=chunk)[302](index=302&type=chunk)

Socket Mobile, Inc. (NASDAQ:SCKT) Q4 2023 Earnings Conference Call March 5, 2024 5:00 PM ET Company Participants Kevin Mills – Chief Executive Officer Dave Holmes – Chief Business Officer Lynn Zhao – Chief Financial Officer Conference Call Participants BJ Cook – Singular Research Steve Swanson – Private Investor Operator Welcome to the Socket Mobile Inc. Q4 2023 Earnings Call. My name is Jen, and I will be your operator for today's call. Before we begin, I'd like to remind everyone that this conference call ...

Exhibit 99.1 Socket Mobile Reports Fourth Quarter 2023 and Full Year Results FREMONT, Calif., – March 5, 2024 – 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 and twelve months ended December 31, 2023. Fourth Quarter 2023 Financial Highlights: Full Year 2023 Financial Hi ...

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) The company reported decreased revenue and increased net loss for Q3 and first nine months of 2023, with declining assets and equity, and negative operating cash flow offset by financing activities [Condensed Statements of Operations](index=4&type=section&id=Condensed%20Statements%20of%20Operations) Revenues decreased by 14% in Q3 and 21% in the first nine months of 2023, resulting in wider net losses for both periods Condensed Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended Sep 30, 2023 ($) | Three Months Ended Sep 30, 2022 ($) | Nine Months Ended Sep 30, 2023 ($) | Nine Months Ended Sep 30, 2022 ($) | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $3,205,893 | $3,727,871 | $12,635,228 | $16,066,855 | | **Gross Profit** | $1,418,197 | $1,654,859 | $6,142,247 | $7,818,203 | | **Operating Loss** | $(1,398,555) | $(947,427) | $(2,645,522) | $(294,439) | | **Net Loss** | $(1,324,995) | $(874,034) | $(2,831,231) | $(428,142) | | **Diluted Net Loss Per Share** | $(0.16) | $(0.11) | $(0.34) | $(0.05) | [Condensed Balance Sheets](index=5&type=section&id=Condensed%20Balance%20Sheets) As of September 30, 2023, total assets decreased to $27.3 million, liabilities increased to $8.9 million, and stockholders' equity declined to $18.4 million Condensed Balance Sheet Highlights (Unaudited) | Metric | September 30, 2023 ($) | December 31, 2022 ($) | | :--- | :--- | :--- | | **Total Current Assets** | $11,046,357 | $12,768,536 | | **Total Assets** | $27,306,391 | $28,597,988 | | **Total Current Liabilities** | $5,985,462 | $4,972,429 | | **Total Liabilities** | $8,930,967 | $8,276,231 | | **Total Stockholders' Equity** | $18,375,424 | $20,321,757 | [Condensed Statements of Cash Flows](index=9&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Net cash used in operations significantly increased to $(522,529) for the first nine months of 2023, with financing activities providing $1.46 million Cash Flow Summary (Nine Months Ended September 30) | Activity | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | **Net Cash Used in Operating Activities** | $(522,529) | $(30,182) | | **Net Cash Used in Investing Activities** | $(1,469,227) | $(910,603) | | **Net Cash (Used in) Provided by Financing Activities** | $1,461,842 | $(917,759) | | **Net Decrease in Cash** | $(529,914) | $(1,858,544) | | **Cash at End of Period** | $3,093,555 | $4,237,342 | [Notes to Condensed Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) Notes highlight $1.6 million convertible note financing, bank covenant waivers, significant customer concentrations, and substantial inventory purchase commitments - The company obtained waivers from its bank for failing to meet **minimum adjusted EBITDA requirements** in Q1 and Q3 2023[42](index=42&type=chunk)[43](index=43&type=chunk) - In May 2023, the company completed a **secured subordinated convertible note financing of $1.6 million**, maturing in May 2026 and convertible at **$1.34 per share**[48](index=48&type=chunk) Revenue Concentration by Major Customer (Nine Months Ended Sep 30) | Customer | 2023 (%) | 2022 (%) | | :--- | :--- | :--- | | BlueStar, Inc. | 23% | 22% | | Ingram Micro Inc. | 22% | 27% | | ScanSource, Inc. | * | 13% | - As of September 30, 2023, the company has **non-cancelable purchase commitments for inventory** amounting to approximately **$7.16 million**[74](index=74&type=chunk) [Management's Discussion and Analysis (MD&A)](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 21% year-to-date revenue decline to inventory reductions, with stable gross margins, increased operating expenses, and new working capital from a $1.6 million convertible note [The Company and its Products](index=23&type=section&id=The%20Company%20and%20its%20Products) Socket Mobile offers Bluetooth-connected data capture solutions, including barcode scanners and RFID/NFC readers, with product families like SocketScan and a comprehensive SDK - The company's primary products are **cordless data capture devices** (barcode scanning, RFID/NFC) that connect to mobile devices via Bluetooth[81](index=81&type=chunk) - Product families include **SocketScan, DuraScan®, DuraSled, the new industrial-grade XtremeScan**, and the **software-based SocketCam**[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) - The company provides a **Software Developer Kit (CaptureSDK)** to application providers to integrate data capture capabilities into their mobile applications[88](index=88&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Revenue for the first nine months of 2023 fell 21% to $12.6 million due to inventory reductions, while gross margin remained stable and operating expenses increased - The revenue decline for Q3 and the first nine months of 2023 (**14% and 21% respectively**) was primarily attributed to **distribution partners reducing inventories** due to market uncertainty and high interest rates[92](index=92&type=chunk) Operating Expense Changes (Nine Months Ended Sep 30, 2023 vs 2022) | Expense Category | 2023 ($) | 2022 ($) | Change | | :--- | :--- | :--- | :--- | | Research and development | $3,644,000 | $3,271,000 | +11% | | Sales and marketing | $3,014,000 | $2,729,000 | +10% | | General and administrative | $2,131,000 | $2,113,000 | +1% | [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) Net cash used in operations was $(523,000) for the first nine months of 2023, offset by $1.46 million from financing activities, with significant contractual obligations - **Net cash used in operating activities** was approximately **$523,000** in the first nine months of 2023, compared to **$30,000** in the same period of 2022[101](index=101&type=chunk) - Financing activities in the first nine months of 2023 provided **$1.46 million**, mainly from a **$1.58 million note financing**, offset by **$208,000 in stock repurchases** and a **$125,000 loan repayment**[105](index=105&type=chunk) Contractual Cash Obligations as of September 30, 2023 | Contractual Obligations | Total ($) | Less than 1 year ($) | | :--- | :--- | :--- | | Unconditional purchase obligations | $7,162,000 | $6,701,000 | | Operating lease | $3,952,000 | $634,000 | | **Total** | **$11,114,000** | **$7,335,000** | [Quantitative and Qualitative Disclosures about Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Primary market risks include interest rate fluctuations on unused variable-rate credit facilities and foreign currency exchange rates, with a 10% adverse change impacting Q3 2023 net loss by $27,000 - **Interest rate risk** is tied to the company's revolving credit lines, which have variable rates based on the lender's prime rate, with **no outstanding balances**[110](index=110&type=chunk) - **Foreign currency risk** exists as European sales are denominated in Euros and British pounds; a **10% adverse change** would have increased the **Q3 2023 net loss by about $27,000**[111](index=111&type=chunk) [Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting - The **CEO and CFO concluded** that the company's **disclosure controls and procedures are effective**[113](index=113&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter[114](index=114&type=chunk) [Part II. Other Information](index=31&type=section&id=Part%20II.%20Other%20Information) [Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including profitability challenges, reliance on limited suppliers and distributors, bank covenant compliance, dependence on application providers, intense competition, and potential dilution - The company may **not return to profitability** and may require **additional capital** in the future, which may not be available on reasonable terms[119](index=119&type=chunk)[121](index=121&type=chunk) - The company must remain in **compliance with bank covenants** to maintain its lines of credit and has received **waivers for past non-compliance**[122](index=122&type=chunk) - Sales are highly dependent on a **few key distributors** (Ingram Micro and BlueStar represented **~45% of sales** in the first nine months of 2023) and on **third-party application providers** integrating Socket Mobile's products[123](index=123&type=chunk)[136](index=136&type=chunk) - The business is exposed to **supply chain risk**, as several component parts are produced by a **limited number of suppliers**[127](index=127&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[163](index=163&type=chunk) [Exhibits](index=42&type=section&id=Item%206.%20Exhibits) Filed exhibits include CEO and CFO certifications as required by Sarbanes-Oxley Act, along with the XBRL Interactive Data File - Filed exhibits include **CEO and CFO certifications** pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, and the **XBRL document**[163](index=163&type=chunk)

Socket Mobile, Inc. (NASDAQ:SCKT) Q3 2023 Earnings Conference Call October 27, 2023 5:00 PM ET Company Participants Kevin Mills - President & CEO David Holmes - Chief Business Officer Lynn Zhao - CFO Conference Call Participants Chris Sakai - Singular Research Operator Welcome to the Socket Mobile Inc. Q3 2023 Earnings Call. My name is Jen, 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 me ...

Financial Performance - Total revenues for Q2 2023 were approximately $5.1 million, a decrease of 15% from $6.05 million in Q2 2022[95] - Gross profit margins for Q2 2023 were 51.8%, an improvement from 50.2% in Q2 2022, attributed to higher margins from direct online sales[96] - The decline in revenues was primarily due to weakness in the retail POS market, which is the main revenue source[95] Expenses - Research and development expenses for Q2 2023 were approximately $1.19 million, a 6% increase from $1.12 million in Q2 2022[97] - Sales and marketing expenses for Q2 2023 were approximately $1.01 million, reflecting a 4% increase from $964,000 in Q2 2022[98] - General and administrative expenses for Q2 2023 were approximately $749,000, a slight decrease of 2% from $761,000 in Q2 2022[99] - The company anticipates R&D expenses to remain at similar levels for the remainder of the year[97] Cash Flow - Net cash used in operating activities for the first half of 2023 was approximately $528,000, compared to net cash provided of $599,000 in the first half of 2022[105] - Net cash provided by financing activities was approximately $1,439,000 in the first half of 2023, a significant increase from net cash used of approximately $546,000 in the comparable period a year ago[109] - The company completed secured subordinated note financing of $1,582,000 in 2023, alongside proceeds from employee stock options amounting to $190,315[109] Investments - In the first half of 2023, the company invested approximately $1,104,000 in manufacturing tooling, firmware development, website development, and leasehold improvements, compared to $560,000 in the same period of 2022[109] Financial Obligations - Total contractual obligations as of June 30, 2023, amounted to $12,047,000, with $8,082,000 due within one year[113] - The company has a revolving credit line facility of up to $2.5 million, with variable interest rates based on the lender's prime rate, which could increase interest expenses if rates rise[116] Foreign Currency Risks - An adverse change of 10% in foreign exchange rates could have increased the company's net loss by approximately $30,000 for the second quarter of 2023[117] - The actual net adjustment for foreign currency effects on cash balances, collections, and payables was a loss of approximately $2,500 for the second quarter of 2023[117] - The company continues to monitor and assess risks related to foreign currency fluctuations to mitigate potential impacts on financial performance[117] Accounting Policies - Significant accounting policies include Revenue Recognition, Accounts Receivable Reserves, and Inventory Valuation, which may affect reported financial results[110] - The company had no off-balance sheet arrangements as of June 30, 2023[114]

Socket Mobile, Inc. (NASDAQ:SCKT) Q2 2023 Earnings Conference Call August 2, 2023 5:00 PM ET Company Participants Kevin Mills - President & Chief Executive Officer Dave Holmes - Chief Business Officer Lynn Zhao - Chief Financial Officer Conference Call Participants Chris Sakai - Singular Research Operator Welcome to the Socket Mobile Inc. Q2 2023 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 fo ...