Socket Mobile(SCKT) - 2023 Q1 - Quarterly Report

Financial Performance - Revenues for Q1 2023 were $4,312,178, a decrease of 31.6% compared to $6,293,002 in Q1 2022[9] - Gross profit for Q1 2023 was $2,072,487, down 33.8% from $3,127,662 in Q1 2022[9] - Operating loss for Q1 2023 was $(955,412), compared to an operating income of $463,704 in Q1 2022[9] - Net loss for Q1 2023 was $(993,420), compared to a net income of $341,933 in Q1 2022, resulting in a net loss per share of $(0.12)[9] - Total revenues for Q1 2023 were approximately $4.3 million, a 31% decrease from $6.3 million in Q1 2022, primarily due to distribution inventory balancing activities[83] - Gross profit margins decreased to 48.1% in Q1 2023 from 49.7% in the same period last year, attributed to lower production volumes[84] - The company reported a net loss of $993,420 for Q1 2023, compared to a net income of $341,933 in Q1 2022[55] - Basic net loss per share for Q1 2023 was $(0.12), a decrease from a net income of $0.04 per share in Q1 2022[55] Assets and Liabilities - Total current assets decreased to $11,948,021 as of March 31, 2023, from $12,768,536 as of December 31, 2022[11] - Cash and cash equivalents at the end of Q1 2023 were $2,963,308, down from $3,623,469 at the beginning of the quarter[17] - Total liabilities increased to $8,478,108 as of March 31, 2023, compared to $8,276,231 as of December 31, 2022[12] - Stockholders' equity decreased to $19,449,450 as of March 31, 2023, from $20,321,757 as of December 31, 2022[12] - The balances of right-of-use assets and liabilities for operating leases were $3,443,826 and $3,630,508, respectively, as of March 31, 2023, compared to $3,559,658 and $3,736,564 on December 31, 2022[27] Cash Flow and Expenses - Operating cash flow for Q1 2023 was $105,665, compared to $(452,413) in Q1 2022[17] - The company incurred stock-based compensation of $295,833 in Q1 2023, up from $223,446 in Q1 2022[17] - Research and development expenses increased by 18% to approximately $1,247,000 in Q1 2023, compared to $1,054,000 in Q1 2022, driven by new product development and hiring[85] - Sales and marketing expenses rose by 12% to approximately $1,007,000 in Q1 2023, up from $900,000 in the same quarter last year, mainly due to additional hiring[86] - General and administrative expenses increased by 9% to approximately $774,000 in Q1 2023, compared to $710,000 in Q1 2022, primarily due to higher equity-based compensation[87] - Cash payments for operating lease liabilities were $153,181 in Q1 2023, up from $132,010 in Q1 2022[63] Revenue Sources and Customer Base - Major customers for the three months ended March 31, 2023 included Ingram Micro, Inc. at 23% and BlueStar, Inc. at 20% of total revenues[46] - SocketCare revenue for the quarters ended March 31, 2023 and 2022 was approximately $5,600 and $5,400, respectively, with unrecognized service revenue at approximately $34,000 as of March 31, 2023[25] - Company’s sales are significantly dependent on a limited number of distributors, with Ingram Micro® and BlueStar representing approximately 43% and 47% of worldwide sales in Q1 2023 and 2022, respectively[130] Strategic Risks and Market Conditions - Company faces risks from a limited number of qualified suppliers for essential components, which could adversely affect financial results[120] - Company must rapidly develop and introduce new products to remain competitive, as the market is prone to rapidly changing technology[123] - The expensing of employee stock options and restricted stocks will continue to adversely affect net income and earnings per share, making profitability harder to achieve[146] - The company’s ability to forecast demand accurately is crucial, as miscalculations could lead to excess inventory or production capacity issues[128] - Events outside the company's control, such as natural disasters or health epidemics, could materially impact business operations and financial condition[150] Stock and Shareholder Information - As of May 9, 2023, the company had 7,130,853 shares of common stock outstanding, with substantial shares freely tradable in the public market[155] - The company had 1,262,028 shares of common stock subject to outstanding options and 1,068,934 shares of restricted stock outstanding as of May 9, 2023[156] - The trading price of the company's common stock fluctuated between a high of $4.84 and a low of $1.47 from January 1, 2022, to the date of the report, indicating high volatility[158]