Socket Mobile(SCKT) - 2024 Q1 - Quarterly Report

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]