SOCKET MOBILE INC

Previous wording

Total revenues for the quarter ended June 30, 2024, were approximately $5.08 million, a slight decrease of 0.7% compared to the same period in 2023, which reported $5.12 million. For the six-month period, revenue increased by 6.7% to approximately $10.06 million from $9.43 million in the prior year. Revenue growth over the past six months was primarily driven by increases in both run rate and deployment business during the first quarter of 2024 compared to the same period in 2023.

Current wording

Total revenues for the quarter ended September 30, 2024, were approximately $3.9 million, an increase of 21% compared to the same period in 2023, which reported $3.2 million. For the nine-month period, revenue increased by 10.3% to approximately $13.9 million from $12.6 million in the prior year. Revenue growth over the past three and nine months was primarily driven by increases in run-rate business during 2024 compared to the same periods in 2023.

Previous wording

We have maintained a gross profit margin exceeding 50%. For the quarter ended June 30, 2024, our gross profit margin was 50.9%, compared to 51.8% in the prior year. For the six-month period, the margin was 50.6%, up from 50.1% in 2023. The improvement in the gross margin is primarily attributed to the effective management of manufacturing overhead costs.

Current wording

For the quarter ended September 30, 2024, our gross profit margin was 49%, compared to 44.2% in the prior year. For the nine-month period, the margin was 50.1%, up from 48.6% in 2023. The improvement in the gross margin is primarily attributed to allocation of manufacturing overhead costs across higher shipments during 2024 compared to the same periods in 2023.

Previous wording

Sales and marketing expense in the three and six months ended June 30, 2024, were approximately $1,154,000 and $2,186,000, respectively, representing an increase of 15% and 9% compared to expense of approximately $1,005,000 and $2,011,000 in the corresponding periods a year ago. The increase is primarily attributed to new hires and the cost-of-living adjustments implemented in Q2 2024. We anticipate a modest increase for the remainder of the year.

Current wording

Sales and marketing expenses in the three and nine months ended September 30, 2024, were approximately $1.1 million and $3.3 million, respectively, representing an increase of 12% and 10% compared to expense of approximately $1.0 million and $3.0 million in the corresponding periods a year ago. The increase is primarily attributed to new hires and the cost-of-living adjustments implemented in Q2 2024. We anticipate a modest increase for the remainder of the year.

Previous wording

General and administrative expense in the three and six months ended June 30, 2024 were approximately $733,000 and $1,484,000, respectively, representing a decrease of 2% and a decrease of 3% compared to expense of approximately $749,000 and $1,523,000 in the corresponding periods a year ago. The decrease is primarily attributed to reduced amortization of stock options. We anticipate a slight decrease in the general and administrative expenses for the remaining of the year.

Current wording

General and administrative expense in the three and nine months ended September 30, 2024 were approximately $644,000 and $2.1 million, respectively, representing an increase of 6% and a decrease of 0.12% compared to expense of approximately $608,000 and $2.1 million in the corresponding periods a year ago. The increase is primarily attributed to the cost-of-living adjustments implemented in Q2 2024. We anticipate a slight increase in the general and administrative expenses for the remaining of the year.

Previous wording

Interest expense, net of interest income, in the three and six months ended June 30, 2024 was approximately $72,000 and $145,000, respectively, compared to approximately $55,000 and $93,000, respectively, in the same periods one year ago. Interest expense in the three and six months ended June 30, 2024, was related to interest on the secured subordinated convertible notes payable (see “NOTE 6 — Secured Subordinated Convertible Notes Payable” of the notes to consolidated financial statements for more information). Our credit lines had no outstanding balances during the three and six months ended June 30, 2024. Interest expense in the three and six months ended June 30, 2023, was related to interest on the secured subordinated convertible notes payable (see “NOTE 6 — Secured Subordinated Convertible Notes Payable” of the notes to consolidated financial statements for more information) and on the CalCap loan.

Current wording

Interest expense, net of interest income, in the three and nine months ended September 30, 2024 was approximately $84,000 and $229,000, respectively, compared to approximately $76,000 and $170,000, respectively, in the same periods one year ago. Interest expense in the three and nine months ended September 30, 2024, was related to interest on the secured subordinated convertible notes payable (see “NOTE 6 — Secured Subordinated Convertible Notes Payable” of the notes to consolidated financial statements for more information). Our credit lines had no outstanding balances during the three and nine months ended September 30, 2024. Interest expense in the three and nine months ended September 30, 2023, was related to interest on the secured subordinated convertible notes payable (see “NOTE 6 — Secured Subordinated Convertible Notes Payable” of the notes to consolidated financial statements for more information) and on the CalCap loan. The increase in interest expense is due to the new convertible notes issued in August 2024.

Previous wording

In the three and six months ended June 30, 2024, we did not record any income tax expense. As of June 30, 2024, our deferred tax asset, primarily representing future income tax savings from the application of net operating loss carry forwards, was valued at $10,112,419. In the three and six months ended June 30, 2023, we recorded income tax expenses of $166,000. As of December 31, 2023, our deferred tax asset was valued at $10,112,419.

Current wording

In the three and nine months ended September 30, 2024, we did not record any income tax expense. As of September 30, 2024, our deferred tax asset, primarily representing future income tax savings from the application of net operating loss carry forwards, was valued at approximately $10.1 million. In the three and nine months ended September 30, 2023, we recorded an income tax benefit of $150,000 and an income tax expense of $16,000. As of December 31, 2023, our deferred tax asset was valued at approximately $10.1 million.

Previous wording

As reflected in our Statements of Cash Flows, net cash used in operating activities was approximately $638,000 in the first half of 2024, compared to net cash used in operating activities amounted to approximately $528,000 in the first half of 2023. We calculate net cash used in operating activities by adjusting our net loss (approximately a net loss of approximately $1,165,000 and a net loss of $1,506,000 in the first half of 2024 and 2023, respectively) with the items that did not require the use of cash. Those items include stock-based compensation expense, depreciation and amortization of equipment and intangible assets, amortization of debt discount and operating lease ROU assets, and deferred tax expenses (benefits). These amounts totaled approximately $1,314,000 and $1,437,000 in the first half of 2024 and 2023, respectively. In addition, we report increases in assets and reductions in liabilities as uses of cash and decreases in assets and increases in liabilities as sources of cash, together referred to as changes in operating assets and liabilities.

Current wording

As reflected in our Statements of Cash Flows, net cash used in operating activities was approximately $434,000 in the first nine months of 2024, compared to net cash used in operating activities of approximately $523,000 in the first nine months of 2023. We calculate net cash used in operating activities by adjusting our net loss (approximately a net loss of approximately $2.3 million and $2.8 million in the first nine months of 2024 and 2023, respectively) with items that did not require the use of cash. Those items include stock-based compensation expense, depreciation and amortization of equipment and intangible assets, amortization of debt discount and operating lease ROU assets, and deferred tax benefits. These amounts totaled approximately $2.0 million and $2.0 million in the first nine months of 2024 and 2023, respectively. In addition, we report increases in assets and reductions in liabilities as uses of cash and decreases in assets and increases in liabilities as sources of cash, together referred to as changes in operating assets and liabilities.

Previous wording

In the first half of 2024, changes in operating assets and liabilities resulted in net cash used in operating activities of approximately $787,000 which were primarily from increased accounts receivable levels driven by higher shipment levels at the end of the quarter and operating lease payments. The uses of cash were partially offset by reduction in inventory and increase in accounts payable.

Current wording

In the first nine months of 2024, changes in operating assets and liabilities resulted in net cash used in operating activities of approximately $120,000, primarily due to operating lease payments. This was partially offset by a release of cash from a reduced accounts receivable balance as of September 30, resulting from lower shipment levels at the end of the quarter.

Previous wording

In the first half of 2024 and 2023, we invested approximately $168,000 and $1,104,000, respectively, in leasehold improvements, computer software development costs, and manufacturing tooling costs. In Q1 2024, these investing activities were offset by proceeds from a tenant improvements allowance amounting to $72,800.

Current wording

In the first nine months of 2024 and 2023, we invested approximately $564,000 and $1.5 million, respectively, in manufacturing tooling, firmware development, website development, and leasehold improvements. In 2024, these investing activities were offset by proceeds from a tenant improvements allowance amounting to $72,800.

Previous wording

Net cash provided by financing activities was approximately $24,000 in the first half of 2024, compared to net cash used in financing activities was approximately $1,439,000 in the comparable period a year ago. Financing activities in 2024 consisted solely of proceeds from stock options exercised. In contrast, financing activities in 2023 consisted primarily of the completion of secured subordinated note financing of $1,582,000 and the proceeds of employee stock options in the amount of $190,315. These were partially offset by the repurchase of treasury stock amounting to approximately $208,000 and the final repayment of our term loan, which was $125,000.

Current wording

Net cash provided by financing activities was approximately $1.0 million in the first nine months of 2024, compared to net cash provided of approximately $1.5 million in the comparable period a year ago. In 2024, financing activities consisted primarily of the completion of secured subordinated note financing of approximately $989,000, and the proceeds of employee stock options in the amount of $23,750. In contrast, financing activities in 2023 consisted primarily of the completion of secured subordinated note financing of approximately $1.6 million, and the proceeds of employee stock options in the amount of $212,815. These were partially offset by the repurchase of treasury stock amounting to approximately $208,000 and the final repayment of our term loan, which was $125,000.