SOCKET MOBILE INC
For the period ended Mar 31, 2025. Filed May 8, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 8, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-08.
0000944075-24-000083
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-08.
0000944075-25-000025
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 51 previous paragraphs and 48 current paragraphs.
34 unchanged; 7 reworded; 7 added; 10 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 1 previous and 1 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
Total revenues for the first quarter of 2025 were approximately $4.0 million, reflecting a 20% decline compared to $5.0 million in the same period last year. This decrease is primarily attributed to weaker demand in both domestic and international markets. In Q1, we experienced reduced purchasing activity from key customers, which negatively impacted sales volumes. While we remain confident in our long-term growth prospects, these short-term fluctuations are largely due to less robust demand for our products during this quarter.
Current report
Our gross profit margin on sales reached 50.4% in Q1 2025, slightly up from 50.3% in the same period last year. Despite the lower revenue in this quarter, we have successfully maintained our gross margin, demonstrating effective cost control and operational efficiency.
Current report
In the first quarter of 2025, engineering expenses were approximately $1,132,000, reflecting a 6% decrease compared to approximately $1,208,000 in Q1 2024. This reduction is primarily due to a decrease in headcount, including retirements and other personnel changes, as well as the reduction in equity expense resulting from the cancellation of old grants.
Current report
Sales and marketing expenses in the first quarter of 2025 totaled approximately $1,106,000, reflecting a 7% increase compared to approximately $1,031,000 in the same quarter last year. This increase was primarily driven by higher headcount.
Current report
In the first quarter of 2025, the Company incurred approximately $653,000 in general and administrative expenses, reflecting a 13% decrease from approximately $751,000 in the same quarter of 2024. This reduction was primarily due to a decrease in equity expenses resulting from the cancellation of old grants.
Current report
Interest expense and other, net of interest income and other, was approximately $100,000 in the first quarter of 2025 compared to $72,000 in the first quarter of 2024. Interest expenses in the first quarter of both 2025 and 2024 were related to interest on secured subordinated convertible notes payable (see “NOTE 6 — Secured Subordinated Convertible Notes Payable” for more information). There were no outstanding balances of credit lines during the first three months of 2025 or 2024.
Current report
We have determined that utilization of existing net operating losses against future taxable income is not limited by Section 382 of the Internal Revenue Code. Future ownership changes, however, may limit our ability to fully utilize the existing net operating loss carryforwards against any future taxable income. We will continue to monitor the likelihood to realize the value of deferred tax assets in the future.
Removed paragraphs (10)
Previous report
DuraScan® Family. Our DuraScan® family consists of 700 Series (D700, D720, D730, D740, D745, D755, D760) companion scanners, 800 Series (D800, D820, D840, D860) attachable scanners and Wearable (DW930, DW940), which are designed to be durable barcode scanners with IP54-rated outer casing to withstand tougher environments. The D720 is priced competitively with a 1D barcode scanner, making it the affordable 2D option available in the market. The D820 provides a basic and affordable option for those who wish to upgrade to 2D scanning. The D745 and D755 are medical-grade, universal scanners. The D760 and D860 include MRZ (machine-readable zone) support, making it capable of scanning passports, visas, and other travel documents. Additionally, the 800 Series scanners may be used as stand-alone devices as well.
Previous report
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 report
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 report
Research and development expense in the three and nine months ended September 30, 2024, were approximately $1.2 million and $3.6 million, respectively, representing a decrease of 4% and 1% compared to expenses of approximately $1.2 million and $3.6 million in the corresponding periods a year ago. The reduction in Q3 2024 is primarily due to a decrease in headcount, leading to lower payroll and related costs. The reduction in nine months of 2024 is primarily due to savings on external consulting services that were required during the development of new product in 2023. We anticipate a modest increase for the remainder of the year.
Previous report
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 report
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 report
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 report
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 report
In the first nine months of 2023, changes in operating assets and liabilities resulted in net cash provided by operating activities of approximately $365,000, primarily stemming from reduced levels of accounts receivable. The increased cash flow was partially offset by the paydown of accounts payable and accrued expenses, along with operating lease payment.
Reworded paragraphs (7)
Previous wording
XtremeScan family. In August 2023, the Company made entry into the industrial barcode scanning market with the XtremeScan family. XtremeScan combines the versatility and user-friendliness of iPhones with the ruggedness and top-of-the-line protection required for extreme, industrial work environments. XtremeScan Case XC100 offers ultimate iPhone protection with its rugged outer shell and fully enclosed, rubberized shielding for maximum durability. It's the toughest iPhone case on the market, offering military-grade protection against drops, dirt, water, and even more unpredictable elements found in harsh industrial environments. XtremeScan XS930 & XS940 are built upon the XtremeScan Case and provide the same rugged iPhone protection, adding a high-performance Socket Mobile data reader. With both 1D (XS930) and powerful 1D/2D (XS940) options, these data readers can scan through various types of packaging materials under different lighting conditions. They provide the perfect solution for users who wish to utilize iPhones for data capture within rough, industrial settings. XtremeScan Grip XG930 & XG940 provides 1D or 1D/2D barcode scanning capabilities and builds even further on the XS by providing an added pistol grip handle. The ergonomic grip enables an easy point-and-shoot approach and comfort during extended scanning sessions.
Current wording
XtremeScan family. XtremeScan combines the versatility and user-friendliness of iPhones with the ruggedness and top-of-the-line protection required for extreme, industrial work environments. XtremeScan Case XC100 offers ultimate iPhone protection with its rugged outer shell and fully enclosed, rubberized shielding for maximum durability. It's the toughest iPhone case on the market, offering military-grade protection against drops, dirt, water, and even more unpredictable elements found in harsh industrial environments. XtremeScan XS930 & XS940 are built upon the XtremeScan Case and provide the same rugged iPhone protection, adding a high-performance Socket Mobile data reader. With both 1D (XS930) and powerful 1D/2D (XS940) options, these data readers can scan through various types of packaging materials under different lighting conditions. They provide the perfect solution for users who wish to utilize iPhones for data capture within rough, industrial settings. XtremeScan Grip XG930 & XG940 provides 1D or 1D/2D barcode scanning capabilities and builds even further on the XS by providing an added pistol grip handle. The ergonomic grip enables an easy point-and-shoot approach and comfort during extended scanning sessions. In March 2025, the Company released XtremeScan iXG and iXS Series, powered by iOS 18.3 and featuring a fully integrated iPhone 16e. These devices are designed to serve as full-featured handheld computers, combining high-performance long-range barcode scanning with the connectivity, app ecosystem, and user-friendly interface of the iOS platform.
Previous wording
DuraScan Wear DW930 & DW940 are the first wearable additions to the DuraScan Product Family, introducing a new era of innovative scanning technologies for the Company. The DW930 offers 1D laser scanning technology, while the DW940 provides powerful 1D/2D barcode scanning functionality. Their glove-like, wearable design allows workers to use both hands freely, enhancing speed and flexibility. This makes them perfect for scanning in industries such as warehousing, manufacturing, and distribution.
Current wording
DuraScan® Family. Our DuraScan® family comprises the 700 Series (D700, D720, D730, D740, D745, D755, D760, D762) companion scanners, the 800 Series (D800, D820, D840, D860) attachable scanners, and the Wearable Series (DW930, DW940), all designed with IP54-rated durable casings to withstand challenging environments. The D720 offers an affordable entry point into 2D scanning, while the D820 provides a basic and cost-effective upgrade to 2D capabilities. The D745 and D755 are medical-grade, universal scanners suitable for healthcare settings. The D760 and D860 include MRZ (machine-readable zone) support, enabling the scanning of passports, visas, and other travel documents. The newly introduced D762 enhances the lineup with an extended scanning range of up to 14 feet, making it ideal for logistics and warehouse operations where scanning from a distance is beneficial. Additionally, the 800 Series scanners can function as stand-alone devices, offering flexibility across various applications. DuraScan Wear DW930 & DW940 are the first wearable additions to the DuraScan Product Family, introducing a new era of innovative scanning technologies for the Company. The DW930 offers 1D laser scanning technology, while the DW940 provides powerful 1D/2D barcode scanning functionality. Their glove-like, wearable design allows workers to use both hands freely, enhancing speed and flexibility. This makes them perfect for scanning in industries such as warehousing, manufacturing, and distribution.
Previous wording
SocketScan family. Our SocketScan family consists of the 700 Series (S700, S720, S730, S740) companion scanners and 800 Series (S800, S820, S840, S860) attachable scanners. The 700 Series are available in multiple vivid colors: blue, green, red, white, yellow and black. The S720 reads both 1D and 2D barcodes on paper and screen, serving as a drop-in replacement for our previously popular S700 model while also adding QR code functionality. The 800 Series comprises 1D linear imaging (S800) and 2D (S820, S840, S860), which can be easily clipped onto smartphones, tablets and other mobile devices using an easily detachable clip or DuraCase, creating a one-handed solution. The S860 includes MRZ (machine-readable zone) support, allowing it scan passports, visas, and other travel documents in addition to barcodes. Additionally, the 800 Series scanners may be used as stand-alone devices as well.
Current wording
SocketScan family. Our SocketScan family consists of the 300 Series (S320), 700 Series (S700, S720, S730, S740) companion scanners, and 800 Series (S800, S820, S840, S860) attachable scanners. The S320 is a compact reader designed specifically for reading QR codes, making it ideal for applications such as access control, ticketing, and event check-in. The 700 Series are available in multiple vivid colors: blue, green, red, white, yellow, and black. The S720 reads both 1D and 2D barcodes on paper and screen, serving as a drop-in replacement for our previously popular S700 model while also adding QR code functionality. The 800 Series comprises 1D linear imaging (S800) and 2D (S820, S840, S860) scanners, which can be easily clipped onto smartphones, tablets, and other mobile devices using an easily detachable clip or DuraCase, creating a one-handed solution. The S860 includes MRZ (machine-readable zone) support, allowing it to scan passports, visas, and other travel documents in addition to barcodes. Additionally, the 800 Series scanners may be used as stand-alone devices as well
Previous 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.
Current wording
No income tax expense was recorded for the first quarter of 2025 or 2024. Our deferred tax asset, primarily representing future income tax savings from the application of net operating loss carry forwards, was valued at $10,663,419 on March 31, 2025.
Previous 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.
Current wording
As reflected in our Condensed Statements of Cash Flows, we used net cash of $732,970 from operating activities in the first quarter of 2025, compared to net cash used in operating activities of $94,890 in the same period last year. To calculate our net cash used in operating activities, we adjusted our net loss of $994,140 and $557,415 in the first quarter of 2025 and 2024, respectively, by adding back non-cash expenses such as stock-based compensation expense, depreciation and amortization, and deferred tax expenses and benefits, which amounted to $540,117 and $647,252 in the first quarters of 2025 and 2024, respectively. In addition, we analyze changes in operating assets and liabilities as a source or use of cash. In the first quarter of 2025, changes in operating assets and liabilities resulted in a net cash outflow of $278,947, primarily driven by increases in accounts receivable due to customer payment delays and higher inventory levels resulting from slower sales. This cash outflow was partially offset by an increase in accounts payable, reflecting our cash management efforts. In the first quarter of 2024, changes in operating assets and liabilities used a net cash outflow of $184,727, mainly due to increases in accounts receivable resulting from higher shipments.
Previous 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.
Current wording
In the first quarters of 2025 and 2024, we invested $52,304 and $56,442, respectively, in leasehold improvements, computer software development costs, and manufacturing tooling costs. In the first quarter of 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 $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.
Current wording
Net cash provided by financing activities for the three months ended March 31, 2025 was zero, compared to net cash provided by financing activities of $23,750 in the comparable period a year ago. Financing activities in 2024 consisted of proceeds of employee stock options exercised.