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What changed in SOCKET MOBILE, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of SOCKET MOBILE, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+106 added−113 removedSource: 10-K (2025-03-25) vs 10-K (2024-03-25)

Top changes in SOCKET MOBILE, INC.'s 2024 10-K

106 paragraphs added · 113 removed · 81 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

36 edited+18 added−23 removed16 unchanged
Biggest changeWe were founded in March 1992 as Socket Communications, Inc. and reincorporated in Delaware in 1995 prior to our initial public offering in June 1995. We have financed our operations since inception primarily from selling equity capital or convertible debt, receivables-based revolving lines of credit and term loans with our bank.
Biggest changeWe have financed our operations since inception primarily from selling equity capital or convertible debt, receivables-based revolving lines of credit and term loans with our bank. We began doing business as Socket Mobile, Inc. in January 2007 to better reflect our market focus on the mobile business market and changed our legal name to Socket Mobile, Inc. in April 2008.
Once our data capture products are integrated by the application provider, our products become an ingredient of the application solution and part of the application provider’s marketing program. We provide regular CaptureSDK updates including updates that support the latest operating system updates provided by Apple, Google, and Microsoft.
Once our data capture products are integrated by the app provider, our products become an ingredient of the application solution and part of the app provider’s marketing program. We provide regular CaptureSDK updates including updates that support the latest operating system updates provided by Apple, Google, and Microsoft.
We offer an easy-to-use software developer kit (CaptureSDK) to application providers, which enables them to provide their consumers with our advanced barcode scanning features. Our products are integrated by the application providers and are marketed by the application providers or their resellers. The number of application providers supporting our data capture solutions continues to grow. XtremeScan family .
We offer an easy-to-use software developer kit (CaptureSDK) to app providers, which enables them to provide their consumers with our advanced barcode scanning features. Our products are integrated by the app providers and are marketed by the app providers or their resellers. The number of app providers supporting our data capture solutions continues to grow. XtremeScan family .
We offer a full range of cordless barcode scanners designed to connect to smartphones, tablets, and other computing devices via Bluetooth. Our Software Developer Kit (CaptureSDK) empowers application providers to integrate the capabilities of our Data Capture software into their applications, setting our products apart.
We offer a full range of cordless barcode scanners designed to connect to smartphones, tablets, and other computing devices via Bluetooth. Our Software Developer Kit (CaptureSDK) empowers app providers to integrate the capabilities of our Data Capture software into their applications, setting our products apart.
Personnel Our future success will depend in significant part upon the continued service of certain of our key technical and senior management personnel, and our continuing ability to attract, assimilate and retain highly qualified technical, managerial, and sales and marketing personnel. Our total employee headcount was 61 and 56 as of December 31, 2023 and 2022, respectively.
Personnel Our future success will depend in significant part upon the continued service of certain of our key technical and senior management personnel, and our continuing ability to attract, assimilate and retain highly qualified technical, managerial, and sales and marketing personnel. Our total employee headcount was 59 and 61 as of December 31, 2024 and 2023, respectively.
Our solutions are incorporated into mobile applications used in point of sale (POS), commercial services (field workers), asset tracking, manufacturing and quality control processes, transportation and logistics (goods tracking and movement), event management (ticketing, entry, access control, and identification), medical and education.
Our products are incorporated into mobile applications used in point of sale (POS), commercial services (field workers), asset tracking, manufacturing process and quality control, transportation and logistics (goods tracking and movement), event management (ticketing, entry, access control, and identification), medical and education.
They may not offer extensive tools for application providers, such as our software developer kit (CaptureSDK), to integrate the features of our sophisticated data collection scanning software and hardware. This could potentially limit their ability to meet the consumer’s requirements fully. NFC & RFID Contactless Reader/Writer .
They may not offer extensive tools for app providers, such as our software developer kit (CaptureSDK), to integrate the features of our sophisticated data collection scanning software and hardware. This could potentially limit their ability to meet the consumer’s requirements fully. 5 Table of Contents NFC & RFID Contactless Reader/Writer .
Users of their apps pay for the solutions only if the C860 is selected. For end users, most of their needs can be met with our free camera scanning solution, except for a small percentage of needs requiring the advanced solution, C860.
Users of their apps pay for the solutions only if the C860 is selected. For end users, most of their needs can be met with our free camera scanning solution, except for a small percentage of needs requiring the advanced solution, C860. This makes our camera scanning solution ideal for end users as well.
We believe growth in mobile applications and the mobile workforce resulting from technical advances in mobile technologies, cost reductions in mobile devices and the growing adoption by businesses of mobile applications for smartphones and tablets, builds a growing demand for our products.
Our products are also available on our online stores. We believe growth in mobile applications and the mobile workforce resulting from technical advances in mobile technologies, cost reductions in mobile devices and the growing adoption by businesses of mobile applications for smartphones and tablets, builds a growing demand for our products.
Our employees are not represented by a union, and we consider our employee relationships to be good. As of December 31, 2023, we had 19 persons in sales, marketing, and customer service, 16 persons in development engineering, 8 persons in finance and administration, and 18 persons in operations. 7 Table of Contents
Our employees are not represented by a union, and we consider our employee relationships to be good. As of December 31, 2024, we had 22 persons in sales, marketing, and customer service, 13 persons in development engineering, 7 persons in finance and administration, and 17 persons in operations. 7 Table of Contents
Our principal executive offices are located at 40675 Encyclopedia Circle, Fremont, CA 94538, and our phone number is (510) 933-3000. 1 Table of Contents Our Internet home page is https://www.socketmobile.com; however, the information on or that can be accessed through it is not part of this Annual Report.
Our common stock trades on the NASDAQ Capital Market under the symbol “SCKT”. Our principal executive offices are located at 40675 Encyclopedia Circle, Fremont, CA 94538, and our phone number is (510) 933-3000. Our Internet home page is https://www.socketmobile.com; however, the information on or that can be accessed through it is not part of this Annual Report.
We provide an easy-to-use software developer kit (CaptureSDK) and training and technical support to our application providers. We support the marketing activities of our application providers in promoting the applications that include our products.
We actively support app providers to integrate our data capture solutions into their applications. We provide an easy-to-use software developer kit (CaptureSDK) and training and technical support to app providers. We support the marketing activities of app providers in promoting the applications that include our products.
We stress to customers the design of our products for the markets they serve, emphasizing quality and standards-based connectivity. Mobility requires products that are compact and designed to be handled while mobile, with low power consumption to extend the time between charges and are easy to use. We strive to offer high-performance products at a wide range of competitive prices.
Mobility requires products that are compact and designed to be handled while mobile, with low power consumption to extend the time between charges and are easy to use. We strive to offer high-performance products at a wide range of competitive prices.
This makes our camera scanning solution ideal for end users as well. 6 Table of Contents Proprietary Technology and Intellectual Property We have been granted U.S. patents and design patents and have other patent applications under review. We have registered trademarks with the U.S. Patent and Trademark Office for the mark “Socket”, our logo, DuraScan, SocketScan, SocketCam, and XtremeScan.
Proprietary Technology and Intellectual Property We have been granted U.S. patents and design patents and have other patent applications under review. We have registered trademarks with the U.S. Patent and Trademark Office for the mark “Socket”, our logo, DuraScan, SocketScan, SocketCam, and XtremeScan.
We subcontract the manufacturing of all our product components to independent third-party contract manufacturers located in the United States, Mexico, Taiwan, Singapore, Malaysia and China that have the equipment, know-how and capacity to manufacture products to our specifications. We perform final product assembly, testing and packaging at, and distribute our products from, our Fremont, California facility.
We design our own products and are responsible for all associated test equipment. We subcontract the manufacturing of all our product components to independent third-party contract manufacturers located in the United States, Mexico, Taiwan, Singapore, Malaysia and China that have the equipment, know-how and capacity to manufacture products to our specifications.
We offer our products worldwide through two-tier distribution enabling customers to purchase from large numbers of online resellers around the world including application providers who resell their own solutions along with our data capture products. Our products are also available on our online stores.
We perform final product assembly, testing and packaging at, and distribute our products from, our Fremont, California facility. We offer our products worldwide through two-tier distribution enabling customers to purchase from large numbers of online resellers around the world including app providers who resell their own solutions along with our data capture products.
We comply with the standards set by the standard-setting bodies whose technologies are used in our products such as Bluetooth SIG, NFC Forum, GS1, AIM Global, CIPURSE, and FeliCa. 4 Table of Contents Mobile Markets .
We comply with the standards set by the standard-setting bodies whose technologies are used in our products such as Bluetooth SIG, NFC Forum, GS1, AIM Global, CIPURSE, and FeliCa. Mobile Markets . Our revenues are primarily driven by sales of barcode scanners integrated into mPOS (mobile Point of Sale) applications used with Apple tablets and other mobile devices.
From time to time, we receive communications from third parties asserting that our products infringe, or may infringe, their proprietary rights. Litigation could be brought against us that could result in significant additional expense or compel us to discontinue or redesign some of our products.
Litigation could be brought against us that could result in significant additional expense or compel us to discontinue or redesign some of our products.
We are building a brand image focused on business mobility. This image closely associates us with business mobility solutions and to reflect this image, we began doing business as Socket Mobile, Inc. in January 2007 and changed our legal name to Socket Mobile, Inc. in April 2008.
This image closely associates us with business mobility solutions and to reflect this image, we began doing business as Socket Mobile, Inc. in January 2007 and changed our legal name to Socket Mobile, Inc. in April 2008. We stress to customers the design of our products for the markets they serve, emphasizing quality and standards-based connectivity.
We have embraced the following core values : Accountability : We take ownership and responsibility for our actions and performance. We learn from our mistakes and celebrate our successes. Customer Focus: We live by and for our customer’s success. We want to earn their top-of-mind choice, enhance their final customer experience, and create value through our relationship.
Our customers are app providers and their consumers in need of data capture solutions. We have embraced the following core values : Accountability : We take ownership and responsibility for our actions and performance. We learn from our mistakes and celebrate our successes. Customer Focus: We live by and for our customer’s success.
Our vision is to manage the complexity of capturing and delivering data across a spectrum of data sources, network technologies, and mobile systems so that our customers can concentrate on applications of the data. Our customers are application providers and their consumers in need of data capture solutions.
Our Mission, Vision, and Core Values Our mission is to supply innovative and cost-effective data capture tools for businesses that use mobile platforms to conduct business in mobile environments. 3 Table of Contents Our vision is to manage the complexity of capturing and delivering data across a spectrum of data sources, network technologies, and mobile systems so that our customers can concentrate on applications of the data.
Other mobile markets addressed by application providers include commercial services (field workers), asset tracking, manufacturing process and quality control, transportation and logistics (goods tracking and movement), event management (ticketing, entry, access control, and identification), medical and education. We expect these markets to increase the use of mobile applications and the demand for barcode scanners. Expanded and improved product offerings.
Many mPOS application providers develop software for smaller retailers using tablets as cash registers. Other mobile markets addressed by app providers include commercial services (field workers), asset tracking, manufacturing process and quality control, transportation and logistics (goods tracking and movement), event management (ticketing, entry, access control, and identification), medical and education.
We use Bluetooth technology to provide a completely functional Bluetooth solution enabling connections and data transfers between Bluetooth-enabled devices. Our companion applications assist Apple iOS, Android and Windows users with the proper setup and use of our data capture products.
We use Bluetooth technology to provide a completely functional Bluetooth solution enabling connections and data transfers between Bluetooth-enabled devices.
Our largest distributors are Ingram Micro®, ScanSource® and Blue Star, and they support a worldwide network of online resellers including Shopify®, Amazon.com, and CDW®. We also offer products in our own online stores. Strong Brand Name . We believe that our products make a difference in the daily work life of mobile workers and the people they serve.
We distribute our products through a worldwide distribution network that places products into geographic regions to shorten purchasing time and provides a credit shield to us. Our largest distributors are Ingram Micro®, ScanSource® and Blue Star, and they support a worldwide network of online resellers including Shopify®, Amazon.com, and CDW®. We also offer products in our own online stores.
We offer a wide range of products that enable application providers and their consumers to design their mobile systems to meet their specific requirements, and we encourage our distributors to support the full range of our products. The goal is for customers to view Socket Mobile as a primary source for their mobile data capture needs.
We expect these markets to increase the use of mobile applications and the demand for barcode scanners. Expanded and improved product offerings. We offer a wide range of products that enable app providers and their consumers to design their mobile systems to meet their specific requirements, and we encourage our distributors to support the full range of our products.
Excellence: We take pride in what we make and do and value the creativity, talent, ambition, and drive of each employee to be his or her best and to achieve superior results. Integrity: We are honest and ethical in all our dealings with each other, customers, business partners, suppliers, competitors, and other stakeholders.
We want to earn their top-of-mind choice, enhance their final customer experience, and create value through our relationship. Excellence: We take pride in what we make and do and value the creativity, talent, ambition, and drive of each employee to be his or her best and to achieve superior results.
Our overall company brand identity and positioning goal is to be a leading provider of easy-to-deploy business mobility data capture systems to the business mobility market. 5 Table of Contents Competition and Competitive Risks The overall market for mobile handheld data capture solutions is both complex and competitive.
Through our developer support program, we work closely with app providers who are developing productivity-enhancing applications for the mobile workforce. Our overall company brand identity and positioning goal is to be a leading provider of easy-to-deploy business mobility data capture systems to the business mobility market.
The C820 is a free, easily integrated camera scanning solution. The C860 offers a significant upgrade for users with advanced scanning needs. It stands out due to its swift and accurate reading of damaged barcodes, coupled with exceptional performance in poor lighting conditions, setting it apart from others in the industry.
The C860 stands out due to its swift and accurate reading of damaged barcodes and exceptional performance in poor lighting conditions, setting it apart in the industry. Both C820 and C860 enable App providers to serve a wide range of customers with diverse data capture requirements, from price-sensitive to performance-sensitive.
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.
Our DuraScan® family includes the 600 Series NFC & RFID readers (D600), 700 Series companion scanners (D700, D720, D730, D740, D745, D755, D760, D762), 800 Series attachable scanners (D800, D820, D840, D860), and the Wearable 900 Series (DW930, DW940).
We design our products to comply with the regulations of the many worldwide agencies that regulate the safety, performance, and use of electronic products. Competitive pricing. We have designed our products to be priced competitively although we are subject to changes in component pricing by our suppliers.
The Company and its Products” for a more detailed description of our products. 4 Table of Contents We design our products to comply with the regulations of the many worldwide agencies that regulate the safety, performance, and use of electronic products. Competitive pricing.
We say what we mean and mean what we say. Mutual Respect: We value people's differences and diverse opinions, and we treat each other fairly. Marketing Dynamics Application provider relationships . We actively support application providers to integrate our data capture solutions into their applications.
Integrity: We are honest and ethical in all our dealings with each other, customers, business partners, suppliers, competitors, and other stakeholders. We say what we mean and mean what we say. Mutual Respect: We value people's differences and diverse opinions, and we treat each other fairly. Marketing Dynamics Application provider relationships .
We rely on a combination of patent, copyright, trademark and trade secret laws, and confidentiality procedures to protect our proprietary rights. As part of our confidentiality procedures, we generally enter into non-disclosure agreements with our employees, distributors and strategic partners, and limit access to our software, documentation and other proprietary information.
As part of our confidentiality procedures, we generally enter into non-disclosure agreements with our employees, distributors and strategic partners, and limit access to our software, documentation and other proprietary information. Despite these precautions, it may be possible for a third-party to copy or otherwise obtain and use our products or technology without authorization, or to develop similar technology independently.
Item 1. Business General We are a leading provider of data capture and delivery solutions, enhancing productivity for a mobile workforce through innovative technology and tailored applications. Historically, we began as a hardware peripheral company but have transitioned into a comprehensive data capture organization.
Item 1. Business General We are a leading provider of data capture and delivery solutions for enhanced productivity in workforce mobilization.
Our products include stand-alone barcode scanners in both durable and standard cases, attachable barcode scanners, RFID/NFC reader/writer and camera-based scanning software. We provide a software developer kit to application providers to enable our advanced data capture software to be easily integrated into applications. See “Item 1 Business. The Company and its Products” for a more detailed description of our products.
The goal is for customers to view Socket Mobile as a primary source for their mobile data capture needs. Our products include stand-alone barcode scanners in both durable and standard cases, attachable barcode scanners, RFID/NFC reader/writer and camera-based scanning software.
We update our products from time to time and work with our vendors to achieve reductions in component pricing. Worldwide product availability. We distribute our products through a worldwide distribution network that places products into geographic regions to shorten purchasing time and provides a credit shield to us.
We have designed our products to be priced competitively although we are subject to changes in component pricing by our suppliers. We update our products from time to time and work with our vendors to achieve reductions in component pricing. Worldwide product availability.
Despite these precautions, it may be possible for a third-party to copy or otherwise obtain and use our products or technology without authorization, or to develop similar technology independently. In addition, we may not be able to effectively protect our intellectual property rights in certain foreign countries.
In addition, we may not be able to effectively protect our intellectual property rights in certain foreign countries. From time to time, we receive communications from third parties asserting that our products infringe, or may infringe, their proprietary rights.
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Our evolution has enabled us to generate revenue through software solutions, as well as hardware solutions like barcode scanners and NFC/RFID readers. Initially building our foundation on hardware, we later expanded into software, creating a robust, integrated offering that covers all aspects of data capture for our customers.
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Our primary products are cordless data capture devices incorporating barcode scanning or RFID/Near Field Communications (NFC) technologies that connect over Bluetooth. All products work with applications running on smartphones, mobile computers and tablets using operating systems from Apple® (iOS), Google™ (Android™) and Microsoft® (Windows®).
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We began doing business as Socket Mobile, Inc. in January 2007 to better reflect our market focus on the mobile business market and changed our legal name to Socket Mobile, Inc. in April 2008. Our common stock trades on the NASDAQ Capital Market under the symbol “SCKT”.
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We offer an easy-to-use software developer kit (CaptureSDK) to app providers, which enables them to provide their users with our advanced barcode scanning features. Our products are integrated in their application solutions and are marketed by the app providers or the resellers of their applications.
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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.
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The number of our registered app providers for data capture applications continues to grow. 1 Table of Contents We were founded in March 1992 as Socket Communications, Inc. and reincorporated in Delaware in 1995 prior to our initial public offering in June 1995.
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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.
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Our XtremeScan product line consists of three configurations: XtremeScan Case, XtremeScan, and XtremeScan Grip, all designed for iPhone. This product family marks a significant milestone in our commitment to delivering high-quality data capture solutions for customers in industrial, manufacturing, warehousing, oil and gas, and airports. XtremeScan enables iPhones to withstand harsh industrial conditions, offering robust scanning capabilities with military-grade durability.
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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.
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The product family expanded in 2024 with the introduction of several XtremeScan Mag devices, catering for the growing number of workers using a single phone for both personal and business needs. The Bring Your Own Device ( BYOD) market is a significant yet underserved segment where we see strong growth potential.
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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. SocketCam family . Our camera-based barcode scanning software includes SocketCam C820 and C860 for both iOS and Android.
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XtremeScan is fully compatible with iPhone 16e, a durable, cost-effective device designed for industrial environments. With an extra-long battery life, enhanced drop resistance, and the trusted iOS platform, it is expected to become the go-to device for demanding industrial sectors. XtremeScan, combined with iPhones16e, will empower industrial businesses with durable, adaptable, and future-ready data capture technology. SocketCam family .
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The C820 and C860 enable App providers to service a wide range of customers with various data capture requirements, from price-sensitive to performance-sensitive. End-users whose data capture requirements exceed the capabilities of the free camera-based scanners will have the choice of upgrading to an advanced camera-based scanner, C860, or purchase a Socket hardware scanner. DuraScan® Family .
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Our camera-based barcode scanning software includes SocketCam C820 and C860, compatible with both iOS and Android. The C820 is a free, easily integrated camera scanning solution, while the C860 offers a significant upgrade for users with advanced scanning needs.
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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.
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End-users needing more than a free camera-based scanners can upgrade to advanced C860 or opt for a Socket hardware scanner. 2 Table of Contents DuraScan® Family .
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The D760 and D860 include MRZ (machine-readable zone) support, making it capable of scanning passports, visas, and other travel documents.
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Designed for rugged work environments, DuraScan data readers offer exceptional durability, making them ideal for industries such as warehousing, manufacturing, and distribution. SocketScan family . Our SocketScan family offers a range of versatile solutions designed for seamless integration into various business applications.
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Additionally, the 800 Series scanners may be used as stand-alone devices as well. 2 Table of Contents 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.
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It includes the 300 Series countertop readers (S320, S370), the 500 Series NFC Mobile Wallet Reader (S550), the 700 Series companion scanners (S700, S720, S730, S740), and the 800 Series attachable scanners (S800, S820, S840, S860). With an easy setup process and user-friendly design, SocketScan enhances efficiency by delivering fast, high-performance 1D/2D scanning while reducing human errors.
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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. 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.
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Whether scanning barcodes, reading NFC data, or handling combo applications, SocketScan ensures accuracy and reliability across diverse industries. DuraSled Family . Our DuraSled (DS800, DS820, DS840, DS860) integrates a smartphone with a high-performance, protective barcode sled scanner, creating a one-handed solution.
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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.
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Designed for efficiency, these sled scanners offer native support with select Apple and Samsung smartphones, enabling full application control of a one-handed data collection experience. Software Developer Kit (CaptureSDK) . Our CaptureSDK supports all Socket Mobile data capture devices through a single integration, simplifying the process for app developers to incorporate our data capture capabilities into their applications.
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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.
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By installing our SDK, developers enable their customers to select the most suitable Socket Mobile products for their needs. CaptureSDK allows developers to modify captured data, control the placement of barcode or RFID data within their applications, and manage user feedback to confirm successful transactions and data transmissions.
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Additionally, the 800 Series scanners may be used as stand-alone devices as well. DuraSled Family . Our DuraSled (DS800, DS820, DS840, DS860) is a barcode scanning sled designed for durability. It combines a phone with a scanner to create a one-handed solution. DuraSled protects phones from impact damage and provides a robust charging solution for all environments.
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Additionally, CaptureSDK includes SocketCam, a feature that enables the use of a device's built-in camera for occasional or lower-volume data collection requirements. CaptureSDK is compatible with development tools such as Swift Package Manager, Maven, and NuGet, and supports high-level frameworks including MAUI, React Native, Java, JavaScript, and Flutter, facilitating seamless integration of our data capture solutions into diverse applications.
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It is easy-to-use and ideal for delivery services, stock counting, ticketing and other App-driven mobile solutions. The DuraSled products are compatible with Apple and Samsung devices. The D S820 provides a basic and affordable option for those who wish to upgrade to 2D scanning. NFC & RFID Contactless Reader/Writer. The product line consists of the D600, S550 and S370.
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We provide a software developer kit to app providers to enable our advanced data capture software to be easily integrated into applications. See “Item 1 Business.
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The D600 is an ergonomically handheld model with an IP54-rated outer casing that can read and write various types of electronic SmartTags or transfer data with near-field communication. The S550 is a contactless membership card reader/writer designed for tap-and-go smart card and Near Field Communication (“NFC”) applications. The S370 supports both barcode scanning and NFC reading and writing technologies.
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Strong Brand Name . We believe that our products make a difference in the daily work life of mobile workers and the people they serve. We are building a brand image focused on business mobility.
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It provides App providers the ability to read both QR code-based and NFC-based credentials, enabling them to accept multiple formats with just one device. Additionally, the S370 can read credentials following ISO 18013-5, the Mobile Driver’s License (mDL) standard being adopted in some states and countries. Software Developer Kit (CaptureSDK) .
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Competition and Competitive Risks The overall market for mobile handheld data capture solutions is both complex and competitive.
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Our Software Developer Kit (CaptureSDK) supports all our data capture devices with a single integration, making it easier for App providers to integrate our data capture capabilities into their applications. With the installation of our data capture software, the App providers’ customers can choose any of our products that work best for them.
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Our companion applications assist Apple iOS, Android and Windows users with the proper setup and use of our data capture products. 6 Table of Contents We rely on a combination of patent, copyright, trademark and trade secret laws, and confidentiality procedures to protect our proprietary rights.
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Our CaptureSDK enables the App providers to modify captured data, control the placement of the barcoded or RFID data in their applications, and control the feedback to the user that the transaction and transmission were successfully completed. Our CaptureSDK also supports the built-in camera in a customer’s smartphone or tablet to be used for occasional or lower-volume data collection requirements.
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The CaptureSDK uses tools integrated with software building environments such as Swift Package Manager, Maven and NuGet, adds support for high-level frameworks such as MAUI, ReactNative, Java, JavaScript, and Flutterand adds other features to make it easier for App providers to integrate our data capture software into their applications. 3 Table of Contents We design our own products and are responsible for all associated test equipment.
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Our Mission, Vision, and Core Values Our mission is to supply innovative and cost-effective data capture tools for businesses that use mobile platforms to conduct business in mobile environments.
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Our revenues are primarily driven by sales of barcode scanners integrated into mPOS (mobile Point of Sale) applications used with Apple tablets and other mobile devices. Many mPOS application providers develop software for smaller retailers using tablets as cash registers.
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Through our developer support program, we work closely with application providers who are developing productivity-enhancing applications for the mobile workforce.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

17 edited+2 added−2 removed92 unchanged
Biggest changeOur operating results may also fluctuate due to factors such as: • the demand for our products; • the size and timing of customer orders; • unanticipated delays or problems in our introduction of new products and product enhancements; • the introduction of new products and product enhancements by our competitors; • the timing of the introduction and deployment of new applications that work with our products; • changes in the revenues attributable to royalties and engineering development services; • product mix; • timing of software enhancements; • changes in the level of operating expenses; • competitive conditions in the industry including competitive pressures resulting in lower average selling prices; • timing of distributors’ shipments to their customers; • delays in supplies of key components used in the manufacturing of our products; and • general economic conditions and conditions specific to our customers’ industries. 15 Table of Contents Because we base our staffing and other operating expenses on anticipated revenues, unanticipated declines or delays in the receipt of orders can cause significant variations in operating results from quarter to quarter.
Biggest changeOur operating results may also fluctuate due to factors such as: · the demand for our products; · the size and timing of customer orders; · unanticipated delays or problems in our introduction of new products and product enhancements; 15 Table of Contents · the introduction of new products and product enhancements by our competitors; · the timing of the introduction and deployment of new applications that work with our products; · changes in the revenues attributable to royalties and engineering development services; · product mix; · timing of software enhancements; · changes in the level of operating expenses; · competitive conditions in the industry including competitive pressures resulting in lower average selling prices; · timing of distributors’ shipments to their customers; · delays in supplies of key components used in the manufacturing of our products; and · general economic conditions and conditions specific to our customers’ industries.
In addition, we may be affected by health epidemic or pandemics, such as the current COVID-19 pandemic, or geopolitical instability, such as Russia’s military action against Ukraine. We may incur expenses or delays relating to such events outside of our control, which could have a material adverse impact on our business, operating results and financial condition.
In addition, we may be affected by health epidemic or pandemics, such as the COVID-19 pandemic, or geopolitical instability, such as Russia’s military action against Ukraine. We may incur expenses or delays relating to such events outside of our control, which could have a material adverse impact on our business, operating results and financial condition.
If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our stock could drop significantly. 9 Table of Contents Despite security protections, our business records and information could be hacked by unauthorized personnel.
If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our stock could drop significantly. Despite security protections, our business records and information could be hacked by unauthorized personnel.
We are aware that unauthorized efforts to access our business records and information with sophisticated tools could bypass our controls and procedures and we remain alert to that possibility. Deferred tax assets comprise a significant portion of our assets and are dependent upon future tax profitability to realize the benefits.
We are aware that unauthorized efforts to access our business records and information with sophisticated tools could bypass our controls and procedures and we remain alert to that possibility. 9 Table of Contents Deferred tax assets comprise a significant portion of our assets and are dependent upon future tax profitability to realize the benefits.
During the twelve months ended December 31, 2023 and 2022, Ingram Micro® and BlueStar together represented approximately 44% and 50%, respectively, of our worldwide sales. We expect that a significant portion of our sales will continue to depend on sales to a limited number of distributors.
During the twelve months ended December 31, 2024 and 2023, Ingram Micro® and BlueStar together represented approximately 48% and 44%, respectively, of our worldwide sales. We expect that a significant portion of our sales will continue to depend on sales to a limited number of distributors.
In addition, a severe prolonged economic downturn could result in a variety of risks to the business, including impairing our ability to pursue potential opportunities and limiting our ability to raise additional capital when needed on acceptable terms, if at all. We may not return to profitability.
In addition, a severe prolonged economic downturn could result in a variety of risks to the business, including impairing our ability to pursue potential opportunities and limiting our ability to raise additional capital when needed on acceptable terms, if at all.
Additional risks that are currently unknown to the Company or that the Company currently considers immaterial may also impair its business or adversely affect its financial condition or results of operations.
Additional risks that are currently unknown to the Company or that the Company currently considers immaterial may also impair its business or adversely affect its financial condition or results of operations. We may not return to profitability.
During the period from January 1, 2023 through the date of the report, our common stock price fluctuated between a high of $2.48 and a low of $0.90. We have experienced low trading volumes in our stock, and thus relatively small purchases and sales can have a significant effect on our stock price.
During the period from January 1, 2024 through the date of the report, our common stock price fluctuated between a high of $1.72 and a low of $0.91. We have experienced low trading volumes in our stock, and thus relatively small purchases and sales can have a significant effect on our stock price.
The agreements may be terminated by us or by our bank at any time. Upon such termination, our bank would no longer make advances under the credit agreement and outstanding advances would be repaid as receivables are collected. All advances are at our bank’s discretion and our bank is not obligated to make advances.
The agreements may be terminated by us or by our bank at any time. Upon such termination, our bank would no longer make advances under the credit agreement and outstanding advances would be repaid as receivables are collected.
The market price of our common stock could also decline if one or more of our significant stockholders decided for any reason to sell substantial amounts of our common stock in the public market. As of March 22, 2024, we had 7,547,327 shares of common stock outstanding.
The market price of our common stock could also decline if one or more of our significant stockholders decided for any reason to sell substantial amounts of our common stock in the public market. As of March 20, 2025, we had 7,952,988 shares of common stock outstanding.
Should any major changes, even if anticipated, occur, we would be required to invest significant time and resources to redesign our products to ensure compliance with relevant standards.
Unanticipated changes in industry standards could render our products incompatible with products developed by major hardware manufacturers and software developers. Should any major changes, even if anticipated, occur, we would be required to invest significant time and resources to redesign our products to ensure compliance with relevant standards.
These independent committees establish standards, which evolve and change over time, for different categories of our products. We must continue to identify and ensure compliance with evolving industry standards so that our products are interoperable and we remain competitive. Unanticipated changes in industry standards could render our products incompatible with products developed by major hardware manufacturers and software developers.
Standards for the form and functionality of our products are established by standards committees. These independent committees establish standards, which evolve and change over time, for different categories of our products. We must continue to identify and ensure compliance with evolving industry standards so that our products are interoperable and we remain competitive.
As of March 22, 2024, we had 1,126,114 shares of common stock subject to outstanding options under our stock option plans, 1,127,207 shares of restricted stock outstanding, and 432,181 shares of common stock available for future issuance under the plans.
As of March 20, 2025, we had 1,114,698 shares of common stock subject to outstanding options under our stock option plans, 1,140,202 shares of restricted stock outstanding, and 328,166 shares of common stock available for future issuance under the plans.
If application providers are not successful in their efforts to develop, market and sell the applications into which our software and products are incorporated, we may not achieve our sales projections.
All advances are at our bank’s discretion and our bank is not obligated to make advances. 8 Table of Contents If app providers are not successful in their efforts to develop, market and sell the applications into which our software and products are incorporated, we may not achieve our sales projections.
If our products are not in compliance with prevailing industry standards for a significant period of time, we would miss opportunities to sell our products for use with new hardware components from mobile computer manufacturers and OEMs, thus affecting our business.
If our products are not in compliance with prevailing industry standards for a significant period of time, we would miss opportunities to sell our products for use with new hardware components from mobile computer manufacturers and OEMs, thus affecting our business. 13 Table of Contents Undetected flaws and defects in our products may disrupt product sales and result in expensive and time-consuming remedial action Our hardware and software products may contain undetected flaws, which may not be discovered until customers have used the products.
Thus, any adverse determinations in this type of litigation could subject us to significant liabilities and costs. 13 Table of Contents New industry standards may require us to redesign our products, which could substantially increase our operating expenses. Standards for the form and functionality of our products are established by standards committees.
Plaintiffs in intellectual property cases often seek injunctive relief, and the measures of damages in intellectual property litigation are complex and often subjective or uncertain. Thus, any adverse determinations in this type of litigation could subject us to significant liabilities and costs. New industry standards may require us to redesign our products, which could substantially increase our operating expenses.
There can be no assurance that such capital will be available in sufficient amounts or on terms acceptable to us, if at all. 8 Table of Contents In order to maintain the availability of our bank lines of credit we must remain in compliance with the covenants as specified under the terms of the credit agreements and the bank may exercise discretion in making advances to us.
In order to maintain the availability of our bank lines of credit we must remain in compliance with the covenants as specified under the terms of the credit agreements and the bank may exercise discretion in making advances to us.
Removed
Plaintiffs in intellectual property cases often seek injunctive relief, and the measures of damages in intellectual property litigation are complex and often subjective or uncertain.
Added
There can be no assurance that such capital will be available in sufficient amounts or on terms acceptable to us, if at all.
Removed
Undetected flaws and defects in our products may disrupt product sales and result in expensive and time-consuming remedial action Our hardware and software products may contain undetected flaws, which may not be discovered until customers have used the products.
Added
Because we base our staffing and other operating expenses on anticipated revenues, unanticipated declines or delays in the receipt of orders can cause significant variations in operating results from quarter to quarter.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity program is led by our Chief Technology Officer (“CTO”) who is responsible for our overall information security strategy, policy, security engineering, operations and cyber threat detection and response. Our CTO has extensive information technology and program management experience and many years of experience with our organization. Our CTO reports to our president and CEO.
Biggest changeOur cybersecurity program is led by our Chief Information Officer (“CIO”) who is responsible for our overall information security strategy, policy, security engineering, operations and cyber threat detection and response. Our CIO has extensive information technology and program management experience and many years of experience with our organization. Our CIO reports to our president and CEO.
Thus far all such incidents have been minor.
Thus far all such incidents have been minor. 17 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties In February 2022, the Company entered into an operating lease agreement for an approximately 35,913 square-foot facility in Fremont, California, where our office and manufacturing operations are located. The lease agreement is for a base term of 87 months with a monthly rent obligation of $50,278, subject to annual increases of 3%.
Biggest changeItem 2. Properties In February 2022, the Company entered into an 87-month operating lease agreement for an approximately 35,913 square-foot facility in Fremont, California, where our office and manufacturing operations are located. The current monthly rent obligation is $53,340, subject to annual 3% increases each May. Item 3.
Added
Legal Proceedings We are currently not a party to any material legal proceedings.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers Shares repurchase activity during the twelve months ended December 31, 2023 was as follows: Periods Total Number of Shares Purchased Average Price Paid Per Share Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program January 3, 2023 to March 29, 2023 Open market purchases 92,959 $2.24 $0 Performance Graph As a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, we have elected scaled disclosure reporting and therefore are not required to provide the stock performance graph.
Biggest changePerformance Graph As a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, we have elected scaled disclosure reporting and therefore are not required to provide the stock performance graph. Recent Sales of Unregistered Securities. None. 19 Table of Contents
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock The Company’s common stock is traded on the NASDAQ Marketplace under the symbol “SCKT.” On March 22, 2024, the closing sales price for our common stock of 7,547,327 shares and approximately 8,490 beneficial shareholders of record, as reported on the NASDAQ Marketplace was $1.03.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock The Company’s common stock is traded on the NASDAQ Marketplace under the symbol “SCKT.” On March 20, 2025, the closing sales price for our common stock of 7,952,988 shares as reported on the NASDAQ Marketplace, was $1.15.
Removed
Recent Sales of Unregistered Securities. None. 19 Table of Contents

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeSelected Financial Data The following selected financial data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the financial statements and the notes thereto in Item 8, “Financial Statements and Supplementary Data.” Years Ended December 31, (Amounts in thousands, except per share) 2019 2020 2021 2022 2023 Income Statement Data: Revenues $ 19,253 $ 15,700 $ 23,199 $ 21,238 $ 17,034 Gross profit $ 10,101 $ 8,335 $ 12,436 $ 10,366 $ 8,463 Operating expenses $ 9,494 $ 12,686 $ 9,739 $ 10,812 $ 11,584 Net income (loss) before income taxes $ 506 $ (3,330 ) $ 2,564 $ (621 ) $ (3,363 ) Income tax benefit (expense) $ (219 ) $ 51 $ 1,903 $ 708 $ 1,444 Net income (loss) $ 287 $ (3,279 ) $ 4,466 $ 87 $ (1,919 ) Net income (loss) per share: Basic $ 0.05 $ (0.51 ) $ 0.58 $ 0.01 $ (0.27 ) Diluted $ 0.05 $ (0.51 ) $ 0.48 $ 0.01 $ (0.27 ) Weighted average shares outstanding: Basic 5,984 6,036 6,991 7,185 7,230 Diluted 6,208 6,036 8,923 7,533 7,230 At December 31, 2019 2020 2021 2022 2023 Balance Sheet Data: Cash and cash equivalents $ 959 $ 2,122 $ 6,096 $ 3,624 $ 2,827 Total assets $ 20,009 $ 15,609 $ 25,575 $ 28,598 $ 28,742 Bank line of credit $ 1,413 $ — $ — $ — $ — Term loan $ 333 $ — $ 625 $ 125 $ — Related party convertible notes payable $ — $ 1,272 $ 1,201 $ 1,231 $ 2,836 Convertible notes payable $ — $ 170 $ 144 $ 147 $ 150 Operating lease $ 1,134 $ 741 $ 258 $ 3,737 $ 3,292 Total stockholders’ equity $ 13,785 $ 11,173 $ 20,046 $ 20,322 $ 19,420 20 Table of Contents
Biggest changeSelected Financial Data The following selected financial data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the financial statements and the notes thereto in Item 8, “Financial Statements and Supplementary Data.” Years Ended December 31, (Amounts in thousands, except per share) 2020 2021 2022 2023 2024 Income Statement Data: Revenues $ 15,700 $ 23,199 $ 21,238 $ 17,034 $ 18,763 Gross profit $ 8,335 $ 12,436 $ 10,366 $ 8,463 $ 9,311 Operating expenses $ 12,686 $ 9,739 $ 10,812 $ 11,584 $ 11,914 Net income (loss) before income taxes $ (3,330 ) $ 2,564 $ (621 ) $ (3,363 ) $ (2,793 ) Income tax benefit (expense) $ 51 $ 1,903 $ 708 $ 1,444 $ 551 Net income (loss) $ (3,279 ) $ 4,466 $ 87 $ (1,919 ) $ (2,242 ) Net income (loss) per share: Basic $ (0.51 ) $ 0.58 $ 0.01 $ (0.27 ) $ (0.30 ) Diluted $ (0.51 ) $ 0.48 $ 0.01 $ (0.27 ) $ (0.30 ) Weighted average shares outstanding: Basic 6,036 6,991 7,185 7,230 7,558 Diluted 6,036 8,923 7,533 7,230 7,558 At December 31, 2020 2021 2022 2023 2024 Balance Sheet Data: Cash and cash equivalents $ 2,122 $ 6,096 $ 3,624 $ 2,827 $ 2,492 Total assets $ 15,609 $ 25,575 $ 28,598 $ 28,742 $ 27,346 Bank line of credit $ — $ — $ — $ — $ — Term loan $ — $ 625 $ 125 $ — $ — Related party convertible notes payable $ 1,272 $ 1,201 $ 1,231 $ 2,836 $ 3,818 Convertible notes payable $ 170 $ 144 $ 147 $ 150 $ 150 Operating lease $ 741 $ 258 $ 3,737 $ 3,292 $ 2,817 Total stockholders’ equity $ 11,173 $ 20,046 $ 20,322 $ 19,420 $ 18,161 20 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

19 edited+4 added−6 removed29 unchanged
Biggest changeQuarter Ended (unaudited) (Amounts in thousands, except per share amounts) Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Dec 31, 2022 Mar 31, 2023 Jun 30, 2023 Sep 30, 2023 Dec 31, 2023 Summary Quarterly Data: Revenue $ 6,293 $ 6,046 $ 3,728 $ 5,171 $ 4,312 $ 5,117 $ 3,206 $ 4,399 Cost of revenue 3,165 3,010 2,073 2,623 2,240 2,466 1,788 2,078 Gross profit 3,128 3,036 1,655 2,548 2,072 2,651 1,418 2,321 Operating expenses: Research and development 1,054 1,121 1,096 1,091 1,247 1,190 1,207 1,188 Sales and marketing 900 964 865 909 1,006 1,004 1,002 1,003 General and administrative 710 761 641 700 774 749 608 605 Total operating expenses 2,664 2,846 2,602 2,700 3,027 2,943 2,817 2,796 Interest expense, net (46 ) (45 ) (43 ) (41 ) (38 ) (55 ) (76 ) (73 ) Income tax (expense) benefit (76 ) (40 ) 116 708 — (166 ) 150 1,460 Net income (loss) $ 342 $ 104 $ (874 ) $ 515 $ (993 ) $ (513 ) $ (1,325 ) $ 912 Basic net income (loss) per share $ 0.04 $ 0.01 $ (0.11 ) $ 0.06 $ (0.12 ) $ (0.06 ) $ (0.16 ) $ 0.11 Fully diluted net income (loss) per share $ 0.04 $ 0.01 $ (0.11 ) $ 0.06 $ (0.12 ) $ (0.06 ) $ (0.16 ) $ 0.08 25 Table of Contents Our quarterly revenue and operating results depend on the volume and timing of orders received, which are difficult to forecast.
Biggest changeQuarter Ended (unaudited) (Amounts in thousands, except per share amounts) Mar 31, 2023 Jun 30, 2023 Sep 30, 2023 Dec 31, 2023 Mar 31, 2024 Jun 30, 2024 Sep 30, 2024 Dec 31, 2024 Summary Quarterly Data: Revenue $ 4,312 $ 5,117 $ 3,206 $ 4,399 $ 4,978 $ 5,081 $ 3,872 $ 4,831 Cost of revenue 2,240 2,466 1,788 2,078 2,473 2,497 1,975 2,366 Gross profit 2,072 2,651 1,418 2,321 2,505 2,584 1,897 2,465 Operating expenses: Research and development 1,247 1,190 1,207 1,188 1,208 1,232 1,162 1,119 Sales and marketing 1,006 1,004 1,002 1,003 1,031 1,154 1,122 1,106 General and administrative 774 749 608 605 751 733 644 651 Total operating expenses 3,027 2,943 2,817 2,796 2,990 3,119 2,928 2,876 Interest expense, net (38 ) (55 ) (76 ) (73 ) (72 ) (73 ) (84 ) (102 ) Income tax (expense) benefit — (166 ) 150 1,460 — — — 551 Net income (loss) $ (993 ) $ (513 ) $ (1,325 ) $ 912 $ (557 ) $ (608 ) $ (1,115 ) $ 38 Basic net income (loss) per share $ (0.12 ) $ (0.06 ) $ (0.16 ) $ 0.11 $ (0.07 ) $ (0.08 ) $ (0.15 ) $ 0.00 Fully diluted net income (loss) per share $ (0.12 ) $ (0.06 ) $ (0.16 ) $ 0.08 $ (0.07 ) $ (0.08 ) $ (0.15 ) $ 0.00 Our quarterly revenue and operating results depend on the volume and timing of orders received, which are difficult to forecast.
The Company generally recognizes revenues on sales to customers other than distributors upon shipment provided that contract with the customer is identified, performance obligations in the contract are satisfied, and the price is determined. Most of our customers other than distributors do not have a right of return except under warranty.
The Company generally recognizes revenues on sales to customers other than distributors upon shipment provided that contract with the customer is identified, performance obligations in the contract are satisfied, and the price is determined. Most of our customers other than distributors do not have a right of return except under a warranty.
We are monitoring legislation for any further changes to Section 174 and the potential impact on our financial statements in 2024. Our net operating loss carryforwards will expire at various dates from 2025 through 2033.
We are monitoring legislation for any further changes to Section 174 and the potential impact on our financial statements in 2025. Our net operating loss carryforwards will expire at various dates from 2025 through 2033.
On December 31, 2023, the Company had no outstanding drawings against the revolving credit facility. The primary factors that influence our liquidity include the amount and timing of our revenues, cash collections from our customers, cash payments to our suppliers, capital expenditures, acquisitions, and share repurchases.
On December 31, 2024, the Company had no outstanding drawings against the revolving credit facility. The primary factors that influence our liquidity include the amount and timing of our revenues, cash collections from our customers, cash payments to our suppliers, capital expenditures, acquisitions, and share repurchases.
Critical Accounting Policies Our significant accounting policies are described in Note 1, Organization and Summary of Significant Accounting Policies, of the Notes to Financial Statements included in our Annual Reports on Form 10-K for the years ended December 31, 2023 and 2022.
Critical Accounting Policies Our significant accounting policies are described in Note 1, Organization and Summary of Significant Accounting Policies, of the Notes to Financial Statements included in our Annual Reports on Form 10-K for the years ended December 31, 2024 and 2023.
The increases in expenses in 2023 were primarily due to the impact of the increase in the number of employees and an annual salary increase. We anticipate that our compensation expense to increase as we selectively add new talent and adjust compensation to market conditions.
The increases in expenses in 2024 were primarily due to the impact of the increase in the number of employees and an annual salary increase. We anticipate that our compensation expense to increase as we selectively add new talent and adjust compensation to market conditions.
We believe our critical accounting policies that are subject to these estimates are: Accounts Receivable Reserves, Revenue Recognition, Inventory Valuation, Stock-Based Compensation, Intangible Assets, Impairment of Long-Lived Assets and Income Taxes. 21 Table of Contents Accounts Receivable Allowances Trade accounts receivables are recorded at the net invoice value and are not interest bearing.
We believe our critical accounting policies that are subject to these estimates are: Accounts Receivable Reserves, Revenue Recognition and Reserve for Future Returns, Inventory Valuation and Reserve, Stock-Based Compensation, Intangible Assets, Impairment of Long-Lived Assets, and Income Taxes. 21 Table of Contents Accounts Receivable Allowances Trade accounts receivables are recorded at the net invoice value and are not interest bearing.
Therefore, we expect to continue to make significant Research and Development investments in the future. The investment percentage is impacted by revenue levels and investing cycles. Sales and Marketing Expenses Sales and marketing expenses in 2023 were approximately $4.0 million, an increase of approximately 10% compared to $3.6 million in 2022.
Therefore, we expect to continue to make significant Research and Development investments in the future. The investment percentage is impacted by revenue levels and investing cycles. Sales and Marketing Expenses Sales and marketing expenses in 2024 were approximately $4.4 million, an increase of approximately 10% compared to $4.0 million in 2023.
Interest expense in both 2023 and 2022 was primarily related to the subordinated convertible notes (see Note 4, Secured Subordinated Convertible Notes Payable, of the Notes to Financial Statements included in this Annual Report on Form 10-K for further information). Interest income reflects the interest earned on cash balances.
Interest expense in both 2024 and 2023 was primarily related to the subordinated convertible notes (see Note 4, Secured Subordinated Convertible Notes Payable, of the Notes to Financial Statements included in this Annual Report on Form 10-K for further information). Interest income reflects the interest earned on cash balances. Interest income was nominal in each of the comparable periods.
In 2023 and 2022, we invested approximately $2.2 million and $1.2 million, respectively, in computer software development, website development, and manufacturing tooling. We expect to continue our investing activities, including planned capital expenditures. Net cash provided by financing activities in 2023 was approximately $1.3 million, compared to approximately $1.2 million in net cash used for financing activities in 2022.
In 2024 and 2023, we invested approximately $0.7 million and $2.2 million, respectively, in computer software development, website development, and manufacturing tooling. We expect to continue our investing activities, including planned capital expenditures. Net cash provided by financing activities in 2024 was approximately $0.9 million, compared to approximately $1.3 million in net cash provided by financing activities in 2023.
Our primary requirements for liquidity and capital arise from employee-related expenditures, inventory purchases, capital expenditures, leasing of facilities, general operating expenses, and interest and principal repayments related to our outstanding indebtedness. Net cash provided by operating activities was $48,562 for 2023, compared to net cash used of $111,415 for 2022.
Our primary requirements for liquidity and capital arise from employee-related expenditures, inventory purchases, capital expenditures, leasing of facilities, general operating expenses, and interest and principal repayments related to our outstanding indebtedness. Net cash used in operating activities was $521,485 for 2024, compared with net cash provided by operating activities of $48,562 for 2023.
Interest Expense, net of Interest Income Interest expense and other, net of interest income and other, was approximately $242,000 in 2023 compared to approximately $175,000 in 2022.
Interest Expense, net of Interest Income Interest expense and other, net of interest income and other, was approximately $331,000 in 2024 compared to approximately $242,000 in 2023.
We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. 23 Table of Contents Results of Operations for Years Ended December 31, 2023 and 2022 Revenues The revenue for 2023 was $17.0 million, a decrease of 20% compared to revenue of $21.2 million for 2022.
We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
Contractual Obligations Our contractual obligations as of December 31, 2023 are outlined in the table shown below: Payments Due by Period Contractual Obligations Total 1 year 2 to 3 years 4 to 5 years More than 5 years Unconditional purchase obligations with contract manufacturers $ 5,821,000 $ 5,734,000 $ 87,000 $ — $ — Operating leases 3,794,000 637,000 1,325,000 1,406,000 426,000 Total contractual obligations $ 9,615,000 $ 6,371,000 $ 1,412,000 $ 1,406,000 $ 426,000 Off-Balance Sheet Arrangements As of December 31, 2023, we had no off-balance sheet arrangements as defined in Item 303 of Regulation S-K.
Contractual Obligations Our contractual obligations as of December 31, 2024 are outlined in the table shown below: Payments Due by Period Contractual Obligations Total 1 year 2 to 3 years 4 to 5 years More than 5 years Unconditional purchase obligations with contract manufacturers $ 6,159,000 $ 5,844,000 $ 315,000 $ — $ — Operating leases 3,165,000 657,000 1,369,000 1,139,000 — Total contractual obligations $ 9,324,000 $ 6,501,000 $ 1,684,000 $ 1,139,000 $ — 25 Table of Contents Off-Balance Sheet Arrangements As of December 31, 2024, we had no off-balance sheet arrangements as defined in Item 303 of Regulation S-K.
In 2023, financing activities primarily consisted of proceeds from related party notes convertible of approximately $1.6 million and proceeds from the exercise of stock options totaling approximately $213,000. These proceeds were partially offset by approximately $208,000 spent on repurchasing treasury stock and $125,000 in repayments of notes payable.
In 2023, financing activities primarily consisted of $1.6 million in proceeds from convertible notes and approximately $213,000 from the exercise of stock options. These proceeds were partially offset by approximately $208,000 spent on repurchasing treasury stock and $125,000 in repayments of notes payable. We can borrow under the existing $2.5 million revolving credit facility, which matures on April 30, 2025.
The Company’s deferred tax asset, primarily representing future income tax savings from the application of net operating loss carryforwards, was valued at $10.1 million and $8.7 million as of December 31, 2023 and 2022, respectively.
The Company’s deferred tax asset, primarily representing future income tax savings from the application of net operating loss carryforwards, was valued at $10.7 million and $10.1 million as of December 31, 2024 and 2023, respectively. 24 Table of Contents Quarterly Results of Operations The following table sets forth a summary of quarterly statements of operations data for each of the quarters in 2023 and 2024.
Interest income was nominal in each of the comparable periods. 24 Table of Contents Income Taxes We recorded an income tax benefit of $1.44 million (an effective tax rate of 42.9%) in 2023, compared to $708,000 (an effective tax rate of negative 114.1%) in 2022.
Income Taxes We recorded an income tax benefit of $551,000 (an effective tax rate of 19.7%) in 2024, compared to $1.44 million (an effective tax rate of 42.9%) in 2023.
Research and Development Expenses For the years ended December 31, 2023 and 2022, our research and development expenses were approximately $4.8 million and $4.4 million, respectively. This represents an increase of approximately $470,000, or 11%. The rise in research and development expenses is primarily due to higher payroll-related expenses resulting from annual salary increases and an increase in headcount.
This rise is attributed to the allocation of manufacturing overhead costs across higher production volumes. Research and Development Expenses For the years ended December 31, 2024 and 2023, our research and development expenses were approximately $4.7 million and $4.8 million, respectively. This represents an decrease of approximately $111,000, or 2%.
Additionally, a substantial amount has been accounted for in the amortization of software development costs related to our released products. Research and development expenses as a percentage of revenue were 28% in 2023 and 21% in 2022.
The decrease in research and development expenses is primarily due to a reduction in consulting and professional services related to the development of new products in 2023. 23 Table of Contents Research and development expenses as a percentage of revenue were 25% in 2024 and 28% in 2023.
Removed
In 2022, net cash used in financing activities was primarily due to approximately $830,000 spent on repurchasing treasury stock and $500,000 in repayment of CalCap loan. These outflows were partially offset by proceeds from the exercise of stock options totaling approximately $152,000. We can borrow under the existing $2.5 million revolving credit facility that matures on January 31, 2025.
Added
In 2024, financing activities primarily consisted of $974,000 in proceeds from convertible notes and approximately $24,000 from the exercise of stock options. These proceeds were offset by the acquisition of common stock for tax withholding obligations, totaling approximately $95,000.
Removed
However, we believe that the $17.0 million in reported revenue does not accurately reflect the underlying demand for our products and services. In 2023, our sales through distribution partners to resellers and end customers totaled $19.1 million, making a 2.8% decrease from the $19.7 million in sales through distributor partners to resellers and end customers in 2022.
Added
Results of Operations for Years Ended December 31, 2024 and 2023 Revenues The revenue for 2024 was $18.8 million, an increase of 10% compared to revenue of $17.0 million for 2023 driven by the growth of our business serving retail POS app providers. Gross Margins The annual gross margins on revenue increased to 50.4% in 2024 from 49.7% in 2023.
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While the demand softened in 2023, the timing of shipments to distributors in late 2022 had a positive impact on 2022 and a negative impact on 2023, contributing to the more dramatic decline. Additionally, reductions in distributor inventory and adjustments to distribution reserves also impacted the reported revenue for 2023.
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General and Administrative Expenses General and administrative expenses in 2024 were $2.78 million, marking an increase of approximately $44,000 or 2% compared to $2.74 million in 2023.
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Gross Margins The annual gross margins on revenue increased to 49.7% in 2023 from 48.8% in 2022. This rise is attributed to decreased component costs, which contrasts with 2022 when we faced elevated costs due to shortages and extended lead times.
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The increase is attributed primarily to the net adjustment from foreign currency fluctuations, which affected cash balances, collections, and payables, reflecting the dynamic nature of exchange rates and their influence on our financial position.
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General and Administrative Expenses General and administrative expenses in 2023 was $2.74 million, marking a decrease of approximately $77,000 or 3% compared to $2.81 million in 2022. The decrease can be attributed primarily to the absence of expenses associated with a company event held in 2022 and the lack of management bonus due to unmet financial goals.
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Quarterly Results of Operations The following table sets forth a summary of quarterly statements of operations data for each of the quarters in 2022 and 2023.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk Our exposure to market risk for changes in interest rates relates primarily to our bank term loan and credit line facilities. The term loan interest rate is the lender’s prime rate (minimum of 4.25%) plus 0.75%.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk Our exposure to market risk for changes in interest rates relates primarily to our credit line facilities.
Based on a sensitivity analysis of our net foreign currency denominated assets and expenses at the beginning, during and at the end of the quarter ended December 31, 2023, an adverse change of 10% in exchange rates would have resulted in a decrease in our net income for the fourth quarter 2023 of approximately $36,000 if left unprotected.
Based on a sensitivity analysis of our net foreign currency denominated assets and expenses at the beginning, during and at the end of the quarter ended December 31, 2024, an adverse change of 10% in exchange rates would have resulted in a decrease in our net income for the fourth quarter 2024 of approximately $36,000 if left unprotected.
For the fourth quarter of 2023, the total net adjustment for the effects of changes in foreign currency on cash balances, collections, payables, and derivatives used to hedge foreign currency risks, was a net loss of $12,500. We will continue to monitor, assess, and mitigate through hedging activities, our risks related to foreign currency fluctuations.
For the fourth quarter of 2024, the total net adjustment for the effects of changes in foreign currency on cash balances, collections, and payables, was a net loss of $23,000. We will continue to monitor, assess, and mitigate through hedging activities, our risks related to foreign currency fluctuations.

Other SCKT 10-K year-over-year comparisons