SCKT 10-K & 10-Q changes, risk factors and insider trading
Socket Mobile, Inc. · Nasdaq · Electronic Computers · CIK 944075 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Removed heading “Deferred tax assets comprise a significant portion of our assets and are dependent upon future tax profitability to realize the benefits.”
Largest changes
“Deferred tax assets comprise a significant portion of our assets and are dependent upon future tax profitability to realize the benefits.”see in full comparison
“We have recorded deferred tax assets on our balance sheet because we believe that it is more likely than not that we will generate sufficient tax profitability in the future to realize the tax savings that our deferred tax assets represent. If we do not achieve and maintain sufficient profitability, the tax savings represented by our deferred tax assets may never be realized and we would need to recognize a loss for those deferred tax assets.”see in full comparison
During the period from January 1,see in full comparison20242025 throughtheMarchdate25,of the report,2026, our common stock price fluctuated between a high of $1.72 and a low of$0.91.$0.82. 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 trading price of our commoncommonstock could be subject to wide fluctuations in response to many factors, some of which are beyond our control, including general economiceconomicconditions and the outlook of securities analysts and investors on our industry. In addition, the stock markets in general, and the markets for high technology stocks in particular, have experienced high volatility that has often been unrelated to the operating performanceperformanceof particular companies. These broad market fluctuations may adversely affect the trading price of our common stock.
Because we distribute and fulfill resellers’ orders for our products primarily through distributors, we are subject to risks associated with channel distribution, such as risks related to their inventory levels and support for our products. Our distribution channels may build up inventories in anticipation of growth in their sales. If such growth in their sales does not occur as anticipated, the inventory build-up could contribute to higher levels of product returns. The lack of sales by any one significant participant in our distribution channels could result in excess inventories and adversely affect our operating results and working capital liquidity. During the twelve months ended December 31,see in full comparison20242025 and2023,2024, Ingram Micro® and BlueStar Inc. and ScanSource, Inc together represented approximately48%49% and44%,55%, 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.
Full comparison: every changed paragraph (5)
Deferred tax assets comprise a significant portion of our assets and
are dependent upon future tax profitability to realize the benefits.
We have recorded deferred tax assets on our balance
sheet because we believe that it is more likely than not that we will generate sufficient tax profitability in the future to realize the
tax savings that our deferred tax assets represent. If we do not achieve and maintain sufficient profitability, the tax savings represented
by our deferred tax assets may never be realized and we would need to recognize a loss for those deferred tax assets.
Because we distribute and fulfill resellers’
orders for our products primarily through distributors, we are subject to risks associated with channel distribution, such as risks related
to their inventory levels and support for our products. Our distribution channels may build up inventories in anticipation of growth in
their sales. If such growth in their sales does not occur as anticipated, the inventory build-up could contribute to higher levels of
product returns. The lack of sales by any one significant participant in our distribution channels could result in excess inventories
and adversely affect our operating results and working capital liquidity. During the twelve months ended December 31, 20242025 and 2023,2024, Ingram
Micro® and BlueStar Inc. and ScanSource, Inc together represented approximately 48%49% and 44%,55%, 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.
A number of our officers and senior managers have been employed for more than twenty years by us, including our President, Chief Financial Officer, Chief Information Officer, Vice President of Operations and Vice President of Engineering/Chief Technical Officer. Our future success will depend upon the continued service of key officers and senior managers. Competition for officers and senior managers is intense, and there can be no assurance that we will be able to retain our existing senior personnel. The loss of one or more of our officers or key senior managers could adversely affect our ability to compete.
During the period from January 1, 20242025 through theMarch
date25, of the report,2026, our common stock price fluctuated between a high of $1.72 and a low of $0.91.$0.82. 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 trading price of our common
common stock could be subject to wide fluctuations in response to many factors, some of which are beyond our control, including general economic
economic conditions and the outlook of securities analysts and investors on our industry. In addition, the stock markets in general,
and the markets
for high technology stocks in particular, have experienced high volatility that has often been unrelated to the operating performance
performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock.
Management's Discussion & Analysis (MD&A)
Largest changes
see in full comparisonWeTherecordCompany accounts for uncertain tax positions in accordance with ASC740740.onWe recognize thebasistaxofbenefit from atwo-steptaxprocesspositioninonlywhich (1) we determine whetherif it is more likely than not that thetax positionsposition will be sustainedonupon examination by thebasisrelevantoftaxing authorities, based on the technical merits of thepositionposition.andThe(2)amountforofthosebenefittaxrecognizedpositionsisthatmeasuredmeet the more-likely-than-not recognition threshold, we recognizeas the largest amountof tax benefitthatishasmorea greater than5050%percentlikelihoodlikelyofto bebeing realized upon ultimate settlement. The Company records interest and penalties related to uncertain tax positions as a component ofsettlementincomewithtax expense. As of December 31, 2025, therelatedCompany had unrecognized taxauthority.benefits of approximately $991,000.
“We account for income taxes under the asset and liability method under ASC 740 which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. …”see in full comparison
“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. The Tax Cuts and Jobs Act of 2017 (“TCJA”), which was signed into U.S. law in December 2017, eliminated the option to immediately deduct research and development expenditures in the year incurred under Section 174 effective January 1, 2022. The amended provision under Section 174 requires us to capitalize and amortize these expenditures over five years (for U.S.-based research). …”see in full comparison
“We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. …”see in full comparison
Net cash provided by financing activities insee in full comparison20242025 wasapproximately $0.9$1.3 million, compared to approximately$1.3$0.9 million in net cash provided by financing activities in2023.2024. In 2025, financing activities primarily consisted of $1,500,000 in proceeds from convertible notes, partially offset by approximately $173,000 used to repurchase common stock to satisfy tax withholding obligations. 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.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.
“Effective December 31, 2025, the Company recorded a full valuation allowance of $10,663,419 against our deferred tax assets. In assessing the realizability of deferred tax assets, we considered all available positive and negative evidence, with significant weight given to objectively verifiable negative evidence, including cumulative losses in recent years. Based on this evaluation and in accordance with ASC 740, we concluded that it is more likely than not that our deferred tax assets will not be realized as of December 31, 2025.”see in full comparison
Full comparison: every changed paragraph (19)
Net cash used in operating activities was $521,485$1,249,819
for 2024,2025, compared with net cash providedused byin operating activities of $48,562$521,485 for 2023.2024.
Net cash provided by financing activities in 20242025
was approximately $0.9$1.3 million, compared to approximately $1.3$0.9 million in net cash provided by financing activities in 2023.2024. In 2025, financing activities
primarily consisted of $1,500,000 in proceeds from convertible notes, partially offset by approximately $173,000 used to repurchase common
stock to satisfy tax withholding obligations. 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.
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$1.0 million revolving
credit facility, which matures on AprilJuly 30,31, 2025.2026. On December 31, 2024,2025, the Company had no outstanding drawings against the revolving
credit facility.
The primary factors that influenceaffecting our liquidity include
the amount and timing of our revenues, cashthe collectionscollection of receivables from our customers, cash payments to oursuppliers, suppliers,and capital expenditures, acquisitions,
and share repurchases.expenditures. We believe that
our existing cash balances of cash, and capital resources, inclusive ofincluding available borrowing capacity
on theunder our revolving credit facility and fundspotential
convertible generatednote from operations,financing, are sufficient to meet our anticipated capital requirements, fund our
operationsoperations, and support growth initiatives.
However, our growth. Our cash requirements,requirements however, are subject tomay change as business conditions change.evolve.
Effective December 31, 2025, the Company recorded a full valuation allowance of $10,663,419 against our deferred tax assets. In assessing the realizability of deferred tax assets, we considered all available positive and negative evidence, with significant weight given to objectively verifiable negative evidence, including cumulative losses in recent years. Based on this evaluation and in accordance with ASC 740, we concluded that it is more likely than not that our deferred tax assets will not be realized as of December 31, 2025.
We account for income taxes
under the asset and liability method under ASC 740 which requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets
and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted
tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in income in the period that includes the enactment date.
We recognize deferred tax
assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider
all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable
income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets
in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which
would reduce the provision for income taxes.
WeThe recordCompany accounts
for uncertain tax positions
in accordance with ASC 740740. onWe recognize the basistax ofbenefit from a two-steptax processposition inonly which (1) we determine whetherif it is more likely
than not that the tax
positionsposition will be sustained onupon examination by the basisrelevant oftaxing authorities, based on the technical merits of
the positionposition. andThe (2)amount forof thosebenefit taxrecognized positionsis thatmeasured meet the more-likely-than-not
recognition threshold, we recognizeas the largest amount of tax benefit that ishas morea greater than 5050% percentlikelihood likelyof to be being
realized upon ultimate settlement. The Company records interest and penalties related to uncertain tax positions as a component of
settlementincome withtax expense. As of December 31, 2025, the relatedCompany had unrecognized tax authority.benefits of approximately $991,000.
Revenue for 2025 was $15.1 million, representing a decrease of 20% compared to revenue of $18.8 million for 2024. The decline was primarily attributable to a challenging macroeconomic environment, including reduced customer spending and longer sales cycles, as well as continued headwinds within our distribution channels, which resulted in lower order volumes.
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.
The annual gross margins on revenue decreased to 49.7% in 2025 from 50.4% in 2024. The decline primarily reflects lower sales volumes, which reduced absorption of fixed costs, partially offset by disciplined cost management and operational efficiency initiatives. Despite these headwinds, our focus on optimizing production processes and controlling direct costs helped maintain resilient gross margins.
The annual gross margins on revenue increased to 50.4%
in 2024 from 49.7% in 2023. This rise is attributed to the allocation of manufacturing overhead costs across higher production volumes.
For the years ended December 31, 20242025 and 2023,2024, our
research and development expenses were approximately $4.7$4.4 million and $4.8$4.7 million, respectively.respectively, Thisrepresenting represents ana decrease of approximately
$111,000,$370,000, or 2%.8%. The decrease inwas researchprimarily driven by cost management initiatives, including reduced employee-related expenses, as we
focused R&D efforts on high-priority projects and developmentoptimized expensesresource isallocation. primarilyThese dueactions allowed us to amaintain reductionprogress inon
key consulting and professional services
related to theproduct development ofinitiatives newwhile productsimproving inoperational 2023.efficiency.
Research and development expenses as a percentage
of revenue were 29% in 2025 and 25% in 2024 and 28% in 2023.2024. We believe that a continued commitmentinvestment toin Research and Development activitiesR&D is essential
to maintainmaintaining or achieve achieving
a leadership position for our existing products, to providedelivering innovative new product offerings, and to provideproviding engineering
support for key
customers. In addition, we consider our ability to accelerate time to market for new products to beis critical to ourdriving revenue
growth. Therefore, Accordingly,
we expect to continue to makemaking significant Research and DevelopmentR&D investments in the future. The level of investment as a percentage of revenue may fluctuate
isdepending impacted byon revenue levels and investinginvestment cycles.
Sales and marketing expenses in 20242025 were approximately
$4.4$4.0 million, ana increasedecrease of approximately 10% compared to $4.0$4.4 million in 2023.2024. The increasesdecrease was primarily driven by reductions in expenses in 2024 were primarily dueemployee-related
to the impact of the increase in the number of employees and an annual salary increase. We anticipate that our compensation expense to
increasecosts, as we selectivelyoptimized addthe new talentsales and adjustmarketing compensationworkforce and aligned resources with strategic priorities. These actions improved operational
efficiency while continuing to marketsupport conditions.revenue growth initiatives.
General and administrative expenses in 20242025 were $2.78$2.4
million, markingrepresenting ana increasedecrease of approximately $44,000$413,000 or 2%15% compared to $2.74$2.8 million in 2023.2024. The increasedecrease is attributedwas primarily todriven
theby netreductions adjustmentin fromemployee-related foreign currency fluctuations, which affected cash balances, collections,costs and payables,professional reflectingservices, as we optimized administrative resources and implemented cost management
initiatives. These actions improved operational efficiency while maintaining the dynamic
naturesupport ofnecessary exchangefor ratescritical business functions and
corporate their influence on our financial position.operations.
We recorded an income tax expense of $10.7 million in 2025, compared to an income tax benefit of $551,000 (an effective tax rate of 19.7%) in 2024. The change was primarily attributable to the establishment of a full valuation allowance against our deferred tax assets in 2025.
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. The Tax Cuts and Jobs Act of
2017 (“TCJA”), which was signed into U.S. law in December 2017, eliminated the option to immediately deduct research and development
expenditures in the year incurred under Section 174 effective January 1, 2022. The amended provision under Section 174 requires us to
capitalize and amortize these expenditures over five years (for U.S.-based research). 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. 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.
What changed in the latest 10-Q
Risk Factors
Largest changes
During the period from January 1, 2025 throughsee in full comparisontheAugustdate10,of the report,2026, our common stock price fluctuated between a high of$1.72$2.79 and a low of$0.82.$0.38. 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 trading price of our commoncommonstock could be subject to wide fluctuations in response to many factors, some of which are beyond our control, including general economiceconomicconditions and the outlook of securities analysts and investors on our industry. In addition, the stock markets in general, and the markets for high technology stocks in particular, have experienced high volatility that has often been unrelated to the operating performanceperformanceof particular companies. These broad market fluctuations may adversely affect the trading price of our common stock.
As ofsee in full comparisonMayAugust8,10, 2026, we had1,296,6341,285,548 shares of common stock subject to outstanding options under our stock option plans,733,194699,227 shares of restricted stock outstanding, and584,347593,876 shares of common stock available for future issuance under the plans. We have registered the shares of common stock subject to outstanding options and restricted stock and reserved them for issuance under our stock option plans. Accordingly, the shares of common stock underlying vestedvestedoptions and unvested restricted stock will be eligible for resale in the public market as soon as the options are exercised or the restricted stock vests, as applicable.
As ofsee in full comparisonMayAugust8,10, 2026, we had8,240,9588,291,681 shares of commoncommonstock outstanding. Substantially all of these shares are freely tradable in the public market, either without restriction or subject,subject,in some cases, only to Form S-3 prospectus delivery requirements and, in other cases, only to the manner of sale, volume, and notice requirements of Rule 144 under the Securities Act.
A number of our officers and senior managers havesee in full comparisonhavebeen employed for more than twenty years by us, including ourPresident,Chief Financial Officer, Chief Information Officer, Vice PresidentPresidentofOperations andOperations, Vice President of Engineering/Chief TechnicalOfficer.Officer, and Controller. Our future success will depend upon the continued service of key officers and senior managers. Competition for officers and senior managers is intense, and there can be no assurance that we will be able to retain our existing senior personnel. The loss of one or more of our officers or key senior managers could adversely affect our ability to compete.
Full comparison: every changed paragraph (5)
Because we distribute and fulfill resellers’
orders for our products primarily through distributors, we are subject to risks associated with channel distribution, such as risks related
to their inventory levels and support for our products. Our distribution channels may build up inventories in anticipation of growth in
their sales. If such growth in their sales does not occur as anticipated, the inventory build-up could contribute to higher levels of
product returns. The lack of sales by any one significant participant in our distribution channels could result in excess inventories
and adversely affect our operating results and working capital liquidity. During the threesix months ended MarchJune 31,30, 2026 and 2025, Ingram
Micro®
and BlueStar Inc. and ScanSource, Inc together represented approximately 53%43% and 42%, 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.
A number of our officers and senior managers
have have
been employed for more than twenty years by us, including our President, Chief Financial Officer, Chief Information Officer, Vice
President President
of Operations andOperations, Vice President of Engineering/Chief Technical Officer.Officer, and Controller. Our future success will depend upon the
continued service of
key officers and senior managers. Competition for officers and senior managers is intense, and there can be no
assurance that we will
be able to retain our existing senior personnel. The loss of one or more of our officers or key senior
managers could adversely affect
our ability to compete.
As of MayAugust 8,10, 2026, we had 8,240,9588,291,681 shares of common
common stock outstanding. Substantially all of these shares are freely tradable in the public market, either without restriction or subject,
subject, in some cases, only to Form S-3 prospectus delivery requirements and, in other cases, only to the manner of sale, volume,
and notice requirements
of Rule 144 under the Securities Act.
As of MayAugust 8,10, 2026, we had 1,296,6341,285,548 shares of common
stock subject to outstanding options under our stock option plans, 733,194699,227 shares of restricted stock outstanding, and 584,347593,876 shares
of common stock available for future issuance under the plans. We have registered the shares of common stock subject to outstanding options
and restricted stock and reserved them for issuance under our stock option plans. Accordingly, the shares of common stock underlying vested
vested options and unvested restricted stock will be eligible for resale in the public market as soon as the options are exercised or
the restricted
stock vests, as applicable.
During the period from January 1, 2025 through theAugust
date10, of the report,2026, our common stock price fluctuated between a high of $1.72$2.79 and a low of $0.82.$0.38. 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 trading price of our common
common stock could be subject to wide fluctuations in response to many factors, some of which are beyond our control, including general economic
economic conditions and the outlook of securities analysts and investors on our industry. In addition, the stock markets in general, and
the markets
for high technology stocks in particular, have experienced high volatility that has often been unrelated to the operating performance
performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock.
Management's Discussion & Analysis (MD&A)
Largest changes
“As reflected in our Condensed Statements of Cash Flows, we used net cash of $768,856 in operating activities in the first quarter of 2026, compared to $732,970 in the same period last year. To calculate our net cash used in operating activities, we adjusted our net loss of $899,576 and $994,140 in the first quarter of 2026 and 2025, 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 $598,645 and $540,117 in the first quarters of 2026 and 2025, respectively. …”see in full comparison
“As reflected in our Statements of Cash Flows, net cash used in operating activities was approximately $633,000 in the first half of 2026, compared to net cash used in operating activities amounted to approximately $1,197,000 in the first half of 2025. We calculate net cash used in operating activities by adjusting our net loss (approximately $2,246,000 and $1,786,000 in the first half of 2026 and 2025, respectively) with items that did not require the use of cash. …”see in full comparison
“General and administrative expenses were approximately $741,000 in the second quarter of 2026, compared with approximately $569,000 in the same period last year, an increase of 30%. For the six months ended June 30, 2026, general and administrative expenses were approximately $1.41 million, a 15% increase from $1.22 million for the same period in 2025. …”see in full comparison
“Total revenues for the first quarter of 2026 were approximately $3.7 million, reflecting a 7% decline compared to $4.0 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.”see in full comparison
“Sales and marketing expenses were approximately $809,000 in the second quarter of 2026, a 21% decrease from approximately $1.03 million in the same period last year. For the six months ended June 30, 2026, sales and marketing expenses were approximately $1.71 million, a 20% decrease from $2.13 million for the same period in 2025. The decrease primarily reflected the Company's cost reduction initiatives, including selective headcount reductions and other cost-saving measures, as well as lower travel and marketing-related expenses.”see in full comparison
“Research and development expenses were approximately $1.05 million in the second quarter of 2026, a 4% decrease from approximately $1.10 million in the same period last year. For the six months ended June 30, 2026, research and development expenses were approximately $2.14 million, a 4% decrease from $2.23 million for the same period in 2025. The decrease was primarily attributable to lower employee-related costs resulting from the Company's ongoing cost management initiatives.”see in full comparison
Full comparison: every changed paragraph (22)
Total revenues for the second quarter of 2026 were approximately $3.03 million, a 25% decrease from $4.04 million in the same period last year. For the six months ended June 30, 2026, total revenues were approximately $6.73 million, compared with $8.01 million for the same period in 2025, a decrease of 16%. The decline primarily reflected continued weakness in the retail scanning market, resulting in lower sales volumes.
Total revenues for the first quarter of 2026 were
approximately $3.7 million, reflecting a 7% decline compared to $4.0 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.
Gross margin was 46.4% in the second quarter of 2026, compared with 49.9% in the same period last year. For the six months ended June 30, 2026, gross margin was 49.1%, compared with 50.2% for the same period in 2025. The decrease was primarily due to the underutilization of manufacturing capacity at the current production levels, which resulted in higher fixed manufacturing costs as a percentage of revenue.
Our gross profit margin on sales reached 51.3% in
Q1 2026, a slight increase from 50.4% 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.
Research and development expenses were approximately $1.05 million in the second quarter of 2026, a 4% decrease from approximately $1.10 million in the same period last year. For the six months ended June 30, 2026, research and development expenses were approximately $2.14 million, a 4% decrease from $2.23 million for the same period in 2025. The decrease was primarily attributable to lower employee-related costs resulting from the Company's ongoing cost management initiatives.
In the first quarter of 2026, research and development
expenses were approximately $1,090,000, reflecting a 4% decrease compared to approximately $1,132,000 in Q1 2025.
Sales and marketing expenses were approximately $809,000 in the second quarter of 2026, a 21% decrease from approximately $1.03 million in the same period last year. For the six months ended June 30, 2026, sales and marketing expenses were approximately $1.71 million, a 20% decrease from $2.13 million for the same period in 2025. The decrease primarily reflected the Company's cost reduction initiatives, including selective headcount reductions and other cost-saving measures, as well as lower travel and marketing-related expenses.
Sales and marketing expenses in the first quarter
of 2026 totaled approximately $902,000, reflecting a 19% decrease compared to approximately $1,106,000 in the same quarter last year.
This decrease was primarily driven by reduced headcount.
General and administrative expenses were approximately $741,000 in the second quarter of 2026, compared with approximately $569,000 in the same period last year, an increase of 30%. For the six months ended June 30, 2026, general and administrative expenses were approximately $1.41 million, a 15% increase from $1.22 million for the same period in 2025. The increase was primarily attributable to the absence of certain personnel cost savings recognized in the second quarter of 2025, as well as an unfavorable foreign currency impact, reflecting a foreign exchange loss in 2026 compared with a foreign exchange gain in the prior-year period. In response to continued business challenges, the Company implemented additional cost-saving measures beginning in the third quarter of 2026.
In the first quarter of 2026, the Company incurred
approximately $665,000 in general and administrative expenses, reflecting a 2% increase from approximately $653,000 in the same quarter
of 2025.
Interest expense and other, net of interest income
and other, was approximately $140,000$151,000 in the firstsecond quarter of 2026 compared to $100,000$115,000 in the firstsecond quarter of 2025. For the six months
ended June 30, 2026, interest expense, net was approximately $291,000, compared with $215,000 for the same period in 2025. Interest expenses
in the first quarter of both 2026 and 2025 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 2026 or 2025.
There were no outstanding balances of credit lines during the three and six months ended June 30, 2026 and 2025.
Interest income reflects interest earned on cash balances.
Interest income was nominal in each of the comparable firstsecond quarters, reflecting low average rates of return.
No income tax expense was
recorded for the firstsecond quarter of 2026 ornor 2025.
As reflected in our Statements of Cash Flows, net cash used in operating activities was approximately $633,000 in the first half of 2026, compared to net cash used in operating activities amounted to approximately $1,197,000 in the first half of 2025. We calculate net cash used in operating activities by adjusting our net loss (approximately $2,246,000 and $1,786,000 in the first half of 2026 and 2025, 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. These amounts totaled approximately $1,187,000 and $1,246,000 in the first half of 2026 and 2025, 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. In the first half of 2026, changes in operating assets and liabilities resulted in net cash provided by operating activities of approximately $426,000. This was primarily driven by collections of accounts receivable and lower inventory levels. These cash inflows were partially offset by lease payments and increases in accrued employee costs and accounts payable.
In the first half of 2025, changes in operating assets and liabilities resulted in net cash used in operating activities of approximately $657,000. This was primarily due to operating lease payment, higher accounts receivable driven by increased shipment levels at the end of the quarter, and an increase in prepaid expenses. The uses of cash were partially offset by reduction in inventory and increase in accounts payable.
In the first half of 2026 and 2025, we invested approximately $144,000 and $189,000, respectively, in leasehold improvements, computer software development costs, and manufacturing tooling costs.
Net cash provided by financing activities was $350,000 in the first half of 2026, compared to $1,500,000 in the same period of 2025. In both periods, the cash provided by financing activities consisted of proceeds from secured subordinated note financing completed during the first six months.
As reflected in our Condensed Statements of Cash Flows,
we used net cash of $768,856 in operating activities in the first quarter of 2026, compared to $732,970 in the same period last year.
To calculate our net cash used in operating activities, we adjusted our net loss of $899,576 and $994,140 in the first quarter of 2026
and 2025, 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 $598,645 and $540,117 in the first quarters of 2026 and 2025, respectively. In addition,
we analyze changes in operating assets and liabilities as a source or use of cash. In the first quarter of 2026, changes in operating
assets and liabilities resulted in a net cash outflow of $467,925, primarily driven by increases in accounts receivable due to an increase
in shipments toward the end of the quarter and lower accrued payroll and related expenses. This cash outflow was partially offset by a
decrease in inventory levels. 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 quarters of 2026 and 2025, we invested
$53,332 and $52,304, respectively, in manufacturing tooling costs, computer software development costs, and leasehold improvements, Net
cash provided by financing activities for the three months ended March 31, 2026 was $500,000, compared to zero in the comparable period
a year ago. Financing activities in 2026 consisted of proceeds from a subordinated convertible note.
Our
contractual cash obligations on MarchJune 31,30, 2026 are outlined in the table below:
As of MarchJune 31,30, 2026, we had no off-balance sheet arrangements
as defined in Item 303 of Regulation S-K.
SCKT insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 1 filing (1 insider, 1 trade date, 1,946 shares, about $3.5K). Net open-market shares: -1,946 (purchases minus sales); net value about -$3.5K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-21 | Holmes David A. |
Grant/award | 29,333 | $1.00 | $29.3K |
| 2026-08-21 | Zhao Lynn |
Grant/award | 23,833 | $1.00 | $23.8K |
| 2026-08-21 | Ott Leonard L |
Grant/award | 23,833 | $1.00 | $23.8K |
| 2026-08-21 | Glaenzer Eric |
Grant/award | 21,244 | $1.00 | $21.2K |
| 2026-08-10 | Mills Kevin J |
Open-market sale | 1,946 | $1.80 | $3.5K |
| 2026-08-06 | Macdonald Brenton Earl |
Grant/award | 1,600 | $1.00 | $1.6K |
| 2026-08-06 | Macdonald Brenton Earl |
Grant/award | 7,000 | $0.39 | $2.7K |
| 2026-08-06 | Bass Charlie |
Grant/award | 1,600 | $1.00 | $1.6K |
| 2026-08-06 | Parnell William L. Jr |
Grant/award | 2,000 | $1.00 | $2.0K |
| 2026-08-06 | Lazarev Ivan |
Grant/award | 1,000 | $0.39 | $390 |
| 2026-08-06 | Lazarev Ivan |
Grant/award | 2,000 | $1.00 | $2.0K |
| 2026-06-12 | Bass Charlie |
Grant/award | 13,000 | — | — |
| 2026-06-12 | Parnell William L. Jr |
Grant/award | 10,000 | — | — |
| 2026-06-12 | Lazarev Ivan |
Grant/award | 9,000 | — | — |
| 2026-05-27 | Mills Kevin J |
Gift | 128,981 | — | — |
| 2026-04-29 | Bass Charlie |
Grant/award | 5,000 | $0.87 | $4.3K |
| 2026-04-29 | Parnell William L. Jr |
Grant/award | 5,000 | $0.87 | $4.3K |
| 2026-04-29 | Lazarev Ivan |
Grant/award | 4,000 | $0.87 | $3.5K |
| 2026-04-29 | Marx Felix |
Grant/award | 4,000 | $0.87 | $3.5K |
Well-known investors holding SCKT (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 39,439 | $34.3K | — | Sold out |
| Renaissance Technologies | 2026-06-30 | 26,700 | $16.1K | 0.0% | No change |