NOTE 11 — Commitments and Contingencies |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTE 11 — Commitments and Contingencies | NOTE 11 — Commitments and Contingencies
Operating Lease Obligations
In February 2022, the Company entered into a lease agreement for approximately 35,913 square feet at 40675 Encyclopedia Circle in Fremont, California. This location serves as the Company’s Corporate Headquarters, including office space and manufacturing. The current monthly rent is $54,940.
The Company accounted for the lease as an operating lease under ASC 842 using the bank loan interest rate in effect on May 1, 2022 at 5.0% to discount future lease payments. The lease term expires on July 31, 2029, with a one-time option to renew for a period of five years. The renewal period is not included in the measurement of the leases as the Company is not reasonably certain of exercising it.
In January 2024, the Company renewed its equipment operating lease agreement. The lease term expires on December 31, 2026. The Company accounted for the lease as an operating lease under ASC 842 using the bank loan interest rate in effect on January 1, 2024 at 9.25%.
As of June 30, 2025, the balances of right-of-use assets and liabilities were approximately $2.35 million and $2.56 million, respectively, compared to approximately $2.60 million and $2.82 million, respectively, on December 31, 2024.
In July 2022, the Company also signed a two-year equipment operating lease agreement and the future lease payments are discounted at the interest rate of 5.5%.
SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS June 30, 2025
The operating lease expense was allocated in cost of goods sold and operating expenses based on department headcount and amounted to $161,682 and $323,363 for the three and six months ended June 30, 2025, respectively, compared to $161,681 and $323,363 for the three and six months ended June 30, 2024, respectively.
Cash payments included in the measurement of the Company’s operating lease liabilities were $164,291 and $325,382 for the three and six months ended June 30, 2025, respectively, compared to $159,537 and $315,967, respectively, for the corresponding prior year periods.
Future minimum lease payments for the operating lease in effect as of June 30, 2025 are shown below:
Purchase Commitments As of June 30, 2025, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of approximately $2,856,000.
Legal Matters The Company is subject to disputes, claims, requests for indemnification and lawsuits arising in the ordinary course of business. Under the indemnification provisions of the Company’s customer agreements, the Company routinely agrees to indemnify and defend its customers against infringement of any patent, trademark, copyright, trade secrets, or other intellectual property rights arising from customers’ legal use of the Company’s products or services. The exposure to the Company under these indemnification provisions is generally limited to the total amount paid for the indemnified products. However, certain indemnification provisions potentially expose the Company to losses in excess of the aggregate amount received from the customer. To date, there have been no claims against the Company by its customers pertaining to such indemnification provisions, and no amounts have been recorded. The Company is currently not a party to any material legal proceedings.
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