NOTE 5 — Bank Financing Arrangements

The Company initially entered into a Business Financing Agreement with Western Alliance Bank (the “Bank”), an Arizona corporation, on February 27, 2014, and this agreement has been amended and extended through the years.

Seventh Business Financing Modification Agreement

On April 21, 2025, the Company entered into the Seventh Business Financing Modification Agreement and Waiver of Default with the Bank. Under the terms of the agreement, the Bank renewed the $3.0 million domestic credit line, raised the advance rate to up to 80% of eligible domestic receivables, increased the allowance for subordinated debt to $5.5 million, and increased the credit card limit to $350,000. The maturity date of the domestic credit line is April 30, 2026.

Eighth Business Financing Modification Agreement

On January 20, 2026, the Company entered into the Eighth Business Financing Modification Agreement and Waiver of Default with the Bank. Under the terms of the agreement, the Bank waived the Company’s covenant defaults for the third quarter and the fourth quarter of 2025. The agreement also revised certain terms of the credit facilities, including: (i) modifying the covenant to require the Company to maintain a minimum cash balance of $1.0 million in accounts held with the Bank, measured as of the last day of each month; (ii) reducing the credit card limit to $0.2 million and the domestic credit line limit to $1.0 million; (iii) extending the maturity date of the facilities to July 31, 2026; and (iv) increasing the permitted amount of subordinated debt to an aggregate amount not to exceed $6.5 million.

SOCKET MOBILE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

June 30, 2026

Ninth Business Financing Modification Agreement

On May 27, 2026, the Company entered into the Ninth Business Financing Modification Agreement and Waiver of Default with the Bank. Under the agreement, the Bank waived the Company’s covenant defaults for failing to maintain the required minimum cash balance of $1,000,000 on February 19, and March 5, 6 and 9, 2026. The agreement also amended certain terms of the credit facilities by (i) requiring the lender to complete a collateral audit before any future advance requests after the Ninth Amendment Effective Date; (ii) requiring the Company to maintain a minimum cash balance of $1,000,000; (iii) requiring the Company to terminate and close all business credit cards issued by the lender by August 31, 2026; (iv) extending the maturity date of the domestic line of credit to September 30, 2026;

There were no amounts borrowed on the Company’s bank credit lines as of June 30, 2026 and December 31, 2025.