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Basis of Presentation
6 Months Ended
Jun. 30, 2012
Accounting Policies [Abstract]  
Basis of Presentation

NOTE 1Basis of Presentation

 

The accompanying unaudited condensed financial statements of Socket Mobile, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals considered necessary for fair presentation have been included. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted.

 

These condensed financial statements should be read in conjunction with the audited financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. The financial statements in the Company’s annual report on Form 10-K were prepared on a going concern basis.

 

Liquidity

During the six months ended June 30, 2012, and the year ended December 31, 2011, the Company incurred net losses of $1,627,174 and $2,422,361, respectively. As of June 30, 2012, the Company has an accumulated deficit of $58,831,273. The Company’s cash balances at June 30, 2012 were $612,394 including $897,415 advanced on its bank lines of credit. At June 30, 2012 the Company had additional unused borrowing capacity of approximately $423,000 on its bank lines of credit (approximately $117,000 and $306,000, respectively, on the domestic and international credit lines). The Company’s balance sheet at June 30, 2012 has a current ratio (current assets divided by current liabilities) of 0.6 to 1.0, a working capital deficit of $2,661,750 (current assets less current liabilities).

 

In the last three years the Company has taken actions to reduce its expenses and to align its cost structure with economic conditions. The Company has the ability to further reduce expenses if necessary. Additional steps by management intended to reduce operating losses and achieve profitability include the introduction of new products, and continued close support of the Company’s distributors and its application partners as they establish their mobile applications in key vertical markets. On August 1, 2012, the Company issued $400,000 in convertible subordinated notes to increase its working capital balances (see “NOTE 11 — Subsequent Event” for more information). Management believes its existing cash balances, plus its ability to reduce costs and manage its working capital balances, and its bank lines of credit will be sufficient to meet its funding requirements at least through June 30, 2013.

 

If the Company can return to revenue growth and attain profitability, the Company anticipates requirements for cash will include funding of higher receivable and inventory balances, and increased expenses, including an increase of costs relating to new employees to support the Company’s growth and increases in salaries, benefits, and related support costs for employees. If the Company cannot attain profitability, the Company will not be able to support its operations from positive cash flows, and the Company would use its existing cash to support operating losses. The Company may also find it necessary to raise additional capital to fund its operations, however, there can be no assurance that additional capital will be available on acceptable terms, if at all, and any such terms may be dilutive to existing stockholders. If the Company is unable to secure the necessary capital for its business, the Company may need to suspend some or all of its current operations.