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NOTE 11 — Commitments and Contingencies

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

NOTE 11 — Commitments and Contingencies

NOTE 11 — Commitments and Contingencies

Operating Lease Obligations

The Company leases office space under a non-cancelable operating lease that provides the Company approximately 37,100 square feet in Newark, California. The lease agreement expires on June 30, 2022. In February 2022, the Company entered into an 87-month lease agreement in Fremont, CA effective May 1, 2022. The new space is approximately 35,913 square feet and will serve as the location for the Company’s new Corporate Headquarters, including office space and manufacturing. The Company will account for this lease as an operating lease under ASC 842.

In June 2020, the Company also signed a two-year equipment operating lease agreement. The Company will pay $1,519 in monthly installments starting in September of 2020 through June 2022.

The operating lease expense under existing agreement was allocated in cost of goods sold and operating costs based on department headcount and amounted to $107,218 and $107,765 for the three-month periods ended March 31, 2022 and 2021, respectively.

On March 31, 2022, the balances of right-of-use assets and liabilities for the operating lease were approximately $0.11 million and $0.13 million, respectively, compared to approximately $0.21 million and $0.26 million, respectively, on December 31, 2021.

Cash payments included in the measurement of the Company’s operating lease liabilities were $132,010 and $126,516 for the three months ended March 31, 2022 and 2021, respectively.

Future minimum lease payments under the operating lease on March 31, 2022 are shown below:


Annual minimum payments:		Amount
2022 (through June 30, 2022)			131,395
Total minimum payments			131,395
Less: Present value factor			(1,348	)
Total operating lease liabilities			130,047
Less: Current portion of operating lease			(130,047	)
Long-term portion of operating lease			—

Purchase Commitments

As of March 31, 2022, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of approximately $13,137,000.

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.

SOCKET MOBILE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

March 31, 2022