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NOTE 6 — Secured Subordinated Convertible Notes Payable
 3 Months Ended
Mar. 31, 2024
Debt Disclosure [Abstract]  
NOTE 6 — Secured Subordinated Convertible Notes Payable

NOTE 6 — Secured Subordinated Convertible Notes Payable

 

On August 31, 2020, the Company completed a secured subordinated convertible note financing of $1,530,000, including $1,350,000 from officers, directors, and family members. Because the Financing involved such parties related to the Company, a special committee of the Board comprising the Board’s disinterested directors approved the Financing.

 

The funds raised are used to increase the Company’s working capital balances. The notes have a three-year term that accrues interest at 10% per annum and mature on August 30, 2023. The interest on the notes is payable quarterly in cash. The holder of each note may require the Company to repay the principal amount of the note plus accrued interest at any time after August 31, 2021. The principal amount of each note is convertible at any time, at the option of the holder, into shares of the Company’s common stock at a conversion price of $1.46 per share, which was the market closing price of the common stock on Friday, August 28, 2020, the closing date of the financing. The notes did not contain a beneficial conversion feature because the conversion price is higher than the market closing price on the date of the notes payable. The notes are secured by the assets of the Company and are subordinated to amounts outstanding under the Company’s working capital bank line of credit with Western Alliance Bank. Total issuance costs associated with the financing are $96,515, and the costs are presented on the balance sheet as a direct deduction from the notes payable balance of $1,530,000 as a contra-liability. The issuance costs are amortized over three years, the term of the notes payable, and the amortization expense is reported as interest expense. In 2021, two noteholders elected to convert note principal of $130,000 into shares of the Company’s common. Therefore, the outstanding notes payment balance is $1,400,000.

 

On November 16, 2022, the Company and the requisite holders of the outstanding notes entered into a Secured Subordinated Convertible Note Extension Agreement, extending the maturity date of the notes from August 30, 2023 to August 30, 2024. All other terms and conditions of the notes remain in full force and effect.

 

SOCKET MOBILE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

March 31, 2024

 

On May 1, 2024, the Company and the requisite holders of the outstanding notes entered into a Secured Subordinated Convertible Note Extension Agreement, extending the maturity date of the notes from August 30, 2024 to August 30, 2025. All other terms and conditions of the notes remain in full force and effect.

 

The amortization of debt discount was $1,462 and $8,273 for the quarter ended March 31, 2024 and 2023, respectively.

 

On May 26, 2023, the Company completed a secured subordinated convertible note financing of $1,600,000. The proceeds from the Financing are used to increase the Company’s working capital balances. The secured subordinated convertible notes have a three-year term and will mature on May 26, 2026. The interest rate on the Notes is 10% per year, payable quarterly in cash. The holder of each Note may require the Company to repay the principal amount of the Note plus accrued interest at any time after May 26, 2024. The Notes are secured by the assets of the Company and are subordinated to the Company’s debts with Western Alliance Bank, its senior lender. The principal amount of each Note is convertible at any time, at the option of the holder, into shares of the Company’s common stock at a conversion price of $1.34 per share. Failure to pay the principal payment or any interest payment (with 5 days delinquency) when due are events of default under the Notes. The Company filed and caused to be declared effective pursuant to the Securities Act of 1933, as amended, in June 2023 a Registration Statement to provide for resales of the shares of Common Stock issuable upon conversion of the Notes.

 

Total interest expense recognized related to the convertible note was $76,257 and $42,793 for the three months ended March 31, 2024 and 2023, respectively.