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NOTE 6 — Secured Subordinated Convertible Notes Payable
 3 Months Ended
Mar. 31, 2025
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.

 

Proceeds from the financing were used to increase the Company’s working capital. The notes have a three-year term, accrue interest at an annual rate of 10%, and were initially scheduled to mature on August 30, 2023. Interest is payable quarterly in cash. Beginning August 31, 2021, each noteholder had the right to demand repayment of principal and accrued interest. The principal amount of each note is convertible, at the holder’s option, into shares of the Company’s common stock at a conversion price of $1.46 per share, which was the market closing price on August 28, 2020, the financing’s closing date. The notes did not include a beneficial conversion feature, as the conversion price exceeded the market price on the issuance date. The notes are secured by Company assets and subordinated to obligations under the Company’s working capital line of credit with Western Alliance Bank.

 

In 2021, two noteholders converted $130,000 of principal into shares of the Company’s common, resulting in a remaining outstanding note balance of $1,400,000.

 

On November 16, 2022, the Company and the requisite noteholders entered into a Secured Subordinated Convertible Note Extension Agreement, extending the maturity date to August 30, 2024. All other terms and conditions remained unchanged.

 

On May 1, 2024, the Company and the requisite noteholders executed a second extension agreement, further extending the maturity date to August 30, 2025. All other terms and conditions of the notes continue in full force and effect.

 

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 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.

 

 

SOCKET MOBILE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

March 31, 2025

 

On August 21, 2024, the Company completed a secured subordinated convertible note financing of $1,000,000. The proceeds of the Financing are used to increase the Company’s working capital balances. The secured subordinated convertible notes have a three-year term and mature on August 21, 2027. 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 August 21, 2025. 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 $0.9515 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 it to be declared effective pursuant to the Securities Act of 1933, as amended, in November 2024 a Registration Statement to provide for resales of the shares of Common Stock issuable upon conversion of the Notes.

 

The amortization of debt discount was $3,646 and $1,462 for the quarter ended March 31, 2025 and 2024, respectively.

 

Total interest expense related to the convertible note was $102,276 and $76,257 for the three months ended March 31, 2025 and 2024, respectively.