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NOTE 11 — Commitments and Contingencies

9 Months Ended

Sep. 30, 2025

Commitments and Contingencies Disclosure [Abstract]

NOTE 11 — Commitments and Contingencies

NOTE 11 — Commitments and Contingencies

Operating Lease Obligations

In February 2022, the Company entered into a lease agreement for approximately 35,913 square feet at 40675 Encyclopedia Circle in Fremont, California. This location serves as the Company’s Corporate Headquarters, including office space and manufacturing. The current monthly rent is $54,940.

The Company accounted for the lease as an operating lease under ASC 842 using the bank loan interest rate in effect on May 1, 2022 at 5.0% to discount future lease payments. The lease term expires on July 31, 2029, with a one-time option to renew for a period of five years. The renewal period is not included in the measurement of the leases as the Company is not reasonably certain of exercising it.

In January 2024, the Company renewed its equipment operating lease agreement. The lease term expires on December 31, 2026. The Company accounted for the lease as an operating lease under ASC 842 using the bank loan interest rate in effect on January 1, 2024 at 9.25%.

As of September 30, 2025, the balances of right-of-use assets and liabilities were $2,218,508 and $2,424,805 respectively, compared to $2,604,137 and $2,816,661, respectively, on December 31, 2024.

In July 2022, the Company also signed a two-year equipment operating lease agreement and the future lease payments are discounted at the interest rate of 5.5%.

SOCKET MOBILE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

September 30, 2025

The operating lease expense was allocated in cost of goods sold and operating expenses based on department headcount and amounted to $161,682 and $485,045 for the three and nine months ended September 30, 2025, respectively, compared to $161,681 and $485,045 for the three and nine months ended September 30, 2024, respectively.

Cash payments included in the measurement of the Company’s operating lease liabilities were $165,891 and $491,273 for the three and nine months ended September 30, 2025, respectively, compared to $161,091 and $477,057, respectively, for the corresponding prior year periods.

Future minimum lease payments for the operating lease in effect as of September 30, 2025 are shown below:


Annual minimum payments:	Amount
2025 (October 2025 through December 31, 2025)		165,891
2026		676,751
2027		692,644
2028		713,423
2029		425,646
Total minimum payments		2,674,355
Less: Present value factor		(249,550	)
Total operating lease liabilities		2,424,805
Less: Current portion of operating lease		(564,150	)
Long-term portion of operating lease	$	1,860,655

Purchase Commitments

As of September 30, 2025, the Company has non-cancelable purchase commitments for inventory to be used in the ordinary course of business of approximately $3,358,000.

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.