UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
10-Q
[X]
|
QUARTERLY REPORT PURSUANT TO SECTION
13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|
For
the quarterly period ended September 30, 2008
OR
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period ____________ to ____________
|
Commission
file number 1-13810
SOCKET
MOBILE, INC.
(Exact name of registrant as specified in its charter)
Delaware
|
|
94-3155066
|
(State of incorporation)
|
|
(IRS Employer Identification
No.)
|
39700
Eureka Drive, Newark, CA 94560
(Address of principal executive offices including zip code)
(510)
933-3000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. YES [ X ] NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer
[ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company
[X]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). YES [ ] NO [X]
The number of shares of Common Stock ($0.001 par value) outstanding as of October
31, 2008 was 3,229,916 shares. The number of shares outstanding reflects a 1-for-10
reverse stock split effected by the registrant on October 23, 2008. See "Note
10 - Subsequent Events" for additional information.
(Index)
Item 1. Financial
Statements
SOCKET
MOBILE, INC.
CONDENSED BALANCE SHEETS
|
|
September
30,
2008
(Unaudited)
|
|
December
31,
2007*
 
|
ASSETS
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
4,139,429
|
|
|
$
|
4,963,359
|
|
Accounts
receivable, net
|
|
|
4,215,641
|
|
|
|
2,614,872
|
|
Inventories
|
|
|
4,029,096
|
|
|
|
2,438,033
|
|
Prepaid
expenses and other current assets
|
|
 
|
438,853
|
 
|
|
 
|
282,867
|
 
|
|
Total current assets
|
|
 
|
12,823,019
|
 
|
|
 
|
10,299,131
|
 
|
 
|
|
|
|
|
|
|
|
|
Property
and equipment:
|
|
|
|
|
|
|
|
|
Machinery
and office equipment
|
|
|
2,319,488
|
|
|
|
2,391,991
|
|
Computer
equipment
|
|
 
|
1,203,567
|
 
|
|
 
|
1,125,875
|
 
|
 
|
|
|
3,523,055
|
|
|
|
3,517,866
|
|
Accumulated
depreciation
|
|
 
|
(2,469,206
|
)
|
|
 
|
(2,373,409
|
)
|
|
Property and equipment, net
|
|
 
|
1,053,849
|
 
|
|
 
|
1,144,457
|
 
|
 
|
|
|
|
|
|
|
|
|
Intangible
assets, net
|
|
|
378,574
|
|
|
|
473,934
|
|
Goodwill
|
|
|
9,797,946
|
|
|
|
9,797,946
|
|
Other
assets
|
|
 
|
242,334
|
 
|
|
 
|
258,444
|
 
|
|
Total assets
|
|
$
|
24,295,722
|
|
|
$
|
21,973,912
|
|
 
|
LIABILITIES
AND STOCKHOLDERS EQUITY
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
4,486,921
|
|
|
$
|
2,429,168
|
|
Accrued
payroll and related expenses
|
|
|
937,473
|
|
|
|
852,185
|
|
Bank
line of credit
|
|
|
3,035,012
|
|
|
|
2,622,009
|
|
Deferred
income on shipments to distributors
|
|
|
2,068,626
|
|
|
|
1,744,560
|
|
Term
loan - short term portion
|
|
|
171,522
|
|
|
|
160,439
|
|
Current
portion of capital leases and deferred rent
|
|
 
|
31,593
|
 
|
|
 
|
42,964
|
 
|
|
Total
current liabilities
|
|
 
|
10,731,147
|
 
|
|
 
|
7,851,325
|
 
|
 
|
|
|
|
|
|
|
|
|
Term
loan - long term portion
|
|
|
138,241
|
|
|
|
266,543
|
|
Long
term portion of capital leases and deferred rent
|
|
|
117,831
|
|
|
|
139,743
|
|
Deferred
income taxes
|
|
 
|
206,277
|
 
|
|
 
|
182,322
|
 
|
|
Total
liabilities
|
|
 
|
11,193,496
|
 
|
|
 
|
8,439,933
|
 
|
 
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value: Authorized shares10,000,000,
|
|
|
|
|
|
|
|
|
Issued
and outstanding shares3,230,013 at September 30, 2008 and
3,198,962 at December 31, 2007
|
|
|
3,230
|
|
|
|
3,199
|
|
Additional
paid-in capital
|
|
|
54,438,930
|
|
|
|
53,683,274
|
|
Accumulated
deficit
|
|
 
|
(41,339,934
|
)
|
|
 
|
(40,152,494
|
)
|
|
Total
stockholders equity
|
|
 
|
13,102,226
|
 
|
|
 
|
13,533,979
|
 
|
|
Total
liabilities and stockholders equity
|
|
$
|
24,295,722
|
|
|
$
|
21,973,912
|
|
_____________________________________________
* Derived from audited financial statements.
Note: Authorized shares and issued and outstanding shares reflect a
1-for-10 reverse stock split effected by the Company on October 23,
2008. See "Note 10 - Subsequent Events" for additional information.
|
See accompanying
notes.
1
(Index)
SOCKET MOBILE, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three
Months Ended
September 30,
|
|
|
Nine
Months Ended
September 30,
|
|
|
|
2008
 
|
|
2007
 
|
|
2008
 
|
|
2007
 
|
Revenues
|
|
$
|
8,018,533
|
|
|
$
|
5,424,216
|
|
|
$
|
21,680,966
|
|
|
$
|
17,272,373
|
|
Cost of revenues
|
|
 
|
4,353,379
|
 
|
|
 
|
2,808,200
|
 
|
|
 
|
11,360,115
|
 
|
|
 
|
8,787,932
|
 
|
Gross profit
|
|
 
|
3,665,154
|
|
|
 
|
2,616,016
|
|
|
 
|
10,320,851
|
|
|
 
|
8,484,441
|
|
 
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
1,101,601
|
|
|
|
1,122,561
|
|
|
|
3,433,364
|
|
|
|
3,711,795
|
|
Sales
and marketing
|
|
|
1,971,754
|
|
|
|
1,799,379
|
|
|
|
5,881,549
|
|
|
|
5,528,696
|
|
General
and administrative
|
|
|
610,255
|
|
|
|
566,336
|
|
|
|
2,037,702
|
|
|
|
2,104,677
|
|
Amortization
of intangible assets
|
|
 
|
31,786
|
|
|
 
|
33,808
|
|
|
 
|
95,360
|
|
|
 
|
101,423
|
|
 
|
Total operating expenses
|
|
|
3,715,396
|
|
|
|
3,522,084
|
|
|
|
11,447,975
|
|
|
|
11,446,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
 
|
(50,242
|
)
|
|
 
|
(906,068
|
)
|
|
 
|
(1,127,124
|
)
|
|
 
|
(2,962,150
|
)
|
 
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income and other
|
|
|
3,480
|
|
|
|
30,319
|
|
|
|
19,628
|
|
|
|
97,842
|
|
Interest expense
|
|
 
|
(25,018
|
)
|
|
 
|
(14,645
|
)
|
|
 
|
(55,989
|
)
|
|
 
|
(20,707
|
)
|
 
 
 
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before deferred taxes
|
|
|
(71,780
|
)
|
|
|
(890,394
|
)
|
|
|
(1,163,485
|
)
|
|
|
(2,885,015
|
)
|
Deferred tax expense
|
|
 
|
(7,985
|
)
|
|
 
|
(7,985
|
)
|
|
 
|
(23,955
|
)
|
|
 
|
(23,958
|
)
|
Net loss
|
|
 
|
(79,765
|
)
|
|
 
|
(898,379
|
)
|
|
 
|
(1,187,440
|
)
|
|
 
|
(2,908,973
|
)
|
|
|
 
|
|
|
|
 
|
|
|
|
 
|
|
|
|
 
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.02
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.91
|
)
|
Diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.91
|
)
|
 
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
3,230,013
|
|
|
|
3,194,798
|
|
|
|
3,214,742
|
|
|
|
3,191,173
|
|
Diluted
|
|
|
3,230,013
|
|
|
|
3,194,798
|
|
|
|
3,214,742
|
|
|
|
3,191,173
|
|
Note: Shares used in per share calculations of basic and diluted net loss per
share, reflect a 1-for-10 reverse stock split effected by the Company on October
23, 2008. See "Note 10 - Subsequent Events" for additional information.
See accompanying
notes.
2
(Index)
SOCKET MOBILE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Nine
Months Ended September 30,
|
|
|
2008
|
|
2007
|
Operating
activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,187,440
|
)
|
|
$
|
(2,908,973
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
565,574
|
|
|
|
792,629
|
|
Depreciation
and amortization
|
|
|
392,335
|
|
|
|
436,804
|
|
Amortization
of intangible assets
|
|
|
95,360
|
|
|
|
101,423
|
|
Net
foreign currency transaction (gains) losses
|
|
|
37,043
|
|
|
|
(53,179
|
)
|
Change
in deferred rent
|
|
|
(3,957
|
)
|
|
|
118,024
|
|
Deferred
tax expense
|
|
|
23,955
|
|
|
|
23,958
|
|
 
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(1,675,404
|
)
|
|
|
(121,689
|
)
|
Inventories
|
|
|
(1,591,063
|
)
|
|
|
194,611
|
|
Prepaid expenses and other current assets
|
|
|
(155,986
|
)
|
|
|
(87,493
|
)
|
Other assets
|
|
|
16,110
|
|
|
|
24,400
|
|
Accounts payable and accrued expenses
|
|
|
2,079,068
|
|
|
|
(202,269
|
)
|
Accrued payroll and related expenses
|
|
|
85,288
|
|
|
|
(20,961
|
)
|
Deferred income on shipments to distributors
|
|
 
|
324,066
|
 
|
|
|
251,990
|
 
|
Net cash used in operating activities
|
|
 
|
(995,051
|
)
 
|
|
 
|
(1,450,725
|
)
 
|
 
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
Purchases of equipment and tooling
|
|
 
|
(301,727
|
)
|
|
 
|
(804,651
|
)
|
Net cash used in investing activities
|
|
 
|
(301,727
|
)
 
|
|
 
|
(804,651
|
)
 
|
 
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
Payments on capital leases and equipment financing notes
|
|
|
(29,326
|
)
|
|
|
(6,805
|
)
|
Gross proceeds from borrowings under bank line of credit agreement
|
|
|
8,841,995
|
|
|
|
6,776,888
|
|
Gross repayments of borrowings under bank line of credit agreement
|
|
|
(8,428,992
|
)
|
|
|
(6,776,420
|
)
|
Proceeds from bank term loan
|
|
|
---
|
|
|
|
500,000
|
|
Repayments of bank term loan
|
|
|
(117,219
|
)
|
|
|
(35,913
|
)
|
Proceeds from the exercise of stock options and warrants
|
|
 
|
190,113
|
 
|
|
 
|
83,432
|
 
|
Net cash provided by financing activities
|
|
 
|
456,571
|
 
|
|
 
|
541,182
|
 
|
 
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
 
|
16,277
|
 
|
|
 
|
21,025
|
 
|
Net
decrease in cash and cash equivalents
|
|
|
(823,930
|
)
|
|
|
(1,693,169
|
)
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
 
|
4,963,359
|
 
|
|
 
|
6,104,277
|
 
|
Cash
and cash equivalents at end of period
|
|
$
|
4,139,429
|
|
|
$
|
4,411,108
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
55,989
|
|
|
$
|
20,707
|
|
See accompanying
notes.
3
(Index)
SOCKET
MOBILE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - Basis of Presentation
The accompanying unaudited condensed financial statements of Socket Mobile,
Inc. (the "Company") (formerly Socket Communications, Inc.) 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 10 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, 2007.
Reverse Stock Split
On October 22, 2008, the Company's Board of Directors approved a 1-for-10 reverse
split of its Common Stock effective at 5 PM Eastern Time on October 23, 2008.
The Company's Board of Directors implemented the reverse stock split under the
authority granted to the Board by the Company's stockholders at their annual
meeting on April 23, 2008. As a result of the reverse stock split, each ten
shares of Common Stock, par value $0.001 per share, of the Company issued and
outstanding were, automatically and without any action on the part of the respective
holders thereof, combined and reconstituted as one share of Common Stock, par
value $0.001 per share, of the Company. The reverse stock split reduced the
number of outstanding shares of Common Stock from approximately 32,300,129 shares
to approximately 3,230,013 shares. Consequently, on the Company's balance sheet,
the aggregate par value of the issued Common Stock was reduced by reclassifying
the par value amount of the eliminated shares of Common Stock to additional
paid-in capital. All per share amounts, outstanding share amounts (including
all common stock equivalents), and authorized share amounts, have been restated
in the Condensed Financial Statements and in the Notes to the Condensed Financial
Statements for all periods presented to reflect the reverse stock split. See
"Note 10 - Subsequent Events" for additional information.
NOTE 2 - Summary of Significant
Accounting Policies
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expense during the reporting
period. Actual results could differ from those estimates, and such differences
may be material to the financial statements.
4
(Index)
SOCKET
MOBILE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The Company makes adjustments to the value of inventory based on estimates
of potentially excess and obsolete inventory after considering forecasted demand
and forecasted average selling prices. However, forecasts are subject to revisions,
cancellations, and rescheduling. Actual demand will inevitably differ from anticipated
demand, and such differences may have a material effect on the Company's financial
statements.
Recent Accounting Pronouncements
In September 2006, the FASB issued Statement of Financial Accounting
Standards No. 157, "Fair Value Measurements" ("SFAS 157"), which establishes
a framework for measuring fair value and enhances disclosures about fair value
measurements. In February 2008, the FASB issued FASB Staff Position No. FAS
157-2, "Effective Date of FASB Statement No. 157," which provides for a one
year deferral of the effective date of SFAS 157 for non-financial assets and
non-financial liabilities, except those that are recognized or disclosed in
the financial statements at fair value on a recurring basis. The Company adopted
the provisions of SFAS 157 as of January 1, 2008, with respect to its financial
assets and liabilities only. The adoption of SFAS 157 did not have a material
impact on the Company's financial statements. Under SFAS 157, the definition
of fair value focuses on the price that would be received upon the sale of an
asset or the amount paid to transfer a liability. The fair value measurement
should reflect all of the assumptions that market participants would use in
pricing the asset or liability. SFAS 157 establishes a three-level hierarchy
to prioritize the inputs used in valuation techniques for fair value consisting
of: 1) observable inputs that reflect quoted prices in active markets; 2) inputs
other than quoted prices with observable market data; and 3) unobservable data.
SFAS 157 requires disclosures detailing the extent to which the Company measures
assets and liabilities at fair value, the methods and assumptions used to measure
fair value and the effect of fair value measurements on earnings.
The Company considers all highly liquid investments purchased with a maturity
date of 90 days or less at date of purchase to be cash equivalents. At September
30, 2008, all of the Company's cash and cash equivalents consisted of amounts
held in demand and money market deposits in banks. The Company regularly enters
into forward foreign currency contracts to reduce exposures related to rate
changes in certain foreign currencies. The Company's forward foreign currency
contracts are recorded at fair value and are included in accrued liabilities
at September 30, 2008. At September 30, 2008, these derivative instruments were
not designated as hedges, and accordingly, changes in the fair value of the
forward foreign currency contracts were recorded in net income. At September
30, 2008, contracts with a notional amount of $649,400 to hedge Euros were recorded
as a liability with a fair value of $250 based on quotations from financial
institutions.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" ("SFAS 159"), which permits companies
to choose to measure certain financial instruments and certain other items at
fair value. The standard requires that unrealized gains and losses on items
for which the fair value option has been elected be reported in earnings. SFAS
159 is effective for fiscal years beginning after November 15, 2007. The Company
adopted SFAS 159 as of January 1, 2008. The adoption of SFAS 159 did not have
a material impact on the Company's financial statements.
5
(Index)
SOCKET
MOBILE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - Inventories
Inventories consist principally of raw materials and sub-assemblies, which
are stated at the lower of cost (first-in, first-out) or market.
|
|
September 30,
2008
|
|
December 31,
2007
|
Raw materials
and sub-assemblies
|
|
$
|
3,515,331
|
|
|
$
|
2,012,745
|
|
Finished
goods
|
|
 
|
513,765
|
 
|
|
 
|
425,288
|
 
|
|
|
$
|
4,029,096
|
|
|
$
|
2,438,033
|
|
Increases in overall inventory
balances at September 30, 2008 are due primarily to higher stocking levels of
the Company's mobile handheld computer.
NOTE 4 - Bank Financing Arrangements
On March 24, 2008, the Company agreed with its bank to extend the term of the
existing credit facility by an additional year. The facility now expires on
March 24, 2010. The credit facility allows the Company to borrow up to $4,000,000
based on the level of qualified domestic and international receivables, up to
a maximum of $2,500,000 and $1,500,000, respectively, at the lender's index
rate based on prime plus 0.5%. The rates in effect at September 30, 2008 were
5.5% on both the domestic and international lines. At September 30, 2008, outstanding
amounts borrowed under the lines were $1,833,001 and $1,202,011, respectively,
which were the approximate amounts available on the lines. Of these amounts
outstanding at September 30, 2008, $2.0 million was repaid in early October
2008. In fiscal 2007 the Company used the credit facility only at the end of
each quarter. At December 31, 2007, outstanding amounts borrowed under the lines
were $1,752,459 and $869,550, respectively, which were the approximate amounts
available on the lines. These amounts outstanding at December 31, 2007 were
repaid in early January 2008. The rates in effect at December 31, 2007 were
7.75% on both the domestic and international lines. Under the terms of the credit
agreement, beginning March 31, 2008, the Company must maintain a quarterly minimum
tangible net worth of at least $2,500,000, plus beginning thereafter, 50% of
quarterly positive net income. The Company was in compliance with the tangible
net worth requirement at September 30, 2008.
Under the terms of a term loan agreement, the Company borrowed a principal
amount of $500,000 on June 29, 2007. The term loan bears a fixed interest rate
of 9.75%, equal to the prime rate plus 1.5% at the time of the advance, and
is to be repaid by the Company in 36 equal monthly installments. At September
30, 2008, $309,763 was outstanding on the term loan, of which $171,522 and $138,241
is classified as short term debt and long term debt, respectively. Remaining
payments of principal due in future periods are as follows: $40,723, $173,228,
and $ 93,315, for the years ending December 31, 2008 (three months remaining),
2009 and 2010, respectively.
6
(Index)
SOCKET
MOBILE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 - Intangible Assets
Intangible assets at September 30, 2008 consist of a patent purchased in 2004
for $600,000 covering the design and functioning of plug-in bar code scanners,
bar code imagers, and radio frequency identification products, which is being
amortized on a straight line basis over its estimated life of ten years, and
intangible assets of $570,750 remaining from a prior acquisition in 2000 consisting
of developed software and technology with estimated lives at the time of acquisition
of 8.5 years.
Amortization of all intangible assets for the three and nine months
ended September 30, 2008 was $31,786 and $95,360, respectively, compared to
$33,808 and $101,423, respectively, for the same periods in 2007. Intangible
assets as of September 30, 2008 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
Accumulated
|
|
|
|
|
Assets
|
|
Amortization
|
|
Net
|
Patent
|
|
$
|
600,000
|
|
|
$
|
255,000
|
|
|
$
|
345,000
|
|
Project
management tools
|
|
 
|
570,750
|
 
|
|
 
|
537,176
|
 
|
|
 
|
33,574
|
 
|
Total intangible assets
|
|
$
|
1,170,750
|
|
|
$
|
792,176
|
|
|
$
|
378,574
|
|
Intangible assets as of December 31, 2007 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
Accumulated
|
|
|
|
|
Assets
|
|
Amortization
|
|
Net
|
Patent
|
|
$
|
600,000
|
|
|
$
|
210,000
|
|
|
$
|
390,000
|
|
Project
management tools
|
|
 
|
570,750
|
 
|
|
 
|
486,816
|
 
|
|
 
|
83,934
|
 
|
Total intangible assets
|
|
$
|
1,170,750
|
|
|
$
|
696,816
|
|
|
$
|
473,934
|
|
Based on definite lived intangible assets recorded at September 30, 2008, and
assuming no subsequent impairment of the underlying assets, the annual amortization
expense is expected to be as follows:
Year
|
|
Amount
|
2008 (three
months remaining)
|
|
$
|
31,787
|
|
2009
|
|
|
76,787
|
|
2010
|
|
|
60,000
|
|
2011
|
|
|
60,000
|
|
2012
|
|
|
60,000
|
|
2013 and
beyond
|
|
 
|
90,000
|
 
|
|
|
$
|
378,574
|
 
|
7
(Index)
SOCKET
MOBILE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 - Segment Information
The Company operates in one segment - mobile systems solutions for businesses.
Mobile systems solutions typically consist of a handheld computer, data collection
and connectivity peripherals, and third party vertical applications software.
The Company markets its products in the United States and foreign countries
through its sales personnel, vertical industry partners, and distributors. Revenues
for the geographic areas for the three and nine months ended September 30, 2008
and 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
Revenues:
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
United
States
|
|
$
|
5,418,380
|
|
|
$
|
3,729,356
|
|
|
$
|
14,155,852
|
|
|
$
|
11,128,236
|
|
Europe
|
|
|
1,688,560
|
|
|
|
1,259,344
|
|
|
|
5,089,849
|
|
|
|
4,731,235
|
|
Asia
and rest of world
|
|
 
|
911,593
|
 
|
|
 
|
435,516
|
 
|
|
 
|
2,435,265
|
 
|
|
 
|
1,412,902
|
 
|
Total revenues
|
|
$
|
8,018,533
|
|
|
$
|
5,424,216
|
|
|
$
|
21,680,966
|
|
|
$
|
17,272,373
|
|
Export revenues are attributable to countries based on the location of the Company's
customers. The Company does not hold long-lived assets in foreign locations.
Major customers who accounted for at least 10% of the Company's total revenues
were as follows:
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
Tech Data
Corp.
|
|
|
13
|
%
|
|
|
23
|
%
|
|
|
14
|
%
|
|
|
24
|
%
|
Ingram Micro,
Inc.
|
|
|
22
|
%
|
|
|
13
|
%
|
|
|
17
|
%
|
|
|
13
|
%
|
Intermec
Technologies Corp.
|
|
|
22
|
%
|
|
|
*
|
|
|
|
15
|
%
|
|
|
*
|
|
_____________________________________________
* Customer accounts for less than 10% of total revenues for the period
|
NOTE 7 - Stock-Based Compensation
The Company accounts for share-based awards in accordance with SFAS 123R. SFAS
123R requires all share-based awards to employees, including grants of employee
stock options, to be recognized in the financial statements based on their fair
values. Under SFAS 123R, the Company uses a binomial lattice valuation model
to estimate the fair value of stock option grants made on or after January 1,
2006. The binomial lattice model incorporates calculations for expected volatility,
risk-free interest rates, employee exercise patterns and post-vesting employment
termination behavior, and these factors affect the estimate of the fair value
of the Company's stock option grants.
8
(Index)
SOCKET
MOBILE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The weighted average per share fair value of options granted during the three
and nine months ended September 30, 2008 was estimated at $6.69 and $7.94, respectively,
compared to $15.17 and $15.42, respectively, for the three and nine months ended
September 30, 2007. The weighted average per share fair values presented have
been adjusted to reflect a 1-for-10 reverse stock split. The fair values were
determined using a binomial lattice valuation model for options granted on or
after January 1, 2006, and a Black-Scholes valuation model for options granted
prior to January 1, 2006. Weighted average assumptions for options granted during
the three and nine months ended September 30, 2008 and 2007 are shown below:
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
Risk-free
interest rate (%)
|
|
|
4.18
|
%
|
|
|
3.90
|
%
|
|
|
4.16
|
%
|
|
|
3.80
|
%
|
Dividend
yield
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Volatility
factor
|
|
|
0.71
|
|
|
|
1.0
|
|
|
|
0.75
|
|
|
|
1.0
|
|
Expected
option life (years)
|
|
|
4.9
|
|
|
|
4.7
|
|
|
|
4.8
|
|
|
|
4.7
|
|
At September 30, 2008, options issued to employees for 1,101,110 shares were
outstanding, of which 791,968 were exercisable. At September 30, 2007, options
issued to employees for 1,002,155 shares were outstanding, of which 730,660
were exercisable. The options issued and exercisable at September 30, 2008 and
2007 have been adjusted to reflect a 1-for-10 reverse stock split.
Total stock-based compensation expense recognized in the Company's statements
of operations for the three and nine months ended September 30, 2008 and 2007
is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
Income Statement Classification
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
  Cost
of revenues
|
|
$
|
11,707
|
|
|
$
|
19,695
|
|
|
$
|
31,916
|
|
|
$
|
62,802
|
|
  Research
and development
|
|
|
42,796
|
|
|
|
70,901
|
|
|
|
150,953
|
|
|
|
199,379
|
|
  Sales
and marketing
|
|
|
71,168
|
|
|
|
94,567
|
|
|
|
204,752
|
|
|
|
266,752
|
|
  General
and administrative
|
|
 
|
45,970
|
 
|
|
 
|
72,738
|
 
|
|
 
|
177,953
|
 
|
|
 
|
263,696
|
 
|
  Total
|
|
$
|
171,641
|
|
|
$
|
257,901
|
|
|
$
|
565,574
|
|
|
$
|
792,629
|
|
The decline in stock-based compensation expense in the three and nine months
ended September 30, 2008 compared to the same periods one year ago, reflects
older grants with higher valuations, compared to more current grants, becoming
fully expensed.
9
(Index)
SOCKET
MOBILE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 - Net Loss Per Share Applicable to Common Stockholders
The Company calculates earnings per share in accordance with Financial Accounting
Standards Board Statement No. 128,
Earnings per Share
. The following
table sets forth, on a post reverse stock split basis, the computation of basic
and diluted net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(79,765
|
)
|
|
$
|
(898,379
|
)
|
|
$
|
(1,187,440
|
)
|
|
$
|
(2,908,973
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding used in computing net loss per share
(adjusted
to reflect a 1-for-10
reverse stock split):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
3,230,013
|
|
|
|
3,194,798
|
|
|
|
3,214,742
|
|
|
|
3,191,173
|
|
Diluted
|
|
|
3,230,013
|
|
|
|
3,194,798
|
|
|
|
3,214,742
|
|
|
|
3,191,173
|
|
 
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.02
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.91
|
)
|
Diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.91
|
)
|
For the three and nine months ended September 30, 2008 and 2007, the diluted
net loss per share is equal to the basic net loss per share because the Company
experienced losses in these periods. Thus no potential common shares underlying
stock options or warrants have been included in the net loss per share calculation,
as their effect is anti-dilutive. Therefore, options to purchase 1,101,110 shares
of Common Stock at September 30, 2008, and options and warrants to purchase
1,093,992 shares of Common Stock at September 30, 2007, have been omitted from
the diluted net loss per share calculation. The option and warrants amounts
presented have been adjusted to reflect a 1-for-10 reverse stock split.
NOTE 9 - Income Taxes
Deferred income tax reflects the net tax effects of temporary differences between
the carrying amount of assets and liabilities for financial reporting purposes
and the amount used for income tax purposes. Deferred tax expense of $7,985
and $23,955 for the three and nine months ended September 30, 2008, respectively,
and the corresponding deferred tax liability shown on the Company's balance
sheet, is related entirely to the deferred tax liability on the portion of the
Company's goodwill amortized for tax purposes. Deferred tax expense for the
three and nine months ended September 30, 2007 was $7,985 and $23,958, respectively.
Due to the indefinite characteristic of this deferred tax liability, it cannot
be offset against deferred tax assets, and furthermore, this deferred tax liability
may never reverse. The Company has not generated taxable income in any periods
in any jurisdiction, foreign or domestic. The Company maintains a full valuation
allowance for all other components of deferred tax assets.
10
(Index)
SOCKET
MOBILE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
On January 1, 2007, the Company adopted Financial Accounting Standards Board
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - An Interpretation
of FASB Statement No. 109," ("FIN 48"). FIN 48 prescribes a recognition threshold
that a tax position is required to meet before being recognized in the financial
statements, and provides guidance on derecognition, measurement, classification,
interest and penalties, accounting in interim periods, disclosure, and transition
issues. There were no adjustments to the financial statements as a result of
the adoption of FIN 48. At December 31, 2007, the Company has an unrecognized
tax benefit of approximately $595,000, which did not change significantly during
the nine months ended September 30, 2008. The application of FIN 48 does not
result in a change to retained earnings, as the unrecognized tax benefit would
be fully offset by the application of a valuation allowance. Future changes
in the unrecognized tax benefit will have no impact on the effective tax rate
due to the existence of the valuation allowance. It is the Company's policy
to include interest and penalties related to tax positions as a component of
income tax expense. No interest was accrued for the three and nine months ended
September 30, 2008.
The Company files its tax returns as prescribed by the tax laws
of the jurisdictions in which it operates. The Company is not currently under
audit in any of its jurisdictions where income tax returns are filed. The tax
years 1992 to 2007 remain open to examination by the major domestic taxing jurisdictions
to which the Company is subject, and for the years 2001 to 2007 for the international
taxing jurisdictions to which the Company is subject.
11
(Index)
NOTE 10 - Subsequent Events
Reverse Stock Split
On October 22, 2008, the Company's Board of Directors approved a 1-for-10 reverse
split of its Common Stock effective at 5 PM Eastern time on October 23, 2008.
The Company implemented the reverse stock split under the authority granted
to the Board by the Company's stockholders at their annual meeting on April
23, 2008, to effect a reverse stock split of the Company's common stock, par
value $0.001 per share, at a ratio within a range of from one-for-five to one-for-ten
shares. As a result of the reverse stock split, each ten shares of Common Stock,
par value $0.001 per share, of the Company issued and outstanding were, automatically
and without any action on the part of the respective holders thereof, combined
and reconstituted as one share of Common Stock, par value $0.001 per share,
of the Company. The reverse stock split reduced the number of outstanding shares
of Common Stock from approximately 32,300,129 shares to approximately 3,230,013
shares. Holders of a fractional share of Common Stock as a result of the reverse
stock split were entitled to receive a cash amount, without interest, equal
to the fair market value of that fraction based upon the average of the closing
bid prices of the Common Stock as reported on the NASDAQ Capital Market for
each of the five trading days immediately preceding the effective date of the
reverse stock split. On the Company's balance sheet, the aggregate par value
of the issued common stock was reduced by reclassifying the par value amount
of the eliminated shares of common stock to additional paid-in capital. All
per share amounts, outstanding share amounts (including all common stock equivalents),
and authorized share amounts, have been restated in the Condensed Financial
Statements and in the Notes to the Condensed Financial Statements for all periods
presented to reflect the reverse stock split.
12
(Index)
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. These statements include statements forecasting future
financial results and operating activities, market acceptance of our products,
expectations for general market growth of handheld computers and other mobile
computing devices, growth in demand for our products, expansion of the markets
that we serve, expansion of the distribution channels for our products, adoption
of our embedded products by third party manufacturers of electronic devices,
and the timing of the introduction and availability of new products, as well
as other forecasts discussed under "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Words such as "may," "will,"
"predicts," "anticipates," "expects," "intends," "plans," "believes," "seeks,"
"estimates," variations of such words, and similar expressions are intended
to identify such forward-looking statements. Such forward-looking statements
are based on current expectations, estimates, and projections about our industry,
management's beliefs, and assumptions made by management. These forward-looking
statements are not guarantees of future performance and are subject to certain
risks, uncertainties, and assumptions that are difficult to predict; therefore,
actual results and outcomes may differ materially from what is expressed or
forecasted in any such forward-looking statements. Factors that could cause
actual results and outcomes to differ materially include, but are not limited
to: the risk of delays in the availability of our products due to technological,
market or financial factors including the availability of necessary working
capital; our ability to successfully develop, introduce and market future products;
the change in gross margins between current and future products; our ability
to effectively manage and contain our operating costs; events in the U.S. and
world economy, financial markets and credit markets; the availability of announced
third party handheld computer hardware and software that our products are intended
to work with; product delays associated with new model introductions and product
changeovers by the makers of products that our products are intended to work
with; continued growth in demand for handheld computers; market acceptance of
emerging standards such as Bluetooth and Wireless LAN and of our related connection,
data collection, and mobile handheld computer products; the ability of our strategic
relationships to benefit our business as expected; our ability to enter into
additional distribution relationships; or other factors described in this Form
10-Q including "Part II, Item 1A. Risk Factors" and recent Form 8-K and Form
10-K reports filed with the Securities and Exchange Commission. We assume no
obligation to update such forward-looking statements or to update the reasons
why actual results could differ materially from those anticipated in such forward-looking
statements.
You should read the following discussion in conjunction with the interim
condensed financial statements and notes included elsewhere in this report,
the Company's annual financial statements in the Form 10-K, and other information
contained in other reports and documents filed from time to time with the Securities
and Exchange Commission.
Revenues
We produce mobile computing products which are combined with third party application
software to create mobile system solutions that serve the Business Mobility
market. Mobile systems solutions typically consist of a handheld computer, data
collection and connectivity peripherals, and third party vertical applications
software. We have historically offered a wide range of data collection, connectivity
peripheral, and embedded products for use with mobile computing devices offered
by third parties. In January 2007, we began doing business as Socket Mobile
to emphasize our commitment to mobile computing, and formally changed our name
to Socket Mobile, Inc. in April 2008. In June 2007, we introduced our first
mobile handheld computer, the SoMo650, and began offering this mobile
handheld computer and our peripherals for use with third party vertical applications
software. Our data collection and connectivity peripheral products are used
with a variety of handheld computers, including our SoMo 650 mobile handheld
computer, and with tablet computers, notebook computers and handheld computers
with integrated phones that use Windows Mobile, Windows XP, Windows Vista, RIM
Blackberry, Palm, Symbian 60 and Symbian 80 operating systems.
13
(Index)
Our overall company brand identity and positioning goal is to become the leading
provider of easy-to-deploy Business Mobility systems and peripherals. The guiding
principles that we follow in developing our mobile handheld and peripheral products
for the Business Mobility computing market are stable and expandable computing
devices with industry standard expansion form factors, compact design, low battery
power consumption to extend time between charges, ease of use, interoperability,
and quality. Our focus is business customers in the mobile marketplace. Our
mobile handheld computing products have been designed to address the Business
Mobility market for a handheld computer that is positioned between a consumer-oriented
handheld device and a heavy duty industrial device. Our mobile handheld computer
is easy to customize and integrate with peripherals and information systems
and has an expected product life cycle of three to five years which meets the
needs of businesses for longer deployments than have been available with most
consumer-oriented handheld devices.
We work with more than 200 software integration companies that are offering
or developing vertical application software for use with handheld computers.
Examples of these vertical applications include patient medication administration
within the health care industry, retail merchandising such as managing inventory
on retail store shelves, sales and field force automation involving the collection
and processing of orders or service information from remote locations by sales
and service personnel, asset management and inventory control for assets having
bar codes or radio frequency identification tags, and mobile point of sale applications.
These mobile solutions are designed to improve the productivity of business
enterprises by automating manual tasks, improving the quality of information
collected, and enhancing mobile productivity by processing and transferring
information from remote locations and mobile devices to the business enterprise,
and then if required, back to the remote locations and mobile devices.
Most of our products, except our OEM embedded products, are sold through distributors
and resellers that serve business customers. Our OEM embedded products are sold
directly to the manufacturers of devices in which our products are embedded.
The geographic regions we serve include the Americas, Europe, the Middle East,
Africa and Asia Pacific. Total revenues for the three and nine months ended
September 30, 2008 were $8.0 million and $21.7 million, respectively, which
represented increases of 48% and 26% from revenues of $5.4 million and $17.3
million, respectively for the corresponding periods one year ago.
14
(Index)
Our revenues in the comparable three and nine month periods may be classified
into three broad product families:
-
Mobile handheld computer products;
-
Mobile peripheral products, including
- Data collection products,
- Connectivity products,
- Serial interface products, and
-
OEM embedded products.
Our
mobile handheld computer products
have been designed to address
the Business Mobility market for a handheld computer that is positioned between
a consumer-oriented handheld device and a heavy duty industrial device. Our
initial model, the SoMo 650 (SoMo is derived from Socket Mobile), was introduced
in June 2007 and featured the Microsoft Windows Mobile 5.0 for Pocket PC operating
system to ensure a high level of mobile application compatibility and to give
workers a familiar computing environment. We began offering Windows Mobile 6
Classic and multiple language support for the SoMo 650 in the second quarter
of 2008 giving customers a choice of operating systems and languages to best
fit their needs. The SoMo 650 is easy to customize and integrate with peripherals
and information systems and has an expected product life cycle of three to five
years which meets the needs of businesses for longer deployments than have generally
been available with most consumer-oriented handheld devices. Our mobile handheld
computer's features include Wireless LAN and Bluetooth, a fast processor, a
large, bright screen display, large amounts of SDRAM and flash memory, extended
battery life, programmable action buttons to activate peripheral devices, reinforced
CompactFlash and SDIO card slots, and a durable case. Additional models are
in development that will run the Windows Mobile 5 or Windows Mobile 6 Classic
operating system, add additional multiple language support, enable extended
outdoor use, and offer specialized capabilities oriented to the needs of specific
vertical markets. In the fourth quarter of 2008, we expect to begin shipping
a radio-free configured model, our SoMo 650 DX, for high security applications
such as those found in the government and financial markets, and our SoMo 650
Rx model with an antibacterial case targeted toward healthcare and other markets
that involve hygiene-sensitive environments. The SoMo 650 was specifically designed
without an integrated mobile phone as most solutions involving our products
use Bluetooth or Wireless LAN connections for data communications and do not
require an integrated mobile phone. Mobile handheld computer products represented
approximately 19% and 15% of our revenues for the three and nine month periods
ended September 30, 2008, respectively, compared to 8% and 3% of our revenues
for the same periods one year ago.
Our mobile peripheral products consist of
data collection products
,
connectivity products
, and
serial interface products
, which together
represented approximately 44% and 50% of our revenues for the three and nine
months ended September 30, 2008, respectively, compared to 64% and 71% of our
revenues for the same periods one year ago.
15
(Index)
Our
data collection products
enable the electronic collection of data
from bar codes, Radio Frequency IDentification (RFID) tags, or magnetic stripes
and consist of:
-
bar code scanning products that plug into or connect wirelessly to handheld
computers, tablet computers, notebook computers, and handheld computers with
integrated phones that use Windows Mobile, Windows XP, Windows Vista, Windows
Tablet, RIM Blackberry, Palm, or Symbian 60 or Symbian 80 operating systems,
and turn these devices into portable bar code scanners that can be used in
various retail and industrial workplaces;
-
plug-in radio frequency identification products that read radio frequency
identification tags;
-
a combination plug-in bar code scanner and radio frequency identification
reader; and
-
a plug-in magnetic stripe reader.
We have developed extensive bar code scanning software called SocketScan that
supports all of our data collection products, and have software developer kits
that assist third party developers in integrating our SocketScan software and
our hardware products into their applications and solutions. Our bar code scanning
products include CompactFlash and SDIO plug-in bar code scanners for linear
and two-dimensional bar code scanning, along with a cordless handheld bar code
scanner and a ring scanner worn on the index finger, both of which connect to
computing systems using the Bluetooth standard for short-range wireless connectivity.
Data collection products represented approximately 34% and 38% of our revenues
for the three and nine months ended September 30, 2008, respectively, compared
to 46% and 52% of our revenues for the same periods one year ago.
Our
connectivity products
are connection devices that can be plugged
into standard expansion slots in handheld computers, tablet computers, and notebook
computers that use Windows Mobile, Windows XP, or Windows Tablet operating systems.
These products allow users to connect their devices via Ethernet or telephone
to communicate with other networks and devices such as desktop computers, other
handheld, tablet, and notebook computers, handheld computers with integrated
phones, and printers. Our connectivity products include:
-
modems for telephone connections that connect over a cable, and a cordless
modem that utilizes Bluetooth wireless technology to connect a telephone to
a Bluetooth-enabled computer or other device;
-
Ethernet cards for local area network connections that connect over a cable;
and
-
accessory products such as batteries and cables.
Connectivity products represented approximately 6% of our revenues
for both the three and nine months ended September 30, 2008, respectively, compared
to 9% and 11% of our revenues for the same periods one year ago
Our
serial interface products
enable the connection of
a mobile computer to electronic devices either as a plug-in card (one, two or
four ports) connecting over cables, or wirelessly over a Bluetooth network.
Our serial interface products are used primarily with Windows XP and Windows
Vista based devices. We recently introduced a USB to serial connector to enable
a serial connection through a USB interface, and we expect to introduce a USB
to Ethernet adapter in the fourth quarter of 2008. Serial interface products
represented approximately 4% and 6% of our revenues in the three and nine months
ended September 30, 2008, respectively, compared to 8% of our revenues for each
of the same periods one year ago.
16
(Index)
Our
OEM embedded products
consist of Bluetooth and Wireless LAN modules
and plug-in cards used primarily by OEMs of handheld computers and other devices
to build wireless connection functions into their products using the Bluetooth
and Wireless LAN standards for wireless connectivity. Our plug-in cards and
modules using the Bluetooth standard for short-range wireless connectivity include
extensive communications software enabling the use of these products, as do
our plug-in cards for connecting to local wireless networks using the Wireless
LAN 802.11b/g (or Wi-Fi) standards. We have recently added Cisco Compatible
Extensions (CCX) 4.0 certification to our Wireless LAN software to enable our
Wireless LAN products to be compatible with a Cisco Wireless LAN infrastructure.
Bluetooth and Wireless LAN connection functions are being built into many third
party mobile devices, which may reduce the demand for our plug-in products through
expansion slots but may increase the demand for our Bluetooth and Wireless LAN
modules and embedded plug-in cards. OEM embedded products represented approximately
37% and 35% of our revenues for the three and nine months ended September 30,
2008, respectively, compared to 28% and 26% of our revenues for the same periods
one year ago.
Our revenues by product family for the three and nine months ended September
30, 2008 and 2007, and the corresponding increase or decrease in revenues for
the comparable periods are shown in the following table:
(revenues in
thousands)
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
Product
family:
|
|
2008
|
|
2007
|
|
Increase
(Decrease)
|
|
2008
|
|
2007
|
|
Increase
(Decrease)
|
Mobile handheld computer products
|
|
$
|
1,512
|
|
|
$
|
448
|
|
|
|
238
|
%
|
|
$
|
3,219
|
|
|
$
|
515
|
|
|
|
525
|
%
|
Mobile peripheral products:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data
collection
|
|
|
2,727
|
|
|
|
2,522
|
|
|
|
8
|
%
|
|
|
8,288
|
|
|
|
9,027
|
|
|
|
(8
|
%)
|
Connectivity
|
|
|
483
|
|
|
|
498
|
|
|
|
(3
|
%)
|
|
|
1,389
|
|
|
|
1,921
|
|
|
|
(28
|
%)
|
Serial
products
|
|
|
326
|
|
|
|
437
|
|
|
|
(25
|
%)
|
|
|
1,303
|
|
|
|
1,358
|
|
|
|
(4
|
%)
|
OEM embedded products
|
|
 
|
2,971
|
 
|
|
 
|
1,519
|
 
|
|
|
96
|
%
|
|
 
|
7,482
|
 
|
|
 
|
4,451
|
 
|
|
|
68
|
%
|
Total
|
|
$
|
8,019
|
|
|
$
|
5,424
|
|
|
|
48
|
%
|
|
$
|
21,681
|
|
|
$
|
17,272
|
|
|
|
26
|
%
|
Our mobile handheld computer product revenues in the three and nine months ended
September 30, 2008 were $1,512,000 and $3,219,000, respectively, compared to
$448,000 and $515,000, respectively, in the comparable periods one year ago.
We began shipping our first mobile handheld computer, the SoMo 650, to customers
in our distribution channel in the second quarter of 2007. In the third quarter
of 2007, we completed our objectives of ramping up production and fully stocking
our distribution channel to enable the commencement of widespread customer evaluation,
qualification, and deployment. Increased revenues for our handheld computer
in 2008 reflect higher sales volumes due to a growing customer base with larger
average unit deployments.
Our data collection product revenues in the three and nine months ended September
30, 2008 were $2.7 million and $8.3 million, a increase of 8% and a decrease
of 8% compared to revenues of $2.5 million and $9.0 million, respectively, in
the comparable periods one year ago. Increases totaling $0.6 million in the
comparable three month periods were due to increased sales volumes of our Cordless
Hand Scanner, our CompactFlash In-Hand Scan card, and our Cordless Ring Scanner.
Partially offsetting these increases were declines in sales volumes of our SDIO
In-Hand Scan card between the comparable three month periods. Decreases of $0.9
million between the comparable nine month periods were from declines in sales
volumes of our CompactFlash In-Hand Scan card, our SDIO In-Hand Scan card, and
our Cordless Ring Scanner, and were partially offset by increases in sales of
our Cordless Hand Scanner. Data collection revenues in the first nine months
of 2008 were slowed in the first quarter but began to recover in the second
quarter due in part to delayed availability of new handheld computer models
originally announced by a major handheld computer manufacturer in the third
quarter of 2007, which did not begin shipping until February 2008. Such announcements
and delayed timing of product availability typically slow customer deployments
of our peripheral products because of the time needed by customers to evaluate
or adopt the new handheld computer models.
17
(Index)
Our connectivity product revenues in the three and nine months ended
September 30, 2008 were $483,000 and $1,389,000, respectively, declining 3%
and 28% compared to revenues of $498,000 and $1,921,000, respectively, in the
same periods one year go. Declines between the comparable three month periods
were from reduced sales volumes of our Ethernet plug-in products. Declines between
the comparable nine month periods were from reduced sales volumes of our Modem
plug-in products and Ethernet plug-in products. Reductions in connectivity product
revenues are due to reduced corporate deployment of these wired connection solutions
in 2008.
Our serial interface product revenues in the three and nine months
ended September 30, 2008 were $326,000 and $1,303,000, respectively, a decline
of 25% and 4% compared to revenues of $437,000 and $1,358,000, respectively,
in the comparable periods one year ago. Revenue declines between the comparable
three months were from declines in sales volumes of our standard serial PC card
products, our CompactFlash card product, and our cordless Bluetooth serial adapter
product. Revenue declines between the comparable nine months were from declines
in sales volumes of our CompactFlash card and cordless Bluetooth serial adapter
products, partially offset by increases in sales of our standard serial PC card
products. Our standard peripheral connection cards are primarily sold to connect
peripheral devices or other electronic equipment to notebook computers.
Our OEM embedded product revenues in the three and nine months ended
September 30, 2008 were $3.0 million and $7.5 million, respectively, an increase
of 96% and 68% compared to $1.5 million and $4.5 million, respectively, in the
comparable periods one year ago. Revenue increases of $0.8 million and $2.4
million in sales of our Bluetooth modules in the three and nine months of 2008
were due to a recovery in market conditions that existed in early 2007. In the
first quarter of 2007 our customers in the industrial ruggedized market segment
experienced pronounced increased competition due to a short-term aggressive
price discounting by a major competitor, a trend which adversely affected our
related Bluetooth module revenues in the first quarter of 2007, but improved
steadily in the following second, third, and fourth quarters of 2007, and through
the first nine months of 2008, following cessation of the aggressive discounting
by the competition. Additional revenue increases of $0.6 million and $0.7 million
in the three and nine month periods were from increased sales volumes of our
Wireless LAN plug-in card products. Partially offsetting the increase between
the nine month periods was a decline in revenues related to our Bluetooth plug-in
cards primarily due to this wireless technology becoming increasingly a standard
feature built-in by handheld computer manufacturers.
Gross Margins
Gross margins in the three and nine month periods ended September
30, 2008 were 46% and 48% compared to margins of 48% and 49%, respectively,
in each of the comparable periods in 2007. We generally price our products as
a markup from our cost, and we offer discount pricing for higher volume purchases.
Reductions in overall margins in the three and nine month periods of 2008 compared
to the same periods one year ago are due primarily to discounts on volume purchases
of our Bluetooth modules by customers in our OEM embedded business segment and
increased sales of our mobile handheld computer which began shipping late in
the second quarter of 2007. Margins on our mobile handheld computer products
are currently below our average product margins. We expect our overall margins
to improve in the fourth quarter from third quarter 2008 levels due to an anticipated
change in product sales mix.
18
(Index)
Research and Development
Expense
Research and development expense for the three months ended September
30, 2008 was $1,102,000, a decrease of 2% compared to research and development
expense of $1,123,000 in the corresponding period one year ago. Research and
development expense for the nine months ended September 30, 2008 was $3.4 million,
a decline of 8% compared to research and development expense of $3.7 million
in the corresponding period one year ago. The decrease from the comparable three
months is attributable to reductions in equipment costs and consulting and professional
fees partially offset by increased outside services expense. Decreases of $0.2
million between the comparable nine month period was attributable to the costs
incurred in the first quarter of 2007 related to the development of our SoMo
650 mobile handheld computer, the development of which was begun in the fourth
quarter of 2006, with the majority of the development expense concluded by the
end of the first quarter of 2007. Additional decreases from the comparable nine
months were from reductions in consulting and professional fees related to fewer
projects requiring the use of external technical expertise, and from reductions
in equipment costs due to higher amounts of depreciation expense related to
capitalized tooling in the first quarter of 2007. Partially offsetting these
decreases were increases in personnel costs from staffing in-house expertise
for technical skills formerly obtained from outside consulting and professional
service providers. Research and development expenses in the fourth quarter are
expected to remain at levels comparable to the third quarter of 2008.
Sales and Marketing Expense
Sales and marketing expense for the three month period ended September 30, 2008
was $2.0 million, an increase of 10% compared to sales and marketing expense
of $1.8 million in the corresponding period one year ago. Sales and marketing
expense for the nine month period ended September 30, 2008 was $5.9 million,
an increase of 6% compared to sales and marketing expense of $5.5 million in
the corresponding period one year ago. Increases between the comparable three
and nine months were primarily from increased personnel costs due to the additions
of key personnel beginning in the second quarter of 2007, including our Senior
VP of Sales & Marketing, as we added sales resources in North America to begin
selling our new SoMo 650 mobile handheld computer, which began shipping late
in the second quarter of 2007, and to recruit and develop new third party channel
partners. Additional increases between the comparable three and nine month periods
were from higher levels of advertising and promotional expense, offset by reductions
in outside services and travel expense. Sales and marketing expense is expected
to increase in the fourth quarter of 2008 from third quarter levels due to increased
personnel costs and promotional activities.
General and Administrative
Expense
General and administrative expense for the three months ended September 30,
2008 was $610,000, an increase of 8% compared to general and administrative
expense of $566,000 in the corresponding period one year ago. General and administrative
expense for the nine month period ended September 30, 2008 was $2.0 million,
a decrease of 3% compared to general and administrative expense of $2.1 million
in the corresponding period one year ago. Increases between the comparable three
months were from increased facility and compensation related expenses. The decrease
between the comparable nine month periods was primarily from reduced stock-based
compensation expenses as older grants with higher valuations compared to more
current grants, became fully expensed. General and administrative expenses are
expected to increase in the fourth quarter of 2008 from third quarter levels
due primarily to increased consulting and professional fees related to the audit
of our annual financial statements, historically charged during the fourth and
first quarters.
19
(Index)
Amortization of Intangibles
In July 2004 we acquired a patent which covers the design and functioning
of plug-in bar code scanners, bar code imagers, and radio frequency identification
products. The patent was purchased for $600,000 and has been capitalized as
an intangible asset. The patent is being amortized on a straight line basis
over a ten-year period. Intangible assets of $571,000 remaining from a prior
acquisition in 2000 consist of developed software and technology with estimated
lives at the time of acquisition of 8.5 years. Amortization charges for the
three and nine months ended September 30, 2008 for all acquired intangibles
were $32,000 and $95,000, respectively, compared to $34,000 and $101,000 for
the same periods one year ago.
Interest Income and
Expense
Interest income reflects interest earned on cash balances. Interest income of
$3,500 and $19,600 in the three and nine month periods ended September 30, 2008,
respectively, declined from interest income of $30,300 and $97,800, respectively,
in the comparable periods one year ago. Lower interest income in the comparable
periods reflects lower average cash balances combined with lower average rates
of return.
Interest expense of $25,000 and $56,000 for the three and nine months ended
September 30, 2008, respectively, increased from interest expense of $15,000
and $21,000, respectively, for the comparable periods one year ago. Interest
expense is related to interest on amounts drawn on our bank lines of credit
and term loan, and interest on equipment lease financing obligations. Higher
interest expense in the comparable periods is due to higher average balances
outstanding on our bank lines of credit partially offset by lower interest rates,
and higher average amounts outstanding on our bank term loan compared to the
same periods one year ago. In the second and third quarter of 2008, average
amounts outstanding on our bank lines of credit increased from prior quarters'
levels. Prior to the second quarter of 2008 we used our bank lines of credit
only at the end of the quarter in the first quarter of 2008 and at the end of
each quarter in 2007. The term loan was advanced at the end of the second quarter
of 2007 and is being repaid in 36 monthly installments which began in July of
2007.
Taxes
Deferred income tax reflects the net tax effects of temporary differences between
the carrying amount of assets and liabilities for financial reporting purposes
and the amount used for income tax purposes. Deferred tax expense of $8,000
and $24,000 in the three and nine month periods ended September 30, 2008 and
2007, and the corresponding deferred tax liability shown on the Company's balance
sheet, is related entirely to the deferred tax liability on the portion of the
Company's goodwill amortized for tax purposes. Due to the indefinite characteristic
of this deferred tax liability, it cannot be offset against deferred tax assets,
and furthermore, this deferred tax liability may never reverse. The Company
maintains a full valuation allowance for all other components of deferred tax
assets. The Company has not generated taxable income in any periods in any jurisdiction,
foreign or domestic.
20
(Index)
In June 2006, the Financial Accounting Standards Board ("FASB")
issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -
An Interpretation of FASB Statement No. 109" ("FIN 48"), to create a single
model to address accounting for uncertainty in tax positions. FIN 48 clarifies
the accounting for income taxes by prescribing a minimum recognition threshold
a tax position is required to meet before being recognized in the financial
statements. FIN 48 also provides guidance on derecognition, measurement, classification,
interest and penalties, accounting in interim periods, disclosure and transition.
FIN 48 is effective for fiscal years beginning after December 15, 2006. The
Company adopted FIN 48 as of January 1, 2007, as required. There were no adjustments
to the financial statements as a result of the adoption of FIN 48. For additional
information on taxes see Note 9 to the Condensed Financial Statements.
Liquidity and Capital Resources
We were unprofitable in each of the first three quarters of 2008. We were unprofitable
in each of the quarters of fiscal years 2007 and 2006. We were profitable in
two quarters in 2005, but unprofitable for fiscal year 2005. Fiscal year 2004
was the first profitable year in our history, but only to the extent of $288,000.
Prior to 2004, we incurred significant operating losses in each financial period
since our inception. We may continue to be unprofitable in the foreseeable future.
Historically we have financed our operations through the sale of equity securities,
equipment financing, and revolving bank lines of credit. Since our inception
we have raised approximately $51 million in equity capital to fund our operations.
Cash used in operating activities was $1.0 million in the first nine months
of 2008, compared to cash used in operating activities of $1.5 million in the
first nine months of 2007. Cash used in the first nine months of 2008 resulting
from our net loss adjusted for non-cash items was $77,000 compared to cash used
of $1.4 million in the first nine months of 2007 from our net loss adjusted
for non-cash items. Adjustments for non-cash items consisting of depreciation
and amortization, amortization of intangibles, gains and losses on foreign currency
transactions, changes in deferred rent, deferred tax expense, and stock-based
compensation expense, totaled $1.1 million in the first nine months of 2008
compared to $1.4 million in the first nine months of 2007. Changes in working
capital balances in the first nine months of 2008 resulted in a use of cash
of $0.9 million, and were primarily from increases in accounts receivable due
to a combination of the timing of shipments late in the third quarter of 2008
and the timing of collections from key distributors concentrated at the end
of the fourth quarter of 2007, and increases in inventories due primarily to
stocking higher quantities of our mobile handheld computer and stocking higher
quantities of our Bluetooth modules for our OEM customers, partially offset
by increases in accounts payable related to the purchases that led to the increased
levels of inventories. Changes in working capital balances in the first nine
months of 2007 resulted in a source of cash of $39,000, and were primarily from
increases in deferred income on shipments to distributors resulting from volume
shipments of our mobile handheld computer beginning mid-September, as we began
stocking our distribution channel with this product, and from reductions in
levels of inventories, partially offset by reductions in accounts payable and
accrued expenses due to payments of accrued costs attributable to development
of our mobile handheld computer, and from increases in accounts receivable due
to shipments made late in the third quarter.
Cash used in investing activities was $0.3 million in the first nine months
of 2008 compared to $0.8 million in the first nine months of 2007. Higher amounts
of investing activities in the first nine months of 2007 reflect the costs of
leasehold improvements related to our corporate headquarters into which we moved
at the beginning of the first quarter of 2007. Remaining investing activities
in each of the periods reflects the costs of new computer hardware and software,
and tooling costs.
21
(Index)
Cash provided from financing activities was $457,000 in the first nine months
of 2008, compared to $541,000 during the first nine months of 2007. Financing
activities in the first nine months of 2008 consisted primarily of a net increase
in the amounts drawn on our bank lines of credit at the end of the quarter,
proceeds from the exercise of warrants and stock options primarily in the second
quarter of 2008, partially offset by repayments on our bank term loan, which
was advanced at the end of June 2007 and is being repaid in 36 monthly installments
beginning in July 2007. Financing activities in the first nine months of 2007
consisted primarily of proceeds from the bank term loan advanced at the end
of the second quarter of 2007, and proceeds from the exercise of stock options,
and payments on capital leases.
Our cash balances at September 30, 2008 were $4.1 million, including cash of
$3.0 million drawn against our bank line of credit and a net balance of $0.3
million from the bank term loan, which is being repaid monthly over three years
beginning in July 2007. In March 2008, we extended our bank line of credit agreement,
which will now expire on March 24, 2010. We believe our existing cash, plus
our ability to reduce costs, and our bank line will be sufficient to meet our
funding requirements at least through September 30, 2009. To the extent our
revenues continue to grow, we anticipate requirements for cash will include
funding of higher receivable and inventory balances, and increasing expenses,
including more employees to support the growth and increases in salaries, benefits,
and related support costs for employees. If we cannot return to profitability,
however, we will not be able to support our operations from positive cash flows,
and we would use our existing cash to support operating losses. If we are unable
to secure the necessary capital to replace that cash, we may need to suspend
some or all of our current operations. Should the need arise, there are no assurances
that additional capital will be available on acceptable terms, if at all, and
any such terms may be dilutive to existing stockholders. Although we do not
anticipate the need to raise additional capital at this time to fund our operations,
we may raise additional capital if market conditions are appropriate.
Our contractual cash obligations at September 30, 2008 are outlined in the
table below:
|
|
Payments
Due by Period
|
Contractual Obligations
|
 
|
Total
|
|
|
Less
than
1 year
|
|
|
1
to 3
years
|
|
|
4
to 5
years
|
|
|
More
than
5 years
|
|
Capital
leases
|
|
$
|
34,500
|
|
|
$
|
16,800
|
|
|
$
|
17,700
|
|
|
$
|
---
|
|
|
$
|
---
|
|
Operating
leases
|
|
|
1,433,200
|
|
|
|
366,300
|
|
|
|
769,700
|
|
|
|
297,200
|
|
|
|
---
|
|
Term
loan, principal and interest
|
|
|
309,700
|
|
|
|
171,500
|
|
|
|
138,200
|
|
|
|
---
|
|
|
|
---
|
|
Unconditional
purchase obligations with contract manufacturers
|
|
 
|
3,992,700
|
|
|
 
|
3,992,700
|
|
|
 
|
---
|
|
|
 
|
---
|
|
|
 
|
---
|
|
Total
contractual cash obligations
|
|
$
|
5,770,100
|
|
|
$
|
4,547,300
|
|
|
$
|
925,600
|
|
|
$
|
297,200
|
|
|
$
|
---
|
|
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements as defined in Item 303 of Regulation
S-K.
22
(Index)
Recent Accounting Pronouncements
In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" ("SFAS 157"), which establishes a framework
for measuring fair value and enhanced disclosures about fair value measurements.
In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, "Effective
Date of FASB Statement No. 157," which provides for a one year deferral of the
effective date of SFAS 157 for non-financial assets and non-financial liabilities,
except those that are recognized or disclosed in the financial statements at
fair value on a recurring basis. We adopted the provisions of SFAS 157 as of
January 1, 2008, with respect to our financial assets and liabilities only.
The adoption of this statement did not have a material impact on our financial
statements. For additional discussion on fair value measurements see Note 1
to the Condensed Financial Statements.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value
Option for Financial Assets and Financial Liabilities" ("SFAS 159"), which permits
companies to choose to measure certain financial instruments and certain other
items at fair value. The standard requires that unrealized gains and losses
on items for which the fair value option has been elected be reported in earnings.
SFAS 159 is effective for fiscal years beginning after November 15, 2007. We
adopted SFAS 159 as of January 1, 2008. The adoption of SFAS 159 did not have
a material impact on our financial statements.
23
(Index)
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates
primarily to invested cash. Our cash is invested in short-term money market
investments backed by U.S. Treasury notes and other investments that mature
within one year and whose principal is not subject to market rate fluctuations.
Accordingly, interest rate declines would adversely affect our interest income
but would not affect the carrying value of our cash investments. Based on a
sensitivity analysis of our cash investments during the quarter ended September
30, 2008, a decline of 1% in interest rates would not have had a material effect
on our quarterly interest income.
Our bank credit line facilities of up to $4.0 million have variable
interest rates based upon the lender's index rate plus 0.5% for both the domestic
line (up to $2.5 million) and the international line (up to $1.5 million). Accordingly,
interest rate increases would increase our interest expense on our outstanding
credit line balances. We utilized only a portion our credit line facility during
the second and third quarters of 2008. In the first quarter of 2008 and in each
quarter of fiscal year 2007 we utilized the credit line facility only at the
end of the quarter and therefore did not subject ourselves to significant interest
rate exposure in such quarters. Based on a sensitivity analysis, an increase
of 1% in the interest rate would increase our borrowing costs by $10,000 for
each $1 million of borrowings, if outstanding for the entire year, against our
bank credit facility or a maximum of $40,000 if we utilized our entire credit
line.
Foreign Currency Risk
A substantial majority of our revenue, expense and purchasing activities
are transacted in U.S. dollars. However, we require our European distributors
to purchase our products in Euros, we pay the expenses of our European employees
in Euros and British pounds, and we may enter into selected future purchase
commitments with foreign suppliers that may be paid in the local currency of
the supplier. We hedge a significant portion of our European receivables balance
denominated in Euros to reduce the foreign currency risk associated with these
assets, and we have not been subject to significant losses from material foreign
currency fluctuations. Based on a sensitivity analysis of our net foreign currency
denominated assets and subsidiary expenses at the beginning, during and at the
end of the quarter ended September 30, 2008, an adverse change of 10% in exchange
rates would result in an increase in our net loss for the third quarter of approximately
$58,000, if left unprotected. For the third quarter of 2008 the total net adjustment
for the effects of changes in foreign currency on cash balances, collections,
payables, and derivatives was a net loss of $10,400. We will continue to monitor,
assess, and mitigate through hedging activities, the risk associated with these
exposures.
24
(Index)
Item 4T. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls
and Procedures
Our management evaluated, with the participation of our Chief Executive
Officer and our Chief Financial Officer, the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this Quarterly
Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and
our Chief Financial Officer have concluded that our disclosure controls and
procedures are effective to ensure that information we are required to disclose
in reports that we file or submit under the Securities Exchange Act of 1934
is (i) recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms, and (ii) accumulated
and communicated to our management, including our Chief Executive Officer and
our Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred
during the period covered by this Quarterly Report on Form 10-Q that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
25
(Index)
PART II. OTHER INFORMATION
Item 1A. Risk Factors
There are no material changes to the risk factors described in Part
I, "Item 1A. Risk Factors," in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2007, with the exception of the risk factor titled,
"
Our Common Stock will become ineligible for listing on the NASDAQ Capital
Market if it does not trade at or above $1.00, which would materially adversely
affect the liquidity and price of our Common Stock
," which has been deleted
from the risk factors presented below to reflect that a reverse stock split
of 1-for-10 approved by the Board of Directors on October 22, 2008, effective
on October 23, 2008, brought our Common Stock into compliance with the minimum
bid price listing requirement for continued listing on the NASDAQ Capital Market
effective on November 7, 2008. In addition, the presentation of numerical amounts
and percentages in the following risk factors below titled: "
A significant
portion of our revenue currently comes from two distributors, and any decrease
in revenue from these distributors could harm our business;" "Our operating
results could be harmed by economic, political, regulatory and other risks associated
with export sales;" "The sale of a substantial number of shares of our Common
Stock could cause the market price of our Common Stock to decline;" and "Volatility
in the trading price of our Common Stock could negatively impact the price of
our Common Stock
," have been updated to reflect third quarter of 2008 information.
The risks described in our Annual Report on Form 10-K and updated
in this Report on Form 10-Q, are not the only risks facing our Company. Additional
risks and uncertainties not currently known to us or that we currently deem
to be immaterial also may materially adversely affect our business, financial
condition, and operating results.
We have a history of operating losses and may not achieve ongoing
profitability.
We were unprofitable in each of the first three quarters of 2008 and in each
of the quarters in fiscal years 2007 and 2006. We were profitable in two quarters
in 2005, but unprofitable for fiscal year 2005. Fiscal year 2004 was the first
profitable year in our history, but only to the extent of $288,000. Prior to
2004, we incurred significant operating losses in each financial period since
our inception. To achieve ongoing profitability, we must accomplish numerous
objectives, including growth in our business and the development of successful
new products. We cannot foresee with any certainty whether we will be able to
achieve these objectives in the future. Accordingly, we may not generate sufficient
net revenue or manage our expenses sufficiently to achieve ongoing profitability.
If we cannot achieve ongoing profitability, we will not be able to support our
operations from positive cash flows, and we would use our existing cash and
bank line of credit to support operating losses. If we are unable to secure
the necessary capital to replace that cash, we may need to suspend some or all
of our current operations.
We may require additional capital in the future, but that capital may not
be available on reasonable terms, if at all, or on terms that would not cause
substantial dilution to your stock holdings.
Although we do not anticipate the need to raise additional capital during the
next twelve months to fund our operations, we may incur operating losses in
future quarters and may need to raise capital to fund these losses. Our forecasts
are highly dependent on factors beyond our control, including market acceptance
of our products and sales of handheld computers. If capital requirements vary
materially from those currently planned, we may require additional capital sooner
than expected. There can be no assurance that such capital will be available
in sufficient amounts or on terms acceptable to us, if at all. In addition,
the availability of our bank line is dependent upon our maintaining minimum
levels of tangible net worth. Future operating losses could cause us to lose
the availability of our bank line as a result of becoming non-compliant with
this covenant.
26
(Index)
If third parties do not produce and sell innovative products
with which our products are compatible, or if our own line of mobile handheld
computers is not successful, we may not achieve our sales projections.
Our success has been dependent upon the ability of third parties in the mobile
personal computer industry to complete development of products that include
or are compatible with our technology and then to sell these products into the
marketplace. Even if we are successful in marketing and selling our new line
of mobile handheld computers, our ability to generate increased revenue depends
significantly on the commercial success of Windows mobile products, particularly
the standard Pocket PC handhelds, phone-integrated devices, and tablets, and
other phone-integrated devices including those from Palm, Nokia, and Blackberry,
for use with our plug-in and wireless peripherals, and the adoption of these
mobile computer devices for business use. If manufacturers are unable or choose
not to ship new products such as Pocket PC and other Windows mobile devices,
or experience difficulties with new product transitions that cause delays in
the market as we experienced in the past three years, or if these products,
including our new line of mobile handheld computers, the first model of which
we began shipping in June 2007, fail to achieve or maintain market acceptance,
the number of our potential new customers would be reduced and we would not
be able to meet our sales expectations.
If we fail to develop and introduce new products rapidly and successfully,
we will not be able to compete effectively, and our ability to generate sufficient
revenues will be negatively affected.
The market for our products is prone to rapidly changing technology, evolving
industry standards and short product life cycles. If we are unsuccessful at
developing and introducing new products and services on a timely basis that
include the latest technologies conforming to the newest standards and that
are appealing to end users, we will not be able to compete effectively, and
our ability to generate significant revenues will be seriously harmed.
The development of new products and services can be very difficult and requires
high levels of innovation. The development process is also lengthy and costly.
Short product life cycles expose our products to the risk of obsolescence and
require frequent new product introductions. We will be unable to introduce new
products and services into the market on a timely basis and compete successfully,
if we fail to:
-
identify emerging standards in the field of mobile computing products;
-
enhance our products by adding additional features;
-
invest significant resources in research and development, sales and marketing,
and customer support;
-
maintain superior or
competitive performance in our products; and
-
anticipate our end users' needs and technological trends accurately.
27
(Index)
We cannot be sure that we will have sufficient resources to make
adequate investments in research and development or that we will be able to
identify trends or make the technological advances necessary to be competitive.
A significant portion of our revenue currently comes from two distributors,
and any decrease in revenue from these distributors could harm our business.
A significant portion of our revenue comes from two distributors, Tech Data
Corp. and Ingram Micro, Inc., which together represented approximately 31% and
37% of our worldwide revenue in the first nine months of 2008 and fiscal year
2007, respectively. We expect that a significant portion of our revenue will
continue to depend on sales to Tech Data Corp. and Ingram Micro, Inc. We do
not have long-term commitments from Tech Data Corp. or Ingram Micro, Inc. to
carry our products. Either could choose to stop selling some or all of our products
at any time, and each of these companies also carries our competitors' products.
If we lose our relationship with Tech Data Corp. or Ingram Micro, Inc., we would
experience disruption and delays in marketing our products. Additionally, a
significant portion of our revenue, 22% and 15% in the third quarter and first
nine months of 2008, respectively, came from Intermec Technologies Corp. We
do not have a long-term commitment from Intermec Technologies, Corp. to purchase
our products, and there are no assurances that sales to Intermec Technologies,
Inc. in future quarters will be at comparable levels.
If the market for mobile computers experiences delays, or fails to grow,
we will not achieve our sales projections.
Substantially all of our peripheral products are designed for use with mobile
personal computers, including handhelds, notebook computers, tablets and handheld
computers with integrated phones. If the mobile personal computer industry does
not grow, if its growth slows, or if product or operating system changeovers
by mobile computer manufacturers and partners cause delays in the market, as
we experienced in the past three years, or if the markets for our mobile handheld
computers do not grow, we will not achieve our sales projections.
Our sales will be hurt if the new technologies used in our products do not
become widely adopted, or are adopted slower than expected.
Many of our products use new technologies, such as 2D bar code scanning and
radio frequency identification, which are not yet widely adopted in the market.
If these technologies fail to become widespread, or are adopted slower than
expected, our sales will suffer.
We could face increased competition in the future, which would
adversely affect our financial performance.
The market for mobile handheld computers in which we operate is
very competitive. Our future financial performance is contingent on a number
of unpredictable factors, including that:
-
some of our competitors have greater financial, marketing, and technical
resources than we do;
-
we periodically face intense price competition, particularly when our competitors
have excess inventories and discount their prices to clear their inventories;
and
-
certain OEMs of personal computers, mobile phones and handheld computers
offer built-in functions, such as Bluetooth wireless technology, Wi-Fi, or
bar code scanning, that compete with our products.
28
(Index)
Increased competition could result in price reductions, fewer
customer orders, reduced margins, and loss of market share. Our failure to compete
successfully against current or future competitors could harm our business,
operating results and financial condition.
If we do not correctly anticipate demand for our products, our operating
results will suffer.
The demand for our products depends on many factors and is difficult to forecast.
We expect that it will become more difficult to forecast demand as we introduce
and support more products and as competition in the market for our products
intensifies. If demand increases beyond forecasted levels, we would have to
rapidly increase production at our third party manufacturers. We depend on suppliers
to provide additional volumes of components, and suppliers might not be able
to increase production rapidly enough to meet unexpected demand. Even if we
were able to procure enough components, our third party manufacturers might
not be able to produce enough of our devices to meet our customer demand. In
addition, rapid increases in production levels to meet unanticipated demand
could result in higher costs for manufacturing and supply of components and
other expenses. These higher costs could lower our profit margins. Further,
if production is increased rapidly, manufacturing yields could decline, which
may also lower operating results.
If demand is lower than forecasted levels, we could have excess production
resulting in higher inventories of finished products and components, which could
lead to write-downs or write-offs of some or all of the excess inventories,
and reductions in our cash balances. Lower than forecasted demand could also
result in excess manufacturing capacity at our third party manufacturers and
in our failure to meet minimum purchase commitments, each of which may lower
our operating results.
We rely primarily on distributors, resellers, vertical industry partners,
and OEMs to sell our products, and our sales would suffer if any of these third
parties stops selling our products effectively.
Because we sell our products primarily through distributors, resellers, vertical
industry partners, and OEMs, we are subject to risks associated with channel
distribution, such as risks related to their inventory levels and support for
our products. Our distribution channels may build up inventories in anticipation
of growth in their sales. If such growth in their sales does not occur as anticipated,
the inventory build up could contribute to higher levels of product returns.
The lack of sales by any one significant participant in our distribution channels
could result in excess inventories and adversely affect our operating results.
Our agreements with distributors, resellers, vertical industry partners,
and OEMs are generally nonexclusive and may be terminated on short notice by
them without cause. Our distributors, resellers, vertical industry partners,
and OEMs are not within our control, are not obligated to purchase products
from us, and may offer competitive lines of products simultaneously. Sales growth
is contingent in part on our ability to enter into additional distribution relationships
and expand our sales channels. We cannot predict whether we will be successful
in establishing new distribution relationships, expanding our sales channels
or maintaining our existing relationships. A failure to enter into new distribution
relationships or to expand our sales channels could adversely impact our ability
to grow our sales.
29
(Index)
We allow our distribution channels to return a portion of their inventory to
us for full credit against other purchases. In addition, in the event we reduce
our prices, we credit our distributors for the difference between the purchase
price of products remaining in their inventory and our reduced price for such
products. Actual returns and price protection may adversely affect future operating
results, particularly since we seek to continually introduce new and enhanced
products and are likely to face increasing price competition.
We depend on alliances and other business relationships with
a small number of third parties, and a disruption in any one of these relationships
would hinder our ability to develop and sell our products.
We depend on strategic alliances and business relationships with
leading participants in various segments of the communications and mobile handheld
computer markets to help us develop and market our products. Our strategic partners
may revoke their commitment to our products or services at any time in the future
or may develop their own competitive products or services. Accordingly, our
strategic relationships may not result in sustained business alliances, successful
product or service offerings, or the generation of significant revenues. Failure
of one or more of such alliances could result in delay or termination of product
development projects, failure to win new customers, or loss of confidence by
current or potential customers.
We have devoted significant research and development resources to
design activities for Windows-mobile products, Palm and Blackberry devices,
handheld computers with integrated phones using Windows Mobile and Symbian System
60 and 80 operating systems, and more recently, to develop our own family of
mobile handheld computers. Such design activities have diverted financial and
personnel resources from other development projects. These design activities
are not undertaken pursuant to any agreement under which Microsoft, Palm, Research
In Motion, or Symbian is obligated to continue the collaboration or to support
the products produced from the collaboration. Consequently, these organizations
may terminate their collaborations with us for a variety of reasons, including
our failure to meet agreed-upon standards or for reasons beyond our control,
such as changing market conditions, increased competition, discontinued product
lines, and product obsolescence.
Our intellectual property and proprietary rights may be insufficient
to protect our competitive position.
Our business depends on our ability to protect our intellectual property. We
rely primarily on patent, copyright, trademark, trade secret laws, and other
restrictions on disclosure to protect our proprietary technologies. We cannot
be sure that these measures will provide meaningful protection for our proprietary
technologies and processes. We cannot be sure that any patent issued to us will
be sufficient to protect our technology. The failure of any patents to provide
protection to our technology would make it easier for our competitors to offer
similar products. In connection with our participation in the development of
various industry standards, we may be required to license certain of our patents
to other parties, including our competitors, that develop products based upon
the adopted standards.
30
(Index)
We also generally enter into confidentiality agreements with our employees,
distributors, and strategic partners, and generally control access to our documentation
and other proprietary information. Despite these precautions, it may be possible
for a third party to copy or otherwise obtain and use our products, services,
or technology without authorization, develop similar technology independently,
or design around our patents.
Effective copyright, trademark, and trade secret protection may be unavailable
or limited in certain foreign countries. Furthermore, certain of our customers
have entered into agreements with us which provide that the customers have the
right to use our proprietary technology in the event we default in our contractual
obligations, including product supply obligations, and fail to cure the default
within a specified period of time.
We may become subject
to claims of intellectual property rights infringement, which could result in
substantial liability.
In the course of operating our business, we may receive claims of intellectual
property infringement or otherwise become aware of potentially relevant patents
or other intellectual property rights held by other parties. Many of our competitors
have large intellectual property portfolios, including patents that may cover
technologies that are relevant to our business. In addition, many smaller companies,
universities, and individuals have obtained or applied for patents in areas
of technology that may relate to our business. The industry is moving towards
aggressive assertion, licensing, and litigation of patents and other intellectual
property rights. In June 2007, we received a letter from Wi-LAN, Inc., accusing
certain of our wireless LAN products of infringing two U.S. and one Canadian
patent held by Wi-LAN, Inc. In October 2007, Wi-LAN, Inc. filed patent infringement
lawsuits against a number of companies alleging that those companies infringe
the two U.S. patents by manufacturing, using, or offering for sale products
with wireless capability compliant with the IEEE 802.11 standards. Wi-LAN, Inc.
is asking for money damages and a court order barring the sale of products that
use the patented technology. We have not been named in the lawsuit, and we do
not plan to make any changes to our current business at this time. Nonetheless,
we may be added to the lawsuit in the future, and even if we are not, the outcome
of this lawsuit may result in future changes to our business, including potential
increased costs for those of our products that make use of the related technology.
In October 2007, we received a letter from WIAV Solutions, LLC, offering to
license the wireless technology covered by two U.S. patents held by WIAV Solutions,
LLC. The two patents cover implementations of the 802.11 standard. To date we
have not entered into discussions to license their technology.
If we are unable to obtain and maintain licenses on favorable terms for intellectual
property rights required for the manufacture, sale, and use of our products,
particularly those products which must comply with industry standard protocols
and specifications to be commercially viable, our results of operations or financial
condition could be adversely impacted.
In addition to disputes relating to the validity or alleged infringement of
other parties' rights, we may become involved in disputes relating to our assertion
of our own intellectual property rights. Whether we are defending the assertion
of intellectual property rights against us or asserting our intellectual property
rights against others, intellectual property litigation can be complex, costly,
protracted, and highly disruptive to business operations by diverting the attention
and energies of management and key technical personnel. Plaintiffs in intellectual
property cases often seek injunctive relief, and the measures of damages in
intellectual property litigation are complex and often subjective or uncertain.
Thus, any adverse determinations in this type of litigation could subject us
to significant liabilities and costs.
31
(Index)
New industry standards may require us to redesign our products, which could
substantially increase our operating expenses.
Standards for the form and functionality of our products are established by
standards committees. These independent committees establish standards, which
evolve and change over time, for different categories of our products. We must
continue to identify and ensure compliance with evolving industry standards
so that our products are interoperable and we remain competitive. Unanticipated
changes in industry standards could render our products incompatible with products
developed by major hardware manufacturers and software developers. Should any
major changes, even if anticipated, occur, we would be required to invest significant
time and resources to redesign our products to ensure compliance with relevant
standards. If our products are not in compliance with prevailing industry standards
for a significant period of time, we would miss opportunities to sell our products
for use with new hardware components from mobile computer manufacturers and
OEMs, thus affecting our business.
Undetected flaws and
defects in our products may disrupt product sales and result in expensive and
time-consuming remedial action.
Our hardware and software products may contain undetected flaws, which may
not be discovered until customers have used the products. From time to time,
we may temporarily suspend or delay shipments or divert development resources
from other projects to correct a particular product deficiency. Efforts to identify
and correct errors and make design changes may be expensive and time consuming.
Failure to discover product deficiencies in the future could delay product introductions
or shipments, require us to recall previously shipped products to make design
modifications, or cause unfavorable publicity, any of which could adversely
affect our business and operating results.
Our quarterly operating results may fluctuate in future periods, which could
cause our stock price to decline.
We expect to experience quarterly fluctuations in operating results in the
future. We generally ship orders as received, and as a result we may have little
backlog. Quarterly revenues and operating results therefore depend on the volume
and timing of orders received during the quarter, which are difficult to forecast.
Historically, we have often recognized a substantial portion of our revenue
in the last month of the quarter. This subjects us to the risk that even modest
delays in orders may adversely affect our quarterly operating results. Our operating
results may also fluctuate due to factors such as:
-
the demand for our products;
-
the size and timing of customer orders;
-
unanticipated delays or problems in our introduction of new products and
product enhancements;
-
the introduction of new products and product enhancements by our competitors;
-
the timing of the introduction
of new products that work with our connection products;
-
changes in the revenues
attributable to royalties and engineering development services;
-
product mix;
-
timing of software enhancements;
-
changes in the level of operating expenses;
-
competitive conditions
in the industry including competitive pressures resulting in lower average
selling prices; and
-
timing of distributors' shipments to their customers.
32
(Index)
Because we base our staffing and other operating expenses on anticipated revenues,
delays in the receipt of orders can cause significant variations in operating
results from quarter to quarter. As a result of any of the foregoing factors,
or a combination, our results of operations in any given quarter may be below
the expectations of public market analysts or investors, in which case the market
price of our Common Stock would be adversely affected.
The loss of one or more of our senior personnel could harm our existing
business.
A number of our officers and senior managers have been employed for thirteen
to sixteen years by us, including our President, Executive Vice President, Chief
Financial Officer, and Chief Technical Officer. Our future success will depend
upon the continued service of key officers and senior managers. Competition
for officers and senior managers is intense, and there can be no assurance that
we will be able to retain our existing senior personnel. The loss of one or
more of our officers or key senior managers could adversely affect our ability
to compete.
Beginning January 1, 2006 we began to expense options granted under our
employee stock plans as compensation, and as a result our net income and earnings
per share were negatively affected, we may continue to have net losses as a
result of the requirement to expense options, and may find it necessary to change
our business practices to attract and retain employees.
Historically, we have used stock options as a key component of our employee
compensation packages. We believe that stock options provide an incentive to
our employees to maximize long-term stockholder value and, through the use of
vesting, encourage valued employees to remain with us. The expensing of employee
stock options adversely affected our net income and earnings per share in the
first two quarters of 2008 and in each of the quarters of fiscal years 2007
and 2006, will continue to adversely affect future quarters, and will make profitability
harder to achieve or make our future profits or net losses worse. In addition,
we may decide in response to the effects of expensing stock options on our operating
results to reduce the number of stock options granted to employees or to grant
options to fewer employees. This could adversely affect our ability to retain
existing employees and attract qualified candidates, and also could increase
the cash compensation we would have to pay to them.
If we are unable to
attract and retain highly skilled sales and marketing and product development
personnel, our ability to develop and market new products and product enhancements
will be adversely affected.
We believe our ability to achieve increased revenues and to develop successful
new products and product enhancements will depend in part upon our ability to
attract and retain highly skilled sales and marketing and product development
personnel. Our products involve a number of new and evolving technologies, and
we frequently need to apply these technologies to the unique requirements of
mobile products. Our personnel must be familiar with both the technologies we
support and the unique requirements of the products to which our products connect.
Competition for such personnel is intense, and we may not be able to attract
and retain such key personnel. In addition, our ability to hire and retain such
key personnel will depend upon our ability to raise capital or achieve increased
revenue levels to fund the costs associated with such key personnel. Failure
to attract and retain such key personnel will adversely affect our ability to
develop and market new products and product enhancements.
33
(Index)
We may not be able to collect revenues from customers who experience financial
difficulties.
Our accounts receivable are derived primarily from distributors and OEMs. We
perform ongoing credit evaluations of our customers' financial conditions but
generally require no collateral from our customers. Reserves are maintained
for potential credit losses, and such losses have historically been within such
reserves. However, many of our customers may be thinly capitalized and may be
prone to failure in adverse market conditions. Although our collection history
has been good, from time to time a customer may not pay us because of financial
difficulty, bankruptcy or liquidation. The current global financial crisis may
have an impact on our customers' ability to pay us in a timely manner, and consequently,
we may experience increased difficulty in collecting our accounts receivable,
and we may have to increase our reserves in anticipation of increased uncollectible
accounts.
We may be unable to
manufacture our products, because we are dependent on a limited number of qualified
suppliers for our components.
Several of our component parts, including our serial interface chip, our Ethernet
chip, our bar code scanning modules, and our new line of mobile handheld computers,
are produced by one or a limited number of suppliers. Shortages could occur
in these essential components due to an interruption of supply or increased
demand in the industry. If we are unable to procure certain component parts,
we could be required to reduce our operations while we seek alternative sources
for these components, which could have a material adverse effect on our financial
results. To the extent that we acquire extra inventory stocks to protect against
possible shortages, we would be exposed to additional risks associated with
holding inventory, such as obsolescence, excess quantities, or loss.
Our operating results could be harmed by economic, political, regulatory
and other risks associated with export sales.
Export sales (sales to customers outside the United States) accounted for approximately
35% of our revenue in both the first nine months of 2008 and in fiscal year
2007. Accordingly, our operating results are subject to the risks inherent in
export sales, including:
-
longer payment cycles;
-
unexpected changes in
regulatory requirements, import and export restrictions and tariffs;
-
difficulties in managing
foreign operations;
-
the burdens of complying with a variety of foreign laws;
-
greater difficulty or
delay in accounts receivable collection;
-
potentially adverse
tax consequences; and
-
political and economic instability.
34
(Index)
Our export sales are primarily denominated in United States dollars and in
Euros for our sales to European distributors. Accordingly, an increase in the
value of the United States dollar relative to foreign currencies could make
our products more expensive and therefore potentially less competitive in foreign
markets. Declines in the value of the Euro relative to the United States dollar
may result in foreign currency losses relating to collection of Euro denominated
receivables if left unhedged.
Our operations are vulnerable to interruption by fire, earthquake, power
loss, telecommunications failure, and other events beyond our control.
Our corporate headquarters is located near an earthquake fault. The potential
impact of a major earthquake on our facilities, infrastructure, and overall
business is unknown. Additionally, we may experience electrical power blackouts
or natural disasters that could interrupt our business. Should a disaster be
widespread, such as a major earthquake, or result in the loss of key personnel,
we may not be able to implement our disaster recovery plan in a timely manner.
Any losses or damages incurred by us as a result of these events could have
a material adverse effect on our business.
Failure to maintain
effective internal controls could have a material adverse effect on our business,
operating results and stock price.
We have evaluated and will continue to evaluate our internal control procedures
in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act,
which requires an annual management assessment of the design and effectiveness
of our internal controls over financial reporting. If we fail to maintain the
adequacy of our internal controls, as such standards are modified, supplemented
or amended from time to time, we may not be able to ensure that we can conclude
on an ongoing basis that we have effective internal controls over financial
reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover,
effective internal controls, particularly those related to revenue recognition,
are necessary for us to produce reliable financial reports and are important
to helping prevent financial fraud. If we cannot provide reliable financial
reports or prevent fraud, our business and operating results could be harmed,
investors could lose confidence in our reported financial information, and the
trading price of our stock could drop significantly.
The sale of a substantial number of shares of our Common Stock could cause
the market price of our Common Stock to decline.
Sales of a substantial number of shares of our Common Stock in the public market
could adversely affect the market price for our Common Stock. The market price
of our Common Stock could also decline if one or more of our significant stockholders
decided for any reason to sell substantial amounts of our Common Stock in the
public market.
As of October 31, 2008, we had 3,229,916 shares of Common Stock outstanding.
Substantially all of these shares are freely tradable in the public market,
either without restriction or subject, in some cases, only to S-3 prospectus
delivery requirements and, in other cases, only to manner of sale, volume, and
notice requirements of Rule 144 under the Securities Act.
As of October 31, 2008, we had 1,093,845 shares subject to outstanding options
under our stock option plans, and 110,028 shares were available for future issuance
under the plans. We have registered the shares of Common Stock subject to outstanding
options and reserved for issuance under our stock option plans. Accordingly,
shares underlying vested options will be eligible for resale in the public market
as soon as the options are exercised.
35
(Index)
Volatility in the trading price of our Common Stock could negatively impact
the price of our Common Stock.
During the period from January 1, 2007 through October 31, 2008, our Common
Stock price (adjusted to reflect a 1-for-10 reverse stock split effected on
October 23, 2008) fluctuated between a high of $14.00 and a low of $2.85. Following
the reverse stock split which significantly decreased the Company's share float,
we have experienced low trading volume in our stock, and thus relatively small
purchases and sales can have a significant effect on our stock price. The trading
price of our Common Stock could be subject to wide fluctuations in response
to many factors, some of which are beyond our control, including general economic
conditions and the outlook of securities analysts and investors on our industry.
In addition, the stock markets in general, and the markets for high technology
stocks in particular, have experienced high volatility that has often been unrelated
to the operating performance of particular companies. These broad market fluctuations
may adversely affect the trading price of our Common Stock.
The global financial crisis may have an impact on our business and financial
condition in ways that we currently cannot predict, and may further limit our
ability to raise additional funds.
The continued credit crisis and related turmoil in the global financial system
may have an impact on our business and our financial condition. We may face
significant challenges if conditions in the financial markets do not improve
or continue to worsen. In particular, our ability to access the capital markets
and raise funds required for our operations may be severely restricted at a
time when we would like, or need, to do so, which could have an adverse effect
on our ability to meet our current and future funding requirements and on our
flexibility to react to changing economic and business conditions.
36
(Index)
Item 6. Exhibits
Exhibits
31.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Executive Officer and Chief Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
37
(Index)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
SOCKET
MOBILE, INC.
Registrant
Date: November
13, 2008
|
|
/s/ Kevin J. Mills
|
|
|
Kevin J. Mills
President and Chief Executive Officer
(Duly Authorized Officer and Principal Executive Officer)
|
|
|
|
Date: November
13, 2008
|
|
/s/ David W. Dunlap
|
|
|
David
W. Dunlap
Vice President of Finance and Administration and Chief Financial Officer
(Duly Authorized Officer and Principal Financial and Accounting Officer)
|
38
(Index)
Index to
Exhibits
Exhibit
Number
|
Description
|
|
|
31.1
|
Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
39
Socket Mobile (MM) (NASDAQ:SCKTD)
Gráfico Histórico do Ativo
De Jun 2024 até Jul 2024
Socket Mobile (MM) (NASDAQ:SCKTD)
Gráfico Histórico do Ativo
De Jul 2023 até Jul 2024