SOCKET MOBILE, INC. Commitments Disclosure

NOTE 5 — Commitments and Contingencies

 

Operating Lease Obligations

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

 

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

 

In January 2024, the Company renewed its equipment operating lease agreement, extending it through the end of 2026, with lease payments discounted at an interest rate of 9.25%.

 

As of December 31, 2025, the balances of right-of-use assets and liabilities were approximately $2.09 million and $2.29 million, respectively, compared to approximately $2.60 million and $2.82 million, respectively, on December 31, 2024.

 

The operating lease expense under the existing agreement was allocated in cost of goods sold and operating costs based on department headcount and amounted to $646,726 for the twelve-month periods ended December 31, 2025 and 2024, respectively.

 

Cash payments included in the measurement of our existing operating lease liabilities were $657,164 and $638,148 for the twelve-month periods ended December 30, 2025 and 2024, respectively.

 

Future minimum lease payments under the existing operating lease as of December 31, 2025 are shown below:

 

 

Annual minimum payments:		Amount
2026			676,751
2027			692,644
2028			713,423
2029			425,646
Total minimum payments			2,508,464
Less: Present value factor			(219,756	)
Total operating lease liabilities			2,288,708
Less: Current portion of operating lease			(575,172	)
Long-term portion of operating lease		$	1,713,536

 

 

 

SOCKET MOBILE, INC.

NOTES TO FINANCIAL STATEMENTS

 

Purchase Commitments

On December 31, 2025, the Company’s non-cancelable purchase commitments for inventory to be used in the ordinary course of business during 2026 were approximately $2,869,000.

 

Legal Matters

The Company is subject to disputes, claims, requests for indemnification and lawsuits arising in the ordinary course of business. Under the indemnification provisions of the Company’s customer agreements, the Company routinely agrees to indemnify and defend its customers against infringement of any patent, trademark, copyright, trade secrets, or other intellectual property rights arising from customers’ legal use of the Company’s products or services. The exposure to the Company under these indemnification provisions is generally limited to the total amount paid for the indemnified products. However, certain indemnification provisions potentially expose the Company to losses in excess of the aggregate amount received from the customer. To date, there have been no claims against the Company by its customers pertaining to such indemnification provisions, and no amounts have been recorded. The Company is currently not a party to any material legal proceedings.