SOCKET MOBILE, INC. Debt Disclosure
NOTE 4 — Secured Subordinated Convertible Notes Payable
The Company has issued multiple series of secured subordinated convertible notes (collectively, the “Notes”) between 2020 and 2025. The Notes are secured by substantially all of the Company’s assets and are subordinated to the Company’s obligations under its senior credit facility with Western Alliance Bank.
All Notes bear interest at 10% per annum, payable quarterly in cash. Each series is convertible at the holder’s option into shares of the Company’s common stock at fixed conversion prices established at issuance. Beginning one year after issuance, holders may require the Company to repay principal and accrued interest. Failure to pay principal or interest when due (subject to a five-day grace period) constitutes an event of default.
Proceeds from the issuances were used for general working capital purposes.
In connection with certain issuances involving related parties, the transactions were reviewed and approved in accordance with the Company’s related-party transaction policies. The Company filed and obtained effectiveness of registration statements under the Securities Act of 1933, as amended, covering the resale of shares issuable upon conversion of the applicable Notes.
Summary of Secured Subordinated Convertible Notes
| Issuance Year | Principal Issued | Principal Outstanding* | Maturity Date | Conversion Price | ||||||||||||
| 2020 | $ | 1,400,000 | $ | 1,400,000 | August 30, 2027 | $ | 1.46 | |||||||||
| 2023 | $ | 1,600,000 | $ | 1,600,000 | May 26, 2026 | $ | 1.34 | |||||||||
| 2024 | $ | 1,000,000 | $ | 1,000,000 | August 21, 2027 | $ | 0.9515 | |||||||||
| 2025 | $ | 1,500,000 | $ | 1,500,000 | May 30, 2028 | $ | 1.07 | |||||||||
| *Principal outstanding as of December 31, 2025. | ||||||||||||||||
Total amortization of debt discount related to all convertible notes was $14,583 and $8,761 for the year ended December 31, 2025 and 2024, respectively. As of December 31, 2025, the remaining debt discount balance was $16,993.
SOCKET MOBILE, INC.
NOTES TO FINANCIAL STATEMENTS
Total interest expenses related to the convertible note were $502,939 and $336,491 for the years ended December 31, 2025 and 2024, respectively.
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.