SOCKET MOBILE, INC. Stock Compensation Disclosure
The Company has one share-based compensation plan in effect for the two years presented: the 2004 Equity Incentive Plan (the “2004 Plan”). The plan allows for the grant of incentive stock options, non-statutory stock options, restricted stock, stock appreciation rights, and performance awards to employees, directors, and consultants. Stock options are granted at an exercise price per share equal to the fair market value per share of common stock on the date of grant. Restricted stocks are granted at zero cost. Vesting and exercise provisions are determined by the Board of Directors, with a maximum term of ten years. The 2004 Plan is set to terminate on April 23, 2034.
The 2004 Plan allows for an annual increase in the number of shares authorized under the plan to be added on the first day of each fiscal year equal to the least amount of 400,000 shares, 4% of the outstanding shares on that date, or an amount as determined by the Board of Directors. On January 1, 2026 and 2025, a total of 319,078 and 304,225 additional shares, respectively, became available for grant from the 2004 Plan.
The stock-based compensation expense included in the Company’s statements of income for the years ended December 31, 2025 and 2024, consisted of the following:
| Years Ended December 31, | ||||||||
| Income Statement Classification | 2025 | 2024 | ||||||
| Cost of revenues | $ | 108,413 | $ | 119,872 | ||||
| Research and development | $ | 212,465 | $ | 318,258 | ||||
| Sales and marketing | $ | 192,869 | $ | 283,672 | ||||
| General and administrative | $ | 155,451 | $ | 332,494 | ||||
| Stock-based compensation expenses | $ | 669,198 | $ | 1,054,296 | ||||
SOCKET MOBILE, INC.
NOTES TO FINANCIAL STATEMENTS
As of December 31, 2025, the remaining unamortized stock-based compensation expense was and is expected to be amortized over a weighted average period of years.
Stock Options – Stock option awards have an exercise price equal to the closing price on the date of grant, expire ten years from the date of grant and vest over a four-year period at 25% per year. The Company calculates the value of each stock option grant, estimated on the date of grant, using binomial lattice option pricing model.
On October 1, 2025, the Company granted 25,000 stock options at a closing market price of $1.02.
On June 25, 2024, the Company completed a one-time tender offer to exchange 613,936 stock options granted under its 2004 Equity Incentive Plan for current employees, executive officers, and directors. All surrendered options were cancelled as of the Exchange Offer’s expiration on June 25, 2024. The Company granted new options to purchase an aggregate of shares of common stock pursuant to the terms of the Exchange Offer and 2004 Equity Incentive Plan. These new options were priced at the closing market price of on June 25, 2024, with monthly vesting over 4 years and a 10-year expiration date of June 25, 2034. The Company’s stockholders approved the stock option exchange program at the 2024 annual meeting on May 15, 2024. The Company accounted for the exchange as a modification of the options and calculated the incremental expense to be $187,117, which will amortized over the estimated life of the new options. Additionally, on June 26, 2024, the Company granted stock options at a closing market price of $1.08.
The weighted-average estimated fair value of stock options granted in 2025 was , determined using a binomial lattice valuation model with the following weighted-average assumptions:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Risk-free interest rate (%) | 4.12 | % | 4.24 | % | ||||
| Dividend yield | ||||||||
| Volatility factor | 54.03 | % | 106.88 | % | ||||
| Expected option life (years) | 10 | 3.41 | ||||||
The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant; the dividend yield is calculated as the ratio of dividends paid per share of common stock to the stock price on the date of grant; the expected life is based on historical and expected exercise behavior; and volatility is based on the historical volatility of the Company’s stock price over the expected life of the option.
The table below presents the information related to stock option activity for the years ended December 31, 2025 and 2024:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Total intrinsic value of stock options exercised | $ | $ | (23,688 | ) | ||||
| Cash received from stock option exercises | $ | $ | 23,750 | |||||
SOCKET MOBILE, INC.
NOTES TO FINANCIAL STATEMENTS
The following summarizes stock option activity under the 2004 Plan as of and for the years ended December 31, 2025, and 2024:
| Outstanding Options | |||||||||||||||
Number of Shares | Weighted Average Exercise Price Per Share | Remaining Contractual Term (in years) |
Intrinsic | ||||||||||||
| Balance as of December 31, 2023 | 1,151,115 | $ | 3.11 | ||||||||||||
| Granted | 688,936 | $ | 1.12 | ||||||||||||
| Exercised | (25,000 | ) | $ | 0.42 | |||||||||||
| Canceled | (684,791 | ) | $ | 0.13 | |||||||||||
| Balance as of December 31, 2024 | 1,130,260 | $ | 1.93 | ||||||||||||
| Granted | 25,000 | $ | 1.02 | ||||||||||||
| Exercised | |||||||||||||||
| Canceled | (22,560 | ) | $ | 2.63 | |||||||||||
| Balance as of December 31, 2025 | 1,132,700 | $ | 1.89 | 6.50 | $ | 0.00 | |||||||||
| Exercisable | 649,330 | $ | 2.47 | 4.92 | $ | 0.00 | |||||||||
| Unvested | 483,370 | $ | 1.11 | 8.58 | $ | 0.00 | |||||||||
Stock options outstanding as of December 31, 2025 are summarized below:
| Options Outstanding | Options Exercisable | ||||||||||||||||||
Range of Exercise Prices |
Number of Options Outstanding | Weighted Average Remaining Life (Years) |
Weighted Average Exercise Price |
Number of Options Exercisable |
Weighted Average Exercise Price | ||||||||||||||
| $1.02 - $1.08 | 119,000 | 8.17 | $ | 1.08 | 44,521 | $ | 1.07 | ||||||||||||
| $1.1197 - $1.12 | 613,349 | 8.50 | $ | 1.12 | 204,458 | $ | 1.12 | ||||||||||||
| $1.90 - $2.27 | 110,825 | 2.08 | $ | 1.99 | 110,825 | $ | 1.99 | ||||||||||||
| $2.32 | 94,275 | 3.67 | $ | 2.32 | 94,275 | $ | 2.32 | ||||||||||||
| $2.45 - $2.52 | 19,000 | 3.08 | $ | 2.48 | 19,000 | $ | 2.48 | ||||||||||||
| $2.75 | 33,600 | 0.25 | $ | 2.75 | 33,600 | $ | 2.75 | ||||||||||||
| $2.93 - $2.95 | 28,051 | 2.75 | $ | 2.93 | 28,051 | $ | 2.93 | ||||||||||||
| $3.05 | 12,000 | 6.50 | $ | 3.05 | 12,000 | $ | 3.05 | ||||||||||||
| $3.73 - $3.88 | 17,000 | 0.92 | $ | 3.81 | 17,000 | $ | 3.81 | ||||||||||||
| $4.22 - $5.00 | 40,600 | 2.50 | $ | 4.45 | 40,600 | $ | 4.45 | ||||||||||||
| $8.58 | 45,000 | 5.33 | $ | 8.58 | 45,000 | $ | 8.58 | ||||||||||||
| $1.02 - $8.58 | 1,132,700 | 6.50 | $ | 1.89 | 649,330 | $ | 2.47 | ||||||||||||
Restricted stock – The Company issues restricted stocks to employees, consultants and directors, and holds shares of such stock in escrow until the shares vest, subject to the employees, consultants and directors being a continuing service provider on the vesting dates. If the service or employment is terminated, unvested shares revert to the Company. Shares are registered at grant, so share owners may vote at the annual stockholder meeting. Shares of restricted stocks are granted at zero cost basis. Compensation cost of the shares of restricted stocks issued by the Company is recognized on a straight-line basis over the 4-year vesting period.
SOCKET MOBILE, INC.
NOTES TO FINANCIAL STATEMENTS
The following summarizes information related to restricted stock activity under the 2004 Plan for the years ended December 31, 2025 and 2024:
| Number of Restricted Stocks | Weighted Average Price Per Share | ||||||
| Unvested as of December 31, 2023 | 991,199 | $ | 2.83 | ||||
| Granted | 506,000 | $ | 1.11 | ||||
| Vested | (316,519 | ) | $ | 1.16 | |||
| Forfeited | (101,840 | ) | $ | 2.18 | |||
| Unvested as of December 31, 2024 | 1,078,840 | $ | 0.98 | ||||
| Granted | 643,793 | $ | 1.42 | ||||
| Vested | (477,715 | ) | $ | 2.00 | |||
| Forfeited | (128,427 | ) | $ | 3.33 | |||
| Unvested as December 31, 2025 | 1,116,491 | $ | 1.14 | ||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 30, 2026 | Showing above |
| 2017 | Mar 23, 2018 | |
| 2016 | Mar 24, 2017 | |
| 2015 | Mar 24, 2016 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.