Greetings and welcome to the Socket Mobile 2012 Fourth Quarter and Full-Year Management Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jim Byers of MKR Group. Thank you, sir. You may begin.

Thank you, Operator. Good afternoon and welcome to Socket’s conference call today to review financial results for its 2012 fourth quarter and year ended December 31, 2012. On the call today from Socket are Kevin Mills, President and CEO and Dave Dunlap, Chief Financial Officer. Socket Mobile distributed its earnings release over the wire service at the close of the market today. The release has also been posted on Socket’s website at www.socketmobile.com. And in addition a replay of today’s call will be available at Vcall.com shortly after the call’s completion. And a transcript of this call will be posted on the Socket website within a few days. We’ve also posted replay numbers in today’s press release for those wishing to replay this call by phone. The phone replays will be available for one week. Now before we begin, I would like to remind everyone that this conference call may contain forward-looking statements within the meaning of section 27-A of the Securities Act of 1933 as amended and section 21-E of the Securities and Exchange Act of 1934 as amended. Such forward-looking statements include, but are not limited to, statements regarding mobile computer data collection and OEM products including details on timing, distribution and market acceptance of products and statements predicting trends of sales and market conditions and opportunities in the markets in which Socket sells its products. Such statements involve risks and uncertainties and actual results could differ materially from the results anticipated in such forward-looking statements as a result of a number of factors including, but not limited to, the risk that manufacture of Socket’s products may be delayed or not rolled out as predicted due to technological, market or financial factors including the availability of product components and necessary working capital, the risk that market acceptance and sales opportunities may not happen as anticipated, the risk that Socket’s application partners and current distribution channels may choose not to distribute the products or may not be successful in doing so, the risks that acceptance of Socket’s products and vertical application markets may not happen as anticipated, as well as other risks described in Socket’s most recent form 10-K and 10-Q reports filed with the Securities and Exchange Commission. Socket does not undertake any obligation to update any such forward-looking statements. Now with that said, I would like to turn the call over to Socket’s President and CEO, Kevin Mills.

Thank you, Jim. Good afternoon everyone and thank you for joining us today. In today’s call, I’ll begin with a brief review of 2012 results and then discuss the business opportunities we see ahead in 2013. Our revenue for 2012 began well. What was impacted in the second half of the year by markets and product transitions we’ve mentioned previously which lowered our revenue growth in the second half of the year. These transitions are now behind us. We enter this year with new products in the market, a growing number of software developer relationships and a significantly reduced cost structure. All of which position us to grow to profitable operating levels in 2013. Our revenues for 2012 was $13.6 million consisting of $6.1 million of SoMo related sales, $5.5 million of cordless scanning related sales and about $2 million from service, OEM and legacy related products. As I noted, our 2012 revenue distribution was run and loaded. In that we generated about 60% of our revenue in the first six months of the year and then 40% in the last six months reflecting the market and product transition. Specifically this relates to Apple’s product and OS transition as well as our transition to our new and upgraded SoMo 655 from the 650. With these now completed, we see significant progress and growth opportunities ahead of us. I’d now like to provide our outlook for both our cordless scanning and our SoMo businesses for 2013 starting with our cordless scanning business. We expect our cordless scanning business to have strong growth in 2013 starting in the current first quarter. As of today, and we are not yet half way through the first quarter, we already have shippable orders to achieve record cordless scanning quarterly revenue levels in Q1. And we…

Thank you, Kevin. 2012 was a transition year for Socket. We reduced our revenue in the second half of the year but sufficient company for growth that began December and has continued today. In the first half of the year, we reported $8 million in revenue including $4 million in sales of handheld computers consisting of last buying purchases of our SoMo 650 Handheld computers that we announced last February would be replaced midyear. We also introduced in the second quarter our model 7ci world class, Apple certified, Bluetooth linear barcode scanner, which address the needs of Apple, tablets and smartphone users for a low-cost linear barcode scanner. The second half revenues dropped to $5.6 million. Our customers needed time to evaluate the replacement of SoMo 655 handheld computer and began to work down their SoMo 650 last volume [inaudible]. Handheld computer revenues in the second half of 2012 were only $2.1 million. The cap total has been steadily growing. At the same time, the Apple announces this December announcing their iPhone 5 and mini-tablet slowed barcode scanner purchases from Apple customers while Apple customers devaluated the new product leaving second half barcode scanning revenue flat in the first half levels. By December, barcode scanning orders were coming back strongly. Our shippable order backlog going into the fourth quarter was only $600,000 well-below normal levels due to the order slowdowns resulting from the timing of the Apple announcements. But entering January, our backlog returns to a more than normal level of $1.2 million reflecting strong order growth in December. January new orders exceeded $2 million and total orders on hand today shippable during the quarter are above $3.5 million, a very fast start into the first quarter. Our Model 7Ci barcode scanner is driving that growth and we are experiencing…

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Thank you. Our first question comes from the lines of Steve Swanson of Private Investor. Please proceed with your question. Steve Swanson – Private Investor: Okay. What’s the monthly cash burn rate that we’re going through now for January in the first quarter? We have not cash the people’s business growth while we’re trying to gain business growth.

All right. And the answer is yes but we are managing cash very closely and where we are today, of course, is we’ve been operating successfully with the support of our vendors who we do have in some cases extended the terms and – but we are, as I said, very closely monitoring cash flow. We’re starting to move forward now where we’re no longer using cash for burning – for expenses, we’re now expanding cash app [ph] to cover growth. Our focus is more now on having the cash needed to ensure that our vendors are being paid for the higher inventory levels that we’re bringing in. And we are continuing to see the support of the officers and directors of the company, so we are continuing to be very tightly managing our cash but we believe the cash at this point has been adequate and will continue to be so. And as we move through the quarter, the working capital cycle begins to generate more and more cash in terms from the higher levels of shipments that we’ve been making. Steve Swanson – Private Investor: Dave, I thought I heard that year-end, the directors and the officers and the employees have – was is $800,000 that they’ve loaned to the company?

Yes. I think at the end of the year we have $750,000 and there was also some remaining amounts on merchant cash advance that we have [inaudible] in the year which has been fully paid off. We are continuing to see the support from the officers and directors of the company. So that number has grown at small amount but up-to-date, we’re about $1 million. Steve Swanson – Private Investor: About $1 million. And do we see the need to have that as we move forward in the first quarter or are we generating enough cash that we’re not going to need to be that anymore?

We’re anticipating phasing out that program during the quarter. Steve Swanson – Private Investor: Okay. Thank you very much.

Thank you. Our next question comes from the line of Bernard Fidel of Private Investor. Please proceed with your question. Bernard Fidel – Private Investor: Hello, good fellow.

Hi, Dr. Fidel. How are you? Bernard Fidel – Private Investor: How you doing?

Good. Bernard Fidel – Private Investor: Okay. Well, I’m glad to see, in other words, we anticipate for the first quarter be profitable. Was that a fair statement?

Yes, that’s a fair statement. Bernard Fidel – Private Investor: Okay. Now, you came out with this thing up-to-date on the scanners of $3.5 million to-date in sales?

No, not in sales. In bookings. Bernard Fidel – Private Investor: Oh in bookings, okay.

And that is available to ship in the quarter. Bernard Fidel – Private Investor: All right, okay. In other words that $3.5 million will be available to be shipped in the quarter?

Yes. And we anticipate that that it is a recognizable revenue in the quarter. Bernard Fidel – Private Investor: Right, okay. Now, $3.5 million and it’s only half the quarter at this point. And does that include the SoMo or the SoMo addition?

It does include all of our products, Dr. Fidel. Bernard Fidel – Private Investor: Okay. So theoretically if we take $3.5 million and you’re supposed to get more sales for the second half of this quarter, is that true?

Yes.

Yes. But bear in mind that bookings is a reflection of what’s going to happen in the future. So we have to buy the materials and manufacture it and ship it also, okay? Bernard Fidel – Private Investor: Right.

So you just can’t take a number and double it. Bernard Fidel – Private Investor: Right, right.

And we got a two- to four-week lead time typically from our customers. We’re working to restock the inventories that they’re carrying in the distribution channel. So what we came in to the quarter was about $1.2 million in orders on hand. We expect it was a lot of the quarter with a similar backlog around [inaudible] growing a bit as our volumes are growing. So we’ll get those orders during the quarter too, but you do have a backlog coming in and we’ll expect the backlog going out. So when we get the orders that we see in March a portion of those will be shippable in March, a portion of those will be carried over as backlog. Bernard Fidel – Private Investor: Okay. So $3.5 million is actually a respectable amount that we say at this point, is that fair?

That’s a fair statement, yes.

We’re about $800,000 away from the possibility threshold. Bernard Fidel – Private Investor: Okay.

Yes. So we indicated that we have profitability somewhere around $4.3 million. Bernard Fidel – Private Investor: So that should be easy enough to get. Okay now, I noticed you have a big deal of 3,200 scanners for Japan through this issue okay. And what is the process issue [ph] with this [inaudible]? Was this–

This is a trial order. This is a trial order. So the company is quite large and they have gone through the process of evaluating the scanners, designing an application that’s built based on the scanners. And they have many stores and they are putting 3,200 into other stores. And if they are successful as in, then they would come back and do a company-wide rollout and the numbers would be substantially big. Bernard Fidel – Private Investor: Okay. Are there any other scanner big deals pending or anything to that effect?

There are many actually, but I think we have to be reasonable. We have a number of large deals pending, okay? And we do expect it to see more momentum strictly in point of sales between now and August. And the larger deals generally, you get more lead time. So if you land a larger deal, customers don’t want this tomorrow. They want it in April or May when they will get all the other components. But although yes, we would expect that more deals will land this quarter, but the bigger ones tend to be staged because there’s a lot of other components required. If you go back to the deal with the 3,200 units, we were working on this since October last year when they started the trial. And they would like to deploy these 3,200 in the first week of April. So we received the order in, I think, mid January and they gave us, let’s say, two months lead time because there are other components to be purchased and training to be done et cetera. Bernard Fidel – Private Investor: Right.

And we will expect that trend to continue and we would expect to shore off our orders for Q2 through the remainder of Q1. Bernard Fidel – Private Investor: Okay. What about the SoMo, like the Canadian company or HP in England?

Well I think the SoMo, first of all we have to say that the transition has taken longer and was more difficult than we expected. One of the things that I think that wasn’t in the market was that there was a lot of uncertainty with the Operating System, Windows 6.5. And Microsoft did announced a newer version 8.0. And most of the time when they announced a newer version there is a transition of a task that allows you to develop on one and then do upgrade so that the application you developed in 6.5 will run on 7. As was the case when people developed applications on 4, they run on 5 and when they have 5, they run on 6. Microsoft was very silent on what exactly was the migration path from 6.5 to 8. But we have a great deal of uncertainty and we have a lot of people who didn’t do anything until Microsoft clarified the situation. As I mentioned in my remarks, Microsoft have now clarified the situation, 6.5 will be the last Operating System, okay, in the current period if you will and 8.0 will be a new Operating System. Microsoft have made a very long commitment for 6.5 of another nine years. So even though you could say we’re down a dead-end street or it is a very long dead-end street and 8.0 will not be compatible, but there only be phone-based [ph] version available. So customers now can make a meaningful decision about where they want to stay with 6.5 which we believe many of our customers will want to do because of the longevity of the OS and the fact that if you’re doing a medical type of device, you want that long product cycle. So I think that we lost two or three months as a result of this uncertainty, but now we’re seeing the SoMo business pick back up again. Bernard Fidel – Private Investor: Okay. Has it picked up in January [inaudible], January, February?

Yes. But again, I think that this is a slow growth, but steady growth type of business. But we have seen January being stronger and we do expect Q1 revenue to be above Q4. So we believe head back north with the SoMo as we get more and more customers. Bernard Fidel – Private Investor: Okay. I want the idea about those expenses because hopefully in the future we expect this to be kept laid down because that is what the – I was just thinking if we have these expenses throughout this couple of years, we would be profitable on many of our sales.

That’s true. Bernard Fidel – Private Investor: But I still wanted to tell you.

It is true. I mean there’s a balance and I would say we do a very good job of adjusting our expenses to what we can afford. However you can also overdo this. And on one side, people love the fact that we’re first to market with the 7Ci and new and innovative products. And you can’t get people to do this and not also incur some expense in the process. So there’s a balance there and I think that we have done a good job at maintaining the balance, but we still want to have new and exciting product. So you can’t do that and not have some expense also. Bernard Fidel – Private Investor: Right. Okay now with the profitability in the first quarter, that should create cash, improve our cash position, am I correct?

Yes. I mean we’re leveraged. So cash will improve, but depending on your way of approach [ph] then you will use cash. But these are good problems to have and problems that we’re well able to manage. Believe me managing a business without cash is way more difficult than managing business that’s growing rapidly that needs cash. So we’ve done the hard part first. It’s been difficult certainly in 2012 to manage through having no cash and we’d be delighted to have the problem of growth so great that we need more cash and we look forward to it. Bernard Fidel – Private Investor: Right. Well I’m not an accountant, but the $3.5 million that we have for the first half of this quarter, would that be considered good growth or a rapid growth or anything for that manner?

Well, we did $2.8 million in Q4. So if you did nothing else, you got no more orders and you just stopped a quarter right now– Bernard Fidel – Private Investor: But way ahead of the deal [ph].

You’re ahead. So again, we don’t know the final number. We can tell you what has transpired today, which is what we’re doing. And I think we’re in a very good position to be profitable this quarter and that basically what we’re communicating. Bernard Fidel – Private Investor: Okay. One thing, it seems to be a lack of announcement of – so does she held of most of what’s going on and with almost two months. So you want to even comment on this but it would be nice if we have more frequent announces so we know what’s happening.

Yes, I would just comment this. Everything cost money. Bernard Fidel – Private Investor: Oh, I didn’t say it. It’s strong enough for what it’s worth.

That’s fine. The reason our expenses are down like $600,000 over last year is not because – I mean, it’s because we stopped doing certain things, and certainly we have not done a loss on the PR side or the IR side and we would love to do more. And to better be able to tell our story as our story gets stronger, but all of that increases our expenses and we’re trying to maintain the time bound [ph].

Also I like your fidelity, we are making substantial use and more use of the social media so Socket has its accounts with YouTube and Twitter and some would be Facebook. So those folks that are able to sign up for access, we send out a lot of blogs and information about the company that is probably below the threshold of a major news announcement but keeps everybody reasonably well address. So you may want to link into those types of blogs, too, and make sure that you’re seeing that as you go. Any material announcements we clearly will make whether its earnings release or the momentum release we have a week to go on our quite a fail activity. So we’ll continue to make those releases as break of the releases, but we do find the use of social media. It’s very helpful because we can do it more frequently at an affordable less cost.

Let me just add on that, I mean, if you go to, we have a YouTube. Bernard Fidel – Private Investor: Okay. That’s all right. I know two or three would think and that’s it. How many employees do we have now?

Approximately 50. Bernard Fidel – Private Investor: 50?

Yes.

Yes. Bernard Fidel – Private Investor: And how many do we have last year at this time?

Oh, I would say probably 75. Bernard Fidel – Private Investor: Oh, very good, quite a few stats then.

Yes, I see, slightly below that number. I think our number was 66.

66, yes. We basically have lost 16 employees. Bernard Fidel – Private Investor: Okay. How was flow [ph] on sales doing? Let’s say, in Germany or in England [ph].

Quite well. I mean, I think our distribution of sales hasn’t changed all that much. I think Europe having a good Q4 and we expect them to have a solid Q1. We’re still doing 60% of our sales [inaudible] and 40% internationally. Asia has done better [inaudible] and certainly the deal in Japan will add to our percent in Asia in Q1. Bernard Fidel – Private Investor: Okay, one way of thinking then I would say how’s the scanners versus the SoMo presented to our towards – –

It’s getting close to 50-50. And I expect in the 1st quarter that scanning will be ahead of SoMo. I mean, if you don’t get last year, we essentially did 6.5 or 6.1 million in SoMo and we did 5.5 in scanner. The scanner as an accessory business tends to grow more quickly. So I would expect maybe on the first half of this year scanning to be our primary product category. But I think the SoMo will – it’s a bit of a charges [ph] inheriting. I think the charges [ph] will eventually catch up but it won’t be as rapid growth as the scanning, and we certainly have a lot of scanning deals right now. Bernard Fidel – Private Investor: Yes, we have no estimate what you expect sales in the first quarter to be at this point.

Say it again? Bernard Fidel – Private Investor: You don’t have an estimate of what the sales would be for the first quarter.

We always have an estimate. We just don’t know if it’s right jest [ph]. Bernard Fidel – Private Investor: And do you expect the year to be profitable [inaudible]?

Yes, that is correct. Bernard Fidel – Private Investor: Okay. I bet you’re happy now you got rid of me. I’ll go now.

Thank you very much, Mr. Fidel. We appreciate your approach.

Thank you. (Operator Instructions) Thank you. Our next question comes from the line of David Henri [ph] with Private Investor. Please proceed with your question. David Henri – Private Investor: Good afternoon, gentlemen.

Hello, Dave. David Henri – Private Investor: I have a question. You did 1,200 at the SoMo 655 in the fourth quarter. What did that turn out to be revenue wise?

Approximately I think 700,000.

It was, yeah, 900,000 with a SoMo 456. David Henri – Private Investor: And what was the break down between scanners and SoMos in general for the fourth quarter, how about that?

Well, your total would be – the Kronos barcode scanner is a little under $1.5 million and your computers were a little over $900,000; and then the balance with service, a very small amount of what we have, a legacy product so that was a little more than $400,000. David Henri – Private Investor: Okay. And I have just one question on the $3.5 million has been bookable so far for the first quarter.

Yes. David Henri – Private Investor: Did that including like the large order would be bookable when you deliver it. Also is it bookable to the distributor or it is to final customers?

Well, we always have to make an estimate on this. And we recognize revenue based on sales. So we make the assumption that the inventory in the channel is kept relatively flat. And therefore, and we assume, and we monitor this in a weekly basis that sales in and sales out match, okay? And then we would adjust if we’re seeing those off of inventory over adoption [ph] of inventory. So we do that. The 3.5 is our estimates of if we do receive no more orders as of today and just deliver what we have, what our sales out would be for the quarter. That’s [inaudible]. David Henri – Private Investor: Okay.

The 3.5 million, David, does include the order from the Japanese company but it’s scheduled for shipment within plenty of time for it to clear the distributor and the customer wants to take it prior to the end of March. So we’ll see that flow through as revenue as long as everything is delivered on schedule. David Henri – Private Investor: Okay. Most of the point of sale partners like I said as far as I know have not really initiated anything too much, is that what you’re saying? And then going forward like in February toward the industry [inaudible] you start to see them pushing the product more?

Yes, I mean, obviously we already talked to people who have been on the point of sale business before and [inaudible] NRF, and we have been told repeatedly that nobody, well, that they buy between February and August [Inaudible] our discussions with NCR [ph] and they launched in December and into the stores like Snapple and, et cetera. And in our discussions with them we asked what was their expectation, and their expectation was that the reason you do in December and January is more for product awareness but sales happen in February through August when they’ve seen their year up, they’ve decided what to do going forward and depending on how organize they are, the more organize guys may be start in, in late February and the more average guys like the rest of us may be start in March, April. But that’s the traditional buying season and that’s something that has been repeated to us and by almost everybody. David Henri – Private Investor: I mean, I commend you guys because you literally have gotten the scanner connect with so many partners and, I mean, large partners especially they will play out in the future. In general, you have about 300 registered developers total and about 100 of them are point of sales. Do you know how many of them in general have a final product versus how many will still be coming online going forward?

Yes, we do. I think almost 80% of our developers, 70 something percent are what do we call corporate developers, which means that they are hired by someone to do a specific development. Now, within that, you can see people who are hired for – let’s just take an example of a company like Medtronic, because the maximum that you could sell for that application would be one to every employee of Medtronic, right, so there’s a limited market. Then we probably collect NCR who are selling into markets and depending on their success in the markets, you don’t know. So we try to categorize our developers. Today, it’s still a log-off [ph], I would say mainly corporate developers and now that we have a community, we have – we’re looking to service this community so we’re asking a lot of questions, getting a lot of feedback, what can we do venture, et cetera, so all of that will help us to better drive the company going forward because ultimately, the developers are working for people who are trying to solve problems and we’re trying to help them. David Henri – Private Investor: Yes. Like I said, I’m excited with the scanner, little worried about the SoMo, so SoMos ran about $900,000. Can you give me an idea where you’re looking at for first quarter?

Well, let me just first say – [multiple speakers] David Henri – Private Investor: Because if we go back to the first half of 2012, you guys were in the $2 million plus range and how –

Yes. But before we even go there, David, let me just explain the following. David Henri – Private Investor: Yes.

We launched our SDK for the SoMo in October. David Henri – Private Investor: Okay.

So we were approximately three to four months behind the scanning. David Henri – Private Investor: Yes.

Today, we have somewhere north of 40 people who have downloaded the SDK and working on SoMo-related applications. Okay? So, again, it will take a little bit of time and we started a little bit late, but, again, it’s going to be driven by the developers, right, and we do have developers now that are downloading the SDK and writing applications. So, I think you need to look beyond Q1, right? David Henri – Private Investor: Yes.

Q1 will be up from Q4 – David Henri – Private Investor: Okay.

But the momentum in the business will come from people using it as a development platform and, again, we are down – we’re a little bit behind the scanning itself a few month but that’s a better indication of the health of business to [ph] what’s going to happen in the next 30 days. David Henri – Private Investor: I’d like to say – I look at it as ignite [ph] through first quarter to be profitable, but the key is as you increase the number of developers, does Q1 the – have continuing reoccurring income first quarter, like a point of sale system, the more NCR growth, you just had to grow with them.

Yes. And what’s really nice about our business model is that somebody like NCR comes with their own sales force, so not only – David Henri – Private Investor: Yes.

– did they buy your product but they actually sell this and certainly, that gives us a lot of leverage and allow this people our cost flow and continued to invest in new products and better software. David Henri – Private Investor: Okay. Well, like you said, is just keep up the hard work, keep up those new [ph] developers and hopefully, like you said, the first quarter I guess is to sober [ph] the hump and we can curtain in the positive.

All right. Well, we appreciate your support and your concerns. David Henri – Private Investor: Okay. Thank you very much.

Thank you.

Thank you. There are no further questions at this time. I would like to turn the call over to management for closing comments.

Okay. Thank you, operator. So I just like to thank everyone for participating today and to say, we look forward to reporting to you in April and to wish you all a good day. Thank you.

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time and thank you for your participation.