Greetings. And welcome to the Socket Mobile Third Quarter 2013 Management Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jim Byers from MKR Group. Thank you, Mr. Byers. You may begin.

Thank you, Operator. Good afternoon. And welcome to Socket’s conference call today to review financial results for its 2013 third quarter and nine months ended September 30, 2013. 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. 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. Before we begin, I would like to remind everyone that this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E 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 handheld computer 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 maybe 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.

Thanks Jim. Good afternoon, everyone, and thank you for joining us today. In today’s call, I will begin with a brief review of our third quarter 2013 results and then discuss the business opportunities as in the fourth quarter. Today we report the third quarter revenue of $3.3 million. While this represents an increase of 18% over the same quarter last year, it is below our revenue in the previous quarter due to certain issues that impacted our product sales in the quarter, which have now been mostly resolved. Total revenue for Q3 consisted of $2.05 million of scanning-related products, $850,000 of SoMo products and $400,000 of service and accessories revenue. Our lower than expected product sales coupled with our lower expense levels resulted in a quarterly loss of $321,000 or $0.07 per share. I would now like to review our progress and outlook for both our cordless scanning and SoMo businesses starting with our cordless scanning business. Revenue from our cordless scanning business in the third quarter grew 72% over the same quarter last year. However, we saw sequential decline of 15% from the second quarter due to a major slowdown we experienced as a result of Apple product changes in September. Apple changes were not as expensive this year but it turned out that the new iOS 7 operating system had more issues than expected, resulting in several upgrades during September that resulted in Socket losing about two to three weeks of selling from this quarter. The good news is that we are seeing a recovery beginning in October rather than December as we experienced last year. It’s important to point out that both July and August were solid months for our cordless scanning business and while revenue for September in the U.S. would typically be 50% to…

Thank you, Kevin. Our third quarter revenue was $3.3 million, up 18% over our third quarter revenue a year ago but down sequentially from the revenue of $4.4 million in the previous quarter. Third quarter revenue was affected by a customer order slowdown in September, which we attributed to the timing of Apple’s new product announcement in mid-September whereas similar to last year, the customer’s slowed down their mobile deployment plan and purchases until very determinant what new products, Apple is offering. The Apple product changes and the related impact delaying customer purchasing were not as extensive this year. And we resumed upward order momentum with strong October bookings. Our margin contributions in the third quarter were 39% of revenue, up from 35% in the same quarter a year ago but down by nearly 2% from the previous quarter, primarily due to lower revenue in the third quarter, providing less coverage of our fixed cost of manufacturing. Our research, sales and marketing and general administrative expenses in the third quarter were $1.5 million, down by 22% over the third quarter, a year ago and down by 10% from the previous quarter. Operating as a leaner organization has made a substantial improvement to our bottom line results. In the third quarter, we incurred a net quarterly loss of $321,000 or $0.07 per share and a smaller EBITDA loss or earnings before interest, taxes, depreciation and amortization of $67,000. The previous two quarters of 2013 were profitable with GAAP net income of $118,000 and EBITDA net income of $623,000. Results from the nine months compared to the same period in the previous year reflect trends that are positive year-over-year. Revenue for the nine months of 2013 was $12 million compared to the revenue of $10.8 million from the nine months a year…

(Operator Instructions) Our first question comes from the line of Brian Swift from Security Research Associates. Please proceed with your question.

Thank you. Could you give us a little color, I think, on the new attachable scanners and (inaudible) of where do we expect to be seeing those sold, they are going to go to the same customers driven by the handheld scanners or do you think they might open up some new markets for you?

Okay. So first of all we just launched this entire shipping in early September and the reaction today has been very positive. And we view this product as being, I would say, a largely complementary to our existing handheld scanners. And today we estimate that 85% to 90% of all our scanners, and our cordless scanners are sold in conjunction with tablets whether they be 7-inch tablets or 10-inch tablets, but that’s the majority of our sale. And we’ve not been able to, I would say participate in the single-handed solution and I will use the Apple store as the good example where the iPhone or iPod in conjunction with the sled has been used as a single-handed cash register. And that markets has been something, we’ve been never be able to penetrate and that we feel with the ace, this is the markets that we would be able to penetrate and take some good market share. I expect that customers who are using the 8Ci, will use as and more as a single handed cash register and we made the conscious decision not to put in Mag Stripe Readers. So we could partner with guys like Square and other people who are doing the payment. And it will take a little bit of time for this offer to be re-written even though its compatible because we don’t have market share in the phone-centric markets and -- but we believe that this phone-centric market is probably, equally big or bigger than the tablet-centric markets. So we think that the 8Ci will be a huge contributor to our revenue in 2014.

You are trying to get some business from Apple to use your device [convergence]?

While I just use the -- I mean, most people are familiar with the Apple stores where each sales associate has a scanner and iPod and they are used together as being a mobile cash register. And we would see the 8Ci as an equivalent that could be used in other places. It’s unlikely that we will get the Apple business and -- but that’s really not their target. We are looking for others who want to replicate the Apple experience with the single-handed solution and that’s an area where historically we’ve been unable to play. And with the 8Ci, we believe, we will start to capture some market share for this opportunity.

Okay. Thanks.

(Operator Instructions) Our next question is from the line of [Bernard Fidel], a private investor. Please proceed with your question.

Okay. Hi folks. How are you doing?

Hi, Dr. Bernard.

Okay. How are internationally, how is Europe doing and I think you’ve mentioned about Japan, that’s coming back on line for the fourth quarter, what about Europe?

Europe actually did quite well in Q3 and we saw our revenue essentially getting above Q2 levels and the business strengthening. So, overall, I think, Europe was not really impacted by the Apple transition and we saw a very good September as we typically see. And overall our business in Europe was stronger and we had some shortages which affected our numbers over there also as we had some product delays and but overall we were quite pleased with the Europe numbers in Q3. And in the case of Japan, the Asia-Pac, yes, we had some difficulty with our distributor in Japan, which resulted been unable to ship for most third quarter, that’s now been rectified and we expect to resume normal operations in Asia-Pac and particularly in Japan in the fourth quarter.

Okay. The last conference call you mentioned something about a retailer in England equal to possible 1,200 scanners, do you recall what I’m saying there?

I recall, I don’t remember mentioning 1,200 scanners, but I do recall that we…

Yeah.

… I mentioned on our last call that we were doing a field trial with the retailer in the U.K.

Yeah.

And that went quite well and it took a bit longer than expected and they have made decision to proceed and but -- and as part of their field trial and they have decided to add number of new features to the application and they basically won’t consider deploying it now until February, March of next year. And I think one other problem that has happened this year with the mobile point of sales solutions is that many of the field trials and pilot deployments took longer than people expected. They also found a number of areas where they could improve and as a result, a lot of them have simply run out of time to do anything this year and won’t pickup the projects again to early next year, because there is a more to fear in retail of doing anything late in the year and then having some hiccup in your system during the busy holiday season. So and it’s a bit of a double edge sword. I think the good news is that people are excited and there’s a lot of evidence to suggest that this is really a profitable way forward for retailers. I think the bad news is it took a bit longer and you are not going to see the benefit of that until 2014.

Does that mean that they are going to -- they are going to deploy the one in England?

Yeah. It does. I mean, well, I can only report what they have reported. What they have reported is that they felt the trial and pilot deployment was successful and in their review they are updating the application to incorporate a number of benefits and features that the employees requested and that’s off we won’t be ready now until I would say February of next year. I would imaging that they will do another little deployment to verify everything is working and then pull the trigger. But, yes, and the indications are that they are going forward based on the results they achieved in the pilot and they intend to deploy.

Okay.

But that’s all we know.

Yeah.

I am happy to share.

The medical equipment company with the SoMo.

Yes.

Now, they are waiting to get certification in United States, am I correct on that?

Yeah. I mean, there -- as you can imagine with medical equipments, there is a lot of certification. So the company is in the process of submitting there new and updated product which includes the SoMo motherboard and other SoMo element to the FDA for approval and that approval is ongoing as we speak.

Oh! I see. They’ll expect to get it this year would you think or…

We -- it's the FDA, so these things can take time -- while. But our understanding is, yes, they are working hard to get it as soon as possible. And then once they get it they can enter a deployment phase but they are not legally allowed to sell the product to customers until they have those certifications.

Okay. And October is getting a longer as we covered from September I will mention that?

Yeah. We’ve seen the pick-up, I mean, I think as Dave mentioned. And last year there seem to be a lot more confusion and the delay last September, October and much November. And I think Apple maybe iOS 7 software available in June which helped greatly and there was a number of unexpected hiccups and so far as Apple released 7 and then 7.01 and 7.02 in quick succession. And things seem to have stabilized and people are making their way forward again. And so, yes, we feel that the interruption is much shorter this year.

Right. Anything you know on band line contract or where do you want to go…

Well, there is nothing new, I mean, essentially there is belief that and this company has told people, but they intend to deploy before the end of the year and unless we don’t have any evidence that this is not going to happen. And our concern is that, if we get a rush of orders in late December we will be able to fulfill most but not all. And that we’re staying as close as we can to the company to make sure that the products are brought in in time to meet any demand they have. And but we’re reluctant just to bring in all our supplies in the hope that it happened because occasionally these things get delayed and as a result, we don’t want to get caught with the inventory. So we are monitoring the situation closely and we do expect them to deploy and the timing is always a challenge for us. And I think we’ll be in a position to react, but and we really need to see some orders before we commit to bringing in all that inventory.

Right. Are there any large order contracts that have been considered now?

Yeah. We’ve seen as I mentioned in my comments that our deployment associated with pharmaceutical and other, what I would describe is more commercial services and customers, and have as usual resurfaced in the fourth quarter and this companies seem to have a budgets that they need to spend and they are planning for 2014. So we would expect a number of those to pull the trigger in Q4.

Okay. Well, I’ll tell you the two positive things actually today is that, you kept the expenses down, I was surprised that you even got it down even more? And number two, we had the worse at least we were cash flow positive which is positive in my mind?

Yeah. No. I think that we have really tried to adjust our expenses and to keep them as low as possible, and we have done a good job on the expense control, and ultimately it’s the topline growth that we need to guess. But I think as Dave mentioned, and we are a much leaner organization now going forward. And there is a lot more leverage and with a small uptick in sales the return for share becomes quite interesting.

Okay. Just one last thing and I will get off. In regard to basic, do you expect to have sequential growth in the fourth quarter? Now, when you see sequential growth, is that compared to the second quarter or to the third quarter?

While sequential implies third that’s what…

What?

Sequential, it means than…

Okay. Well, maybe I’m using the wrong term, okay. The third quarter was obviously extremely depressed, now could we do better than the sec -- in the second quarter and in the fourth quarter, of course the answer is (inaudible)?

Yeah. Certainly we could. But I think I have to bring up your previous point and we have a number of deals and the band line deals which you previously alluded to is a big swinger.

Yeah.

And certainly if that comes in, we will do better. And I think if it doesn’t come in, we’ll do better. But how much better is hard to predict because there are so many variables.

No, no. You have answered my question well, that even without the band line you expect to better.

Correct. Yeah.

Yeah. Okay. And of course, if the band line comes in, we -- we will do a hell of a lot better.

Yeah. Yeah. Provided it comes in time that we can get the product out to them which at some point you run out of time and whereas we are very mindful to keep our expenses and inventory in line because the cash situation remains tights and those are difficult things that we are managing on a daily basis.

Okay. Good. Okay. I’ve had it. Okay. Thanks a lot.

Thank you.

Our next question is a follow-up question from the line of Brian Swift. Please proceed with your question.

Yes. You mentioned Japan a couple of times has been one of the issues that depressed September verdict, could you elaborate more, I mean, I wonder is a demand issue or was this was a financially with your tight finances or was there some type of inventory work-off or what can you do to shed a little light on that? And also where they are now? And then, and additionally Europe you said was -- was a stronger quarter but typically in September, I mean in the September quarter? If you highlight any other strength in business in terms of geographically how the quarter went?

Okay. So our Japan situation is quite clear. Our Japanese distributor have basically ran into some financially difficulty and wasn’t able to secure credits which resulted not being able to ship. We have subsequently added an alternative distributor and that really we don’t have any demand issues in Japan. The demand remained reasonably strong. It was our ability to service that demand and the logistics of us that went away. So and we have had people, our regional sales person in Japan for the last week and we are bringing a new distributor online to service the existing business we have there. And so I think that’s the long and the short of the Japanese situation. I would say it typically cost us somewhere in the region of 150 to 200,000, which we wouldn’t expected in Japan which we didn’t guess. And then in terms of other areas and I think that Europe has continued to be weak. It strengthened in Q3 and but I don’t really see southern Europe recovering much. Northern Europe has remained reasonably strong and stable, and the U.K. has come back a little bit and southern Spain whether it’s Italy, Spain, Portugal, et cetera has for the whole year been extremely weak and we expect it to stay that way and probably until the middle of next year. In terms of the U.S., I would actually say things were going along quite well for July and August. We essentially lost a few weeks while there was a great deal of uncertainty about the Apple situation and we have seen it come back. And nothing too extraordinary in terms of geographical dispersion, we didn’t see the same impact overseas and that’s partly because Apple don’t deliver new products around the world at the same time. And I think in Ireland, they were delivering the new iPhones in late October. So, it means that the 6.0 Operating System is still available for anyone who wants to deploy through mid-October and it’s the abrupt transition that causes the grief. You are delivering 6.0 Operating System on Wednesday and on Thursday you are delivering 7.0, and that causes people to just stop and hasten and halt their deployment. The situation in Europe is somewhat easier because they do get the benefit of longer runway to do these transitions. And generally speaking Apple and its good example, in September are able to do quick updates prior to going overseas. So the overseas customers don’t suffer the 7.0, 7.01, 7.02, they start at 7.02 and that makes life somewhat easier.

Well, I have 7.03 with my iPhone, so it seems like another one came out about a week ago?

Well, yeah, I am sure, it’s -- I mean the -- there has been some rapid changes and I think from a consumer point of view they are all pretty benign and maybe some of them aren’t. But from running your business point of view and the impact of your application not working when you have sales people out there using it as their daily tool and it is dramatically different than if you can’t get your email for 45 minutes.

Right. But do you think that the movement to iOS 7 is pretty much run its course as far as your delays or do you think they are still more ahead?

No. I think its run its course. I think that part -- but part of the dilemma here I think we have Brian is that the Windows is quite short from September through when somebody can put a new system into a retail store. And because of the delays I think that more of the deployments got pushed to 2014 than would have happened, had they are not been delayed.

Oh, I see.

So there isn’t enough time, I mean, right now we are getting to stability but it’s the 28th of October. I think if we got the stability either 28th of September, people would still have had four to five weeks to push solutions into retail stores prior to Christmas, four to five days won’t get it done. So you are now going to see some those push off into early 2014.

Did you elaborate bit on your sales pipeline, now that’s going (inaudible) now and that’s split just (inaudible) in the SoMo and then just any kind of color on why you have a lot of trials going in your (inaudible) this quarter?

Yes. So the line is breaking up badly, Brian. So let me just reiterate. So you would like a little more color on the developers and both on scanning and on SoMo?

Right.

Okay. So I think that in terms of the pipeline and what we really look at is where we are with the developers. And today I would say we have in excess of 120 mobile point of sales solutions which have been completed, gone through some type of field trial or test and are ready to be deployed where the cordless scanner -- our cordless scanner is the primary scanning solution. And you can see if you go to places like Shopify, they recently posted on their homepage their new mobile point of sales solutions listing of -- as is the case with Lightspeed and NCR and ShopKeep and Zend and there is a long list. And I think that many of them are still gaining traction as oppose to help traction. And as they get traction, they are pulling us into these deals. We estimate that 20% of all point of sales systems will need a scanner. And it’s not a 100% situation and largely depends on what you are selling. Obviously if you are selling coffee and cupcakes, there is no requirement for a scanner. And if you are selling clothes or shoes or other items, there is. And if you take situation of Square as an example, they have gone from selling a service which is where they started to selling items, but items that were picture items like coffee and cupcakes and pastries and other things to now to a point where their software has been upgraded to sell items and as part of this they’ve incorporated our scanners. And I think that the market is still evolving and that we somewhat run out of time this year due to the fact that the people underestimate the difficulty. And having that said we expect -- I mean I could give you a lot of customers who are looking at deal. But I think many of them will fall into next year, including the likes of Yamazaki who took the 3200 units as part of a trial this year and want to deploy their second phase until next year and that second phase is likely to be 27,000 to 30,000 units. So there is a good pipeline. I think on the SoMo side, we’ve had a 150 people download the SCKT. And I think that there are pockets of our potential success here and as people who value stability particularly in healthcare, in hospitality and has deal with the rapid changing world of Apple and Android are relooking at the SoMo. And there are some interesting opportunities but I don’t think there are far left alone, yes. And to get overly excited, we have seen our regular customers come back and they are maintaining the business during this transitionary period.

Okay. And just one last question on technology side, every time Apple and the Android guys come up with new phones, the camera will get better and sharper. The couple of times that I have used it for scanning, I haven’t noticed that being any easier, any faster, I might just being left at it. Do you have any color on how -- whether that’s proving because obviously down the road that seems to be what most have to worry about in terms of that they are able to scan so well with the handheld as they don’t need the scanner. But I haven’t seen that technology improving well as the clarity of the pictures that you get?

Well, it’s a very interesting observation in fact as the cameras get better, the ability to scan barcodes actually gets reverse. And your ideal barcode scanner is a high contrast black and white camera. Because you want nice, crisp lines between your lines -- your white lines and your black lines. As you start getting very good cameras like the new Nokia with the 41 megapixel camera, it becomes increasingly difficult to scan barcodes for two reasons. One is that you don’t get those nice, sharp, black and white lines that the barcode scanner likes. And the second thing is that it’s quite difficult to maintain stability when you have a very sensitive camera to read the barcodes. So I have been to a number of customers and developers and the few of them as they operate with iOS 7 and the improved camera picture situation. As they find that they are unable to read barcodes anymore with the primary camera and recommending customers now read the barcodes with their face time camera or the camera that takes the picture of you are the poorer quality one. So even though it’s not obvious, I actually think as the camera gets better their ability to scan barcodes get worse which somewhat eliminates these thrash of your camera will read the barcodes quickly. And it’s actually quite the opposite. We like better pictures and worse barcode scanners because it makes our life easier. And ultimately I have to say that you still have a timing problem. Most of our customers are scanning 50 to 200-300 times a day. And I think most camera phones run out of scanning capability once you get past 10, 15 may be maximum of 20 scans a day. It gets very old, very quickly and so -- but I think actually it reduces as opposed to increases the thrash and going forward the camera is improved.

Okay. Glad to hear [it isn’t just negative] I am using the product. Okay. That’s it for me. Thank you.

All right. Thank you very much, Brian. So I don’t know if we have any more questions and but I assume the silence indicates we don’t have any more. So I would just like to thank everyone for participating in today’s call and wish you all a good afternoon. Thank you.

Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.