Greetings and welcome to the Socket Mobile second quarter 2013 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. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jim Byers of the 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 second quarter and six months ended June 30, 2014. On the call today from Socket are Kevin Mills, President and Chief Executive Officer and Dave Dunlap, Chief Financial Officer. Socket Mobile distributed its earnings release over the wire service earlier 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 have 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 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 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.

Thanks, Jim. Good afternoon, everyone, and thank you for joining us today. I will begin today's call with a review of our second quarter results and then discuss the business opportunities we are seeing as we move into the second half of 2014. We are pleased to report a return to profitable operating levels, for both the second quarter and the first six months of this year. Total revenue for the second quarter was $4.4 million, which is up 15% sequentially from the preceding quarter, and is our third consecutive quarter of sequential revenue growth. The increase we achieved in revenue, as well as margins enabled us to record a second quarter profit of $93,000 or $0.02 a share and positive EBITDA for the quarter of $400,000 or $0.08 per share. Let me now discuss the dynamics of our business in Q2 and then outline our expectations for the remainder of 2014, starting with our cordless barcode scanning business. Revenue from our cordless scanning business reached a record level of $3.6 million in the second quarter, up 32% sequentially from the preceding quarter and up 42% over the same quarter last year. This solid growth reflects a combination of strong run rate business coupled with two larger deals in the quarter, both of which were in the 1,000 units plus range. As a result, we saw sequential growth in the quarter well in excess of our forecast. While we are always delighted with larger deals and, the positive impact they have been our revenue and results, we continue to be very encouraged by the strong run rates business we are seeing. The run rate exclude larger one time deals and continues to be driven by the increasing deployments of barcode enabled applications. Many of these applications were developed over the…

Thank you, Kevin. The growing of applications that enable the use our barcode scanners as part of mobile point-of-sale or commercial services applications moved our second quarter revenue up to profitable operating levels. Our cordless barcode scanning revenue in the second quarter was $3.6 million, up 32% sequentially over the previous quarter cordless barcode scanning revenue of $2.7 million and up 42% over cordless barcode scanning revenue in the same quarter a year ago. Cordless barcode scanning revenue for the first half of 2014 was $6.3 million, up 30% over the first half of last year. Total revenue for the second quarter was $4.4 million, up 16% sequentially over the first quarter and flat with the second quarter a year ago, reflecting the drop in our SoMo handheld computer sales as noted by Kevin. Cordless barcode scanning revenue represented 81% of our second quarter revenue with the balance from sales of our handheld computers, service and accessories. Our registered developer community now numbers over 1,000, 90% of whom have signed up to integrate our barcode scanners into applications for Apple and Android devices. These applications drive our sales and include mobile point-of-sale software, commercial services applications such as used in hospitality environments and many applications developed by companies for internal business use, reflecting the growing adoption by businesses of Apple and Android tablets and smartphones. We offer a full range of barcode scanning products designed for Apple, Android and Windows smartphones and tablets. The quality and ease of use our software developer kits and the breadth of applications being created by our registered developers creates a lot of current and future sales momentum for Socket. We have become the cordless barcode scanner recommended for each of these applications, and our products are incorporated into each application's promotional programs by those…

(Operator Instructions). Our first question today comes from Brian Swift, Security Research Associates. Please go ahead, sir.

Thank you. So, congrats on a good quarter.

Thank you.

Just one clarification here on the interest guidance going forward. You have this one-time charge of $60,000 and you are saying you are going to have a reduction of $55,000 going forward. Is that the $55,000 reduction from what you had previously been doing in interest? Or $55,000 from this $175,000 level?

No, you get the combination of the two, Brian. The $61,000 was a one-time non-cash charge. So that goes away in Q3. In addition, the total interest savings on the quarter on the new rate versus the old was about $55,000. Now we had the newer interest rate in effect for one month. So the effect on Q3, if you are modeling it, is two-thirds of that and then the full $55,000 as long as there are no outstanding from that point forward.

Okay. Thanks. First on the SoMo. You said you had developed a new customer during the quarter. What type of application is that? Or can you say who the customer is? Hello?

Sorry. Standby, sir. Mr. Dunlap, are you still there?

I am not hearing anything.

His line is connected. Just standby please. Please stand by. We are going to reattempt to reconnect the speaker. Early participants, please continue to standby, while we reach the speaker. Please continue to standby, as we attempt to rejoin the speakers. Pardon me, everyone. I have rejoined today's speakers, and I will open up Mr. Swift's line again. Please proceed.

Hi, Brian.

I am back.

(inaudible), so we are back and we apologize for the inconvenience. We don't know what went wrong.

I didn't think my question was that dramatic, that it would knock you out.

Okay. So to answer your question, the OEM is using the SoMo in a medical instrument and they are currently selling that medical instruments primarily in Europe. They are switching over to Socket based solution and that solution will be sold in Europe and they are currently going through FDA approval and then we hope to be supporting them in selling in the U.S. in 2015. So that is where we are with that.

Okay. So you expect this will be something that would continue on going forward. And do you have other -- and you said, you have some existing customers that are going to be renewing the combination (inaudible).

Yes. I mean I think, obviously the summer business has struggled. What's attractive about the platform is people who want to lot of stability. Obviously with medical related equipments, stability trumps everything because once you go through the process of getting it certified with the FDA and various medical organizations around the world, nobody wants to change it. So I think that seems to be a better home for SoMo and we will look to maybe get some other customers in that area. We have customers who are happy with the SoMo, deploying it, using it and have plans to continue to do that and we would like to continue to support them.

Okay, and so you think that is going to stabilize the business at this level going forward, at the Q2 level? Or you are going to grow going forward?

We would hope that we will stabilize at a higher level. But to be honest, we need it go get back to, in the $1 million a quarter range to make it a business. We suffered, I think, that's partly due to the, I would say, just turmoil in the industry. And some of that is now is getting sorted out. But I think the goal would be to get it back towards $1 million a quarter. I don't we will achieved that during this year but we hope to achieve that in 2015.

Okay. Getting back to the scanner, you indicated that you had a couple of large customer orders during the quarter. What's the outlook for the September quarter?

The timing of the large deals has always been difficult for us to determine. We have always had these larger deals, I would say, hanging there. But our ability to influence the exact timing has been very, very difficult. So I think that we will get some large deals in Q3, but I think the better story is that the underlying run rates business continues to strengthen, and that seems to be a much more predictable indicator of our growth. I think we sold out almost 14,000 scanners in Q2 and we can identify two large deals that were 1,000 plus. And when I say, 1,000 plus, I mean just over 1,000. So there was 11,000 plus that were, what I would describe as, run rate small deals and that's the number that I think continues to grow quickly. So we do expect some larger deals in Q3, but we don't exactly how large or the exact timing of them right now.

The other thing helpful with third quarter is that we are entering the quarter with a much stronger backlog of shippable orders and those order phase has continued since the beginning of the quarter. Today we have orders on hand that are about half of last quarter's or the second quarter's revenue levels. So you can see we are progressing along quite well during the quarter. What's not known yet is what impact, if any, we may see in terms of timing of orders when we get into the September time period where Apple is expected to make its new product announcements.

Right. On that subject, when you are trying to, I though in the beginning that you were going to give some guidance for the second half but all you indicated was that your growth rate is going to slow down in the September quarter because of the well-publicized Apple product announcements, as it has in the past. In the past, you actually have had sequential down, to an extent, in the September quarters. But some of that may have been influenced by other things as well. And as much as your SoMo, you expect to be no longer dragging, at least on the sequential aspect of it, are you are you saying that we should be expecting a lower quarter in September? Or sequentially up, but not by much?

See I think the last one. Sequentially up, but not by much, right. So I think that the impact of the Apple situation is unknown, but effectively it reduces our quarter from somewhere in the region of 13 weeks to, depending on the level of disruption, nine to 10 weeks, right, as people need to retest and they kind of do nothing for two or three weeks while they figure things out. And as we have seen over the last two years, I think the impact in 2012 hugely negative for us. But then Apple changed the connector in that transition as we moved up. 2013, I think we lost probably two or three weeks out of the quarter and the reality is that the third quarter, September is by far the most important month. So I think we can sit here and guess all day. I think our focus will be to maintain the momentum and maintain profitability and not go backwards. It is kind of what I think is possible, and then we will be in a better position to outline what growth we have in Q4. I don't think we will have a negative downticks we have had in the past based on the momentum we have entered with and the solid July that we started with. But I think we have to be realistic here.

Al right. Okay, and just another follow-up on your new product announcement and you had mentioned that perhaps it may be aimed at the sporting event type of areas? Do you have installations now using other devices? Or is this more specifically in response to an opportunity you see coming?

Well, I think that we do have other installations using our 1D scanners. We see much more ticketing related opportunity with the 2D scanner. What we have seen is that a number of people have gone to an electronic ticket format, and they have suggested the customers that they use their mobile phone with the built-in camera, but they find in many instances, this is not fast enough and results in large crowds and dissatisfied patrons. So they switched to a single-handed operation. In the trials we have done with the 8Ci, people have come back and said it's absolutely perfect in terms of the size, the weight, the life except we already moved on to 2D barcode tickets and we couldn't read them. We are addressing that problem now with the 8Qi. So I think this product in particular, we have I think a few customers waiting in the wings that have said, as soon as you get it, we will deploy with this which will be a little bit faster than we would expect with other products.

Okay. All right. I will let somebody else ask a question.

All right. Thank you very much, Brian and thanks for your patience.

(Operator Instructions). Our next question comes from Al Troy, a private investor. Please go ahead.

Congratulations on a good quarter. It was nice to see a profit there. My question is, there seems to be very little interest in the investment community for Socket. It goes some days without trading at all, other days it trades 1,000 or 2,000 shares. But what are your plans to get people excited about the company and the investment community.

Well, I think that first of all, we are recognizing shares as their trading hasn't been what we would like. I think our number one objective, when I look at the year, was to grow business and get profitable, and that will stay our objective. We haven't spent a great deal of money on outreach and other relations investor activities. And I think as we gain a little more strength, we intend to do that. But it's much easier to do that when we have a little bit of a track record under our belts, and we have now done three consecutive growth quarters. I think I would like to see us get through Q3 and make sure that we don't have setback based on the Apple situation and then we can do more outreach. So that's kind of where we are at.

But you have a lot of great products and people who are not aware of it and not aware of the company, I mean there is just no interest. If you could do $4 million, $5 million, $6 million in the quarter, nobody is going to care. You have to get people involved. You have to get investors interested. You have to do some public relations work.

We understand. I think that our focus has been on the developer community. We know over 1,000 developers. The applications have to be written. Much of the revenue that we are now seeing has been driven by applications that have been written as far back as two years ago or 18 months ago. So we basically have been following the field and sowing the seeds. We will continue to do this and we will increase our outreach. But I think there is a sequence here not to get ahead of ourselves. We have done this in the past where we got excited and then investors have come in and there hasn't been a continued growth story. We would like to make sure that we have a continued growth story before we do too much outreach. We will be the first to admit, we haven't done anything actually and we have reduced associates' budgets enough to get profitable. So it's on the agenda but it's at going to happened tomorrow. I think you can expect it to happen in the fourth quarter and Q1 next year.

Because the stock is so under priced. I mean you have a market cap of about $8 million and you have revenues of over $16 million. It's really unheard of a company be selling for such a low price with so much revenues and being profitable.

Sounds like a fine opportunity to me.

Yes, but nobody is buying. There is no interest.

We understand. And we share your frustration, but I think we need to do our blocking and tackling first and we are doing this. And as we get stronger, we will reach out and make sure the story is well known and well understood.

Okay. Thank you.

The next question comes from Bernard Fidel, a private investor. Please go ahead.

Hi. Evening, fellows. It is nice to see we are profitable. What's happening with the WAN line? It doesn't seem to be kicking in.

Well, yes. I would agree that it hasn't kicked in, which is I think both a good thing and a bad thing. Obviously we believe that revenue is still ahead of us and can help shore up an increase our revenue in the latter part of the year. And I think actually it highlights the difficulty we have in predicting the timing of such deals. In that particular case, that customer came to us with a very specific plan, timeline, they had completed their software. They completed the field trial. And still it takes, at least it looks like it will take 15 months from their intention to say go to their actual say go. Now the work from our point of view, all the work associated with application has been done and we just haven't reap the reward. We are very confident and we do talk to this company on a regular basis that the deployment will happen. But I think it highlights the difficulty we have in nailing down a specific application. The good news is that we are seeing a very strong run rate, so that when this comes in, it will be incremental to our business. There was a time in the not-too-distant past where we were dependent on that happening any given quarter to make our number. So as the business have progressed, these deals have become more bonus to the business as opposed to the business, and therefore we can be a little more patient and philosophical about this. But we do fully expect that deal to happen.

What timeframe, would you say? In this fiscal year?

To be honest, I would say late in this fiscal year, but more likely early next year. Ultimately these deals are driven by what I call a tax day. Everybody does their tax rate April 15 because that's the date you are told. If the day got moved to June 15, everyone will do their taxes on June 14. If the company that doesn't move the days, then I think it will happen late this year, but often there is pressure because people aren't ready to move to days which is why the project has delayed. So to question your question, the current day, we believe is that they would like everything in place for January 1, 2015. If human nature is what it is, I would expect many of their customers will buy in December and the majority in January. If they move the days to February, they will then impact the rollouts to January and February. So that's as much as we know. We are not counting it in our current forecasts. It is on our off side list. We are ready to service this but we have all the customers that are near term that are more run rate at this stage that we are more comfortable with.

Right. Kevin, how is Europe doing? Are we seeing growth from the first quarter or what?

Yes. I think that Europe is lagging behind the U.S. and I think that whereas the deployment has started to happen in the U.S., we haven't seen the same level of deployments in Europe. We will see Europe picking up. We have some larger deals that have already been -- the product has been shipped but the revenue hasn't been recognized. And so we are pretty confident Europe and Asia-Pac will follow a similar growth path, but they are probably offset between six and nine months.

Okay. How is the Japanese thing? Anything at all on that?

It's again the same. The customer we previously talked about have deployed about 3,400 scanners and they are supposed to make a decision later part of this year on whether they will do Phase 2, but we don't have any update on that decision until they make it. I will most likely travel to Japan in the fourth quarter to meet with them to understand if we can get that second part of the deal, but at this stage, I would say we just are going to have to wait.

Okay. I wondered, would third quarter, you say it is actually going to be slower because of the Apple. Do you still -- even with that, do you see any growth or anything in the third quarter and would it be profitable?

Yes, I called us to maintain profitability, right. I think that we can speculate. I think we have to be cautious with Apple and a lot depends on what changes they bring out and how smooth the transition from iOS7 to iOS8 is. If you remember back to when we moved from 5 to 6, it was very bumpy and a lot of things broke. Apple were better when they moved from 6 to 7, and we are hoping they will be better when they move from 7 to 8, but we have no -- it's just wishful thinking. I think it's better to be cautious and assume that it will be some difficulty and be surprised it's less. Even with the difficulties, unless they are disastrous difficulties, but even with normal difficulties, we believe we can maintain profitability and we haven't increased our expenses significantly and we will remain cautious on it, so we know that we have clear water ahead of us.

Yes. You when the past, Kevin, we used to get announcements of relationships et cetera. And we don't get any announcements. We do not here it anymore. It's just like no products.

Well, yes. I mean part of it is that there was great desire on behalf of our customers, particularly early customers like LightSpeed to announce the world that they had a complete solution and it was Apple centric and it was new to the world. Part of the issue now is that we have over hundreds type customers and it isn't a new and exciting development for someone to have a mobile point-of-sale system based on Apple. And therefore, it's just not as newsworthy. Now from a business point of view, it's equally lucrative or equally beneficial to us as they get out and start selling. I think that's again, we will go to a new cycle as new and innovative things happen whether they are in the area of mobile payments on coupons or other related activities, it's just that at the moment, even though the world is very focused on mobile point-of-sale and we are deeply involved in this category, it's just not as newsworthy as it was and we don't have news for the sake of just saying something.

Okay. One last question. How were the point-of-sales, like for NCR, for instance. Are we seeing any pickup in that?

The short answer is yes. We continue to see any pickup from all the mobile point-of-sale people and we do track on a weekly basis, sales out associated with the various applications. And yes, we have seen a significant uptick in NCR and others which has driven the run rate business and while we shipped almost 30,000 units this first half of 2014, which is almost the same number of units we shipped in all of 2013. So yes, all of them are picking up, but we haven't seen a dramatic single customer which is fine by us. The underlying business continues to strengthen. I think that's the message here.

And the last thing is, Do you expect Square, not Square but I could hear your comment on that, with the SoMo, did the sales of the SoMo go up or down in the second quarter?

The sales of SoMo were down in the second quarter, but we expect them to the rebound a bit in the third quarter.

And what you think will they bounce back in the third. They will come back off in the third quarter. They will higher in the third quarter.

Okay. Well, that's a good positive. And one last thing, the Square, anything going with that? I heard they might be using us or something or some program?

With their mobile point-of-sale, they rolled out a mobile point-of-sale cash register and they selected us in a -- designed us in as their cordless scanner of choice. We haven't seen them on our charts as regards people who are driving a lot of scanning sales at this stage, but they are still a big force in this mobile point-of-sale market. And yes, we are working with them closely.

Okay. Good. I will let somebody else ask too.

All right. Thank you very much, Dr. Fidel.

I am showing no further questions. I would like to turn the floor back over to management for closing comments.

Thank you very much, operator. I would like to apologize for the technical difficulties we had in the call, and thank you all for participating and your patience and wish you all a good afternoon. Thank you.

This concludes today's teleconference. You may know disconnect your lines. Thank you for participating. And have a peasant day.