Greetings and welcome to the Socket Mobile second [ph] quarter 2009 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 Myers for MKR Group. Thank you. Mr. Myers, you may begin.

Thank you, Operator. Good afternoon and welcome to Socket's conference call to review financial results for its third quarter ended September 30th, 2009. Online today are Kevin Mills, President and CEO of Socket and Dave Dunlap, CFO of Socket. Socket Mobile distributed its earnings release over the wire service at the close of 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 Socket’s 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. And 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 Exchange Act of 1934, as amended. Such forward-looking statements include, but are not limited to, statements with respect to the distribution, timing and market acceptance of Socket’s products and statements predicting trends, sales, order activity, backlog and market 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 risks that shipments of our products may be delayed or not happened as predicted, if ever, due to technological, market, or financial factors, including the availability of necessary working capital, the risk that the market acceptance and sales opportunities may not happen as anticipated, the risk that the company's integrator program and current distribution channels may not choose to distribute its product or may not be successful in doing so, the risk that acceptance of the company’s products in vertical application markets may not happen as anticipated, and other risks described in Socket’s most recent Form 10-K and Form 10-Q reports filed with the Securities and Exchange Commission. Socket does not undertake any obligation to update any forward-looking statements. With that said, I would now like to turn the call over to Socket's CEO, Kevin Mills.

Thank you, Jim. First, I would like to thank everyone for joining us today. I will begin by providing an overview of our third quarter results, followed by our current outlook on our markets and business for the rest of the year. We grew total revenue 10% in the third quarter, representing a return to sequential growth for the first time in 12 months, despite the difficult economy. At the same time, we continued to reduce our expenses and tightly manage our resources to achieve cash neutral results from operations. The sale of Socket Serial, which was our legacy serial product, has been a strategic objective for many quarters as it brings cash to Socket and enables greater focus towards the success of our handheld and data collection businesses. The sale was a win-win situation as it enabled another company to service Socket’s existing customers and extend the use of the serial technology we developed over many years. In Q3, we continued to see solid adoption of our SoMo handheld computers and sales in the third quarter remained near record levels. We sold 3,167 units, which is 119 fewer than Q2. However, it’s important to note that in Q2 we delivered over 600 SoMo units to Good Samaritan Hospital that completed our planned deployment of 3,000 units over the past year. Excluding this deployment, SoMo unit sales grew 14% in Q3, which is especially noteworthy since Q3 is historically a weaker quarter for us. SoMo sales continue to make headway in our target markets of health care and hospitality and we also continue to see sales in the education and government sectors. In health care, we continue to work with medical technology companies like Epocal, who have developed a highly portable bedside blood analyzer, capable of delivering results within 30…

Thank you, Kevin. Financial highlights for Socket’s third quarter include 10% sequential growth in revenue from $4.1 million to $4.6 million, an improvement of nearly 4% in margins from 41.4% to 45.2%, a further reduction in the quarterly operating expenses from $2.6 million to $2.4 million, and a gain of $450,000 from the strategic sales of our serial product line. As a result, we reported a third quarter profit of $49,000 or $0.01 per share compared to a loss of $945,000 or $0.27 per share in the second quarter of 2009. For comparison purposes, excluding the one-time gain from the sale, third quarter net loss was $401,000 or $0.11 per share, a 58% improvement over the preceding quarter. Our balance sheet also strengthened as we generated $844,000 in cash, improving our end-of-quarter cash balance to $2.5 million, up from $1.7 million at June 30th, 2009. About half of the cash increase was generated from the gain on the sale of our serial product line and the other half was generated from operations, particularly from the management of our working capital. In our July conference call, we reported to you increasing pipeline activity and our expectations that revenue growth would return across all of our product lines. Our expectations were met. Our data collection product revenue grew 12% sequentially from $1.3 million to $1.5 million, aided by the addition of ScanSource in North America as the new distributor early in the quarter. Within our OEM business, our wireless LAN products grew 39% as we continued to roll out our newest 802.11a/b/g modules and cards and our total OEM business increased from $668,000 in the second quarter to $1.1 million in the third. Our handheld computer product sales were $1.6 million, flat compared to the preceding quarter. But as Kevin noted, we…

Thank you. (Operator instructions) Our first question is from Brian Swift of Security Research Associates. You may proceed with your question. Brian Swift – Security Research Associates: Thank you. A couple of questions. One, have you received the cash for the sale of the serial operation in the quarter? If so, how much and I noticed that the current liabilities, accounts payable went up about $0.5 million. So what would that be attributable to?

In terms of the sales of serial business, we – the transaction closed on September 30th and we received the cash on that date. So it is reflected in the cash on the balance sheet at the end of September. I think the increase in payables is more timing. We have been acquiring replacement inventory in anticipation of fourth quarter and the amounts due to the vendors will be due more in October than in September. So it’s a function more of the timing of the amounts that we owe our vendors. Brian Swift – Security Research Associates: Okay. And can you – can you just – in previous quarters, you have indicated how many SoMo's you’ve shipped and I didn’t – I hear a dollar number, but I didn’t hear the –

I indicated it at 3,167, Brian, which is a 119 less than our record of the previous quarter, but in Q2 we had 600 units going to Good Sam and we didn’t replace that all. I mean, we replaced 500 of those with run rates, but we were up 14% excluding Good Sam, but down 119 units to 3,167.

And on an accumulated basis, Brian, through the end of third quarter, our account is 22,212. So we are now moving up – continuing to move up in terms of the total units that are sold and most of the units are in the market today. Brian Swift – Security Research Associates: Okay. And I know the last time I was down visiting with you, you had some other hospital care type – not hospital, but I mean home retirement or residential or whatever type care people similar to Good Samaritan kind of in your queue. Where is – where are they now? Is that starting to ramp up?

We haven't signed the deal. We have a few people who’ve started, but unlike Good Samaritan we don't have a contract we can talk about. We are in discussions with a few larger groups at the moment and we are hoping to get those to conclude, I would say, one or two before the end of the year, but realistically they are 2010 opportunities. Brian Swift – Security Research Associates: Okay. All right. Can you talk about some of the other programs that are out there in the pipeline that either in health care or other areas that may be you could just develop of from what you had in your opening remarks?

Yes, again – I mean, we are dependent on third parties selling solutions. So I did highlight two in the health care, both Epocal – I think Epocal is up to around 700, 800 units from us at this stage and there are a number of hospitals and the hospitals deploy anything from 50 to 150 of their portable blood analyzers. We still have a lot of opportunity in medication dispensing, food and service, tracking drugs, et cetera. The bigger ones like for example, Plasco ID, as they get a school district there are several hundred units that get sold. Likewise, with Envision, as they get a library services contract, we get units that are sold with them. We have a lot more little ones than we have, I would say, Good Samaritan at this stage. But we have been contacted by a number of organizations, particularly in Europe that have deployment in the 800 to 1,500 units’ length. Brian Swift – Security Research Associates: And how about the programs you have done with – over the U.K., Dakota IS booked in there? I mean, I think –

Yes, again, I don't know if we talked about that, but I went over to see them. They have a number of hospitals in trials. We have won in the Liverpool area that basically we are hoping to see this quarter and they have been in trials for, I would say, at least two months. They have 10 units and the opportunity is 400 units. And again, once they pull the trigger, those units will be ordered, but right now they are still in trials. And that’s true of a lot. I mean, Europe isn’t terribly robust during the summer. They have a lot of holiday days or vacation days, but overall I think we’ve continued to get units out there for trials. We haven't seen a lot of the money starting to really flow from the various governments, but we are seeing more and more of it coming into the markets and I think for many, that would push them to pull the trigger on these trials they’ve been doing because even though the markets are recovering, I think they still lack what I would describe as a sense of urgency. I think the full and close you get are who are very close to pulling the trigger whereas often when business is a little bit stronger, there is more of a sense of, “I have to get this done this week, this month.” I don't think we’ve seen the economy get back to that stage just yet. Brian Swift – Security Research Associates: Now, the hospital application you described with Dakota IS, was that the one where they have the wristbands or the Dakota printer and you do the reader – ?

That’s one of them. And actually the one that is currently I would say leading the charge is actually the iBleep solution, which is a doctor paging system, used particularly at nights to page doctors to patients that in the event they need attention. Currently, they use the paging system. They’ve replaced all of that using the SoMo, but in addition, they – the doctor can respond back with – that they are on the way and their ETA as well as they’ve seen the patients’ soft, critical information like blood pressure and other vital statistic type information can be gathered and sent to doctor prior to him leaving for the patient. This has been adopted at a few hospitals within what’s – the trust. The way the U.K. medical system works is that a trust will basically oversee five or six hospitals and we have seen some traction within the trusts and there is an opportunity to – for us to be, I would say, approved for national deployment and hopefully, we will expect to see that happen next year where this would be a standard thing that is used in hospitals in the U.K. And again, then you get some exciting numbers. Brian Swift – Security Research Associates: All right. Any movement in the U.S. for a replacement for the old paging system?

Again, they don't use it as much. I mean, it’s interesting as we’ve been in health care, practices vary in different countries. I think in the U.S., there are still a lot of small hospitals and they use different systems. But I think certainly within long-term health care we seem to have a lot of opportunities based on the work we’ve done with Good Samaritan. There are a number of similar organizations that have contacted us and that seems to be an area where there is a higher level of automation than in other areas. But it’s very much application driven and currently – I mean, we are supporting a number of different applications, but there is no standards in the U.S. So the business kind of arrives differently. Brian Swift – Security Research Associates: Okay. I’ll let somebody ask the questions.

Thank you very much, Brian.

Our next question is from Bernard Fidel [ph], a private investor. Please proceed with your question.

Hello, am I on?

You are on, Dr. Fidel.

Okay. I want to let you guys know that you did a pretty good job, particularly during the summer month quarter, which is usually pretty slow. I know particularly in Europe it is since I’m familiar with that. And so – particularly in the SoMo, you grew by 14%. I figured out that if you continue growing by 14%, you are going to double sales in six, seven months. But anyhow, here is a couple of questions I have. Kevin, you were speaking last time about in Europe there were some large orders pending for Sweden, Germany, and Switzerland, I believe?

Yes.

How are those getting along?

Well, the one in Sweden has continued to deploy. In fact, there was a – I don't know if it’s on our web page, I think it was on our mobile connection magazine. We included a little video of this application being used in Sweden and it basically is being used by people who have attention deficit disorders just to help them manage their daily activities, as well as other people who have (inaudible). So that’s continuing. I think through their summer they added another 200 or 300 units and we expect that to continue through, I would say, Q4 and into Q1. In Germany, we have continued to do quite well. Some of the larger hospitals were a bit slow over the summer, but again we are seeing those pick back up. So we are in these hospitals, but I think I should rightly point out, it’s difficult to make traction in the summer because of the long holidays they have in Europe. But all of those deals are still alive and moving forward and we’d anticipate the pace of them will pick up in Q4. We are quite happy not to lose ground in Q3, particularly in Europe.

Right. Okay. Couple of months ago, you mentioned that – I don't know – in your release anyhow, let’s put it that way, about ScanSource. And that’s a $1 billion electronic distributor, I believe. And how are they doing? I mean, are they getting this – ?

Well, they are doing quite well. I mean, we started with them in July and again, they have to both get stock, as well as get their sales force trained. And as you know, we only account revenue based on a sales house [ph]. But we did over $150,000 of sales house. So that’s delivering products and then delivering it on to a reseller customer. So overall, we are quite pleased with that. That was a – I think a very good start and we enjoy, I think, working with ScanSource. They have great contact in the industry and I think long term, they will be a big partner for us in the U.S. They have been our number one distributor in Europe, but we’ve basically, I would say, struggled to get in unlike a (inaudible) who have I think 1,100 or 1,200 suppliers. A company like ScanSource is much more selective and they might only have 100 suppliers. So I think based on our good work in good work in Europe, we were able to convince them that we were a good source of growth for them in the U.S. So we are delighted with the relationship for starters, but it’s early days.

In other words, for the fourth quarter do you see sales improving from ScanSource – ?

Absolutely, absolutely.

Yes. Okay, now you are familiar with the stimulus program of – I find it unbelievable, $20 billion would be for medical technology.

Yes.

How would that continue going – it should benefit us, especially the SoMo and also the scanner?

Yes. We believe that it will be an enormous benefit. I think the difficulty here is they are having difficulty distributing the money, right? The money hasn’t been flowing as quick as the Obama administration would like. I think they are working on that. But I think that for many hospitals, they know what to do, but they find it difficult to have the capital to do it and certainly as this money flows into the system, I think it will greatly help people eliminate paper and pen based systems and move to electronic record where there is ample money to do this. But this requires wireless LAN infrastructures, devices like SoMo, as well as software. So I would expect it will continue to grow, but I think we haven't seen the bumps yet that we were expecting as the money really hasn't started to flow yet.

Okay. Where – for the fourth quarter, where do you see the greatest strengths of – would that be the SoMo basically?

Yes. Again, we would expect – I mean, we are quite happy now with the progress we’ve made in the scanning side, but I think the greatest strength in Q4 will continue to come from the SoMo with scanning being, I would say, neck and neck. So I would expect our revenues for both scanning and SoMo to be – growth in Q4, but certainly lead by SoMo.

Okay. Just one last statement and then I’ll let somebody else get on. And this is a constructive thing. Socket is an unbelievable great story, okay? It really is. And I think you guys are doing a good job of turning it around and I think the SoMo is going to be a phenomenal thing.

Okay.

However, the one thing that is lacking is exposure. The company – a lot of people don't even know the story or ever heard of the company. I believe it – now, eventually they are going to find out because your growth rate is conceivably going to be tremendous. However, can’t we do something about promoting it to institutions and funds and other investors because it seems to me if anybody hears the story, the Socket would double overnight, you know?

Yes, certainly. I think we share your optimism for the future. I think part of the difficulty has been as we have reduced expenses to get through, I would say, a difficult year and we haven't allocated a lot of money on promoting Socket as a business. We’ve been really working in the tranches with our developers, as well as our core customers to generate the revenue. But certainly, we’d take it onboard your comments and as, I think, the economy improves and our sales go up, we will certainly allocate money to promote not just Socket’s long-term solution, but the health of our company.

Okay. Final thing is that you guys are doing a real good job. It looks like the company is really on a good growth pattern now, you know? And looking forward to some growth in the fourth quarter and a terrific year 2010. Good luck, fellows.

Thanks a lot.

(Operator instructions) Our next question is from Steve Krueger from Foresight Investing. Please proceed with your question. Steve Krueger – Foresight Investing: Hi Kevin, how are you?

I’m good, Steve, and you? Steve Krueger – Foresight Investing: Fine, thanks. Kevin, when we first started marketing the SoMo back in 2007, we had a discussion about calibrating the market opportunity and Dell had recently exited the market. They were doing about 200 million a year in their PDA sales and I think you were thinking maybe half of that market would be addressable by the SoMo plus other market share you might be able to pick up. And we were talking about maybe a $200 million a year business, maybe 10,000 to 20,000 units a month as opposed to 20,000 units over two years.

Yes. Steve Krueger – Foresight Investing: So it seems like the trajectory for the growth in the sales of SoMo are, at this point, quite a bit lower than what we were hoping maybe a couple of years ago. I wonder if – and I also note that the focus in discussion of applications now seems to be concentrated in two areas really, health care and hospitality, whereas before I think you were talking about several different areas, ignoring just those two. I’m wondering if you might recalibrate for us what you see as a – realistically, what you see as a size of the market opportunity right now?

Okay, I’d be happy to. So – well, I think first if you go back to 2007, we didn’t expect the world to stop through the year when we made those projections. And I think what we’ve seen in the marketplace is that people have continued to use their equipment much longer than was originally anticipated and I think the level of paper and pen based use has remained very high as people have put off improving their systems and moving to an electronic equivalent. So – again, I would just say that as a starting point, certainly it’s a different world. Going forward, I think we see a lot of opportunity in health care and hospitality. I think we need to focus on certain markets to both establish our name and to have a leadership position in those markets. I don't think that the markets we talked about have gone away. But I think that for Socket, we did the antimicrobial units and we optimized units for the health care market because we think that that will be a leading market. But just as I pointed out in our discussion, we are seeing opportunities in hospitality, governments, as well as one other one I pointed out, but we are actually seeing opportunities all over the place. So I think opportunity, Steve, still exists. But things have moved much more slowly. Steve Krueger – Foresight Investing: Kevin, when you say opportunity, are you still thinking in terms of being able to get this to a $200 million a year business?

Yes. Steve Krueger – Foresight Investing: Okay.

The short answer is yes. And again, recent reports from BBC suggested that health care PDAs alone would get into the $150 million to $200 million over the next three years. And so the – now, it’s interesting because in health care a lot of different technologies have been tried, whether it’s computer (inaudible), tablet PCs, PDAs, iPhones, et cetera, but there is a sense that the handheld will win out and there are reports now circulating that would suggest that just the health care market alone will be over $100 million by 2012 just for PDAs. And – so yes, we believe that this market opportunity is still there and conservative estimates have suggested that HP is still doing, I would say, several hundred million dollars of PDAs on an annual basis. And again, I think maybe we overestimated at the beginning how quickly people would transition from Dell to Socket and let’s face on our side, maybe a lot of IT people didn’t feel comfortable that they’d be beginning things in debugging any device we might do. But now that we have 20,000 plus units out there and a solid reputation, we think that we will actually gain more traction. But I think to answer your question, Steve, yes, we still believe this is a several hundred million dollar market and we can do very well as it recovers. But I think that for our market in particular, the timing of the, I would say, economic slowdown was particularly cruel because a lot of people were in the process of starting to move to an electronic system and weren’t fully committed and therefore could really hold back until things improved and they haven't for 14 months. Steve Krueger – Foresight Investing: Right. Okay. Thanks, Kevin.

My pleasure, Steve.

There appear to be no further questions at this time. I would like to turn the floor back over to management for closing comments.

Thank you very much. We would just like to thank everyone for participating in today’s call and to wish you all a good day. Thank you.

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