Greetings, and welcome to the Socket Mobile Second Quarter 2012 Management Conference Call. (Operator Instructions) It is now my pleasure to introduce your host, Jim Byers of 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 2012 second quarter ended June 30th, 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. In addition, the 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’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 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 regarding mobile computer data collection and OEM products, including details on timing, distribution and market acceptance of products, and statements predicting trends, 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, but not limited to, the risk that the manufacture of Socket’s products may be delayed and 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 and the risk 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’d 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’ll begin with a brief review of our Q2 results, then discuss the business opportunities we see ahead and our outlook for 2012. Our revenue for the second quarter was 4 million, consisting of 2.1 million of SoMo related sales, 1.6 of cordless scanning related sales and 300,000 from service and other legacy-related products. Q2 revenue was essentially flat compared to Q1, reflecting the impact of the transition we have been going through with both our product families. Both our next generation handheld computer and new cordless scanning products are now shipping, and we expect to be well-positioned to see growth in both categories in the third quarter and going forward. Revenue from our SoMo product line was impacted by customers waiting for our next generation handheld, the SoMo655. We started shipping the new 655s in late Q2, a few weeks later than originally expected. Based on our late quarter shipments and the fact that we only recognize revenue based on sales out of distribution, we only recognized about $10,000 of revenue within our stated second quarter results. The positive side of this minor delay is that sales of our previous version, the SoMo 650, remained strong in Q2, and we began the process of transitioning our existing and new customers over to the 655. We also completed a transition in our cordless scanning business during Q2, for the phasing in of our Apple-certified version, the 7ci, which utilizes a cost-reduced 1D scanning engine that positions the scanner nicely within our Apple-certified product family. This introduction allows us to consolidate our lower-priced 1D scanning offerings into a single product. I’d now like to provide more detail on each product family, starting with the SoMo handheld…

Thank you, Kevin. Our second quarter 2012 revenue was just over $4 million, flat with the previous quarter and down 7% from the second quarter a year ago. Product sales in both first and second quarters were nearly identical, as both quarters were impacted by product transitions that were announced in the first quarter and completed in the second. As Kevin mentioned, we released during the second quarter our low-cost Apple-certified barcode scanner, our model 7ci. Our cordless barcode scanning revenue was 1.6 million in the second quarter, an increase of 5% from sales of 1.5 million in the first quarter. Our 2D scanners represented 48% of this total. Sales of our linear barcode scanners represented 42%, with the balance of 10% attributed to sales of our ring scanner and accessories. The mix was similar to the mix in the previous quarter, but with increasing sales of our high-end and low-end linear barcode scanners, while the sales in our intermediate model, the 7m, declined somewhat, all based on customer preferences that can vary from quarter to quarter. Early adoption of the model 7ci has been good, with approximately 800 units selling out of the channel during the second quarter. The channel is now fully-stocked with our model 7ci product. We defer revenue recognition until products ship out of the channel. The favorable pricing of the model 7ci has allowed application developers such as LightSpeed, which offers a point of sale retail solution, to bundle our 7ci barcode scanner with their point of sale application. We expect continued growth in both our low-end and high-end barcode scanning models as we move through the year. We also released our newest handheld computer, our SoMo model 655. But it was released just about a week prior to the end of the second quarter,…

(Operator instructions). Our first question comes from the line of Brian Swift – Security Research Associates. Please proceed with your question. Brian Swift – Security Research Associates: Yes, I don’t know if you can hear me. I missed a little bit of the earlier comments, but can you give us a little bit more collar on how your pipeline of customer orders are for the new 655, and what kind of ramp should we be expecting over the next quarter or two?

Sure. So I said on the ramp. Right now I would describe it as we are still in testing phase. We sold near record levels of the 650 in Q2, that’s almost 3,800 units. Most of those customers are happy with the 650, and until we run out of supplies of the 650, which we anticipate should happen probably in the next three weeks, I don’t see the majority of, I will call it, the runway customers moving across. We’ve had many people test and approve. The difference with the 655 is that we now can attract new customers, and we are seeing customers come to us that we didn’t previously have, that are testing and adding to our revenue. So, it’s still a little early, but we would expect, I would say a small increase in Q3, and a much bigger increase in Q4, as people have completed their evaluation. Even though we had 80 companies test the beta unit, we also had a number of them who declined to be in the beta program, and selected to test the real production units, and we are just getting to those customers now.

(inaudible) about the ability to get supply, how is that ramping up, are you on tract with what you expected?

Yes. Well overall as we pointed out in our call. We are probably three weeks later than expected in delivering the product. So, we’re a few weeks behind in ramping up. In the first phase we just filled up the channels, but not overstocked us, as the people can get their eval units, and then the plan is to fill the channels with the appropriate number to meet demands I would say by late August. As you know during the summer, and particularly this year with the Olympics, we do expect July and August to be light, particularly in Europe, and the anticipation is that we’ll have a strong September. That’s our traditional pattern in Q3, it might be a little bit more exaggerated because of things like the Olympics that are going on this year.

Okay, thanks.

Thanks Brian.

Thank you. Our next question comes from the line of Paul Bornstein - Black Diamond Advisers. LLC. Please proceed with your question. Paul Bornstein – Black Diamond Advisers. LLC: Yes, thank you. I’m just kind of curious since you guys have been involved for a number of years with Socket, and you have been struggling to get the company profitable. I mean you haven’t been profitably in at least five years if not longer. I’m just wondering what is the push here? You have a number of excuses, you having traded any sales of value in five years. I’d go back longer if you’d like. You guys have paid a lot of money. Your expenses just went up again on compensation, and I’m just kind of curious, how does all this – how much sales do you need to benefit the bottom line where we can see a growth, since you’re supposed to be a growth company and not a biotech company that never makes money. So, I’m just kind of wondering what the problem is here. You’ve come out with a lot of new devices, new products that seem to be great, but you can’t sell them. You just don’t have the faction to be profitable, so I just wanted to get the thought process, since you guys have been pretty much onboard for a longtime with the company, and haven’t been able to make it profitable.

Okay, so there were many questions in there. Let me start by addressing them in order, as best I can. So, in terms of the growth, obviously we have struggled and certainly the environment we have been in, in the last few years have been difficult. No excuses, we would have like to have grown the company, but certainly our timing of launching our new products at the beginning of the recession, was not maybe the most fortuitous. But, we sold 50-60,000 units. (inaudible) on the scanning side, it’s been very difficult for the last five years. The biggest problem being, - or if you take a five year period, that for three and a half of those five years, we couldn’t address the Apple markets. And probably as everyone predicted, right, the Apple market has been an enormous factor on the mobile phone space. I mean (inaudible) few people in the world would have predicted three years ago – five years ago when Apple started the iPhone that Nokia would be $6 billion dollars in market (inaudible). And Apple would be $600 billion. So, we’ve been struggling, we have now got back the situation where we can support the Apple market. We have Apple approved products, that profits through the year with certified products. We are struggling, I’m not trying to suggest were not. But I think what keeps people here is, we believe we can still grow the company on a combination of our scanning products, as well as our handheld products. As regards to pay, no executive in the company has got pay increase in the last five years. So… Paul Bornstein – Black Diamond Advisers. LLC: I would not expect that to be, given you haven’t been profitable in five years.

But you made the statement that we are paying ourselves more, which is actually technically incorrect. We are paying ourselves less than we were five years ago. So if you phrase the question differently, I would have answered it differently. But you can go back and you can check. The salaries have been either cost or no salary has been increased, okay. So yes, we still believe, yes it’s been a struggle. We now have gotten to the point of getting some new products in the market that we feel will make a difference but time will tell. At the end of the day, I think people have put a lot of effort in to stay alive during the last few years, it’s not been easy. People are motivated by the fact that they still believe. The environment hasn’t been easy and it’s not getting any easier. We make decisions, like supporting the Apple (inaudible). And just the qualifications alone took nine months. So, I think that we’ve put ourselves in a better position to grow going forward, and certainly we, I would say telegraphed at the beginning of the year that we didn’t expect much growth for the first half because we had these big transitions to get through. Now we are through the transitions and let’s see what happens. That’s all I can basically do in terms of an answer to you.

And Paul, let me quantify a little bit. When revenue is at $4 million, we’re obviously incurring losses, but the growth – the $5.4 million is about where we would breakeven in terms of bottom line breakeven results. We grew last year 30% in our revenue, and that was primarily driven by the growth in barcode scanning and particularly with the introduction of the 2D Apple certified scanner at the beginning of the year because it finally opened up our markets for 2D scanning, but it provided access to Apple devices early on. We now have expanded that line. We need to go be about 30% higher than where we are today. So, that’s the objective, and the question is how quickly can we grow to the five and half million dollar level, and then go beyond that. We’ve held our expenses down, we’ve actually reduced them overall over the last several years. We are up based on the immediate comparison to a year ago period, but only because we’ve added some key middle management people particularly in sales, that were needed to support now the growth plans that we have. So, that’s where we are heading, but (inaudible) wise, we should hit profitability, you know, certainly by five and half million at quarterly revenue.

And just maybe to add one last thing on the expense category. Our expenses in 2011 were $10 million. If you go back five years ago, I think they were close to $13 million. Paul Bornstein – Black Diamond Advisers. LLC: I’m not saying your expenses didn’t go down. (inaudible) And you guys are running out of time. (Inaudible) decreased the value, I think your stock was probably $10 dollars five or six years ago, it’s under $2 and you got knocked down another bulletin board, you know. So, I understand the marketplace, and I’m just wondering what the reality is for the company, because you either rip it this year to show you can do something, or you have to do something else that – I just don’t see how you can get the traction, if you don’t get the sales going real quickly.

Okay, well we’re working real hard to get the sales up quickly, and we’re not arguing any points you make, yes we have to perform. Paul Bornstein – Black Diamond Advisers. LLC: And you haven’t in five years. So, let’s hope you can perform in the next six months.

Okay.

Thank you. Our next question comes from the line of Bernard Fidel, a private investor. Please proceed with your question. Bernard Fidel – Private Investor: Hello?

Hello, Dr. Fidel. How are you ? Bernard Fidel – Private Investor: Fine, how you doing? Oh yeah, by the way, as far as performing in the next six months, there is one catalyst and that is the 655 and then new scanners, so – which you didn’t have in the past.

That’s very agreed. I mean, we basically told everyone at the start of the year that things would be difficult as we did the transitions, now they’re behind us so we’re looking for things to improve. Bernard Fidel – Private Investor: But on the other hand, the transition is now finished, I would assume and you’re getting into 655s, is that correct?

Yeah, I mean, finished is probably not the correct phrase. I mean, we’re now filling up the distribution channel and I would say the transition will be finished in about another four weeks. But the final portion of it is taking place right now. Bernard Fidel – Private Investor: Right. Are there any large orders being contemplated?

I mean, certainly we hope so but the larger orders are not going to happen without people fully testing the 655. We know from our extensive history that for someone to buy a large order, they usually take I would say six months of between product testing and field trials before they would deploy that large order. Bernard Fidel – Private Investor: Yeah, but what about those 18 groups for the past six months?

Okay, no, eventually the process – again, I don’t want to get into too much detail, but there’s a [inaudible] process because the products are like complicated. During this quarter, we worked with [inaudible] companies and we did, I would say, about six iterations of the software during the first six – the six eight weeks of the quarter to make sure that the products are fully tested in multiple environment, many of which we don’t have. Once we completed that, then we took all that know how, put it into the final version, we then made the final version and we started to distribute them as of the end of June. The aiding customers will now check to make sure the final version is in fact – meets all the needs. We’ve just begun that phase and as the initial reports, as I said in my discussion, is that nobody has found any problems with the final version of the SoMo. And now we begin the process of converting those into orders. At the same time, customers are continuing to buy the 650, which is why we sold almost 38,000 650s in Q2. Now, I just – to get the timing and the expectations right, I would expect most of July and the beginning of August, people will continue to [inaudible] the 650, they will continue to do their testing and they’ll be comfortable to move over to the 655 as the quarter proceeds. And now in addition, we will be able to capture customers who are new and larger customers, people we could not seriously entertain as we have limited stock in the 650. And from these new customers, this is where the additional grow will come. Bernard Fidel – Private Investor: Okay, now what do you look for in sales for the third quarter? A ballpark figure.

Well, there’s no such thing as a ballpark figure. We’re looking… Bernard Fidel – Private Investor: Substantially better than the second quarter?

I think that the next objective is to make sure that we’re cash positive. We don’t have the ability to continue to burn cash. We burned cash in the first six months, but much of this was used to develop the new product that we needed for the 7Ci and the 655. The objective internally is to be cash neutral in Q3 and to be profitable in Q4. I think those are both realistic and obtainable goals. You can work out what those numbers are. Bernard Fidel – Private Investor: What are the – what would it be, the – in the third quarter, cash positive?

We’ll want to be in the 5 million range, Dr. Fidel. Bernard Fidel – Private Investor: For the third quarter?

Yes. [Inaudible] but the 5 million gets you to cash breakeven levels and then on top of that you hit profitability around 5.4 or 5.5. Bernard Fidel – Private Investor: Oh, that’s – that would be nice [inaudible] from the 5 million.

It would and the key for us in this case is how quickly we get customers moving from the testing stage into the deployment stage and usually our – in our third quarter we find September is a very strong month because Europe’s back from vacation and everybody’s off and running. But if they’re still in the testing phases at the end of September, that will slip into the next quarter. But all of that will move forward more rapidly now that we have product available for customers. We’re ramping up supply as well. The expectations, as Kevin mentioned, is it will have the channel fully stocked, which means they’ll have taken care of all their customer orders and have product waiting in reserve by the end of August. And that’s an ideal position for us to be in because then customers can get a product very quickly as they’re ready to move forward. Bernard Fidel – Private Investor: Okay, so you say that, Kevin, a $5 million quarter is certain feasible for the third quarter?

Yes, certainly feasible. Bernard Fidel – Private Investor: Okay. Okay, and you look for the fourth quarter to be – that would make a case – [inaudible] positive or whatever. But anyhow – and the fourth quarter, you could see a profitability?

Correct. Bernard Fidel – Private Investor: Okay. Well, that sounds good to me. Now let’s see, another question I have here, what do you think with the H – capturing the HP customers? Do you see them coming to you?

Yeah, we do, and you know, it’s difficult to quantify it, but just to give you an example, you know, we have a lot of smaller customers who we feel are using a similar HP replacement. And you know, we sell through Ingram, as an example, to over 180 or I’ll say over 150 different resellers on a quarterly basis. And a lot of this is small quantity. We – I think as I said on the last call, we’ve made extensive efforts in Europe to work with HP. I visited HP during Q2. Their sales [inaudible] the SoMo into a few products in Europe. So we’re working that angle. But HP is a big organization and it takes time. And really what we need is we need some success to – in some area of HP where HP’s involved to leverage that [inaudible] across the environment. We’re working on that. I can’t say that we’ve achieved that yet but we are achieving the replacement market through the vendor distribution channel. Bernard Fidel – Private Investor: So they are replacing with the [inaudible] or the 650?

Oh, up until today, it’s all been 650. I mean, realistically people, I mean, we shipped on June 27th and by the time it gets to the distributors, it’s the 4th of July. I don’t think it was available out of distribution probably close to the 10th or 12 of July. Today is the 25th. It’s been available for two weeks. People generally will get a unit, [inaudible], deplete their stock and move mover. Bernard Fidel – Private Investor: The one thing I did [inaudible] was one of the problems with the top of the company is that it is not that well-known, you have an excellent [inaudible], particularly with 5 million for this quarter and then profitability in the – well, the next quarter is only two months away. So you would have profitability but that you hired a public relations firm or something to that effect that’s going to broaden the …

Again, I just – we’ve been very frugal with our expenses and all the money we had went into the development efforts to get the new product into the market. Bernard Fidel – Private Investor: But they’ve been saying they’ve hired a company or working with a company?

I mentioned a company called Accelerize New Media. You can check them out in their – through the Internet. They’re in the business of marketing communications, specifically focused in terms of maintaining good contact between the company and investors so they’ll highlight the things we’re doing and greatly improve the communicates to a well-established distribution of interested investors that they have developed over the last several years. So we’re looking forward to working with them. We’ll have more information on our website over the next couple of weeks, but I'm looking for that relationship to kick into high gear with the next week or two and the said we’ll try to substantially increase the information that we’re communicating. Now, we have a well-established website, but only some people like to go and go through a website because there’s lot of information on the website and they’ve got to click down to mobile tiers and so on. So Accelerize will refocus the things that we’re doing and target them at the direction of people who have expressed an interest in companies like Socket and I think that will be helpful at building interest in the stock and as we continue to report positive momentum, we hope we’ll see a lot more people wanting to become shareholders of Socket and building – helping us build shareholder value. Bernard Fidel – Private Investor: Okay, no, I think that’s excellent. So justo summarize what we were just discussing, [inaudible] for this quarter, we’ll be in the $5 million range, which would be cash flow positive and next quarter as of October 1st, you’ll be in the positive area. By the way, any change of being positive for this quarter ?

I don’t [inaudible] expecting it. The rate at which we’re going to build product and bring product in will allow us to achieve our objective of cash positive. And as you can see from our balance sheets, we don’t have positive cash flow, we have to continue the cash flow management situation. So we would manage to have cash neutral in Q3 and we’ll manage to be profitable in Q4. Bernard Fidel – Private Investor: Just one thing, what about – what do you think for next year?

Well, again, I think we can predict with this ever-changing [inaudible] , but I’m not sure our predictions would be worth much, so I’d much rather try to hit our short-term predictions right first before we go into long-term predictions.

And Dr. Fidel, we’re very good at responding very quickly to orders, so as we find order pace picking up, we’re capable of expanding the production rates fairly rapidly and responding to those requirements. So we do have and we’re highly leveraged in terms of both our contract manufacturing arrangements where we can increase volumes, our costs are tied to – on a unit-cost basis will actually go down as our volumes go up and on the distribution side, because we have all our products through channel distribution, we can greatly increase the volumes without having to increase the expenses to manage those channels. So we’re looking forward to the opportunity to show that we can respond quickly but generating orders follows evaluations that Kevin has talked to on the products. Bernard Fidel – Private Investor: [Inaudible] that we would have [inaudible] the 650 earlier, at the beginning of June, how much of an impact would have that had had to this quarter?

It all depends on how quickly – the very things that are happening now would have happened at the time we began shipping. So if we had started two weeks earlier, you know, you would have had maybe 100,000, $200,000 benefit.

And if you had started four weeks earlier when it was originally planned, we expected the 650 sales in Q2, our original plan was it would be about half a million dollars, which was what we were short in terms of growing the business. Bernard Fidel – Private Investor: So it would have been the 4.5 million…

Again, it just depends how early we could have gotten it into the market, Dr. Fidel. But remember, there’s two groups out there. You’ve got the groups that are already utilizing our SoMo products and they’ve been able to continue to buy the SoMo 650s, which worked very well for them. So you haven’t lost any of that business. And then for new customers thought that have been waiting, that would be where the benefits would have come into play the earlier we could it into the channel. [Inaudible].

I’d like to turn the floor back over to management for closing remarks.