Greetings and welcome to the Socket Mobile Third Quarter 2015 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.

I would now like to turn the conference over to 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 third quarter ended September 30, 2015. 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 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 in 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. We are pleased to report a solid increase in operating profit for both third quarter and first nine months, both sequentially and compared to last year, reflecting a continued growth in revenue of our cordless scanning business.

We achieved net income for the quarter of $530,000, or $0.10 per share, which is up 23% year-over-year and up 32% sequentially, from the preceding quarter. For the first nine months, we achieved net income of $859,000, which is almost doubled our net income from the same period last year.

During the third quarter, our barcode scanning business generated record revenue of more than $4 million. It is up slightly from both preceding quarter and from Q3 a year ago, and represented 88% of our total revenue for the third quarter.

These results reflect growing demand for our cordless, barcode scanners for mobile point of sale and other mobile applications marketed by our growing community of registered application developers and driven by the expanding mobile point of sale markets.

We decreased in our total revenue for the third quarter and nine months facility due to lower revenues from our SoMo business, which has been in declined over the past several years. As I’ve noted before, the primary driver of our scanning revenues continues to be the small for retailer locations.

These customers deploy individual applications like mobile point of sale being the leader, and purchased our data collection products, as part of this deployment. Typically, we see customers purchasing one of our 7 Series scanners via one of our many online resellers, with Q2 and Q3 being our strongest quarters.

This is what we saw in the third quarter. There were two minor events in Q3 that caused our scanning revenue to be a little lighter than we expected. Apple made their annual iOS change during the quarter and many companies ended the quarter on October 2.

I’d like to note that both these minor events essentially amounted to a delay in revenue, which has already been picked up in October. Apple’s iOS changed in mid September. As expected we saw a decrease in sales activity between the time Apple first announced their plans announcement date, and when they made the actual announcement.

During this time of uncertainty, when customers know the change is coming, but are unsure of the actual details. There is a strong tendency to wait on any purchasing. With our normal sales activities resume, continues to gain public and customers were able to confirm, everything were still operating as before.

Last year, this iOS change occurred in October or September, which impacts the year-over-year comparison of our results. While we obviously plan around this annual event, we cannot be certain of the actual timing. We released an updated SDK for iOS 9 about four days after the OS was available.

Thereby guaranteeing our development partners, we would be able to use the latest and greatest for their development work. The other minor event which impacted revenue in the third quarter was the fact that many companies ended their third quarter on October 2 which resulted in Socket missing out on some of the normal quarter and push.

Neither of these minor events impacted the overall health of our business and amounted to a delay in our capturing this revenue. Besides these events, our business operated very much as we outlined in our previous conference call.

From an operation standpoint, we have optimized our business model to support the data capture requirements of mobile applications used by businesses, our mobile devices which are marketed and distributed online. To maximize opportunities in this online in app driven world we now live in, we are focused on our web centric marketing activities.

And have improved our website substantially over the past two quarters. We now have fully operational website in Japanese, German and French, make it easier for app driven customers to add scanners to their solutions in these regions.

In addition, we continue to maintain careful control of our expenses and improved our efficiencies, so that a higher percentage of our revenue falls to the bottom line. As we move into the fourth quarter, here is what we expect. We are seeing a strong October driven by our mobile point of sale scanning business.

In November and December, we expect to experience, a typical slowdown we see in mobile point of sale deployment and as related to the holiday season, which extends into mid February. However, at the same time we expect to see additional business activity this quarter that we believe will contribute to a much stronger Q4 than last year.

In Q4, we expect to see more activity from inventory driven applications as company is get ready for their year-end processes. Further, currently represents a much smaller portion of our overall scanning business, we expect to see growing revenue from this segment as developer activity in the inventory category continues to grow.

This added revenue, will serve to concur the seasonal declines in mobile point of sale, which we typically experienced during the winter month. In addition, we expect to see stronger demand in Q4, from many of our pharma based customers, above historically showed a preference to purchase in the fourth quarter.

In total, we expect our net scanning revenue for Q4 to be down sequentially from Q3 went up compared to the fourth quarter last year. In Q4, we also expect to shift the first part of our $1.6 million SoMo order that we received in the second quarter.

When combined with our normal SoMo shipments we believe this will more than offset the declines we anticipate in our scanning business. As a result, we expect to see a much stronger fourth quarter, this year than last year and we expect to maintain profitability.

We have made solid progress this year, establishing a strong position in the emerging mobile phone, and tablet driven data collection markets, with mobile point of sale leading the way. We optimized our business model based on the new online app driven deployment model, achieved solid profitability, and substantially increased our network.

And we remain very focused on continuing these positive trends in 2016. Looking ahead to 2016, we are very confident in the continued strength of our scanning business, driven by an increasing number of mobile application deployment.

As part of our strategic plans, we also see a significant opportunity in the data capture market, represents an equally large opportunity for Socket and scanning. To further leverage our capabilities and capitalize to this opportunity, we plan to broaden our product portfolio to include other data capture technologies such as RFID and NFC.

We plan to announce these products starting later this year and into early 2016, enabling our development partners to support these electronic exchange data formats. Which we believe would be used for royalty programs, identification and many other beneficial programs.

We expect to provide these products with the appropriate [ph] case to our growing developer community, so they can deliver the application if their customers are demanding. And we look forward to making further announcement in the near future. With that said, I would now like to turn the call over to Dave for his review of the financials.

Dave?.

Thank you, Kevin.

As an overview, our third quarter and nine months financial results reflects sequential improvements in our operating results, including a third quarter profit of $530,000 or $0.10 per share up from a profit of $401,000 or $0.07 per share in the preceding quarter and a profit of $432,000 or $0.09 per share, in the third quarter a year ago.

In the just completed third quarter, our total revenue of $4.5 million was flat compared to the previous quarter, but with 2% growth in barcode scanning revenues sequentially and with 4% growth over the third quarter a year ago. Our SoMo handheld computer revenue continued its downturn trend.

We achieved higher margins of 49.5% from a combination of component price reductions and improved manufacturing efficiencies, up from margins of 47.2% in the previous quarter and margins of 43.6% a year ago.

We maintained operating expenses of $1.6 million in the current quarter flat with the previous quarter and with the same quarter a year ago, and moderately reduced interest expense from $80,000 to $63,000, by reducing our debt balances outstanding during the quarter.

Stockholders’ equity at September 30, increased from $1 million at last year end and $1.6 million at June 30 to $2,243,000 at the end of Q3, with growth and net capital driven primarily by profitable operating results. We generated approximately $680,000 in positive cash flow from operations during the quarter.

We used the cash in multiple ways, a portion we used for working capital. We invested in a new accounting and operations management the ERP software system and we will further improve internal efficiencies and support future growth.

We also invested in tooling for new products that will commence shipping in the first half of 2016, and we paid down a portion of our debt. Now the details; our third quarter revenue was $4.5 million. Cordless barcode scanning revenue for the quarter was a little over $4 million or 89% of this total.

With the balance attributed to sales from handheld computers in service. Cordless barcode scanning revenue for the nine months was $11.4 million or 88% of our nine months revenue of $13 million. Cordless barcode scanning revenue continues to grow, up 2% from the previous quarter, and 4% from the same quarter a year ago.

However, within these totals we identified specific deployments and we characterized the balances run rate business which is mostly smaller quantity sales by many end users through online resellers. Our largest online reseller is Amazon.com.

The underlying growth of our run rate business in the third quarter, was up nearly 16% from the third quarter a year ago, and up more than 7% from the previous quarter, while deployments declined.

Our deployment based revenue will vary from quarter-to-quarter, and we have a number of future deployments in our pipeline and these will be added, if through our run rate revenue as they happen. Total revenue growth continues to be impacted by our SoMo handheld computer sales, which have been in decline over the past several years.

Total Q3 revenue dropped from $4.9 million a year ago, to $4.5 million in the third quarter of 2015, entirely due to declines in handheld computer revenue. Handheld computer revenue in the third quarter of 2015 was $379,000 or decline of $562,000 compared to the third quarter of 2014.

Handheld computer revenue in the third quarter a year ago was $941,000 and included an order of $350,000 from a customer using the computer as a controller for a medical device. Mobile point of sale customers are the largest purchasers of our cordless barcode scanning products.

With the peak season happening between late February and early November each year. Offsetting the seasonality, we have in shippable backlog this year, as Kevin mentioned, our non-recurring handheld computer order of $1.6 million with 60% expected to be shipped in Q4, and 40% to be shipped in the first quarter.

As a result, we expect to maintain profitability in both our fourth and first quarters. Our higher margins of 49.5% reflect a number of positive trends which we believe are sustainable. Average margins on our cordless barcode scanners are higher than margins on our handheld computers.

And our revenue has been trending upwards, as a percentage of cordless barcode scanning products increases.

We continue to benefit from the supplier cost reductions due to our higher volumes for cordless barcode scanner sales, and we continue to reduce our overhead by improving the management of our inventories and reducing creation of waste costs including managing excess or obsolete inventories.

We expect that higher handheld computer sales in the fourth quarter of 2015 will only decrease our average margins for the quarter by less than 1%. We carefully managed our operating costs, and kept them flat at $1.6 million and compared to the previous quarter and to the same quarter a year-ago. Our employees are our biggest expense.

We’ve held our headcount flat, while supporting the development of new products. We’re supporting our growing base of registered developers by expanding the features of our software developer kit and keeping in current with operating system changes from Apple, Google and Microsoft.

And we have completed a major upgrade of our website at socketmobile.com, including international localized versions in Japanese, German and French.

We expect moderate future growth in fourth quarter operating expenses, as we’ve added a key marketing resource to better support and act even growing developer community and a key engineering resource to improve our capacity to more quickly update and expand the features of our software developer kit and barcode scanning software.

In the third quarter of 2015, we generated cash from operations of approximately $640,000 and as an additional $40,000 from working capital changes for total cash flow from operations of approximately $680,000.

Within our working capital balances, we used cash to fund higher receivables, funded the higher inventories needs to support our fourth quarter planned shipments and paydown our payables by $150,000.

We generate a cash to cover these investments with paid increases in differed income of over $900,000, and we expect to recognize this revenue over the next two quarters.

We invested $200,000, the cash generated by operations in the tooling for new products and into licenses for a new general ledger and operations management ERP software system, which we planned to activate in January.

The tooling is for new products will be announced this or next quarter and will begin shipping during the first quarter and second quarters of 2016. The new ERP system replaces system reviews for more than 20 years and will ensure that our future growth is not limited by the internal systems that we use.

We also acquired some of the additional cash generated by operations to reduce our bank credit line balance by $400,000 and to repay $100,000 of subordinated notes payable. We keep the credit line available to ensure our suppliers then we will have the capital to timely pay for larger orders.

Our net capital balance of September 30, 2015, increased to $2.2 million up from $1.6 million at June 30, and up from $1 million at December 31 of 2014.

The increase in capital in the third quarter of 2015, which totaled $624,000 was generated by profits of $530,000 plus stock option compensation expense which is added back to capital in the amount $55,000 and by stock option exercises during the quarter of $39,000.

At September 30, 2015, we had outstanding invested and in the money stock options of $1.4 million and $170,000 in exercise of the warrants. We also have additional invested but out of the money stock options and unvested stock options totaling $2.9 million which maybe a source of capital in the future.

Included in the total warrants our 75,000 warrants held by Hudson Bay Master Fund exercisable of the $25 with proceeds of the company of approximately $94,000. These warrants expire on May 20, 2016. Our stock trades on over-the-counter QB Exchange. At September 30, 2015 our net capital was $2.2 million.

We plan to apply for returns in NASDAQ listing when we meet the minimum capital requirements for such listing up $4 million for a profitable company. I’d like to wrap up my remarks with a thank you to our stakeholders, for their continued support, including our investors, our suppliers, our distributors and retailers and our employees.

Now let me turn the call back to our operator for your questions..

Thank you, ladies and gentlemen, at this time, we will be conducting a question-and-answer session. [Operator instructions] Our first question comes from the line of Brian Swift from Security Research Associates. Please proceed with your question..

Yes, thank you, when I listen to your description of this year versus last year, in terms of the timing with Apple and also the delivery on that $1.6 million SoMo order. I come up with about $5.2 million for the December quarter.

I know you’re not giving forecast or whatever, but it would be a long time, since you have exceeded $5 million, so that would be a nice way to finish the year. I did have a question about your sales and marketing number for the December quarter..

Yes..

Last year if the – last year even though you had a relatively low quarter for reasons that you’ve already explained, the sales and marketing was around $650, so is there – would we expect that that number would approximate that again this year, or would you expect it to be any higher?.

All right now, well I think the quarter, this fourth quarter this year will be comparable to the fourth quarter of last year..

Okay.

And you mentioned some deferred revenue that was coming in over the next couple of quarters, and I didn’t hear the story so I – so could you give us idea of what that’s about?.

Yes..

So I don’t know what – there is something I have to factor in here..

Well I think the increase in deferred revenue balance, because the $1.6 million order is a customized order. We do ask for substantial upfront payment, which we received. And so….

Okay..

So that’s….

Okay, so you have already been – you have been paid for some of that order and it’s showing up in your deferred revenue. Okay, that all relates to the same thing we were talking about..

Correct..

Okay. All right. Okay, all right and I guess the lastly would be the – you referred to some new products coming down the road in the NFC, in the RFID areas….

Yes..

Can you elaborate in terms of what would you be – what’s that’s probably, just different scanners or in other words different features on your existing product line, or do you envision some new type of products or accessories type things coming down the road?.

We – it will be a combination of both an extension and some new products. As you know, we have a pretty substantial portion of our business in the mobile point of sale area.

And with all the activity that’s happening in that area, with people arriving with smartphones, NFC, loyalty tags, et cetera, we believe there’s a good opportunity to read those as part of a mobile point of sale solution. And we would like to be in that portion of the business.

So we will add products to, I would say, enable a lot of these activities with our partners over 2016, but they’ll kick off at NRF. So this would be what I would describe as an expansion of our business. Currently we have no business in this area. And we’re anxious to be more than just a scanning company.

We really believe that there is an opportunity to be a data capture company and to be agnostic over the type of electronic exchange the customers want. And therefore we need to able to read other methods equally well what SDK has provided to our developers. So we are in that position to, I would say, roll with the punches as these markets evolve..

Okay. More recently we’ve seen the credit card company or the banks that issued credit cards go in to the chip cards..

Yes..

And there’s been a bit of publicity and the reason the – in the hospitality business, restaurants and such as to I guess some other, they are kind of at a dilemma they did then had to shift the way they charge, or where they include service, and tips and stuff.

And I guess under the new system you can’t go back and add a tip and then they get to punch it in, currently we have one shot at it.

And I’m just – since retail and hospitality, whatever has been, part of your business, how do you see, I mean, the small business are kind of just not adopting to it, I guess they picked their chances in terms of having to absorb….

The extra charge..

The project leases are for extra charges or whatever this is doing?.

Yes. I would think….

When do you see that on your business?.

Well first of all, we’re not directly involved in payment and payment is a very complicated business that we are adjacent to but not directly involved in. We think that the complexity and all of these regulations make it even more compelling for people to switch to mobile phone-based payments and other types of in Cloud payments.

And that there’s a big shift coming in this area. From our point of view we don’t want to be in the payment category, but we would like to facilitate what we call the token exchange and that’s part of why we’re doing some of these new products. I inked for many years small businesses have paid disproportionally high percentage on their transactions.

And with these newer methods they will be able to get much more competitive rate. So I just think this is a area influx and it really hasn’t affected our business, because most of the hospitality driven business scanning is not part of us at this stage.

If we’re involved in hospitality it’s often in the inventory at the end of the evening aspects not in the point of transaction. But this is a just indication of how dynamic this market is, how much it’s going to change, there is a lot of money involved in the transactions and transaction fees.

And I think we would like to be in this environment, but we don’t necessarily want to be directly in the payment portion..

Okay. Thank you. Let somebody else..

Okay. Thanks, Brian..

Our next question comes from the line of Al Troy a private investor. Please proceed with your question..

Hi, congratulations gentlemen on a excellent quarter $0.10 per share is very good..

Thank you..

Very pleased with the guidance going forward and the excellent new products that will be coming out. My question is what are you doing to get investors interested in the company? There was no trade today and very little interest in general the volume is very light.

So I mean people should be excited that the company, it’s doing well, future looks very bright and yet, nobody seems to be interested..

Well, yes, I think, that’s – we had this somewhat discussion on the last call. I think one of the things, as we wanted to get more of a track record under our belt, which we’re continuing to do.

We will pick up the pace a little bit off investor outreach, but I think that our main objective is to get back on NASDAQ, which I believe we’re on track to do sometime middle to end of next year. And that would actually allow a lot more investors to come into the stock.

I think there were lot people watching and again we will see if the fact we report $0.10 per share makes a difference. We will be attending some conference later in the year. But I really feel that the story is building. We have spoken to a lot more analysts and interested people over the last 60 days.

So I think there are people watching, we can’t make them buy and sell, but I don’t think, about that’s far away anymore..

Okay, I think it’s very important for the existing shareholders to generate some more interest because the price is relatively low in comparison to where it should be and, I think, the price should be much higher. And I think the people who knew about it and more people who were involved would definitely spike the price..

Now, you want many arguments on that score from us..

Okay, well I hope you guys just get a little bit more aggressive in that area..

All right. Thanks a lot Al..

Thank you..

Our next question comes from the line of David Sedaris, a private investor. Please proceed with your question..

Hi, good afternoon gentlemen. Congratulations on the quarter..

Thank you very much..

I think you’ve definitely proven, your business model is working, you know as this scanners grow, some margins stay strong or improve and you can really leverage your fixed expenses, lot of money flows to the bottom line.

The question I have and probably every shareholder has is, when are revenues going to bump up higher? So the question I have – okay go ahead..

So I think that – it’s a question that I think that, we answer in the following way. Revenues will bump up, ask more and more people adopt a mobile point of sale Apple based, or app based application and role it in their business.

And I think what we’ve done over the last two years is to seed the market for this activity and we continue to see a growing interest in these applications and we’re continuing to see growth rise. We continue to see more and more applications. But at the end of the day, people buy the application, not the scanners, okay.

A lot of our partners aren’t what I will describe as fully supporting scanning, yes. I just answered the question to Brian Swift about the hospitality markets, where we have a lot of customers – potential customers but not a lot of traction because the programs haven’t extended into supporting inventory counting and cycle counting.

So we believe it’s coming and we are, I would say, facilitating that. But at the end of the day, people buy the apps. And I think as you go around and see more and more people using iPads as cash registers, and iPads for process control, all of that bodes well for what we’ve done. But we’re not in a position to actually accelerate the sales ourselves..

I understand that, I mean, you tend to follow what software developers are doing..

Correct..

And they know from a retail point of sale, I mean, there’s an incredible amount of venture capital funding flowing into it, I think, through your partners, just raise over $50 million each this last summer to expand their operations..

Correct..

And they know your run rate was up 16% year-over-year which is primarily small business, retail point to say. And without a doubt I don’t – I believe that will extend and continue on in 2016.

Question I have is what about larger project-based deployment, because you’re only up so much versus last year, I take it and compare to year-over-year, your largest deployments was down?.

Yes and I think that’s both the beauty and somewhat the dilemma of our current business model. The business model has been optimized I would say for the smaller retailer, who buys online. Our margins go up because there is – we don’t get a lot of discount request.

I think that what’s happening is that what we call the Tier 2 and Tier 3 people are seeing the success below. I think that one of our areas we have to work on is how we better suit our products to the larger deployments. That’s something we’re working on.

I don’t think that they are ready yet, but I think there’s a lot of them kicking the tires and doing evaluations. And we’ve been involved in a lot of these evaluations, they move slowly, they take time and they haven’t deployed. We have some feedback from some of them say we should modify some of our products, which we’re in the process of doing.

And so I still think that’s ahead of us. But it’s – they are not ready yet. I think it’s the big problem. But we are involved in many of the trials..

Okay.

Do you think that in 2016 they’ll start to increase the number or is it something that can be more in 2017?.

Well I think it’s probably at 2016. I think a lot of that Tier 3, Tier 2 guys nobody wants to go first, alright, and often they go in bunches. So I think that we will see a lot more activity in that, what I call Tier 2, Tier 3 category in 2016, based on the success people have had in Tier 4, right..

Okay. Another question is on international sales for scanners, how are they been – how are they done year-over-year, especially with the affected U.S. dollar..

Well, I hate that on the scanning side they are relatively flat..

Okay..

I think that internationally they’ve not had the benefit of, as you mentioned earlier, the VC money where people are throwing, investments of $50 million into software companies. But we have overall, I would say, the last quarter seen a lot of green suits in terms of European based developers, who now have products in the markets.

I would say generally seeking their 12 months behind the U.S. and that’s largely based on the funding that’s available to them and the fact as these programs tend to be complex.

The European taxation and VAT system is complex, so they have a reasonably a difficult program to rise, but we see them coming now, we don’t have a lot of sales from EMEAs cluster. We’re pretty confident we are on the good path with them now also..

Okay, that sounds good. Again, one more question then I will get off the line, I know on the SoMo you talked in the last conference call about certain components are end-of-life, I know you got fourth quarter, first quarter can be rewarded by larger orders of customers taking possession of large numbers.

How long do you think you can support the SoMo going forward, I mean should we look for SoMo revenue in the third quarter next year fourth quarter or how long can you stockpile components up to keep offering the product?.

I think the third quarter next year would be optimistic, but I think that, we are in a phase-down mode, we’ll certainly have Q1 and Q2 we will depend on Q3 and also depends what our customers do in the events that customers come to us with larger orders, during this – I would say phase out mode, then depending on the availability of these components of the market we may be able to guess more and build more.

So it’s a little bit dynamic what we are not willing to do is to buy components on spec because this market is weak. But we are more than happy to work with partners, as we have done with these larger orders where the risk is reduced because we know that we have an end customer, so….

Okay..

But I think certainly maybe some small revenue Q3 I’d be surprised if we have revenue in Q4..

Okay, on that kind of a follow-up question to that is I know you had like a 600 SoMo order from Japan is that going to be primarily delivered fourth quarter, first quarter also?.

Primarily..

Okay, and so as you talking to your customers and telling them you got end-of-life components put your larger orders and now if you want to made would you expect there to be a possibility of more the same mid-size orders like the 600 unit order?.

Yes. The possibility exists, because people have a lot of software written for windows mobile. But at the end of the day they have to step up, I think – I wouldn’t expect huge orders, where flexible and if we’re in a position to support our customers we certainly will..

Okay. Okay, hey, thank you very much, guys..

Thanks, David..

Our next question comes from the line of Steve Swanson of Private Investor. Please proceed with your question..

Good afternoon. Dave, I realized we don’t really have any control over the NASDAQ, what they do at our application once we put it in.

But I just wanted to confirm that we’re still on track, that we’re going to meet the target that we’ve set out through fiscal 2015, so that we can get our financial audit completed on 2015, and get our application include into NASDAQ. So there were some certain targets you’re trying to get completed by year-end.

So that our application for the process to begin, it seems we had audited financial for 2015, are we still on track for that or just slipped a bit?.

I think it will slip in terms of the capital level Steve for a couple of reasons. We have to get the $4 million to meet the NASDAQ requirement for our profitable company. Otherwise everything we do will meet their requirements.

But the part of that growth potential was from stock option exercises, warrant exercises and I think with the stock price being where it is that ran up early last year to little over $3.

But it’s been mostly in the $2 to $250 range until we start to seeing that go higher, I think the pace of option exercises and other things that add the capital – will probably, it just takes a little longer, we were not seeing the levels yet of option exercises that could drive us toward those total.

So we’ll keep everybody posted, but we’ll clearly as long as we remain profitable, we’ll clearly grow our capital, as soon as we get to the $4 million range, we’ll look to move forward with NASDAQ, I believe they’ll require audited results, but we certainly could accomplish the mid-year audit if we needed to.

So we’ll head down that path as quickly as the – that the folks that are raising capital between our operations and option and warrant exercises. And frankly, even the conversion of convertible notes. So all of that would add to capital, so we will encourage all of that to happen as quickly as investors are willing..

So, Dave, what if the year-end audit, what’s the cost of goods instead of audited financials or so. In other words, if we it sounds like we’ve – there is no way in heck we are going to get there with the needed targets by year-end financially.

So let’s say we do it in the May of 2016, and so the second quarter of 2016 is completed, what would it cost us to do a set of financials, from an auditing perspective, so we could make the application midyear, instead of waiting until the end of 2016, you have a ballpark what that might be?.

Not really Steve, I mean, I could guess but the key is what NASDAQ requires and what the auditors are able to do for us.

So, again, let’s get ourselves up to the $4 million capital levels and we will take a look at the process from there, but as you know we – over the last several years, have been able to be very efficient in terms of supporting an audit, and we’ve worked with auditing companies who have reflected that and their billings to us which we disclosed in our proxy.

So we’re – we believe that will all work and the key for us is now getting to a solid $4 million plus on our capital balances, and then we’ll go from there..

Okay, thanks. That’s all I got..

[Operator Instructions] Our next question comes from the line of Brian Swift as a follow-up question. Please proceed with your question..

I just have something that came up today, that I was pointed out but – I guess Microsoft reported and that they now have 110 million people have upgraded to Windows 10, they finally have something that people are interested in.

And, well I know, that doesn’t have anything to do with your SoMo, but – I was talking to is, developers are now, getting interested because, you got 110 million people that went every quarter, do you see any opportunities with your markets there?.

Absolutely, we’ve been interested in Microsoft for quite some time, even though they have been out of favor. In fact, they have included our scanners in their developments in case for Windows 10. So our Bluetooth cordless scanners are the default cordless scanners in Windows 10 development environment.

So, we are very interested, we like working with Microsoft, we like Windows 10, and yes, I think that this will give us more opportunity going forward..

Okay, thanks..

Our next question comes from the line of [indiscernible]. Please proceed with your question. I’m sorry he took himself out of queue. I see no further questions in the queue at this time. I would like to hand the call back over to management for closing comments..

Okay, thank you very much. I’d just like to thank everyone for participating in today’s call and to wish you all a good day. Thank you..

Ladies and gentlemen, this does conclude today’s teleconference. You may now disconnect your telephone lines. We thank you for your participation..