Welcome to the Q1, 2021 Management Conference Call. Management is on the call from Socket Mobile. Kevin Mills, President and CEO, along with Lynn Zhao, CFO. My name is Adrianne, and I will be your operator for today's call.

Before we begin, I'd 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 data collection and mobile data collection products, including details on timing, distribution and market acceptance of products and statements predicting the trends, sales and market conditions and opportunities in the markets in which Socket Mobile sells its products.

Such statements include risks and uncertainties and actual results could differ materially from the results anticipated in such forward-looking statements because of a number of factors, including, but not limited to, the risk that manufacture of Socket 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, and the risk that Socket application partners and current distribution channels may choose not to distribute the products or may not be successful in doing so, 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. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note this conference is being recorded. I will now turn the call over to Kevin Mills, President and CEO.

Kevin you may begin..

Thank you, operator. Good afternoon, everyone. And thank you for joining us today. Our first quarter revenue was $4.8 million, up 14% over $4.2 million in the first quarter of 2020.

Net income for the first quarter of 2021 was $203,000, or $0.03 per fully diluted share, compared to a net loss of $90,000, or a loss of $0.01 per fully diluted share in the first quarter of 2020. Lynn Zhao will provide a more detailed breakdown of our results in a few minutes.

In Q1, our revenue was driven by our retail centric customers led by Shopify and Square. Our retail centric business is benefiting from the reopening of the economy as the COVID restrictions are eased. I would also like to share that customer requirements are a bit different post pandemic.

Customers are more interested in a mobile system supporting indoor and outdoor operations, especially in hospitality related activities, making an iPad based solution much more attractive. We're also seeing greater interest in shopping assistance and one on one customer interactive solutions in retail.

These solutions allow our customers to avoid queuing and check out via sales associates. These new requirements bode well for our mobile centric application driven business model. We're also seeing good demand from commercial services type customers who deliver inspection services and other Field Services.

We expect the commercial services segment of our business to continue to grow strongly this year. The strong demand we saw in Q1 should continue and potentially increase during 2021. However, I must also point out there are real supply chain issues in the world today. And these issues may impact our ability to deliver during the year.

Component lead times have ballooned with some parts lead times going from two weeks to four months overnight. Ensuring we have the components we need remains a daily challenge. Currently, we have sufficient supply commitments to be confident of having a solid Q2 and we are working very hard to ensure supply issues do not impact Q3 or Q4.

But it's a challenge. We will continue to provide updates on the supply situation on our quarterly calls. In Q1, we also entered into a technology transfer agreement with SpringCard SAS, a market leader in the contactless field.

Under the deal, we acquired a perpetual royalty-free license to the core technology in our DuraScan D600 and SocketScan S550 contactless reader writer products. We believe there will be a strong demand for contactless readers as the world reopens post COVID which is why we moved aggressively to secure the technology we need to deliver these products.

As I've said many times, nobody writes software for hardware that doesn't exist. So we need to provide the hardware to our customers so they can develop their applications. Our initial contactless centric market focus was loyalty releases; the market opportunity has grown considerably due to COVID.

There is a new potential contactless requirement COVID Health passport, which if adopted, are likely to end up in mobile wallets on your phone. Should this happen, the S550 is the ideal contactless reader for reading your COVID passport status and passing the information to the controlling application.

In the past few months, the S550 was used in several COVID bubble trials where it read 1000s of mobile passes and worked exceptionally well. Based on these field trials, we are very confident about its capabilities and effectiveness.

Today, our focus is completing our development tools, which support both our scanners and contactless readers and providing these tools to our developer partners. So our scanners and contactless readers can be integrated into their solutions.

Assuming COVID passports become a reality, many businesses from theatres, and restaurants to nightclubs will need to determine your COVID status before entry. The S550 is already fully Apple and Google Wallet certified. So it can read mobile passes directly from your phone, as well as from traditional contactless cards. So in summary, Q1 was good.

And we expect to see strong demand for our products as the world reopens. We have supply issues like everyone else and are working hard to ensure these issues don't impact our customers and our associated revenue.

We are seeing a much more significant contactless reader opportunity on the horizon and are working hard to be a significant player in this emerging opportunity. With that said I now like to turn the call over to our CFO, Lynn Zhao.

Lynn?.

Thank you, Kevin. In addition to delivering a quarter with a solid revenue growth, we continued to manage out our operating costs and expenses while investing actively in new products and improving the existing products which could drive profitable growth. Our gross profit margin was 53.5%, increased 2.8% from the first quarter of 2020.

Our Q1 operating expense of $2.3 million is at the same level as Q1 2020. But their expense to revenue ratio is lower to 48% compared to 55% a year ago. Our liquidity has been further strengthened on March 31. Our cash balance was $5 million, compared to $2.8 million on December 31, 2021.

Their increase is attributed to the profitable operations, the exercise of employee stock options and the funding of the non-formula loan. The acquisition of the SpringCard technology is reported as an intangible asset for $1.9 million on March 31 financial statements.

Our auditors have conducted as their review of the valuation that the company determined and agreed on the valuation. In Q1, we renewed our credit facilities with our bank and they extended the maturity date to January 2023.

With the new agreement, the domestic line of credit was increased to $3 million that includes $2 million revolving credit facility and a $1 million non-formula loan. Our XM credit facility of $0.5 million remains in place. We will hold our Annual Shareholder Meeting on Thursday May 13 at 10:30 AM. The meeting will be in a virtual meeting format.

To obtain the meeting link, please send an email requests to proxymaterials@ socketmobile.com. The voting results will be collected and tallied prior to the meeting. We will file a Form 8-K to report the results after the meeting. The results will also be posted on our website. Now I will turn the call over to the operator for your questions.

Operator?.

[Operator Instructions].

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Currently, we have no questions but if you'd like to enter the queue, please press star one. And we have no questions..

Okay, thank you. Thank you, operator. So I just like to wish everyone good afternoon. I thank you for participating in the call. And I'd also like take the opportunity to thank our employees for their continued commitment and support. Thank you again. Good afternoon..

Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating. You may now disconnect..