Welcome to the Socket Mobile's Q2 Management Conference Call. 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; and Lynn Zhao, CFO. You may begin..

Thank you operator. Good afternoon everyone and thank you for joining us today. Our second quarter revenue was $6 million, an increase of 119% compared to the $2.7 million for the same period in 2020. The increase was driven by the deployment of business applications in the retail industry.

Operating income for the second quarter of 2021 was $814,000 compared to an operating loss of $810,000 in the prior year period. Q2 net income was $2.6 million which included an adjustment of $1.9 million related to a tax benefit from the disqualification disposition of incentive stock options.

Lynn will provide a more detailed breakdown of our results in a few minutes. In Q2, our revenue was driven by our retail-centric customers led by Shopify and Square.

Our retail-centric business is continuing to benefit from both the reopening of the economy as the COVID restrictions are eased and ongoing retail changes that require customers to be serviced in a more old friendly way. The strong demand we saw in Q2 should continue during 2021.

We expect retail to remain strong and hope to see improvements in our Commercial Services, Logistics, and Healthcare segments where we are currently seeing many testing and piloting activities. We expect these activities to start converting into meaningful revenue moving forward.

We continue to invest in our NFC-centric products which we expect to be a significant revenue driver in 2022 and beyond. Currently, the NFC market is very payment centric. For example, the NFC technology is used in Apple Pay and Google Pay. Their technology is easy to use, convenient and secure.

Apple, an iOS 15 will enable the consumer to use the same NFC technology to carry identification information such as mobile driver licenses, and you'll be able to carry these as mobile passes in your digital wallets.

Visibility will significantly increase the usage of mobile driver licenses and the demand for a reader that can access this information in a nonpayment situation. We believe our S550 and D600 NFC products are the ideal mobile pass readers for this opportunity.

Socket Mobile is working hard to deliver a comprehensive NFC reader solution to our development partners to incorporate these capabilities into their applications and deliver the benefit to their customers. So in summary, Q2 was very good and we expect to see demand for our products to remain strong.

We have supply issues like everyone else and are working hard to ensure these issues don't impact our customers and our associated revenue. In addition, we are working hard to provide a complete comprehensive solution to our developer partners to capture the significant cordless opportunity that is emerging.

With that said, I will now like to turn the call over to our CFO, Lynn Zhao.

Lynn?.

Thank you Kevin. In the second quarter we built on the momentum from the beginning of the year and achieved another profitable quarter. It's the fifth consecutive quarter that the company earned operating profits.

Q2 gross margin increased to 55% compared with 50% for the same period last year and 53% sequentially from the immediately preceding quarter, driven by the strong top line and the absorption of overhead costs.

Operating expenses for the second quarter were $2.4 million, an increase of 12% compared to the same quarter a year ago and 5% sequentially from Q1 2021. The company is investing in both technology and the talent, while remaining disciplined on costs.

The company generated adjusted EBITDA in Q2 of $1.2 million versus a loss of $500,000 in Q2 2020 and the earnings of $570,000 in Q1 2021. Our balance sheet has further strength with the current ratio of 3.2% as of June 30th. Our inventory level increased in Q2 in response to the supply chain tightness.

The team is navigating the challenges well through supplier diversification and inventory management, and we feel good about the rest of the year. We have been explaining our business model and our products to the financial analysts in hope of promoting our story out there.

Singular Research, a wholly-owned subsidiary of Millennium Asset Management, LLC recently published a report on our app-driven business model and initiated coverage of our stock. Their report is available to public on Seeking Alpha.

Overall, we are pleased with our progress in the first half of the year and we are grateful for the hard work of our employees that contributed to our results. With that operator, we are ready to take questions.

Operator?.

[Operator Instructions] And we have no questions in the queue..

All right. Well I'd like to....

Take that back, we just had somebody the queue up. Frank Katrina [ph]. Your line is open..

Yes. Since you're on the New York Stock Exchange, my question is most stocks that are listed over $5 a share have options.

Is there any reason why there have not been any options puts and calls traded on the Socket company?.

Well, we're listed on NASDAQ to start with and I'm not aware, if there's options or puts or calls on our stock. That's between the market makers and consumers and has nothing to do with us. But we're listed on NASDAQ and our shares are freely tradable. I believe there are options.

There are abilities to have options and puts, if they're offered but we have no control over that..

Okay. Thank you..

Thank you..

[Operator Instructions] And we have no further questions..

Okay. Thank you, operator. So I'd just like to thank everyone for participating in today's call and wish you all a good afternoon. Thank you..

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