Good day, everyone, and welcome to the Socket Mobile, Inc. Q3 2025 Earnings Call. My name is Elvis, and I'll 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, market conditions and opportunities in the market in which Socket Mobile sells its products. Such statements involve 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'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 risk 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. On the call with me today are Kevin Mills, Chief Executive Officer; Dave Holmes, Chief Business Officer; and Lynn Zhao, Chief Financial Officer. Now I'll turn the call over to Kevin Mills. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone, and thank you for joining us today. Our revenue for Q3 was $3.1 million, a decrease of 20% over Q3 2024. Our Q3 expenses were $2.5 million, 16% lower than the $2.9 million in Q3 2024. Our operating loss was $1.1 million, which was similar to the loss reported in Q3 2024. Overall, Q3 was another difficult quarter. Revenue came in lower than expected as sales to our distribution partners were much weaker than anticipated. Our distribution partners did not replenish their inventory at the same rate as their sales to end customers. Sales out of distribution were better than in Q2 but remained weak as the level of uncertainty continues to delay or cause projects to be canceled. On the positive side, we did deliver Capture SDK 2.0, which is a significant milestone for Socket Mobile. Capture SDK 2.0 supports all of our new Bluetooth Low Energy products and remains fully compatible with existing devices using Bluetooth Classic. The challenges of creating and delivering the software were significant, and I'm very proud of the work the software development team has done, as it enables us to move forward with our next-generation, lower-cost products that our customers need without any significant development work required from the application partner. Our application partners only need to recompile their current application with Capture SDK 2.0 and the app will fully support all existing and next-generation products, which was our goal. We estimate it will take about 90 days for most application developers to complete the inclusion of Capture 2.0, which is typically done in conjunction with our normal schedule release mechanisms, and their end users will be able to use the new and improved products. There are a few apps that we expect will be updated in the coming weeks, and we plan to run promotions for the new products with some of these early adopter applications. In Q3, we controlled our expenses tightly, reducing the overall expenses by 16% over 2024, while we maintained our investment in R&D and Apple sales opportunities. Securing even a few Apple-related opportunities will deliver substantial long-term benefits. We understand that this will strain our resources in Q4 and force us to continue to manage our expenses very tightly as we did in Q3. We expect Q4 to be EBITDA neutral and look forward to a stronger 2026.

Thank you, Kevin, and good afternoon, everyone. Today, I'd like to highlight some Q3 achievements, and I'll also spend a few minutes walking through our strategic priorities, how we see the market evolving, and how we intend to continue positioning Socket Mobile for a future of sustainable growth. We have invested a lot into our expansion into the industrial scanning and handheld computing markets over the last two years. I mentioned last quarter that we were starting to see interest from a variety of customers in the industrial sector, and we've received our first purchase orders from multiple Fortune 50 companies. The interest is coming from many verticals, such as warehousing and logistics, manufacturing, mining, energy, and construction. Initial rollouts have been quite successful, and many of the customers we have gained will continue rolling out devices and projects into 2026 and beyond. The ruggedized scanning market is quite large, and our entry into this space will help us diversify our business beyond retail. We expect the momentum in this space to continue building for us in the coming quarters and years. Most of the interest and rollouts are with large enterprise customers, which are new to us. Although the sales cycles are long, the size of the opportunities we are seeing is quite substantial. We are expanding our addressable market, and we are putting structure into place to serve these customers in an efficient manner. We have continued investing in our DuraSled and ExtremeScan product lines, which are all designed for iPhone, and now we're offering models with iPhone inside. This entrance into the mobile handheld computing market has opened the door to new customer segments, and we're starting to gain real traction. We also have some market forces working in our favor, namely the continued shift to mobile computing platforms such as smartphones and tablets for enterprise and industrial applications. This works particularly well for us when those customers are transitioning to iOS devices. We also see growing demand for real-time data capture at the edge, for example, in logistics, inventory, and field operations to drive operational productivity. Our new product and technology investments are starting to extend our reach and diversify our customer base. Ultimately, this will make us more sustainable as we become a more complete data capture company.

Okay. Thanks, Dave. Good afternoon, everyone. Thank you for joining today's call. Revenue in Q3 decreased 20% year-over-year to $3.1 million, down from $3.9 million in the same quarter last year, and 23% sequentially from $4 million in Q2. However, sales-out to end users via our distributors remained stable with Q2, which is encouraging, especially since Q3 is usually our softest quarter. We view this resilience as a positive sign amid the market conditions. Gross margin for the quarter was 47.7% compared with 49% in Q3 2024 and 49.9% in Q2 2025. The decline primarily reflects the impact of fixed overhead costs spread over a lower revenue base. Operating expenses for Q3 were $2.5 million compared with $2.9 million in the same quarter last year and $2.7 million in Q2. This reduction was mainly the result of management's cost control initiatives implemented in anticipation of slower business activity. As a result, we reported an operating loss of $1.1 million for the quarter compared with a loss of $1 million in Q3 2024 and a loss of $700,000 in Q2 2025. Adjusted EBITDA for Q3 was a loss of $540,000 versus a loss of $510,000 in Q3 last year and $100,000 in Q2 2025. Diluted loss per share was $0.15, consistent with Q3 2024 and compared with a $0.10 loss in Q2 2025. Turning to the balance sheet. As of September 30, cash totaled $2 million compared with $2.6 million at June 30 and $2.5 million at December 31, 2024. Cash outflows during the quarter included $400,000 for operating activities and $190,000 for capital expenditures, primarily related to product tooling and software development. Inventory net of reserves was $4.7 million as of September 30 versus $5 million at year-end 2024. We continue to focus on managing inventory levels to avoid excess stock in a slower demand environment. This concludes our prepared remarks. I will now turn the call over to the operator for questions.

Our first question comes from Steve Swanson, a private investor.

Will we need to do any more convertible debt before too long?

We have no plan to do a convertible debt at this stage, Steve. I know I've said this in the past, and we ended up doing so. But currently, there are no plans to do a convertible debt. If we can get through Q4 at EBITDA neutral, we believe we have enough business in the hopper to get back to profitable operating levels.

Okay. So we think we got enough cash with what we're looking at going forward that we aren't going to need to raise any more cash. Is that right?

That's correct. We have no questions at this time. Lynn, I'll turn the program back over to you for any additional or closing comments.

Okay. Yes. I just want to thank you, everyone, for your time and wish you a good afternoon. Bye now.

That concludes our meeting today. You may now disconnect.