Socket Communications Reports Record Fourth Quarter and 2003

Socket Communications Reports Record Fourth Quarter and 2003 Wireless connectivity and mobile bar code scanning products lead the fifth quarter of sequential revenue growth, increasing revenue by 49% from 2002 fourth quarterNewark, CA? 2/18/2004? Socket Communications, Inc. (Nasdaq: SCKT; Pacific Exchange: SOK), The Mobile Connection? Company, today announced its revenue for the fourth quarter and year ended 31 December 2003. Revenues for the fourth quarter was $ 6.0 million, the fourth consecutive quarter of revenue. Fourth quarter increased by 6 percent compared to revenues of $ 5.7 million in the previous quarter and an increase of 49 percent compared to revenues of $ 4.0 million for the same quarter a year ago. The net loss applicable to common shareholders for the fourth quarter was $ 0.1 million, or $ 0.00 per share, compared to net loss for common shareholders for the third quarter of 2003 of $ 0.3 million, or $ 0.01 per share for the fourth quarter a year ago to $ 0.6 million, or $ 0.02 per share. Cash flow from operating activities (net loss of cash not less charges for amortization of intangible assets and income in foreign currency) was positive by $ 84,000 for the fourth quarter of 2003 compared to negative cash flow from activities exercise of $ 0.2 million for the fourth quarter of 2002.For the year ended 31 December 2003, the company recorded sales of $ 21.6 million, an increase of 32 percent compared to revenues of $ 16.3 million in the previous year. The net loss applicable to common shareholders was $ 2.0 million, or $ 0.07 per share compared to net loss to common shareholders for 2002 of $ 3.1 million, or $ 0.13 per share.The balance sheet 31 December 2003 cash of $ 6.4 million, a current ratio of 1.8 to a net worth of $ 16.5 million and no long-term debt. At 31 December 2002, the company? The cash balances were $ 3.1 million, the current ratio of a 1.0, net was $ 11.4 million and $ 0.7 million in Series E redeemable Preferred Stock has been suspended. Reached base four consecutive quarter of revenue during 2003? said Kevin Mills, President and CEO. ? The main driver of growth is still the growing use of Pocket PCs, particularly in business. We have excellent growth in a number of our product lines. We are particularly pleased with the positive impact of the wireless connection to our revenue growth? Mills continues. ? Socket offers wireless connections in the form of plug-in cards and modules embedded with Bluetooth? Wireless technology, and there are more stand-alone products with Bluetooth wireless technology, the handheld device, such as the battery of our GPS receivers, wireless serial adapters, and recently announced Cordless 56K Modem. Socket products with Bluetooth wireless technology offers a complete solution for hardware and embedded software and our KwikBlue? The modules will be developed in more than 20 models of Pocket PC industrialized countries from 13 companies. Our 802.11b Wireless LAN plug-in card to connect a Pocket PC with a wireless LAN in a hotspot, at home or commercial environment. Wireless products in 2003 accounted for 30% of revenue and $ 2.1 million of our revenue growth. Bar code scanning has become the fastest growing family of products in 2003, representing 31% of our revenue and $ 2.8 million of our revenue growth. During 2003, we expanded our product range to a 2D bar code scanner and imager and a small scanner Barcode SDIO to work with Pocket PC and Palm Tungsten models. Productivity benefits of lightweight portable bar code scanning combined with improving the guidance of investment firms are the growth of our family of bar code scanning products. We expect this trend will continue in 2004? Mills completed. ? Further improvements to the economy than expected increase in sales of handheld computers, and new products continue to drive our expansion. Our goal in 2004 is the further development of our family of wireless products, and further maturation of the industrial scanning bar codes and embedded systems companies. Socket? Excellent brand and global distribution are all expected to contribute to our growth. Further quarterly and annual InformationThe company? S balance sheet at 31 December 2003, a cash consideration of $ 6.4 million, based on the net - an increase of $ 3.3 million in cash during the year. The increase in cash was primarily due to two equity funds during the year and the exercise of stock options and warrants, which aggregated $ 5.9 million, partially offset by $ 1.1 million in payments for the Bluetooth wireless acquired technology, the use of cash to fund operating losses during the year of $ 0.4 million, with changes in working capital $ 0.3 million in cash, assets of $ 0.4 million, payment of Dividends on preference shares for cash $ 0.1 million, and lower bank line moves from $ 0.3 million at the end of the year. Cash increased $ 54,000 in the fourth quarter of 2003, the positive cash flow from operating activities and $ 0.4 million of cash benefits from the exercise of stock options and warrants partially offset by payments for acquired wireless technology Bluetooth, investment in equipment and a lower bank line traction. Connectivity products represented 40% of the company? s sales in 2003 compared to 37% in 2002. Bar code scanning products increased in 2003 to 31% of revenue compared to 24% of revenue in 2002. Revenue from products and services decreased by $ 56,000 16% of revenues in 2002 to 12% of revenue in 2003 due to the large role of first order from a customer in 2002. Serial card received $ 0.15 million to $ 3.6 million in 2003, 17% of revenue in 2003 compared to 23% in 2002.Gross profit from the sale were $ 10.7 million or 50% of revenue for the year ended December 31, 2003, compared to gross - profits on sales of $ 8.1 million or 50% of revenue in 2002. Gross profit for the quarter ending 31 December, 2003 $ 3.0 million or 50% of revenue, compared to gross profit on sales of $ 2.1 million or 52 percent of revenue for the quarter ending 31 December , 2002. Changes in gross profit in the fourth quarter of 2003 compared to the same period a year ago was due primarily to growth in sales of new products, with historically lower than average gross margins. The company plans to engineer cost reductions in some of these products during 2004.Research and development was $ 3.4 million in 2003 compared to € 3.5 million in 2002 due to staffing levels, reducing the funded engineering inteal engineering resources are in product development, the decline in consulting services and engineering outside. Research and development was $ 0.9 million for the fourth quarter in two years. Moderate increase in research and development costs are expected in 2004, as the firm research and development and marketing costs program.Sales was $ 5.2 million in 2003 compared to € 4.9 million in 2002, increase the number of sales and marketing staff. Expenditure on marketing and sales for the quarter ending 31 December 2003 was $ 1.3 million compared to $ 0.9 million for the quarter ended 31 December 2002, the increase in sales and marketing and a higher level of advertising and promotion. Marketing costs and sales are expected to rise in 2004, when the company grows.General and administrative expense was $ 2.9 million in 2003 compared to € 2.1 million in 2002, which increase the costs for professional services and insurance and increased shareholder communications. General and administrative expenses for the quarter ending 31 December, 2003 $ 0.8 million in 2003 compared to $ 0.5 million for the quarter ended 31 December 2002, reflecting the annual trend. General and administrative expenses is expected that in 2004 when the company grows.Preferred stock dividends were $ 0.1 million in 2003 compared to $ 29,000 in 2002, dividends on the issuance of $ 2.0 million of Series F Convertible Preferred Stock, in March 2003 and the decline of the balance of redeemable Series E Preferred Stock. Dividend in 2002 in connection with the issuance of $ 1.0 million Series E redeemable Preferred Stock in October 2002, was in 2003 completely transformed. An increase in charges related to the Series F preferred in the first quarter of 2003, reflects a discount from the market after the effect of an allocation to the investor warrants of $ 0.3 million of proceeds from the Series F issue. As a dividend the amount of $ 0.3 million in 2003 and $ 83,000 in 2002, was created by accreting the redeemable value of the Preferred Stock to its redemption value.Conference Call WebcastManagement and the base will be a conference call today at 2 clock time Pacific Time, to discuss the quarterly and annual results and prospects for the future. The call will be broadcast live and in playback, or participants will be able to answer the call by phone at (800) 218-8862 or (303) 262-2130. A replay will be for a week at (800) 405-2236 or (303) 590-3000 code 570048.About Socket Socket Communications, Inc., the wireless connection? The companies, offering the widest range of connectivity products for Windows Mobile-based computers, focusing on handhelds running Pocket PC, Windows CE devices, Palm PDAs and mobile phones. Socket's Mobility Friendly? The products have many functions, and ease of use and lead the market with the smallest footprint and battery-Friendly? Energy consumption in their class. Socket's Embedded Systems Group provides solutions with mobilityIC? Interface chip, KwikBlue? Modules with integrated Bluetooth technology and a family of bar code scanning products. Socket is headquartered in Newark, Califoia, and can be reached at 510-744-2700 or for research StatementsThis press release contains forward-looking statements "within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 as amended. Such statements are predictions of future financial performance, markets and operational activities. These statements are based on expectations of market acceptance of our products, increased shipments of handheld computers, growth in demand for our products, the potential for further revenue growth, expectations regarding the timing of introduction and the availability of new products and expectations regarding our ability to control operating costs and improve our cash flow. These statements involve risks and uncertainties, and actual results could differ materially from expected results in such statements due to a number of factors. These factors include, but are not limited to, risks of delays in the availability of new products due to technological, market and financial institutions, including the availability of capital needed, our ability to launch and marketing of future products, our ability to effectively manage operating costs and has announced the availability of handheld hardware and software, market acceptance of handheld computers and emerging standards such as Bluetooth and 802.11, and the company? s-connectivity products, the failure of our strategic partnerships for the benefit of our economy, as expected, disruptions to our business in general or caused by exteal forces, such as terrorist activities or natural disasters, decline in consumer spending or companies on technology products, or other factors in the company? s most recent Form 10-K / A and 10-Q / A reports to the Securities and Exchange Commission.Condensed Summary Statements of Operations (Amounts in thousands, except per share amounts) Three months to 31 December, nine months, until 31 December, 2003 2002 2003 2002 Revenues $ 6006 $ 4037 $ 21,611 $ 16,312 Cost of revenues 3026 1934 10908 8177 Gross margin 2830 1840 7723 6032 Gross margin percentage 50% 52% 50% 50% Research and development 869 905 3449 3516 Sales and marketing 1,314 939 5,189 4,889 General and administrative 800 523 2,867 2,118 Amortization of intangibles 91 137 410 486 Total operating expenses 3,074 2,504 11,915 11,009 Interest (income) expense, net (2) 45 38 97 Net loss ( 92) (446) (1250) (2971) How Dividend / Preferred Stock accretion - (83) (565) (83) Preferred stock dividends (17) (29) (137) (29) Net loss applicable to common shareholders $ (109) $ (558) $ (1,952) $ (3,083) Eaings per share applicable to common shareholders $ (0.00) $ (0.02) $ (0.07) $ (0.13) The weighted average . Shares O / S 29,336 24,113 26,301 23,976 Reconciliation of net loss to net cash from operating activities, without changes in working capital (amounts in thousands) Three months to 31 December, the year ended December 31 2003 2002 2003 2002 Net loss $ (92) $ (446) $ (1,250) $ (2971) Add back non-cash amortization expense of intangible technology 128 127 569 444 Amortization of intangible assets 91 137 410 486 Foreign currency (profits) (43 ) (34) (92) (34) Cash flow from (to) operations * $ 84 $ (216) $ (363) $ (2075) * Do not change the capital Socket Communications, Inc. Summary consolidated balance sheet (amounts in thousands) December 31, 2003 2002 * Cash $ 3147 $ 6422 Receivables 3648 2308 Inventories 1737 2129 Other current assets 210 604 Tangible assets, net 585 789 Goodwill 9798 9798 Intangible technology 711 1122 Other assets 154 171 Total assets $ 23,265 $ 20,067 Accounts payable and accrued expenses $ 3,751 $ 3,761 Bank line of credit 1,567 1,906 Deferred tax on shipments to distributors 852 531 Note payable 505 1,693 Capital lease / Other non-current liabilities 92 44 Series E redeemable convertible preferred stock - 731 Common and convertible preferred stock 50,460 43,411 deficit accrued (33,962) (32,010) Total liabilities AND SHAREHOLDERS 'EQUITY $ 23,265 $ 20,067 * Derived from audited financial statements. Socket and Battery Friendly are registered trademarks of Socket Communications, Inc. The Mobile Connection Company, Mobility Friendly, mobilityIC and KwikBlue are trademarks of Socket Communications, Inc. The Bluetooth word mark and logos are owned by Bluetooth SIG, Inc. and any use of such marks by Socket Communications, Inc. is under license. All other trademarks and trade names contained herein are of their respective owners. ? 2004, Socket Communications, Inc. All rights reserved. About the author: Press Release