-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 TMU9lfO/BsXHEHeCNF75v3lEs+DuWBoQLklZ8Brpz+db2x2uuEwT7ip1ZHqZ5JOd
 wr3oB28XJt4VdG4RLPq0hQ==

<SEC-DOCUMENT>0000944075-04-000013.txt : 20040510
<SEC-HEADER>0000944075-04-000013.hdr.sgml : 20040510
<ACCEPTANCE-DATETIME>20040510142837
ACCESSION NUMBER:		0000944075-04-000013
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20040331
FILED AS OF DATE:		20040510

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SOCKET COMMUNICATIONS INC
		CENTRAL INDEX KEY:			0000944075
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTRONIC COMPUTERS [3571]
		IRS NUMBER:				943155066
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-13810
		FILM NUMBER:		04792378

	BUSINESS ADDRESS:	
		STREET 1:		37400 CENTRAL COURT
		CITY:			NEWARK
		STATE:			CA
		ZIP:			94560
		BUSINESS PHONE:		5107442700

	MAIL ADDRESS:	
		STREET 1:		37400 CENTRAL COURT
		CITY:			NEWARK
		STATE:			CA
		ZIP:			94560
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>q1-2004.htm
<TEXT>
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<!-- saved from url=(0042)file://N:\STMNTS\SEC\2002_06_Q\q2-2002.htm -->
<!-- saved from url=(0042)file://N:\STMNTS\SEC\2002_03_Q\q1-2002.htm --><HTML><HEAD><TITLE>10q doc</TITLE>

<META content="MSHTML 5.50.4522.1800" name=GENERATOR></HEAD>
<BODY bgColor=white>
<DIV align=left> </DIV>
<DIV align=left> </DIV>
<P align=center><FONT face="Times New Roman, Times, serif" size=3>UNITED
STATES<BR>SECURITIES AND EXCHANGE COMMISSION<BR>
  WASHINGTON, D.C. 20549<BR>
  <STRONG>FORM 10Q</STRONG></FONT></P>
<TABLE cols=2 width="100%">

  <TR>
    <TD vAlign=top width="5%"><FONT size=3><STRONG>
      <CENTER>[X] </CENTER></STRONG></FONT></TD>
    <TD vAlign=top width="95%"><FONT size=3><STRONG><FONT
      face="Times New Roman, Times, serif">QUARTERLY REPORT PURSUANT TO SECTION
      13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 </FONT></STRONG></FONT></TD>
  </TR></TABLE>
<P align=center><FONT face="Times New Roman, Times, serif"
size=3><STRONG>&nbsp;&nbsp;For the quarterly period ended March 31, 2004</STRONG></FONT></P>
<P align=center><STRONG><FONT face="Times New Roman, Times, serif"
size=3>OR</FONT></STRONG></P>
<TABLE cols=2 width="100%">

  <TR>
    <TD vAlign=top width="5%"><FONT size=3><STRONG>
      <CENTER><FONT face="Times New Roman, Times, serif">[&nbsp;&nbsp;&nbsp;]
      </FONT></CENTER></STRONG></FONT></TD>
    <TD vAlign=top width="95%"><FONT face="Times New Roman, Times, serif"
      size=3><STRONG>TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934 &nbsp;&nbsp;</STRONG><BR>
      <BR>For the
      transition period ____________ to ____________ </FONT></TD></TR></TABLE>
<P align=center><FONT face="Times New Roman, Times, serif"
size=3><STRONG>Commission file number 1-13810 </STRONG></FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=5><STRONG><font size="4">SOCKET
  COMMUNICATIONS, INC. </font></STRONG></FONT><FONT face="Times New Roman, Times, serif"
size=2><BR>
  (Exact Name of Registrant as Specified in its Charter) </FONT></P>
<P>&nbsp;
<TABLE cols=2 width="100%">

  <TR>
    <TD><FONT size=3><STRONG>
      <CENTER><FONT face="Times New Roman, Times, serif" size=3>Delaware
      </FONT></CENTER></STRONG></FONT></TD>
    <TD><FONT size=3><STRONG>
      <CENTER><FONT face="Times New Roman, Times, serif" size=3>94-3155066
      </FONT></CENTER></STRONG></FONT></TD></TR>
  <TR>
    <TD><FONT size=2>
      <CENTER><FONT face="Times New Roman, Times, serif" size=3>&nbsp; (State or
      other jurisdiction of incorporation or organization)&nbsp;
      </FONT></CENTER></FONT></TD>
    <TD><FONT size=2>
      <CENTER>
        <FONT face="Times New Roman, Times, serif" size=3>(IRS Employer Identification
        No.) </FONT>
      </CENTER></FONT></TD></TR></TABLE><FONT
face="Times New Roman, Times, serif"><BR></FONT>
<P align=center><FONT face="Times New Roman, Times, serif" size=3><STRONG>37400
Central Court, Newark, CA 94560 </STRONG></FONT><FONT
face="Times New Roman, Times, serif"><BR><FONT size=2>(Address of principal
executive offices including zip code) </FONT></FONT></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=3><STRONG>(510)
744-2700 </STRONG></FONT><FONT face="Times New Roman, Times, serif"><BR><FONT
size=2>(Registrant's telephone number, including area code)
<BR><BR><BR></FONT></FONT></P>
<P><FONT face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp; </FONT>
<P><font face="Times New Roman, Times, serif" size="3">Indicate by check mark
  whether the registrant (1) has filed all reports required to be filed by Section
  13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
  (or for such shorter period that the registrant was required to file such reports),
  and (2) has been subject to such filing requirements for the past 90 days. YES
  [ X ] NO [ ]</font></P>
<p><font face="Times New Roman, Times, serif" size="3">Indicate by check mark
  whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
  the Exchange Act). YES [ ] NO [ X ]</font></p>
<p><font face="Times New Roman, Times, serif" size="3">Number of shares of Common
  Stock ($0.001 par value) outstanding as of April 30, 2004 was 30,040,147 shares.</font></p>
<DIV align=left>
<HR align=left width="100%" SIZE=1>
</DIV>
<DIV align=left>
<HR align=left width="100%" SIZE=1>
</DIV>
<div align="center"><FONT face="Times New Roman, Times, serif"
size=3><STRONG> </STRONG></FONT><font face="Times New Roman, Times, serif" size="3"><strong>
  </strong></font></div>
<P align=left><font face="Times New Roman, Times, serif" size="2"><a name="tab"></a></font></P>
<table width="879" border="0" cellspacing="0" cellpadding="0" align="center">
  <tr>
    <td colspan="3">
      <div align="center"><font face="Times New Roman, Times, serif"
size=3><strong> </strong></font></div>
      <p align=center><font face="Times New Roman, Times, serif" size="3"><strong>INDEX
        </strong></font></p>
      <font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3"><u>PAGE
        <br>
        NO.</u></font></div>
    </td>
  </tr>
  <tr>
    <td colspan="3"><font face="Times New Roman, Times, serif" size="3">PART I.
      Financial information </font></td>
  </tr>
  <tr>
    <td colspan="3">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="3"><font face="Times New Roman, Times, serif" size="3">Item 1.
      Consolidated Financial Statements: </font></td>
  </tr>
  <tr>
    <td width="27">&nbsp;</td>
    <td width="807">&nbsp;</td>
    <td width="56" align="center" valign="bottom">&nbsp;</td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif" size="3"><a
  href="#bs">Condensed Consolidated Balance Sheets - March 31, 2004 and December
      31, 2003 </a></font></td>
    <td width="56" align="center" valign="bottom">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">2</font></div>
    </td>
  </tr>
  <tr>
    <td width="27" height="10">&nbsp;</td>
    <td width="807" height="10">&nbsp;</td>
    <td width="56" height="10" align="center" valign="bottom">&nbsp;</td>
  </tr>
  <tr>
    <td width="27" height="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="807" height="10"><font face="Times New Roman, Times, serif" size="3"><a
  href="#ops">Condensed Consolidated Statements of Operations - Three Months Ended
      March 31, 2004 and 2003</a></font></td>
    <td width="56" height="10" align="center" valign="bottom">
      <div align="center"> <font face="Times New Roman, Times, serif" size="3">3</font></div>
    </td>
  </tr>
  <tr>
    <td width="27">&nbsp;</td>
    <td width="807">&nbsp;</td>
    <td width="56" align="center" valign="bottom">&nbsp;</td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif" size="3"><a
  href="#flows">Condensed Consolidated Statements of Cash Flows - Three Months
      Ended </a><a
  href="#ops">March 31, 2004 and 2003</a></font></td>
    <td width="56" align="center" valign="bottom">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">4</font></div>
    </td>
  </tr>
  <tr>
    <td width="27">&nbsp;</td>
    <td width="807">&nbsp;</td>
    <td width="56" align="center" valign="bottom">&nbsp;</td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif" size="3"><a
  href="#notes">Notes to Condensed Consolidated Financial Statements</a> </font></td>
    <td width="56" align="center" valign="bottom">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">5</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</td>
    <td width="56">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size="3"><a
href="#mda">Item 2. Management's Discussion and Analysis of Financial Condition
      and Results of Operations</a> </font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">12</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</td>
    <td width="56">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size="3"><a
href="#qqd">Item 3. Quantitative and Qualitative Disclosures about Market Risk</a>
      </font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">26</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</td>
    <td width="56">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size="3"><a
href="#item4">Item 4. Controls and Procedures</a></font> </td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">27</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="3">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="3">
      <div align="left"><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size="3"></font>
        <font face="Times New Roman, Times, serif" size="3"><a
href="#oth">PART II. Other information</a></font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</td>
    <td width="56">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size="3"><a
href="#item6">Item 6. Exhibits and Reports on Form 8-K</a></font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">28</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</td>
    <td width="56">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size="3"><a
href="#sig">Signatures</a></font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">29</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</td>
    <td width="56">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size=3><a
href="#index">Index to Exhibits</a></font></td>
    <td width="56">
      <div align="center">30</div>
    </td>
  </tr>
</table>
<P align=left>&nbsp; </P>
<P align="center"><FONT face="Times New Roman, Times, serif" size=3><BR>
  <BR>
  <A
name=bs></A>1</FONT>
<HR width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><FONT face="Times New Roman, Times, serif" size=3><BR>
<BR>
</FONT>
<P align=left><FONT face="Times New Roman, Times, serif" size=3><STRONG>PART I.
FINANCIAL INFORMATION</STRONG> </FONT>
<P align=left><FONT face="Times New Roman, Times, serif" size=3>Item 1.
Financial Statements (Unaudited) </FONT>
<P align=center>
<P align=center>
<table cellspacing=1 cellpadding=1 width=695 align=center border=1>
  <tr valign=bottom>
    <td colspan=3><font size=2><b>
      <p align=center><font face="Times New Roman, Times, serif">SOCKET COMMUNICATIONS,
        INC. <br>
        CONDENSED CONSOLIDATED BALANCE SHEETS </font></p>
      </b></font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%" height=17><font
      face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></td>
    <td width="14%" height=17><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">March 31,<br>
        2004 (Unaudited) </font></p>
      </font></td>
    <td width="17%" height=17><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">&nbsp; December
        31, 2003* </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td colspan=3><b><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">ASSETS </font></p>
      </font></b></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">Current assets: </font></p>
      </font></td>
    <td width="14%"><font
face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="17%"><font
  face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">&nbsp;&nbsp;Cash and cash
        equivalents </font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">$ 7,694,523</font></p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">$ 6,421,425</font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">&nbsp;&nbsp;Accounts receivable,
        net </font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">4,338,590 </font></p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">3,648,173 </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">&nbsp;&nbsp;Inventories </font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">1,724,566</font></p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">1,736,966 </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">&nbsp;&nbsp;Prepaid expenses
        and other current assets</font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">218,192 </font></p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">210,172 </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font
      face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;Total current
        assets </font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center>13,975,871</p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">12,016,736 </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td colspan=3><font
  face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">Property and equipment: </font></p>
      </font></td>
    <td width="14%"><font
face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="17%"><font
  face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">&nbsp;&nbsp;Machinery and
        office equipment </font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">1,750,841 </font></p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">1,699,660 </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">&nbsp;&nbsp;Computer equipment
        </font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">737,240 </font></p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">692,656 </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font
      face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;Total property
        and equipment</font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center>2,488,081</p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">2,392,316 </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">&nbsp;&nbsp;Accumulated depreciation
        </font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">(1,915,330) </font></p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">(1,807,032) </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;Net
        property and equipment </font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center>572,751</p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">585,284 </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font
      face="Times New Roman, Times, serif">&nbsp;&nbsp;<font size=2>Intangible
      technology, net</font></font></td>
    <td width="14%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>619,607</font></div>
    </td>
    <td width="17%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>711,394</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font
      face="Times New Roman, Times, serif">&nbsp;&nbsp;<font size=2>Goodwill </font></font></td>
    <td width="14%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>9,797,946</font></div>
    </td>
    <td width="17%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>9,797,946</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">&nbsp;&nbsp;Other assets </font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">147,899 </font></p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">154,267 </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font
      face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;Total assets
        </font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">$ 25,114,074
        </font></p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">$ 23,265,627
        </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td colspan=3><font
  face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan=3 height="24">
      <p align=center><b><font face="Times New Roman, Times, serif" size="2">LIABILITIES
        </font></b><font face="Times New Roman, Times, serif" size="2"><b>AND
        STOCKHOLDERS' EQUITY</b></font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">Current liabilities: </font></p>
      </font></td>
    <td width="14%"><font
face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="17%"><font
  face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">&nbsp;&nbsp; Accounts payable
        and accrued expenses </font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif"> $ 3,212,878
        </font></p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">$ 3,057,007 </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">&nbsp;&nbsp; Accrued payroll
        and related expenses </font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">701,794 </font></p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">694,440 </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">&nbsp;&nbsp; Bank line of
        credit </font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif"
      size=2> 3,455,903</font><font face="Times New Roman, Times, serif"></font></p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">1,567,390 </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">&nbsp;&nbsp; Deferred income
        on shipments to distributors</font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">894,872 </font></p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">851,668 </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font
      face="Times New Roman, Times, serif">&nbsp;&nbsp;<font size=2>Current portion
      of capital leases and equipment financing notes</font></font></td>
    <td width="14%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>13,834</font></div>
    </td>
    <td width="17%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>20,882</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font
      face="Times New Roman, Times, serif">&nbsp;&nbsp;<font size=2>Note payable</font></font></td>
    <td width="14%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>123,536</font></div>
    </td>
    <td width="17%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>504,714</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font
      face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;Total current
        liabilities </font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">8,402,817 </font></p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">6,696,101 </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td colspan=3><font
  face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">Long term liabilities: </font></p>
      </font></td>
    <td width="14%"><font
face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="17%"><font
  face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp; Long term portion of deferred rent and capital leases</font></td>
    <td width="14%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>74,441</font></div>
    </td>
    <td width="17%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>71,191</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td colspan="3">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">Commitments and contingencies
        </font></p>
      </font></td>
    <td width="14%"><font
face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="17%"><font
  face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%">&nbsp;</td>
    <td width="14%">&nbsp;</td>
    <td width="17%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">Stockholders' equity: </font></p>
      </font></td>
    <td width="14%"><font
face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="17%"><font
  face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%" height="50"><font size=2>
      <p><font size=2><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp; </font><font face="Times New Roman, Times, serif"></font></font><font face="Times New Roman, Times, serif">Series
        F Convertible Preferred Stock, $0.001 par value: <br>
        </font><font size=2><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp; </font><font face="Times New Roman, Times, serif"></font></font><font size=2><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp; </font><font face="Times New Roman, Times, serif"></font></font><font face="Times New Roman, Times, serif">Authorized
        Shares - 276,269, </font><font face="Times New Roman, Times, serif">Issued
        and outstanding shares - <br>
        </font><font size=2><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp; </font><font face="Times New Roman, Times, serif"></font></font><font size=2><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp; </font><font face="Times New Roman, Times, serif"></font></font><font face="Times New Roman, Times, serif">87,893
        at March 31, 2004 and 92,906 at December 31, 2003</font></p>
      </font></td>
    <td width="14%" height="50"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">88</font></p>
      </font></td>
    <td width="17%" height="50"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">93</font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%" height="52"><font size=2> <font size=2><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp; </font><font face="Times New Roman, Times, serif"></font></font><font face="Times New Roman, Times, serif">Common
      stock, $0.001 par value: Authorized shares - <br>
      </font><font size=2><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp; </font><font face="Times New Roman, Times, serif"></font></font><font size=2><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp; </font><font face="Times New Roman, Times, serif"></font></font><font face="Times New Roman, Times, serif">100,000,000
      </font><font face="Times New Roman, Times, serif"
      size=2> </font><font
      face="Times New Roman, Times, serif">Issued and outstanding shares - 30,013,477
      at <br>
      </font><font size=2><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp; </font><font face="Times New Roman, Times, serif"></font></font><font size=2><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp; </font><font face="Times New Roman, Times, serif"></font></font><font
      face="Times New Roman, Times, serif">March 31, </font><font size=2><font
      size=2></font></font><font
      face="Times New Roman, Times, serif">2004 and </font><font face="Times New Roman, Times, serif"
      size=2> </font><font
      face="Times New Roman, Times, serif">29,827,029 at December 31, 2003</font>
      </font></td>
    <td width="14%" height="52"><font size=2>
      <p align=center><font
      face="Times New Roman, Times, serif">30,013</font></p>
      </font></td>
    <td width="17%" height="52"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">29,827 </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">Additional paid-in capital
        </font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">50,528,448 </font></p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">50,430,460 </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font face="Times New Roman, Times, serif">Accumulated deficit </font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">(33,921,733)
        </font></p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">(33,962,045)
        </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%" height=23><font size=2>
      <p><font
      face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders'
        equity </font></p>
      </font></td>
    <td width="14%" height=23><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">16,636,816</font></p>
      </font></td>
    <td width="17%" height=23><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">16,498,335 </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td width="69%"><font size=2>
      <p><font
      face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
        liabilities and stockholders' equity </font></p>
      </font></td>
    <td width="14%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">$ 25,114,074
        </font></p>
      </font></td>
    <td width="17%"><font size=2>
      <p align=center><font face="Times New Roman, Times, serif">$ 23,265,627
        </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td colspan=3><font size=2>
      <p><font face="Times New Roman, Times, serif">_________________________
        </font></p>
      </font></td>
  </tr>
  <tr valign=bottom>
    <td colspan=3><font size=2>
      <p><font face="Times New Roman, Times, serif">*Derived from audited consolidated
        financial statements. </font></p>
      </font></td>
  </tr>
</table>
<P></P><FONT face="Times New Roman, Times, serif" size=3><BR></FONT>
<P align=center><FONT face="Times New Roman, Times, serif" size=3>See
accompanying notes. <BR><BR>
  <A name=ops></A></FONT> 2
<HR width="100%">
<FONT face="Times New Roman, Times, serif" size=3><BR>
</FONT><font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><FONT face="Times New Roman, Times, serif" size=3><BR>
</FONT>
<P align=center>
<TABLE cellSpacing=1 cellPadding=1 width=695 align=center border=1>
  <TR vAlign=bottom>
    <TD colSpan=3 height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2><B>SOCKET COMMUNICATIONS, INC. <BR>
        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS</B> <BR>
        (Unaudited) </FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD height=17>
      <P><FONT face="Times New Roman, Times, serif"><FONT size=2> </FONT></FONT><FONT face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;</FONT></P>
    </TD>
    <TD colspan="2" height=17>
      <div align="center"><font face="Times New Roman, Times, serif" size=2>Three
        Months Ended March 31,</font></div>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="41%" height=17>
      <P><FONT face="Times New Roman, Times, serif">&nbsp;&nbsp; </FONT></P>
    </TD>
    <TD width="14%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif" size=2>2004 </FONT></P>
    </TD>
    <TD width="15%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif" size=2>2003 </FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="41%" height=17>
      <P><FONT face="Times New Roman, Times, serif" size=2>Revenues </FONT></P>
    </TD>
    <TD width="14%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif" size=2>$ 6,743,228</FONT>
      </P>
    </TD>
    <TD width="15%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif" size=2>$ 4,878,565
        </FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="41%" height=17>
      <P><FONT face="Times New Roman, Times, serif" size=2>Cost of revenues </FONT></P>
    </TD>
    <TD width="14%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>3,311,666</FONT></P>
    </TD>
    <TD width="15%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>2,476,713</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="41%" height=17>
      <P><FONT face="Times New Roman, Times, serif" size=2>Gross profit </FONT></P>
    </TD>
    <TD width="14%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>3,431,562</FONT></P>
    </TD>
    <TD width="15%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>2,401,852</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="41%" height=17>
      <P><FONT face="Times New Roman, Times, serif">&nbsp;&nbsp;<FONT size=2>
        </FONT></FONT></P>
    </TD>
    <TD width="14%" height=17><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp; </FONT></TD>
    <TD width="15%" height=17><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp; </FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD height=26>
      <P><FONT face="Times New Roman, Times, serif" size=2>Operating expenses:
        </FONT></P>
    </TD>
    <TD height=26>&nbsp;</TD>
    <TD height=26>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="41%" height=17>
      <P><FONT face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;Research
        and development </FONT></P>
    </TD>
    <TD width="14%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>924,152</FONT></P>
    </TD>
    <TD width="15%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>920,941</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="41%" height=17>
      <P><FONT face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;Sales and
        marketing </FONT></P>
    </TD>
    <TD width="14%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>1,519,037</FONT></P>
    </TD>
    <TD width="15%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>1,283,586</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="41%" height=17>
      <P><FONT face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;General
        and administrative </FONT></P>
    </TD>
    <TD width="14%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>846,924</FONT></P>
    </TD>
    <TD width="15%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>673,794</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="41%" height=17><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp; Amortization of intangible technology</FONT></TD>
    <TD width="14%" height=17>
      <DIV align=center><FONT face="Times New Roman, Times, serif"
      size=2>91,787</FONT></DIV>
    </TD>
    <TD width="15%" height=17>
      <DIV align=center><FONT face="Times New Roman, Times, serif"
      size=2>116,368</FONT></DIV>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="41%" height=17>
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses </FONT></P>
    </TD>
    <TD width="14%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>3,381,900</FONT></P>
    </TD>
    <TD width="15%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>2,994,689</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="41%" height=17>
      <P><FONT face="Times New Roman, Times, serif" size=2>Operating income (loss)
        </FONT></P>
    </TD>
    <TD width="14%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>49,662</FONT></P>
    </TD>
    <TD width="15%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>(592,837)</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="41%" height=17>
      <P><FONT face="Times New Roman, Times, serif" size=2>Interest income and
        other </FONT> </P>
    </TD>
    <TD width="14%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>10,660</FONT></P>
    </TD>
    <TD width="15%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>7,210</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="41%" height=17>
      <P><FONT face="Times New Roman, Times, serif" size=2>Interest expense </FONT></P>
    </TD>
    <TD width="14%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif" size=2>(6,932)
        </FONT></P>
    </TD>
    <TD width="15%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif" size=2>(26,880)
        </FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="41%" height=17>
      <P><FONT face="Times New Roman, Times, serif" size=2>Net income (loss) </FONT></P>
    </TD>
    <TD width="14%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif" size=2>53,390</FONT></P>
    </TD>
    <TD width="15%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif" size=2>(612,507)</FONT></P>
    </TD>
  </TR>
  <tr valign=bottom>
    <td valign=top width="41%" height=17>
      <p><font face="Times New Roman, Times, serif" size=2>Preferred stock dividends</font></p>
    </td>
    <td width="14%" height=17>
      <p align=center><font face="Times New Roman, Times, serif" size=2>(13,078)
        </font></p>
    </td>
    <td width="15%" height=17>
      <p align=center><font face="Times New Roman, Times, serif" size=2>(32,000)
        </font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top width="41%" height=17>
      <p><font face="Times New Roman, Times, serif" size=2>Preferred stock accretion
        </font></p>
    </td>
    <td width="14%" height=17>
      <p align=center><font face="Times New Roman, Times, serif" size=2>-- </font></p>
    </td>
    <td width="15%" height=17>
      <p align=center><font face="Times New Roman, Times, serif" size=2>(383,898)
        </font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top width="41%" height=17>
      <p><font face="Times New Roman, Times, serif" size=2>Net income (loss) applicable
        to common stockholders</font></p>
    </td>
    <td width="14%" height=17>
      <p align=center><font face="Times New Roman, Times, serif" size=2>$ 40,312
        </font></p>
    </td>
    <td width="15%" height=17>
      <p align=center><font face="Times New Roman, Times, serif" size=2>$ (1,028,405)
        </font></p>
    </td>
  </tr>
  <TR vAlign=bottom>
    <TD vAlign=top width="41%" height=17>&nbsp;</TD>
    <TD width="14%" height=17>&nbsp;</TD>
    <TD width="15%" height=17>&nbsp;</TD>
  </TR>
  <tr valign=bottom>
    <td valign=top width="41%" height=8>
      <p><font face="Times New Roman, Times, serif" size=2>Net income (loss) per
        share applicable to common stockholders:</font></p>
    </td>
    <td width="14%" height=8>
      <p align=center><font face="Times New Roman, Times, serif" size=2> </font></p>
    </td>
    <td width="15%" height=8>
      <p align=center><font face="Times New Roman, Times, serif" size=2> </font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top width="41%" height=9>
      <p><font face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;Basic</font></p>
    </td>
    <td width="14%" height=9>
      <p align=center><font face="Times New Roman, Times, serif" size=2>$ 0.00</font></p>
    </td>
    <td width="15%" height=9>
      <p align=center><font face="Times New Roman, Times, serif" size=2>$ (0.04)</font></p>
    </td>
  </tr>
  <TR vAlign=bottom>
    <TD width="41%" height=17><font face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;Diluted</font></TD>
    <td width="14%" height=9>
      <p align=center><font face="Times New Roman, Times, serif" size=2>$ 0.00</font></p>
    </td>
    <td width="15%" height=9>
      <p align=center><font face="Times New Roman, Times, serif" size=2>$ (0.04)</font></p>
    </td>
  </TR>
  <tr valign=bottom>
    <td width="41%" height=17>
      <p><font face="Times New Roman, Times, serif" size=2>Weighted average shares
        outstanding</font>: </p>
    </td>
    <td width="14%" height=17>
      <p align=center>&nbsp;</p>
    </td>
    <td width="15%" height=17>
      <p align=center>&nbsp;</p>
    </td>
  </tr>
  <TR vAlign=bottom>
    <TD width="41%" height=17><font face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;Basic</font></TD>
    <td width="14%" height=17>
      <p align=center><font face="Times New Roman, Times, serif"
      size=2>29,933,603</font></p>
    </td>
    <td width="15%" height=17>
      <p align=center><font face="Times New Roman, Times, serif"
      size=2>24,207,403</font></p>
    </td>
  </TR>
  <TR vAlign=bottom>
    <TD width="41%" height=17>
      <P><font face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;Diluted</font>
      </P>
    </TD>
    <TD width="14%" height=17>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>34,478,732</FONT></P>
    </TD>
    <TD width="15%" height=17>
      <P align=center><font face="Times New Roman, Times, serif"
      size=2>24,207,403</font></P>
    </TD>
  </TR>
</TABLE>
<P></P><FONT face="Times New Roman, Times, serif" size=3><BR></FONT>
<P align=center><FONT face="Times New Roman, Times, serif" size=3>See
accompanying notes. <BR><BR></FONT>
<P align=center>
<P align=center><FONT face="Times New Roman, Times, serif" size=3><A
name=flows></A></FONT> 3
<HR width="100%">
<p><FONT face="Times New Roman, Times, serif" size=3></FONT><font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font>
</p>
<P align=center>
<P align=center>
<P align=center>
<P align=center>
<P align=center>
<P align=center>
<P align=center>
<P align=center>
<TABLE cellSpacing=1 cellPadding=1 width=695 align=center border=1>
  <TR vAlign=bottom>
    <TD colSpan=3>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2><B>SOCKET COMMUNICATIONS, INC. <BR>
        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS</B> <BR>
        (Unaudited) </FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;</FONT></P>
    </TD>
    <TD colSpan=2>
      <P align=center><FONT face="Times New Roman, Times, serif" size=2><u>Three
        Months Ended March 31,</u> </FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;</FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif" size=2>2004 </FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif" size=2>2003 </FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%"><B>
      <P><FONT face="Times New Roman, Times, serif" size=2>Operating activities</FONT>
      </P>
      </B></TD>
    <TD colSpan=2>
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;Net income
        (loss)</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif" size=2>$ 53,390</FONT>
      </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif" size=2>$ (612,507)</FONT>
      </P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;Adjustments to reconcile net income (loss) to net cash
        used in operating activities: </FONT></P>
    </TD>
    <TD colSpan=2>
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>108,298</FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>136,203</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;Net (gain) loss on foreign currency translations</FONT>
      </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>18,427</FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>(8,068)</FONT></P>
    </TD>
  </TR>
  <tr valign=bottom>
    <td width="68%"><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp; Gain on forward exchange contract</font></td>
    <td width="16%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>(44,090)</font></div>
    </td>
    <td width="16%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>(10,170)</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="68%"><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp; Foreign currency exchange loss on note payable</font></td>
    <td width="16%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>43,560</font></div>
    </td>
    <td width="16%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>4,500</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="68%"><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp; Amortization of intangibles</font></td>
    <td width="16%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>91,787</font></div>
    </td>
    <td width="16%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>116,368</font></div>
    </td>
  </tr>
  <TR vAlign=bottom>
    <TD width="68%"><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp; Change in deferred rent</FONT></TD>
    <TD width="16%">
      <DIV align=center><FONT face="Times New Roman, Times, serif"
      size=2>5,503</FONT></DIV>
    </TD>
    <TD width="16%">
      <DIV align=center><FONT face="Times New Roman, Times, serif"
      size=2>--</FONT></DIV>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD colspan="3">&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;&nbsp;
        Changes in operating assets and liabilities:</FONT> </P>
    </TD>
    <TD colSpan=2>
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable</FONT>
      </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>(720,218)</FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>(474,657)</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</FONT>
      </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>12,400</FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>231,678</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses
        and other current assets</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>(51,580)</FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>117,599</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets</FONT>
      </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>6,368</FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>7,007</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable
        and accrued expenses</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>142,173</FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>132,301</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued payroll and
        related expenses</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>7,354</FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>131,136</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><font size=2><font face="Times New Roman, Times, serif">Deferred
        income on shipments to distributors</font></font> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>43,204</FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>98,422</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash
        used in operating activities</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>(283,424)</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>(130,188)</FONT> </P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD colSpan=3>
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%"><B>
      <P><FONT face="Times New Roman, Times, serif" size=2>Investing activities</FONT>
      </P>
      </B></TD>
    <TD colSpan=2>
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchase of equipment</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>(95,765)</FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>(76,222)</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash
        used in investing activities</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>(95,765)</FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>(76,222)</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD colSpan=3>
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%"><B>
      <P><FONT face="Times New Roman, Times, serif" size=2>Financing activities</FONT>
      </P>
      </B></TD>
    <TD colSpan=2>
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;</FONT></P>
    </TD>
  </TR>
  <tr valign=bottom>
    <td width="68%">
      <p><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Payments on capital leases and equipment
        financing notes</font> </p>
    </td>
    <td width="16%">
      <p align=center><font face="Times New Roman, Times, serif"
      size=2>(9,301)</font></p>
    </td>
    <td width="16%">
      <p align=center><font face="Times New Roman, Times, serif"
      size=2>(7,392)</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="68%">
      <p><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Payments on notes payable</font> </p>
    </td>
    <td width="16%">
      <p align=center><font face="Times New Roman, Times, serif"
      size=2>(337,088)</font></p>
    </td>
    <td width="16%">
      <p align=center><font face="Times New Roman, Times, serif"
      size=2>(272,078)</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="68%">
      <p><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net proceeds from sale of foreign
        exchange contract</font> </p>
    </td>
    <td width="16%">
      <p align=center><font face="Times New Roman, Times, serif"
      size=2>--</font></p>
    </td>
    <td width="16%">
      <p align=center><font face="Times New Roman, Times, serif"
      size=2>161,700</font></p>
    </td>
  </tr>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gross proceeds from bank lines of
        credit</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>3,455,903</FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>1,495,131</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gross payments on bank lines of credit</FONT>
      </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>(1,567,390)</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>(1,906,000)</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from stock options exercised</FONT>
      </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>43,797</FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>--</FONT></P>
    </TD>
  </TR>
  <tr valign=bottom>
    <td width="68%"><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from warrants exercised</font></td>
    <td width="16%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>54,372</font></div>
    </td>
    <td width="16%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>119,179</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="68%"><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net proceeds from sale of preferred
      stock and warrants to purchase common stock</font></td>
    <td width="16%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>--</font></div>
    </td>
    <td width="16%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>1,544,838</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="68%"><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Redemption payments on Series E redeemable
      convertible preferred stock</font></td>
    <td width="16%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>--</font></div>
    </td>
    <td width="16%">
      <div align=center><font face="Times New Roman, Times, serif"
      size=2>(200,000)</font></div>
    </td>
  </tr>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Dividends paid</FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>--</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><font face="Times New Roman, Times, serif"
      size=2>(32,000)</font></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash
        provided by financing activities</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>1,640,293</FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>903,378</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD colSpan=3>
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;</FONT></P>
    </TD>
  </TR>
  <tr valign=bottom>
    <td width="68%">
      <p><font face="Times New Roman, Times, serif" size=2>Effect of exchange
        rate changes on cash and cash equivalents</font> </p>
    </td>
    <td width="16%">
      <p align=center><font face="Times New Roman, Times, serif"
      size=2>11,994</font> </p>
    </td>
    <td width="16%">
      <p align=center><font face="Times New Roman, Times, serif"
      size=2>6,878</font> </p>
    </td>
  </tr>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif" size=2>Net increase in cash
        and cash equivalents</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>1,273,098</FONT></P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>703,846</FONT> </P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif" size=2>Cash and cash equivalents
        at beginning of period</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>6,421,425</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=2>3,146,483</FONT> </P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif" size=2>Cash and cash equivalents
        at end of period</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif" size=2>$ 7,694,523</FONT>
      </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif" size=2>$ 3,850,329</FONT>
      </P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD colSpan=3>
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%"><B>
      <P><FONT face="Times New Roman, Times, serif" size=2>Supplemental cash flow
        information</FONT> </P>
      </B></TD>
    <TD colSpan=2>
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;</FONT></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="68%">
      <P><FONT face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash paid for interest</FONT> </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif" size=2>$ 6,932</FONT>
      </P>
    </TD>
    <TD width="16%">
      <P align=center><FONT face="Times New Roman, Times, serif" size=2>$ 26,880</FONT>
      </P>
    </TD>
  </TR>
  <tr valign=bottom>
    <td width="68%">
      <p><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Warrants issued in conjunction with
        preferred stock financing</font> </p>
    </td>
    <td width="16%">
      <p align=center><font face="Times New Roman, Times, serif" size=2>$ --</font>
      </p>
    </td>
    <td width="16%">
      <p align=center><font face="Times New Roman, Times, serif" size=2>$ 296,494</font>
      </p>
    </td>
  </tr>
</TABLE>
<P></P><FONT face="Times New Roman, Times, serif" size=3><BR></FONT>
<P align=center><FONT face="Times New Roman, Times, serif" size=3>See
accompanying notes. <BR><BR>
  <A name=notes></A></FONT><FONT
face="Times New Roman, Times, serif" size=3>4<BR>
  </FONT>
<P align=center>
<HR width="100%">

<P align=left>
<P align=left><font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font>
<P align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  COMMUNICATIONS, INC.<br>
  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</b><br>
  (Unaudited)</font>
<p><font face="Times New Roman, Times, serif" size="3"><b>NOTE 1 - Basis of Presentation</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">The accompanying unaudited
  consolidated financial statements of Socket Communications, Inc. and its wholly
  owned subsidiaries (the &quot;Company&quot;) have been prepared in accordance
  with accounting principles generally accepted in the United States for interim
  financial information and with the instructions to Form 10-Q and Article 10
  of Regulation S-X. Accordingly, they do not include all of the information and
  footnotes required by accounting principles generally accepted in the United
  States for complete financial statements. In the opinion of management, all
  adjustments (consisting only of normal recurring accruals) considered necessary
  for fair presentation have been included. Certain information and footnote disclosures
  normally included in financial statements prepared in accordance with accounting
  principles generally accepted in the United States have been condensed or omitted.
  These consolidated financial statements should be read in conjunction with the
  audited consolidated financial statements and notes included in the Company's
  Annual Report on Form 10-K for the year ended December 31, 2003.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  <b>NOTE 2 - Summary of Significant Accounting Policies</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">The preparation of financial
  statements in conformity with accounting principles generally accepted in the
  United States requires management to make estimates and assumptions that affect
  the reported amounts of assets and liabilities, the disclosure of contingent
  assets and liabilities at the date of the financial statements, and the reported
  amounts of revenue and expense during the reporting period. Actual results could
  differ from those estimates, and such differences may be material to the financial
  statements.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">The Company makes adjustments
  to the value of inventory based on estimates of potentially excess and obsolete
  inventory after considering forecasted demand and forecasted average selling
  prices. However, forecasts are subject to revisions, cancellations, and rescheduling.
  Actual demand will inevitably differ from anticipated demand, and such differences
  may have a material effect on the financial statements.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">The Company accounts for
  employee stock options in accordance with Accounting Principles Board Opinion
  No. 25, &quot;Accounting for Stock Issued to Employees&quot; (APB 25), and the
  Company has adopted the disclosure-only alternative described in Statement of
  Financial Accounting Standards No. 123, &quot;Accounting for Stock-Based Compensation&quot;
  (FAS 123). The Company has elected to follow APB No. 25 and related interpretations
  in accounting for its employee stock options because, as discussed below, the
  alternative fair value accounting provided for under FAS 123 requires use of
  option valuation models that were not developed for use in valuing employee
  stock options. Under APB 25, the Company generally does not record compensation
  expense because the exercise price of the Company's employee stock options equals
  the market price of the underlying stock on the date of grant. Pro forma information
  regarding net loss and loss per share available to common shareholders is required
  by FAS 123, and such information has been determined as if the Company had accounted
  for its employee stock options under the fair value method.</font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3>5</font>
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3">Had compensation cost for
  the Company's stock-based compensation plans been determined based on the fair
  value at the grant dates for awards under those plans consistent with the method
  of FAS 123, the Company's net loss per share would have increased to the pro
  forma amounts indicated below:</font></p>
<P>&nbsp;</P>
<table cellspacing=1 cellpadding=1 width=700 align=center border=1>
  <tr valign=bottom>
    <td width="63%"><font face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;</font><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td colspan="2">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">Three
        Months Ended March 31,</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="63%">
      <p><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;</font><font face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;</font></p>
    </td>
    <td width="19%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">2004
        </font></p>
    </td>
    <td width="18%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">2003
        </font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="63%">
      <p><font face="Times New Roman, Times, serif" size="3">Net income (loss)
        applicable to common shareholders</font> </p>
    </td>
    <td width="19%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">$ 40,312</font>
      </p>
    </td>
    <td width="18%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">$ (1,028,405)</font>
      </p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="63%">
      <p><font face="Times New Roman, Times, serif" size="3">Stock-based employee
        compensation expense <br>
        </font><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp; </font><font face="Times New Roman, Times, serif" size="3">determined
        under fair value based method</font> </p>
    </td>
    <td width="19%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">(707,912)</font>
      </p>
    </td>
    <td width="18%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">(544,028)</font>
      </p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="63%">
      <p><font face="Times New Roman, Times, serif" size="3">Pro forma net loss
        applicable to common stockholders</font> </p>
    </td>
    <td width="19%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">$ (667,600)</font>
      </p>
    </td>
    <td width="18%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">$ (1,572,433)</font>
      </p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="63%">
      <p><font face="Times New Roman, Times, serif" size="3">Basic net income
        (loss) per share, as reported</font> </p>
    </td>
    <td width="19%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">$ 0.00</font>
      </p>
    </td>
    <td width="18%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">$ (0.04)</font>
      </p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="63%">
      <p><font face="Times New Roman, Times, serif" size="3">Diluted net income
        (loss) per share, as reported</font> </p>
    </td>
    <td width="19%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">$ 0.00</font>
      </p>
    </td>
    <td width="18%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">$ (0.04)</font>
      </p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="63%">
      <p><font face="Times New Roman, Times, serif" size="3">Pro forma basic and
        diluted net loss per share</font> </p>
    </td>
    <td width="19%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">$ (0.02)</font>
      </p>
    </td>
    <td width="18%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">$ (0.06)</font>
      </p>
    </td>
  </tr>
</table>
<p><font size="3" face="Times New Roman, Times, serif">The fair value of these
  options was estimated at the date of grant using the Black-Scholes option pricing
  model. Weighted average assumptions for the comparable three month periods presented
  are as follows:</font></p>
<table cellspacing=1 cellpadding=1 width=700 align=center border=1>
  <tr valign=bottom>
    <td width="63%"><font face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;</font><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td colspan="2">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">Three
        Months Ended March 31,</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="63%">
      <p><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;</font><font face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;</font></p>
    </td>
    <td width="19%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">2004
        </font></p>
    </td>
    <td width="18%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">2003
        </font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="35%">
      <p><font face="Times New Roman, Times, serif" size="3">Risk-free interest
        rate (%)</font> </p>
    </td>
    <td width="17%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">2.93%</font>
      </p>
    </td>
    <td width="17%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">3.46%</font>
      </p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="35%">
      <p><font face="Times New Roman, Times, serif" size="3">Dividend yield</font>
      </p>
    </td>
    <td width="17%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">--</font>
      </p>
    </td>
    <td width="17%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">--</font>
      </p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="35%" height="22">
      <p><font face="Times New Roman, Times, serif" size="3">Volatility factor</font>
      </p>
    </td>
    <td width="17%" height="22">
      <p align=center><font face="Times New Roman, Times, serif" size="3">1.4</font>
      </p>
    </td>
    <td width="17%" height="22">
      <p align=center><font face="Times New Roman, Times, serif" size="3">1.3</font>
      </p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="35%">
      <p><font face="Times New Roman, Times, serif" size="3">Expected option life
        (years) </font> </p>
    </td>
    <td width="17%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">4.5</font></p>
    </td>
    <td width="17%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">6.5</font>
      </p>
    </td>
  </tr>
</table>
<p align="center">&nbsp;</p>
<p align="left"><font size="3" face="Times New Roman, Times, serif">The Black-Scholes
  option valuation model was developed for use in estimating the fair value of
  traded options that have no vesting restrictions and are fully transferable.
  In addition, option valuation models require the input of highly subjective
  assumptions including the expected stock price volatility and expected option
  life. Because the Company's employee stock options have characteristics significantly
  different from those of traded options, and because changes in the subjective
  input assumptions can materially affect the fair value estimate, in management's
  opinion, the existing models do not necessarily provide a reliable single measure
  of the fair value of its employee stock options.</font></p>
<P>&nbsp;</P>
<p align=center><font
face="Times New Roman, Times, serif" size=3>6<br>
  </font>
<p align=center>
<hr width="100%">
<P><font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font></P>
<P><FONT face="Times New Roman, Times, serif" size=3><BR>
  <B>NOTE 3 - Inventories</B></FONT></P>
<P><font face="Times New Roman, Times, serif" size="3">Inventories consist principally
  of raw materials and subassemblies, which are stated at the lower of cost (first-in,
  first-out) or market.</font></P>
<P align=center>
<TABLE cellSpacing=1 cellPadding=1 width=700 align=center border=1>
  <TR vAlign=bottom>
    <TD width="49%"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;</font></TD>
    <TD width="28%">
      <P align=center><font face="Times New Roman, Times, serif" size="3">March
        31,<br>
        2004</font></P>
    </TD>
    <TD width="23%">
      <P align=center><font face="Times New Roman, Times, serif" size="3">December
        31, <br>
        2003 </font></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="49%">
      <P><font face="Times New Roman, Times, serif" size="3">Raw materials and
        subassemblies </font></P>
    </TD>
    <TD width="28%">
      <P align=center><font face="Times New Roman, Times, serif" size="3">$ 1,436,511</font></P>
    </TD>
    <TD width="23%">
      <P align=center><font face="Times New Roman, Times, serif" size="3">$ 1,470,538</font>
      </P>
    </TD>
  </TR>
  <tr valign=bottom>
    <td width="49%" height="21">
      <p><font face="Times New Roman, Times, serif" size="3">Finished goods</font></p>
    </td>
    <td width="28%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">288,055
        </font></p>
    </td>
    <td width="23%">
      <p align=center><font face="Times New Roman, Times, serif" size="3">266,428
        </font></p>
    </td>
  </tr>
  <TR vAlign=bottom>
    <TD width="49%">
      <P><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;Total
        inventory</font></P>
    </TD>
    <TD width="28%">
      <P align=center><font face="Times New Roman, Times, serif" size="3">$ 1,724,566</font></P>
    </TD>
    <TD width="23%">
      <P align=center><font face="Times New Roman, Times, serif" size="3">$ 1,736,966
        </font></P>
    </TD>
  </TR>
</TABLE>
<P><font face="Times New Roman, Times, serif" size="3"><b>NOTE 4 - Bank Financing
  Arrangements</b></font></P>
<p><font face="Times New Roman, Times, serif" size="3">On March 5, 2004, the Company
  entered into a new credit agreement with a bank, which will expire on March
  5, 2006. This new credit agreement replaces the credit agreement previously
  in effect. The credit facility under the new credit agreement allows the Company
  to borrow up to $4,000,000 based on the level of qualified domestic and international
  receivables, $2,500,000 and $1,500,000, respectively, at the lender's index
  rate based on prime plus 0.5%. The rates in effect at March 31, 2004 were 4.5%
  on both the domestic and international lines. At March 31, 2004, outstanding
  amounts borrowed under the lines were $2,358,144 and $1,097,759, respectively,
  which were the approximate amounts available on the lines. These amounts outstanding
  at March 31, 2004 were repaid in April 2004. Under the new credit agreement,
  the Company must maintain quarterly minimum tangible net worth equal to $5,500,000,
  plus 75% of quarterly net profits beginning March 31, 2004. At March 31, 2003,
  outstanding amounts borrowed under the Company's previous bank lines were $744,000
  and $751,000, respectively, which were the approximate amounts available on
  those lines. The amounts outstanding at March 31, 2003 were repaid in April
  2003.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"> <b>NOTE 5 - Series F Convertible
  Preferred Stock Financing</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">On March 20, 2003, the
  Company sold 276,269 units at a price of $7.22 per unit (total of $2,000,000
  gross cash proceeds) in a private placement. Each unit consisted of one share
  of the Company's Series F convertible preferred stock (the &quot;Series F Preferred
  Stock&quot;) and a three-year warrant to purchase three shares of the Company's
  common stock. Two directors of the Company invested an aggregate of $115,000
  in the financing. Each share of Series F Preferred Stock is convertible, in
  whole or in part, into 10 shares of common stock at the option of the holder
  at any time for a period of three years following the date of sale, with a mandatory
  conversion date three years from date of sale. The originally issued Series
  F Preferred Stock was convertible into a total of 2,762,690 shares of common
  stock at a conversion price of $0.722 per share, subject to certain adjustments.
  An additional 828,807 shares of common stock were issuable upon exercise of
  the originally issued warrants at an exercise price of $0.722 per share. In
  addition, the Company issued five-year warrants to the placement agent to acquire
  up to 718,300 shares of common stock at $0.722 per share. Using a Black-Scholes
  valuation model with the following assumptions: 0.0% dividend yield rate, risk
  free interest rates of 1.9% and 2.81%, respectively, for the investors and placement
  agent, $0.73 per share fair value of common stock, $0.722 exercise price, a
  life of three years and five years, respectively, for the investors and placement
  agent, and a volatility of 0.911, $296,494 of the proceeds were attributed to
  the warrants issued to investors, and the warrants issued to the placement agent
  were valued at $366,333, which was included in the cost of the financing. The
  Company recorded a one-time accretion charge of $296,494 in the first quarter
  of 2003 reflecting the discount from market resulting from the allocation of
  the proceeds to the investor warrants.</font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3>6</font>
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3">The Series F Preferred
  Stock automatically converts into common stock three years after sale and automatically
  converts earlier in the event of a merger or consolidation of the Company, subject
  to certain conditions. The holders of Series F Preferred Stock have voting rights
  equal to the number of shares of common stock issuable upon conversion. In the
  event of liquidation, holders of Series F Preferred Stock are entitled to liquidation
  preferences over common stockholders equal to their initial investment plus
  all accrued but unpaid dividends. Dividends accrue at the rate of 8% per annum
  and are payable quarterly in cash or in common stock, at the option of the Company.
  Dividends for the three months ended March 31, 2004 and 2003 were $13,078, and
  $4,384, respectively, which were paid in cash subsequent to the quarter. During
  the first quarter of 2004, holders of 5,013 shares of Series F Preferred Stock
  elected to convert their shares into 50,130 shares of common stock, leaving
  87,893 shares of Series F Preferred Stock outstanding at March 31, 2004.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"> <b>NOTE 6 - Note Payable
  to Nokia</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">On March 16, 2002, the
  Company acquired from Nokia Corporation its CompactFlash (&quot;CF&quot;) Bluetooth&reg;
  Card business including a product line and a sole, non-exclusive, nontransferable,
  worldwide license to make, use and sell the related product line technology.
  The purchase price was three million Euros, of which two million Euros was in
  the form of a note payable to Nokia. In August 2002 and September 2003, payment
  of the balance was revised to monthly installments of 100,000 Euros due each
  month beginning September 11, 2002 with a final installment due on April 11,
  2004. Outstanding balances under the note accrue interest at an annual rate
  of 6% and the accumulated interest is payable at the time of each installment
  payment. Interest charges in the first quarter of 2004 were $4,353 compared
  to $23,597 in the first quarter of 2003. Subsequent to the end of the quarter,
  the remaining balance of the note was paid in full.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">The Company is using foreign
  currency forward exchange contracts for Euros in order to mitigate the impact
  of currency fluctuations between the Euro and the U.S. dollar on the future
  payments to Nokia. Due to the change in the payment schedule with Nokia these
  derivatives do not qualify for SFAS 133 hedge accounting treatment. Accordingly,
  the changes in fair value of these derivatives are recorded to earnings. In
  the first quarter of 2004 the net of the currency exchange gain on the note
  payable of $44,090 and the loss on the forward exchange contracts of $43,560
  was included in interest and other income. In the first quarter of 2003 the
  net of the currency exchange loss on the note payable of $4,500 and the gain
  on the forward exchange contracts of $10,170 was included in interest and other
  income. At March 31, 2004 and 2003, the Company had forward purchase contracts
  to buy Euros with a nominal US dollar value equivalent to $123,130 and $1,420,380,
  respectively. The fair value of these forward purchase contracts at March 31,
  2004 and 2003, was $11,300 and $120,180, respectively, and such value is included
  in other current assets in the accompanying balance sheet.</font></p>
<p> <font face="Times New Roman, Times, serif" size="3"> </font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3>8</font>
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3"><b>NOTE 7 - Intangible
  Assets</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">The Company acquired intangible
  assets in conjunction with the acquisition of Nokia's CompactFlash Bluetooth
  Card business and related product line technology in March of 2002. These intangible
  assets were valued at $980,000, and consist of purchased technology and a licensing
  agreement. Estimated useful lives of the acquired assets ranged from one to
  three years. Intangible assets of $835,125 from a prior acquisition consist
  of developed software and technology, and such intangible assets have estimated
  lives ranging form 2.5 to 8.5 years. Amortization of all intangible assets in
  the first quarter of 2004 was $91,787 compared to $116,368 in the first quarter
  of 2003.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">Intangible assets as of
  March 31, 2004 consisted of the following:</font></p>
<P>&nbsp;</P>
<table cellspacing=1 cellpadding=1 width=700 align=center border=1>
  <tr valign=bottom>
    <td width="331">
      <p><font face="Times New Roman, Times, serif" size=2><font size="2"><font face="Times New Roman, Times, serif"><font face="Times New Roman, Times, serif"><font size="3"><font face="Times New Roman, Times, serif"><font face="Times New Roman, Times, serif"><font size="2"><font size="3"><font face="Times New Roman, Times, serif"><font face="Times New Roman, Times, serif"><font size="3"></font><font face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;</font></font></font></font></font></font></font></font></font></font></font>
        </font></p>
    </td>
    <td width="118">
      <p align=center><font face="Times New Roman, Times, serif" size="3">Gross<br>
        Assets </font></p>
    </td>
    <td width="115">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Accumulated
        Amortization</font></div>
    </td>
    <td width="109">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">Net
        </font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="331">
      <p><font face="Times New Roman, Times, serif" size="3">Project management
        tools </font></p>
    </td>
    <td width="118">
      <p align=center><font face="Times New Roman, Times, serif" size="3">$ 570,750
        </font></p>
    </td>
    <td width="115">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">$
        (235,014) </font></div>
    </td>
    <td width="109">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">$
        335,736 </font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="331">
      <p><font face="Times New Roman, Times, serif" size="3">Development software</font></p>
    </td>
    <td width="118">
      <p align=center><font face="Times New Roman, Times, serif" size="3">111,375
        </font></p>
    </td>
    <td width="115">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">(111,375)
        </font></div>
    </td>
    <td width="109">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">--
        </font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="331">
      <p><font face="Times New Roman, Times, serif" size="3">Schematic library</font></p>
    </td>
    <td width="118">
      <p align=center><font face="Times New Roman, Times, serif" size="3">153,000
        </font></p>
    </td>
    <td width="115">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">(153,000)
        </font></div>
    </td>
    <td width="109">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">--</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="331">
      <p><font face="Times New Roman, Times, serif" size="3">Bluetooth CompactFlash
        technology </font></p>
    </td>
    <td width="118">
      <p align=center><font face="Times New Roman, Times, serif" size="3">900,000
        </font></p>
    </td>
    <td width="115">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">(616,129)
        </font></div>
    </td>
    <td width="109">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">283,871
        </font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="331">
      <p><font face="Times New Roman, Times, serif" size="3">Licensing agreement</font></p>
    </td>
    <td width="118">
      <p align=center><font face="Times New Roman, Times, serif" size="3">80,000
        </font></p>
    </td>
    <td width="115">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">(80,000)
        </font></div>
    </td>
    <td width="109">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">--
        </font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="331">
      <p><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;Definite
        lived intangible assets</font></p>
    </td>
    <td width="118">
      <p align=center><font face="Times New Roman, Times, serif" size="3">$ 1,815,125
        </font></p>
    </td>
    <td width="115">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">$
        (1,195,518) </font></div>
    </td>
    <td width="109">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">$
        619,607 </font></div>
    </td>
  </tr>
</table>
<P><font size="3" face="Times New Roman, Times, serif">Based on definite lived
  intangible assets recorded at March 31, 2004 and assuming no subsequent impairment
  of the underlying assets, the annual amortization expense is expected to be
  as follows:</font></P>
<table cellspacing=1 cellpadding=1 width=700 align=center border=1>
  <tr valign=bottom>
    <td colspan="3">
      <p align="left"><font face="Times New Roman, Times, serif" size="3">Year
        </font></p>
    </td>
    <td width="300">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">Amount</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td colspan="3">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">2004
        (nine months remaining)</font></div>
    </td>
    <td width="300">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">$
        275,361 </font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td colspan="3">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">2005
        </font></div>
    </td>
    <td width="300">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">126,018
        </font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td colspan="3">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">2006
        </font></div>
    </td>
    <td width="300">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">67,147
        </font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td colspan="3">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">2007
        </font></div>
    </td>
    <td width="300">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">67,147
        </font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td colspan="3">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">2008
        and beyond</font></div>
    </td>
    <td width="300">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">83,934
        </font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td colspan="3">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">
        Total</font></div>
    </td>
    <td width="300">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">$
        619,607 </font></div>
    </td>
  </tr>
</table>
<P>&nbsp;</P>
<p align=center><font
face="Times New Roman, Times, serif" size=3>9<br>
  </font>
<p align=center>
<hr width="100%">
<P><font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font></P>
<P><b><font face="Times New Roman, Times, serif" size="3">NOTE 8 - Net Income
  (Loss) Per Share Applicable to Common Stockholders</font></b></P>
<p><font size="3" face="Times New Roman, Times, serif">The Company calculates
  earnings per share in accordance with Financial Accounting Standards Board Statement
  No. 128, <i>Earnings per Shar</i>e.</font></p>
<p><font size="3" face="Times New Roman, Times, serif">The following table sets
  forth the computation of basic and diluted net income (loss) per share:</font></p>
<P align=center>
<TABLE cellSpacing=1 cellPadding=1 width=700 align=center border=1>
  <TR vAlign=bottom>
    <TD width=433><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;</font></TD>
    <TD colSpan=2>
      <P align=center><font face="Times New Roman, Times, serif" size="3">Three
        Months Ended March 31,</font></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width=433><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;</font></TD>
    <TD width=124>
      <P align=center><font face="Times New Roman, Times, serif" size="3">2004
        </font></P>
    </TD>
    <TD width=122>
      <P align=center><font face="Times New Roman, Times, serif" size="3">2003
        </font></P>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="433">
      <P><font face="Times New Roman, Times, serif" size="3">Numerator: </font></P>
    </TD>
    <TD width="124"><font face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;</font><font face="Times New Roman, Times, serif" size="3"></font></TD>
    <TD width="122"><font face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;</font><font face="Times New Roman, Times, serif" size="3"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD width=433 height="19">
      <P><font face="Times New Roman, Times, serif" size="3">Net income (loss)
        </font></P>
    </TD>
    <TD width=124 height="19">
      <P align=center><font face="Times New Roman, Times, serif" size="3">$ 53,390
        </font></P>
    </TD>
    <TD width=122 height="19">
      <P align=center><font face="Times New Roman, Times, serif" size="3">$ (612,507)
        </font></P>
    </TD>
  </TR>
  <tr valign=bottom>
    <td width=433 height="19">
      <p><font face="Times New Roman, Times, serif" size="3">&nbsp&nbsp&nbspPreferred
        stock dividends </font></p>
    </td>
    <td width=124 height="19">
      <p align=center><font face="Times New Roman, Times, serif" size="3">(13,078)
        </font></p>
    </td>
    <td width=122 height="19">
      <p align=center><font face="Times New Roman, Times, serif" size="3">(32,000)</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=433 height="19">
      <p><font face="Times New Roman, Times, serif" size="3">&nbsp&nbsp&nbspPreferred
        stock accretion </font></p>
    </td>
    <td width=124 height="19">
      <p align=center><font face="Times New Roman, Times, serif" size="3">-- </font></p>
    </td>
    <td width=122 height="19">
      <p align=center><font face="Times New Roman, Times, serif" size="3">(383,898)</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=433 height="19">
      <p><font face="Times New Roman, Times, serif" size="3">&nbsp&nbsp&nbspNet
        income (loss) applicable to common stockholders</font></p>
    </td>
    <td width=124 height="19">
      <p align=center><font face="Times New Roman, Times, serif" size="3">$ 40,312
        </font></p>
    </td>
    <td width=122 height="19">
      <p align=center><font face="Times New Roman, Times, serif" size="3">$ (1,028,405)
        </font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=433 height="23"><font face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;</font><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width=124 height="23"><font face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;</font><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width=122 height="23"><font face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;</font><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <TR vAlign=bottom>
    <TD width="433">
      <P><font face="Times New Roman, Times, serif" size="3">Denominator: </font></P>
    </TD>
    <TD width="124"><font face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;</font><font face="Times New Roman, Times, serif" size="3">
      </font></TD>
    <TD width="122"><font face="Times New Roman, Times, serif" size=2>&nbsp;&nbsp;</font><font face="Times New Roman, Times, serif" size="3"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD width=433 height="45">
      <P><font face="Times New Roman, Times, serif" size="3">&nbsp&nbsp&nbspWeighted
        average common shares outstanding used <br>
        &nbsp&nbsp&nbspin computing net income (loss) per share </font></P>
    </TD>
    <TD width=124 height="45">
      <P align=center><font face="Times New Roman, Times, serif" size="3"> </font><font face="Times New Roman, Times, serif" size="3">
        </font></P>
    </TD>
    <TD width=122 height="45">
      <P align=center><font face="Times New Roman, Times, serif" size="3"> </font><font face="Times New Roman, Times, serif" size="3">
        </font></P>
    </TD>
  </TR>
  <tr valign=bottom>
    <td width="68%" height="10">
      <p><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font face="Times New Roman, Times, serif" size="3">Basic</font>
      </p>
    </td>
    <td width=124 height="10">
      <p align=center><font face="Times New Roman, Times, serif" size="3">29,933,603
        </font></p>
    </td>
    <td width=122 height="10">
      <p align=center><font face="Times New Roman, Times, serif" size="3">24,207,403
        </font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width="68%" height="10">
      <p><font face="Times New Roman, Times, serif"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font face="Times New Roman, Times, serif" size="3">Diluted</font>
      </p>
    </td>
    <td width=124 height="10">
      <p align=center><font face="Times New Roman, Times, serif" size="3">34,478,732
        </font></p>
    </td>
    <td width=122 height="10">
      <p align=center><font face="Times New Roman, Times, serif" size="3">24,207,403
        </font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=433 height="13">
      <p><font face="Times New Roman, Times, serif" size="3">&nbsp&nbsp&nbspBasic
        net income (loss) per share</font></p>
    </td>
    <td width=124 height="13">
      <p align=center><font face="Times New Roman, Times, serif" size="3">$ 0.00
        </font></p>
    </td>
    <td width=122 height="13">
      <p align=center><font face="Times New Roman, Times, serif" size="3">$ (0.04)
        </font></p>
    </td>
  </tr>
  <TR vAlign=bottom>
    <td width=433 height="11">
      <p><font face="Times New Roman, Times, serif" size="3">&nbsp&nbsp&nbspDiluted
        net income (loss) per share </font></p>
    </td>
    <TD width=124 height="11">
      <P align=center><font face="Times New Roman, Times, serif" size="3">$ 0.00
        </font></P>
    </TD>
    <TD width=122 height="11">
      <P align=center><font face="Times New Roman, Times, serif" size="3">$ (0.04)
        </font></P>
    </TD>
  </TR>
</TABLE>
<P><font face="Times New Roman, Times, serif" size="3">For the quarter ended March
  31, 2003 the diluted net loss per share is equivalent to the basic net loss
  per share because prior to the quarter ended March 31, 2004 the Company experienced
  losses in all quarters since inception, and thus a potential 11,691,934 shares
  of common stock from the exercise of stock options and warrants, and conversion
  of preferred stock, have been omitted from the net loss per share calculation
  for the comparable quarter shown as their effect is antidilutive.</font></P>
<p></p>
<p><b><font face="Times New Roman, Times, serif" size="3">NOTE 9 - Income Taxes</font></b></p>
<p><font face="Times New Roman, Times, serif" size="3">There were no provisions
  for federal or state income taxes for the quarters ended March 31, 2004 and
  2003. The Company has incurred net operating losses in all periods prior to
  the first quarter 2004. Earnings in the first quarter 2004, the Company's first
  profitable quarter, are not material, and continued earnings are not assured.
  The Company has maintained a full valuation allowance for all deferred tax assets.</font></p>
<p></p>
<p></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3>10</font>
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><b><font face="Times New Roman, Times, serif" size="3">NOTE 10 - Segment Information</font></b></p>
<p><font face="Times New Roman, Times, serif" size="3">The Company operates in
  one segment, connection solutions for mobile computers and other electronic
  devices. The Company markets its products in the United States and foreign countries
  through its sales personnel and distributors. Information regarding geographic
  areas for the three months ended March 31, 2004 and 2003 are as follows:</font></p>
<P>&nbsp;</P>
<P align=center>
<CENTER>
  <TABLE cellSpacing=1 cellPadding=1 width=700 align=center border=1>
    <TR vAlign=bottom>
      <TD width=252 height="14"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;</font></TD>
      <TD colSpan=2 height="14" align="center">
        <P align=center><font face="Times New Roman, Times, serif" size="3">Three
          Months Ended March 31,</font></P>
      </TD>
    </TR>
    <TR vAlign=bottom>
      <TD width=252>
        <P><font face="Times New Roman, Times, serif" size="3">Revenues:</font></P>
      </TD>
      <TD width=222 align="center">
        <P align=center><font face="Times New Roman, Times, serif" size="3">2004</font></P>
      </TD>
      <TD width=205 align="center">
        <P align=center><font face="Times New Roman, Times, serif" size="3">2003</font></P>
      </TD>
    </TR>
    <TR vAlign=bottom>
      <TD width=252>
        <P><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;United
          States</font></P>
      </TD>
      <TD width=222 align="center">
        <P align=center><font face="Times New Roman, Times, serif" size="3">$
          4,049,171</font></P>
      </TD>
      <TD width=205 align="center">
        <P align=center><font face="Times New Roman, Times, serif" size="3">$
          2,955,706</font></P>
      </TD>
    </TR>
    <TR vAlign=bottom>
      <TD width=252>
        <P><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;Europe</font></P>
      </TD>
      <TD width=222 align="center">
        <P align=center><font face="Times New Roman, Times, serif" size="3">1,758,303</font></P>
      </TD>
      <TD width=205 align="center">
        <P align=center><font face="Times New Roman, Times, serif" size="3">1,193,557</font></P>
      </TD>
    </TR>
    <TR vAlign=bottom>
      <TD width=252>
        <P><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;Asia
          and rest of world</font></P>
      </TD>
      <TD width=222 align="center">
        <P align=center><font face="Times New Roman, Times, serif" size="3">935,754</font></P>
      </TD>
      <TD width=205 align="center">
        <P align=center><font face="Times New Roman, Times, serif" size="3">729,302</font></P>
      </TD>
    </TR>
    <TR vAlign=bottom>
      <TD width=252>
        <P><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;Total
          Revenues</font></P>
      </TD>
      <TD width=222 align="center">
        <P align=center><font face="Times New Roman, Times, serif" size="3">$
          6,743,228</font></P>
      </TD>
      <TD width=205 align="center">
        <P align=center><font face="Times New Roman, Times, serif" size="3">$
          4,878,565</font></P>
      </TD>
    </TR>
  </TABLE>
</CENTER>
<P></P>
<P><FONT face="Times New Roman, Times, serif" size=3><BR>
  Export revenues are attributable to countries based on the location of the Company's
  customers. The Company does not hold long-lived assets in foreign locations.</FONT></P>
<p><font face="Times New Roman, Times, serif" size="3">Major customers who accounted
  for at least 10% of the Company's total revenues were as follows:</font></p>
<P align=center>
<CENTER>
  <TABLE cellSpacing=1 cellPadding=1 width=700 align=center border=1>
    <TR vAlign=bottom>
      <TD width="32%" height=17><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;</font></TD>
      <TD colSpan=2 height=17>
        <P align=center><font face="Times New Roman, Times, serif" size="3">Three
          Months Ended March 31, </font></P>
      </TD>
    </TR>
    <TR vAlign=bottom>
      <TD width="32%"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;</font></TD>
      <TD width="16%">
        <P align=center><font face="Times New Roman, Times, serif" size="3">2004
          </font></P>
      </TD>
      <TD width="19%">
        <P align=center><font face="Times New Roman, Times, serif" size="3">2003
          </font></P>
      </TD>
    </TR>
    <tr valign=bottom>
      <td width="32%" height=23>
        <p><font face="Times New Roman, Times, serif" size="3">Tech Data </font></p>
      </td>
      <td width="16%" height=23>
        <p align=center><font face="Times New Roman, Times, serif" size="3">27%
          </font></p>
      </td>
      <td width="19%" height=23>
        <p align=center><font face="Times New Roman, Times, serif" size="3">23%
          </font></p>
      </td>
    </tr>
    <tr valign=bottom>
      <td width="32%" height=23>
        <p><font face="Times New Roman, Times, serif" size="3">Ingram Micro</font></p>
      </td>
      <td width="16%" height=23>
        <p align=center><font face="Times New Roman, Times, serif" size="3">18%
          </font></p>
      </td>
      <td width="19%" height=23>
        <p align=center><font face="Times New Roman, Times, serif" size="3">13%
          </font></p>
      </td>
    </tr>
  </TABLE>
</CENTER>
<P></P>
<p><FONT face="Times New Roman, Times, serif"
size=3><BR>
  <b>NOTE 12 - Related Party Transactions</b></FONT></p>
<p><font size="3" face="Times New Roman, Times, serif">The Company purchases engineering
  design and consulting services from Impact Zone. Impact Zone's principal stockholder,
  Dale Gifford, is a sibling of Michael L. Gifford, Executive Vice President and
  Director of Socket. The Company had no outstanding accounts payable due to Impact
  Zone at March 31, 2004, and had $71,250 of outstanding accounts payable due
  at March 31, 2003. The Company received no services for the quarter ended March
  31, 2004, and received services valued at $67,500 during the quarter ended March
  31, 2003.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"> <br>
  </font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3><a
name=mda></a>1</font>1
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3"><b>Item 2. Management's
  Discussion and Analysis of Financial Condition and Results of Operations </b></font></p>
<p><font face="Times New Roman, Times, serif" size="3"><i>This Management's Discussion
  and Analysis of Financial Condition and Results of Operations contains forward-looking
  statements within the meaning of Section 27A of the Securities Act of 1933 and
  Section 21E of the Securities Exchange Act of 1934. The forward-looking statements
  involve risks and uncertainties, including, among other things, the uncertainties
  associated with forecasting future revenues, costs and expenses. You are cautioned
  not to place undue reliance on the forward-looking statements, which speak only
  as of the date of this report. Our actual results may differ materially from
  the results discussed in the forward-looking statements. Factors that might
  cause such a difference include, but are not limited to, those discussed below
  and under &quot;Other Factors Affecting Future Operations.&quot; We assume no
  obligation to update such forward-looking statements or to update the reasons
  why actual results could differ materially from those anticipated in such forward-looking
  statements.</i></font></p>
<p><i><font face="Times New Roman, Times, serif" size="3">You should read the
  following discussion in conjunction with the interim condensed consolidated
  financial statements and notes included elsewhere in this report, the Company's
  annual financial statements in the 10-K, and other information contained in
  other reports and documents filed from time to time with the Securities and
  Exchange Commission.</font></i></p>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  <b>Revenue</b><br>
  We design, manufacture and sell products for connecting handheld and notebook
  computers to computer networks and peripherals, and bar code products for data
  collection using handheld and notebook computers. Total revenues for the first
  quarter of 2004 were $6.7 million, an increase of 38% over revenue of $4.9 million
  in the first quarter of 2003.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">Our products cover a wide
  range of connection solutions in four product families:</font></p>
<ul>
  <li><font face="Times New Roman, Times, serif" size="3">Our <i>network connection
    products</i> are connection devices that can be plugged into standard expansion
    slots in handheld and notebook computers or connect to handheld and notebook
    computers over wireless connections. These products allow users to connect
    their devices to the Internet via mobile or wired phone services, or to private
    networks, or to communicate with other electronic devices such as desktop
    computers and printers. Our products offer both wireless and cable connections
    to external devices such as mobile phones and printers and Global Positioning
    System receivers. Wireless connection products include cards using the Bluetooth
    standard for short-range wireless connectivity and cards for connecting to
    local wireless networks using the Wireless LAN 802.11b (or WiFi) standard.
    Cable connection products include modems for telephone connections, Ethernet
    cards for local area network connections and digital phone cards for wide
    area network connections through mobile phones.</font></li>
  <li><font face="Times New Roman, Times, serif" size="3"> Our <i>bar code scanning
    products</i> plug into or connect wirelessly to handheld or notebook computers
    and turn handheld or notebook computers into portable bar code scanners that
    can be used in various retail and industrial workplaces.</font></li>
  <li><font face="Times New Roman, Times, serif" size="3"> Our <i>serial products</i>
    add connection ports to a notebook or handheld computer that allow users to
    connect these portable computers to standard peripherals designed primarily
    for desktop PCs.</font></li>
  <li><font face="Times New Roman, Times, serif" size="3"> Our <i>embedded products
    and services</i> consist of Bluetooth modules, interface chips, and engineering
    design services to install these products. Our Bluetooth modules allow manufacturers
    of handheld computers and other devices to build wireless connection functions
    into their products. Our interface chips allow manufacturers of wide area
    network cards and other devices to incorporate into their products the capability
    to transfer information to and from handheld or notebook computers.</font></li>
</ul>
<p align="center"><font face="Times New Roman, Times, serif" size=3>1</font>2
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3">Our network connection
  product revenue in the first quarter of 2004 was $2.6 million, an increase of
  34% compared to revenue of $1.9 million in the first quarter of 2003. Revenue
  growth in the first quarter 2004 was due primarily to continued growth in sales
  of products introduced in 2003 and increasing enterprise deployment of Pocket
  PCs. Revenue growth of $0.4 million in our Bluetooth plug-in card product line
  was primarily from our Secure Digital (SDIO) Bluetooth plug-in card, which began
  shipping in only modest quantities in the comparable quarter of 2003. Revenue
  growth of $0.2 million in our Wireless LAN product line was primarily from our
  SDIO Wireless LAN card which began shipping in the third quarter of 2003, combined
  with growth of $0.3 million from our modem cards sales. Revenue growth from
  these products were partially offset by declines in revenue from our Bluetooth
  GPS receiver with navigation kit, digital phone cards, and modest declines in
  revenue from our Ethernet plug-in cards.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">Our bar code scanning product
  revenue in the first quarter of 2004 was $2.4 million, an increase of 85% compared
  to revenue of $1.3 million in the first quarter of 2003. Revenue growth of $0.7
  million was due to our primary scanning product, the In-Hand Scan card, which
  is a laser scanner incorporated into a CompactFlash card that plugs into a Pocket
  PC, notebook, or other mobile computer to turn the computer into a portable
  laser scanner. Additional revenue growth of $0.8 million was due to our SDIO
  In-Hand Scan card, which began shipping to customers in the third and fourth
  quarters of 2003. Partially offsetting this revenue growth was a decline in
  sales of our bar code laser scanner system, which is a laser gun attached via
  a cable to a CompactFlash card with a PC card adaptor. Our scanning products
  are sold both through general distribution and through value added resellers
  who contract with customers to provide scanning solutions. Our products are
  becoming more widely adopted by the value added reseller community for light
  duty portable scanning.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">Our peripheral connection
  card revenue in the first quarter of 2004 was $0.9 million compared to $1.0
  million for the first quarter of 2003. Peripheral connection cards are primarily
  sold to connect peripheral devices or other electronic equipment to notebook
  computers. Declines in revenue were primarily in our custom serial card product
  sales partially offset by increased sales of our Bluetooth cordless serial adaptor,
  which began shipping in the fourth quarter of 2003. Sales volumes for our standard
  serial PC Card and CompactFlash card products were flat for the comparable quarters.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">Our embedded products and
  services revenue in the first quarter of 2004 was $0.8 million compared to $0.6
  million for the first quarter of 2003. Revenue growth was due to increased sales
  of our Bluetooth modules. Sales of our proprietary ASIC chip and engineering
  service revenues were flat for the comparable quarters.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Gross Margins</b><br>
  Our gross margin for the first quarter of 2004 was 51% compared to a margin
  of 49% for the first quarter of 2003. We generally price our products as a markup
  from our cost, and we offer discount pricing for higher volume purchases. Cost
  reductions on several of our products, including our Bluetooth modules and modems,
  and the introduction of our lower cost third generation proprietary ASIC chip
  in the third quarter of 2003 resulted in improved margins for the first quarter
  of 2004 compared to the same period one year ago.</font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3>1</font>3
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3"><b>Research and Development
  Expense</b><br>
  Research and development expense in the first quarter of 2004 was $0.9 million,
  flat compared to research and development expense in the first quarter of 2003.
  Increases in payroll expense was offset by reductions in engineering supplies
  and equipment from the completion of the development of a new proprietary ASIC
  chip at the end of the first quarter of 2003. Expenses are expected to remain
  at similar levels in the second quarter.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Sales and Marketing
  Expense</b><br>
  Sales and marketing expense for the first quarter of 2004 was $1.5 million,
  an increase of 18% compared to $1.3 million in the first quarter of 2003. Almost
  half of the increase is due to increased staffing of sales and marketing personal
  as we staffed for growth. The remaining increases are due to increased advertising
  and promotional activities, and outside sales and marketing services, partially
  offset by reductions in occupancy costs. Expenses are expected to remain at
  similar levels in the second quarter.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>General and Administrative
  Expense</b><br>
  General and administrative expense for the first quarter of 2004 was $0.8 million,
  an increase of 26% compared to general and administrative expense of $0.7 million
  in the first quarter of 2003. Over half of the increase is due to increased
  legal and professional fees are related to our response to the complaint filed
  by Khyber Technologies Corporation. Additional increases in investor relations
  activities were partially offset by reductions in occupancy costs. Expenses
  are expected to remain at similar levels in the second quarter.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Amortization of Intangibles</b><br>
  In March 2002, the Company acquired Nokia's CompactFlash Bluetooth Card business
  from Nokia, including a product line and a sole, non-exclusive, nontransferable,
  worldwide license to use, make and sell the related product line technology.
  The total purchase price was $2.6 million, of which approximately $1.0 million
  was attributed to intangible technology and licensing. The intangible assets
  are being amortized over their estimated useful lives of one to three years.
  Amortization charges were $75,000 in both the first quarter of 2004 and the
  first quarter of 2003. </font></p>
<p><font face="Times New Roman, Times, serif" size="3">In October 2000, the Company
  acquired 3rd Rail Engineering, an engineering services firm specializing in
  engineering design and integration services of embedded systems for Windows
  CE and other operating system environments. The acquisition was valued at $11.3
  million, of which approximately $1.1 million was attributed to intellectual
  property. The intellectual property is being amortized over estimated useful
  lives of 3 to 8 years. Amortization charges were $17,000 in the first quarter
  2004 and $41,000 in the first quarter of 2003. The lower amortization charges
  in 2004 are due to components of intangible property becoming fully amortized.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Interest and Other Income,
  Interest Expense, Net</b><br>
  Interest income reflects interest earned on cash balances. Interest income of
  $10,200 in the first quarter of 2004 as compared to interest income of $1,500
  in the first quarter of 2003, reflects a higher level of cash on hand during
  the first quarter of 2004 compared to the first quarter of 2003. Other income
  included $500 of net currency gain on the Euro note payable to Nokia partially
  offset by the loss on the foreign currency contracts.</font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3>14</font>
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3">Interest expense of $6,900
  in the first quarter of 2004 compared to interest expense of $26,900 in the
  first quarter of 2003 and is related to interest on equipment lease financing
  obligations assumed from 3rd Rail Engineering, and interest on the outstanding
  notes payable balances due to Nokia for acquisition of its Bluetooth CompactFlash
  Card business and related product line technology in March 2002.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Income Taxes </b><br>
  There were no provisions for federal or state income taxes as the Company has
  incurred net operating losses in all periods prior to the first quarter 2004.
  Earnings in the first quarter 2004, the Company's first profitable quarter,
  are not material, and continued earnings are not assured. The Company has maintained
  a full valuation allowance for all deferred tax assets.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Preferred Stock Dividends
  and Accretion of Preferred Stock</b><br>
  Preferred stock dividends in the first quarter of 2004 reflect dividends of
  $13,100 accrued at the rate of 8% per annum on Series F Preferred Stock issued
  in March 2003. Dividends on the Series F Preferred Stock in the first quarter
  of 2003 were $4,400. Additional dividends of $27,600 in the first quarter 2003
  accrued at the rate of 12% per annum on Series E redeemable convertible preferred
  stock issued in October 2002. None of the Series E redeemable convertible preferred
  stock was outstanding during the 2004 period. Dividends were paid in cash for
  each of the first quarters in 2004 and 2003. Preferred stock accretion in the
  first quarter of 2003 included $87,400 arising from the accounting for the redemption
  of the Series E redeemable convertible preferred stock issuance, and a one time
  accretion charge of $296,500 reflecting the discount from market after giving
  effect to an allocation to the investor warrants of $296,500 of the proceeds
  of the Series F Preferred Stock issuance.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Liquidity and Capital
  Resources</b><br>
  The first quarter of 2004 was our first profitable quarter in our history. Historically
  we have financed our operations through the sale of equity securities, equipment
  financing, and revolving bank lines of credit. Since our inception we have raised
  approximately $51 million in equity capital and preferred stock. Prior to the
  first quarter of 2004 we incurred significant quarterly and annual operating
  losses in every fiscal period, and although we have experience our first profitable
  quarter, continued ongoing profitability is not assured.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">Cash used in operating
  activities was $0.3 million in the first quarter 2004 as compared to cash used
  of $0.1 million in the first quarter of 2003. The use of cash resulted from
  our net income of $53,000 in the first quarter 2004 and from financing our net
  losses of $0.6 million in the first quarter of 2003, adjusted for non-cash items
  and changes in working capital balances. Adjustments for non-cash items, including
  depreciation and amortization, amortization of intangibles, gains and losses
  on the foreign currency forward exchange contracts, foreign currency gains and
  losses on the Euro note payable to Nokia, and changes in deferred rent, totaled
  $0.2 million in the first quarter of 2004 and 2003. Changes in working capital
  balances in the first quarter of 2004 resulted in a use of cash of $0.6 million,
  and were primarily from increases in receivables and prepaids partially offset
  by increases in payables and accrued payroll and decreases in inventories. Changes
  in working capital balances in the first quarter of 2003 resulted in a source
  of cash of $0.2 million, and were primarily from decreases in inventories and
  prepaids and increases in payables and accrued payroll, and were partially offset
  by increases in receivables.</font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3>15</font>
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3">Cash used in investing
  activities was $96,000 in the first quarter of 2004 as compared to $76,000 in
  the first quarter of 2003. Investing activities in both 2004 and 2003 primarily
  reflect the cost of new computer hardware and software, and tooling costs.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">Cash provided by financing
  activities was $1.6 million in the first quarter of 2004, as compared to $0.9
  million during the first quarter of 2003. Financing activities in 2004 consist
  primarily of a net increase in the amounts drawn on our bank lines of credit,
  proceeds from the exercise of stock options and warrants, partially offset by
  payments on the note payable to Nokia. Financing activities in 2003 consist
  primarily of the net proceeds from the issuance of Series F Preferred Stock
  and the exercise of previously issued warrants partially offset by payments
  on the note payable to Nokia, redemption payments made on the Series E redeemable
  convertible preferred stock, and reductions of the amount outstanding under
  our bank lines of credit.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">Our cash balances as of
  March 31, 2004 were $7.7 million including cash of $3.5 million drawn against
  our bank line of credit. In March 2004 we entered into a new bank line of credit
  agreement which expires on March 5, 2006. We have warrants outstanding from
  our private placement financings and outstanding employee stock options that,
  if exercised, would further increase our cash and equity balances. We believe
  our existing cash, plus our ability to reduce costs, and the new bank line will
  be sufficient to meet our funding requirements at least through December 31,
  2004. Although we do not anticipate the need to raise additional capital during
  this time to fund operations, we may raise additional capital if market conditions
  are appropriate. If we cannot maintain profitability, we will not be able to
  support our operations from positive cash flows, and we would use our existing
  cash to support operating losses. Should the need arise, we cannot assure you
  that additional capital will be available on acceptable terms, if at all, and
  any such terms may be dilutive to existing stockholders.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">The Company's contractual
  cash obligations at March 31, 2004 are outlined in the table below:</font></p>
<TABLE cellSpacing=1 cellPadding=1 width=700 align=center border=1>
  <TR valign="bottom">
    <TD width=279>
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;</font></DIV>
    </TD>
    <TD colSpan=5>
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">Payments
        Due by Period</font></DIV>
    </TD>
  </TR>
  <TR valign="bottom">
    <TD width=279 height="35">
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">Contractual
        Obligations</font></DIV>
    </TD>
    <TD align=middle width=85 height="35">
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">Total
        </font></DIV>
    </TD>
    <TD align=middle width=96 height="35">
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">Less
        than <br>
        1 year</font></DIV>
    </TD>
    <TD align=middle width=67 height="35">
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">1
        to 3 <br>
        years</font></DIV>
    </TD>
    <td align=middle width=57 height="35">
      <div align=center><font face="Times New Roman, Times, serif" size="2">4
        to 5<br>
        years</font></div>
    </td>
    <TD align=middle width=77 height="35">
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">More
        than <br>
        5 years</font></DIV>
    </TD>
  </TR>
  <tr valign="bottom">
    <td width=279><font face="Times New Roman, Times, serif" size="2">Capital
      leases </font></td>
    <td align=middle width=85>
      <div align=center><font face="Times New Roman, Times, serif" size="2">$
        39,000</font></div>
    </td>
    <td align=middle width=96>
      <div align=center><font face="Times New Roman, Times, serif" size="2">$
        14,000</font></div>
    </td>
    <td align=middle width=67>
      <div align=center><font face="Times New Roman, Times, serif" size="2">$
        19,000</font></div>
    </td>
    <td align=middle width=57>
      <p align=center><font face="Times New Roman, Times, serif" size="2">$ 6,000</font></p>
    </td>
    <td align=middle width=77>
      <p align=center><font face="Times New Roman, Times, serif" size="2">$ --</font></p>
    </td>
  </tr>
  <tr valign="bottom">
    <td width=279><font face="Times New Roman, Times, serif" size="2">Purchase
      of Nokia technology</font></td>
    <td align=middle width=85>
      <div align=center><font face="Times New Roman, Times, serif" size="2">124,000</font></div>
    </td>
    <td align=middle width=96>
      <div align=center><font face="Times New Roman, Times, serif" size="2">124,000</font></div>
    </td>
    <td align=middle width=67>
      <div align=center><font face="Times New Roman, Times, serif" size="2">--</font></div>
    </td>
    <td align=middle width=57>
      <div align=center><font face="Times New Roman, Times, serif" size="2">--</font></div>
    </td>
    <td align=middle width=77>
      <div align=center><font face="Times New Roman, Times, serif" size="2">--</font></div>
    </td>
  </tr>
  <TR valign="bottom">
    <TD width=279><font face="Times New Roman, Times, serif" size="2">Operating
      leases</font></TD>
    <TD align=middle width=85>
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">1,326,000</font></DIV>
    </TD>
    <TD align=middle width=96>
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">453,000</font></DIV>
    </TD>
    <TD align=middle width=67>
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">873,000</font></DIV>
    </TD>
    <td align=middle width=57>
      <div align=center><font face="Times New Roman, Times, serif" size="2">--</font></div>
    </td>
    <TD align=middle width=77>
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">--</font></DIV>
    </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=279><font face="Times New Roman, Times, serif" size="2">Unconditional
      purchase obligations with <br>
      </font><font face="Times New Roman, Times, serif" size="3">&nbsp&nbsp&nbsp</font><font face="Times New Roman, Times, serif" size="2">contract
      manufacturers</font></TD>
    <TD align=middle width=85>
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">3,841,000</font></DIV>
    </TD>
    <TD align=middle width=96>
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">3,841,000</font></DIV>
    </TD>
    <TD align=middle width=67>
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">--</font></DIV>
    </TD>
    <td align=middle width=57>
      <div align=center><font face="Times New Roman, Times, serif" size="2">--</font></div>
    </td>
    <TD align=middle width=77>
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">--</font></DIV>
    </TD>
  </TR>
  <TR valign="bottom">
    <TD width=279><font face="Times New Roman, Times, serif" size="2">Total contractual
      cash obligations</font></TD>
    <TD align=middle width=85>
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">$
        5,330,000 </font></DIV>
    </TD>
    <TD align=middle width=96>
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">$
        4,432,000 </font></DIV>
    </TD>
    <TD align=middle width=67>
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">$
        892,000</font></DIV>
    </TD>
    <td align=middle width=57>
      <div align=center><font face="Times New Roman, Times, serif" size="2">$
        6,000 </font></div>
    </td>
    <TD align=middle width=77>
      <DIV align=center><font face="Times New Roman, Times, serif" size="2">$
        -- </font></DIV>
    </TD>
  </TR>
</TABLE>
<P><font face="Times New Roman, Times, serif" size="3"><b>Off-Balance Sheet Arrangements</b></font></P>
<p><font face="Times New Roman, Times, serif" size="3">The Company has no off-balance
  sheet arrangements as defined in Item 303 of Regulation S-K.<br>
  </font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3>1</font>6
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3"><b><u>Other Factors Affecting
  Future Operations </u></b></font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>We have a history of
  operating losses, and may not achieve ongoing profitability.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">The first quarter 2004
  was our first profitable quarter. Prior to this we have incurred significant
  operating losses since our inception. For the fiscal year ended December 31,
  2003 we incurred net losses of $1,249,900. To maintain profitability, we must
  accomplish numerous objectives, including the development of successful new
  products. We cannot foresee with any certainty whether we will be able to achieve
  these objectives in the future. Accordingly, we may not generate sufficient
  net revenue to achieve ongoing profitability. If we cannot achieve ongoing profitability,
  we will not be able to support our operations from positive cash flows, and
  we would use our existing cash to support operating losses. If we are unable
  to secure the necessary capital to replace that cash we may need to suspend
  some or all of our current operations.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>If we are required to
  expense options granted under our employee stock plans as compensation, our
  net income and earnings per share would be significantly reduced, and we may
  be forced to change our business practices to attract and retain employees.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">Historically, we have used
  stock options as a key component of our employee compensation packages. We believe
  that stock options provide an incentive to our employees to maximize long-term
  stockholder value and, through the use of vesting, encourage valued employees
  to remain with us. Certain proposals related to accounting for the grant of
  an employee stock option as an expense are currently under consideration by
  accounting standards organizations and governmental authorities. If such proposals
  are adopted, our net income and earnings per share will be negatively impacted.
  In addition, we may decide in response to reduce the number of stock options
  granted to employees or to grant options to fewer employees. This could adversely
  affect our ability to retain existing employees and attract qualified candidates,
  and also could increase the cash compensation we would have to pay to them.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>We may require additional
  capital in the future, but that capital may not be available on reasonable terms,
  if at all, or on terms that would not cause substantial dilution to your stock
  holdings.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">Although we do not anticipate
  the need to raise additional capital through 2004 to fund our operations, we
  have historically needed to raise capital to fund our operating losses. We may
  incur operating losses in future quarters. Our forecasts are highly dependent
  on factors beyond our control, including market acceptance of our products and
  sales of handheld computers. If capital requirements vary materially from those
  currently planned, we may require additional capital sooner than expected. There
  can be no assurance that such capital will be available in sufficient amounts
  or on terms acceptable to us, if at all. Any sale of a substantial number of
  additional shares will cause dilution to our stockholders' investments and could
  also cause the market price of our Common Stock to fall.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b> </b></font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3>1</font>7
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3"><b>A significant portion
  of our revenue currently comes from two distributors, and any decrease in revenue
  from these distributors could harm our business.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">A significant portion of
  our revenue comes from two distributors, Tech Data Corp. and Ingram Micro, Inc.,
  which together represented approximately 45 percent of our worldwide revenue
  in the first three months of fiscal 2004, and 43 percent of our worldwide revenue
  in fiscal 2003. We expect that a significant portion of our revenue will continue
  to depend on sales to Tech Data Corp. and Ingram Micro, Inc. We do not have
  long-term commitments from Tech Data Corp. or Ingram Micro, Inc. to carry our
  products, and either could choose to stop selling some or all of our products
  at any time. If we lose our relationship with Tech Data Corp. or Ingram Micro,
  Inc., we could experience disruption and delays in marketing our products.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>If the market for handheld
  computers fails to grow, we would not achieve our sales projections.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">Substantially all of our
  products are designed for use with mobile personal computers, including handhelds,
  notebook computers and tablets. If the mobile personal computer industry does
  not grow or if its growth slows, we would not achieve our sales projections.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Our sales would be hurt
  if the new technologies used in our products do not become widely adopted.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">Many of our products use
  new technologies, such as the Bluetooth wireless standard and 2D bar code scanning,
  which are not yet widely adopted in the market. If these technologies fail to
  become widespread, our sales will suffer.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>If third parties do
  not produce and sell innovative products with which our products are compatible,
  we may not achieve our sales projections.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">Our success is dependent
  upon the ability of third parties in the mobile personal computer industry to
  complete development of products that include or are compatible with our technology
  and then to sell these products into the marketplace. Our ability to generate
  increased revenue depends significantly on the commercial success of Windows-powered
  handheld devices, particularly the Pocket PC, and other devices, such as the
  new line of handhelds with expansion options offered by Palm. If manufacturers
  are unable or choose not to ship new products such as Pocket PC and other Windows-powered
  devices or Palm devices on schedule, or if these products fail to achieve or
  maintain market acceptance, the number of our potential new customers would
  be reduced and we would not be able to meet our sales expectations.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>We could face increased
  competition in the future, which would adversely affect our financial performance.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">The market for handheld
  computers in which we operate is very competitive. Our future financial performance
  is contingent on a number of unpredictable factors, including that:</font></p>
<ul>
  <li><font face="Times New Roman, Times, serif" size="3">Some of our competitors
    have greater financial, marketing, and technical resources than we do; <br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">We periodically face
    intense price competition, particularly when our competitors have excess inventories
    and discount their prices to clear their inventories; and<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">Certain original equipment
    manufacturers of personal computers, mobile phones and handheld computers
    may make our products less significant by incorporating built-in functions,
    such as Bluetooth wireless technology and WiFi, into their products.</font></li>
</ul>
<p align="center"><font face="Times New Roman, Times, serif" size=3>1</font>8
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3">Increased competition could
  result in price reductions, fewer customer orders, reduced margins, and loss
  of market share. Our failure to compete successfully against current or future
  competitors could harm our business, operating results and financial condition.
  </font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>If we fail to develop
  and introduce new products rapidly and successfully, we will not be able to
  compete effectively, and our ability to generate sufficient revenues will be
  negatively affected. </b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">The market for our products
  is prone to rapidly changing technology, evolving industry standards and short
  product life cycles. If we are unsuccessful at developing and introducing new
  products and services on a timely basis that include the latest technologies
  conforming with the newest standards and that are appealing to end users, we
  will not be able to compete effectively, and our ability to generate significant
  revenues will be seriously harmed.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">The development of new
  products and services can be very difficult and requires high levels of innovation.
  The development process is also lengthy and costly. Short product life cycles
  expose our products to the risk of obsolescence and require frequent new product
  introductions. We will be unable to introduce new products and services into
  the market on a timely basis or compete successfully, if we fail to:</font></p>
<ul>
  <li><font face="Times New Roman, Times, serif" size="3">identify emerging standards
    in the field of mobile computing products; <br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">enhance our products
    by adding additional features; <br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">invest significant resources
    in research and development, sales and marketing, and customer support;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">maintain superior or
    competitive performance in our products; and<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">anticipate our end users'
    needs and technological trends accurately. </font></li>
</ul>
<p><font face="Times New Roman, Times, serif" size="3">We cannot be sure that
  we will have sufficient resources to make adequate investments in research and
  development or that we will be able to make the technological advances necessary
  to be competitive. </font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>If we do not correctly
  anticipate demand for our products, our operating results will suffer. </b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">The demand for our products
  depends on many factors and is difficult to forecast. We expect that it will
  become more difficult to forecast demand as we introduce and support more products
  and as competition in the market for our products intensifies. If demand increases
  beyond forecasted levels, we would have to rapidly increase production at our
  third-party manufacturers. We depend on suppliers to provide additional volumes
  of components, and suppliers might not be able to increase production rapidly
  enough to meet unexpected demand. Even if we were able to procure enough components,
  our third-party manufacturers might not be able to produce enough of our devices
  to meet our customer demand. In addition, rapid increases in production levels
  to meet unanticipated demand could result in higher costs for manufacturing
  and supply of components and other expenses. These higher costs could lower
  our profit margins. Further, if production is increased rapidly, manufacturing
  yields could decline, which may also lower operating results.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">If demand is lower than
  forecasted levels, we could have excess production resulting in higher inventories
  of finished products and components, which could lead to write-downs or write-offs
  of some or all of the excess inventories. Lower than forecasted demand could
  also result in excess manufacturing capacity at our third-party manufacturers
  and in our failure to meet some minimum purchase commitments, each of which
  may lower our operating results.</font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3>19</font>
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3"><b>We depend on alliances
  and other business relationships with a small number of third parties, and a
  disruption in any one of these relationships would hinder our ability to develop
  and sell our products.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">We depend on strategic
  alliances and business relationships with leading participants in various segments
  of the communications and mobile personal computer markets to help us develop
  and market our products. Our strategic partners may revoke their commitment
  to our products or services at any time in the future or may develop their own
  competitive products or services. Accordingly, our strategic relationships may
  not result in sustained business alliances, successful product or service offerings,
  or the generation of significant revenues. Failure of one or more of such alliances
  could result in delay or termination of product development projects, failure
  to win new customers, or loss of confidence by current or potential customers.
  </font></p>
<p><font face="Times New Roman, Times, serif" size="3">We have devoted significant
  research and development resources to design activities for Windows-powered
  mobile products and, more recently, to design activities for Palm devices. Such
  design activities have diverted financial and personnel resources from other
  development projects. These design activities are not undertaken pursuant to
  any agreement under which Microsoft or Palm is obligated to continue the collaboration
  or to support the products produced from the collaboration. Consequently, Microsoft
  or Palm may terminate their collaborations with us for a variety of reasons
  including our failure to meet agreed-upon standards or for reasons beyond our
  control, such as changing market conditions, increased competition, discontinued
  product lines, and product obsolescence.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>We rely primarily on
  distributors, resellers, retailers and original equipment manufacturers to sell
  our products, and our sales would suffer if any of these third parties stops
  selling our products effectively.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">Because we sell our products
  primarily through distributors, resellers, retailers and original equipment
  manufacturers, we are subject to risks associated with channel distribution,
  such as risks related to their inventory levels and support for our products.
  Our distribution channels may build up inventories in anticipation of growth
  in their sales. If such growth in their sales does not occur as anticipated,
  the inventory build up could contribute to higher levels of product returns.
  The lack of sales by any one significant participant in our distribution channels
  could result in excess inventories and adversely affect our operating results.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">Our agreements with distributors,
  resellers, retailers and original equipment manufacturers are generally nonexclusive
  and may be terminated on short notice by them without cause. Our distributors,
  resellers, retailers and original equipment manufacturers are not within our
  control, are not obligated to purchase products from us, and may offer competitive
  lines of products simultaneously. Our current sales growth expectations are
  contingent in part on our ability to enter into additional distribution relationships
  and expand our retail sales channels. We cannot predict whether we will be successful
  in establishing new distribution relationships, expanding our retail sales channels
  or maintaining our existing relationships. A failure to enter into new distribution
  relationships or to expand our retail sales channels could adversely impact
  our ability to grow our sales. </font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3>20</font>
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3">We allow our distribution
  channels to return a portion of their inventory to us for full credit against
  other purchases. In addition, in the event we reduce our prices, we credit our
  distributors for the difference between the purchase price of products remaining
  in their inventory and our reduced price for such products. Actual returns and
  price protection may adversely affect future operating results, particularly
  since we seek to continually introduce new and enhanced products and are likely
  to face increasing price competition.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Our intellectual property
  and proprietary rights may be insufficient to protect our competitive position.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">Our business depends on
  our ability to protect our intellectual property. We rely primarily on patent,
  copyright, trademark, trade secret laws, and other restrictions on disclosure
  to protect our proprietary technologies. We cannot be sure that these measures
  will provide meaningful protection for our proprietary technologies and processes.
  We cannot be sure that any patent issued to us will be sufficient to protect
  our technology. The failure of any patents to provide protection to our technology
  would make it easier for our competitors to offer similar products. In connection
  with our participation in the development of various industry standards, we
  may be required to license certain of our patents to other parties, including
  our competitors, that develop products based upon the adopted standards.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">We also generally enter
  into confidentiality agreements with our employees, distributors, and strategic
  partners, and generally control access to our documentation and other proprietary
  information. Despite these precautions, it may be possible for a third party
  to copy or otherwise obtain and use our products, services, or technology without
  authorization, develop similar technology independently, or design around our
  patents. </font></p>
<p><font face="Times New Roman, Times, serif" size="3">Effective copyright, trademark,
  and trade secret protection may be unavailable or limited in certain foreign
  countries. Furthermore, certain of our customers have entered into agreements
  with us which provide that the customers have the right to use our proprietary
  technology in the event we default in our contractual obligations, including
  product supply obligations, and fail to cure the default within a specified
  period of time. </font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>We may become subject
  to claims of intellectual property rights infringement, which could result in
  substantial liability.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">In the course of our business,
  we may receive claims of infringement or otherwise become aware of potentially
  relevant patents or other intellectual property rights held by other parties.
  Many of our competitors have large intellectual property portfolios, including
  patents that may cover technologies that are relevant to our business. In addition,
  many smaller companies, universities, and individuals have obtained or applied
  for patents in areas of technology that may relate to our business. The industry
  is moving towards aggressive assertion, licensing, and litigation of patents
  and other intellectual property rights.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">On June 30, 2003, Khyber
  Technologies Corporation filed a complaint against us in the United States District
  Court, Northern District of Ohio, alleging that we had infringed a patent held
  by Khyber in manufacturing, using and selling our portable bar code scanners.
  We have filed our answer to the complaint and dispute the Khyber claims. Both
  parties have filed a motion for summary judgment.</font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3>21</font>
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3">If we are unable to obtain
  and maintain licenses on favorable terms for intellectual property rights required
  for the manufacture, sale, and use of our products, particularly those products
  which must comply with industry standard protocols and specifications to be
  commercially viable, our results of operations or financial condition could
  be adversely impacted.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">In addition to disputes
  relating to the validity or alleged infringement of other parties' rights, we
  may become involved in disputes relating to our assertion of our own intellectual
  property rights. Whether we are defending the assertion of intellectual property
  rights against us or asserting our intellectual property rights against others,
  intellectual property litigation can be complex, costly, protracted, and highly
  disruptive to business operations by diverting the attention and energies of
  management and key technical personnel. Plaintiffs in intellectual property
  cases often seek injunctive relief, and the measures of damages in intellectual
  property litigation are complex and often subjective or uncertain. Thus, any
  adverse determinations in this type of litigation could subject us to significant
  liabilities and costs.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>New industry standards
  may require us to redesign our products, which could substantially increase
  our operating expenses. </b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">Standards for the form
  and functionality of our products are established by standards committees. Separate
  committees establish standards, which evolve and change over time, for different
  categories of our products. We must continue to identify and ensure compliance
  with evolving industry standards so that our products are interoperable and
  we remain competitive. Unanticipated changes in industry standards could render
  our products incompatible with products developed by major hardware manufacturers
  and software developers. Should any major changes, even if anticipated, occur,
  we would be required to invest significant time and resources to redesign our
  products to ensure compliance with relevant standards. If our products are not
  in compliance with prevailing industry standards for a significant period of
  time, we would miss opportunities to have our products specified as standards
  for new hardware components designed by mobile computer manufacturers and original
  equipment manufacturers.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Undetected flaws and
  defects in our products may disrupt product sales and result in expensive and
  time-consuming remedial action.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">Our hardware and software
  products may contain undetected flaws, which may not be discovered until customers
  have used the products. From time to time, we may temporarily suspend or delay
  shipments or divert development resources from other projects to correct a particular
  product deficiency. Efforts to identify and correct errors and make design changes
  may be expensive and time consuming. Failure to discover product deficiencies
  in the future could delay product introductions or shipments, require us to
  recall previously shipped products to make design modifications, or cause unfavorable
  publicity, any of which could adversely affect our business and operating results.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"></font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3>22</font>
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3"><b>Our quarterly operating
  results may fluctuate in future periods, which could cause our stock price to
  decline.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">We expect to experience
  quarterly fluctuations in operating results in the future. We generally ship
  orders as received and as a result typically have little backlog. Quarterly
  revenue and operating results therefore depend on the volume and timing of orders
  received during the quarter, which are difficult to forecast. Historically,
  we have often recognized a substantial portion of our revenue in the last month
  of the quarter. This subjects us to the risk that even modest delays in orders
  may adversely affect our quarterly operating results. Our operating results
  may also fluctuate due to factors such as:</font></p>
<ul>
  <li><font face="Times New Roman, Times, serif" size="3">the demand for our products;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">the size and timing
    of customer orders;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">unanticipated delays
    or problems in our introduction of new products and product enhancements;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">the introduction of
    new products and product enhancements by our competitors;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">the timing of the introduction
    of new products that work with our connection products;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">changes in the proportion
    of revenues attributable to royalties and engineering development services;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">product mix;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">timing of software enhancements;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">changes in the level
    of operating expenses;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">competitive conditions
    in the industry including competitive pressures resulting in lower average
    selling prices; and<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">timing of distributors'
    shipments to their customers.</font></li>
</ul>
<p><font face="Times New Roman, Times, serif" size="3">Because we base our staffing
  and other operating expenses on anticipated revenue, delays in the receipt of
  orders can cause significant variations in operating results from quarter to
  quarter. As a result of any of the foregoing factors, our results of operations
  in any given quarter may be below the expectations of public market analysts
  or investors, in which case the market price of our Common Stock would be adversely
  affected.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>The loss of one or more
  of our senior personnel could harm our existing business. </b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">A number of our officers
  and senior managers have been employed for seven to twelve years by us, including
  our President, Chief Financial Officer, Chief Technical Officer, Vice President
  of Marketing, and Senior Vice President for Business Development/General Manager
  Embedded Systems Group. Our future success will depend upon the continued service
  of key officers and senior managers. Competition for officers and senior managers
  is intense, and there can be no assurance that we will be able to retain our
  existing senior personnel. The loss of key senior personnel could adversely
  affect our ability to compete.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>If we are unable to
  attract and retain highly skilled sales and marketing and product development
  personnel, our ability to develop new products and product enhancements will
  be adversely affected. </b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">We believe our ability
  to achieve increased revenues and to develop successful new products and product
  enhancements will depend in part upon our ability to attract and retain highly
  skilled sales and marketing and product development personnel. Our products
  involve a number of new and evolving technologies, and we frequently need to
  apply these technologies to the unique requirements of mobile connection products.
  Our personnel must be familiar with both the technologies we support and the
  unique requirements of the products to which our products connect. Competition
  for such personnel is intense, and we may not be able to attract and retain
  such key personnel. In addition, our ability to hire and retain such key personnel
  will depend upon our ability to raise capital or achieve increased revenue levels
  to fund the costs associated with such key personnel. Failure to attract and
  retain such key personnel will adversely affect our ability to develop new products
  and product enhancements.</font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3>23</font>
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3"><b>We may not be able to
  collect revenues from customers who experience financial difficulties.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">Our accounts receivable
  are derived primarily from distributors and original equipment manufacturers.
  We perform ongoing credit evaluations of our customers' financial conditions
  but generally require no collateral from our customers. Reserves are maintained
  for potential credit losses, and such losses have historically been within such
  reserves. However, many of our customers may be thinly capitalized and may be
  prone to failure in adverse market conditions. Although our collection history
  has been good, from time to time a customer may not pay us because of financial
  difficulty, bankruptcy or liquidation.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>We may be unable to
  manufacture our products because we are dependent on a limited number of qualified
  suppliers for our components. </b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">Several of our component
  parts, including our serial interface chip, our Ethernet chip, and our bar code
  scanning modules, are produced by one or a limited number of suppliers. Shortages
  could occur in these essential components due to an interruption of supply or
  increased demand in the industry. If we are unable to procure certain component
  parts, we could be required to reduce our operations while we seek alternative
  sources for these components, which could have a material adverse effect on
  our financial results. To the extent that we acquire extra inventory stocks
  to protect against possible shortages, we would be exposed to additional risks
  associated with holding inventory, such as obsolescence, excess quantities,
  or loss. </font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Our operating results
  could be harmed by economic, political, regulatory and other risks associated
  with export sales.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">Export sales (sales to
  customers outside the United States) accounted for approximately 39 percent
  of our revenue in the first quarter 2004 and in the fiscal year 2003. Accordingly,
  our operating results are subject to the risks inherent in export sales, including:</font></p>
<ul>
  <li><font face="Times New Roman, Times, serif" size="3">longer payment cycles;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">unexpected changes in
    regulatory requirements, import and export restrictions and tariffs;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">difficulties in managing
    foreign operations;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">the burdens of complying
    with a variety of foreign laws;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">greater difficulty or
    delay in accounts receivable collection;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">potentially adverse
    tax consequences; and<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">political and economic
    instability.</font></li>
</ul>
<p><font face="Times New Roman, Times, serif" size="3">Our export sales are predominately
  denominated in United States dollars and in Euros for our sales to European
  distributors. Accordingly, an increase in the value of the United States dollar
  relative to foreign currencies could make our products more expensive and therefore
  potentially less competitive in foreign markets. Declines in the value of the
  Euro relative to the United States dollar may result in foreign currency losses
  relating to collection of Euro denominated receivables.</font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3>24</font>
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3"><b>Our operations are vulnerable
  to interruption by fire, earthquake, power loss, telecommunications failure,
  and other events beyond our control.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">Our corporate headquarters
  are located near an earthquake fault. The potential impact of a major earthquake
  on our facilities, infrastructure, and overall business is unknown. Additionally,
  we may experience electrical power blackouts or natural disasters that could
  interrupt our business. We do not have a detailed disaster recovery plan. We
  do not carry sufficient business interruption insurance to compensate us for
  losses that may occur. Any losses or damages incurred by us as a result of these
  events could have a material adverse effect on our business.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  <b>The sale of a substantial number of shares of Common Stock could cause the
  market price of our Common Stock to decline.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">Sales of a substantial
  number of shares of our Common Stock in the public market could adversely affect
  the market price for our Common Stock. The market price of our Common Stock
  could also decline if one or more of our significant stockholders decided for
  any reason to sell substantial amounts of our Common Stock in the public market.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">As of April 30, 2004, we
  had 30,040,147 shares of Common Stock outstanding. Substantially all of these
  shares are freely tradable in the public market, either without restriction
  or subject, in some cases, only to S-3 or S-8 prospectus delivery requirements
  and, in other cases, only to manner of sale, volume, and notice requirements
  of Rule 144 under the Securities Act.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">As of April 30, 2004, we
  had 87,354 shares of Series F Preferred Stock outstanding that are convertible
  into 873,540 shares of Common Stock at $0.722 per share.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">As of April 30, 2004, we
  had 6,602,914 shares subject to outstanding options under our stock option plans,
  and 937,660 shares were available for future issuance under the plans. We have
  registered the shares of Common Stock subject to outstanding options and reserved
  for issuance under our stock option plans. Accordingly, shares underlying vested
  options will be eligible for resale in the public market as soon as the options
  are exercised.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">As of April 30, 2004, we
  had warrants outstanding to purchase a total of 1,741,611 shares of our Common
  Stock at exercise prices ranging from $0.722 to $2.73. All such warrants may
  be exercised at any time, and the shares issuable upon exercise may be resold,
  either without restrictions or subject, in some cases, only to S-3 prospectus
  delivery requirements, and, in some cases, only to manner of sale, volume, and
  notice requirements of Rule 144.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Volatility in the trading
  price of our Common Stock could negatively impact the price of our Common Stock.
  </b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">During the period from
  January 1, 2003 through April 30, 2004, our Common Stock price fluctuated between
  a high of $4.80 and a low of $0.65. The trading price of our Common Stock could
  be subject to wide fluctuations in response to many factors, some of which are
  beyond our control, including general economic conditions and the outlook of
  securities analysts and investors on our industry. In addition, the stock markets
  in general, and the markets for high technology stocks in particular, have experienced
  high volatility that has often been unrelated to the operating performance of
  particular companies. These broad market fluctuations may adversely affect the
  trading price of our Common Stock.</font></p>
<p></p>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  </font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3><a
name=qqd></a>25</font>
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3"><b>Item 3. Quantitative
  and Qualitative Disclosures About Market Risk</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Interest Rate Risk</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">Our exposure to market
  risk for changes in interest rates relates primarily to invested cash. Our cash
  is invested in short-term money market investments backed by U.S. Treasury notes
  and other investments that mature within one year and whose principal is not
  subject to market rate fluctuations. Accordingly, interest rate declines would
  adversely affect our interest income but would not affect the carrying value
  of our cash investments. Based on a sensitivity analysis of our cash investments
  during the quarter ended March 31, 2004, a decline of 1% in interest rates would
  reduce our quarterly interest income by approximately $11,000.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">Our bank credit line facilities
  of up to $4.0 million have variable interest rates based upon the lender's index
  rate plus 0.5% for both the domestic line (up to $2.5 million) and the international
  line (up to $1.5 million). Accordingly, interest rate increases would increase
  our interest expense on outstanding credit line balances. We utilized our credit
  line facility only at the end of the quarter in the first quarter 2004 and each
  of the quarters in 2003, and therefore did not subject ourselves to interest
  rate exposure. Based on a sensitivity analysis, an increase of 1% in the interest
  rate would increase our borrowing costs by $10,000 for each $1 million of borrowings,
  if outstanding for the entire year, against our bank credit facility or a maximum
  of $40,000 if we utilized our entire credit line.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Foreign Currency Risk</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">A substantial majority
  of our revenue, expense and purchasing activities are transacted in US dollars.
  However, we require our European distributors to purchase our products in Euros,
  we pay the expenses of our European subsidiary in Euros, and we expect to enter
  into selected future purchase commitments with foreign suppliers that may be
  paid in the local currency of the supplier. To date these balances have been
  small, and we have not been subject to significant losses from material foreign
  currency fluctuations. At March 31, 2004, we have one final payment obligation
  of 100,000 Euros remaining as a result of our purchase of Nokia's CompactFlash
  Bluetooth Card business and related product line technology in March of 2002.
  We have purchased forward exchange contracts for Euros in order to mitigate
  our foreign currency exposure. Based on a sensitivity analysis of our net assets
  and subsidiary expenses at the beginning, during and at the end of the quarter
  ended March 31, 2004, an adverse change of 10% in exchange rates would result
  in an increase in our net loss for the quarter of approximately $49,000. For
  the first quarter 2004 the total adjustment for the effects changes in foreign
  currency on cash balances, collections, payables, and derivatives, was a net
  loss of $18,000. We will continue to monitor and assess the risk associated
  with these exposures and may at some point in the future take actions to hedge
  or mitigate these risks.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b><br>
  </b></font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3><a
name=item4></a>26</font>
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3"><b>Item 4. Controls and
  Procedures</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">(a) Evaluation of disclosure
  controls and procedures</font></p>
<p><font face="Times New Roman, Times, serif" size="3">Our management evaluated,
  with the participation of our Chief Executive Officer and our Chief Financial
  Officer, the effectiveness of our disclosure controls and procedures as of the
  end of the period covered by this Quarterly Report on Form 10-Q. Based on this
  evaluation, our Chief Executive Officer and our Chief Financial Officer have
  concluded that our disclosure controls and procedures are effective to ensure
  that information we are required to disclose in reports that we file or submit
  under the Securities Exchange Act of 1934 is recorded, processed, summarized
  and reported within the time periods specified in Securities and Exchange Commission
  rules and forms.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">(b) Changes in internal
  control over financial reporting</font></p>
<p><font face="Times New Roman, Times, serif" size="3">There was no change in
  our internal control over financial reporting that occurred during the period
  covered by this Quarterly Report on Form 10-Q that has materially affected,
  or is reasonably likely to materially affect, our internal control over financial
  reporting.</font></p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  <br>
  </font></p>
<p align="center"><font face="Times New Roman, Times, serif" size=3><a
name=oth></a><a
name=Item6></a>27</font>
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p><font face="Times New Roman, Times, serif" size="3"><b>PART II. OTHER INFORMATION</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  <b>Item 6. Exhibits and Reports on Form 8-K.</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  (a) Exhibits</font></p>
<p><font face="Times New Roman, Times, serif" size="3">31.1 Certification of Chief
  Executive Officer and Chief Financial Officer pursuant to Section 302 of the
  Sarbanes-Oxley Act of 2002.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">32.1 Certification of Chief
  Executive Officer and Chief Financial Officer pursuant to Section 906 of the
  Sarbanes-Oxley Act of 2002.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  (b) Reports on Form 8-K</font></p>
<p><font face="Times New Roman, Times, serif" size="3">On February 18, 2004, we
  filed a report on Form 8-K, furnishing to the SEC the Company's press release,
  dated February 18, 2004, announcing fourth quarter 2003 financial results.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">On March 23, 2004, we reported
  on Form 8-K the Company's dismissal of its independent auditors Ernst &amp;
  Young LLP on March 16, 2004, and the subsequent engagement of Moss Adams LLP
  as the Company's independent auditors on March 17, 2004.</font></p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size=3><a
name=sig></a>28</font>
<hr width="100%">
<font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size=3></font>
<p> </p>
<p align="center"><font face="Times New Roman, Times, serif" size="3"><br>
  SIGNATURES</font></p>
<p></p>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant
  has duly caused this report to be signed on its behalf by the undersigned thereunto
  duly authorized.</font></p>
<P>&nbsp;</P>
<P align=center><FONT face="Times New Roman, Times, serif" size=3><U>SOCKET
COMMUNICATIONS, INC.<BR></U>Registrant</FONT></P>
<P>&nbsp;
<TABLE cols=2 width="81%">
  <TR>
    <TD width="38%"><FONT face="Times New Roman, Times, serif" size=3>Date: May
      7, 2004 </FONT></TD>
    <TD width="21%">
      <CENTER>
        <FONT face="Times New Roman, Times, serif"><FONT
      face="Times New Roman, Times, serif"><FONT
      size=3></FONT></FONT></FONT>
      </CENTER>
    </TD>
    <TD width="41%">
      <DIV align=left><FONT face="Times New Roman, Times, serif"
      size=3><U>&nbsp;&nbsp;/s/ Kevin J. Mills</U></FONT></DIV>
    </TD>
  </TR>
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif"
    size=3></font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif" size=3>&nbsp; </font>
      </center>
    </td>
    <td valign=top align=middle width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size=3>Kevin
        J. Mills<br>
        President and Chief Executive Officer (Duly Authorized Officer and Principal
        Executive Officer) </font></div>
    </td>
  </tr>
  <tr>
    <td width="38%" height="44">&nbsp;</td>
    <td width="21%" height="44">&nbsp;</td>
    <td width="41%" height="44">&nbsp;</td>
  </tr>
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif" size=3>Date: May
      7, 2004 </font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif"><font
      face="Times New Roman, Times, serif"><font
      size=3></font></font></font>
      </center>
    </td>
    <td width="41%">
      <div align=left><font face="Times New Roman, Times, serif"
      size=3><u>&nbsp;&nbsp;/s/ David W. Dunlap&nbsp;&nbsp;</u></font></div>
    </td>
  </tr>
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif"
    size=3></font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif" size=3>&nbsp; </font>
      </center>
    </td>
    <td valign=top align=middle width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size=3>David
        W. Dunlap<br>
        Vice President of Finance and Administration and Chief Financial Officer
        (Duly Authorized Officer and Principal Financial and Accounting Officer)
        </font></div>
    </td>
  </tr>
</TABLE>
<p>&nbsp;</p>
<p>&nbsp;</p>
<P>&nbsp;</P>
<div align="center"><font face="Times New Roman, Times, serif" size=3><a
name=index></a></font>29<br>
</div>
<HR width="100%">
<P align=left><font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font></P>
<P align=center><FONT face="Times New Roman, Times, serif" size=3><B>Index to
  Exhibits</B><BR>
  <BR>
  </FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width=800 align=center border=0>
  <TR>
    <TD vAlign=bottom width="10%" height=48>
      <P align=center><FONT face="Times New Roman, Times, serif" size=3>Exhibit
        <U>Number</U></FONT></P>
    </TD>
    <TD vAlign=bottom width="90%" height=48>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=3><U>Description </U></FONT></P>
    </TD>
  </TR>
  <TR>
    <TD vAlign=top width="10%" height=25>
      <P align=right><FONT face="Times New Roman, Times, serif"><FONT
      face="Times New Roman, Times, serif"><FONT
    size=3></FONT></FONT></FONT></P>
    </TD>
    <TD vAlign=top width="90%" height=25>
      <P><FONT face="Times New Roman, Times, serif"><FONT
      face="Times New Roman, Times, serif"><FONT
    size=3></FONT></FONT></FONT></P>
    </TD>
  </TR>
  <tr>
    <td valign=top width="10%" height=30>
      <p align=center><font face="Times New Roman, Times, serif"
      size=3>31.1&nbsp;</font> </p>
    </td>
    <td valign=top width="90%" height=30>
      <p><font size="3" face="Times New Roman, Times, serif">Certification of
        Chief Executive Officer and Chief Financial Officer pursuant to Section
        302 of the Sarbanes-Oxley Act of 2002.</font></p>
    </td>
  </tr>
  <TR>
    <TD vAlign=top width="10%" height=30>
      <P align=center><FONT face="Times New Roman, Times, serif"
      size=3>32.1&nbsp;</FONT> </P>
    </TD>
    <TD vAlign=top width="90%" height=30>
      <P><font size="3" face="Times New Roman, Times, serif">Certification of
        Chief Executive Officer and Chief Financial Officer pursuant to Section
        906 of the Sarbanes-Oxley Act of 2002.</font></P>
    </TD>
  </TR>
</TABLE>
<BLOCKQUOTE>
  <P><FONT face="Times New Roman, Times, serif"><BR></FONT></P></BLOCKQUOTE>
<div align="center">
  <p>&nbsp;</p>
  <p>&nbsp;</p>
  <p>&nbsp;</p>
  <p>&nbsp;</p>
  <div align="center">30<br>
  </div>
  <hr width="100%">
  <p align=left><font face="Times New Roman, Times, serif" size="2"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"></font></p>
  <p><FONT
face="Times New Roman, Times, serif"><BR>
    <BR>
    </FONT></p>
</div>
</BODY></HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>2
<FILENAME>exhibit31-1.htm
<TEXT>
<html>
<head>
<title>Untitled Document</title>

</head>

<body bgcolor="#FFFFFF">
<p align="right"><font face="Times New Roman, Times, serif" size="3">Exhibit 31.1</font></p>
<p align="center"><font face="Times New Roman, Times, serif" size="3"><br>
  <b>CERTIFICATIONS</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">I, Kevin J. Mills, certify
  that:</font></p>
<p><font face="Times New Roman, Times, serif" size="3">1. I have reviewed this
  quarterly report on Form 10-Q of Socket Communications, Inc.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">2. Based on my knowledge,
  this report does not contain any untrue statement of a material fact or omit
  to state a material fact necessary to make the statements made, in light of
  the circumstances under which such statements were made, not misleading with
  respect to the period covered by this report.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">3. Based on my knowledge,
  the financial statements, and other financial information included in this report,
  fairly present in all material respects the financial condition, results of
  operations and cash flows of the registrant as of, and for, the periods presented
  in this report.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">4. The registrant's other
  certifying officer(s) and I are responsible for establishing and maintaining
  disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e
  and 15d-15e) for the registrant and we have:</font></p>
<blockquote>
  <p><font face="Times New Roman, Times, serif" size="3">(a) Designed such disclosure
    controls and procedures, or caused such disclosure controls and procedures
    to be designed under our supervision, to ensure that material information
    relating to the registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during the period
    in which this report is being prepared;</font></p>
  <p><font face="Times New Roman, Times, serif" size="3">(b) Evaluated the effectiveness
    of the registrant's disclosure controls and procedures and presented in this
    report our conclusions about the effectiveness of the disclosure controls
    and procedures as of the end of the period covered by this report based on
    such evaluation; and</font></p>
  <p><font face="Times New Roman, Times, serif" size="3">(c) Disclosed in this
    report any change in the registrant's internal control over financial reporting
    that occurred during the registrant's most recent fiscal quarter (the registrant's
    fourth fiscal quarter in the case of an annual report) that has materially
    affected, or is reasonably likely to materially affect, the registrant's internal
    control over financial reporting; and</font></p>
</blockquote>
<p><font face="Times New Roman, Times, serif" size="3">5. The registrant's other
  certifying officer(s) and I have disclosed, based on our most recent evaluation
  of internal control over financial reporting, to the registrant's auditors and
  the audit committee of the registrant's board of directors (or persons performing
  the equivalent functions):</font></p>
<blockquote>
  <p><font face="Times New Roman, Times, serif" size="3">(a) All significant deficiencies
    and material weaknesses in the design or operation of internal control over
    financial reporting which are reasonably likely to adversely affect the registrant's
    ability to record, process, summarize and report financial information; and</font></p>
  <p><font face="Times New Roman, Times, serif" size="3">(b) Any fraud, whether
    or not material, that involves management or other employees who have a significant
    role in the registrant's internal control over financial reporting.</font></p>
  <p>&nbsp;</p>
</blockquote>
<table width="913" border="0" cellspacing="0" cellpadding="0" align="left">
  <tr>
    <td width="508" valign="top"><font face="Times New Roman, Times, serif" size="3">Date:
      May 7, 2004</font></td>
    <td width="399"><font face="Times New Roman, Times, serif" size="3"><u>/s/
      Kevin J. Mills</u><br>
      Name: Kevin J. Mills<br>
      Title: &nbsp&nbspPresident and Chief Executive Officer &nbsp&nbsp &nbsp&nbsp&nbsp&nbsp<br>
      &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp (Principal Executive
      Officer)</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  </font></p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3"><b>CERTIFICATIONS</b></font></p>
<p><font face="Times New Roman, Times, serif" size="3">I, David W. Dunlap, certify
  that:</font></p>
<p><font face="Times New Roman, Times, serif" size="3">1. I have reviewed this
  quarterly report on Form 10-Q of Socket Communications, Inc.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">2. Based on my knowledge,
  this report does not contain any untrue statement of a material fact or omit
  to state a material fact necessary to make the statements made, in light of
  the circumstances under which such statements were made, not misleading with
  respect to the period covered by this report.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">3. Based on my knowledge,
  the financial statements, and other financial information included in this report,
  fairly present in all material respects the financial condition, results of
  operations and cash flows of the registrant as of, and for, the periods presented
  in this report.</font></p>
<p><font face="Times New Roman, Times, serif" size="3">4. The registrant's other
  certifying officer(s) and I are responsible for establishing and maintaining
  disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e
  and 15d-15e) for the registrant and we have:</font></p>
<blockquote>
  <p><font face="Times New Roman, Times, serif" size="3">(a) Designed such disclosure
    controls and procedures, or caused such disclosure controls and procedures
    to be designed under our supervision, to ensure that material information
    relating to the registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during the period
    in which this report is being prepared;</font></p>
  <p><font face="Times New Roman, Times, serif" size="3">(b) Evaluated the effectiveness
    of the registrant's disclosure controls and procedures and presented in this
    report our conclusions about the effectiveness of the disclosure controls
    and procedures as of the end of the period covered by this report based on
    such evaluation; and</font></p>
  <p><font face="Times New Roman, Times, serif" size="3">(c) Disclosed in this
    report any change in the registrant's internal control over financial reporting
    that occurred during the registrant's most recent fiscal quarter (the registrant's
    fourth fiscal quarter in the case of an annual report) that has materially
    affected, or is reasonably likely to materially affect, the registrant's internal
    control over financial reporting; and</font></p>
</blockquote>
<p><font face="Times New Roman, Times, serif" size="3">5. The registrant's other
  certifying officer(s) and I have disclosed, based on our most recent evaluation
  of internal control over financial reporting, to the registrant's auditors and
  the audit committee of the registrant's board of directors (or persons performing
  the equivalent functions):</font></p>
<blockquote>
  <p><font face="Times New Roman, Times, serif" size="3">(a) All significant deficiencies
    and material weaknesses in the design or operation of internal control over
    financial reporting which are reasonably likely to adversely affect the registrant's
    ability to record, process, summarize and report financial information; and</font></p>
  <p><font face="Times New Roman, Times, serif" size="3">(b) Any fraud, whether
    or not material, that involves management or other employees who have a significant
    role in the registrant's internal control over financial reporting.</font></p>
</blockquote>
<table width="964" border="0" cellspacing="0" cellpadding="0" align="left">
  <tr>
    <td width="419" valign="top"><font face="Times New Roman, Times, serif" size="3">Date:
      May 7, 2004</font></td>
    <td width="539"> <font face="Times New Roman, Times, serif" size="3"><u>/s/
      David W. Dunlap</u><br>
      Name: David W. Dunlap <br>
      Title: </font><font size="3">&nbsp&nbsp</font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size="3">Vice
      President of Finance and Administration and <br>
      </font><font size="3">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp</font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size="3">Chief
      Financial Officer (Principal Financial Officer)</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p></p>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  </font></p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>3
<FILENAME>exhibit32-1.htm
<TEXT>
<html>
<head>
<title>Untitled Document</title>

</head>

<body bgcolor="#FFFFFF">
<p align="right"><font face="Times New Roman, Times, serif" size="2"></font><font face="Times New Roman, Times, serif" size="2">
  </font><font face="Times New Roman, Times, serif" size="3">Exhibit 32.1<br>
  </font></p>
<p align="center"><font face="Times New Roman, Times, serif" size="3"></font></p>
<p align="center">CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL
  OFFICER<br>
  PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</p>
<p>&nbsp;</p>
<p> I, Kevin J. Mills, certify, pursuant to 18 U.S.C. Section 1350, as adopted
  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
  Report of Socket Communications, Inc. on Form 10-Q for the quarter ended March
  31, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the
  Securities Exchange Act of 1934 and that information contained in such Quarterly
  Report on Form 10-Q fairly presents in all material respects the financial condition
  and results of operations of Socket Communications, Inc. <br>
  <br>
</p>
<table width="964" border="0" cellspacing="0" cellpadding="0" align="left">
  <tr>
    <td width="419" valign="top">&nbsp; </td>
    <td width="539">
      <p><font face="Times New Roman, Times, serif" size="3"><u>/s/ Kevin J. Mills</u><br>
        Name: Kevin J. Mills<br>
        Title: &nbsp&nbspPresident and Chief Executive Officer &nbsp&nbsp &nbsp&nbsp&nbsp&nbsp<br>
        &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp (Principal Executive
        Officer)</font><br>
        <font face="Times New Roman, Times, serif" size="3">Date: May 7, 2004</font>
      </p>
      </td>
  </tr>
</table>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp; </p>
<p>I, David W. Dunlap, certify, pursuant to 18 U.S.C. Section 1350, as adopted
  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
  Report of Socket Communications, Inc. on Form 10-Q for the quarter ended March
  31, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the
  Securities Exchange Act of 1934 and that information contained in such Quarterly
  Report on Form 10-Q fairly presents in all material respects the financial condition
  and results of operations of Socket Communications, Inc. <br>
  <br>
</p>
<table width="964" border="0" cellspacing="0" cellpadding="0" align="left">
  <tr>
    <td width="419" valign="top">&nbsp;</td>
    <td width="539">
      <p><font face="Times New Roman, Times, serif" size="3"><u>/s/ David W. Dunlap</u><br>
        Name: David W. Dunlap <br>
        Title: </font><font size="3">&nbsp&nbsp</font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size="3">Vice
        President of Finance and Administration and <br>
        </font><font size="3">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp</font><font face="Times New Roman, Times, serif" size="3"></font><font face="Times New Roman, Times, serif" size="3">Chief
        Financial Officer (Principal Financial Officer)</font><br>
        <font face="Times New Roman, Times, serif" size="3">Date: May 7, 2004</font>
      </p>
      </td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  </font></p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
</body>
</html>

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
