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<SEC-DOCUMENT>0000944075-08-000029.txt : 20080514
<SEC-HEADER>0000944075-08-000029.hdr.sgml : 20080514
<ACCEPTANCE-DATETIME>20080514172313
ACCESSION NUMBER:		0000944075-08-000029
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20080331
FILED AS OF DATE:		20080514
DATE AS OF CHANGE:		20080514

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SOCKET MOBILE, 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:		08832978

	BUSINESS ADDRESS:	
		STREET 1:		39700 EUREKA DRIVE
		CITY:			NEWARK
		STATE:			CA
		ZIP:			94560-4808
		BUSINESS PHONE:		5109333000

	MAIL ADDRESS:	
		STREET 1:		39700 EUREKA DRIVE
		CITY:			NEWARK
		STATE:			CA
		ZIP:			94560-4808

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	SOCKET COMMUNICATIONS INC
		DATE OF NAME CHANGE:	19950418
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>q1-2008.htm
<DESCRIPTION>QUARTERLY REPORT
<TEXT>
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
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<!-- 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>
  </font></P>
<P align=center><font face="Times New Roman, Times, serif" size="3"><STRONG>FORM
  10-Q</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>QUARTERLY REPORT PURSUANT
      TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.</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, 2008</STRONG></font></P>
<P align=center><font size="3" face="Times New Roman, Times, serif"><STRONG>OR</STRONG></font></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="3"><STRONG><b><font size="5">SOCKET
  MOBILE, INC.</font></b></STRONG><BR>
  (Exact name of registrant as specified in its charter) </font></P>
<P>&nbsp;
<TABLE cols=2 width="100%">
  <TR>
    <td width="47%"><font size=3><strong>
      <center>
        <font face="Times New Roman, Times, serif" size=3>Delaware </font>
      </center>
      </strong></font></td>
    <TD width="17%">&nbsp;</TD>
    <TD width="36%"><FONT size=3><STRONG>
      <CENTER>
        <FONT face="Times New Roman, Times, serif" size=3>94-3155066 </FONT>
      </CENTER>
      </STRONG></FONT></TD>
  </TR>
  <TR>
    <td width="47%"><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 width="17%">&nbsp;</TD>
    <TD width="36%"><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" size="3"><BR>
</font>
<P align=center><font face="Times New Roman, Times, serif" size="3"><STRONG>39700
  Eureka Drive, Newark, CA 94560 </STRONG><BR>
  (Address of principal executive offices including zip code) </font></P>
<P align=center><font face="Times New Roman, Times, serif" size="3"><STRONG>(510)
  933-3000 </STRONG><BR>
  (Registrant's telephone number, including area code) <BR>
  </font></P>
<P><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp; </font>
<P>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 [ ]</P>
<P>Indicate by check mark whether the registrant is a large accelerated filer,
  an accelerated filer, a non-accelerated filer, or a smaller reporting company.
  See the definitions of "large accelerated filer," "accelerated filer," and "smaller
  reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer
  [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company
  [X]</P>
<P>Indicate by check mark whether the registrant is a shell company (as defined
  in Rule 12b-2 of the Exchange Act). YES [ ] NO [X]</P>
<P>The number of shares of Common Stock ($0.001 par value) outstanding as of April
  30, 2008 was 32,015,975 shares.</P>
<hr width="100%">
<div align="center"></div>
<P align=left><font face="Times New Roman, Times, serif" size="3"><a name="tab"></a></font></P>
<table width="879" border="0" cellspacing="0" cellpadding="0" align="center">
  <tr>
    <td colspan="3">
      <div align="center"></div>
      <p align=center><font face="Times New Roman, Times, serif" size="3"><strong>INDEX
        </strong></font></p>
    </td>
  </tr>
  <tr>
    <td width="27">&nbsp;</td>
    <td width="807">&nbsp;</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">Part I. Financial Information</td>
  </tr>
  <tr>
    <td colspan="3">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="3">Item 1. Financial Statements (Unaudited):</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">&nbsp;</td>
    <td width="807"><font face="Times New Roman, Times, serif" size="3"><a
  href="#bs">Condensed Balance Sheets - March 31, 2008 and December 31, 2007 </a></font></td>
    <td width="56" align="center" valign="bottom">
      <div align="center">1</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">&nbsp;</td>
    <td width="807" height="10"><font face="Times New Roman, Times, serif" size="3"><a
  href="#ops">Condensed Statements of Operations - Three Months Ended March 31,
      2008 and 2007</a></font></td>
    <td width="56" height="10" align="center" valign="bottom">
      <div align="center"> 2</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">&nbsp;</td>
    <td width="807"><font face="Times New Roman, Times, serif" size="3"><a
  href="#flows">Condensed Statements of Cash Flows - Three Months Ended March
      31, 2008 and 2007</a></font></td>
    <td width="56" align="center" valign="bottom">
      <div align="center">3</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">&nbsp;</td>
    <td width="807"><font face="Times New Roman, Times, serif" size="3"><a
  href="#notes">Notes to Condensed Financial Statements</a> </font></td>
    <td width="56" align="center" valign="bottom">
      <div align="center">4</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="#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">11</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="#qqd">Item 3. Quantitative and Qualitative Disclosures about Market Risk</a>
      </font></td>
    <td width="56">
      <div align="center">21</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="#item4">Item 4T. Controls and Procedures</a></font> </td>
    <td width="56">
      <div align="center">22</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"><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"><a
href="#risk">Item 1A. Risk Factors</a></font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">23</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="#sub">Item 4. Submission of Matters to a Vote of Security Holders</a></font></td>
    <td width="56">
      <div align="center">35</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="#item6">Item 6. Exhibits</a></font></td>
    <td width="56">
      <div align="center">36</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="#sig">Signatures</a></font></td>
    <td width="56">
      <div align="center">37</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="#ind">Index to Exhibits</a></font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">38</font></div>
    </td>
  </tr>
</table>
<P align=left>&nbsp; </P>
<P align="center"><font face="Times New Roman, Times, serif" size="3"><BR>
  <BR>
  </font>
<HR width="100%">
<font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a>
<a
name=bs></a> <BR>
<BR>
</font>
<P align=left><font face="Times New Roman, Times, serif" size="3"><b>Item 1. Financial
  Statements</b></font>
<div align="center" style="font-size: 12.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; "><b>SOCKET
  MOBILE, INC.</b> <br>
  <b>CONDENSED BALANCE SHEETS</b> </div>
<center>
  <table width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 12pt; ">
    <tr style="font-size: 8.0pt;">
      <td colspan="2" align="left" nowrap><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td colspan="2" align="center" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">March
        31,<br>
        2008<br>
        (Unaudited)<br>
        </font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td colspan="2" align="center" valign="top" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><br>
        December 31,<br>
        2007*</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr valign="bottom">
      <td colspan="10" align="center" valign="top" bgcolor="#cceeff"> <font face="Times New Roman, Times, serif" size="3"><b>ASSETS</b></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top"><font face="Times New Roman, Times, serif" size="3">Current
        assets:</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" bgcolor="#CCEEFF">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Cash
          and cash equivalents</font></div>
      </td>
      <td bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3">3,943,345</font></td>
      <td bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3">4,963,359</font></td>
      <td bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Accounts
          receivable, net</font></div>
      </td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">3,224,762</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">2,614,872</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Inventories</font></div>
      </td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,042,445</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">2,438,033</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Prepaid
          expenses and other current assets</font></div>
      </td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">410,127</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">282,867</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td bgcolor="#CCEEFF" height="18"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="top" bgcolor="#CCEEFF" height="18">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets</font></div>
      </td>
      <td bgcolor="#CCEEFF" height="18"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">10,620,679</font></td>
      <td bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="10" height="18" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">10,299,131</font></td>
      <td bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#FFFFFF"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td bgcolor="#FFFFFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#FFFFFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td bgcolor="#FFFFFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap bgcolor="#FFFFFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td bgcolor="#FFFFFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#CCEEFF" height="8"><font face="Times New Roman, Times, serif" size="3">Property
        and equipment:</font></td>
      <td bgcolor="#cceeff" height="8"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff" height="8"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" height="8">&nbsp;</td>
      <td bgcolor="#cceeff" height="8"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10" height="8" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff" height="8"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap bgcolor="#cceeff" height="8"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td bgcolor="#cceeff" height="8"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Machinery
          and office equipment</font></div>
      </td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">2,298,750</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">2,391,991</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Computer
          equipment</font></div>
      </td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">1,130,297</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">1,125,875</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp</font>
        </div>
      </td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">3,429,047</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">3,517,866</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Accumulated
          depreciation</font></div>
      </td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">(2,329,922</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
      <td width="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">(2,373,409</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td bgcolor="#FFFFFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="top" bgcolor="#FFFFFF">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and equipment, net</font></div>
      </td>
      <td bgcolor="#FFFFFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">1,099,125</font></td>
      <td bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">1,144,457</font></td>
      <td bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#FFFFFF" height="8"><font face="Times New Roman, Times, serif" size="3">Intangible
        assets, net</font></td>
      <td bgcolor="#FFFFFF" height="8"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF" height="8"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#FFFFFF" height="8"><font face="Times New Roman, Times, serif" size="3">442,147</font></td>
      <td bgcolor="#FFFFFF" height="8"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10" height="8"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF" height="8"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap bgcolor="#FFFFFF" height="8"><font face="Times New Roman, Times, serif" size="3">473,934</font></td>
      <td bgcolor="#FFFFFF" height="8"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">Goodwill</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">9,797,946</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">9,797,946</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#FFFFFF"><font face="Times New Roman, Times, serif" size="3">Other
        assets</font></td>
      <td bgcolor="#FFFFFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">320,111</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">258,444</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="top" bgcolor="#CCEEFF">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets</font></div>
      </td>
      <td bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">22,280,008</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" valign="bottom">&nbsp;</td>
      <td width="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">21,973,912</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" valign="bottom">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="10"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="10" align="center" valign="top" bgcolor="#cceeff"> <font face="Times New Roman, Times, serif" size="3"><b>LIABILITIES
        AND STOCKHOLDERS&#146; EQUITY</b></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" height="14"><font face="Times New Roman, Times, serif" size="3">Current
        liabilities:</font></td>
      <td height="14"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" height="14"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap height="14"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td height="14"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td height="14" width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" height="14"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap height="14"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td height="14"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Accounts
          payable and accrued expenses</font></div>
      </td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,537,790</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">2,429,168</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Accrued
          payroll and related expenses</font></div>
      </td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">817,146</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">852,185</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Bank
          line of credit</font></div>
      </td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">2,754,147</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" bgcolor="#cceeff" nowrap><font face="Times New Roman, Times, serif" size="3">2,622,009</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Deferred
          income on shipments to distributors</font></div>
      </td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">1,609,786</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap><font face="Times New Roman, Times, serif" size="3">1,744,560</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Term
          loan - short term portion</font></div>
      </td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">164,087</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">160,439</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Current
          portion of capital leases and deferred rent</font></div>
      </td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">39,213</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">42,964</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;Total
          current liabilities</font></div>
      </td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">8,922,169</font></td>
      <td bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">7,851,325</font></td>
      <td bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">Term
        loan - long term portion</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">224,753</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">266,543</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top"><font face="Times New Roman, Times, serif" size="3">Long
        term portion of capital leases and deferred rent</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">133,841</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap><font face="Times New Roman, Times, serif" size="3">139,743</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" height="8" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">Deferred
        income taxes</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">190,307</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">182,322</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Total
          liabilities</font></div>
      </td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">9,471,070</font></td>
      <td style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">8,439,933</font></td>
      <td style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr>
      <td colspan="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" height="8"><font face="Times New Roman, Times, serif" size="3">Commitments
        and contingencies</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" height="8" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">Stockholders'
        equity:</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" height="19">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common
          stock, $0.001 par value: Authorized shares&#151;100,000,000,</font></div>
      </td>
      <td height="19"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" height="19"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap height="19">&nbsp;</td>
      <td height="19"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10" height="19"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" height="19"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap height="19">&nbsp;</td>
      <td height="19"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff" height="18">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issued
          and outstanding shares&#151;32,015,975 at March 31, 2008 and 31,989,617
          at December 31, 2007</font></div>
      </td>
      <td bgcolor="#cceeff" height="18"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff" height="18"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" height="18"><font face="Times New Roman, Times, serif" size="3">32,016</font></td>
      <td bgcolor="#cceeff" height="18"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10" height="18" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" bgcolor="#cceeff" height="18"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" height="18"><font face="Times New Roman, Times, serif" size="3">31,990</font></td>
      <td bgcolor="#cceeff" height="18"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional
          paid-in capital</font></div>
      </td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">53,888,040</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap><font face="Times New Roman, Times, serif" size="3">53,654,483</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated
          deficit</font></div>
      </td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(41,111,118</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
      <td width="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(40,152,494</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;Total
          stockholders&#146; equity</font></div>
      </td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" valign="bottom"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">12,808,938</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" valign="bottom"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">13,533,979</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr valign="bottom">
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="top" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
        liabilities and stockholders&#146; equity</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">22,280,008</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">21,973,912</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="10" align="left" valign="top" height="8">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="2" face="Times New Roman, Times, serif">_____________________________________________<br>
          * Derived from audited financial statements.</font></div>
      </td>
    </tr>
  </table>
</center>
<P align=left>&nbsp;
<P align=center>
<P align=center>
<P></P>
<font face="Times New Roman, Times, serif" size="3"> </font>
<P align=center><font face="Times New Roman, Times, serif" size="3">See accompanying
  notes.<BR>
  <BR>
  1</font>
<HR width="100%">
<font face="Times New Roman, Times, serif" size="3"><BR>
<a href="#TAB">(Index)</a> <a name=ops></a><BR>
</font>
<div align="center" style="font-size: 12.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; "><b><font size="3">SOCKET
  MOBILE, INC.</font></b> <font size="3"><br>
  <b>CONDENSED STATEMENTS OF OPERATIONS<br>
  </b>(Unaudited)</font><br>
</div>
<div align="center" style="font-size: 12.0pt;color: #000000; background: #ffffff; margin-top: 2pt; margin-left: 0; margin-right: 0; margin-bottom: 0; "></div>
<center>
  <table width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 12pt; ">
    <tr>
      <td colspan="3"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="center" nowrap colspan="7"><font face="Times New Roman, Times, serif" size="3">Three
        Months Ended March&nbsp;31,</font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" nowrap><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td colspan="2" align="center" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2008</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td colspan="2" align="center" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2007</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Revenues</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" width="11%"><font face="Times New Roman, Times, serif" size="3">6,169,869</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">5,548,340</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Cost of revenues</font></div>
      </td>
      <td width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">3,152,317</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">2,763,773</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Gross profit</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">3,017,552</font></td>
      <td width="1%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2,784,567</font></td>
      <td width="1%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Operating expenses:</font></div>
      </td>
      <td width="2%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" height="18">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research
          and development</font></div>
      </td>
      <td height="18" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" height="18" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap height="18" width="11%"><font face="Times New Roman, Times, serif" size="3">1,186,822</font></td>
      <td height="18" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td height="18" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" height="18" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap height="18" width="11%"><font face="Times New Roman, Times, serif" size="3">1,427,046</font></td>
      <td height="18" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
          and marketing</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,943,349</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,759,020</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General
          and administrative</font></div>
      </td>
      <td width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3">805,467</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3">856,973</font></td>
      <td align="left" valign="bottom" nowrap width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
          of intangible assets</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">31,787</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">33,808</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td width="5%"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Total operating expenses</font></div>
      </td>
      <td width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3">3,967,425</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3">4,076,847</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">&nbsp;</td>
      <td width="2%" bgcolor="#cceeff" valign="bottom">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="1%" bgcolor="#cceeff" valign="bottom">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Operating loss</font></div>
      </td>
      <td width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom"  width="2%">
        <div align="right"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td align="right" valign="bottom" nowrap  width="11%"><font face="Times New Roman, Times, serif" size="3">(949,873</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom"  width="2%"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap  width="11%"><font face="Times New Roman, Times, serif" size="3">(1,292,280</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp</font>
        </div>
      </td>
      <td width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Interest income and other</font></div>
      </td>
      <td width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3">11,928</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3">37,881</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Interest expense</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(12,694</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(3,414</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" height="14">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp</font>
          <font face="Times New Roman, Times, serif" size="3">&nbsp</font> <font size="3">&nbsp</font></div>
      </td>
      <td width="2%" height="14"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" height="14"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%" height="14"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" height="14"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" height="14"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" height="14"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%" height="14"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" height="14"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" height="14" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Net loss before deferred taxes</font></div>
      </td>
      <td height="14" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" height="14" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap height="14" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(950,639</font></td>
      <td height="14" width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td height="14" width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" height="14" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap height="14" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(1,257,813</font></td>
      <td height="14" width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Deferred tax expense</font></div>
      </td>
      <td width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">(7,985</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">(7,988</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" height="16" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Net loss</font></div>
      </td>
      <td width="2%" height="16" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left bgcolor="#cceeff" valign="bottom" width="2%" style="border-bottom: 3px double width="11%" ><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double width="11%" height="16" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(958,624</font></td>
      <td width="1%" height="16" bgcolor="#cceeff" style="border-bottom: 3px double width="11%" ><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="1%" height="16" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left  bgcolor="#cceeff" valign="bottom" width="2%" style="border-bottom: 3px double width="11%" ><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double width="11%" height="16" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(1,265,801</font></td>
      <td width="1%" height="16" bgcolor="#cceeff" style="border-bottom: 3px double width="11%" ><font face="Times New Roman, Times, serif" size="3">)</font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          </font></div>
      </td>
      <td width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left width="2%" ><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap  width="11%">&nbsp;</td>
      <td width="1%"><font size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left width="2%" ><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap  width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">&nbsp;</td>
      <td width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Net loss per share:</font></div>
      </td>
      <td width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" height="10" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(0.03</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff"><font size="3">)</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(0.04</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff"><font size="3">)</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</font></div>
      </td>
      <td width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">(0.03</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%"><font size="3">)</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">
        (0.04</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%"><font size="3">)</font></td>
    </tr>
    <tr>
      <td colspan="3" bgcolor="#cceeff"><font style="font-size: 10pt" face="Times New Roman, Times, serif" size="3">&nbsp;</font><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Weighted average shares outstanding:</font></div>
      </td>
      <td width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" height="10" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">32,012,798</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">31,872,223</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</font></div>
      </td>
      <td width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">32,012,798</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">31,872,223</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    </tr>
  </table>
</center>
<P align=center>
<p>&nbsp;</p>
<font face="Times New Roman, Times, serif" size="3"> </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"> 2</font>
<HR width="100%">
<p><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=flows></a></font> </p>
<p>&nbsp;</p>
<p align="center"><b>SOCKET MOBILE, INC.<br>
  CONDENSED STATEMENTS OF CASH FLOWS<br>
  </b>(Unaudited)</p>
<table style="MARGIN-TOP: 6pt; FONT-SIZE: 9.6pt" cellspacing=0 cellpadding=0
width="100%" align=center border=0>
  <tr style="FONT-SIZE: 10pt">
    <td colspan=4><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td noWrap align=middle colspan=7>
      <div align="center"><font face="Times New Roman, Times, serif" size="3">Three
        Months Ended March&nbsp;31,</font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 10pt">
    <td noWrap align=left colspan=4><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td noWrap align=middle colspan=2 style="border-bottom: 1px solid #000000">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">2008</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td width="1%"><font size="3"><b><font face="Times New Roman, Times, serif"></font></b></font></td>
    <td noWrap align=middle colspan=2 style="border-bottom: 1px solid #000000">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">2007</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div
    style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3"><b>Operating
        activities</b></font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Net loss</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3">(958,624</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3">(1,265,801</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Adjustments to reconcile net loss to net cash provided by (used in) operating
        activities:</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based
        compensation</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3">219,066</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3">281,668</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation
        and amortization</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3">150,273</font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">141,855</font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
        of intangible assets</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3">31,787</font></td>
    <td width="1%"><font size="3"></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3">33,808</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
        foreign currency transaction (gains) losses</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3">2,340</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(11,372</font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
        tax expense</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3">7,985</font></td>
    <td valign=bottom noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3">7,988</font></td>
    <td valign=bottom noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change
        in deferred rent</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3">(81</font></td>
    <td width="1%" bgcolor="#cceeff">)</td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">29,294</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td colspan="4"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Changes in operating assets and liabilities:</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
        receivable</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3">(620,624</font></td>
    <td valign=bottom noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3">(566,261</font></td>
    <td valign=bottom noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3">(604,412</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3">(346,033</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid
        expenses and other current assets</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3">(127,261</font></td>
    <td valign=bottom noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3">19,101</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
        assets </font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3">(61,667</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3">)</font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3">7,733</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
        payable and accrued expenses</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3">1,105,261</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3">980,345</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued
        payroll and related expenses</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3">(35,039</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3">162,333</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
        income on shipments to distributors</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3">(134,774</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000" ><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3">(10,980</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        Net cash used in operating activities</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font size="3">(1,025,770</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font size="3">(536,322</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="4"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div
    style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3"><b>Investing
        activities</b></font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Purchases of equipment and tooling</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3">(104,941</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">(480,748</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        &nbsp;&nbsp; Net cash used in investing activities</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td noWrap align=right width="11%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font size="3">(104,941</font></td>
    <td noWrap align=left width="1%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">(480,748</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3"><b><b><font face="Times New Roman, Times, serif"><font face="Times New Roman, Times, serif">&nbsp</font></font></b></b></font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div
    style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3"><b>Financing
        activities</b></font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Payments on capital leases and equipment financing notes</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3">(9,572</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3">(2,488</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Gross proceeds from borrowings under bank line of credit agreement</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3">2,754,147</font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3">2,285,230</font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Gross repayments of borrowings under bank line of credit agreement</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3">(2,622,009</font></td>
    <td width="1%" valign="bottom"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3">(2,213,261</font></td>
    <td width="1%" valign="bottom"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Proceeds from bank term loan</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3">---</font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3">---</font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 height="22">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Repayments of bank term loan</font></div>
    </td>
    <td height="22" width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left height="22"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right height="22" width="11%"><font size="3">(38,142</font></td>
    <td height="22" width="1%"><font size="3">)</font></td>
    <td height="22" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left height="22" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right height="22" width="11%"><font size="3">---</font></td>
    <td height="22" width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td valign=top align=left colspan=4 height="22">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Stock options exercised</font></div>
    </td>
    <td height="22" width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left height="22"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3">14,517</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td height="22" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left height="22" width="1%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3">26,396</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        Net cash provided by financing activities</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3">98,941</font></td>
    <td valign=bottom noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3">95,877</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr bgcolor="#cceeff">
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3"><b><b><font face="Times New Roman, Times, serif"><font face="Times New Roman, Times, serif">&nbsp</font></font></b></b></font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">Effect
        of exchange rate changes on cash and cash equivalents</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3">11,756</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">(783</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">Net
        decrease in cash and cash equivalents</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3">(1,020,014</font></td>
    <td valign=bottom noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td noWrap align=right width="11%"><font size="3">(921,976</font></td>
    <td noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4>&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left >&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" >&nbsp;</td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left >&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" >&nbsp;</td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr bgcolor="#cceeff">
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">Cash
        and cash equivalents at beginning of period</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3">4,963,359</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">6,104,277</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 height="12">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">Cash
        and cash equivalents at end of period</font></div>
    </td>
    <td height="12" width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left height="12" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td valign=bottom noWrap align=right height="12" width="11%" style="border-bottom: 3px double #000000"><font size="3">3,943,345</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td height="12" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left height="12" width="1%" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td valign=bottom noWrap align=right height="12" width="11%" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">5,182,301</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
  </tr>
  <tr bgcolor="#cceeff">
    <td valign=top align=left colspan=4 height="16">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><b><b><font face="Times New Roman, Times, serif"><font face="Times New Roman, Times, serif"><font size="2"><font size="3"></font></font></font></font></b></b></div>
    </td>
    <td height="16" width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left height="16"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right height="16" width="11%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=left height="16" width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td height="16" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left height="16" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right height="16" width="11%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td height="16" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3"><b>Supplemental
        cash flow information </b></font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Cash paid for interest</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3">12,694</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3">3,414</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
  </tr>
</table>
<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">See accompanying
  notes. <BR>
  <BR>
  3 <BR>
  </font>
<P align=center>
<HR width="100%">
<P align=left>
<P align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a name=notes></a></font>
<P align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><font face="Times New Roman, Times, serif" size="3"><b><br>
  NOTE 1 - Basis of Presentation</b></font></p>
<p>The accompanying unaudited condensed financial statements of Socket Mobile,
  Inc. (the "Company") (formerly Socket Communications, Inc.) 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 condensed financial statements should be read in conjunction with the
  audited financial statements and notes included in the Company's Annual Report
  on Form 10-K for the year ended December 31, 2007.</p>
<p><font face="Times New Roman, Times, serif"><b>NOTE 2 - Summary of Significant
  Accounting Policies</b></font></p>
<p>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.</p>
<p>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 Company's financial
  statements. </p>
<p><font face="Times New Roman, Times, serif"><i>Recent Accounting Pronouncements
  </i><br>
  In September 2006, the FASB issued Statement of Financial Accounting Standards
  No. 157, "Fair Value Measurements" ("SFAS 157"), which establishes a framework
  for measuring fair value and enhances disclosures about fair value measurements.
  In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, "Effective
  Date of FASB Statement No. 157," which provides for a one year deferral of the
  effective date of SFAS 157 for non-financial assets and non-financial liabilities,
  except those that are recognized or disclosed in the financial statements at
  fair value on a recurring basis. The Company adopted the provisions of SFAS
  157 as of January 1, 2008, with respect to its financial assets and liabilities
  only. The adoption of SFAS 157 did not have a material impact on the Company's
  financial statements. Under FASB 157, the definition of fair value focuses on
  the price that would be received upon the sale of an asset or the amount paid
  to transfer a liability. The fair value measurement should reflect all of the
  assumptions that market participants would use in pricing the asset or liability.
  SFAS 157 establishes a three-level hierarchy to prioritize the inputs used in
  valuation techniques for fair value consisting of: 1) observable inputs that
  reflect quoted prices in active markets; 2) inputs other than quoted prices
  with observable market data; and 3) unobservable data. SFAS 157 requires disclosures
  detailing the extent to which we measure assets and liabilities at fair value,
  the methods and assumptions used to measure fair value and the effect of fair
  value measurements on earnings.</font></p>
<p><font face="Times New Roman, Times, serif"><br>
  </font></p>
<p><br>
</p>
<p align=center><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="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p>The Company considers all highly liquid investments purchased with a maturity
  date of 90 days or less at date of purchase to be cash equivalents. At March
  31, 2008, all of the Company's cash and cash equivalents consisted of amounts
  held in demand and money market deposits in banks. The Company regularly enters
  into forward foreign currency contracts to reduce exposures related to rate
  changes in certain foreign currencies. The Company's forward foreign currency
  contracts are recorded at fair value and are included in accrued liabilities
  at March 31, 2008. At March 31, 2008, none of these derivative instruments was
  accounted for as a hedge transaction, and accordingly, changes in the fair value
  of the forward foreign currency contracts were recorded in net income. At March
  31, 2008, contracts with a notional amount of $606,800 to hedge Euros, were
  recorded as a liability with a fair value of $24,744, based on quotations from
  financial institutions.</p>
<p>In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
  Financial Assets and Financial Liabilities" ("SFAS 159"), which permits companies
  to choose to measure certain financial instruments and certain other items at
  fair value. The standard requires that unrealized gains and losses on items
  for which the fair value option has been elected be reported in earnings. SFAS
  159 is effective for fiscal years beginning after November 15, 2007. The Company
  adopted SFAS 159 as of January 1, 2008. The adoption of SFAS 159 did not have
  a material impact on the Company's financial statements.</p>
<p><font face="Times New Roman, Times, serif"><b>NOTE 3 - Inventories</b></font></p>
<p>Inventories consist principally of raw materials and sub-assemblies, which
  are stated at the lower of cost (first-in, first-out) or market.</p>
<table width="80%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">
  <tr>
    <td align="left" valign="top" width="71%">
      <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="2"><font face="Times New Roman, Times, serif"><font face="Times New Roman, Times, serif"><font size="2"><font size="3"></font></font></font></font>
        </font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td align="center" valign="bottom" colspan="2" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">March
      31,<br>
      2008</font></td>
    <td align="center" valign="bottom" nowrap width="4%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td width="2%" align="center"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td align="center" valign="bottom" colspan="2" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">December
      31,<br>
      2007</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="71%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
        Raw materials and subassemblies</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td align="left" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td align="right" nowrap width="9%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">2,608,003</font></td>
    <td width="4%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td align="right" nowrap width="9%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">2,012,745</font></td>
  </tr>
  <tr>
    <td align="left" valign="top" width="71%">
      <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">Finished
        goods</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td align="left" valign="bottom" width="2%" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="9%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">434,442</font></td>
    <td align="left" valign="bottom" nowrap width="4%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td width="2%"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td align="left" valign="bottom" width="2%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td align="right" valign="bottom" nowrap width="9%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">425,288</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="71%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif"><font face="Times New Roman, Times, serif"><font size="2"><font size="3"></font></font></font></font>
      </div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td align="left" width="2%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td align="right" nowrap width="9%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">3,042,445</font></td>
    <td width="4%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b></b></font></td>
    <td align="left" valign="bottom" width="2%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td align="right" nowrap width="9%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">2,438,033</font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif" size="3"><b><br>
  NOTE 4 - Bank Financing Arrangements</b></font></p>
<p>On March 24, 2008, the Company agreed with its bank to extend the term of the
  existing credit facility by an additional year. The facility now expires on
  March 24, 2010. The credit facility allows the Company to borrow up to $4,000,000
  based on the level of qualified domestic and international receivables, up to
  a maximum of $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, 2008 were 5.75%
  on both the domestic and international lines. The Company used the credit facility
  at the end of the first quarter of 2008 and the end of each quarter in fiscal
  year 2007. At March 31, 2008, outstanding amounts borrowed under the lines were
  $1,674,171 and $1,079,976, respectively, which were the approximate amounts
  available on the lines. Of these amounts outstanding at March 31, 2008, $2.0
  million was repaid in early April 2008. At December 31, 2007, outstanding amounts
  borrowed under the lines were $1,752,459 and $869,550, respectively, which were
  the approximate amounts available on the lines. These amounts outstanding at
  December 31, 2007 were repaid in early January 2008. The rates in effect at
  December 31, 2007 were 7.75% on both the domestic and international lines. Under
  the terms of the credit agreement, beginning March 31, 2008, the Company must
  maintain a quarterly minimum tangible net worth of at least $2,500,000, plus
  beginning thereafter, 50% of net income measured on a monthly basis. The Company
  was in compliance with the tangible net worth requirement at March 31, 2008.</p>
<p>&nbsp; </p>
<p align=center><font face="Times New Roman, Times, serif" size="3">5<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p align=left><b>NOTE 5 - Intangible Assets</b>
<p>Intangible assets at March 31, 2008 consist of a patent purchased in 2004 for
  $600,000 covering the design and functioning of plug-in bar code scanners, bar
  code imagers, and radio frequency identification products, which is being amortized
  on a straight line basis over its estimated life of ten years, and intangible
  assets of $570,750 remaining from a prior acquisition in 2000 consisting of
  developed software and technology with estimated lives at the time of acquisition
  of 8.5 years.<br>
</p>
<p align=left>Amortization of all intangible assets in the first quarter of 2008
  was $31,787 compared to $33,808 for the same period in 2007. Intangible assets
  as of March 31, 2008 consisted of the following:
<p align=left>&nbsp;
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="90%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td width="65%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="1%">&nbsp;</td>
    <!-- colindex=02 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=02 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=02 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=02 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=03 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=03 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=03 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=03 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=04 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=04 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=04 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=04 type=hang1 --></tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left><font size="3"></font></td>
    <td><font size="3"></font></td>
    <td  valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3">Gross</font></div>
    </td>
    <td><font size="3"></font></td>
    <td><font size="3"></font></td>
    <td valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3">Accumulated</font></div>
    </td>
    <td><font size="3"></font></td>
    <td><font size="3"></font></td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2><font size="3"></font></td>
    <td><font size="3"></font></td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left>
      <div
     ><font size="2"><font size="3"><font size="3"></font></font></font></div>
    </td>
    <td><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3">Assets</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3">Amortization</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3">Net</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Patent</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left><font size="3">$</font> </td>
    <td valign=bottom noWrap align=right><font size="3">600,000</font></td>
    <td valign=bottom noWrap align=left><font size="3"></font> </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left><font size="3">$ </font></td>
    <td noWrap align=right><font size="3">225,000</font></td>
    <td valign=bottom noWrap align=left>&nbsp;</td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left><font size="3">$</font> </td>
    <td noWrap align=right><font size="3">375,000</font></td>
    <td valign=bottom noWrap align=left><font size="3"></font> </td>
  </tr>
  <tr  valign=bottom>
    <td valign=bottom noWrap align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Project
        management tools </font></div>
    </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 1px solid #000000"><font size="3">570,750</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3">&nbsp
      </font></td>
    <td noWrap align=right style="border-bottom: 1px solid #000000"><font size="3">503,603</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000"><font size="3">67,147</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3">&nbsp;&nbsp;
        </font><font size="3">Total intangible assets</font></div>
    </td>
    <td bgcolor="#cceeff"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff" ><font size="3">$</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3">1,170,750</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td bgcolor="#cceeff"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3">$
      </font></td>
    <td noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3">728,603</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td bgcolor="#cceeff"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3">442,147</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
</table>
<p>&nbsp;</p>
<p>Intangible assets as of December 31, 2007 consisted of the following:</p>
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="90%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td width="65%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="1%">&nbsp;</td>
    <!-- colindex=02 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=02 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=02 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=02 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=03 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=03 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=03 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=03 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=04 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=04 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=04 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=04 type=hang1 --></tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left><font size="3"></font></td>
    <td><font size="3"></font></td>
    <td  valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3">Gross</font></div>
    </td>
    <td><font size="3"></font></td>
    <td><font size="3"></font></td>
    <td valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3">Accumulated</font></div>
    </td>
    <td><font size="3"></font></td>
    <td><font size="3"></font></td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2><font size="3"></font></td>
    <td><font size="3"></font></td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left>
      <div
     ><font size="2"><font size="3"><font size="3"></font></font></font></div>
    </td>
    <td><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3">Assets</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3">Amortization</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3">Net</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Patent</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left><font size="3">$</font> </td>
    <td valign=bottom noWrap align=right><font size="3">600,000</font></td>
    <td valign=bottom noWrap align=left><font size="3"></font> </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left><font size="3">$ </font></td>
    <td noWrap align=right><font size="3">210,000</font></td>
    <td valign=bottom noWrap align=left>&nbsp; </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left><font size="3">$</font> </td>
    <td noWrap align=right><font size="3">390,000</font></td>
    <td valign=bottom noWrap align=left><font size="3"></font> </td>
  </tr>
  <tr  valign=bottom>
    <td valign=bottom noWrap align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Project
        management tools</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 1px solid #000000"><font size="3">570,750</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3">&nbsp
      </font></td>
    <td noWrap align=right style="border-bottom: 1px solid #000000"><font size="3">486,816</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000"><font size="3">83,934</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td valign=bottom noWrap align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3">&nbsp;&nbsp;
        </font><font size="3">Total intangible assets</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" ><font size="3">$</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000"><font size="3">1,170,750</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000"><font size="3">$
      </font></td>
    <td noWrap align=right style="border-bottom: 3px double #000000"><font size="3">696,816</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000"><font size="3">473,934</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
  </tr>
</table>
<p>&nbsp;</p>
<p>Based on definite lived intangible assets recorded at March 31, 2008, and assuming
  no subsequent impairment of the underlying assets, the annual amortization expense
  is expected to be as follows:</p>
<table style="MARGIN-TOP: 3pt; FONT-SIZE: 10pt" cellspacing=0 cellpadding=0
width="90%" align=center border=0>
  <tr>
    <td noWrap align=left width="71%" style="border-bottom: 1px solid #000000" ><font size="3">
      Year</font></td>
    <td width="4%"><font size="3"></font></td>
    <td colspan="4" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3">Amount</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left bgcolor="#cceeff" width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3">2008 (nine
        months remaining)</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%"><font size="3"></font></td>
    <td bgcolor="#cceeff" width="3%" align="right"><font size="3">$</font></td>
    <td valign=bottom align=right bgcolor="#cceeff" colspan="2"><font size="3">95,360</font></td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="10%"><font size="3"></font></td>
  </tr>
  <tr>
    <td valign=top align=left width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3">2009</font></div>
    </td>
    <td width="4%"><font size="3"></font></td>
    <td width="3%"><font size="3"></font></td>
    <td valign=bottom align=right colspan="2"><font size="3">76,787</font></td>
    <td width="10%"><font size="3"></font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left bgcolor="#cceeff" width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3">2010</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%"><font size="3"></font></td>
    <td bgcolor="#cceeff" width="3%"><font size="3"></font></td>
    <td valign=bottom align=right bgcolor="#cceeff" colspan="2"><font size="3">60,000</font></td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="10%"><font size="3"></font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3">2011</font></div>
    </td>
    <td width="4%"><font size="3"></font></td>
    <td width="3%"><font size="3"></font></td>
    <td valign=bottom align=right colspan="2"><font size="3">60,000</font></td>
    <td valign=bottom noWrap align=left width="10%"><font size="3"></font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left bgcolor="#cceeff" width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3">2012</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%"><font size="3"></font></td>
    <td bgcolor="#cceeff" width="3%"><font size="3"></font></td>
    <td valign=bottom align=right bgcolor="#cceeff" colspan="2"><font size="3">60,000</font></td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="10%"><font size="3"></font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3">2013 and
        beyond</font></div>
    </td>
    <td width="4%"><font size="3"></font></td>
    <td width="3%" style="border-bottom: 1px solid #000000"><font size="3">&nbsp</font></td>
    <td valign=bottom align=right colspan="2" style="border-bottom: 1px solid #000000"><font size="3">90,000</font></td>
    <td valign=bottom noWrap align=left width="10%" style="border-bottom: 1px solid #000000"><font size="3">&nbsp</font></td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td valign=top align=left width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3"></font></div>
    </td>
    <td width="4%"><font size="3"></font></td>
    <td width="3%" align="right" style="border-bottom: 3px double #000000"><font size="3">$</font></td>
    <td valign=bottom align=right colspan="2" style="border-bottom: 3px double #000000"><font size="3">442,147</font></td>
    <td valign=bottom noWrap align=left width="10%" style="border-bottom: 3px double #000000"><font size="3">&nbsp</font></td>
  </tr>
</table>
<p><b><br>
  </b></p>
<p align=center><font face="Times New Roman, Times, serif" size="3">6<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><b>NOTE 6 - Segment Information</b></p>
<p> The Company operates in one segment-mobile systems solutions for businesses.
  Mobile systems solutions typically consist of a handheld computer, data collection
  and connectivity peripherals, and third-party vertical applications software.
  The Company markets its products in the United States and foreign countries
  through its sales personnel, vertical industry partners, and distributors. Revenues
  for the geographic areas for the three months ended March 31, 2008 and 2007
  are as follows:</p>
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="90%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td width="65%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="1%">&nbsp;</td>
    <!-- colindex=02 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=02 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=02 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=02 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=03 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=03 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=03 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=03 type=hang1 --> <!-- colindex=04 type=gutter --> <!-- colindex=04 type=lead -->
    <!-- colindex=04 type=body --> <!-- colindex=04 type=hang1 --></tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left height="13"><font size="3"></font> </td>
    <td height="13"><font size="3"></font> </td>
    <td valign=bottom noWrap align=middle colspan=7 height="13" >
      <div align="center"><font size="3">Three Months Ended March 31, </font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left>
      <div
      ><font size="3">Revenues:</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3">2008</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3">2007</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3">&nbsp;&nbsp;
        </font><font size="3"></font><font size="3"></font><font size="3">United
        States</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left><font size="3">$</font> </td>
    <td valign=bottom noWrap align=right><font size="3">3,763,864</font></td>
    <td valign=bottom noWrap align=left><font size="3"></font> </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left><font size="3">$ </font></td>
    <td noWrap align=right><font size="3">3,264,260</font></td>
    <td valign=bottom noWrap align=left><font size="3"></font> </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">&nbsp;&nbsp;Europe</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left><font size="3"></font> </td>
    <td valign=bottom noWrap align=right><font size="3">1,668,491</font></td>
    <td valign=bottom noWrap align=left><font size="3"></font></td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left><font size="3"> </font></td>
    <td noWrap align=right><font size="3">1,763,745</font></td>
    <td valign=bottom noWrap align=left><font size="3"></font></td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom noWrap align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">&nbsp;&nbsp;Asia
        and rest of world</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 1px solid #000000"><font size="3">737,514</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3">&nbsp
      </font></td>
    <td noWrap align=right style="border-bottom: 1px solid #000000"><font size="3">520,335</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3"><font style="FONT-SIZE: 10pt" size="2" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        &nbsp;&nbsp; </font>Total Revenues<font size="3"></font></font></div>
    </td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000"><font size="3">$</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000"><font size="3">6,169,869</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000"><font size="3">$
      </font></td>
    <td noWrap align=right style="border-bottom: 3px double #000000"><font size="3">5,548,340</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
  </tr>
</table>
<p>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.</p>
<p>Major customers who accounted for at least 10% of the Company's total revenues
  were as follows:</p>
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="90%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td width="51%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="9%">&nbsp;</td>
    <!-- colindex=02 type=gutter -->
    <td align=right width="11%">&nbsp;</td>
    <!-- colindex=02 type=lead -->
    <td align=right width="6%">&nbsp;</td>
    <!-- colindex=02 type=body -->
    <td align=left width="4%">&nbsp;</td>
    <!-- colindex=02 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=03 type=gutter -->
    <td align=right width="9%">&nbsp;</td>
    <!-- colindex=03 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=03 type=body --> <!-- colindex=03 type=hang1 --> <!-- colindex=04 type=gutter -->
    <!-- colindex=04 type=lead --> <!-- colindex=04 type=body --> <!-- colindex=04 type=hang1 --></tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left height="16" width="51%"><font size="3"></font>
    </td>
    <td height="16" width="9%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=middle colspan=6 height="16" >
      <div align="center"><font size="3">Three Months Ended March 31, </font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="51%">
      <div
     ><font size="3"></font></div>
    </td>
    <td width="9%"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan="2">
      <div align="center"><font size="3">2008</font></div>
      <font size="3"></font></td>
    <td width="2%"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle>
      <div align="center"></div>
    </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan="2">
      <div align="center"><font size="3">2007</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="51%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Tech Data</font></div>
    </td>
    <td width="9%"><font size="3"></font> </td>
    <td noWrap align=right width="9%"><font size="3">17</font></td>
    <td noWrap align=left width="8%"><font size="3">%</font> </td>
    <td width="4%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3"> </font></td>
    <td noWrap align=right width="9%"><font size="3">23</font></td>
    <td valign=bottom noWrap align=left width="8%"><font size="3">%</font> </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="51%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Ingram Micro</font></div>
    </td>
    <td width="9%"><font size="3"></font> </td>
    <td noWrap align=right width="9%"><font size="3">11</font></td>
    <td noWrap align=left width="8%"><font size="3">%</font></td>
    <td width="4%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3"> </font></td>
    <td noWrap align=right width="9%"><font size="3">14</font></td>
    <td valign=bottom noWrap align=left width="8%"><font size="3">%</font></td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td valign=bottom noWrap align=left width="51%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Intermec
        Technologies Corp.</font></div>
    </td>
    <td width="9%"><font size="3"></font> </td>
    <td noWrap align=right width="9%"><font size="3">15</font></td>
    <td noWrap align=left width="8%"><font size="3">%</font></td>
    <td width="4%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3"> </font></td>
    <td noWrap align=right width="9%">*</td>
    <td valign=bottom noWrap align=left width="8%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left colspan="8" height="26">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="2" face="Times New Roman, Times, serif">_____________________________________________<br>
        * Customer accounts for less than 10% of total revenues for the period</font></div>
      </td>
  </tr>
</table>
<p>&nbsp;</p>
<p><b>NOTE 7 - Stock-Based Compensation</b></p>
<p>On January 1, 2006, the Company adopted SFAS 123R for fiscal years ended December
  31, 2006 and onward. SFAS 123R requires all share-based awards to employees,
  including grants of employee stock options, to be recognized in the financial
  statements based on their fair values. The valuation provisions of SFAS 123R
  apply to new grants and to grants that were outstanding as of the effective
  date. Under SFAS 123R, the Company uses a binomial lattice valuation model to
  estimate the fair value of stock option grants made on or after January 1, 2006.
  The binomial lattice model incorporates calculations for expected volatility,
  risk-free interest rates, employee exercise patterns and post-vesting employment
  termination behavior, and these factors affect the estimate of the fair value
  of the Company's stock option grants. The fair value of stock option grants
  outstanding as of the effective date is estimated using the Black-Scholes option
  pricing model used under SFAS 123. The Company adopted the modified prospective
  recognition method and implemented the provisions of SFAS 123R beginning with
  the first quarter of 2006.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">7<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p>The weighted average per share fair value of the individual options issued
  and outstanding during the three months ended March 31, 2008 and 2007 was estimated
  at $0.98 and $1.51, respectively. The fair values were determined using a binomial
  lattice valuation model for options granted on or after January 1, 2006, and
  a Black-Scholes valuation model for options granted prior to January 1, 2006.
  Weighted average assumptions for options issued and outstanding during the three
  months ended March 31, 2008 and 2007 are shown below:</p>
<table width="80%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">
  <tr class="border">
    <td align="left" valign="top" width="70%" height="19"><font size="3"></font></td>
    <td width="1%" class="border" height="19"><font size="3"></font></td>
    <td colspan="7" align="center" nowrap height="21" >
      <div align="center"><font size="3">Three Months Ended March 31,</font></div>
    </td>
  </tr>
  <tr class="border">
    <td align="left" valign="top" width="70%" height="16">
      <div style="margin-left: 10px; text-indent: -10px">
        <div align="center" ><font size="3"></font></div>
      </div>
    </td>
    <td width="1%" class="border" height="16"><font size="3"></font></td>
    <td align="right" valign="bottom" nowrap colspan="2" height="16">
      <div align="center" style="border-bottom: 1px solid #000000" ><font size="3">2008</font></div>
    </td>
    <td width="1%"class="border" height="16"><font face="Times New Roman, Times, serif" size="3">&nbsp
      </font></td>
    <td align="right" valign="bottom" nowrap colspan="2" height="16">
      <div align="center" style="border-bottom: 1px solid #000000"><font size="3">2007</font></div>
    </td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="70%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3"> Risk-free
        interest rate (%) </font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align="right" nowrap width="9%" bgcolor="#cceeff"><font size="3">4.11</font></td>
    <td width="5%" bgcolor="#cceeff"><font size="3">%</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align="right" valign="bottom" nowrap width="9%" bgcolor="#cceeff"><font size="3">3.66</font></td>
    <td align="left" valign="bottom" nowrap width="5%" bgcolor="#cceeff"><font size="3">%</font></td>
  </tr>
  <tr>
    <td align="left" valign="top" width="70%">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3">Dividend
        yield</font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td align="right" valign="bottom" nowrap width="9%"><font size="3">---</font></td>
    <td align="left" valign="bottom" nowrap width="5%"><font size="3"></font></td>
    <td width="1%"><font size="3"></font></td>
    <td align="right" valign="bottom" nowrap width="9%"><font size="3">---</font></td>
    <td align="left" valign="bottom" nowrap width="5%"><font size="3"></font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="70%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3"> Volatility
        factor</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align="right" nowrap width="9%" bgcolor="#cceeff"><font size="3">0.8</font></td>
    <td width="5%" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align="right" valign="bottom" nowrap width="9%" bgcolor="#cceeff"><font size="3">1.1</font></td>
    <td align="left" valign="bottom" nowrap width="5%" bgcolor="#cceeff"><font size="3"></font></td>
  </tr>
  <tr>
    <td align="left" valign="top" width="70%">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3">Expected
        option life (years)</font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td align="right" valign="bottom" nowrap width="9%"><font size="3">4.8</font></td>
    <td align="left" valign="bottom" nowrap width="5%"><font size="3"></font></td>
    <td width="1%"><font size="3"></font></td>
    <td align="right" valign="bottom" nowrap width="9%"><font size="3">4.6</font></td>
    <td align="right" valign="bottom" nowrap width="5%"><font size="3"></font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p>At March 31, 2008, options issued to employees for 10,830,750 shares were outstanding,
  of which 7,495,198 were exercisable. At March 31, 2007, options issued to employees
  for 9,439,760 shares were outstanding, of which 7,009,588 were exercisable.</p>
<p>Total stock-based compensation expense recognized in our statements of income
  for the three months ended March 31, 2008 and 2007 is shown below:</p>
<table width="80%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">
  <tr>
    <td align="left" nowrap width="72%" height="21"><font size="3"></font></td>
    <td width="1%" height="21"><font size="3"></font></td>
    <td colspan="7" align="center" nowrap height="21" >
      <div align="center" class="border"><font size="3">Three Months Ended March
        31,</font></div>
    </td>
  </tr>
  <tr class="border">
    <td align="left" valign="top" width="72%" height="13">
      <div style="margin-left: 10px; text-indent: -10px">
        <div align="left"><font size="3">Income Statement Classification</font></div>
      </div>
    </td>
    <td width="1%" class="border" height="13"><font size="3"></font></td>
    <td align="center" valign="bottom" colspan="3" class="border" style="border-bottom: 1px solid #000000" height="13"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
      </font><font size="3">2008</font></td>
    <td width="1%" class="border" height="13"><font size="3"><b></b></font></td>
    <td align="center" valign="bottom" colspan="3" class="border" height="13" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;</font><font size="3">2007</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="72%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3"> </font><font style="FONT-SIZE: 10pt" size="3">&nbsp;&nbsp;
        </font><font size="3"></font><font size="3">Cost of revenues</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align="left" width="3%" bgcolor="#cceeff"><font size="3">$</font></td>
    <td align="right" nowrap width="7%" bgcolor="#cceeff"><font size="3">9,196</font></td>
    <td width="2%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff"><font size="3"><b></b></font></td>
    <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font size="3">$</font></td>
    <td align="right" valign="bottom" nowrap width="7%" bgcolor="#cceeff"><font size="3">22,680</font></td>
    <td align="left" valign="bottom" nowrap width="4%" bgcolor="#cceeff"><font size="3"></font></td>
  </tr>
  <tr>
    <td align="left" valign="top" width="72%">
      <div style="margin-left: 10px; text-indent: -10px"><font style="FONT-SIZE: 10pt" size="3">&nbsp;&nbsp;
        </font><font size="3"></font><font size="3">Research and development</font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td align="left" valign="bottom" width="3%" style="border-bottom: 1px solid #000000"><font size="3"></font></td>
    <td align="right" valign="bottom" nowrap width="7%" ><font size="3">57,554</font></td>
    <td align="left" valign="bottom" nowrap width="2%" >&nbsp;</td>
    <td width="1%"><font size="3"><b></b></font></td>
    <td align="left" valign="bottom" width="2%" style="border-bottom: 1px solid #000000"><font size="3"></font></td>
    <td align="right" valign="bottom" nowrap width="7%" ><font size="3">62,966</font></td>
    <td align="left" valign="bottom" nowrap width="4%" >&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="72%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3"> </font><font style="FONT-SIZE: 10pt" size="3">&nbsp;&nbsp;
        </font><font size="3"></font><font size="3">Sales and marketing</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align="left" width="3%" bgcolor="#cceeff" >&nbsp;</td>
    <td align="right" nowrap width="7%" bgcolor="#cceeff" ><font size="3">67,102</font></td>
    <td width="2%" bgcolor="#cceeff" >&nbsp;</td>
    <td width="1%" bgcolor="#cceeff"><font size="3"><b></b></font></td>
    <td align="left" valign="bottom" width="2%" bgcolor="#cceeff" >&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="7%" bgcolor="#cceeff" ><font size="3">79,644</font></td>
    <td align="left" valign="bottom" nowrap width="4%" bgcolor="#cceeff" >&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top" width="72%">
      <div style="margin-left: 10px; text-indent: -10px"><font style="FONT-SIZE: 10pt" size="3">&nbsp;&nbsp;
        </font><font size="3"></font><font size="3">General and administrative</font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td align="left" valign="bottom" width="3%" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="7%" style="border-bottom: 1px solid #000000"><font size="3">85,214</font></td>
    <td align="left" valign="bottom" nowrap width="2%" style="border-bottom: 1px solid #000000" >&nbsp;</td>
    <td width="1%"><font size="3"></font></td>
    <td align="left" valign="bottom" width="2%" style="border-bottom: 1px solid #000000" >&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="7%" style="border-bottom: 1px solid #000000"><font size="3">116,378</font></td>
    <td align="right" valign="bottom" nowrap width="4%" style="border-bottom: 1px solid #000000"><font size="3">&nbsp</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="72%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3"> </font><font style="FONT-SIZE: 10pt" size="3">&nbsp;&nbsp;
        </font><font size="3"></font><font size="3">Total</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align="left" width="3%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font size="3">$</font></td>
    <td align="right" nowrap width="7%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font size="3">219,066</font></td>
    <td width="2%" bgcolor="#cceeff" style="border-bottom: 3px double #000000">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff"><font size="3"><b></b></font></td>
    <td align="left" valign="bottom" width="2%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font size="3">$</font></td>
    <td align="right" valign="bottom" nowrap width="7%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font size="3">281,668</font></td>
    <td align="left" valign="bottom" nowrap width="4%" bgcolor="#cceeff" style="border-bottom: 3px double #000000">&nbsp;</td>
  </tr>
</table>
<p>The decline in stock-based compensation expense in the first quarter of 2008
  compared to the same period one year ago, reflects older grants with higher
  valuations, compared to more current grants, becoming fully expensed.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">8<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><b>NOTE 8 - Net Loss Per Share Applicable to Common Stockholders</b></p>
<p>The Company calculates earnings per share in accordance with Financial Accounting
  Standards Board Statement No. 128, <i>Earnings per Share</i>.</p>
<p>The following table sets forth the computation of basic and diluted net loss
  per share:</p>
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="80%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left height="13" width="59%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td height="13" width="0%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=middle colspan=8 height="13">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Three
        Months Ended March 31, </font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="59%" height="16">
      <div
      ><font face="Times New Roman, Times, serif"><font face="Times New Roman, Times, serif"><font size="2"><font size="3"><font size="3"></font></font></font></font></font></div>
    </td>
    <td width="0%" height="16"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="16">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2008</font></div>
    </td>
    <td width="1%" height="16"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="2%" height="16"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="16">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2007</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Numerator:</font><font size="3" face="Times New Roman, Times, serif"></font></div>
    </td>
    <td width="0%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left width="2%"><font face="Times New Roman, Times, serif" size="3"></font>
    </td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">
      </font></td>
    <td valign=bottom noWrap align=left width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3" face="Times New Roman, Times, serif">
      </font></td>
    <td valign=bottom noWrap align=right width="12%"><font size="3" face="Times New Roman, Times, serif">
      </font></td>
    <td valign=bottom noWrap align=left width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
  </tr>
  <tr  valign=bottom>
    <td valign=bottom noWrap align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3">Net loss</font></div>
    </td>
    <td width="0%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3" face="Times New Roman, Times, serif">$&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" width="11%"><font size="3">(958,624</font></td>
    <td valign=bottom noWrap align=left width="2style="border-bottom: 3px double #000000"%" style="border-bottom: 3px double #000000"><font size="3">)</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3" face="Times New Roman, Times, serif">
      &nbsp</font></td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" width="12%"><font size="3" face="Times New Roman, Times, serif">(1,265,801</font></td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">)</font>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left bgcolor="#cceeff" width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td bgcolor="#cceeff" width="0%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=right bgcolor="#cceeff" width="11%"><font size="3" face="Times New Roman, Times, serif">
      </font></td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td bgcolor="#cceeff" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td bgcolor="#cceeff" width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%"><font size="3" face="Times New Roman, Times, serif">
      </font></td>
    <td valign=bottom noWrap align=right bgcolor="#cceeff" width="12%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=left width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Denominator:</font></div>
    </td>
    <td width="0%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left width="2%"><font face="Times New Roman, Times, serif" size="3"></font>
    </td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=left width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3" face="Times New Roman, Times, serif">
      </font></td>
    <td valign=bottom noWrap align=right width="12%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=left width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3"></font><font size="3">Weighted average common shares
        outstanding used in computing net loss per share:</font></div>
    </td>
    <td bgcolor="#cceeff" width="0%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=right bgcolor="#cceeff" width="11%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td bgcolor="#cceeff" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td bgcolor="#cceeff" width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%"><font size="3" face="Times New Roman, Times, serif">
      </font></td>
    <td valign=bottom noWrap align=right bgcolor="#cceeff" width="12%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=left width="2%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        &nbsp;&nbsp; </font><font size="3">Basic</font></div>
    </td>
    <td width="0%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 3px double #000000"><font size="3">32,012,798</font></td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp
      </font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp
      </font></td>
    <td noWrap align=right width="11%" style="border-bottom: 3px double #000000"><font size="3">31,872,223</font></td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
  </tr>
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td noWrap align=left bgcolor="#cceeff" width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        &nbsp;&nbsp; </font><font size="3">Diluted</font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">
        </font></div>
    </td>
    <td bgcolor="#cceeff" width="0%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td style="border-bottom: 3px double #000000" bgcolor="#cceeff" width="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td style="border-bottom: 3px double #000000" align="right" bgcolor="#cceeff" width="11%"><font size="3">32,012,798</font></td>
    <td align="left" valign="bottom" bgcolor="#cceeff" style="border-bottom: 3px double #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td bgcolor="#cceeff" width="1%"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td bgcolor="#cceeff" width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td style="border-bottom: 3px double #000000" bgcolor="#cceeff" width="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td style="border-bottom: 3px double #000000" align="right" bgcolor="#cceeff" width="11%"><font size="3">31,872,223</font></td>
    <td align="left" valign="bottom" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left bgcolor="#FFFFFF" width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font face="Times New Roman, Times, serif"><font face="Times New Roman, Times, serif"><font size="3"><font size="3">Net
        loss per share:</font></font></font></font></div>
    </td>
    <td bgcolor="#FFFFFF" width="0%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left bgcolor="#FFFFFF" width="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right bgcolor="#FFFFFF" width="11%"><font size="3" face="Times New Roman, Times, serif">
      </font></td>
    <td valign=bottom noWrap align=left bgcolor="#FFFFFF" width="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td bgcolor="#FFFFFF" width="1%"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td bgcolor="#FFFFFF" width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left bgcolor="#FFFFFF" width="2%"><font size="3" face="Times New Roman, Times, serif">
      </font></td>
    <td valign=bottom noWrap align=right bgcolor="#FFFFFF" width="12%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign=bottom noWrap align=left width="2%" bgcolor="#FFFFFF" ><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        &nbsp;&nbsp; </font><font size="3">Basic</font></div>
    </td>
    <td width="0%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" width="11%"><font size="3" face="Times New Roman, Times, serif">(0.03</font></td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">)
      </font></td>
    <td valign="bottom" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td valign="bottom" width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3" face="Times New Roman, Times, serif">$
      </font></td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" width="12%"><font size="3" face="Times New Roman, Times, serif">(0.04</font></td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">)</font>
    </td>
  </tr>
  <tr valign=bottom>
    <td noWrap align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        &nbsp;&nbsp; </font><font size="3">Diluted</font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">
        </font></div>
    </td>
    <td width="0%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" width="11%"><font size="3" face="Times New Roman, Times, serif">(0.03</font></td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">)
      </font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"></font>
    </td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">$
      </font></td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" width="12%"><font face="Times New Roman, Times, serif" size="3">(0.04</font></td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">)</font>
    </td>
  </tr>
</table>
<p><br>
  For the quarters ended March 31, 2008 and 2007, the diluted net loss per share
  is equal to the basic net loss per share because the Company experienced losses
  in these periods. Thus no potential common shares underlying stock options or
  warrants have been included in the net loss per share calculation, as their
  effect is anti-dilutive. Options and warrants to purchase 11,701,201 and 10,373,128
  shares of common stock at March 31, 2008 and 2007, respectively, have been omitted
  from the net loss per share calculation.</p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">9<br>
  </font> </p>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><b>NOTE 9 - Taxes</b></p>
<p>Deferred income tax reflects the net tax effects of temporary differences between
  the carrying amount of assets and liabilities for financial reporting purposes
  and the amount used for income tax purposes. Deferred tax expense of $7,985
  and $7,988 for the three months ended March 31, 2008 and 2007, respectively,
  and the corresponding deferred tax liability shown on the Company's balance
  sheet, is related entirely to the deferred tax liability on the portion of the
  Company's goodwill amortized for tax purposes. Due to the indefinite characteristic
  of this deferred tax liability, it cannot be offset against deferred tax assets,
  and furthermore, this deferred tax liability may never reverse. The Company
  has not generated taxable income in any periods in any jurisdiction, foreign
  or domestic. The Company maintains a full valuation allowance for all other
  components of deferred tax assets. </p>
<p>On January 1, 2007, the Company adopted Financial Accounting Standards Board
  Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - An Interpretation
  of FASB Statement No. 109," ("FIN 48"). FIN 48 prescribes a recognition threshold
  that a tax position is required to meet before being recognized in the financial
  statements, and provides guidance on derecognition, measurement, classification,
  interest and penalties, accounting in interim periods, disclosure, and transition
  issues. There were no adjustments to the financial statements as a result of
  the adoption of FIN 48. At December 31, 2007, the Company has an unrecognized
  tax benefit of approximately $595,000, which did not change significantly during
  the three months ended March 31, 2008. The application of FIN 48 does not result
  in a change to retained earnings, as the unrecognized tax benefit would be fully
  offset by the application of a valuation allowance. Future changes in the unrecognized
  tax benefit will have no impact on the effective tax rate due to the existence
  of the valuation allowance. It is the Company's policy to include interest and
  penalties related to tax positions as a component of income tax expense. No
  interest was accrued for the period ended March 31, 2008.</p>
<p>The Company files its tax returns as prescribed by the tax laws of the jurisdictions
  in which it operates. The Company is not currently under audit in any of its
  jurisdictions where income tax returns are filed. The tax years 1992 to 2007
  remain open to examination by the major domestic taxing jurisdictions to which
  the Company is subject, and for the years 2001 to 2007 for the international
  taxing jurisdictions to which the Company is subject.<br>
  <br>
</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">10<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=mda></a></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 Quarterly Report
  contains forward-looking statements within the meaning of Section 27A of the
  Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
  Act of 1934, as amended. These statements include statements forecasting future
  financial results and operating activities, market acceptance of our products,
  expectations for general market growth of handheld computers and other mobile
  computing devices, growth in demand for our products, expansion of the markets
  that we serve, expansion of the distribution channels for our products, adoption
  of our embedded products by third party manufacturers of electronic devices,
  and the timing of the introduction and availability of new products, as well
  as other forecasts discussed under "Management's Discussion and Analysis of
  Financial Condition and Results of Operations." Words such as "may," "will,"
  "predicts," "anticipates," "expects," "intends," "plans," "believes," "seeks,"
  "estimates," variations of such words, and similar expressions are intended
  to identify such forward-looking statements. Such forward-looking statements
  are based on current expectations, estimates, and projections about our industry,
  management's beliefs, and assumptions made by management. These forward-looking
  statements are not guarantees of future performance and are subject to certain
  risks, uncertainties, and assumptions that are difficult to predict; therefore,
  actual results and outcomes may differ materially from what is expressed or
  forecasted in any such forward-looking statements. Factors that could cause
  actual results and outcomes to differ materially include, but are not limited
  to: the risk of delays in the availability of our products due to technological,
  market or financial factors including the availability of necessary working
  capital; our ability to successfully develop, introduce and market future products;
  our ability to effectively manage and contain our operating costs; the availability
  of announced third-party handheld computer hardware and software that our products
  are intended to work with; product delays associated with new model introductions
  and product changeovers by the makers of products that our products are intended
  to work with; continued growth in demand for handheld computers; market acceptance
  of emerging standards such as Bluetooth and Wireless LAN and of our related
  connection, data collection, and mobile handheld computer products; the ability
  of our strategic relationships to benefit our business as expected; our ability
  to enter into additional distribution relationships; or other factors described
  in this Form 10-Q including "Part II, Item 1A. Risk Factors" and recent Form
  8-K and Form 10-K reports filed with the Securities and Exchange Commission.
  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><font face="Times New Roman, Times, serif" size="3"><i>You should read the
  following discussion in conjunction with the interim condensed financial statements
  and notes included elsewhere in this report, the Company's annual financial
  statements in the Form 10-K, and other information contained in other reports
  and documents filed from time to time with the Securities and Exchange Commission.</i></font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Revenues<br>
  </b></font><br>
  We produce mobile computing products which are combined with third-party application
  software to create mobile system solutions that serve the Business Mobility
  market. Mobile systems solutions typically consist of a handheld computer, data
  collection and connectivity peripherals, and third-party vertical applications
  software. We have historically offered a wide range of data collection, connectivity
  peripheral, and embedded products for use with mobile computing devices offered
  by third-parties. In January 2007, we began doing business as Socket Mobile,
  Inc. to emphasize our commitment to mobile computing, and formally changed our
  name in April 2008. In June 2007, we introduced our first mobile handheld computer,
  the SoMo&#153;650, and began offering this mobile handheld computer and our
  peripherals for use with third-party vertical applications software. Our data
  collection and connectivity peripheral products are used with a variety of handheld
  computers, including our SoMo 650 mobile handheld computer, and with tablet
  computers, notebook computers and handheld computers with integrated phones
  that use Windows Mobile, Windows XP, RIM Blackberry, Palm, Symbian 60 and Symbian
  80 operating systems.</p>
<p><br>
  <br>
</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">11<br>
  </font> </p>
<p align=center>
<hr width="100%">
<p><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font></p>
<p>Our focus is business customers in the mobile marketplace. Our overall company
  brand identity and positioning goal is to become the leading provider of easy-to-deploy
  Business Mobility systems and peripherals. The guiding principles that we follow
  in developing our mobile handheld and peripheral products for the Business Mobility
  computing market are stable and expandable computing devices with industry standard
  expansion form factors, compact design, low battery power consumption to extend
  time between charges, ease of use, interoperability, and quality. Our mobile
  handheld computing products have been designed to address the Business Mobility
  market for a handheld computer that is neither a consumer-oriented handheld
  device nor a heavy duty industrial device. Our mobile handheld computer is easy
  to customize and integrate with peripherals and information systems and has
  an expected product life cycle of three to five years which meets the needs
  of businesses for longer deployments than have been available with most consumer-oriented
  handheld devices.</p>
<p>We work with more than 180 software integration companies that are offering
  or developing vertical application software for use with handheld computers.
  Examples of these vertical applications include patient medication administration
  within the health care industry, retail merchandising such as managing inventory
  on retail store shelves, sales and field force automation involving the collection
  and processing of orders or service information from remote locations by sales
  and service personnel, asset management and inventory control for assets having
  bar codes or radio frequency identification tags, and mobile point of sale applications.
  These mobile solutions are designed to improve the productivity of business
  enterprises by automating manual tasks, improving the quality of information
  collected, and enhancing mobile productivity by processing and transferring
  information from remote locations and mobile devices to the business enterprise,
  and then if required, back to the remote locations and mobile devices. </p>
<p>Most of our products, except our OEM embedded products, are sold through distributors
  and resellers that serve business customers. Our OEM embedded products are sold
  directly to the manufacturers of devices in which our products are embedded.
  The geographic regions we serve include the Americas, Europe, the Middle East,
  Africa and Asia Pacific. Total revenues for the first quarter of 2008 were $6.2
  million, an increase of 11% from revenues of $5.5 million in the first quarter
  of 2007.<br>
  <br>
</p>
<p>&nbsp; </p>
<p align=center><font face="Times New Roman, Times, serif" size="3">12<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=mda></a></font>
<p>Our revenues in the comparable three month periods may be classified into three
  broad product families:</p>
<ul>
  <li>Mobile handheld computer products;</li>
  <li>Mobile peripheral products, including
    <ul>
      <li>Data collection products,</li>
      <li>Connectivity products,</li>
      <li>Serial interface products, and </li>
    </ul>
  </li>
  <li>OEM embedded products.</li>
</ul>
<p>Our <i>mobile handheld computer products</i> have been designed to address
  the Business Mobility market for a handheld computer that is neither a consumer-oriented
  handheld device nor a heavy duty industrial device. Our initial model, the SoMo
  650 (SoMo is derived from Socket Mobile), introduced in June 2007, features
  the Microsoft Windows Mobile 5.0 for Pocket PC operating system to ensure a
  high level of mobile application compatibility and to give workers a familiar
  computing environment. The SoMo 650 is easy to customize and integrate with
  peripherals and information systems and has an expected product life cycle of
  three to five years which meets the needs of businesses for longer deployments
  than have generally been available with most consumer-oriented handheld devices.
  Our mobile handheld computer's features include Wireless LAN and Bluetooth,
  a fast processor, a large, bright screen display, large amounts of SDRAM and
  flash memory, extended battery life, programmable action buttons to activate
  peripheral devices, reinforced CompactFlash and SDIO card slots, and a durable
  case. Additional models are in development that will run the Windows Mobile
  6 Classic operating system, add multiple language support, enable extended outdoor
  use, and offer specialized capabilities oriented to the needs of specific vertical
  markets. The SoMo 650 was specifically designed without an integrated mobile
  phone as most solutions involving our products use Bluetooth or Wireless LAN
  connections for data communications and do not require an integrated mobile
  phone. Mobile handheld computer products represented approximately 11% of our
  revenue for the three months ended March 31, 2008.</p>
<p>Our mobile peripheral products consist of <i>data collection products, connectivity
  products, and serial interface products</i>, which together represented approximately
  58% of our revenues for the three months ended March 31, 2008 compared to 80%
  of our revenues for the same period one year ago.</p>
<p>Our <i>data collection products</i> enable the electronic collection of data
  from bar codes, radio frequency identification tags, or magnetic stripes and
  consist of: </p>


<ul>
  <li> bar code scanning products that plug into or connect wirelessly to handheld
    computers, tablet computers, notebook computers, and handheld computers with
    integrated phones that use Windows Mobile, Windows XP, Windows Tablet, RIM
    Blackberry, Palm, or Symbian 60 or Symbian 80 operating systems, and turn
    these devices into portable bar code scanners that can be used in various
    retail and industrial workplaces; </li>
  <li>plug-in radio frequency identification products that read radio frequency
    identification tags; </li>
  <li>a combination plug-in bar code scanner and radio frequency identification
    reader; and </li>
  <li><font face="Times New Roman, Times, serif" size="3">a </font><font face="Times New Roman, Times, serif" size="3">plug-in
    magnetic stripe reader.</font></li>
</ul>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">13<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=mda></a></font>
<p>We have developed extensive bar code scanning software called SocketScan that
  supports all of our data collection products, and have software developer kits
  that assist third-party developers in integrating our SocketScan software and
  our hardware products into their applications and solutions. Our bar code scanning
  products include CompactFlash and SDIO plug-in bar code scanners for linear
  and two-dimensional bar code scanning, along with a cordless handheld bar code
  scanner and a ring scanner worn on the index finger, both of which connect to
  computing systems using the Bluetooth standard for short-range wireless connectivity.
  Data collection products represented approximately 41% of our revenues for the
  three months ended March 31, 2008 compared to 58% of our revenues for the same
  period one year ago.</p>
<p>Our <i>connectivity products</i> are connection devices that can be plugged
  into standard expansion slots in handheld computers, tablet computers, and notebook
  computers that use Windows Mobile, Windows XP, or Windows Tablet operating systems.
  These products allow users to connect their devices via Ethernet or telephone
  to communicate with other networks and devices such as desktop computers, other
  handheld, tablet, and notebook computers, handheld computers with integrated
  phones, and printers. Our connectivity products include: </p>


<ul>
  <li>modems for telephone connections that connect over a cable, and a cordless
    modem that utilizes Bluetooth wireless technology to connect a telephone to
    a Bluetooth-enabled computer or other device; </li>
  <li>Ethernet cards for local area network connections that connect over a cable;
    and</li>
  <li>accessory products such as batteries and cables.<br>
  </li>
</ul>
<p align="left">Connectivity products represented approximately 8%of our revenues
  for the three months ended March 31, 2008 compared to 13% of our revenues for
  the same period one year ago.</p>
<p align="left">Our <i>serial interface products</i> enable the connection of
  a mobile computer to electronic devices either as a plug-in card (one, two or
  four ports) connecting over cables, or wirelessly over a Bluetooth network.
  We have recently introduced a USB to serial connector to enable a serial connection
  through a USB interface. Serial interface products represented approximately
  9% of our revenues in each of the three months ended March 31, 2008 and 2007.</p>
<p align="left">Our <i>OEM embedded products</i> consist of Bluetooth and Wireless
  LAN modules and plug-in cards used primarily by OEMs of handheld computers and
  other devices to build wireless connection functions into their products using
  the Bluetooth and Wireless LAN standards for wireless connectivity. Our plug-in
  cards and modules using the Bluetooth standard for short-range wireless connectivity
  include extensive communications software enabling the use of these products,
  as do our plug-in cards for connecting to local wireless networks using the
  Wireless LAN 802.11b/g (or Wi-Fi) standards. We have recently added Cisco Compatible
  Extensions (CCX) 4.0 certification to our Wireless LAN software to enable our
  Wireless LAN products to be compatible with a Cisco Wireless LAN infrastructure.
  Bluetooth and Wireless LAN connection functions are being built into many third-party
  mobile devices, which may reduce the demand for our plug-in products through
  expansion slots but may increase the demand for our Bluetooth and Wireless LAN
  modules and embedded plug-in cards. OEM embedded products represented approximately
  31% of our revenues for the three months ended March 31, 2008 compared to 20%
  of our revenues for the same period one year ago. <br>
</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">14<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=left>Our revenues by product family for the three months ended March
  31, 2008 and 2007, and the corresponding increase or decrease in revenues for
  the comparable periods are shown in the following table:
<p align=left><br>
<table style="MARGIN-TOP: 6pt; FONT-SIZE: 10pt" cellspacing=0 cellpadding=0
width="90%" align=center border=0>
  <tr class="border">
    <td colspan=2 height="20" valign="bottom"  ><font size="3"><i>(revenues in
      thousands)</i></font></td>
    <td height="20" valign="bottom" width="3%"  >&nbsp;</td>
    <td noWrap align=middle colspan=11 height="20">
      <div align="center"><font size="3">Three months ended March 31,</font></div>
    </td>
    <td align=right style="border-bottom: 1px solid #000000" width="1%%" valign="bottom">
      <div align="left"><font size="3"><font size="3"></font></font></div>
    </td>
    <td noWrap align=middle colspan=2 height="20" >
      <div align="center"><font face="Times New Roman, Times, serif" size="3">Increase</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td colspan="2" height="8"style="border-bottom: 1px solid #000000"><font size="3"></font>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3">Product
        family: </font></div>
    </td>
    <td height="8" width="3%">&nbsp;</td>
    <td align="center" colspan="5" style="border-bottom: 1px solid #000000" height="8"><font face="Times New Roman, Times, serif" size="3">2008</font><font size="3"></font><font size="3"></font></td>
    <td align=left width="1%">&nbsp;</td>
    <td align=right style="border-bottom: 1px solid #000000" colspan="5">
      <div align="center"><font size="3"><font size="3"></font></font><font size="3">2007</font></div>
    </td>
    <td align=right style="border-bottom: 1px solid #000000" width="1%%">
      <div align="left"><font size="3"><font size="3"></font></font></div>
    </td>
    <td align="center" style="border-bottom: 1px solid #000000" height="8" colspan="2"><font face="Times New Roman, Times, serif" size="3">(Decrease)</font></td>
  </tr>
  <tr>
    <td colspan="2" bgcolor="#cceeff"><font size="3"></font>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        </font><font size="3">Mobile handheld computer products</font></div>
    </td>
    <td width="3%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font size="3">$</font></td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">675</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" bgcolor="#cceeff">
      <div align="right"><font size="3">11</font></div>
    </td>
    <td width="2%" valign="bottom" bgcolor="#cceeff"><font size="3">%</font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font size="3">$</font></td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">---</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" bgcolor="#cceeff">
      <div align="right"><font size="3">---</font></div>
    </td>
    <td width="2%" valign="bottom" bgcolor="#cceeff"><font size="3">%</font></td>
    <td valign=bottom align=left width="1%%" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">n/a</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="2"><font size="3"></font>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        </font><font size="3"></font><font size="3">Mobile peripheral products:</font></div>
    </td>
    <td width="3%">&nbsp;</td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="1%"><font size="3"></font></td>
    <td valign=bottom align=right style="border-bottom: 1px solid #000000" width="5%"><font size="3">
      </font></td>
    <td valign=bottom align=right style="border-bottom: 1px solid #000000" width="1%"><font size="3"></font></td>
    <td valign=bottom align=right style="border-bottom: 1px solid #000000" width="3%">
      <div align="right"><font size="3"></font></div>
    </td>
    <td valign=bottom align=right style="border-bottom: 1px solid #000000" width="2%">
      <div align="left"><font size="3"><font size="3"></font></font></div>
    </td>
    <td align=right style="border-bottom: 1px solid #000000" width="1%"><font size="3"></font></td>
    <td valign=bottom align=right style="border-bottom: 1px solid #000000" width="1%"><font size="3"></font></td>
    <td align=right style="border-bottom: 1px solid #000000" width="5%"><font size="3">
      </font></td>
    <td valign=bottom align=right style="border-bottom: 1px solid #000000" width="1%"><font size="3"></font></td>
    <td align=right style="border-bottom: 1px solid #000000" width="3%">
      <div align="right"><font size="3"></font></div>
    </td>
    <td valign=bottom align=right style="border-bottom: 1px solid #000000" width="2%"><font size="3"></font></td>
    <td valign=bottom align=right style="border-bottom: 1px solid #000000" width="1%%"><font size="3"></font></td>
    <td align=right style="border-bottom: 1px solid #000000" width="5%"><font size="3">
      </font></td>
    <td valign=bottom align=right style="border-bottom: 1px solid #000000" width="1%"><font size="3"></font></td>
  </tr>
  <tr>
    <td colspan="2" bgcolor="#cceeff"><font size="3"></font>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        </font><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        </font><font size="3"></font><font size="3">Data collection</font></div>
    </td>
    <td width="3%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">2,505</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" bgcolor="#cceeff">
      <div align="right"><font size="3">41</font></div>
    </td>
    <td width="2%" valign="bottom" bgcolor="#cceeff">
      <div align="left"><font size="3"><font size="3">%</font></font></div>
    </td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">3,235</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" bgcolor="#cceeff">
      <div align="right"><font size="3">58</font></div>
    </td>
    <td width="2%" valign="bottom" bgcolor="#cceeff">
      <div align="left"><font size="3">%</font></div>
    </td>
    <td valign=bottom align=left width="1%%" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">(23</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3">%)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="2"><font size="3"></font>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        </font><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        </font><font size="3"></font><font size="3">Connectivity</font></div>
    </td>
    <td width="3%">&nbsp;</td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%"><font size="3">469</font></td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom">
      <div align="right"><font size="3">8</font></div>
    </td>
    <td width="2%" valign="bottom">
      <div align="left"><font size="3"><font size="3">%</font></font></div>
    </td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td noWrap align=right width="5%"><font size="3">689</font></td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom">
      <div align="right"><font size="3">13</font></div>
    </td>
    <td width="2%" valign="bottom">
      <div align="left"><font size="3">%</font></div>
    </td>
    <td valign=bottom align=left width="1%%"><font size="3"></font></td>
    <td noWrap align=right width="5%"><font size="3">(32</font></td>
    <td width="1%" valign="bottom"><font size="3">%)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="2" height="10" bgcolor="#cceeff"><font size="3"></font>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        &nbsp;&nbsp; </font><font size="3"></font><font size="3"></font><font face="Times New Roman, Times, serif" size="3">Serial
        interface </font></div>
    </td>
    <td height="10" width="3%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" height="10" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%" height="10" bgcolor="#cceeff"><font size="3">572</font></td>
    <td width="1%" valign="bottom" height="10" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" height="10" bgcolor="#cceeff">
      <div align="right"><font size="3">9</font></div>
    </td>
    <td width="2%" valign="bottom" height="10" bgcolor="#cceeff">
      <div align="left"><font size="3"><font size="3">%</font></font></div>
    </td>
    <td valign=bottom align=left width="1%" height="10" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" height="10" bgcolor="#cceeff"><font size="3"></font></td>
    <td noWrap align=right width="5%" height="10" bgcolor="#cceeff"><font size="3">487</font></td>
    <td valign=bottom noWrap align=left width="1%" height="10" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" height="10" bgcolor="#cceeff">
      <div align="right"><font size="3">9</font></div>
    </td>
    <td width="2%" valign="bottom" height="10" bgcolor="#cceeff">
      <div align="left"><font size="3">%</font></div>
    </td>
    <td valign=bottom align=left width="1%%" height="10" bgcolor="#cceeff"><font size="3"></font></td>
    <td noWrap align=right width="5%" height="10" bgcolor="#cceeff"><font size="3">17</font><font size="4"></font></td>
    <td width="1%" valign="bottom" height="10" bgcolor="#cceeff"><font size="3">%</font></td>
  </tr>
  <tr>
    <td colspan="2"><font size="3"></font>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        OEM embedded products</font><font size="3"></font><font size="3"></font></div>
    </td>
    <td width="3%">&nbsp;</td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000"><font size="3">&nbsp</font></td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000"><font size="3">1,949</font></td>
    <td align=right style="border-bottom: 1px solid #000000" width="1%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000"><font size="3">31</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">%&nbsp</font></div>
    </td>
    <td valign=bottom align=right style="border-bottom: 1px solid #000000" width="1%"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000"><font size="3">&nbsp</font></td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000"><font size="3">1,137</font></td>
    <td align=right style="border-bottom: 1px solid #000000" width="1%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000"><font size="3">20</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">%&nbsp</font></div>
    </td>
    <td valign=bottom align=left width="1%%"><font size="3"></font></td>
    <td noWrap align=right width="5%" valign="bottom"><font size="3">71</font></td>
    <td width="1%" valign="bottom"><font size="3">%</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="2" bgcolor="#cceeff"><font size="3"></font>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        &nbsp;&nbsp; </font><font size="3">Total</font></div>
    </td>
    <td width="3%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" ><font size="3">$</font></td>
    <td valign=bottom align=right style="border-bottom: 3px double #000000" width="5%" bgcolor="#cceeff" ><font size="3">6,170</font></td>
    <td align=right style="border-bottom: 1px solid #000000" width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align=right style="border-bottom: 3px double #000000" width="5%" bgcolor="#cceeff" ><font size="3">100</font></td>
    <td width="2%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font size="3">%</font></td>
    <td align=left width="1%" height="14" bgcolor="#cceeff"><font size="3"></font></td>
    <td align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" ><font size="3">$</font></td>
    <td align=right style="border-bottom: 3px double #000000" width="5%" bgcolor="#cceeff" ><font size="3">5,548</font></td>
    <td align=right style="border-bottom: 1px solid #000000" width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align=right style="border-bottom: 3px double #000000" width="5%" bgcolor="#cceeff" ><font size="3">100</font></td>
    <td width="2%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font size="3">%</font></td>
    <td align=left width="1%%" height="14" bgcolor="#cceeff"><font size="3"></font></td>
    <td noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">11</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3">%</font></td>
  </tr>
</table>
<p>Our mobile handheld computer product revenues in the first quarter of 2008
  were $675,000. We did not have any revenues in this category in the comparable
  period in 2007 as shipments of our first mobile handheld computer, the SoMo
  650, to customers in our distribution channel began in the second quarter of
  2007. In the third quarter of 2007 we completed our objectives of ramping up
  production and fully stocking our distribution channel to enable widespread
  customer evaluation, qualification, and deployment to commence.</p>
<p>Our data collection product revenues in the first quarter of 2008 were $2.5
  million, a decrease of 23% compared to revenues of $3.2 million in the first
  quarter of 2007. Revenue decreases of $0.5 million in sales of our primary scanning
  product, the CompactFlash In-Hand Scan card, and decreases of $0.3 million in
  sales of our Cordless Ring Scanner, were partially offset by increases in sales
  of our SDIO In-Hand Scan card. Revenues from our Cordless Hand Scanner were
  flat in the first quarter of 2008 compared to the same period one year ago.
  Data collection revenues were slowed in the first quarter of 2008 due in part
  to delayed availability of new handheld computer models originally announced
  by a major handheld computer manufacturer in the third quarter of 2007, which
  did not begin shipping until February 2008. Such announcements and delayed timing
  of product availability typically slow customer deployments of our peripheral
  products because of the time needed by customers to evaluate or adopt the new
  handheld computer models. </p>
<p>Our connectivity product revenues in the first quarter of 2008 were $469,000,
  a decline of 32% compared to revenues of $689,000 in the first quarter of 2007.
  The decline resulted from reduced sales volumes of our Modem plug-in products
  and Ethernet plug-in products due to reduced corporate deployment of these wired
  connection solutions.</p>
<p align=left>Our serial interface product revenues in the first quarter of 2008
  were $572,000, an increase of 17% compared to revenues of $487,000 in the first
  quarter of 2007. Revenue increases were from sales of our standard serial PC
  card products. Our standard peripheral connection cards are primarily sold to
  connect peripheral devices or other electronic equipment to notebook computers.
  Sales of our CompactFlash card product and cordless Bluetooth serial adapter
  product were flat in the comparable periods.
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">15<br>
  </font>
<p align=center>
<hr width="100%">
<p><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
</p>
<p>Our OEM embedded product revenues in the first quarter of 2008 were $1.9 million,
  an increase of 71% compared to $1.1 million in the first quarter of 2007. Revenue
  increases of $0.8 million in sales of our Bluetooth modules were due to a recovery
  in market conditions that existed in early 2007. In the first quarter of 2007
  our customers in the industrial ruggedized market segment experienced pronounced
  increased competition due to a short-termed aggressive price discounting by
  a major competitor, a trend which adversely affected our related Bluetooth module
  revenues in the first quarter of 2007, but improved steadily in the following
  second, third, and fourth quarters of 2007, and through the first quarter of
  2008, as the industrial ruggedized market segment recovered following cessation
  of the aggressive discounting. Revenues related to our Wireless LAN plug-in
  cards and Bluetooth plug-in cards were flat in the first quarter of 2008 compared
  to the same period one year ago, primarily due to these wireless technologies
  becoming increasingly already built-in by handheld computer manufacturers.</p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Gross Margins<br>
  </b></font>Our gross margins for the first quarter of 2008 were 49% compared
  to 50% in the comparable period one year ago. We generally price our products
  as a markup from our cost, and we offer discount pricing for higher volume purchases.
  Reductions in overall margins in the first quarter of 2008 compared to the same
  period one year ago are due primarily to discounts on volume purchases of our
  Bluetooth modules by customers in our OEM embedded business segment and sales
  of our mobile handheld computer which did not began shipping until late in the
  second quarter of 2007. Initial margins on our mobile handheld computer product
  are below our average product margins. </p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Research and Development
  Expense<br>
  </b></font>Research and development expense in the first quarter of 2008 was
  $1.2 million, a decrease of 17% compared to $1.4 million in the first quarter
  of 2007. Decreases of $0.2 million are attributable to the costs incurred in
  the first quarter of 2007 related to the development of our SoMo 650 mobile
  handheld computer, the development of which was begun in the fourth quarter
  of 2006 with the majority of the development expense concluded by the end of
  the first quarter of 2007. Additional decreases were from reductions in consulting
  and professional fees related to fewer projects requiring the use of external
  technical expertise, and from reductions in equipment costs due to higher amounts
  of depreciation expense related to capitalized tooling in the first quarter
  of 2007. Partially offsetting these decreases were increases in personnel costs
  from staffing in-house expertise for technical skills formally obtained from
  outside consulting and professional service providers. Expenses are expected
  to increase in the second quarter of 2008 from first quarter levels.</p>
<p align=left><b>Sales and Marketing Expense</b><br>
  Sales and marketing expense for the first quarter of 2008 was $1.9 million,
  an increase of 10% compared to $1.8 million in the first quarter of 2007. Increases
  in personnel costs in the comparable three month periods were due to the additions
  of key personnel beginning in the second quarter of 2007, including our Senior
  VP of Sales & Marketing, as we upgraded and added sales resources in North America
  to begin selling our new SoMo 650 mobile handheld computer, which began shipping
  late in the second quarter of 2007, and to recruit and develop new third-party
  channel partners. Additional increases were related to higher levels of participation
  at key tradeshows in the first quarter of 2008 compared to the same period one
  year ago. Expenses are expected to increase in the second quarter of 2008 from
  first quarter levels due to the additions of sales personnel and related anticipated
  increases in travel expense.
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">16<br>
  </font>
<p align=center>
<hr width="100%">
<p><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
</p>
<p><font face="Times New Roman, Times, serif" size="3"><b>General and Administrative
  Expense<br>
  </b></font>General and administrative expense for the first quarter of 2008
  was $805,000, a decrease of 6% compared to $857,000 in the first quarter of
  2007. Decreases in the first quarter of 2008 were primarily from reduced stock-based
  compensation expense as older grants with higher valuations compared to more
  current grants, became fully expensed. Expenses are expected to decline in the
  second quarter of 2008 from first quarter levels due to the absence of professional
  fees expense related to costs of our annual audit historically expensed in the
  fourth and first quarters.</p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Amortization of Intangibles<br>
  </b></font>In July 2004 we acquired a patent which covers the design and functioning
  of plug-in bar code scanners, bar code imagers, and radio frequency identification
  products. The patent was purchased for $600,000 and has been capitalized as
  an intangible asset. The patent is being amortized on a straight line basis
  over a ten-year period. Intangible assets of $571,000 remaining from a prior
  acquisition in 2000 consist of developed software and technology with estimated
  lives at the time of acquisition of 8.5 years. Amortization charges for the
  three months ended March 31, 2008 for all acquired intangibles were $32,000
  compared to $34,000 for the same period one year ago.</p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Interest Income and
  Expense<br>
  </b></font>Interest income reflects interest earned on cash balances. Interest
  income in the first quarter of 2008 was $12,000 compared to interest income
  of $38,000 in the comparable period one year ago. Lower interest income in the
  first quarter of 2008 reflects lower average cash balances combined with lower
  average rates of return.</p>
<p>Interest expense in the first quarter of 2008 was $13,000 compared to interest
  expense of $3,000 in the same period one year ago. Interest expense is related
  to interest on equipment lease financing obligations and interest on amounts
  drawn on our bank lines of credit and term loan. We used our bank lines of credit
  only at the end of the first quarter 2008 and at the end of each quarter in
  2007. The term loan was advanced at the end of the second quarter of 2007 and
  is being repaid in 36 monthly installments which began in July of 2007. Higher
  interest expense in the three months ended March 31, 2008 compared to the same
  period one year ago is due to interest on our term loan partially offset by
  lower interest rates on advances on our lines of credit at the end of the first
  quarter 2008 compared to the same time one year ago. Interest expense is expected
  to increase in the second quarter of 2008 from first quarter levels due to an
  increase in the average amounts outstanding on our bank lines of credit.</p>
<p><b>Taxes</b><br>
  Deferred income tax reflects the net tax effects of temporary differences between
  the carrying amount of assets and liabilities for financial reporting purposes
  and the amount used for income tax purposes. Deferred tax expense of $8,000
  in each of the three month periods ended March 31, 2008 and 2007, and the corresponding
  deferred tax liability shown on the Company's balance sheet, is related entirely
  to the deferred tax liability on the portion of the Company's goodwill amortized
  for tax purposes. Due to the indefinite characteristic of this deferred tax
  liability, it cannot be offset against deferred tax assets, and furthermore,
  this deferred tax liability may never reverse. The Company maintains a full
  valuation allowance for all other components of deferred tax assets. The Company
  has not generated taxable income in any periods in any jurisdiction, foreign
  or domestic.</p>
<p>&nbsp;</p>
<p></p>
<p align=center><font face="Times New Roman, Times, serif" size="3">17<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p>In June 2006, the Financial Accounting Standards Board ("FASB") issued Interpretation
  No. 48, "Accounting for Uncertainty in Income Taxes - An Interpretation of FASB
  Statement No. 109" ("FIN 48"), to create a single model to address accounting
  for uncertainty in tax positions. FIN 48 clarifies the accounting for income
  taxes by prescribing a minimum recognition threshold a tax position is required
  to meet before being recognized in the financial statements. FIN 48 also provides
  guidance on derecognition, measurement, classification, interest and penalties,
  accounting in interim periods, disclosure and transition. FIN 48 is effective
  for fiscal years beginning after December 15, 2006. The Company adopted FIN
  48 as of January 1, 2007, as required. There were no adjustments to the financial
  statements as a result of the adoption of FIN 48. For additional information
  on taxes see Note 9 to the Condensed Financial Statements.</p>
<p><b>Liquidity and Capital Resources</b><br>
  We were unprofitable in the first quarter of 2008. We were unprofitable in each
  of the quarters of fiscal 2007 and 2006. We were profitable in two quarters
  in 2005, but unprofitable for fiscal year 2005. Fiscal year 2004 was the first
  profitable year in our history, but only to the extent of $288,000. Prior to
  2004, we incurred significant operating losses in each financial period since
  our inception. We may continue to be unprofitable in the foreseeable future.
  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 to fund our operations.</p>
<p>Cash used in operating activities was $1,026,000 in the first quarter of 2008
  compared to cash used in operating activities of $536,000 in the first quarter
  of 2007. Cash used in the first quarter of 2008 resulting from our net loss
  adjusted for non-cash items was $547,000 compared to cash used of $783,000 in
  the first quarter of 2007 from our net loss adjusted for non-cash items. Adjustments
  for non-cash items consisting of depreciation and amortization, amortization
  of intangibles, gains and losses on foreign currency transactions, changes in
  deferred rent, deferred tax expense, and stock-based compensation expense, totaled
  $411,000 in the first quarter of 2008 compared to $483,000 in the first quarter
  of 2007. Changes in working capital balances in the first quarter of 2008 resulted
  in a use of cash of $479,000, and were primarily from increases in accounts
  receivable due to the timing of shipments in the last month of the first quarter
  of 2008 and the timing of collections from key distributors concentrated at
  the end of the immediately preceding quarter, and increases in inventories due
  primarily to stocking of our mobile handheld computer, partially offset by increases
  in accounts payable due to the purchases that led to the increased levels of
  inventories. Changes in working capital balances in the first quarter of 2007
  resulted in a source of cash of $246,000, and were primarily from increases
  in accounts payable and accrued expenses attributable to accrued development
  costs related to our SoMo 650 mobile handheld computer, increased levels of
  inventories, and increases in accrued payroll, partially offset by increases
  in accounts receivable due to a concentration of shipments in the latter part
  of the first quarter 2007 compared to the immediately preceding prior quarter,
  and increases in levels of inventory.</p>
<p>Cash used in investing activities was $105,000 in the first quarter of 2008
  compared to $481,000 in the first quarter of 2007. Higher amounts of investing
  activities in the first quarter of 2007 reflect the costs of leasehold improvements
  related to our corporate headquarters into which we moved at the beginning of
  the first quarter of 2007. Remaining investing activities in each of the periods
  reflects the costs of new computer hardware and software, and tooling costs.</p>
<p>&nbsp;</p>
<P>&nbsp;</P>
<p align=center><font face="Times New Roman, Times, serif" size="3">18<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=left>Cash provided by financing activities was $99,000 and $96,000 in
  the first quarters of 2008 and 2007, respectively. Financing activities in each
  of the comparable periods consisted primarily of a net increase in the amounts
  drawn on our bank lines of credit, proceeds from the exercise of stock options,
  and additions of leased equipment. Additional financing activities in the first
  quarter of 2008 included repayments on our bank term loan, which was advanced
  at the end of June 2007 and is being repaid in 36 monthly installments beginning
  in July 2007.
<p align=left>Our cash balances at March 31, 2008 were $4.0 million, including
  cash of $2.8 million drawn against our bank line of credit and a net balance
  of $0.4 million from the bank term loan, which is being repaid monthly over
  three years beginning in July 2007. In March 2008, we extended our bank line
  of credit agreement, which will now expire on March 24, 2010. 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 our bank
  line will be sufficient to meet our funding requirements at least through March
  31, 2009. If we can return to profitability and revenue growth, we anticipate
  requirements for cash will include funding of higher receivable and inventory
  balances, and increasing expenses, including more employees to support our growth
  and increases in salaries, benefits, and related support costs for employees.
  If we cannot return to 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. Should the need
  arise, there are no assurances that additional capital will be available on
  acceptable terms, if at all, and any such terms may be dilutive to existing
  stockholders. Although we do not anticipate the need to raise additional capital
  at this time to fund our operations, we may raise additional capital if market
  conditions are appropriate.
<p>Our contractual cash obligations at March 31, 2008 are outlined in the table
  below:</p>
<table width="90%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">
  <tr>
    <td colspan="2"><b><font size="3"></font></b></td>
    <td width="4%"><b><font size="3"></font></b></td>
    <td colspan="18" align="center" nowrap class="border" style="border-bottom: 1px solid #000000"><font size="3">Payments
      Due by Period</font></td>
    <td width="1%" class="border"><b><font color="#FF0000" size="3"></font></b></td>
  </tr>
  <tr>
    <td colspan="2" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3">Contractual Obligations</font></div>
    </td>
    <td width="4%"><b><font size="3">&nbsp</font></b></td>
    <td colspan="2" align="center" nowrap class="border" style="border-bottom: 1px solid #000000"><font size="3">Total</font></td>
    <td width="1%" class="border"><b><font color="#FF0000" size="3"></font></b></td>
    <td class="border" width="4%"><b><font color="#FF0000" size="3"></font></b></td>
    <td colspan="2" align="center" nowrap class="border" style="border-bottom: 1px solid #000000"><font size="3">Less
      than<br>
      1 year</font></td>
    <td width="1%" class="border"><b><font color="#FF0000" size="3"></font></b></td>
    <td width="4%" class="border"><b><font color="#FF0000" size="3"></font></b></td>
    <td colspan="2" align="center" nowrap class="border" style="border-bottom: 1px solid #000000"><font size="3">1
      to 3<br>
      years</font></td>
    <td width="1%" class="border"><b><font color="#FF0000" size="3"></font></b></td>
    <td width="4%" class="border"><b><font color="#FF0000" size="3"></font></b></td>
    <td colspan="2" align="center" nowrap class="border" style="border-bottom: 1px solid #000000"><font size="3">4
      to 5<br>
      years</font></td>
    <td width="1%" class="border"><b><font color="#FF0000" size="3"></font></b></td>
    <td width="4%" class="border"><b><font color="#FF0000" size="3"></font></b></td>
    <td colspan="2" align="center" nowrap class="border" valign="bottom" style="border-bottom: 1px solid #000000"><font size="3">More
      than<br>
      5 years</font></td>
    <td colspan="4" width="1%"><b><font size="3"></font></b></td>
  </tr>
  <tr valign="bottom">
    <td colspan="2" align="left" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3"> Capital
        leases</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%"><font size="3"><b></b></font></td>
    <td align="left" bgcolor="#cceeff" width="1%"><font size="3">$</font></td>
    <td align="right" width="8%" nowrap bgcolor="#cceeff"><font size="3">54,300</font></td>
    <td bgcolor="#cceeff" width="1%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td bgcolor="#cceeff" width="4%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3">30,500</font></td>
    <td bgcolor="#cceeff" width="1%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td bgcolor="#cceeff" width="4%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3">23,800</font></td>
    <td bgcolor="#cceeff" width="1%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td bgcolor="#cceeff" width="4%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3">---</font></td>
    <td bgcolor="#cceeff" width="1%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td bgcolor="#cceeff" width="4%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="4%" bgcolor="#cceeff" valign="bottom"><font size="3"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3">---</font></td>
    <td colspan="4" width="1%"><font size="3"></font></td>
  </tr>
  <tr valign="bottom">
    <td colspan="2">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3">Operating
        leases</font></div>
    </td>
    <td width="4%"><font size="3"><b></b></font></td>
    <td align="left" width="1%"><font size="3"><b></b></font></td>
    <td align="right" width="8%" nowrap><font size="3">1,612,800</font></td>
    <td width="1%"><font size="3"></font></td>
    <td width="4%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="1%"><font size="3"></font></td>
    <td align="right" width="8%" nowrap><font size="3">360,300</font></td>
    <td width="1%"><font size="3"></font></td>
    <td width="4%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="1%"><font size="3"></font></td>
    <td align="right" width="8%" nowrap ><font size="3">757,200</font></td>
    <td width="1%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td width="4%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="1%"><font size="3"></font></td>
    <td align="right" width="8%" nowrap><font size="3">495,300</font></td>
    <td width="1%"><font size="3"></font></td>
    <td width="4%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="4%" valign="bottom"><font size="3"></font></td>
    <td align="right" width="8%" nowrap><font size="3">---</font></td>
    <td colspan="4" width="1%"><font size="3"></font></td>
  </tr>
  <tr valign="bottom">
    <td colspan="2" align="left" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3"> Term
        loan, principal and interest</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%"><font size="3"><b></b></font></td>
    <td align="left" bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td align="right" width="8%" nowrap bgcolor="#cceeff"><font size="3">388,800</font></td>
    <td bgcolor="#cceeff" width="1%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td bgcolor="#cceeff" width="4%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3">164,100</font></td>
    <td bgcolor="#cceeff" width="1%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td bgcolor="#cceeff" width="4%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3">224,700</font></td>
    <td bgcolor="#cceeff" width="1%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td bgcolor="#cceeff" width="4%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3">---</font></td>
    <td bgcolor="#cceeff" width="1%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td bgcolor="#cceeff" width="4%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="4%" bgcolor="#cceeff" valign="bottom"><font size="3"></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3">---</font></td>
    <td colspan="4" width="1%"><font size="3"></font></td>
  </tr>
  <tr valign="bottom">
    <td colspan="2">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3"> Unconditional
        purchase obligations with contract manufacturers</font></div>
    </td>
    <td width="4%"><font size="3"><b></b></font></td>
    <td align="left" width="1%" style="border-bottom: 1px solid #000000"><font size="3"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 1px solid #000000"><font size="3">3,669,100</font></td>
    <td width="1%"><font size="3"></font></td>
    <td width="4%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="1%" style="border-bottom: 1px solid #000000"><font size="3"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" nowrap width="8%" style="border-bottom: 1px solid #000000"><font size="3">3,669,100</font></td>
    <td width="1%"><font size="3"></font></td>
    <td width="4%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="1%" style="border-bottom: 1px solid #000000"><font size="3"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" nowrap width="8%" style="border-bottom: 1px solid #000000"><font size="3">---</font></td>
    <td width="1%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td width="4%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="1%" style="border-bottom: 1px solid #000000"><font size="3"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" nowrap width="8%" style="border-bottom: 1px solid #000000"><font size="3">---</font></td>
    <td width="1%"><font size="3"></font></td>
    <td width="4%"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="4%" valign="bottom" style="border-bottom: 1px solid #000000"><font size="3"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" nowrap width="8%" style="border-bottom: 1px solid #000000"><font size="3">---</font></td>
    <td colspan="4" width="1%"><font size="3"></font></td>
  </tr>
  <tr valign="bottom">
    <td colspan="2" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3"> Total
        contractual cash obligations </font></div>
    </td>
    <td width="4%" bgcolor="#cceeff"><font size="3"><b></b></font></td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3">5,725,000</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="4%" bgcolor="#cceeff"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3">4,224,000</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="4%" bgcolor="#cceeff"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3">1,005,700</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td width="4%" bgcolor="#cceeff"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3">495,300</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="4%" bgcolor="#cceeff"><font size="3"><b><font color="#000000"></font></b></font></td>
    <td align="left" width="4%" valign="bottom" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3">---</font></td>
    <td colspan="4" width="1%"><font size="3"></font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Off-Balance Sheet Arrangements<br>
  </b></font>We have no off-balance sheet arrangements as defined in Item 303
  of Regulation S-K.</p>
<p>&nbsp; </p>
<p align=left>&nbsp;
<p align=center><font face="Times New Roman, Times, serif" size="3">19<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=left><b>Recent Accounting Pronouncements<br>
  </b>In September 2006, the FASB issued Statement of Financial Accounting Standards
  No. 157, "Fair Value Measurements" ("SFAS 157"), which establishes a framework
  for measuring fair value and enhanced disclosures about fair value measurements.
  In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, "Effective
  Date of FASB Statement No. 157," which provides for a one year deferral of the
  effective date of SFAS 157 for non-financial assets and non-financial liabilities,
  except those that are recognized or disclosed in the financial statements at
  fair value on a recurring basis. We adopted the provisions of SFAS 157 as of
  January 1, 2008, with respect to our financial assets and liabilities only.
  The adoption of this statement did not have a material impact on our financial
  statements. For additional discussion on fair value measurements see Note 1
  to the Condensed Financial Statements.
<p align=left>In February 2007, the FASB issued SFAS No. 159, "The Fair Value
  Option for Financial Assets and Financial Liabilities" ("SFAS 159"), which permits
  companies to choose to measure certain financial instruments and certain other
  items at fair value. The standard requires that unrealized gains and losses
  on items for which the fair value option has been elected be reported in earnings.
  SFAS 159 is effective for fiscal years beginning after November 15, 2007. We
  adopted SFAS 159 as of January 1, 2008. The adoption of SFAS 159 did not have
  a material impact on our financial statements.
<p align=left>&nbsp;
<p align=center><font face="Times New Roman, Times, serif" size="3">20<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=qqd></a></font>
<p align=left><b>Item 3. Quantitative and Qualitative Disclosures About Market
  Risk</b>
<p align=left><b>Interest Rate Risk</b>
<p align=left>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, 2008, a decline of 1% in interest rates would reduce our quarterly interest
  income by approximately $3,000.
<p align=left>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 first
  quarter of 2008 and at the end of each quarter in fiscal 2007, 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.
<p align=left><b>Foreign Currency Risk</b>
<p align=left>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 employees
  in Euros and British pounds, and we may enter into selected future purchase
  commitments with foreign suppliers that may be paid in the local currency of
  the supplier. We hedge a significant portion of our European receivables balance
  denominated in Euros to reduce the foreign currency risk associated with these
  assets, and we have not been subject to significant losses from material foreign
  currency fluctuations. Based on a sensitivity analysis of our net foreign currency
  denominated assets and subsidiary expenses at the beginning, during and at the
  end of the quarter ended March 31, 2008, an adverse change of 10% in exchange
  rates would result in a decrease in our net income for the first quarter of
  approximately $73,000, if left unprotected. For the first quarter of 2008 the
  total net adjustment for the effects of changes in foreign currency on cash
  balances, collections, payables, and derivatives was a net gain of $9,000. We
  will continue to monitor, assess, and mitigate through hedging activities, the
  risk associated with these exposures.
<p align=left>&nbsp;
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  <font face="Times New Roman, Times, serif" size="3"><a
name=item4></a></font>
<p><b>Item 4T. Controls and Procedures</b> </p>
<p><i>Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures</i></p>
<p>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 (i) recorded,
  processed, summarized and reported within the time periods specified in Securities
  and Exchange Commission rules and forms, and (ii) accumulated and communicated
  to our management, including our Chief Executive Officer and our Chief Financial
  Officer, as appropriate to allow timely decisions regarding required disclosure.</p>
<p><i>Management's Quarterly Report on Internal Control Over Financial Reporting</i></p>
<p>Our management is responsible for establishing and maintaining adequate internal
  control over financial reporting. There are inherent limitations in the effectiveness
  of any internal control, including the possibility of human error and the circumvention
  or overriding of controls. Accordingly, even effective internal control can
  provide only reasonable assurances with respect to financial statement preparation.
  Further because of changes in conditions, the effectiveness of internal control
  may vary over time.</p>
<p>We assessed the effectiveness of the Company's internal control over financial
  reporting as of March 31, 2008. In making this assessment, we used the criteria
  set forth by the Committee of Sponsoring Organizations of the Treadway Commission
  (COSO) in <i>Internal Control - Integrated Framework</i>.</p>
<p>Based on our assessment using those criteria, we believe that, as of March
  31, 2008, our internal control over financial reporting is effective.</p>
<p>This quarterly report does not include an attestation report of the Company's
  registered public accounting firm regarding internal control over financial
  reporting. Management's report was not subject to attestation by the Company's
  registered public accounting firm pursuant to temporary rules of the Securities
  and Exchange Commission that permit the Company to provide only management's
  report in this quarterly report.</p>
<p><i>Changes in Internal Control Over Financial Reporting</i></p>
<p>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.</p>
<p>&nbsp;</p>
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  <font face="Times New Roman, Times, serif" size="3"><a
name=oth></a></font> <font face="Times New Roman, Times, serif" size="3"><a
name=risk></a></font>
<p><b>PART II. OTHER INFORMATION </b> </p>
<p><b>Item 1A. Risk Factors </b></p>
<p align=left>There are no material changes to the risk factors described in Part
  I, "Item 1A. Risk Factors," in our Annual Report on Form 10-K for the fiscal
  year ended December 31, 2007. The risk factor titled, <i>"Our Common Stock will
  become ineligible for listing on the NASDAQ Global Market or alternatively the
  NASDAQ Capital Market if it does not trade at or above $1.00, which would materially
  adversely affect the liquidity and price of our Common Stock,"</i> has been
  expanded to include information regarding the approval by stockholders of a
  proposal which grants to the Board of Directors the authority to initiate a
  reverse stock split in a range from one-for-five to one-for-ten any time through
  December 31, 2008. The presentation of numerical amounts and percentages in
  the following risk factors below titled: <i>"A significant portion of our revenue
  currently comes from two distributors, and any decrease in revenue from these
  distributors could harm our business;" "Our operating results could be harmed
  by economic, political, regulatory and other risks associated with export sales;"
  "The sale of a substantial number of shares of our Common Stock could cause
  the market price of our Common Stock to decline;" and "Volatility in the trading
  price of our Common Stock could negatively impact the price of our Common Stock,"</i>
  have been updated to reflect the first quarter of 2008 information.
<p align=left>The risks described in our Annual Report on Form 10-K and updated
  in this Report on Form 10-Q, are not the only risks facing our Company. Additional
  risks and uncertainties not currently known to us or that we currently deem
  to be immaterial also may materially adversely affect our business, financial
  condition, and operating results.
<p align=left><b>We have a history of operating losses and may not achieve ongoing
  profitability.</b>
<p>We were unprofitable in the first quarter of 2008 and in each of the quarters
  in fiscal years 2007 and 2006. We were profitable in two quarters in 2005, but
  unprofitable for fiscal year 2005. Fiscal year 2004 was the first profitable
  year in our history, but only to the extent of $288,000. Prior to 2004, we incurred
  significant operating losses in each financial period since our inception. To
  achieve ongoing profitability, we must accomplish numerous objectives, including
  growth in our business and 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 and bank line of credit 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.</p>
<p><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></p>
<p>Although we do not anticipate the need to raise additional capital during the
  next twelve months to fund our operations, we may incur operating losses in
  future quarters and may need to raise capital to fund these losses. 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. In addition,
  the availability of our bank line is dependent upon our meeting certain covenants,
  including maintaining minimum levels of tangible net worth. Future operating
  losses could cause us to lose the availability of our bank line as a result
  of becoming non-compliant with these covenants.</p>
<p>&nbsp;</p>
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<p align=left> <b>Our Common Stock will become ineligible for listing on the NASDAQ
  Global Market or alternatively the NASDAQ Capital Market if it does not trade
  at or above $1.00, which would materially adversely affect the liquidity and
  price of our Common Stock.</b>
<p align=left>We are listed on the NASDAQ Global Market. Our continued listing
  is contingent on meeting specific quantitative standards, including a minimum
  closing bid price of $1.00. Our Common Stock has traded below $1.00 for significant
  periods during the last twelve months. In particular, our stock failed to maintain
  a minimum closing bid price of at least $1.00 in the 30 consecutive business
  days prior to December 10, 2007. On December 10, 2007 we received a staff deficiency
  notice from the Listing Qualifications Department of the NASDAQ Stock Market
  which stated that our stock will have to achieve a minimum closing bid price
  of at least $1.00 for at least 10 consecutive business days within 180 calendar
  days, or by June 9, 2008, or else we may be delisted from the NASDAQ Global
  Market. As of May 14, 2008, our Common Stock has not achieved the minimum closing
  bid price of $1.00 on any single day since receipt of the deficiency notice.
  Should we be delisted from the NASDAQ Global Market, we may be eligible for
  listing on the NASDAQ Capital Market, subject to meeting specific quantitative
  standards. If we transfer to the NASDAQ Capital Market, we will need to achieve
  a minimum closing bid price of $1.00 within 180 calendar days of the initial
  listing on the NASDAQ Capital Market.
<p align=left>On April 23, 2008 at the Annual Meeting of Stockholders, our stockholders
  approved a proposal to give the Board of Directors the authority to initiate
  a reverse stock split in a range from one-for-five to one-for-ten any time through
  December 31, 2008, which if implemented, would have the effect of increasing
  the trading price of our Common Stock. The NASDAQ Stock Exchange views the use
  of a reverse stock split as an acceptable method to achieve compliance with
  the minimum closing bid price requirement.
<p align=left>If our Common Stock becomes ineligible for listing on either the
  NASDAQ Global Market or the NASDAQ Capital Market, and is thereafter traded
  only on the over-the-counter market, our stockholders' abilities to purchase
  and sell our Common Stock could be less orderly and efficient and more costly.
  Furthermore, a delisting of our Common Stock could have a materially adverse
  impact on our business operations by damaging our general business reputation,
  impairing our ability to obtain additional capital, reducing the incentives
  that equity ownership is intended to provide to our employees, and causing a
  loss of confidence by investors, suppliers and employees. As a result of the
  negative impact on the liquidity of our Common Stock and on our business, a
  delisting would also likely decrease the market price of our Common Stock and
  increase the volatility of our stock price.
<p>&nbsp;</p>
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<p align=center>&nbsp;
<p><b>If third parties do not produce and sell innovative products with which
  our products are compatible, or if our own line of mobile handheld computers
  is not successful, we may not achieve our sales projections.</b></p>
<p>Our success has been 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. Even if we are successful in marketing and selling our new line
  of mobile handheld computers, our ability to generate increased revenue depends
  significantly on the commercial success of Windows mobile handheld devices,
  particularly the Pocket PC and other devices such as the line of handhelds with
  expansion options offered by Palm, and the adoption of these handheld computers
  for business use. If manufacturers are unable or choose not to ship new products
  such as Pocket PC and other Windows-mobile devices or Palm devices, or experience
  difficulties with new product transitions that cause delays in the market as
  we experienced in the past three years, or if these products, including our
  new line of mobile handheld computers, the first model of which we began shipping
  in June 2007, 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.</p>
<p><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></p>
<p>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 to 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.</p>
<p>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 and compete successfully,
  if we fail to:</p>
<ul>
  <li>identify emerging standards in the field of mobile computing products; <font face="Times New Roman, Times, serif" size="3"><br>
    </font></li>
  <li>enhance our products by adding additional features; <font face="Times New Roman, Times, serif" size="3"><br>
    </font></li>
  <li>invest <font face="Times New Roman, Times, serif" size="3">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>anticipate our end users' needs and technological trends accurately. </li>
</ul>
<p>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 identify trends or make
  the technological advances necessary to be competitive.</p>
<p>&nbsp; </p>
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<p align=left><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>
<p>A significant portion of our revenue comes from two distributors, Tech Data
  Corp. and Ingram Micro, Inc., which together represented approximately 28% and
  37% of our worldwide revenue in the first quarter of 2008 and fiscal year 2007,
  respectively. 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. Either could choose to stop selling some or all of our products at
  any time, and each of these companies also carries our competitors' products.
  If we lose our relationship with Tech Data Corp. or Ingram Micro, Inc., we would
  experience disruption and delays in marketing our products. </p>
<p><b>If the market for mobile computers experiences delays, or fails to grow,
  we will not achieve our sales projections.</b></p>
<p>Substantially all of our peripheral products are designed for use with mobile
  personal computers, including handhelds, notebook computers, tablets and handheld
  computers with integrated phones. If the mobile personal computer industry does
  not grow, if its growth slows, or if product or operating system changeovers
  by mobile computer manufacturers and partners cause delays in the market, as
  we experienced in the past three years, or if the markets for our mobile handheld
  computers do not grow, we will not achieve our sales projections.</p>
<p><b>Our sales will be hurt if the new technologies used in our products do not
  become widely adopted, or are adopted slower than expected.</b></p>
<p>Many of our products use new technologies, such as 2D bar code scanning and
  radio frequency identification, which are not yet widely adopted in the market.
  If these technologies fail to become widespread, or are adopted slower than
  expected, our sales will suffer.</p>
<p align=left><b>We could face increased competition in the future, which would
  adversely affect our financial performance.</b>
<p align=left>The market for mobile handheld computers in which we operate is
  very competitive. Our future financial performance is contingent on a number
  of unpredictable factors, including that:
<ul>
  <li>some of our competitors have greater financial, marketing, and technical
    resources than we do; </li>
  <li>we periodically face intense price competition, particularly when our competitors
    have excess inventories and discount their prices to clear their inventories;
    and</li>
  <li>certain OEMs of personal computers, mobile phones and handheld computers
    offer built-in functions, such as Bluetooth wireless technology, Wi-Fi, or
    bar code scanning, that compete with our products.</li>
</ul>
<p>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.</p>
<p>&nbsp;</p>
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<p align=center>&nbsp;
<p><b>If we do not correctly anticipate demand for our products, our operating
  results will suffer.</b></p>
<p>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.</p>
<p>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,
  and reductions in our cash balances. Lower than forecasted demand could also
  result in excess manufacturing capacity at our third party manufacturers and
  in our failure to meet minimum purchase commitments, each of which may lower
  our operating results.</p>
<p><b>We rely primarily on distributors, resellers, vertical industry partners,
  and OEMs to sell our products, and our sales would suffer if any of these third
  parties stops selling our products effectively.</b></p>
<p>Because we sell our products primarily through distributors, resellers, vertical
  industry partners, and OEMs, 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.
</p>
<p align=left>Our agreements with distributors, resellers, vertical industry partners,
  and OEMs are generally nonexclusive and may be terminated on short notice by
  them without cause. Our distributors, resellers, vertical industry partners,
  and OEMs are not within our control, are not obligated to purchase products
  from us, and may offer competitive lines of products simultaneously. Sales growth
  is contingent in part on our ability to enter into additional distribution relationships
  and expand our sales channels. We cannot predict whether we will be successful
  in establishing new distribution relationships, expanding our sales channels
  or maintaining our existing relationships. A failure to enter into new distribution
  relationships or to expand our sales channels could adversely impact our ability
  to grow our sales.
<p align=left>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.
<p>&nbsp;</p>
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<p><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></p>
<p align=left>We depend on strategic alliances and business relationships with
  leading participants in various segments of the communications and mobile handheld
  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.
<p align=left>We have devoted significant research and development resources to
  design activities for Windows-mobile products, Palm devices, and handheld computers
  with integrated phones using Windows Mobile and Symbian System 60 and 80 operating
  systems, and more recently, to develop our own family of mobile handheld computers.
  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, Palm, or Symbian is obligated to continue
  the collaboration or to support the products produced from the collaboration.
  Consequently, these organizations 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.
<p align=left><b>Our intellectual property and proprietary rights may be insufficient
  to protect our competitive position.</b>
<p>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.</p>
<p>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.<br>
  <br>
</p>
<p>&nbsp;</p>
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<p>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.</p>
<p><b>We may become subject to claims of intellectual property rights infringement,
  which could result in substantial liability.</b></p>
<p>In the course of operating our business, we may receive claims of intellectual
  property 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. In June 2007, we received a letter from Wi-LAN Inc., accusing
  certain of our wireless LAN products of infringing two US and one Canadian patent
  held by WI-LAN Inc. In October 2007, WI-LAN Inc. filed patent infringement lawsuits
  against a number of companies alleging that those companies infringe the two
  US patents by manufacturing, using, or offering for sale products with wireless
  capability compliant with the IEEE 802.11 standards. WI-LAN Inc. is asking for
  money damages and a court order barring the sale of products that use the patented
  technology. We have not been named in the lawsuit, and we do not plan to make
  any changes to our current business at this time. Nonetheless, we may be added
  to the lawsuit in the future, and even if we are not, the outcome of this lawsuit
  may result in future changes to our business, including potential increased
  costs for those of our products that make use of the related technology. In
  October 2007, we received a letter from WIAV Solutions, LLC, offering to license
  the wireless technology covered by two US patents held by WIAV Solutions, LLC.
  The two patents cover implementations of the 802.11 standard. To date we have
  not entered into discussions to license their technology.</p>
<p>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. </p>
<p>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.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">29<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p><b>New industry standards may require us to redesign our products, which could
  substantially increase our operating expenses.</b></p>
<p>Standards for the form and functionality of our products are established by
  standards committees. These independent 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 sell our products
  for use with new hardware components from mobile computer manufacturers and
  OEMs, thus affecting our business.</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>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.</p>
<p><b>Our quarterly operating results may fluctuate in future periods, which could
  cause our stock price to decline.</b></p>
<p>We expect to experience quarterly fluctuations in operating results in the
  future. We generally ship orders as received, and as a result we may have little
  backlog. Quarterly revenues 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: </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 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>changes <font face="Times New Roman, Times, serif" size="3">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>timing of distributors' shipments to their customers.</li>
</ul>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">30<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p>Because we base our staffing and other operating expenses on anticipated revenues,
  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,
  or a combination, 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.</p>
<p><b>The loss of one or more of our senior personnel could harm our existing
  business.</b></p>
<p>A number of our officers and senior managers have been employed for thirteen
  to sixteen years by us, including our President, Executive Vice President, Chief
  Financial Officer, and Chief Technical Officer. 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 one or
  more of our officers or key senior managers could adversely affect our ability
  to compete.</p>
<p><b>Beginning January 1, 2006 we began to expense options granted under our
  employee stock plans as compensation, and as a result our net income and earnings
  per share were negatively affected, we may continue to have net losses as a
  result of the requirement to expense options, and may find it necessary to change
  our business practices to attract and retain employees.</b></p>
<p>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. The expensing of employee
  stock options adversely affected our net income and earnings per share in the
  first quarter of 2008 and in each of the quarters in fiscal years 2007 and 2006,
  will continue to adversely affect future quarters, and will make profitability
  harder to achieve or make our future profits or net losses worse. In addition,
  we may decide in response to the effects of expensing stock options on our operating
  results 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.</p>
<p><b>If we are unable to attract and retain highly skilled sales and marketing
  and product development personnel, our ability to develop and market new products
  and product enhancements will be adversely affected.</b></p>
<p>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 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 and market new products and product enhancements.</p>
<p><br>
</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">31<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p><b>We may not be able to collect revenues from customers who experience financial
  difficulties.</b></p>
<p>Our accounts receivable are derived primarily from distributors and OEMs. 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.</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>Several of our component parts, including our serial interface chip, our Ethernet
  chip, our bar code scanning modules, and our new line of mobile handheld computers,
  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.</p>
<p><b>Our operating results could be harmed by economic, political, regulatory
  and other risks associated with export sales.</b></p>
<p>Export sales (sales to customers outside the United States) accounted for approximately
  39% of our revenue in the first quarter of 2008 and 41% of our revenue in the
  fiscal year 2007. Accordingly, our operating results are subject to the risks
  inherent in export sales, including:</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>the <font face="Times New Roman, Times, serif" size="3">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>political and economic instability.</li>
</ul>
<p>Our export sales are primarily 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 if left unhedged.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">32</font><font face="Times New Roman, Times, serif" size="3"><br>
  </font>
<p align=center>
<hr width="100%">
<p><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font> </p>
<p><b>Our operations are vulnerable to interruption by fire, earthquake, power
  loss, telecommunications failure, and other events beyond our control.</b></p>
<p>Our corporate headquarters is 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. Should a disaster be
  widespread, such as a major earthquake, or result in the loss of key personnel,
  we may not be able to implement our disaster recovery plan in a timely manner.
  Any losses or damages incurred by us as a result of these events could have
  a material adverse effect on our business.</p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Failure to maintain
  effective internal controls could have a material adverse effect on our business,
  operating results and stock price. </b></font></p>
<p>We have evaluated and will continue to evaluate our internal control procedures
  in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act,
  which requires an annual management assessment of the design and effectiveness
  of our internal controls over financial reporting. If we fail to maintain the
  adequacy of our internal controls, as such standards are modified, supplemented
  or amended from time to time, we may not be able to ensure that we can conclude
  on an ongoing basis that we have effective internal controls over financial
  reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover,
  effective internal controls, particularly those related to revenue recognition,
  are necessary for us to produce reliable financial reports and are important
  to helping prevent financial fraud. If we cannot provide reliable financial
  reports or prevent fraud, our business and operating results could be harmed,
  investors could lose confidence in our reported financial information, and the
  trading price of our stock could drop significantly.</p>
<p><b>The sale of a substantial number of shares of our Common Stock could cause
  the market price of our Common Stock to decline.</b></p>
<p>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.</p>
<p>As of April 30, 2008, we had 32,015,975 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 prospectus
  delivery requirements and, in other cases, only to manner of sale, volume, and
  notice requirements of Rule 144 under the Securities Act.</p>
<p>As of April 30, 2008, we had 11,095,750 shares subject to outstanding options
  under our stock option plans, and 1,001,296 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.</p>
<p>As of April 30, 2008, we had warrants outstanding to purchase a total of 870,451
  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 face="Times New Roman, Times, serif" size="3">
  </font></p>
<p>&nbsp;</p>
<p></p>
<p></p>
<p></p>
<p align=center><font face="Times New Roman, Times, serif" size="3">33</font><font face="Times New Roman, Times, serif" size="3"><br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p><b>Volatility in the trading price of our Common Stock could negatively impact
  the price of our Common Stock.</b></p>
<p>During the period from January 1, 2007 through April 30, 2008, our Common Stock
  price fluctuated between a high of $1.40 and a low of $0.43. 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.</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">34</font><font face="Times New Roman, Times, serif" size="3"><br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a name="sub"></a></font>
<p><font face="Times New Roman, Times, serif" size="3"><b>Item 4. Submission of
  Matters to a Vote of Security Holders</b></font></p>
<p>At our Annual Meeting of Stockholders, held at our Newark, California facilities
  on April 23, 2008, the stockholders elected eight directors to serve until the
  next annual meeting of stockholders (Item 1), ratified the appointment of Moss
  Adams LLP to serve as the independent public accountants of the Company for
  the fiscal year ending December 31, 2008 (Item 2), approved a proposal to amend
  the Company's Certificate of Incorporation to effect a corporate name change
  to "Socket Mobile, Inc." (Item 3), and approved a proposal to authorize the
  Board of Directors to file an amendment to the Certificate of Incorporation
  to effect a reverse stock split any time through December 31, 2008. Total voting
  shares on the record date of February 25, 2008 consisted of 32,015,975 common
  shares. Each share of Common Stock was entitled to one vote. A total of 27,499,624
  shares or 85.89% of outstanding shares were present or voting by proxy. Results
  of the stockholder vote were as follows:<br>
  <br>
</p>
<table cellspacing=1 cellpadding=1 width=627 align=center border=1>
  <tr valign=bottom>
    <td width="222" height=25><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font>
      <p align=left>ITEM 1:<font face="Times New Roman, Times, serif" size="2">
        </font></p>
    </td>
    <td height=25 width="117">
      <div align="center">FOR</div>
    </td>
    <td width="177" height=25>
      <div align="center">WITHHELD</div>
    </td>
    <td width="84" height=25>
      <div align="center">RESULT</div>
    </td>
  </tr>
  <tr valign=bottom>
    <td height=21 width="222"><u>Election of Directors:</u></td>
    <td height=21 width="117">&nbsp;</td>
    <td width="177" height=21>
      <div align="center">&nbsp</div>
    </td>
    <td width="84" height=21>
      <div align="center">&nbsp</div>
    </td>
  </tr>
  <tr valign=bottom>
    <td height=16 width="222">Charlie Bass (1)(2)</td>
    <td height=21 width="117" valign="bottom">
      <div align="center">25,696,525</div>
    </td>
    <td width="177" height=21 valign="bottom">
      <div align="center">1,803,099</div>
    </td>
    <td width="84" height=16>
      <div align="center">Elected</div>
    </td>
  </tr>
  <tr valign=bottom>
    <td height=14 width="222">Kevin Mills</td>
    <td height=16 width="117" valign="bottom">
      <div align="center">25,958,868</div>
    </td>
    <td width="177" height=16 valign="bottom">
      <div align="center">1,540,756</div>
    </td>
    <td width="84" height=14>
      <div align="center">Elected</div>
    </td>
  </tr>
  <tr valign=bottom>
    <td height=15 width="222">Micheal Gifford</td>
    <td height=14 width="117" valign="bottom">
      <div align="center">26,101,837</div>
    </td>
    <td width="177" height=14 valign="bottom">
      <div align="center">1,397,787</div>
    </td>
    <td width="84" height=15>
      <div align="center">Elected</div>
    </td>
  </tr>
  <tr valign=bottom>
    <td height=23 width="222">Leon Malmed (2)(3)</td>
    <td height=23 width="117" valign="bottom">
      <div align="center">26,149,957</div>
    </td>
    <td width="177" height=23 valign="bottom">
      <div align="center">1,349,667</div>
    </td>
    <td width="84" height=23>
      <div align="center">Elected</div>
    </td>
  </tr>
  <tr valign=bottom>
    <td height=23 width="222">Thomas Miller (1)(2)</td>
    <td height=23 width="117" valign="bottom">
      <div align="center">26,208,308</div>
    </td>
    <td width="177" height=23 valign="bottom">
      <div align="center">1,291,316</div>
    </td>
    <td width="84" height=23>
      <div align="center">Elected</div>
    </td>
  </tr>
  <tr valign=bottom>
    <td height=23 width="222">Gianluca Rattazzi (1)(2)</td>
    <td height=15 width="117" valign="bottom">
      <div align="center">26,151,547</div>
    </td>
    <td width="177" height=15 valign="bottom">
      <div align="center">1,348,077</div>
    </td>
    <td width="84" height=23>
      <div align="center">Elected</div>
    </td>
  </tr>
  <tr valign=bottom>
    <td height=27 width="222">Peter Sealey (2)(3)</td>
    <td height=23 width="117" valign="bottom">
      <div align="center">25,134,393</div>
    </td>
    <td width="177" height=27>
      <div align="center">1,365,231</div>
    </td>
    <td width="84" height=27>
      <div align="center">Elected</div>
    </td>
  </tr>
  <tr valign=bottom>
    <td height=15 width="222">Enzo Torresi (2)(3)</td>
    <td height=15 width="117">
      <div align="center">26,136,197</div>
    </td>
    <td width="177" height=15>
      <div align="center">1,363,427</div>
    </td>
    <td width="84" height=15>
      <div align="center">Elected</div>
    </td>
  </tr>
  <tr valign=bottom>
    <td height=45 colspan="4">
      <p>(1) Denotes member of Audit Committee<br>
        (2) Denotes member of Nominating Committee<br>
        (3) Denotes member of Compensation Committee</p>
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<table cellspacing=1 cellpadding=1 width=627 align=center border=1>
  <tr valign=bottom>
    <td width="211" height=25><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font>
      <p align=left>ITEM 2:<font face="Times New Roman, Times, serif" size="2">
        </font></p>
    </td>
    <td height=25 width="95">
      <div align="center">FOR</div>
    </td>
    <td width="112" height=25>
      <div align="center">AGAINST</div>
    </td>
    <td width="95" height=25>
      <div align="center">ABSTAIN</div>
    </td>
    <td width="81" height=25>
      <div align="center">RESULT</div>
    </td>
  </tr>
  <tr valign=bottom>
    <td height=21 width="211">Appoint Moss Adams LLP as the Company's independent
      auditors for the 2008 fiscal year. Approval of a majority of votes cast
      required for approval.</td>
    <td height=21 width="95" align="center" valign="middle">
      <div align="center">26,745,521</div>
    </td>
    <td height=21 width="95" align="center" valign="middle">
      <div align="center">226,082</div>
    </td>
    <td height=21 width="95" align="center" valign="middle">
      <div align="center">528,019</div>
    </td>
    <td height=21 width="95" align="center" valign="middle">
      <div align="center">Approved</div>
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<table cellspacing=1 cellpadding=1 width=627 align=center border=1>
  <tr valign=bottom>
    <td width="211" height=25><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font>
      <p align=left>ITEM 3:<font face="Times New Roman, Times, serif" size="2">
        </font></p>
    </td>
    <td height=25 width="95">
      <div align="center">FOR</div>
    </td>
    <td width="112" height=25>
      <div align="center">AGAINST</div>
    </td>
    <td width="95" height=25>
      <div align="center">ABSTAIN</div>
    </td>
    <td width="81" height=25>
      <div align="center">RESULT</div>
    </td>
  </tr>
  <tr valign=bottom>
    <td height=21 width="211">Amend the Company's Certificate of Incorporation
      to effect a corporate name change to Socket Mobile, Inc. Approval of a majority
      of outstanding shares required for approval.</td>
    <td height=21 width="95" align="center" valign="middle">
      <div align="center">26,632,976</div>
    </td>
    <td height=21 width="95" align="center" valign="middle">
      <div align="center">336,372</div>
    </td>
    <td height=21 width="95" align="center" valign="middle">
      <div align="center">530,275</div>
    </td>
    <td height=21 width="95" align="center" valign="middle">
      <div align="center">Approved</div>
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<table cellspacing=1 cellpadding=1 width=627 align=center border=1>
  <tr valign=bottom>
    <td width="211" height=25><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font>
      <p align=left>ITEM 4:<font face="Times New Roman, Times, serif" size="2">
        </font></p>
    </td>
    <td height=25 width="95">
      <div align="center">FOR</div>
    </td>
    <td width="112" height=25>
      <div align="center">AGAINST</div>
    </td>
    <td width="95" height=25>
      <div align="center">ABSTAIN</div>
    </td>
    <td width="81" height=25>
      <div align="center">RESULT</div>
    </td>
  </tr>
  <tr valign=bottom>
    <td height=21 width="211">Authorize the Board of Directors to file an amendment
      to the Certificate of Incorporation to effect a reverse stock split anytime
      through December 31, 2008. Approval of a majority of outstanding shares
      required for approval.</td>
    <td height=21 width="95" align="center" valign="middle">
      <div align="center">24,586,271</div>
    </td>
    <td height=21 width="95" align="center" valign="middle">
      <div align="center">2,822,871</div>
    </td>
    <td height=21 width="95" align="center" valign="middle">
      <div align="center">90,479</div>
    </td>
    <td height=21 width="95" align="center" valign="middle">
      <div align="center">Approved</div>
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">35</font><font face="Times New Roman, Times, serif" size="3"><br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a><a
name=item6></a></font>
<p align=left><font face="Times New Roman, Times, serif" size="3"><b>Item 6. Exhibits</b></font>
<p><font face="Times New Roman, Times, serif" size="3"> Exhibits</font></p>
<p>31.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant
  to Section 302 of the Sarbanes-Oxley Act of 2002.</p>
<p>31.2 Certification of Chief Executive Officer and Chief Financial Officer pursuant
  to Section 906 of the Sarbanes-Oxley Act of 2002.</p>
<p>32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant
  to Section 906 of the Sarbanes-Oxley Act of 2002.</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">36</font><font face="Times New Roman, Times, serif" size="3"><br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=sig></a></font>
<p>&nbsp;</p>
<div align="center"><font face="Times New Roman, Times, serif" size="3"><BR>
  </font></div>
<P align=center><font face="Times New Roman, Times, serif" size="3"><b>SIGNATURES</b></font></P>
<P>&nbsp;</P>
<P>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.</P>
<P>&nbsp;</P>
<P align=center><font face="Times New Roman, Times, serif" size="3"><U>SOCKET
  MOBILE, INC.<BR>
  </U>Registrant</font></P>
<P>&nbsp;
<TABLE cols=2 width="89%">
  <TR>
    <TD width="38%"><FONT face="Times New Roman, Times, serif" size=3>Date: May
      14, 2008 </FONT></TD>
    <TD width="21%">
      <CENTER>
      </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%">&nbsp;</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>
        <p><font face="Times New Roman, Times, serif" size=3>Kevin J. Mills<br>
          President and Chief Executive Officer</font><br>
          (Duly Authorized Officer and Principal Executive Officer)</p>
      </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
      14, 2008 </font></td>
    <td width="21%">
      <center>
      </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%">&nbsp;</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 align=center><font face="Times New Roman, Times, serif" size="3">37<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=ind></a></font>
<P>&nbsp;</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>&nbsp;</p>
    </td>
    <td valign=top width="90%" height=25>
      <p>&nbsp;</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>Certification of Chief Executive Officer pursuant to Section 302 of the
        Sarbanes-Oxley Act of 2002.</p>
    </td>
  </tr>
  <tr>
    <td valign=top width="10%" height=30>
      <p align=center><font face="Times New Roman, Times, serif"
      size=3>31.2&nbsp;</font> </p>
    </td>
    <td valign=top width="90%" height=30>
      <p>Certification of Chief Financial Officer pursuant to Section 302 of the
        Sarbanes-Oxley Act of 2002.</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>Certification of Chief Executive Officer and Chief Financial Officer
        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</p>
    </td>
  </tr>
</table>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<p align=center><font face="Times New Roman, Times, serif" size="3">38<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left>&nbsp;
</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>exhibit311.htm
<DESCRIPTION>CERTIFICATION
<TEXT>
<html>
<head>
<title>Untitled Document</title>
</head>

<body bgcolor="#FFFFFF">
<p align=left>
<p align=right><font face="Times New Roman, Times, serif" size="3">Exhibit 31.1
  </font>
<p align="center"><font face="Times New Roman, Times, serif" size="3"><b>CERTIFICATION</b></font></p>
<p>I, Kevin J. Mills, certify that:</p>
<p><font face="Times New Roman, Times, serif" size="3">1. I have reviewed this
  quarterly report on Form 10-Q of Socket Mobile, 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 and I are responsible for establishing and maintaining disclosure
  controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
  and internal control over financial reporting (as defined in Exchange Act Rules
  13a-15(f) and 15d-15(f)) for the registrant and have:</font></p>
<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 is made known to us by others within those entities, particularly
  during the period in which this report is being prepared;</font></p>
<p>(b) Designed such internal control over financial reporting, or caused such
  internal control over financial reporting to be designed under our supervision,
  to provide reasonable assurance regarding the reliability of financial reporting
  and the preparation of financial statements for external purposes in accordance
  with generally accepted accounting principles;</p>
<p>(c) 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</p>
<p>(d) 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</p>
<p><font face="Times New Roman, Times, serif" size="3">5. The registrant's other
  certifying officer 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>
<p>(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</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.<br>
  <br>
  </font></p>
<table cols=2 width="97%">
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif" size=3>Date: May
      14, 2008 </font></td>
    <td width="17%">
      <center>
      </center>
    </td>
    <td width="45%">
      <div align=left><font face="Times New Roman, Times, serif"
      size=3><u>By: /s/ Kevin J. Mills</u></font></div>
    </td>
  </tr>
  <tr>
    <td width="38%">&nbsp;</td>
    <td width="17%">
      <center>
        <font face="Times New Roman, Times, serif" size=3>&nbsp; </font>
      </center>
    </td>
    <td valign=top align=middle width="45%">
      <div align=left><font face="Times New Roman, Times, serif" size=3>Name:
        Kevin J. Mills<br>
        Title: President and Chief Executive Officer (Principal Executive Officer)</font></div>
    </td>
  </tr>
</table>
<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"></font>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>exhibit312.htm
<DESCRIPTION>CERTIFICATION
<TEXT>
<html>
<head>
<title>Untitled Document</title>
</head>

<body bgcolor="#FFFFFF">
<p align=right><font face="Times New Roman, Times, serif" size="3">Exhibit 31.2
  </font>
<p align="center"><font face="Times New Roman, Times, serif" size="3"><b>CERTIFICATION</b></font><br>
</p>
<p align="center">&nbsp; </p>
<p>I, David W. Dunlap, certify that:</p>
<p><font face="Times New Roman, Times, serif" size="3">1. I have reviewed this
  quarterly report on Form 10-Q of Socket Mobile, 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 and I are responsible for establishing and maintaining disclosure
  controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
  and internal control over financial reporting (as defined in Exchange Act Rules
  13a-15(f) and 15d-15(f)) for the registrant and have:</font></p>
<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 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) Designed such internal
  control over financial reporting, or caused such internal control over financial
  reporting to be designed under our supervision, to provide reasonable assurance
  regarding the reliability of financial reporting and the preparation of financial
  statements for external purposes in accordance with generally accepted accounting
  principles;</font></p>
<p><font face="Times New Roman, Times, serif" size="3">(c) 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>(d) 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</p>
<p><font face="Times New Roman, Times, serif" size="3">5. The registrant's other
  certifying officer 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>
<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.<br>
  <br>
  </font></p>
<table cols=2 width="96%">
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif" size=3>Date: May
      14, 2008 </font></td>
    <td width="21%">
      <center>
      </center>
    </td>
    <td width="41%">
      <div align=left><font face="Times New Roman, Times, serif"
      size=3><u>By: /s/ David W. Dunlap&nbsp;&nbsp;</u></font></div>
    </td>
  </tr>
  <tr>
    <td width="38%">&nbsp;</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>Name:
        David W. Dunlap<br>
        Title: Vice President of Finance and Administration and Chief Financial
        Officer (Principal Financial Officer) </font></div>
    </td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  </font></p>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>4
<FILENAME>exhibit321.htm
<DESCRIPTION>CERTIFICATION
<TEXT>
<html>
<head>
<title>Untitled Document</title>
</head>

<body bgcolor="#FFFFFF">
<p align=right><font face="Times New Roman, Times, serif" size="3">Exhibit 32.1</font>
<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><font face="Times New Roman, Times, serif" size="3"><br>
  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 Mobile, Inc. on Form 10-Q for the quarter ended March 31, 2008 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 Mobile, Inc.</font></p>
<p>&nbsp;</p>
<table cols=2 width="43%" align="center">
  <tr>
    <td width="41%">
      <div align=left><font face="Times New Roman, Times, serif"
      size=3><u>By: &nbsp;&nbsp;/s/ Kevin J. Mills</u></font></div>
    </td>
  </tr>
  <tr>
    <td valign=top align=middle width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size=3>Name:
        Kevin J. Mills<br>
        Title: &nbsp&nbspPresident and Chief Executive Officer <br>
        &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp(Principal Executive
        Officer)<br>
        Date: &nbspMay 14, 2008</font></div>
    </td>
  </tr>
</table>
<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 Mobile, Inc. on Form 10-Q for the quarter ended March 31, 2008
  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 Mobile, Inc.</p>
<p>&nbsp;</p>
<p></p>
<table cols=2 width="43%" align="center">
  <tr>
    <td width="41%">
      <div align=left><font face="Times New Roman, Times, serif"
      size=3><u>By: &nbsp;&nbsp;/s/ David W. Dunlap&nbsp;&nbsp;</u></font></div>
    </td>
  </tr>
  <tr>
    <td valign=top align=middle width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size=3>Name:
        David W. Dunlap<br>
        Title: &nbsp&nbspVice President of Finance and Administration <br>
        &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbspand Chief
        Financial Officer (Principal <br>
        &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbspFinancial
        Officer)<br>
        Date:&nbsp&nbsp&nbsp&nbspMay 14, 2008</font></div>
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<p align=center>&nbsp;
<p align=center>&nbsp;
</body>
</html>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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