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<SEC-DOCUMENT>0000944075-09-000050.txt : 20091113
<SEC-HEADER>0000944075-09-000050.hdr.sgml : 20091113
<ACCEPTANCE-DATETIME>20091112195922
ACCESSION NUMBER:		0000944075-09-000050
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20090930
FILED AS OF DATE:		20091113
DATE AS OF CHANGE:		20091112

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:	000-25904
		FILM NUMBER:		091178779

	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>q3-2009.htm
<DESCRIPTION>10-Q
<TEXT>
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<!-- saved from url=(0042)file://N:\STMNTS\SEC\2002_06_Q\q2-2002.htm -->
<!-- saved from url=(0042)file://N:\STMNTS\SEC\2002_03_Q\q1-2002.htm --><HTML><HEAD><TITLE>10q doc</TITLE>

<META content="MSHTML 5.50.4522.1800" name=GENERATOR></HEAD>
<BODY bgColor=white>
<DIV align=left> </DIV>
<DIV align=left> </DIV>
<P align=center><font face="Times New Roman, Times, serif" size="3">UNITED STATES<BR>
  SECURITIES AND EXCHANGE COMMISSION<BR>
  WASHINGTON, D.C. 20549<BR>
  </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>
        <font face="Times New Roman, Times, serif"> [X] </font>
      </CENTER>
      </STRONG></FONT></TD>
    <TD vAlign=top width="95%"><font size="3" face="Times New Roman, Times, serif"><b>QUARTERLY
      REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934.</b></font></TD>
  </TR>
</TABLE>
<P align=center><font face="Times New Roman, Times, serif" size="3"><STRONG>&nbsp;&nbsp;For
  the quarterly period ended September 30, 2009</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><b>TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934.<BR>
      </b><BR>
      For the transition period ____________ to ____________ </FONT></TD>
  </TR>
</TABLE>
<P align=center><font face="Times New Roman, Times, serif" size="3"><b>Commission
  file number 1-13810</b></font></P>
<P align=center><font face="Times New Roman, Times, serif" size="3"><STRONG><b><font size="6">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%"><font face="Times New Roman, Times, serif"></font></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 size="3" face="Times New Roman, Times, serif">(State of incorporation)</font>
      </center>
      </font></td>
    <TD width="17%"><font face="Times New Roman, Times, serif"></font></TD>
    <TD width="36%"><FONT size=2>
      <CENTER>
        <font size="3" face="Times New Roman, Times, serif">(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><font face="Times New Roman, Times, serif">Indicate by check mark whether the
  registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
  of the Securities Exchange Act of 1934 during the preceding 12 months (or for
  such shorter period that the registrant was required to file such reports),
  and (2) has been subject to such filing requirements for the past 90 days. YES
  [ X ] NO [ ]</font></P>
<P><font face="Times New Roman, Times, serif">Indicate by check mark whether the
  registrant has submitted electronically and posted on its corporate Web site,
  if any, every Interactive Data File required to be submitted and posted pursuant
  to Rule 405 of Regulation S-T (&sect;232.405 of this chapter) during the preceding
  12 months (or for such shorter period that the registrant was required to submit
  and post such files). YES [ ] NO [ ]</font></P>
<P><font face="Times New Roman, Times, serif">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 &quot;large accelerated
  filer,&quot; &quot;accelerated filer,&quot; and &quot;smaller reporting company&quot;
  in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer
  [ ] Non-accelerated filer [ ] Smaller reporting company [X]</font></P>
<P><font face="Times New Roman, Times, serif">Indicate by check mark whether the
  registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
  YES [ ] NO [X]</font></P>
<P>The number of shares of Common Stock ($0.001 par value) outstanding as of November
  6, 2009 was 3,786,702 shares.<br>
  <br>
</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"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3"><u>PAGE
        <br>
        NO.</u></font></div>
    </td>
  </tr>
  <tr>
    <td colspan="3"><font face="Times New Roman, Times, serif">Part I. Financial
      Information</font></td>
  </tr>
  <tr>
    <td colspan="3"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="3"><font face="Times New Roman, Times, serif">Item 1. Financial
      Statements (Unaudited):</font></td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56" align="center" valign="bottom"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif" size="3"><a
  href="#bs">Condensed Balance Sheets - September 30, 2009 and December 31, 2008
      </a></font></td>
    <td width="56" align="center" valign="bottom">
      <div align="center"><font face="Times New Roman, Times, serif">1</font></div>
    </td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56" align="center" valign="bottom"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td width="27" height="10"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807" height="10"><font face="Times New Roman, Times, serif" size="3"><a
  href="#ops">Condensed Statements of Operations - Three Months and Nine Months
      Ended September 30, 2009 and 2008</a></font></td>
    <td width="56" height="10" align="center" valign="bottom">
      <div align="center"><font face="Times New Roman, Times, serif"> 2</font></div>
    </td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56" align="center" valign="bottom"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif" size="3"><a
  href="#flows">Condensed Statements of Cash Flows - Nine Months Ended September
      30, 2009 and 2008</a></font></td>
    <td width="56" align="center" valign="bottom">
      <div align="center"><font face="Times New Roman, Times, serif">3</font></div>
    </td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56" align="center" valign="bottom"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></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"><font face="Times New Roman, Times, serif">4</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></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">13</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></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"><font face="Times New Roman, Times, serif">24</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></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"><font face="Times New Roman, Times, serif">25</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="3"><font face="Times New Roman, Times, serif"></font></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"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></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">26</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></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"><font face="Times New Roman, Times, serif">37</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></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"><font face="Times New Roman, Times, serif">38</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></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">39</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; "><font face="Times New Roman, Times, serif"><b>SOCKET
  MOBILE, INC.</b> <br>
  <b>CONDENSED BALANCE SHEETS</b> </font></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;" valign="bottom">
      <td colspan="2" align="left" nowrap height="26">&nbsp;</td>
      <td height="26">&nbsp;</td>
      <td colspan="3" align="center" nowrap style="border-bottom: 1px solid #000000" height="26"><font face="Times New Roman, Times, serif" size="3">September
        30,<br>
        2009<br>
        (Unaudited)<br>
        </font></td>
      <td width="10" height="26">&nbsp;</td>
      <td colspan="3" align="center" style="border-bottom: 1px solid #000000" height="26"><font face="Times New Roman, Times, serif" size="3"><br>
        December 31,<br>
        2008*</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>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>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</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">&nbsp;</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">2,528,218</font></td>
      <td bgcolor="#CCEEFF">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</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">757,342</font></td>
      <td bgcolor="#CCEEFF">&nbsp;</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>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">2,040,253</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">3,334,661</font></td>
      <td>&nbsp;</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">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">2,294,545</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,929,822</font></td>
      <td bgcolor="#cceeff">&nbsp;</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>&nbsp;</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">455,157</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">&nbsp;</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">387,428</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">&nbsp;</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">&nbsp;</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">7,318,173</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">&nbsp;</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">8,409,253</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">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#FFFFFF">&nbsp;</td>
      <td bgcolor="#FFFFFF">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF">&nbsp;</td>
      <td align="right" nowrap bgcolor="#FFFFFF">&nbsp;</td>
      <td bgcolor="#FFFFFF">&nbsp;</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">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff" height="8">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" height="8">&nbsp;</td>
      <td bgcolor="#cceeff" height="8">&nbsp;</td>
      <td width="10" height="8" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff" height="8">&nbsp;</td>
      <td align="right" nowrap bgcolor="#cceeff" height="8">&nbsp;</td>
      <td bgcolor="#cceeff" height="8">&nbsp;</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>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">2,175,422</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">2,332,092</font></td>
      <td>&nbsp;</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">&nbsp;</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">1,220,122</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">&nbsp;</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">1,206,668</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>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">3,395,544</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">3,538,760</font></td>
      <td>&nbsp;</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">&nbsp;</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">(2,550,212</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">&nbsp;</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">(2,561,696</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">&nbsp;</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">&nbsp;</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">845,332</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">&nbsp;</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">977,064</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">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff">&nbsp;</td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap bgcolor="#cceeff">&nbsp;</td>
      <td bgcolor="#cceeff">&nbsp;</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">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF" height="8">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#FFFFFF" height="8"><font face="Times New Roman, Times, serif" size="3">285,000</font></td>
      <td bgcolor="#FFFFFF" height="8">&nbsp;</td>
      <td width="10" height="8">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF" height="8">&nbsp;</td>
      <td align="right" nowrap bgcolor="#FFFFFF" height="8"><font face="Times New Roman, Times, serif" size="3">346,787</font></td>
      <td bgcolor="#FFFFFF" height="8">&nbsp;</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">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</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">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">9,797,946</font></td>
      <td bgcolor="#cceeff">&nbsp;</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">&nbsp;</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">189,000</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">&nbsp;</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">225,667</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">&nbsp;</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">&nbsp;</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">18,435,451</font></td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" style="border-bottom: 3px double #000000">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">19,756,717</font></td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" style="border-bottom: 3px double #000000">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="10"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="10" align="center" valign="top" bgcolor="#cceeff"> <font face="Times New Roman, Times, serif" size="3"><b>LIABILITIES
        AND STOCKHOLDERS&#146; EQUITY</b></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" height="14"><font face="Times New Roman, Times, serif" size="3">Current
        liabilities:</font></td>
      <td height="14">&nbsp;</td>
      <td align="left" valign="bottom" height="14">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="14">&nbsp;</td>
      <td height="14">&nbsp;</td>
      <td height="14" width="10">&nbsp;</td>
      <td align="left" valign="bottom" height="14">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="14">&nbsp;</td>
      <td height="14">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Accounts
          payable and accrued expenses</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">2,674,774</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</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">3,513,770</font></td>
      <td bgcolor="#cceeff">&nbsp;</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>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">787,606</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">774,434</font></td>
      <td>&nbsp;</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">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,288,436</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" bgcolor="#cceeff" nowrap><font face="Times New Roman, Times, serif" size="3">1,005,791</font></td>
      <td bgcolor="#cceeff">&nbsp;</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>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">1,824,608</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" nowrap><font face="Times New Roman, Times, serif" size="3">2,434,393</font></td>
      <td>&nbsp;</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;Current
          portion of capital leases and deferred rent</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</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 style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">39,189</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">&nbsp;</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 style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">30,019</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>&nbsp;</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
          current liabilities</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">6,614,613</font></td>
      <td valign="bottom">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" nowrap valign="bottom"><font face="Times New Roman, Times, serif" size="3">7,758,407</font></td>
      <td valign="bottom">&nbsp;</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">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff">&nbsp;</td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap bgcolor="#cceeff">&nbsp;</td>
      <td bgcolor="#cceeff">&nbsp;</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>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">107,997</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" nowrap><font face="Times New Roman, Times, serif" size="3">109,724</font></td>
      <td>&nbsp;</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">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" valign="bottom" 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">238,216</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" valign="bottom" 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">214,261</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" 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 size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Total
          liabilities</font></div>
      </td>
      <td>&nbsp;</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">6,960,826</font></td>
      <td style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="10">&nbsp;</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">8,082,392</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>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" height="8" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff">&nbsp;</td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff">&nbsp;</td>
      <td bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top"><font face="Times New Roman, Times, serif" size="3">Stockholders'
        equity:</font></td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
    </tr>
    <tr bgcolor="#cceeff">
      <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;Common
          stock, $0.001 par value: Authorized shares&#151;10,000,000,</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</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;&nbsp;&nbsp;Issued
          and outstanding shares&#151;3,786,702 at September 30, 2009 and 3,229,916
          at December 31, 2008</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">3,787</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">3,230</font></td>
      <td>&nbsp;</td>
    </tr>
    <tr valign="bottom" bgcolor="#cceeff">
      <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>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">55,995,075</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" nowrap><font face="Times New Roman, Times, serif" size="3">54,588,192</font></td>
      <td>&nbsp;</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;&nbsp;&nbsp;Accumulated
          deficit</font></div>
      </td>
      <td>&nbsp;</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">(44,524,237</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">&nbsp;</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">(42,917,097</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>&nbsp;</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
          stockholders&#146; equity</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" valign="bottom" 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">11,474,625</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" valign="bottom" 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">11,674,325</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td align="left" valign="top"><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>&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">18,435,451</font></td>
      <td align="left" style="border-bottom: 3px double #000000">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">19,756,717</font></td>
      <td align="left" style="border-bottom: 3px double #000000">&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>
<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; "><font face="Times New Roman, Times, serif"><b><font size="3">SOCKET
  MOBILE, INC.</font></b> <font size="3"><br>
  <b>CONDENSED STATEMENTS OF OPERATIONS<br>
  </b>(Unaudited)</font><br>
  </font></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 valign="bottom">
      <td colspan="3"><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="center" nowrap colspan="7" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3" >Three
        Months Ended<br>
        September 30,</font></td>
      <td align="center" nowrap>&nbsp;</td>
      <td align="center" nowrap colspan="7" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">Nine
        Months Ended<br>
        September 30,</font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" nowrap><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 colspan="3" align="center" nowrap style="border-bottom: 1px solid #000000"><font size="3">2009</font><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td colspan="3" align="center" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2008</font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td colspan="3" align="center" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2009</font><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td width="3%">&nbsp;</td>
      <td colspan="3" align="center" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2008</font><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></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">
          Revenues</font></div>
      </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 bgcolor="#cceeff" width="10%"><font face="Times New Roman, Times, serif" size="3">4,574,325</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" 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">$</font></td>
      <td align="right" nowrap bgcolor="#cceeff" width="10%"><font face="Times New Roman, Times, serif" size="3">8,018,533</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap bgcolor="#cceeff" width="10%"><font face="Times New Roman, Times, serif" size="3">13,489,371</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap bgcolor="#cceeff" width="10%"><font face="Times New Roman, Times, serif" size="3">21,680,966</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="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="10%"><font face="Times New Roman, Times, serif" size="3">2,507,929</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 width="3%"><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="10%"><font face="Times New Roman, Times, serif" size="3">4,353,379</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 width="3%"><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="10%"><font face="Times New Roman, Times, serif" size="3">7,482,639</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 width="3%">&nbsp;</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="10%"><font face="Times New Roman, Times, serif" size="3">11,360,115</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>
    </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="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" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">2,066,396</font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%">&nbsp;</td>
      <td width="3%" 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" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,665,154</font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%">&nbsp;</td>
      <td width="3%" 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" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">6,006,732</font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%">&nbsp;</td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</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" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">10,320,851</font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top"><font face="Times New Roman, Times, serif" size="3">&nbsp</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="10%"><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="3%"><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="10%"><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="3%"><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="10%"><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="3%">&nbsp;</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="10%"><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="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="10%" 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="3%" 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="10%" 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="3%" 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="10%" 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="3%" bgcolor="#CCEEFF">&nbsp;</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="10%" 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="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="10%"><font face="Times New Roman, Times, serif" size="3">664,336</font></td>
      <td height="18" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td height="18" width="3%"><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="10%"><font face="Times New Roman, Times, serif" size="3">1,101,601</font></td>
      <td height="18" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td height="18" width="3%"><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="10%"><font face="Times New Roman, Times, serif" size="3">2,167,418</font></td>
      <td height="18" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td height="18" width="3%">&nbsp;</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="10%"><font face="Times New Roman, Times, serif" size="3">3,433,364</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="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="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,207,767</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" 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="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,971,754</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" 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="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,930,931</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">5,881,549</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="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="10%"><font face="Times New Roman, Times, serif" size="3">504,396</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%"><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="10%"><font face="Times New Roman, Times, serif" size="3">610,255</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" nowrap width="3%"><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="10%"><font face="Times New Roman, Times, serif" size="3">1,695,120</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" nowrap width="3%">&nbsp;</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="10%"><font face="Times New Roman, Times, serif" size="3">2,037,702</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 size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
          of intangible assets</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="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">15,000</font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%">&nbsp;</td>
      <td width="3%" 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" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">31,786</font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%">&nbsp;</td>
      <td width="3%" 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" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">61,787</font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%">&nbsp;</td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</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" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">95,360</font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%">&nbsp;</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="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="10%"><font face="Times New Roman, Times, serif" size="3">2,391,499</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%"><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="10%"><font face="Times New Roman, Times, serif" size="3">3,715,396</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%"><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="10%"><font face="Times New Roman, Times, serif" size="3">7,855,256</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%">&nbsp;</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="10%"><font face="Times New Roman, Times, serif" size="3">11,447,975</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="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="10%" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&nbsp;</td>
      <td width="3%" 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="10%" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&nbsp;</td>
      <td width="3%" 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="10%" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&nbsp;</td>
      <td width="3%" 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="10%" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&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">
          Operating loss</font></div>
      </td>
      <td width="1%"><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="10%"><font face="Times New Roman, Times, serif" size="3">(325,103</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%"><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="10%"><font face="Times New Roman, Times, serif" size="3">(50,242</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%">&nbsp;</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="10%"><font face="Times New Roman, Times, serif" size="3">(1,848,524</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%">&nbsp;</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="10%"><font face="Times New Roman, Times, serif" size="3">(1,127,124</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="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="10%" 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="3%" 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="10%" 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="3%" 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="10%" 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="3%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap width="10%" 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">
          Gain on sale of product line assets</font></div>
      </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="10%"><font face="Times New Roman, Times, serif" size="3">450,000</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%"><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="10%"><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="3%"><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="10%"><font size="3" face="Times New Roman, Times, serif">450,000</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%">&nbsp;</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="10%"><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>
    </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">
          Interest income</font></div>
      </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="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">10</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" 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="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,480</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" 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="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">379</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</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="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">19,628</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">
          Interest expense</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" 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="10%"><font face="Times New Roman, Times, serif" size="3">(67,764</font></td>
      <td align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td 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" nowrap style="border-bottom: 1px solid #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">(25,018</font></td>
      <td align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%">&nbsp;</td>
      <td 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" nowrap style="border-bottom: 1px solid #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">(185,040</font></td>
      <td align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%">&nbsp;</td>
      <td 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" nowrap style="border-bottom: 1px solid #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">(55,989</font></td>
      <td align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" height="14" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></div>
      </td>
      <td width="1%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" height="14" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <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">
          Net income (loss) before deferred taxes</font></div>
      </td>
      <td height="14" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" height="14" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap height="14" width="10%"><font face="Times New Roman, Times, serif" size="3">57,143</font></td>
      <td height="14" width="1%">&nbsp;</td>
      <td height="14" width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" height="14" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap height="14" width="10%"><font face="Times New Roman, Times, serif" size="3">(71,780</font></td>
      <td height="14" width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td height="14" width="3%">&nbsp;</td>
      <td align="left" height="14" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap height="14" width="10%"><font face="Times New Roman, Times, serif" size="3">(1,583,185</font></td>
      <td height="14" width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td height="14" width="3%">&nbsp;</td>
      <td align="left" height="14" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap height="14" width="10%"><font face="Times New Roman, Times, serif" size="3">(1,163,485</font></td>
      <td height="14" 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">
          Deferred tax expense</font></div>
      </td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%" 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" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(7,985</font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%" 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" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(7,985</font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%" 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" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(23,955</font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%" 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" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(23,955</font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" height="16">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Net income (loss)</font></div>
      </td>
      <td width="1%" height="16"><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="10%"><font face="Times New Roman, Times, serif" size="3">49,158</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" valign="bottom">&nbsp;</td>
      <td width="3%" height="16"><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">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">(79,765</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" valign="bottom"><font size="3">)</font></td>
      <td width="3%" height="16">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" valign="bottom"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%" valign="bottom"><font face="Times New Roman, Times, serif" size="3">(1,607,140</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" valign="bottom"><font size="3">)</font></td>
      <td width="3%" height="16">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" valign="bottom"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%" valign="bottom"><font face="Times New Roman, Times, serif" size="3">(1,187,440</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" valign="bottom"><font 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">
          </font></div>
      </td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left width="2%" bgcolor="#cceeff" ><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap  width="10%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left width="2%" bgcolor="#cceeff" ><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap  width="10%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td valign=bottom align=left width="2%" bgcolor="#cceeff" ><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap  width="10%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td valign=bottom align=left width="2%" bgcolor="#cceeff" ><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap  width="10%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff"><font 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">
          Net income (loss) per share:</font></div>
      </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="10%"><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="3%"><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="10%"><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="3%"><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="10%"><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="3%">&nbsp;</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="10%"><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="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="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">0.01</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td width="3%" 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"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(0.02</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff"><font size="3">)</font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(0.46</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff"><font size="3">)</font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(0.37</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff"><font size="3">)</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</font></div>
      </td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">0.01</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">(0.02</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%"><font size="3">)</font></td>
      <td width="3%" height="16">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">(0.46</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%"><font size="3">)</font></td>
      <td width="3%" height="16">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">(0.37</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%"><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="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="10%" 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="3%" 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="10%" 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="3%" 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="10%" 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="3%" bgcolor="#cceeff">&nbsp;</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="10%" 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="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="10%"><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="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap width="10%"><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="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap width="10%"><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="3%">&nbsp;</td>
      <td align="left" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap width="10%"><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 colspan="3" align="left" valign="top" height="10">
        <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="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="10%"><font face="Times New Roman, Times, serif" size="3">3,786,702</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td width="3%"><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" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">3,230,013</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td width="3%"><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" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">3,486,894</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td width="3%">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">3,214,742</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&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="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="10%"><font face="Times New Roman, Times, serif" size="3">3,950,643</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td width="3%"><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" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">3,230,013</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td width="3%"><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" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">3,486,894</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td width="3%">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">3,214,742</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
    </tr>
  </table>
</center>
<P align=center>
<p>&nbsp;</p>
<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"><font face="Times New Roman, Times, serif"><b>SOCKET MOBILE,
  INC.<br>
  CONDENSED STATEMENTS OF CASH FLOWS<br>
  </b>(Unaudited)</font></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>&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td noWrap align=middle colspan=7>
      <div align="center"><font face="Times New Roman, Times, serif" size="3">Nine
        Months Ended September&nbsp;30,</font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 10pt" valign="bottom">
    <td noWrap align=left colspan=4 height="10">&nbsp;</td>
    <td width="1%" height="10">&nbsp;</td>
    <td noWrap align=middle colspan=2 style="border-bottom: 1px solid #000000" height="10">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">2009</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" height="10">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td width="1%" height="10">&nbsp;</td>
    <td noWrap align=middle colspan=3 style="border-bottom: 1px solid #000000" height="10">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">2008</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">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</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%">&nbsp;</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">(1,607,140</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%">&nbsp;</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">(1,187,440</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">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</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%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">522,712</font></td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">565,574</font></td>
    <td width="1%">&nbsp;</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">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">374,025</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">392,335</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;Amortization
        of intangible assets</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">61,787</font></td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">95,360</font></td>
    <td 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;Net
        foreign currency transaction losses</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">15,016</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">37,043</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</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%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">23,955</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">23,955</font></td>
    <td 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;Change
        in deferred rent</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(12,831</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">)</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(3,957</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">)</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;Gain
        on sale of product line assets</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(450,000</font></td>
    <td valign=bottom noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td colspan="4" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
      </font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</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;
        Changes in operating assets and liabilities:</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%">&nbsp;</td>
    <td 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;Accounts
        receivable</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,244,906</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(1,675,404</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 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;Inventories</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">1,635,277</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(1,591,063</font></td>
    <td 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;Prepaid
        expenses and other current assets</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(67,729</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">)</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(155,986</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 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;Other
        assets </font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">36,667</font></td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">16,110</font></td>
    <td 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;Accounts
        payable and accrued expenses</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(802,317</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">)</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">2,079,068</font></td>
    <td valign=bottom noWrap align=left 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;Accrued
        payroll and related expenses</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">13,172</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">85,288</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;Deferred
        income on shipments to distributors</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</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 valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(609,785</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff" ><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" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">324,066</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </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;&nbsp;&nbsp;
        Net cash provided by (used in) operating activities</font></div>
    </td>
    <td width="1%">&nbsp;</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" face="Times New Roman, Times, serif">377,715</font></td>
    <td valign=bottom noWrap align=left width="1%" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td width="1%">&nbsp;</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" face="Times New Roman, Times, serif">(995,051</font></td>
    <td valign=bottom noWrap align=left width="1%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="4" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</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>Investing
        activities</b></font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</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;
        Purchases of equipment and tooling</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align=left bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(213,578</font></td>
    <td noWrap align=left width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">)</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(301,727</font></td>
    <td noWrap align=left width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">)</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;
        Gain on sale of product line assets</font></div>
    </td>
    <td width="1%">&nbsp;</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" face="Times New Roman, Times, serif">450,000</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%">&nbsp;</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 noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">---</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 provided by (used in) investing activities</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</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" face="Times New Roman, Times, serif">236,422</font></td>
    <td noWrap align=left width="1%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</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 noWrap align=right width="11%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">(301,727</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>
  </tr>
  <tr valign=bottom>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif"><b><b>&nbsp</b></b></font></div>
    </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 width="1%">&nbsp;</td>
    <td noWrap align=right width="11%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</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">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</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%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(8,441</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(29,326</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;
        Proceeds from borrowings under bank line of credit agreement</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">7,354,839</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">8,841,995</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</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;
        Repayments of borrowings under bank line of credit agreement</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(7,072,194</font></td>
    <td width="1%" valign="bottom"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(8,428,992</font></td>
    <td width="1%" valign="bottom"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 height="22" bgcolor="#cceeff">
      <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%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left height="22" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right height="22" width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td height="22" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td height="22" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left height="22" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td bgcolor="#cceeff" noWrap align=right height="22" width="11%"><font size="3" face="Times New Roman, Times, serif">(117,219</font></td>
    <td height="22" width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">)</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;
        Proceeds from the issuance of common stock and warrants</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">884,728</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td width="1%" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 height="22" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Proceeds from the exercise of stock options and warrants</font></div>
    </td>
    <td height="22" width="1%" bgcolor="#cceeff">&nbsp;</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 noWrap align=right width="11%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">---</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 height="22" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left height="22" width="1%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">190,113</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=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%">&nbsp;</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 noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">1,158,932</font></td>
    <td noWrap align=left width="1%" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td align=left 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" face="Times New Roman, Times, serif">456,571</font></td>
    <td noWrap align=left width="1%" style="border-bottom: 1px solid #000000">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif"><b><b>&nbsp</b></b>
        </font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</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%">&nbsp;</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 noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">(2,193</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%">&nbsp;</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 noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">16,277</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">Net
        increase (decrease) in cash and cash equivalents</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,770,876</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(823,930</font></td>
    <td noWrap align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      </font></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>
    <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">Cash
        and cash equivalents at beginning of period</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</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 valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">757,342</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</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 valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">4,963,359</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
      <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%">&nbsp;</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" face="Times New Roman, Times, serif">2,528,218</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td height="12" width="1%">&nbsp;</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">$</font></td>
    <td noWrap align=right height="12" width="11%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">4,139,429</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
  </tr>
  <tr bgcolor="#cceeff">
    <td valign=top align=left colspan=4 height="16">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">
        </font></div>
    </td>
    <td height="16" width="1%">&nbsp;</td>
    <td valign=bottom align=left height="16">&nbsp;</td>
    <td valign=bottom noWrap align=right height="16" width="11%">&nbsp;</td>
    <td valign=bottom noWrap align=left height="16" width="1%">&nbsp;</td>
    <td height="16" width="1%">&nbsp;</td>
    <td valign=bottom align=left height="16" width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right height="16" width="11%">&nbsp;</td>
    <td valign=bottom noWrap align=left height="16" width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3"><b>Supplemental
        cash flow information </b></font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Cash paid for interest</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">185,242</font></td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</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" face="Times New Roman, Times, serif">55,989</font></td>
    <td width="1%">&nbsp;</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 &quot;Company&quot;) have been prepared in accordance with accounting
  principles generally accepted in the United States for interim financial information
  and with the instructions to Form 10-Q and Article 8 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, 2008.</p>
<p><font face="Times New Roman, Times, serif"><b>NOTE 2 - Summary of Significant
  Accounting Policies</b></font></p>
<p><font face="Times New Roman, Times, serif"><i>Use of Estimates</i><br>
  The preparation of financial statements in conformity with accounting principles
  generally accepted in the United States requires management to make estimates
  and assumptions that affect the reported amounts of assets and liabilities,
  the disclosure of contingent assets and liabilities at the date of the financial
  statements, and the reported amounts of revenue and expense during the reporting
  period. Actual results could differ from those estimates, and such differences
  may be material to the financial statements.</font></p>
<p>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 Standards </i><br>
  Effective July 1, 2009, the Company adopted &quot;The FASB Accounting Standards
  Codification and the Hierarchy of Generally Accepted Accounting Principles&quot;
  (formerly SFAS No. 168, &quot;The FASB Accounting Standards Codification and
  the Hierarchy of Generally Accepted Accounting Principles - a replacement of
  FASB Statement No. 162&quot;). This standard establishes only two levels of
  U.S. generally accepted accounting principles (&quot;GAAP&quot;), authoritative
  and nonauthoritative. The Financial Accounting Standard Board (&quot;FASB&quot;)
  Accounting Standards Codification (the &quot;Codification&quot;) became the
  source of authoritative, nongovernmental GAAP, except for rules and interpretive
  releases of the SEC, which are sources of authoritative GAAP for SEC registrants.
  All other non-grandfathered, non-SEC accounting literature not included in the
  Codification became nonauthoritative. The Company began using the new guidelines
  and numbering system prescribed by the Codification when referring to GAAP in
  the third quarter of fiscal 2009. As the Codification was not intended to change
  or alter existing GAAP, adoption did not have any impact on the Company's financial
  condition, results of operations and cash flows.<br>
  <br>
  </font><font face="Times New Roman, Times, serif"><br>
  </font></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><font face="Times New Roman, Times, serif"><i><br>
  Cash Equivalents and Foreign Currency Contracts</i><br>
  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 September
  30, 2009, 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 September 30, 2009. At September 30, 2009, these derivative instruments were
  not designated as hedges, and accordingly, changes in the fair value of the
  forward foreign currency contracts were recorded in net income. At September
  30, 2009, contracts with a notional amount of $290,420 to hedge Euros were recorded
  as a liability with a fair value of $2,179 based on quotations from financial
  institutions.</font></p>
<p><font face="Times New Roman, Times, serif"><i>Liquidity<br>
  </i>The Company's cash balances at September 30, 2009 were $2,528,218, including
  cash of $1,288,436 drawn against its bank lines of credit. The Company's cash
  balances at September 30, 2009, reflect net proceeds of $884,728 from the issuance
  of common stock and warrants in May 2009, a net increase of $282,645 in amounts
  drawn on its bank lines of credit, net cash provided by operating activities
  of $377,715, and $450,000 in proceeds from the sale of the Company's serial
  product line assets (see &quot;Note 8 - Sale of Product Line Assets&quot; for
  more information), in the nine months ended September 30, 2009. In February
  of 2009, the Company extended its bank line of credit agreement which will now
  expire on March 24, 2010. On July 7, 2009 the Company's bank agreed to amend
  the terms of the credit agreement to replace the adjusted quick ratio covenant
  with a minimum cash and quarterly revenue requirement, revise the advance rate
  on receivables and the collateral handling fee, and to waive the events of non-compliance
  with respect to the adjusted quick ratio covenant for the months of April, May
  and June (see &quot;Note - 5 Bank Financing Arrangements&quot; for more information).
  The Company's balance sheet at September 30 2009 has a current ratio (current
  assets divided by current liabilities) of 1.11 to 1.0, and no material long
  term debt. In the fourth quarter of 2008 the Company took actions to reduce
  its expenses, including a reduction of 12% in its worldwide workforce, to align
  its cost structure with current economic conditions in light of slowing business
  spending due to the current economic downturn. The Company took additional actions
  during the first nine months of 2009 to sequentially reduce quarterly expenses.
  The Company has the ability to further reduce expenses if necessary. The Company
  believes its existing cash, plus its ability to reduce expenses, and its bank
  lines of credit will be sufficient to meet its funding requirements at least
  through September 30, 2010. If the Company can return to profitability and revenue
  growth, the Company anticipates 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 the Company cannot return to profitability,
  the Company will not be able to support its operations from positive cash flows,
  and the Company would use its existing cash to support operating losses. The
  Company may find it necessary to raise additional capital to fund its operations,
  however, there can be no assurance that additional capital will be available
  on acceptable terms, if at all, and any such terms may be dilutive to existing
  stockholders. If the Company is unable to secure the necessary capital for its
  business, the Company may need to suspend some or all of its current operations.</font></p>
<p align=center>&nbsp;
<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>&nbsp;</p>
<p><b>NOTE 3 - Common Stock Financing</b></p>
<p>On May 26, 2009 the Company sold 556,786 shares of Common Stock in a private
  placement financing. Of the shares sold, the Company issued 306,786 shares to
  non-management purchasers at $1.80 per share, 90 percent of the closing bid
  price of the common stock on the Nasdaq Capital Market one day prior to the
  execution of the Securities Purchase Agreement. Two of the Company's directors
  participated in the financing for a total of 250,000 shares at $2.00 per share,
  the closing bid price of the common stock on the Nasdaq Capital Market one day
  prior to the execution of the Securities Purchase Agreement. Total proceeds
  from the financing were $1,052,215, and net proceeds after costs and expenses
  were $884,728. In conjunction with the financing, the Company issued five-year
  warrants to non-management investors to acquire an additional 61,356 shares
  of Common Stock at $1.80 per share, and issued a five-year warrant to the placement
  agent to acquire 27,839 shares of Common Stock at $1.80 per share. Using a binomial
  lattice valuation formula, $73,627 of the proceeds were attributed to the warrants
  issued to non-management investors, and the warrants issued to the placement
  agent were valued at $33,407 which was included in the cost of the financing.
  The proceeds from the private placement were used to increase the Company's
  working capital balances. <br>
</p>
<p><font face="Times New Roman, Times, serif"><b>NOTE 4 - Inventories</b></font></p>
<p><font face="Times New Roman, Times, serif">Inventories consist principally
  of raw materials and sub-assemblies, which are stated at the lower of cost (first-in,
  first-out) or market.<br>
  <br>
  </font></p>
<table width="70%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">
  <tr>
    <td align="left" valign="top" width="60%">
      <div style="margin-left: 10px; text-indent: -10px"></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td align="center" valign="bottom" colspan="2" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">September
      30,<br>
      2009</font></td>
    <td align="center" valign="bottom" nowrap width="1%">&nbsp;</td>
    <td width="1%" align="center">&nbsp;</td>
    <td align="center" valign="bottom" colspan="2" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">December
      31,<br>
      2008</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="60%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
        Raw materials and sub-assemblies</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td align="right" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">2,169,757</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td align="right" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,760,615</font></td>
  </tr>
  <tr>
    <td align="left" valign="top" width="60%">
      <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">Finished
        goods</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td align="left" valign="bottom" width="2%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td align="right" valign="bottom" nowrap width="11%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">124,788</font></td>
    <td align="left" valign="bottom" nowrap width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td align="left" valign="bottom" width="2%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td align="right" valign="bottom" nowrap width="11%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">169,207</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="60%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"> </div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="2%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td align="right" nowrap width="11%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">2,294,545</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</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="11%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">3,929,822</font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  </font>Decreases in overall inventory balances at September 30, 2009 are due
  primarily to planned reductions in stocking levels of the Company's mobile handheld
  computer. </p>
<p><font face="Times New Roman, Times, serif" size="3"><b>NOTE 5 - Bank Financing
  Arrangements</b></font></p>
<p>On December 31, 2008 the Company entered into a new credit facility agreement
  with Silicon Valley Bank. The credit facility allowed the Company to borrow
  up to $2,500,000 based on the level of qualified domestic and international
  receivables, up to a maximum of $1,000,000 and $1,500,000, respectively. Under
  the agreement the Company was required to maintain a minimum liquidity (cash
  plus availability under the lines) of at least $250,000. The Company was in
  compliance with the liquidity requirement at December 31, 2008. The outstanding
  amounts borrowed under the domestic and international lines at December 31,
  2008, were $603,872 and $401,919, respectively.</p>
<p align=left>&nbsp;
<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 align=left><br>
  On February 19, 2009, the Company agreed with Silicon Valley Bank to extend
  the term of the existing credit facility to March 24, 2010, and to reallocate
  the domestic and international line limits to $1,500,000 and $1,000,000, respectively.
  On July 7, 2009, the Company agreed with Silicon Valley Bank to amend the terms
  of the credit facility. Silicon Valley Bank agreed to replace the adjusted quick
  ratio covenant with a requirement that beginning June 1, 2009, the Company (i)
  maintain at all times a minimum balance of unrestricted cash and cash equivalents
  of no less than $1,000,000; and (ii) maintain minimum revenues of $4,068,000
  during the fiscal quarter ended June 30, 2009, $4,500,000 during the fiscal
  quarter ending September 30, 2009, and $5,355,000 during the fiscal quarter
  ending December 31, 2009 and thereafter. The advance rate for receivables from
  distributors was reduced from 60% to 50% and from 80% to 70% for all other receivables.
  Borrowings under the lines bear an annual interest rate equal to the greater
  of (i) the Lender's prime rate plus 2%, or (ii) 6%. The annual interest rate
  in effect at September 30, 2009 and December 31, 2008 was 6%. The amendment
  also specified a change in the collateral handling fee from 0.7% to 0.62% per
  month. The applicable interest and fees are calculated based on the full amount
  of the accounts receivable provided as collateral, rather than on the actual
  amounts borrowed. The outstanding amounts borrowed under the domestic and international
  lines at September 30, 2009 were $708,170 and $580,266, respectively. The Company
  was in compliance with the minimum unrestricted cash and revenue covenants for
  the quarter ended September 30, 2009.
<p align=left><font face="Times New Roman, Times, serif"><b>NOTE 6 - Intangible
  Assets</b> </font>
<p>Intangible assets 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. 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
  was fully amortized in the quarter ended June 30, 2009.</p>
<p align=left>Amortization of all intangible assets for the three and nine months
  ended September 30, 2009 was $15,000 and $61,787, respectively, compared to
  $31,786 and $95,360, respectively, for the same periods in 2008. Intangible
  assets as of September 30, 2009 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="75%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td width="58%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="7%">&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="2%">&nbsp;</td>
    <!-- colindex=04 type=hang1 --></tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="58%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
    <td  valign=bottom noWrap
    align=middle colspan=3>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Gross</font></div>
    </td>
    <td width="2%">&nbsp;</td>
    <td valign=bottom noWrap
    align=middle colspan=3>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Accumulated</font></div>
    </td>
    <td width="2%">&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=2>
      <div align="center"></div>
    </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="58%" height="7">
      <div
     ></div>
    </td>
    <td width="7%" height="7">&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="7">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Assets</font></div>
    </td>
    <td width="2%" height="7">&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="7">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Amortization</font></div>
    </td>
    <td width="2%" height="7">&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="7">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Net</font></div>
      </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="58%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Patent</font></div>
    </td>
    <td width="7%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="1%"><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right width="8%"><font size="3" face="Times New Roman, Times, serif">600,000</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp; </td>
    <td width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="1%"><font size="3" face="Times New Roman, Times, serif">$
      </font></td>
    <td noWrap align=right width="8%"><font size="3" face="Times New Roman, Times, serif">315,000</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="1%"><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td noWrap align=right width="8%"><font size="3" face="Times New Roman, Times, serif">285,000</font></td>
    <td valign=bottom noWrap align=left width="2%">&nbsp; </td>
  </tr>
  <tr  valign=bottom>
    <td valign=bottom noWrap align=left width="58%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Project
        management tools </font></div>
    </td>
    <td width="7%">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000" width="1%"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 1px solid #000000" width="8%"><font size="3" face="Times New Roman, Times, serif">570,750</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" width="1%">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000" width="1%"><font size="3" face="Times New Roman, Times, serif">&nbsp
      </font></td>
    <td noWrap align=right style="border-bottom: 1px solid #000000" width="8%"><font size="3" face="Times New Roman, Times, serif">570,750</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" width="1%">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000" width="1%"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000" width="8%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" width="2%">
      <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" width="58%">
      <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" face="Times New Roman, Times, serif">Total intangible
        assets</font></div>
    </td>
    <td bgcolor="#cceeff" width="7%">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff" width="1%" ><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">1,170,750</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td bgcolor="#cceeff" width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff" width="1%"><font size="3" face="Times New Roman, Times, serif">$
      </font></td>
    <td noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">885,750</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td bgcolor="#cceeff" width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff" width="1%"><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">285,000</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><b><br>
  </b></font></p>
<p align=center><font face="Times New Roman, Times, serif" size="3"><br>
  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><font face="Times New Roman, Times, serif"><b> </b></font></p>
<p><font face="Times New Roman, Times, serif">Based on definite lived intangible
  assets recorded at September 30, 2009, and assuming no subsequent impairment
  of the underlying assets, the annual amortization expense is expected to be
  as follows:<br>
  <br>
  </font></p>
<table style="MARGIN-TOP: 3pt; FONT-SIZE: 10pt" cellspacing=0 cellpadding=0
width="40%" align=center border=0>
  <tr>
    <td noWrap align=left width="71%" style="border-bottom: 1px solid #000000" ><font size="3" face="Times New Roman, Times, serif">
      Year</font></td>
    <td width="4%">&nbsp;</td>
    <td colspan="3" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">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" face="Times New Roman, Times, serif">2009
        (three months remaining)</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td bgcolor="#cceeff" width="3%" align="right"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td valign=bottom align=right bgcolor="#cceeff" colspan="2">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">15,000</font></div>
    </td>
  </tr>
  <tr>
    <td valign=top align=left width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif">2010</font></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td width="3%">&nbsp;</td>
    <td valign=bottom align=right colspan="2">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">60,000</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" face="Times New Roman, Times, serif">2011</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td bgcolor="#cceeff" width="3%">&nbsp;</td>
    <td valign=bottom align=right bgcolor="#cceeff" colspan="2">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">60,000</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif">2012</font></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td width="3%">&nbsp;</td>
    <td valign=bottom align=right colspan="2">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">60,000</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" face="Times New Roman, Times, serif">2013</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td bgcolor="#cceeff" width="3%">&nbsp;</td>
    <td valign=bottom align=right bgcolor="#cceeff" colspan="2">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">60,000</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif">2014</font></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td width="3%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
    <td valign=bottom align=right colspan="2" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">30,000</font></div>
    </td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td valign=top align=left width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td width="3%" align="right" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td valign=bottom align=right colspan="2" style="border-bottom: 3px double #000000">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">285,000</font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;
        </font><font size="3" face="Times New Roman, Times, serif"></font></div>
    </td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><b><br>
  NOTE 7 - Segment Information</b></font></p>
<p><font face="Times New Roman, Times, serif"> 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
  and nine months ended September 30, 2009 and 2008 are as follows:<br>
  <br>
  </font></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: 1pt" valign=bottom>
    <td width="30%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=02 type=gutter -->
    <td align=right>&nbsp;</td>
    <!-- colindex=02 type=lead -->
    <td align=right width="7%">&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="7%">&nbsp;</td>
    <td align=left width="2%">&nbsp;</td>
    <!-- colindex=03 type=body -->
    <td align=left width="4%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="6%">&nbsp;</td>
    <td align=left width="3%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="2%">&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" width="30%"><font size="3"></font>
    </td>
    <td height="13" width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=middle height="13" colspan="7" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3">Three Months Ended<br>
        September 30, </font></div>
    </td>
    <td valign=bottom noWrap align=middle height="13" width="4%" >&nbsp;</td>
    <td valign=bottom noWrap align=middle height="13" colspan="7" style="border-bottom: 1px solid #000000" >
      <div align="center"><font size="3" >Nine Months Ended<br>
        September 30,</font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="30%" height="15">
      <div
      ><font size="3">Revenues:</font></div>
    </td>
    <td width="2%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
    <td width="2%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2008</font></div>
    </td>
    <td width="4%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
    <td width="1%" height="15">&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2008</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="30%">
      <div><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp; </font><font size="3">United
        States</font></div>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3">$</font> </td>
    <td valign=bottom noWrap align=right width="10%"><font size="3">2,737,113</font></td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font> </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="2%"><font size="3">$</font> </td>
    <td noWrap align=right width="10%"><font size="3">5,418,380</font></td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="4%"><font size="3"></font> </td>
    <td noWrap align=left width="2%"><font size="3">$</font> </td>
    <td noWrap align=right width="10%"><font size="3">7,792,964</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="2%"><font size="3">$</font> </td>
    <td noWrap align=right width="10%"><font size="3">14,155,852</font></td>
    <td noWrap align=right width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="30%">
      <div><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp; </font><font size="3">Europe</font></div>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=right width="10%"><font size="3">1,449,129</font></td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font></td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=right width="10%"><font size="3">1,688,560</font></td>
    <td noWrap align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=left width="4%"><font size="3"></font></td>
    <td noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=right width="10%"><font size="3">4,195,249</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=right width="10%"><font size="3">5,089,849</font></td>
    <td noWrap align=right width="2%">&nbsp;</td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td align=left width="30%">
      <div><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp; </font><font size="3">Asia
        and rest of world</font></div>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 1px solid #000000" width="10%"><font size="3">388,083</font></td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000" width="10%"><font size="3">911,593</font></td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=left width="4%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000" width="10%"><font size="3">1,501,158</font></td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000" width="10%"><font size="3">2,435,265</font></td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp
      </font></td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="30%">
      <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 width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3">$</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" width="10%"><font size="3">4,574,325</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%">&nbsp;
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="10%"><font size="3">8,018,533</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%">&nbsp;
    </td>
    <td valign=bottom noWrap align=left width="4%"><font size="3"></font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="10%"><font size="3">13,489,371</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%">&nbsp;
    </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="10%"><font size="3">21,680,966</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%">&nbsp;
    </td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  Export revenues are attributable to countries based on the location of the Company's
  customers. The Company does not hold long-lived assets in foreign locations.</font></p>
<p><font face="Times New Roman, Times, serif">Major customers who accounted for
  at least 10% of the Company's total revenues were as follows:<br>
  <br>
  </font></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="38%"><font size="3"></font>
    </td>
    <td height="13" width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=middle height="13" colspan="7" style="border-bottom: 1px solid #000000" >
      <div align="center"><font size="3">Three Months Ended<br>
        September 30, </font></div>
    </td>
    <td valign=bottom noWrap align=middle height="13" width="2%" >&nbsp;</td>
    <td valign=bottom noWrap align=middle height="13" colspan="7" style="border-bottom: 1px solid #000000" >
      <div align="center"><font size="3">Nine Months Ended<br>
        September 30,</font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="38%" height="15">
      <div
      ></div>
    </td>
    <td width="1%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
    <td width="1%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2008</font></div>
    </td>
    <td width="2%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
    <td width="2%" height="15">&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2008</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="38%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Tech Data
        Corp. </font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp; </td>
    <td valign=bottom noWrap align=right width="6%"><font size="3">16</font></td>
    <td valign=bottom noWrap align=left width="6%"><font size="3">%</font> </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="6%"><font size="3">13</font></td>
    <td noWrap align=left width="6%"><font size="3">%</font> </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="6%"><font size="3">18</font></td>
    <td noWrap align=left width="6%"><font size="3">%</font> </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="6%"><font size="3">14</font></td>
    <td noWrap align=left width="6%"><font size="3">%</font> </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="38%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Ingram Micro,
        Inc. </font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=right width="6%"><font size="3">16</font></td>
    <td valign=bottom noWrap align=left width="6%"><font size="3">%</font></td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"> </font></td>
    <td noWrap align=right width="6%"><font size="3">22</font></td>
    <td noWrap align=left width="6%"><font size="3">%</font></td>
    <td valign=bottom noWrap align=left width="2%"><font size="3"></font></td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="6%"><font size="3">20</font></td>
    <td noWrap align=left width="6%"><font size="3">%</font></td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"> </font></td>
    <td noWrap align=right width="6%"><font size="3">17</font></td>
    <td noWrap align=left width="6%"><font size="3">%</font></td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom noWrap align=left width="38%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Intermec
        Technologies Corp.</font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="6%"><font size="3">*</font></td>
    <td noWrap align=left width="6%">&nbsp; </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="6%"><font size="3">22</font></td>
    <td noWrap align=left width="6%"><font size="3">%</font> </td>
    <td noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="6%"><font size="3">*</font></td>
    <td noWrap align=left width="6%">&nbsp; </td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"> </font></td>
    <td noWrap align=right width="6%"><font size="3">15</font></td>
    <td noWrap align=left width="6%"><font size="3">%</font> </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left colspan="17">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3"></font></div>
      __________________________________<br>
      * Customer accounts for less than 10% of total revenues for the period</td>
  </tr>
</table>
<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><font face="Times New Roman, Times, serif"><br>
  <b>NOTE 8 - Sale of Product Line Assets </b></font></p>
<p>On September 30, 2009, the Company entered into an asset purchase agreement
  pursuant to which the Company sold its serial product line to Quatech, Inc.,
  a wholly owned subsidiary of DPAC Technologies Corp. and manufacturer of wireless
  machine-to-machine networking and device connectivity systems. Under the terms
  of the asset purchase agreement, Quatech acquired for the sum of $500,000 all
  rights, title and interest in the Company's serial products business including
  related product designs, the SocketSerial brand name and the SocketSerial website
  under which the serial products were marketed by the Company. The products in
  the SocketSerial product line consist of a CompactFlash serial card, a PC serial
  card, a PC dual serial card, and a PC quad serial card, all with fixed and removable
  cable models. Also included are the Company's USB to Serial Adapter, USB to
  Ethernet Adapter and a license to sell the Cordless Serial Adapter. Quatech
  intends to continue to manufacture and distribute the SocketSerial product line
  and will assume existing customer support responsibilities. At the time of closing
  $450,000 of the purchase price was paid with the remaining $50,000 of the purchase
  price contingent and payable upon the attainment by Quatech of quarterly revenue
  from the sale of SocketSerial products of at least $250,000 in any quarter through
  the quarter ending December 31, 2010. The Company recognized $450,000 as a gain
  on sale of product line assets for the quarter ended September 30, 2009. The
  Company will use the proceeds from the transaction for working capital purposes.</p>
<p>In connection with the sale and purchase of the serial products business, the
  Company and Quatech also entered into a supply and licensing agreement pursuant
  to which the Company will (i) supply Quatech with its proprietary HIS3 interface
  chip used in the serial products, (ii) license its Bluetooth software to Quatech
  for use in the Cordless Serial Adapter, and (iii) supply a limited quantity
  of the Cordless Serial Adapter product currently held in the Company's inventory.</p>
<p><font face="Times New Roman, Times, serif"><b>NOTE 9 - Stock-Based Compensation</b></font></p>
<p><font face="Times New Roman, Times, serif">The Company accounts for share-based
  awards to employees, including grants of employee stock options, based on the
  fair values of the share-based awards. 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 Company uses a Black-Scholes valuation
  model for options granted prior to January 1, 2006. </font></p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">9</font>
</p>
<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><font face="Times New Roman, Times, serif"><br>
  Total stock-based compensation expense recognized in our statements of operations
  for the three and nine months ended September 30, 2009 and 2008 is shown below:<br>
  <br>
  </font></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: 1pt" valign=bottom>
    <td width="30%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=02 type=gutter -->
    <td align=right>&nbsp;</td>
    <!-- colindex=02 type=lead -->
    <td align=right width="7%">&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="7%">&nbsp;</td>
    <td align=left width="2%">&nbsp;</td>
    <!-- colindex=03 type=body -->
    <td align=left width="4%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="6%">&nbsp;</td>
    <td align=left width="3%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="2%">&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" width="30%"><font size="3"></font>
    </td>
    <td height="13" width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=middle height="13" colspan="7" style="border-bottom: 1px solid #000000" >
      <div align="center"><font size="3">Three Months Ended<br>
        September 30, </font></div>
    </td>
    <td valign=bottom noWrap align=middle height="13" width="4%" >&nbsp;</td>
    <td valign=bottom noWrap align=middle height="13" colspan="7"  style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3">Nine Months Ended<br>
        September 30,</font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="30%" height="15" style="border-bottom: 1px solid #000000">
      <div
      ><font size="3">Income Statement Classification</font></div>
    </td>
    <td width="2%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
    <td width="2%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2008</font></div>
    </td>
    <td width="4%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
    <td width="1%" height="15">&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2008</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="30%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"> <font size="3">&nbsp&nbspCost
        of revenues </font></div>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3">$</font> </td>
    <td valign=bottom noWrap align=right width="10%"><font size="3">18,303</font></td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font> </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="2%"><font size="3">$</font> </td>
    <td noWrap align=right width="10%"><font size="3">11,707</font></td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="4%"><font size="3"></font> </td>
    <td noWrap align=left width="2%"><font size="3">$</font> </td>
    <td noWrap align=right width="10%"><font size="3">45,099</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="2%"><font size="3">$</font> </td>
    <td noWrap align=right width="10%"><font size="3">31,916</font></td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="30%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">&nbsp&nbspResearch
        and development</font></div>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=right width="10%"><font size="3">48,228</font></td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font></td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=right width="10%"><font size="3">42,796</font></td>
    <td noWrap align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=left width="4%"><font size="3"></font></td>
    <td noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=right width="10%"><font size="3">116,003</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=right width="10%"><font size="3">150,953</font></td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom noWrap align=left width="30%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">&nbsp&nbspSales
        and marketing </font></div>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="2%">&nbsp; </td>
    <td noWrap align=right width="10%"><font size="3">74,971</font></td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="2%">&nbsp; </td>
    <td noWrap align=right width="10%"><font size="3">71,168</font></td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="4%"><font size="3"></font> </td>
    <td noWrap align=left width="2%">&nbsp; </td>
    <td noWrap align=right width="10%"><font size="3">194,782</font></td>
    <td noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="2%">&nbsp; </td>
    <td noWrap align=right width="10%"><font size="3">204,752</font></td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="30%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">&nbsp&nbspGeneral
        and administrative<font size="3"></font></font></div>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000" width="10%"><font size="3">62,114</font></td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000" width="10%"><font size="3">45,970</font></td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=left width="4%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000" width="10%"><font size="3">166,828</font></td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000" width="10%"><font size="3">177,953</font></td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom noWrap align=left width="30%">
      <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">&nbsp&nbspTotal</font></div>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="10%"><font size="3">203,616</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%">&nbsp;
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="10%"><font size="3">171,641</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%">&nbsp;
    </td>
    <td noWrap align=left width="4%"><font size="3"></font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="10%"><font size="3">522,712</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%">&nbsp;
    </td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="10%"><font size="3">565,574</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%">&nbsp;
    </td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  There were no options granted in the three months ended September 30, 2009.
  The weighted average per share fair value of stock options granted during the
  nine months ended September 30, 2009 was estimated at $1.62. The weighted average
  per share fair value of stock options granted during the three and nine months
  ended September 30, 2008 was estimated at $4.00 and $4.06, respectively. At
  September 30, 2009, options issued to employees for 1,230,005 shares were outstanding,
  of which 743,143 were exercisable. At September 30, 2008, options issued to
  employees for 1,101,110 shares were outstanding, of which 791,969 were exercisable.
  As of September 30, 2009, the total remaining unrecognized compensation costs
  related to unvested stock options was approximately $1.15 million, which will
  be amortized over the weighted average remaining option life of 2.2 years.</font></p>
<p><font face="Times New Roman, Times, serif">Weighted average assumptions for
  stock options granted during the three and nine months ended September 30, 2009
  and 2008 are shown below:<br>
  <br>
  </font></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="38%"><font size="3"></font>
    </td>
    <td height="13" width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=middle height="13" colspan="7" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3">Three Months Ended<br>
        September 30, </font></div>
    </td>
    <td valign=bottom noWrap align=middle height="13" width="2%" >&nbsp;</td>
    <td valign=bottom noWrap align=middle height="13" colspan="7" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3">Nine Months Ended<br>
        September 30,</font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="38%" height="15">
      <div
      ></div>
    </td>
    <td width="1%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
    <td width="1%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2008</font></div>
    </td>
    <td width="2%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
    <td width="2%" height="15">&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2008</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="38%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Risk-free
        interest rate (%)</font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp; </td>
    <td valign=bottom noWrap align=right width="7%"><font size="3">*</font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font></td>
    <td valign=bottom noWrap align=left width="5%">&nbsp; </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="7%"><font size="3">4.01</font></td>
    <td noWrap align=left width="5%"><font size="3">%</font> </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="7%"><font size="3">3.04</font></td>
    <td noWrap align=left width="5%"><font size="3">%</font> </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=right width="7%"><font size="3">3.82</font></td>
    <td noWrap align=left width="5%"><font size="3">%</font> </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="38%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Dividend
        yield </font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=right width="7%"><font size="3">*</font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font></td>
    <td valign=bottom noWrap align=left width="5%">&nbsp;</td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"> </font></td>
    <td noWrap align=right width="7%"><font size="3">---</font></td>
    <td noWrap align=left width="5%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%"><font size="3"></font></td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="7%"><font size="3">---</font></td>
    <td noWrap align=left width="5%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="2%"><font size="3"> </font></td>
    <td noWrap align=right width="7%"><font size="3">---</font></td>
    <td noWrap align=left width="5%">&nbsp;</td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom noWrap align=left width="38%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Volatility
        factor </font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="7%"><font size="3">*</font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font></td>
    <td noWrap align=left width="5%">&nbsp; </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="7%"><font size="3">0.62</font></td>
    <td noWrap align=left width="5%">&nbsp; </td>
    <td noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="7%"><font size="3">0.99</font></td>
    <td noWrap align=left width="5%">&nbsp; </td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="2%"><font size="3"> </font></td>
    <td noWrap align=right width="7%"><font size="3">0.66</font></td>
    <td noWrap align=left width="5%">&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="38%" height="17">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Expected
        option life (years)</font></div>
    </td>
    <td width="1%" height="17"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%" height="17"><font size="3"></font>
    </td>
    <td valign=bottom noWrap align=right width="7%" height="17"><font size="3">*</font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font></td>
    <td valign=bottom noWrap align=left width="5%" height="17">&nbsp;</td>
    <td width="1%" height="17"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%" height="17"><font size="3">
      </font></td>
    <td noWrap align=right width="7%" height="17"><font size="3">5.50</font></td>
    <td noWrap align=left width="5%" height="17">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%" height="17"><font size="3"></font></td>
    <td noWrap align=left width="1%" height="17"><font size="3"></font> </td>
    <td noWrap align=right width="7%" height="17"><font size="3">3.99</font></td>
    <td noWrap align=left width="5%" height="17">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%" height="17">&nbsp;</td>
    <td noWrap align=left width="2%" height="17"><font size="3"> </font></td>
    <td noWrap align=right width="7%" height="17"><font size="3">4.94</font></td>
    <td noWrap align=left width="5%" height="17">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left colspan="17" height="17">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="2">* No options
        were granted in the quarter ended September 30, 2009. </font></div>
      </td>
  </tr>
</table>
<font face="Times New Roman, Times, serif"><br>
</font>
<p><font face="Times New Roman, Times, serif"><b><br>
  </b></font></p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">10<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 align="left"><br>
</p>
<p><font face="Times New Roman, Times, serif"><b>NOTE 10 - Net Income (Loss) Per
  Share Applicable to Common Stockholders</b></font></p>
<p>The following table sets forth the computation of basic and diluted net income
  (loss) per share:<font face="Times New Roman, Times, serif"><br>
  <br>
  </font></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: 1pt" valign=bottom>
    <td width="48%">&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="9%">&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="9%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=03 type=body -->
    <td align=left width="3%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="9%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="2%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="9%">&nbsp;</td>
    <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" width="40%"><font size="3"></font>
    </td>
    <td height="13" width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=middle height="13" colspan="7" style="border-bottom: 1px solid #000000" >
      <div align="center"><font size="3">Three Months Ended<br>
        September 30, </font></div>
    </td>
    <td valign=bottom noWrap align=middle height="13" width="3%" >&nbsp;</td>
    <td valign=bottom noWrap align=middle height="13" colspan="7" style="border-bottom: 1px solid #000000" >
      <div align="center"><font size="3">Nine Months Ended<br>
        September 30,</font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="40%" height="15">
      <div
      ></div>
    </td>
    <td width="1%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
    <td width="2%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2008</font></div>
    </td>
    <td width="3%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
    <td width="2%" height="15">&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=2 height="15">
      <div align="center"><font size="3">2008</font></div>
    </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap width="1%" height="15">&nbsp;</td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="40%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"> <font size="3">Numerator:
        </font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp; </td>
    <td valign=bottom noWrap align=right width="9%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font> </td>
    <td width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"> </font></td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="3%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"> </font></td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=right width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="40%">
      <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"></font><font size="3"></font><font size="3"></font><font size="3">Net
        income (loss)</font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">49,158</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">
      </font></td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">(79,765</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">)
      </font></td>
    <td noWrap align=left width="3%"><font size="3"></font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">(1,607,140</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">)
      </font> </td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">(1,187,440</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">)
      </font> </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom noWrap align=left width="40%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="3%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="40%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Denominator:<font size="3"></font></font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font></td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font></td>
    <td noWrap align=left width="3%"><font size="3"></font></td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom noWrap align=left width="40%" height="21"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3">Weighted
      average common shares outstanding </font><font size="3">used </font><font size="3">in
      <br>
      </font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3">computing
      net income (loss) per share: </font></td>
    <td width="1%" height="21">&nbsp;</td>
    <td noWrap align=left width="1%" height="21" >&nbsp;</td>
    <td noWrap align=right width="9%" height="21" >&nbsp;</td>
    <td noWrap align=left width="1%" height="21" >&nbsp;</td>
    <td width="2%" height="21">&nbsp;</td>
    <td noWrap align=left width="1%" height="21" >&nbsp;</td>
    <td noWrap align=right width="9%" height="21" >&nbsp;</td>
    <td noWrap align=left width="1%" height="21" >&nbsp;</td>
    <td noWrap align=left width="3%" height="21">&nbsp;</td>
    <td noWrap align=left width="1%" height="21" >&nbsp;</td>
    <td noWrap align=right width="9%" height="21" >&nbsp;</td>
    <td noWrap align=left width="1%" height="21" >&nbsp;</td>
    <td noWrap align=left width="2%" height="21">&nbsp;</td>
    <td noWrap align=left width="1%" height="21" >&nbsp;</td>
    <td noWrap align=right width="9%" height="21" >&nbsp;</td>
    <td noWrap align=left width="1%" height="21" >&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="40%"> <font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3">Basic</font> </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">3,786,702</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">3,230,013</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;
    </td>
    <td noWrap align=left width="3%"><font size="3"></font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">3,486,894</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;
    </td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">3,214,742</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom noWrap align=left width="40%"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3">Diluted</font></td>
    <td width="1%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">3,950,643</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">3,230,013</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;
    </td>
    <td noWrap align=left width="3%"><font size="3"></font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">3,486,894</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;
    </td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">3,214,742</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="40%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">&nbsp</font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font></td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font></td>
    <td noWrap align=left width="3%"><font size="3"></font></td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td noWrap align=left width="40%"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      &nbsp;&nbsp; </font><font size="3">Net income (loss) per share:</font></td>
    <td width="1%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="3%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td noWrap align=left width="40%"> <font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3">Basic</font> </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">0.01</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">(0.02</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">)</font></td>
    <td noWrap align=left width="3%"><font size="3"></font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">(0.46</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">)
      </font> </td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">(0.37</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">)
      </font> </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom noWrap align=left width="40%"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">
      </font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3">Diluted</font></td>
    <td width="1%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">0.01</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">(0.02</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">)</font></td>
    <td noWrap align=left width="3%"><font size="3"></font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">(0.46</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">)
      </font> </td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">(0.37</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">)
      </font> </td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  For the nine months ended September 30, 2009, and the three and nine months
  ended September 30, 2008, 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 and warrants have been
  included in the net loss per share calculation, as their effect is anti-dilutive.
  Options and warrants to purchase 1,319,200 and 1,101,110 shares of Common Stock
  at September 30, 2009 and 2008, respectively, have been omitted from the diluted
  net loss per share calculation.</font></p>
<p><br>
  <font face="Times New Roman, Times, serif"><b>NOTE 11 - Taxes</b></font></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 $23,955 for the three and nine months ended September 30, 2009, respectively,
  and 2008, 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.<font face="Times New Roman, Times, serif">
  </font></p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">11<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>At December 31, 2008, the Company has an unrecognized tax benefit
  of approximately $643,000, which did not change significantly during the nine
  months ended September 30, 2009. The unrecognized tax benefit is 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 three and nine months ended September 30, 2009.
<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 1994 to 2008
  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.</p>
<p>&nbsp;</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><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 &quot;Management's Discussion and Analysis
  of Financial Condition and Results of Operations.&quot; Words such as &quot;may,&quot;
  &quot;will,&quot; &quot;predicts,&quot; &quot;anticipates,&quot; &quot;expects,&quot;
  &quot;intends,&quot; &quot;plans,&quot; &quot;believes,&quot; &quot;seeks,&quot;
  &quot;estimates,&quot; 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;
  the change in gross margins between current and future products; our ability
  to effectively manage and contain our operating costs; events in the U.S. and
  world economy, financial markets and credit markets; 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 &quot;Part II, Item 1A. Risk Factors&quot; and recent Form 8-K,
  Form 10-Q 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"><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><br>
  <br>
  </font><font face="Times New Roman, Times, serif" size="3"><b><br>
  Revenues</b></font><font face="Times New Roman, Times, serif"><br>
  We are a producer of mobile computing hardware and data collection systems serving
  the hospitality, healthcare, retail, automotive and other Business Mobility
  vertical markets. We offer a family of handheld computer products and a wide
  range of data collection and connectivity peripheral products for use with third-party
  vertical handheld computing applications software and devices. Our peripheral
  products work with many third-party mobile handheld devices including Smartphones,
  handheld computers, tablet computers, ultra-mobile computers, and notebooks,
  adding data collection and connectivity capabilities to these devices. Our products
  are designed to enable the accessing, collection and processing of data by employees
  while mobile. Our products utilize popular Bluetooth and wireless LAN wireless
  connection technologies. Our plug-in and Bluetooth data collection products
  offer a variety of data collection technologies including laser and imager barcode
  scanning engines capable of reading linear (1D) and two dimensional (2D) barcodes,
  plus we offer RFID (radio frequency identification) and magnetic stripe readers.
  We also offer embedded Bluetooth and wireless LAN products for use in the mobile
  products of third-party original equipment manufacturers.</font></p>
<p><font face="Times New Roman, Times, serif"> </font></p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">13<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>We work with more than 200 software integration companies that are offering
  or developing vertical software applications for use with handheld computers
  and mobile phones. Healthcare has been a primary area of focus for our software
  integration partners and more than half of our handheld computer sales now come
  from organizations within the healthcare industry. Other vertical markets benefiting
  from our mobile solutions include hospitality, retail merchandising, automotive,
  government and education. These mobile solutions are designed to improve the
  productivity of business enterprises and service providers 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>We believe that growth in the mobile workforce, technical advances and cost
  reductions in mobile devices and networking technologies, and the pervasive
  use of the Internet are driving broader adoption of mobile computing. Our products
  are designed to address the growing need for mobile computing by today's mobile
  workforce by enabling them to access, collect and process data while mobile,
  thereby enhancing their productivity, allowing them to exploit time sensitive
  opportunities and improving customer satisfaction. We make available to original
  equipment manufacturers (&quot;OEMs&quot;) the Bluetooth and wireless LAN wireless
  technologies that we incorporate in our own products through the sale of modules
  and plug-in cards that these manufacturers embed into their products, including
  driver and device management software that is designed to simplify the ability
  of mobile employees to get and stay connected with Wi-Fi as well as with Bluetooth.
  Overall, our products enable the integration of hardware, software and applications
  into complete mobile data collection and connectivity solutions.</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 three and nine months ended
  September 30, 2009 were $4.6 million and $13.5 million, respectively, which
  represented decreases of 43% and 38%, respectively, from revenues of $7.5 million
  and $13.7 million in the corresponding periods one year ago.</p>
<p>Our revenues in the comparable three and nine month periods may be classified
  into three broad product families:</p>
<ul>
  <li><font face="Times New Roman, Times, serif">Mobile handheld computer products;</font></li>
  <li><font face="Times New Roman, Times, serif">Mobile peripheral products: data
    collection, connectivity and serial; and </font></li>
  <li><font face="Times New Roman, Times, serif">OEM embedded products. </font></li>
</ul>
<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><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p>Our <i><b>mobile handheld computer products</b></i> are designed to be durable
  devices that have features similar to heavier duty industrial handheld devices
  but at a significantly lower price. Our initial model, the SoMo&reg; 650 (SoMo
  is derived from <u>So</u>cket <u>Mo</u>bile), was introduced in June 2007 with
  initial volume shipments in September 2007, and features the Microsoft Windows
  Mobile Classic operating system, Versions 5 and 6. Windows Mobile is the industry
  standard OS for mobile applications, thereby enabling the SoMo to be compatible
  with a large number of business applications and giving users a familiar computing
  environment. Our mobile handheld computers are easy to customize for a particular
  application by adding peripherals. The SoMo products have an expected product
  life cycle of three to five years to address the needs of our customers who
  are deploying mobile solutions. The SoMo's features include wireless LAN and
  Bluetooth, a fast processor, a large, bright screen display enabling its use
  outdoors, 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. The SoMo is available with multiple language
  support and includes our Bluetooth, wireless LAN and barcode scanning software.
  The SoMo 650 was specifically designed without an integrated mobile phone to
  serve the market for business mobility applications that do not depend on mobile
  phone connections such as medication dispensing in the healthcare market or
  serving tables in the hospitality market, many of which use Bluetooth or wireless
  LAN connections for data communications. In late 2008, we introduced the SoMo
  650Rx with an antimicrobial additive incorporated into its plastic case for
  the healthcare market. The antimicrobial material that is embedded into the
  plastics provides an extra layer of protection to the devices against the spread
  and multiplication of potentially harmful bacteria and microbes. In April 2009
  we extended our line of antimicrobial products for the healthcare market to
  include our Cordless Hand Scanners and CompactFlash Scan Cards. We also offer
  a SoMo 650DX without Bluetooth or wireless LAN for high security environments.
  In the third quarter of 2009 we began shipping our SoMo 650 Back Pack Broadband
  ExpressCard Adapter, which attaches to the back of our SoMo 650 and accepts
  pre-certified and approved Novatel Wireless ExpressCards to extend the functionality
  of the SoMo 650 to include anytime, anywhere, data connectivity over a wide
  area network (WAN). The SoMo 650 Back Pack is available in both a standard version
  and an antimicrobial version for use in healthcare applications. Mobile handheld
  computer products represented approximately 36% of our revenues in each of the
  three and nine month periods ended September 30, 2009, compared to 19% and 15%
  of our revenues in the corresponding periods one year ago. The increases in
  the comparable periods are due to the combined effects of increases in mobile
  handheld computer product revenues in each of the comparable periods and lower
  revenues in other product categories in the comparable periods.</p>
<p>Our <i><b>mobile peripheral products</b></i> consist of data collection, connectivity
  and serial products, which together represented approximately 40% and 44% of
  our revenues for the three and nine months ended September 30, 2009, compared
  to 44% and 50% of our revenues for the corresponding periods one year ago.</p>
<p>Our <i>data collection products</i> enable the electronic collection of data
  from barcodes, radio frequency identification (RFID) tags, or magnetic stripes
  and consist of: </p>
<ul>
  <li><font face="Times New Roman, Times, serif"> barcode scanning products that
    plug into or connect wirelessly to handheld computers, tablet computers, ultra-mobile
    computers, notebook computers and smartphones that use Windows Mobile, Windows
    CE, Windows 7/Vista/XP, RIM Blackberry, Nokia E61, E61i, and E71 operating
    systems, and turn these devices into portable barcode scanners and RFID readers
    that can be used in various retail and industrial workplaces. Our cordless
    hand scanner and cordless ring scanner may also be connected wirelessly to
    a desktop computer, enabling mobile barcode scanning around a fixed workstation;</font></li>
  <li><font face="Times New Roman, Times, serif">RFID plug-in products that read
    radio frequency identification tags; </font></li>
  <li><font face="Times New Roman, Times, serif">a combination plug-in barcode
    scanner and RFID reader; and </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">a plug-in magnetic stripe
    reader.<br>
    <br>
    </font></li>
</ul>
<p align=center><font face="Times New Roman, Times, serif" size="3">15<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>Our plug-in and Bluetooth cordless data collection products offer a variety
  of data collection technologies at several performance levels including laser
  and imager barcode scanning engines capable of reading linear (1D) and two dimensional
  (2D) barcodes and RFID readers, enabling solutions to be tailored to optimal
  price/performance levels. Our plug-in barcode scanners are available in both
  CompactFlash and SDIO form factors. In April 2009 we began offering versions
  of our CompactFlash Scan Card and Bluetooth Cordless Hand Scanner with antimicrobial
  material embedded into the plastics to provide an extra layer of protection
  to the devices against the spread and multiplication of potentially harmful
  bacteria and microbes. We also offer a cordless ring scanner worn on the index
  finger which connects to computing systems using the Bluetooth standard for
  short-range wireless connectivity. We have developed extensive barcode scanning
  and RFID reading 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. Data collection products represented approximately
  32% and 33% of our revenues for the three and nine months ended September 30,
  2009, compared to 34% and 38% of our revenues in the corresponding periods one
  year ago.</p>
<p>Our <i>connectivity products</i> are connection devices that can be plugged
  into standard CompactFlash or Secure Digital SDIO expansion slots in handheld
  computers, tablet computers, ultra mobile computers, and notebook computers
  that use Windows Mobile, Windows 7/Vista/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 computers, tablet computers, ultra-mobile computers, and notebook computers,
  smartphones and printers. Our connectivity products include:</p>
<ul>
  <li><font face="Times New Roman, Times, serif">modems for telephone connections
    that connect over a cable;</font></li>
  <li><font face="Times New Roman, Times, serif">Ethernet cards for local area
    network connections that connect over a cable; and </font></li>
  <li><font face="Times New Roman, Times, serif">accessory products such as batteries
    and cables.<br>
    </font></li>
</ul>
<p align="left">Connectivity products represented approximately 4% and 5% of our
  revenues for the three and nine months ended September 30, 2009, compared to
  6% of our revenues in each of the corresponding periods one year ago.</p>
<p align="left">Our <i>serial 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. During 2008 we introduced
  a USB to serial connector to enable a serial connection through a USB interface
  and in the second quarter of 2009 we introduced a USB to Ethernet Adapter. Serial
  products represented approximately 4% and 6% of our revenues for the three and
  nine months ended September 30, 2009, and 2008. On September 30, 2009, we entered
  into an asset purchase agreement pursuant to which we sold our serial product
  line to Quatech, Inc. (see &quot;Note 8 - Sale of Product Line Assets&quot;
  for more information).</p>
<p align="left">&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">16<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 <i><b>OEM embedded products</b></i> consist of Bluetooth and
  wireless LAN modules and plug-in cards used primarily by OEMs of industrial
  grade 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. Our products use the Bluetooth 2.0 standard,
  and we plan to upgrade later in 2009 to the Bluetooth 2.1 + EDR standard, continuing
  our commitment to keep our products current with evolving technology standards.
  Our plug-in cards for connecting to local wireless networks during 2008 used
  the wireless LAN 802.11b/g (or Wi-Fi) standard and included extensive communications
  software designed to make these products easy to use. Our wireless LAN software
  is certified for Cisco Compatible Extensions (CCX) 4.0 which enables our wireless
  LAN products to be compatible with a Cisco wireless LAN infrastructure. In April
  2009 we announced availability of our SDIO wireless LAN plug-in card upgraded
  to incorporate the wireless LAN 802.11 a/b/g standard. OEM embedded products
  represented approximately 24% and 20% of our revenues for the three and nine
  months ended September 30, 2009, compared to 37% and 35% of our revenues for
  the corresponding periods one year ago.</p>
<p>Our revenues by product family for the three and nine months ended September
  30, 2009 and 2008, and the corresponding increase or decrease in revenues for
  the comparable periods are shown in the following table:</p>
<p align=left><font face="Times New Roman, Times, serif"><br>
  </font>
<table style="MARGIN-TOP: 6pt; FONT-SIZE: 10pt" cellspacing=0 cellpadding=0
width="80%" align=center border=0>
  <tr class="border">
    <td colspan=2 height="24" valign="bottom"  ><font size="3"><i>(revenues in
      thousands)</i></font></td>
    <td height="24" valign="bottom" width="3%"  >&nbsp;</td>
    <td noWrap align=middle colspan=11 height="24" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3">Three Months Ended<br>
        September 30,</font></div>
      <font size="3"></font></td>
    <td width="5%" height="24"><font size="3"></font></td>
    <td noWrap align=middle colspan=11 height="24" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3">Nine Months Ended<br>
        September 30,</font><font size="3"></font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td colspan="2" height="29"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="29" width="3%">&nbsp;</td>
    <td align="center" colspan="3" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2009</font></td>
    <td width="3%" height="29"><font size="3"></font></td>
    <td align="center" colspan="3" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2008</font></td>
    <td width="3%" height="29"><font size="3"></font></td>
    <td align="center" colspan="3" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">Increase<br>
      (Decrease) </font><font size="3"></font></td>
    <td width="5%" height="29"><font size="3"></font></td>
    <td align="center" colspan="3" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2009</font><font size="3"></font></td>
    <td width="3%" height="29"><font size="3"></font></td>
    <td align="center" colspan="3" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2008</font><font size="3"></font></td>
    <td width="3%" height="29"><font size="3"></font></td>
    <td align="center" colspan="3" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">Increase<br>
      (Decrease) </font><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;
        </font><font size="3"></font><font size="3">Mobile handheld computer products</font></div>
    </td>
    <td width="3%" bgcolor="#cceeff">&nbsp;</td>
    <td align=left width="1%" bgcolor="#cceeff"><font size="3">$</font></td>
    <td noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">1,653</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align=left width="1%" bgcolor="#cceeff"><font size="3">$</font></td>
    <td noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">1,512</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align=left width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td noWrap align=right width="4%" bgcolor="#cceeff"><font size="3">9</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3">%</font></td>
    <td width="5%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align=left width="1%" bgcolor="#cceeff"><font size="3">$</font></td>
    <td noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">4,932</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align=left width="1%" bgcolor="#cceeff"><font size="3">$</font></td>
    <td noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">3,219</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align=left width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td noWrap align=right width="4%" bgcolor="#cceeff"><font size="3">53</font></td>
    <td width="1%" 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;
        </font><font size="3">Mobile peripheral products:</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%">&nbsp;</td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%">&nbsp;</td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="4%">&nbsp;</td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="5%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%">&nbsp;</td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%">&nbsp;</td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="4%">&nbsp;</td>
    <td width="1%" valign="bottom"><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">1,463</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></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">2,727</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" 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="4%" bgcolor="#cceeff"><font size="3">(46</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3">%)</font></td>
    <td width="5%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></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">4,430</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></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">8,288</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" 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="4%" bgcolor="#cceeff"><font size="3">(47</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">166</font></td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td align=left width="1%"><font size="3"></font></td>
    <td noWrap align=right width="5%"><font size="3">483</font></td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td noWrap align=right width="4%"><font size="3">(66</font></td>
    <td width="1%" valign="bottom"><font size="3">%)</font></td>
    <td width="5%" valign="bottom"><font size="3"></font></td>
    <td align=left width="1%"><font size="3"></font></td>
    <td noWrap align=right width="5%"><font size="3">657</font></td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td align=left width="1%"><font size="3"></font></td>
    <td noWrap align=right width="5%"><font size="3">1,389</font></td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td noWrap align=right width="4%"><font size="3">(53</font></td>
    <td 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">Serial products</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">202</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></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">326</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" 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="4%" bgcolor="#cceeff"><font size="3">(38</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3">%)</font></td>
    <td width="5%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></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">792</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></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">1,303</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" 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="4%" bgcolor="#cceeff"><font size="3">(39</font></td>
    <td width="1%" valign="bottom" 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></div>
    </td>
    <td width="3%">&nbsp;</td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000"><font size="3">1,090</font></td>
    <td width="1%" valign="bottom" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000"><font size="3">2,971</font></td>
    <td width="1%" valign="bottom" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="4%"><font size="3">(63</font></td>
    <td width="1%" valign="bottom"><font size="3">%)</font></td>
    <td width="5%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000"><font size="3">2,678</font></td>
    <td width="1%" valign="bottom" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000"><font size="3">7,482</font></td>
    <td width="1%" valign="bottom" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="4%"><font size="3">(64</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">4,574</font></td>
    <td align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" >&nbsp;
    </td>
    <td align=right style="border-bottom: 1px solid #000000" width="3%" bgcolor="#cceeff" ><font size="3"></font></td>
    <td align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" ><font size="3">$</font></td>
    <td align=right style="border-bottom: 3px double #000000" width="5%" bgcolor="#cceeff" ><font size="3">8,019</font></td>
    <td align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" >&nbsp;
    </td>
    <td align=right style="border-bottom: 1px solid #000000" width="3%" bgcolor="#cceeff" ><font size="3"></font></td>
    <td align=left width="1%" height="14" bgcolor="#cceeff"><font size="3"></font></td>
    <td noWrap align=right width="4%" height="14" bgcolor="#cceeff"><font size="3">(43</font></td>
    <td width="1%" height="14" bgcolor="#cceeff"><font size="3">%)</font></td>
    <td valign=bottom align=right style="border-bottom: 1px solid #000000" width="5%" bgcolor="#cceeff" ><font size="3"></font></td>
    <td align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" ><font size="3">$</font></td>
    <td align=right style="border-bottom: 3px double #000000" width="5%" bgcolor="#cceeff" ><font size="3">13,489</font></td>
    <td align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" >&nbsp;
    </td>
    <td valign=bottom align=right style="border-bottom: 1px solid #000000" width="3%" 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">21,681</font></td>
    <td align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" >&nbsp;
    </td>
    <td align=right style="border-bottom: 1px solid #000000" width="3%" bgcolor="#cceeff" ><font size="3"></font></td>
    <td align=left width="1%" height="14" bgcolor="#cceeff"><font size="3"></font></td>
    <td noWrap align=right width="4%" height="14" bgcolor="#cceeff"><font size="3">(38</font></td>
    <td width="1%" height="14" bgcolor="#cceeff"><font size="3">%)</font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  Our mobile handheld computer product revenues in the three and nine months ended
  September 30, 2009 were $1.7 million and $4.9 million, an increase of 9% and
  53% compared to revenues of $1.5 million and $3.2 million in the corresponding
  periods one year ago. We began shipping our first mobile handheld computer,
  the SoMo 650, to customers through our distribution channel 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 the commencement
  of widespread customer evaluation, qualification, and deployment. We began offering
  Windows Mobile 6 Classic and multiple language support for the SoMo 650 in the
  second quarter of 2008, giving customers a choice of operating systems and languages
  to best fit their needs. In late 2008, we introduced the SoMo 650Rx with an
  antimicrobial case for the healthcare market designed to reduce the risk of
  the spread of bacteria from the use of handheld devices in a healthcare environment,
  and the SoMo 650DX without Bluetooth or wireless LAN for high security environments.
  Increased revenues from our mobile handheld computer products in the three and
  nine months of 2009 compared to the same quarter one year ago, reflect higher
  sales volumes due to a growing customer base with larger average unit deployments.
  Although the comparable three and nine months indicate growth in our mobile
  handheld computer revenues, we believe this growth has been slowed by the worldwide
  economic slowdown, as our customers are taking longer to make their deployment
  decisions. In the third quarter of 2009, mobile handheld computer revenues declined
  by 2% compared to the previous second quarter, due to the completion of a year
  long roll-out to a key customer in the healthcare market early in the third
  quarter. Declines in sales to this key customer were partially offset by growth
  in sales to existing customers in healthcare and other markets, which grew at
  a rate of 14% over the previous quarter. In the second quarter of 2009 mobile
  handheld computer revenues grew by 5% compared to the previous first quarter
  of 2009, and in the first quarter of 2009 mobile handheld computer revenues
  grew by 2% compared to the previous fourth quarter of 2008.</font></p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">17<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 data collection product revenues in the three and nine months ended September
  30, 2009 were $1.5 million and $4.4 million, a decrease of 46% and 47% compared
  to revenues of $2.7 million and $8.3 million in the corresponding periods one
  year ago. Revenue declines in the comparable three and nine month periods were
  due primarily to lower sales volumes of our primary scanning products including
  our CompactFlash In-Hand Scan card, our Cordless Hand Scanner, and our SDIO
  In-Hand Scan card. Our data collection product revenues have been slowed in
  the first nine months of 2009 by the worldwide economic slowdown.</p>
<p>Our connectivity product revenues in the three and nine months ended September
  30, 2009 were $0.2 million and $0.7 million, a decrease of 66% and 53% compared
  to revenues of $0.5 million and $1.4 million in the corresponding periods one
  year go. The declines in each of the comparable periods 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 product revenues in the three and nine months ended September
  30, 2009 were $202,000 and $792,000, a decrease of 38% and 39% compared to revenues
  of $483,000 and $1,303,000 in the corresponding periods one year ago. Revenue
  decreases in the three and nine months were from reduced sales of our standard
  serial PC card products. Our standard serial PC card products are primarily
  sold to connect peripheral devices or other electronic equipment to notebook
  computers. On September 30, 2009, we entered into an asset purchase agreement
  pursuant to which we sold our serial product line to Quatech, Inc. (see &quot;Note
  8 - Sale of Product Line Assets&quot; for more information).
<p>Our OEM embedded product revenues in the three and nine months ended September
  30, 2009 were $1.1 million and $2.7 million, a decrease of 63% and 64% compared
  to $3.0 million and $7.5 million in the corresponding periods one year ago.
  Revenue decreases of $1.8 million and $4.4 million in the three and nine month
  comparable periods were from reduced sales of our Bluetooth modules to our OEM
  customers as a result of phasing out older Bluetooth technology and a last-buy
  purchase program completing in early 2009. Our OEM customers made last-buy Bluetooth
  module purchases beginning in the third quarter of 2008, with the majority of
  these shipments occurring in the latter half of 2008, followed by final remaining
  shipments in 2009 completed primarily in the first quarter. Additional declines
  of $0.3 million in each of the three and nine month comparable periods were
  from reduced sales of our wireless LAN plug-in cards. Sales of our Bluetooth
  plug-in cards increased in the third quarter of 2009 compared to the comparable
  period a year ago, due to last-buy purchases of these products in the third
  quarter of 2009. Sales of our Bluetooth plug-in cards for the nine months of
  2009 declined from the comparable period one year ago. Partially offsetting
  these declines were increases in sales of our wireless LAN modules in each of
  the comparable periods.<br>
  <br>
  <font face="Times New Roman, Times, serif"> <br>
  </font></p>
<p align=center><font face="Times New Roman, Times, serif" size="3">18<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>Gross Margins<br>
  </b></font><font face="Times New Roman, Times, serif">Gross margins in each
  of the three and nine month periods ended September 30, 2009 were 45%, compared
  to margins of 46% and 48% in the corresponding periods in 2008. 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 three and
  nine months ended September 30, 2009 compared to the same periods one year ago
  are due primarily to increased sales of our mobile handheld computer, which
  comprised 36% of our revenues each of the three and nine month periods ended
  September 30, 2009, compared to 19% and 15% in the corresponding periods one
  year ago. Margins on our mobile handheld computer are below our average product
  margins. Additional margin declines in the three and nine months ended September
  30, 2009 are due to our fixed overhead costs, which comprise a greater portion
  of the overall revenues and cost of goods sold due to lower revenues in the
  first three quarters of 2009 compared to the same quarters one year ago. Gross
  margins in the fourth quarter of 2009 are expected to remain at levels similar
  to the third quarter gross margins. </font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Research and Development
  Expense<br>
  </b></font>Research and development expense for the three months ended September
  30, 2009 was $0.7 million, a decrease of 40% compared to research and development
  expense of $1.1 million in the corresponding period one year ago. Research and
  development expense for the nine months ended September 30, 2009 was $2.2 million,
  a decline of 37% compared to research and development expense of $3.4 million
  in the corresponding period one year ago. Sixty three percent of the reduction
  in research and development expense in the comparable three and nine month periods
  was due to reduced personnel costs as the result of a reduction-in-force action
  initiated in the fourth quarter of 2008, followed by additional reductions in
  employee compensation and related expense during the first nine months of 2009.
  In the fourth quarter of 2008 the Company initiated a range of expense reductions
  across all departments and functional expense categories in response to the
  worldwide economic slowdown, with additional reductions following in the first
  and second quarters of 2009, and a continuation of the reduced expense levels
  through the third quarter of 2009. Additional reductions in research and development
  expense in the comparable three and nine month periods were from reduced development
  fees due to a reduction in product development activities, and reduced equipment
  costs related to the reductions in product development activities. Research
  and development expense in the fourth quarter of 2009 is expected to continue
  at levels similar to the previous third quarter.</p>
<p><font face="Times New Roman, Times, serif"><b>Sales and Marketing Expense</b><br>
  Sales and marketing expense for the three months ended September 30, 2009 was
  $1.2 million, a decrease of 39% compared to $2.0 million in the corresponding
  period one year ago. Sales and marketing expense for the nine month period ended
  September 30, 2009 was $3.9 million, a decrease of 33% compared to sales and
  marketing expense of $5.9 million in the corresponding period one year ago.
  Three quarters of the reduction in sales and marketing expense in the three
  and nine month comparable periods was due to reduced personnel costs as a result
  of the reduction-in-force action initiated in the fourth quarter of 2008 referred
  to above and further reductions in employee compensation and related expense
  during the first nine months of 2009. Additional notable reductions in sales
  and marketing expense in the comparable three and nine month periods were in
  the categories of advertising and promotion expense, travel, outside services,
  and equipment costs. Sales and marketing expense in the fourth quarter of 2009
  is expected to continue at levels similar to the previous third quarter.</font><font face="Times New Roman, Times, serif">
  </font></p>
<p>&nbsp;</p>
<p></p>
<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><font face="Times New Roman, Times, serif" size="3"><b>General and Administrative
  Expense<br>
  </b></font>General and administrative expense for the three months ended September
  30, 2009 was $0.5 million, a decrease of 17% compared to general and administrative
  expense of $0.6 million in the corresponding period one year ago. General and
  administrative expense for the nine month period ended September 30, 2009 was
  $1.7 million, a decrease of 17% compared to general and administrative expense
  of $2.0 million in the corresponding period one year ago. Over half of the reduction
  in expense in each of the comparable three and nine month periods was due to
  reduced payroll costs primarily from reductions in employee compensation expense
  in the first nine months of 2009. Additional reductions in general and administrative
  expense in the comparable three and nine month periods were primarily from reduced
  consulting and professional fees and reduced investor relations expense. General
  and administrative expense is expected to increase in the fourth quarter of
  2009 from third quarter levels due to increased consulting and professional
  fees related to the audit of our annual financial statements, historically charged
  during the fourth and first quarters.<font face="Times New Roman, Times, serif">
  </font></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. Such amount has now been fully
  amortized. Amortization charges for the three and nine months ended September
  30, 2009 for all acquired intangibles were $15,000 and $62,000 compared to $32,000
  and $95,000 in the corresponding periods one year ago. Future intangible amortization
  charges will be $15,000 per quarter going forward until fully amortized.</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 was immaterial in the three and nine month periods ended September 30,
  2009, compared to interest income of $3,500 and $19,600 in the comparable periods
  one year ago. Lower interest income in the comparable periods reflects lower
  average cash balances combined with lower average rates of return.</p>
<p>Interest expense of $68,000 and $185,000 for the three and nine months ended
  September 30, 2009, increased from interest expense of $25,000 and $56,000 in
  the comparable periods 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 in 2008 also included interest related to a term loan
  outstanding during 2008, the balance of which was paid back in full at the end
  of 2008 in conjunction with a new credit line agreement. Higher interest expense
  in the three and nine months of 2009 is due to higher average balances outstanding
  on our bank lines of credit at higher overall interest rates compared to the
  same periods one year ago. Interest expense in the fourth quarter of 2009 is
  expected to continue at levels similar to the previous third quarter.</p>
<P>&nbsp;</P>
<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>
<p align=left><font face="Times New Roman, Times, serif"><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
  and $24,000 in the three and nine month periods ended September 30, 2009 and
  2008, 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.</font>
<p align=left><font face="Times New Roman, Times, serif"><b>Liquidity and Capital
  Resources</b><br>
  </font>We were profitable in the third quarter of 2009 due in part to the gain
  on the sale of our serial product line assets. We were unprofitable in each
  of the first two quarters of 2009 and in each of the quarters in fiscal years
  2008, 2007, and 2006. We were profitable in two quarters in 2005, but unprofitable
  for fiscal year 2005. Fiscal year 2004 was the only 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 $40 million in equity
  capital to fund our operations.
<p>As reflected in our Condensed Statements of Cash Flows, net cash provided from
  operating activities was $0.4 million in the first nine months of 2009, compared
  to net cash used in operating activities of $1.0 million in the first nine months
  of 2008. We calculate net cash used in operating activities by reducing our
  net loss ($1.6 million and $1.2 million in the first nine months of 2009 and
  2008, respectively) by those expenses that did not require the use of cash,
  and reversing gains that did not generate cash. These items consist of stock
  based compensation expense, depreciation and amortization, amortization of intangible
  assets, net foreign currency transaction losses, deferred tax expense and change
  in deferred rent. These amounts totaled $1.0 million in the first nine months
  of 2009 compared to $1.1 million in the comparable period one year ago. Also,
  in the first nine months of 2009 our net loss includes a gain of $450,000 from
  the sale of our serial product line assets in September of 2009 (see &quot;Note
  8 - Sale of Product Line Assets&quot; for more information). We adjusted the
  net loss for the first nine months of 2009 to exclude this gain. In addition,
  we report increases in assets and reductions in liabilities as uses of cash
  and decreases in assets and increases in liabilities as sources of cash, together
  referred to as changes in operating assets and liabilities. In the first nine
  months of 2009 changes in operating assets and liabilities resulted in a net
  source of cash of $1.5 million and were primarily from reductions in inventory,
  due primarily to planned reductions in stocking levels of our mobile handheld
  computer from year end inventory levels, reductions in accounts receivable due
  to lower shipments in the third quarter of 2009 compared to the fourth quarter
  of 2008, partially offset by reductions in accounts payable due to reductions
  in overall expenses and inventory purchases in the third quarter that create
  those payables, and reductions in deferred income on shipments to distributors
  due to lower stocking levels of our products in the distribution channel. Changes
  in operating assets and liabilities in the first nine months of 2008 resulted
  in a use of cash of $0.9 million, and were primarily from increases in accounts
  receivable due to a combination of the timing of shipments late in the third
  quarter of 2008 and the timing of collections from key distributors concentrated
  at the end of the fourth quarter of 2007, and increases in inventories due primarily
  to stocking higher quantities of our mobile handheld computer and stocking higher
  quantities of our Bluetooth modules for our OEM customers, partially offset
  by increases in accounts payable related to the purchases that led to the increased
  levels of inventories. <br>
  <br>
</p>
<p align=left>&nbsp;
<p></p>
<p align=center><font face="Times New Roman, Times, serif" size="3">21<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 investing activities was $236,000 in the first
  nine months of 2009 compared to cash used in investing activities of $302,000
  in the comparable period one year ago. Proceeds of $450,000 from the sale of
  our serial product line assets in September of 2009 were partially offset by
  cash used for equipment and tooling purchases in the first nine months of 2009.
  Reductions in equipment and tooling purchases in the first nine months of 2009
  were due to fewer development projects requiring these expenditures compared
  to the same period one year ago.</p>
<p align=left>Cash provided from financing activities was $1.2 million in the
  first nine months of 2009, compared to cash provided of $0.5 million in the
  comparable period one year ago. Financing activities in the first nine months
  of 2009 consisted primarily of net proceeds from the issuance of common stock
  and warrants, and a net increase in the amounts drawn on our bank lines of credit
  at the end of the quarter. Financing activities in the first nine months of
  2008 consisted primarily of a net increase in the amounts drawn on our bank
  lines of credit at the end of the quarter, proceeds from the exercise of warrants
  and stock options primarily in the second quarter of 2008, and repayments on
  our bank term loan, which was advanced at the end of June 2007 and was being
  repaid in 36 monthly installments beginning in July 2007.
<p align="left">Our cash balances at September 30, 2009 were $2.5 million, including
  cash of $1.3 million drawn against our bank line of credit. In February 2009,
  we extended our bank line of credit agreement which will now expire on March
  24, 2010. At September 30, 2009, our balance sheet had a current ratio (current
  assets divided by current liabilities) of 1.11 to 1.0, and no material long
  term debt. On July 7, 2009 our bank agreed to amend the terms of the credit
  agreement to replace the adjusted quick ratio covenant with a minimum cash and
  quarterly revenue requirement, revise the advance rate on receivables and the
  collateral handling fee, and to waive the events of non-compliance with respect
  to the adjusted quick ratio covenant for the months of April, May and June (see
  &quot;Note - 5 Bank Financing Arrangements&quot; for more information). In the
  fourth quarter of 2008 the Company took actions to reduce expenses, including
  a reduction in force of 12% of our worldwide workforce, to align our cost structure
  with current economic conditions in light of slowing business spending due to
  the current economic downturn. We have taken additional actions in 2009 to sequentially
  reduce our quarterly expenses. We have the ability to further reduce expenses
  if necessary. We believe our existing cash, plus our ability to reduce costs,
  and our bank lines of credit will be sufficient to meet our funding requirements
  at least through September 30, 2010. If we can return to profitability through
  normal operations 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
  through normal operations, we will not be able to support our operations from
  positive cash flows, and we would use our existing cash to support operating
  losses. There can be no assurance that additional capital will be available
  on acceptable terms, if at all, and any such terms may be dilutive to existing
  stockholders. If we are unable to secure the necessary capital for our business,
  we may need to suspend some or all of our current operations.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">22<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"><font face="Times New Roman, Times, serif">Our contractual cash
  obligations at September 30, 2009 are outlined in the table below:<br>
  <br>
  </font></p>
<table width="70%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">
  <tr>
    <td colspan="2" height="15">&nbsp;</td>
    <td width="4%" height="15">&nbsp;</td>
    <td colspan="18" align="center" nowrap class="border" style="border-bottom: 1px solid #000000" height="15"><font size="3" face="Times New Roman, Times, serif">Payments
      Due by Period</font></td>
    <td width="1%" class="border" height="15">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2" style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Contractual
        Obligations</font></div>
    </td>
    <td valign="bottom"><font face="Times New Roman, Times, serif"><b><font size="3">&nbsp</font></b></font></td>
    <td colspan="2" align="center" nowrap class="border" style="border-bottom: 1px solid #000000" valign="bottom"><font size="3" face="Times New Roman, Times, serif">Total</font></td>
    <td valign="bottom" class="border">&nbsp;</td>
    <td class="border" valign="bottom">&nbsp;</td>
    <td colspan="2" align="center" nowrap class="border" style="border-bottom: 1px solid #000000" valign="bottom"><font size="3" face="Times New Roman, Times, serif">Less
      than<br>
      1 year</font></td>
    <td valign="bottom" class="border">&nbsp;</td>
    <td valign="bottom" class="border">&nbsp;</td>
    <td colspan="2" align="center" nowrap class="border" style="border-bottom: 1px solid #000000" valign="bottom"><font size="3" face="Times New Roman, Times, serif">1
      to 3<br>
      years</font></td>
    <td valign="bottom" class="border">&nbsp;</td>
    <td valign="bottom" class="border">&nbsp;</td>
    <td colspan="2" align="center" nowrap class="border" style="border-bottom: 1px solid #000000" valign="bottom"><font size="3" face="Times New Roman, Times, serif">4
      to 5<br>
      years</font></td>
    <td valign="bottom" class="border">&nbsp;</td>
    <td valign="bottom" class="border">&nbsp;</td>
    <td colspan="2" align="center" nowrap class="border" valign="bottom" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">More
      than<br>
      5 years</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2" align="left" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">
        Capital leases</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" bgcolor="#cceeff" width="1%"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td align="right" width="8%" nowrap bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">47,000</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">12,000</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">27,000</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">8,000</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff" valign="bottom"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">Operating
        leases</font></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="8%" nowrap><font size="3" face="Times New Roman, Times, serif">1,067,000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="8%" nowrap><font size="3" face="Times New Roman, Times, serif">379,000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="8%" nowrap ><font size="3" face="Times New Roman, Times, serif">688,000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="8%" nowrap><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" valign="bottom">&nbsp;</td>
    <td align="right" width="8%" nowrap><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2" align="left" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">
        Bank line of credit</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td align="right" width="8%" nowrap bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,288,000</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">1,288,000</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff" valign="bottom">&nbsp;</td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">
        Unconditional purchase obligations with contract manufacturers</font></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">2,079,000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" nowrap width="8%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">2,079,000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" nowrap width="8%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" nowrap width="8%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" valign="bottom" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" nowrap width="8%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">
        Total contractual cash obligations </font></div>
    </td>
    <td width="4%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">4,481,000</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="4%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">3,758,000</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="4%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">715,000</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="4%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">8,000</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="4%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="1%" valign="bottom" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td colspan="4" width="1%">&nbsp;</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 align="left"><font face="Times New Roman, Times, serif"><b>Recent Accounting
  Pronouncements<br>
  </b>Effective July 1, 2009, we adopted &quot;The FASB Accounting Standards Codification
  and the Hierarchy of Generally Accepted Accounting Principles&quot; (formerly
  SFAS No. 168, &quot;The FASB Accounting Standards Codification and the Hierarchy
  of Generally Accepted Accounting Principles - a replacement of FASB Statement
  No. 162'). This standard establishes only two levels of U.S. generally accepted
  accounting principles (&quot;GAAP&quot;), authoritative and nonauthoritative.
  The Financial Accounting Standard Board (&quot;FASB&quot;) Accounting Standards
  Codification (the &quot;Codification&quot;) became the source of authoritative,
  nongovernmental GAAP, except for rules and interpretive releases of the SEC,
  which are sources of authoritative GAAP for SEC registrants. All other non-grandfathered,
  non-SEC accounting literature not included in the Codification became nonauthoritative.
  We began using the new guidelines and numbering system prescribed by the Codification
  when referring to GAAP in the third quarter of fiscal 2009. As the Codification
  was not intended to change or alter existing GAAP, adoption did not have any
  impact on our financial condition, results of operations and cash flows.</font><br>
  <br>
</p>
<p align="left">&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">23<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"><font face="Times New Roman, Times, serif"><b>Item 3. Quantitative
  and Qualitative Disclosures About Market Risk</b></font></p>
<p align=left><font face="Times New Roman, Times, serif"><b>Interest Rate Risk</b>
  </font>
<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 September
  30, 2009, a decline of 1% in interest rates would not have had a material effect
  on our quarterly interest income.
<p align=left>Our bank credit line facilities of up to $2.5 million have variable
  interest rates based upon the greater of either the lender's prime rate plus
  2%, or 6%, for both the domestic line (up to $1.5 million) and the international
  line (up to $1.0 million). Accordingly, interest rate increases could increase
  our interest expense on our outstanding credit line balances. We utilized only
  a portion of our credit line facility at the end of 2008, followed by higher
  average outstanding balances on our credit line during the first nine months
  of 2009. Based on a sensitivity analysis, an increase of 1% in the interest
  rate would increase our borrowing costs by $9,400 for each $1 million of borrowings
  against our credit facility, if outstanding for the entire year, or a maximum
  of $37,600 if we utilized our entire credit line (in cases that the applicable
  interest rate is greater than 6%). The credit line agreement also specifies
  a fixed collateral handling fee of 0.62% per month beginning July 1, 2009 on
  the full amount of the accounts receivable provided as collateral to the outstanding
  balances advanced under the credit line. Prior to the third quarter of 2009
  the fixed collateral handling fee was 0.7% per month.
<p align=left><font face="Times New Roman, Times, serif"><b>Foreign Currency Risk</b>
  </font>
<p align=left>A substantial majority of our revenue, expense and purchasing activities
  are transacted in U.S. 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 September 30, 2009, an adverse change of 10% in exchange
  rates would result in a decrease in our net income for the third quarter of
  approximately $48,250, if left unprotected. For the third quarter of 2009 the
  total net adjustment for the effects of changes in foreign currency on cash
  balances, collections, payables, and derivatives was a net loss of $2,200. We
  will continue to monitor, assess, and mitigate through hedging activities, the
  risk associated with these exposures.<br>
  <br>
<p align=left>&nbsp;
<p align=center><font face="Times New Roman, Times, serif" size="3">24<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=item4></a></font>
<p><font face="Times New Roman, Times, serif"><b>Item 4T. Controls and Procedures</b>
  </font></p>
<p><font face="Times New Roman, Times, serif"><i>Conclusion Regarding the Effectiveness
  of Disclosure Controls and Procedures</i> </font></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><font face="Times New Roman, Times, serif"><i>Changes in Internal Control Over
  Financial Reporting</i></font></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>
<p align=center><font face="Times New Roman, Times, serif" size="3">25<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=oth></a></font>
<p><font face="Times New Roman, Times, serif"><b>PART II. OTHER INFORMATION </b>
  </font></p>
<p><font face="Times New Roman, Times, serif"><b>Item 1A. Risk Factors </b></font><font face="Times New Roman, Times, serif" size="3"><a
name=risk></a></font></p>
<p align=left><font face="Times New Roman, Times, serif"><i>The risks described
  in this Quarterly 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.</i></font>
<p align=left><font face="Times New Roman, Times, serif"><b>The global economic
  financial crisis may continue to have an impact on our business and financial
  condition in ways that we currently cannot predict, and may further limit our
  ability to raise additional funds.</b></font>
<p align=left>The continued credit crisis and related turmoil in the global financial
  system may continue to have an impact on our business and our financial condition.
  We may face significant challenges if economic conditions and conditions in
  the financial markets do not improve or continue to worsen. In particular, should
  our revenues be materially less than forecast, we may find it necessary to initiate
  further reductions in our expenses and defer additional product development
  programs. In addition, our ability to access the capital markets and raise funds
  required for our operations may be severely restricted at a time when we would
  like, or need, to do so, which could have an adverse effect on our ability to
  meet our current and future funding requirements and on our flexibility to react
  to changing economic and business conditions.
<p align=left><b>If we do not maintain compliance with the financial covenants
  in our bank line, which we are dependent upon as a source of cash for our operations,
  we may lose our ability to draw upon it and the bank may accelerate our obligation
  to repay the amounts due.</b>
<p align=left>We are dependent upon our bank line under loan agreements with Silicon
  Valley Bank as a source of cash to fund our operations. The availability of
  the bank line is conditioned upon our complying with the terms of the loan agreements,
  including meeting certain financial covenants. We failed to meet our financial
  covenants at the end of April, May and June 2009. In each case, we obtained
  a waiver from the bank of the covenant default. Nonetheless, should we fail
  to comply with any bank line covenant in the future, the bank may choose not
  to grant a further waiver nor to continue to make the bank line available. Should
  the bank line become unavailable, we may not be able to find alternative sources
  of financing, and we may not be able to pay our liabilities and expenses when
  due, which could require us to suspend some or all of our current operations.
  It could also adversely affect the willingness of our vendors and employees
  to continue to work with us.
<p align=left>On July 7, 2009, we amended our loan agreements with Silicon Valley
  Bank in order to avoid defaults under the terms of these agreements due to our
  non-compliance with a covenant to maintain minimum liquidity based on an &quot;adjusted
  quick ratio.&quot; The amendments provided for the waiver of our non-compliance
  with the adjusted quick ratio covenant for the months of April, May and June
  2009, and replaced this covenant with new covenants that require us, commencing
  June 1, 2009: (i) to maintain at all times minimum unrestricted cash and cash
  equivalents at the bank of not less than $1,000,000; and (ii) to achieve minimum
  revenue of (a) $4,068,000 for the quarter ended June 30, 2009, (b) $4,500,000
  for the quarter ending September 30, 2009, and (c) $5,355,000 for the quarter
  ending December 31, 2009 and each quarter thereafter. Our failure to meet any
  of these financial covenants under the loan agreements would constitute an event
  of default, and upon any such event of default, the bank may, among its remedies,
  declare all obligations under the loan agreements immediately due and payable.
  As of September 30, 2009, we had $1,288,436 outstanding under the loan agreements,
  and were in compliance with the minimum unrestricted cash and revenue covenants
  for the quarter ended September 30, 2009.
<p align=left>&nbsp;
<p align=center><font face="Times New Roman, Times, serif" size="3">26<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>As of September 30, 2009, we had $2,528,218 of unrestricted cash
  and cash equivalents at the bank. Our ability to maintain a cash balance at
  the required minimum level for compliance with the financial covenant is dependent
  on a number of factors, including our ability to (i) manage payment terms with
  our customers and suppliers, (ii) manage our inventory levels, (iii) achieve
  sufficient revenues, and (iv) manage our expenses. We can provide no assurance
  that we will be able to continue to meet the requirements under any of the financial
  covenants under the loan agreements.
<p align=left><font face="Times New Roman, Times, serif"><b>We have a history
  of operating losses and may not achieve ongoing profitability.</b></font>
<p>We were profitable in the third quarter of 2009 due in part to the gain on
  the sale of our serial product line assets. We were unprofitable in each of
  the first two quarters of 2009 and in each of the quarters in fiscal years 2008,
  2007, and 2006. We were profitable in two quarters in 2005, but unprofitable
  for fiscal year 2005. Fiscal year 2004 was the only profitable year in our history,
  and 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 or manage our expenses sufficiently
  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><font face="Times New Roman, Times, serif"><b>We may require additional capital
  in the future, but that capital may not be available, if at all, on reasonable
  terms or on terms that would not cause substantial dilution to your stock holdings.</b></font></p>
<p>We may incur operating losses in future quarters and would need to raise capital
  to fund such 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. </p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">27<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><font face="Times New Roman, Times, serif"><b>Our quarterly operating results
  may fluctuate in future periods, which could cause our stock price to decline.</b></font></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><font face="Times New Roman, Times, serif">changes <font size="3">in the
    level of operating expenses;<br>
    </font></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;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif">timing of distributors' shipments
    to their customers; and</font></li>
  <li><font face="Times New Roman, Times, serif">general economic conditions and
    conditions specifically in our customers' industries.</font></li>
</ul>
<p>Because we base our staffing and other operating expenses on anticipated revenues,
  unanticipated declines or 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><font face="Times New Roman, Times, serif"><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></font></p>
<p>Our success has been dependent upon the ability of third-parties in the mobile
  computer industry to successfully develop 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 other parties' Windows mobile products, particularly
  vertical market software applications for use with our handheld computer and
  peripheral products, and standard Pocket PC handhelds, phone-integrated devices,
  tablet computers, and other phone-integrated devices, including those from Palm,
  Nokia, and Blackberry, with which our plug-in and wireless peripherals can be
  used, and the adoption of these mobile computer devices for business use. A
  number of manufacturers of handheld computers have reduced the number of handheld
  products offered, or curtailed development of future handheld computer products.
  If manufacturers are unable or choose not to ship new products such as Pocket
  PC and other Windows mobile devices, or experience difficulties with new product
  transitions that cause delays in the market as we have experienced in the past
  three years, or if these products fail to achieve or maintain market acceptance,
  the number of our potential new customers would be reduced and we would not
  be able to meet our sales expectations. </p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">28<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><font face="Times New Roman, Times, serif"><b>If we fail to develop and introduce
  new products rapidly and successfully, we will not be able to compete effectively,
  and our ability to generate sufficient revenues will be negatively affected.</b></font></p>
<p>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><font face="Times New Roman, Times, serif">invest <font size="3">significant
    resources in research and development, sales and marketing, and customer support;<br>
    </font></font></li>
  <li><font face="Times New Roman, Times, serif">identify <font size="3">emerging
    trends, demands and standards in the field of mobile computing products;<br>
    </font></font></li>
  <li><font face="Times New Roman, Times, serif">enhance <font size="3">our products
    by adding additional features; <br>
    </font></font></li>
  <li><font face="Times New Roman, Times, serif" size="3">maintain superior or
    competitive performance in our products; and<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif">anticipate our end users' needs
    and technological trends accurately.</font></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 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 38% and
  31% of our worldwide revenue in the first nine months of 2009 and fiscal year
  2008, 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 may not achieve our sales projections.</b></p>
<p>Substantially all of our peripheral products are designed for use with mobile
  computers, including handhelds, notebooks, tablets, and handhelds with integrated
  phones. If the mobile 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, or if the markets for our mobile handheld
  computers do not grow, or if the impact of the global economic financial crisis
  continues, we may not achieve our sales projections.</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 align=left><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>Many of our products use new technologies, such as two dimensional 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><font face="Times New Roman, Times, serif"><b>We could face increased
  competition in the future, which would adversely affect our financial performance.
  </b> </font>
<p align=left><font face="Times New Roman, Times, serif">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:
  </font>
<ul>
  <li><font face="Times New Roman, Times, serif">some of our competitors have
    greater financial, marketing, and technical resources than we do; </font></li>
  <li><font face="Times New Roman, Times, serif">we periodically face intense
    price competition, particularly when our competitors have excess inventories
    and discount their prices to clear their inventories; and</font></li>
  <li><font face="Times New Roman, Times, serif">certain OEMs of personal computers,
    mobile phones and handheld computers offer products with built-in functions,
    such as Bluetooth wireless technology, Wi-Fi, or bar code scanning, that compete
    with our products.</font></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><font face="Times New Roman, Times, serif"><b>If we do not correctly anticipate
  demand for our products, our operating results will suffer.</b></font></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 given current
  economic conditions, as we introduce and support more products, and as competition
  in the market for our products intensifies. 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.<br>
</p>
<p>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.<br>
  <br>
</p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">30<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=left><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>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
  and working capital liquidity.</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 and working capital liquidity by reducing our accounts
  receivable and increasing our inventory balances, particularly since we seek
  to continually introduce new and enhanced products and are likely to face increasing
  price competition.
<p><font face="Times New Roman, Times, serif"><b>We depend on alliances and other
  business relationships with a small number of third-parties, and a disruption
  in any one of these relationships would hinder our ability to develop and sell
  our products.</b></font></p>
<p align=left><font face="Times New Roman, Times, serif">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.
  </font>
<p align=left>We have devoted significant research and development resources to
  design activities for Windows Mobile, Windows CE, Windows 7/Vista/XP, RIM Blackberry,
  and Nokia E71 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, Research
  In Motion, 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>&nbsp;
<p align="center"><font face="Times New Roman, Times, serif" size="3">31<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><font face="Times New Roman, Times, serif"><b>Our intellectual property and
  proprietary rights may be insufficient to protect our competitive position.
  </b> </font> </p>
<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><font face="Times New Roman, Times, serif">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>
  Effective copyright, trademark, and trade secret protection may be unavailable
  or limited in certain foreign countries. Furthermore, certain of our customers
  have entered into agreements with us which provide that the customers have the
  right to use our proprietary technology in the event we default in our contractual
  obligations, including product supply obligations, and fail to cure the default
  within a specified period of time.</font></p>
<p><font face="Times New Roman, Times, serif"><b>We may become subject to claims
  of intellectual property rights infringement, which could result in substantial
  liability.</b></font></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., claiming
  that certain of our wireless LAN products infringe on two U.S. 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 U.S. 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.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">32<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>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><font face="Times New Roman, Times, serif"><b>New industry standards may require
  us to redesign our products, which could substantially increase our operating
  expenses.</b></font></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.<br>
  <br>
</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">33<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><font face="Times New Roman, Times, serif"><b>The loss of one or more of our
  senior personnel could harm our existing business.</b></font></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, and 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 each
  of the first three quarters of 2009 and in each of the quarters in fiscal years
  2008, 2007, and 2006, will continue to adversely affect future quarters, and
  will make profitability harder to achieve. 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><font face="Times New Roman, Times, serif"><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></font></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.<br>
  <br>
</p>
<p><font face="Times New Roman, Times, serif"><br>
  </font></p>
<p align=center><font face="Times New Roman, Times, serif" size="3">34<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><font face="Times New Roman, Times, serif"><b>We may not be able to collect
  revenues from customers who experience financial difficulties.</b></font></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. The current global financial crisis may
  have an impact on our customers' ability to pay us in a timely manner, and consequently,
  we may experience increased difficulty in collecting our accounts receivable,
  and we may have to increase our reserves in anticipation of increased uncollectible
  accounts.</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><font face="Times New Roman, Times, serif"><b>Our operating results could be
  harmed by economic, political, regulatory and other risks associated with export
  sales.</b></font></p>
<p>Export sales (sales to customers outside the United States) accounted for approximately
  42% of our revenue in the first nine months of 2009 and 37% of our revenue in
  the fiscal year 2008. 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><font face="Times New Roman, Times, serif">the <font size="3">burdens of
    complying with a variety of foreign laws;<br>
    </font></font></li>
  <li><font face="Times New Roman, Times, serif" size="3">greater difficulty or
    delay in accounts receivable collection;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">potentially adverse
    tax consequences; and<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif">political and economic instability.</font></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><font face="Times New Roman, Times, serif"><b>Our operations are vulnerable
  to interruption by fire, earthquake, power loss, telecommunications failure,
  and other events beyond our control.</b></font></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><br>
  <br>
</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">35<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>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><font face="Times New Roman, Times, serif"><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></font></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 November 6, 2009, we had 3,786,702 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 November 6, 2009, we had 1,226,561 shares of Common Stock subject to
  outstanding options under our stock option plans, and 59,408 shares of Common
  Stock 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, the shares of Common Stock underlying
  vested options will be eligible for resale in the public market as soon as the
  options are exercised.</p>
<p>As of November 6, 2009, we had 89,195 shares of Common Stock subject to outstanding
  warrants issued in a private placement. We have registered the resale of all
  shares of Common Stock subject to the warrants. Accordingly, the shares of Common
  Stock underlying these warrants will be eligible for resale in the public market
  as soon as the warrants are exercised, subject to S-3 prospectus delivery requirements.</p>
<p><br>
  <br>
</p>
<p></p>
<p></p>
<p></p>
<p align=center><font face="Times New Roman, Times, serif" size="3">36<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><font face="Times New Roman, Times, serif"><b>Volatility in the trading price
  of our Common Stock could negatively impact the price of our Common Stock.</b></font></p>
<p>During the 52-week period ending November 6, 2009, our Common Stock price fluctuated
  between a high of $4.00 and a low of $1.32. Following a one-for-ten reverse
  stock split effected on October 23, 2008, which significantly decreased the
  Company's share float, we have experienced low trading volumes in our stock,
  and thus relatively small purchases and sales can have a significant effect
  on our stock price. 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><br>
  <font face="Times New Roman, Times, serif" size="3"><b>Item 6. Exhibits</b></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=item6></a></font> </p>
<p><font face="Times New Roman, Times, serif" size="3"> Exhibits</font></p>
<p><font face="Times New Roman, Times, serif">31.1 Certification of Chief Executive
  Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</font></p>
<p><font face="Times New Roman, Times, serif">31.2 Certification of Chief Financial
  Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</font></p>
<p><font face="Times New Roman, Times, serif">32.1 Certification of Chief Executive
  Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
  Act of 2002.</font></p>
<p>&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=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:
      November 12, 2009 </font></TD>
    <TD width="21%">
      <CENTER>
        <font face="Times New Roman, Times, serif"></font>
      </CENTER>
    </TD>
    <TD width="41%">
      <DIV align=left><font face="Times New Roman, Times, serif" size="3"><U>&nbsp;&nbsp;/s/
        Kevin J. Mills</U></font></DIV>
    </TD>
  </TR>
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif"></font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif" size="3">&nbsp; </font>
      </center>
    </td>
    <td valign=top align=middle width="41%">
      <div align=left>
        <p><font face="Times New Roman, Times, serif" size="3">Kevin J. Mills<br>
          President and Chief Executive Officer</font><font face="Times New Roman, Times, serif"><br>
          (Duly Authorized Officer and Principal Executive Officer)</font></p>
      </div>
    </td>
  </tr>
  <tr>
    <td width="38%" height="44"><font face="Times New Roman, Times, serif"></font></td>
    <td width="21%" height="44"><font face="Times New Roman, Times, serif"></font></td>
    <td width="41%" height="44"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif" size="3">Date:
      November 12, 2009 </font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif"></font>
      </center>
    </td>
    <td width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size="3"><u>&nbsp;&nbsp;/s/
        David W. Dunlap&nbsp;&nbsp;</u></font></div>
    </td>
  </tr>
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif"></font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif" size="3">&nbsp; </font>
      </center>
    </td>
    <td valign=top align=middle width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size="3">David
        W. Dunlap<br>
        Vice President of Finance and Administration and Chief Financial Officer
        <br>
        (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">38<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><font face="Times New Roman, Times, serif"></font></p>
    </td>
    <td valign=top width="90%" height=25>
      <p><font face="Times New Roman, Times, serif"></font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width="10%" height=30>
      <p align=center><font face="Times New Roman, Times, serif" size="3">31.1&nbsp;</font>
      </p>
    </td>
    <td valign=top width="90%" height=30>
      <p>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">39<br>
  </font>
<p align=center>
<hr width="100%">
</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>exhibit311.htm
<DESCRIPTION>EXHIBIT 31.1
<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><font face="Times New Roman, Times, serif">(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">(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><font face="Times New Roman, Times, serif">(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</font></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">(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="97%">
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif" size="3">Date:
      November 12, 2009 </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>&nbsp;
</body>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>exhibit312.htm
<DESCRIPTION>EXHIBIT 31.2
<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>
</p>
<p><font face="Times New Roman, Times, serif"><br>
  I, David W. Dunlap, certify that:</font></p>
<p><font face="Times New Roman, Times, serif" size="3">1. I have reviewed this
  quarterly report on Form 10-Q of Socket 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><font face="Times New Roman, Times, serif">(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</font></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:
      November 12, 2009 </font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif"><font face="Times New Roman, Times, serif"></font></font>
      </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%"><font face="Times New Roman, Times, serif"></font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif" size="3">&nbsp; </font>
      </center>
    </td>
    <td valign=top align=middle width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size="3">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>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>4
<FILENAME>exhibit321.htm
<DESCRIPTION>EXHIBIT 32.1
<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 September 30, 2009
  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.<br>
  <br>
  <br>
  </font></p>
<div align="right"></div>
<table cols=2 width="43%" align="right">
  <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: &nbspNovember 12, 2009</font></div>
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>I, David W. Dunlap, certify, pursuant to 18 U.S.C. Section 1350, as adopted
  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
  Report of Socket Mobile, Inc. on Form 10-Q for the quarter ended September 30,
  2009 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 align="right"></p>
<table cols=2 width="43%" align="right">
  <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&nbspand Chief Financial
        Officer <br>
        &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp(Principal Financial
        Officer)<br>
        Date:&nbsp&nbsp&nbsp&nbspNovember 12, 2009</font></div>
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<p align=center>&nbsp;
<p align=center>&nbsp;
</body>
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</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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