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<SEC-DOCUMENT>0000944075-09-000044.txt : 20090805
<SEC-HEADER>0000944075-09-000044.hdr.sgml : 20090805
<ACCEPTANCE-DATETIME>20090804192450
ACCESSION NUMBER:		0000944075-09-000044
CONFORMED SUBMISSION TYPE:	424B3
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20090805
DATE AS OF CHANGE:		20090804

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:		424B3
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-159923
		FILM NUMBER:		09985285

	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>424B3
<SEQUENCE>1
<FILENAME>socket_424b3.htm
<TEXT>
<HTML>
<HEAD></HEAD><BODY bgcolor=white>
<div align="right"><font face="Times New Roman, Times, serif" size="3"> </font></div>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif" size="3">FILED PURSUANT
  TO RULE 424 (b)(3)<b><br>
  <br>
  PROSPECTUS<br>
  <font size="4"><br>
  645,981 Shares</font><br>
  <br>
  <font size="5">Socket Mobile, Inc.</font><br>
  <br>
  <font size="4">Common Stock</font> </b></font></P>
<P ALIGN="center"><font face="Times New Roman, Times, serif" size="3">____________________</font></P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="left"><font face="Times New Roman, Times, serif" size="3">This prospectus
  relates to 645,981 shares of our Common Stock which may be sold from time to
  time by certain stockholders set forth in the "Selling Stockholders" section
  of this prospectus. Of the shares offered by this prospectus, such shares include
  89,195 shares of Common Stock issuable upon exercise or conversion of warrants.
  The balance of the shares offered pursuant to this prospectus represent shares
  of our Common Stock held by the selling stockholders or their transferees. <br>
  <br>
  The prices at which the selling stockholders or their transferees may sell the
  shares may be determined by the prevailing market prices for the shares or in
  negotiated transactions. While we may receive proceeds upon the exercise of
  the warrants, we will not receive any proceeds from the sale of the shares offered
  by this prospectus.<br>
  <br>
  Our Common Stock is quoted on the Nasdaq Capital Market under the symbol "SCKT."
  On July 27, 2009, the last reported sale price for our Common Stock on the Nasdaq
  Capital Market was $3.24 per share.<br>
  <br>
  <b>Investment in the securities involves a high degree of risk. See "Risk Factors"
  beginning on page 3.</b></font></P>
<P ALIGN="center"><font face="Times New Roman, Times, serif" size="3"><b>____________________<br>
  </b></font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif" size="3"><b>NEITHER
  THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
  APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY
  OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.</b></font></P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif" size="3"><b>The date
  of this prospectus is August 4, 2009.</b></font></P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center">&nbsp;</P>
<hr align="LEFT" size=4>
<p>&nbsp;</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>TABLE
        OF CONTENTS </strong></font></p>
    </td>
  </tr>
  <tr>
    <td width="27" height="28"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807" height="28"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56" height="28">
      <div align="center"><font face="Times New Roman, Times, serif" size="3"><u>PAGE
        </u></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">PROSPECTUS
      SUMMARY</font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">1</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</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">RISK FACTORS</font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">4</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</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">INFORMATION
      CONTAINED IN THIS PROSPECTUS</font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">16</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</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">FORWARD-LOOKING
      STATEMENTS</font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">16</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</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">USE OF
      PROCEEDS</font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">16</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</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">SELLING
      STOCKHOLDERS</font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">17</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</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">PLAN OF
      DISTRIBUTION</font></td>
    <td width="56">
      <div align="center">20</div>
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</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">LEGAL
      MATTERS</font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">21</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</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">EXPERTS</font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">21</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</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">WHERE
      YOU CAN FIND MORE INFORMATION</font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">21</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</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">INFORMATION
      INCORPORATED BY REFERENCE</font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">21</font></div>
    </td>
  </tr>
</table>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center">&nbsp;</P>
<hr align="LEFT" size=4>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><b><br>
  <br>
  PROSPECTUS SUMMARY</b></font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif"><i>This summary highlights
  important features of this offering and the information included or incorporated
  by reference in this prospectus. This summary does not contain all of the information
  that you should consider before investing in our Common Stock. You should read
  the entire prospectus carefully, especially the risks of investing in our Common
  Stock discussed under &quot;Risk Factors.&quot;</i></font></P>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><b><br>
  The Company</b></font></P>
<P ALIGN="left">We are a producer of mobile computing hardware systems serving
  the business and medical mobility market. 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 applications software and devices. We also
  offer embedded Bluetooth and wireless LAN products. Our peripheral products
  work with many third-party mobile handheld devices, including smart phones,
  handheld computers, tablet computers, ultra-mobile personal 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, CMOS, linear
  and two dimensional barcode scanning, plus we offer radio frequency identification
  and magnetic stripe readers.</P>
<P ALIGN="left">We work with more than 200 software integration companies that
  are offering or developing vertical software applications for use with handheld
  computers. Approximately fifty percent of these companies are currently selling
  solutions that include our products. Healthcare has recently 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 in which mobile solutions that include our handheld computer
  and/or data collection products are deployed 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 ALIGN="left">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. These modules and plug-in cards include driver and
  device management software that is designed to simplify the ability of mobile
  employees to get and stay connected with Wireless LAN as well as with Bluetooth.
</P>
<P ALIGN="left"><font face="Times New Roman, Times, serif">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. Overall, our products enable the integration of hardware, software
  and applications into complete mobile data collection and connectivity solutions.
  </font></P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">1</font></P>
<hr align="LEFT" size=4>
<P ALIGN="left"><font face="Times New Roman, Times, serif"><br>
  The Company's employee headcount on June 4, 2009 was 70 employees. We subcontract
  the manufacturing of all of our products to independent third-party contract
  manufacturers located in the U.S., China and Taiwan who have the equipment,
  know-how and capacity to manufacture products to our specifications. Our handheld
  computers and peripheral products are sold through a worldwide network of distributors
  and resellers, vertical industry partners, and value added resellers. Our OEM
  products are sold directly to the original equipment manufacturers.</font></P>
<P ALIGN="left">We have financed our operations since inception primarily from
  the sale of equity capital and have no material long term debt. We also have
  receivables-based working capital lines of credit with a bank of up to $2.5
  million that we use for additional cash resources. The amounts available under
  the lines are based on levels of qualifying domestic and international receivables
  and the availability of the lines require us to maintain compliance with financial
  covenants as specified in the loan agreements with the bank.</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><br>
  </font></P>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><b>2009 Private Placement</b></font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif"><br>
  On May 26, 2009, we completed the sale of shares of our Common Stock in a private
  placement with certain investors. The securities purchase agreement provided
  for the sale of 556,786 shares of Common Stock for aggregate gross proceeds
  of approximately $1,052,000 before deducting expenses. In addition, we issued
  to certain investors and the placement agent in the private placement warrants
  to purchase shares of Common Stock at a price of $1.80 per share. The warrants
  issued in connection with the private placement are exercisable for five years
  from the issuance date and represent the right to purchase an aggregate maximum
  of 89,195 shares of Common Stock.</font></P>
<P ALIGN="left">We issued these shares of Common Stock and the warrants in reliance
  on an exemption from registration pursuant to Section 4(2) of the Securities
  Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder.
  We are now registering for resale under this prospectus the shares of Common
  Stock issued to the investors in the private placement and the shares of Common
  Stock underlying the warrants issued in connection with the private placement.</P>
<P ALIGN="center">&nbsp;</P>
<table cellspacing=1 cellpadding=1 width=60% align=center border=1>
  <tr valign=bottom>
    <td colspan=3 height="22">
      <p align="center"><font face="Times New Roman, Times, serif" size="3"><b>The
        Offering</b></font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td height=19 colspan="2" valign="top"><font face="Times New Roman, Times, serif" size="3">Common
      Stock offered by selling stockholders</font></td>
    <td height=19 width="58%" valign="top"><font face="Times New Roman, Times, serif" size="3">645,981
      shares of our Common Stock, including 89,185 shares issuable upon the exercise
      of warrants.</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="2" valign="top">
      <p><font face="Times New Roman, Times, serif" size="3">Use of proceeds</font></p>
    </td>
    <td width="58%" valign="top">
      <p align=left><font face="Times New Roman, Times, serif" size="3">We will
        not receive any proceeds from the sale of shares in this offering.</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td colspan="2" height="25" valign="top">
      <p><font face="Times New Roman, Times, serif" size="3">Nasdaq Capital Market
        symbol</font></p>
    </td>
    <td width="58%" height="25" valign="top">
      <p align=left><font face="Times New Roman, Times, serif" size="3">SCKT </font></p>
    </td>
  </tr>
</table>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">2</font></P>
<hr align="LEFT" size=4>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><b>Corporate Information</b></font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif"><br>
  We were founded in March 1992 as Socket Communications, Inc. and reincorporated
  in Delaware in 1995 prior to our initial public offering in June 1995. We began
  doing business as Socket Mobile, Inc. in January 2007 to better reflect our
  market focus on the mobile business market and changed our legal name to Socket
  Mobile, Inc. in April 2008. Our principal executive offices are located at 39700
  Eureka Drive, Newark, CA 94560, and our phone number is (510) 933-3000. Our
  Internet home page is located at http://www.socketmobile.com; however, the information
  on, or that can be accessed through, our home page, is not part of this Prospectus.
  Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
  on Form 8-K, and any amendments to such reports are available free of charge
  on or through our Internet home page, as soon as reasonably practical after
  we electronically file such material with, or furnish it to, the Securities
  and Exchange Commission.</font></P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">3</font></P>
<hr align="LEFT" size=4>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><b>RISK FACTORS</b></font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif"><i><br>
  An investment in the Common Stock offered by this prospectus involves a high
  degree of risk. You should carefully consider the risks described below, as
  well as the risks described in our annual and quarterly reports filed with the
  Securities and Exchange Commission, before deciding to purchase shares of our
  Common Stock. The risks described below are not the only ones that we face.
  Additional risks that generally apply to publicly traded companies, that are
  not yet identified or that we currently think are immaterial, may also adversely
  affect our company.</i></font></P>
<P ALIGN="left"> <font face="Times New Roman, Times, serif"><i>If any of the events,
  contingencies, circumstances or conditions described in the following risks
  actually occur, our business, financial condition or results of operations could
  be seriously harmed. The trading price of our Common Stock could, in turn, decline
  and you could lose all or part of your investment.</i><br>
  <b><br>
  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><br>
  <br>
  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 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.</font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif"><b><font size="3">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.</font></b><font size="3"><br>
  </font></font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif"><font size="3">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 bank line 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 available the bank line. 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 result in the suspension of 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. </font></font><font face="Times New Roman, Times, serif"><font size="3"></font></font></P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">4</font></P>
<hr align="LEFT" size=4>
<p align="left"><font face="Times New Roman, Times, serif"><font size="3">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 provide for the waiver of our non-compliance with
  the adjusted quick ratio covenant for the months of April, May and June 2009,
  and replace this covenant with new covenants that require us, commencing June
  1, 2009: (i) to maintain at all times unrestricted cash and cash equivalents
  at the bank of not less than $1,000,000; and (ii) 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 June
  30, 2009, we had $1,201,345 outstanding under the loan agreements, and were
  in compliance with the minimum revenue covenant for the quarter ended June 30,
  2009.<br>
  </font></font></p>
<p align="left"><font face="Times New Roman, Times, serif"><font size="3">As
  of June 30, 2009, we had $1,683,841 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.<br>
  </font><br>
  <b>We have a history of operating losses and may not achieve ongoing profitability.</b><br>
  <br>
  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 first profitable year in our history, but only to the extent of
  $288,000. Prior to 2004, we incurred significant operating losses in each financial
  period since our inception. To achieve ongoing profitability, we must accomplish
  numerous objectives, including growth in our business and the development of
  successful new products. We cannot foresee with any certainty whether we will
  be able to achieve these objectives in the future. Accordingly, we may not generate
  sufficient net revenue 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. </font></p>
<P ALIGN="left"><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><br>
  <br>
  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. &nbsp <br>
  </font></P>
<p>&nbsp;</p>
<P ALIGN="center"><font face="Times New Roman, Times, serif">5</font></P>
<hr align="LEFT" size=4>
<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><font face="Times New Roman, Times, serif">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:<br>
  </font></p>
<ul>
  <li><font face="Times New Roman, Times, serif">the demand for our products;</font></li>
  <li><font face="Times New Roman, Times, serif">the size and timing of customer
    orders;</font></li>
  <li><font face="Times New Roman, Times, serif">unanticipated delays or problems
    in our introduction of new products and product enhancements;</font></li>
  <li><font face="Times New Roman, Times, serif">the introduction of new products
    and product enhancements by our competitors;</font></li>
  <li><font face="Times New Roman, Times, serif">the timing of the introduction
    of new products that work with our connection products;</font></li>
  <li><font face="Times New Roman, Times, serif">changes in the revenues attributable
    to royalties and engineering development services;</font></li>
  <li><font face="Times New Roman, Times, serif">product mix;</font></li>
  <li><font face="Times New Roman, Times, serif">timing of software enhancements;</font></li>
  <li><font face="Times New Roman, Times, serif">changes in the level of operating
    expenses;</font></li>
  <li><font face="Times New Roman, Times, serif">competitive conditions in the
    industry including competitive pressures resulting in lower average selling
    prices;</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.<br>
    </font></li>
</ul>
<p><font face="Times New Roman, Times, serif">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.</font></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><br>
  <br>
  Our success has been dependent upon the ability of third-parties in the mobile
  personal 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 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.</font></p>
<p align="center"><font face="Times New Roman, Times, serif">6</font></p>
<hr align="LEFT" size=4>
<P ALIGN="left"><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><font face="Times New Roman, Times, serif">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.</font></p>
<p><font face="Times New Roman, Times, serif">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:</font></p>
<ul>
  <li><font face="Times New Roman, Times, serif">invest significant resources
    in research and development, sales and marketing, and customer support;</font></li>
  <li><font face="Times New Roman, Times, serif">identify emerging trends, demands
    and standards in the field of mobile computing products;</font></li>
  <li><font face="Times New Roman, Times, serif">enhance our products by adding
    additional features; </font></li>
  <li><font face="Times New Roman, Times, serif">maintain superior or competitive
    performance in our products; and</font></li>
  <li>
    <p><font face="Times New Roman, Times, serif">anticipate our end users' needs
      and technological trends accurately.</font></p>
  </li>
</ul>
<P ALIGN="left"><font face="Times New Roman, Times, serif">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.<br>
  <br>
  <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><br>
  <br>
  A significant portion of our revenue comes from two distributors, Tech Data
  Corp. and Ingram Micro, Inc., which together represented approximately 40% and
  31% of our worldwide revenue in the first half 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.</font></P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">7</font></P>
<hr align="LEFT" size=4>
<p align="left"><font face="Times New Roman, Times, serif"><b>If the market for
  mobile computers experiences delays, or fails to grow, we may not achieve our
  sales projections.</b><br>
  <br>
  Substantially all of our peripheral products are designed for use with mobile
  personal computers, including handhelds, notebooks, tablets, and handhelds with
  integrated phones. If the mobile personal computer industry does not grow, if
  its growth slows, or if product or operating system changeovers by mobile computer
  manufacturers and partners cause delays in the market, as we have experienced
  repeatedly in the past three years, 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.<br>
  <br>
  <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><br>
  <br>
  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.</font></p>
<p><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>
<p><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></p>
<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 ALIGN="left"><font face="Times New Roman, Times, serif">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.<br>
  <br>
  <b>If we do not correctly anticipate demand for our products, our operating
  results will suffer.</b><br>
  <br>
  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.</font></P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">8</font></P>
<hr align="LEFT" size=4>
<P ALIGN="left"><font face="Times New Roman, Times, serif">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>
  <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><br>
  <br>
  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.<br>
  <br>
  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.</font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif">We allow our distribution
  channels to return a portion of their inventory to us for full credit against
  other purchases. In addition, in the event we reduce our prices, we credit our
  distributors for the difference between the purchase price of products remaining
  in their inventory and our reduced price for such products. Actual returns and
  price protection may adversely affect future operating results, particularly
  since we seek to continually introduce new and enhanced products and are likely
  to face increasing price competition.<br>
  <br>
  <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><br>
  <br>
  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>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">9</font></P>
<hr align="LEFT" size=4>
<P ALIGN="left"><font face="Times New Roman, Times, serif">We have devoted significant
  research and development resources to design activities for Windows Mobile,
  Windows CE, Windows 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.<br>
  <br>
  <b>Our intellectual property and proprietary rights may be insufficient to protect
  our competitive position.</b><br>
  <br>
  Our business depends on our ability to protect our intellectual property. We
  rely primarily on patent, copyright, trademark, trade secret laws, and other
  restrictions on disclosure to protect our proprietary technologies. We cannot
  be sure that these measures will provide meaningful protection for our proprietary
  technologies and processes. We cannot be sure that any patent issued to us will
  be sufficient to protect our technology. The failure of any patents to provide
  protection to our technology would make it easier for our competitors to offer
  similar products. In connection with our participation in the development of
  various industry standards, we may be required to license certain of our patents
  to other parties, including our competitors, that develop products based upon
  the adopted standards.</font></P>
<P ALIGN="left"><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 ALIGN="center"><font face="Times New Roman, Times, serif">10</font></P>
<hr align="LEFT" size=4>
<P ALIGN="left"><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><br>
  <br>
  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.
  In October 2007, we received a letter from WIAV Solutions, LLC, offering to
  license the wireless technology covered by two U.S. patents held by WIAV Solutions,
  LLC. The two patents cover implementations of the 802.11 standard. To date we
  have not entered into discussions to license their technology.<br>
  <br>
  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.<br>
  <br>
  In addition to disputes relating to the validity or alleged infringement of
  other parties' rights, we may become involved in disputes relating to our assertion
  of our own intellectual property rights. Whether we are defending the assertion
  of intellectual property rights against us or asserting our intellectual property
  rights against others, intellectual property litigation can be complex, costly,
  protracted, and highly disruptive to business operations by diverting the attention
  and energies of management and key technical personnel. Plaintiffs in intellectual
  property cases often seek injunctive relief, and the measures of damages in
  intellectual property litigation are complex and often subjective or uncertain.
  Thus, any adverse determinations in this type of litigation could subject us
  to significant liabilities and costs.</font></P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">11</font></P>
<hr align="LEFT" size=4>
<p align="left"><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><br>
  <br>
  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.<br>
  <b><br>
  Undetected flaws and defects in our products may disrupt product sales and result
  in expensive and time-consuming remedial action.</b><br>
  <br>
  Our hardware and software products may contain undetected flaws, which may not
  be discovered until customers have used the products. From time to time, we
  may temporarily suspend or delay shipments or divert development resources from
  other projects to correct a particular product deficiency. Efforts to identify
  and correct errors and make design changes may be expensive and time consuming.
  Failure to discover product deficiencies in the future could delay product introductions
  or shipments, require us to recall previously shipped products to make design
  modifications, or cause unfavorable publicity, any of which could adversely
  affect our business and operating results.</font></p>
<p><font face="Times New Roman, Times, serif"><b>The loss of one or more of our
  senior personnel could harm our existing business.</b><br>
  <br>
  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.</font></p>
<P ALIGN="left"><font face="Times New Roman, Times, serif"><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><br>
  <br>
  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 two 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.<b> </b></font></P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">12</font></P>
<hr align="LEFT" size=4>
<P ALIGN="left"><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><br>
  <br>
  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>
  <b>We may not be able to collect revenues from customers who experience financial
  difficulties.</b><br>
  <br>
  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.</font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif"><b>We may be unable
  to manufacture our products, because we are dependent on a limited number of
  qualified suppliers for our components.</b><br>
  <br>
  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. <br>
  </font></P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">13</font></P>
<hr align="LEFT" size=4>
<p align="left"><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><font face="Times New Roman, Times, serif">Export sales (sales to customers
  outside the United States) accounted for approximately 43% of our revenue
  in the first half 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:</font></p>
<ul>
  <li><font face="Times New Roman, Times, serif">longer payment cycles;</font></li>
  <li><font face="Times New Roman, Times, serif">unexpected changes in regulatory
    requirements, import and export restrictions and tariffs;</font></li>
  <li><font face="Times New Roman, Times, serif">difficulties in managing foreign
    operations;</font></li>
  <li><font face="Times New Roman, Times, serif">the burdens of complying with
    a variety of foreign laws;</font></li>
  <li><font face="Times New Roman, Times, serif">greater difficulty or delay in
    accounts receivable collection;</font></li>
  <li><font face="Times New Roman, Times, serif">potentially adverse tax consequences;
    and</font></li>
  <li><font face="Times New Roman, Times, serif">political and economic instability.</font></li>
</ul>
<p><font face="Times New Roman, Times, serif">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.</font></p>
<p align="left"><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><br>
  <br>
  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. </font></p>
<P ALIGN="left"><font face="Times New Roman, Times, serif"><b>Failure to maintain
  effective internal controls could have a material adverse effect on our business,
  operating results and stock price. </b><br>
  <br>
  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. </font></P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">14</font></P>
<hr align="LEFT" size=4>
<P ALIGN="left"><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><br>
  <br>
  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.<br>
  <br>
  As of June 30, 2009, we had 3,786,702 shares of Common Stock outstanding,
  of which 556,786 shares are being registered for resale under the registration
  statement of which this prospectus is a part. Substantially all of these shares
  are, or will become with the effectiveness of the registration statement, freely
  tradable in the public market, either without restriction or subject, in some
  cases, only to prospectus delivery requirements and, in other cases, only to
  manner of sale, volume, and notice requirements of Rule 144 under the Securities
  Act.<br>
  <br>
  As of June 30, 2009, we had 1,275,391 shares of Common Stock subject
  to outstanding options under our stock option plans, and 16,578 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.<br>
  <br>
  As of June 30, 2009, we had 89,195 shares of Common Stock subject to
  outstanding warrants issued in the private placement, all of which are being
  registered for resale under the registration statement of which this prospectus
  is a part. With the effectiveness of the registration statement, the shares
  of Common Stock underlying these warrants will be eligible for resale in the
  public market as soon as the warrants are exercised.</font></P>
<P ALIGN="left"><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><br>
  <br>
  During the period from January 1, 2008 through July 27, 2009, our Common
  Stock price (adjusted to reflect a one-for-ten reverse stock split effected
  on October 23, 2008) fluctuated between a high of $9.00 and a low of $0.50.
  Following the reverse stock split 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.</font></P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">15</font></P>
<hr align="LEFT" size=4>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><b>INFORMATION CONTAINED
  IN THIS PROSPECTUS</b></font></P>
<p align="left"><font face="Times New Roman, Times, serif"><br>
  You should rely only on the information contained in this prospectus. We have
  not authorized anyone to provide you with information different from that contained
  in this prospectus. The selling stockholders listed in this prospectus are offering
  to sell, and seeking offers to buy, shares of our Common Stock only in jurisdictions
  where offers and sales are permitted. The information contained in this prospectus
  is accurate only as of the date of this prospectus, regardless of the time of
  delivery of this prospectus or of any sale of our Common Stock.</font></p>
<p align="center"> <font face="Times New Roman, Times, serif"><b> FORWARD-LOOKING
  STATEMENTS</b><br>
  </font></p>
<p align="left"><font face="Times New Roman, Times, serif">This prospectus contains
  forward looking statements within the meaning of the securities laws. These
  forward looking statements are subject to a number of risks and uncertainties,
  many of which are beyond our control. All statements other than statements of
  historical facts included in this prospectus, including the statements under
  &quot;Prospectus Summary&quot; and elsewhere in this prospectus regarding our
  strategy, future operations, financial position, estimated revenues, projected
  costs, prospects, plans and objectives of management are forward looking statements.
  When used in this prospectus, the words &quot;will,&quot; &quot;believe,&quot;
  &quot;anticipate,&quot; &quot;intend,&quot; &quot;estimate,&quot; &quot;expect,&quot;
  &quot;project&quot; and similar expressions are intended to identify forward
  looking statements, although not all forward looking statements contain such
  identifying words. All forward looking statements speak only as of the date
  of this prospectus. Neither we nor any of the selling stockholders undertake
  any obligation to update or revise publicly any forward looking statements,
  whether as a result of new information, future events or otherwise. Although
  we believe that our plans, intentions and expectations reflected in or suggested
  by the forward looking statements we make in this prospectus are reasonable,
  ultimately we may not achieve such plans, intentions or expectations.<br>
  <br>
  We disclose important factors that could cause our actual results to differ
  materially from our expectations under &quot;Risk Factors&quot; and elsewhere
  in this prospectus. Such factors include, among others, the following: our ability
  to raise sufficient capital to fund our operations, our ability to achieve profitability,
  developments in the market for our products, including the market for mobile
  computers that use the Windows Pocket PC operating system, developments in our
  relationships with our strategic partners, and world economic and financial
  conditions. These cautionary statements qualify all forward looking statements
  attributable to us or persons acting on our behalf.</font></p>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><b>USE OF PROCEEDS</b><br>
  </font></P>
<p align="left"><font face="Times New Roman, Times, serif">We will not receive
  any of the proceeds from the sale of the shares sold under this prospectus,
  although we may receive up to approximately $160,551 upon full exercise of the
  warrants. Any proceeds received from the exercise of warrants will be used to
  increase the Company's working capital balances. All proceeds from the sale
  of the shares will be for the account of the selling stockholders. See &quot;Selling
  Stockholders&quot; and &quot;Plan of Distribution.&quot;</font></p>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">16</font></P>
<hr align="LEFT" size=4>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><b>SELLING STOCKHOLDERS</b><br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif">In connection with
  the private placement completed on May 26, 2009, the Company entered into a
  registration rights agreement with the purchasers in the private placement,
  who are now the selling stockholders. The registration statement of which this
  prospectus is a part has been filed in accordance with the registration rights
  agreement. The shares of Common Stock covered by this prospectus consist of
  shares of Common Stock that we issued in the private placement and shares of
  Common Stock issuable upon the exercise of warrants also issued in the private
  placement. The warrants held by the selling stockholders are exercisable at
  any time in whole or in part and expire on May 26, 2014. The table below sets
  forth, to our knowledge, information about the selling stockholders as of June
  10, 2009. <br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif">We do not know when
  or in what amounts the selling stockholders may offer shares for sale. The selling
  stockholders may sell any or all of the shares offered by this prospectus. Because
  the selling stockholders may offer all or some of the shares pursuant to this
  prospectus, and because there are currently no agreements, arrangements or understandings
  with respect to the sale of any of the shares, we cannot estimate the number
  of shares that will be held by the selling stockholders after completion of
  this offering. For purposes of this table, however, we have assumed that, after
  completion of this offering, none of the shares covered by this prospectus will
  be held by the selling stockholders. Such shares are subject to limitations
  on sale pursuant to an agreement between us and the selling stockholders as
  described below under &quot;Plan of Distribution.&quot;<br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif">Beneficial ownership
  is determined in accordance with the rules of the SEC and includes voting or
  investment power with respect to shares of our Common Stock. Unless otherwise
  indicated below, to our knowledge, the selling stockholders named in the table
  have sole voting and investment power with respect to the shares of Common Stock
  beneficially owned by them. The number of shares of Common Stock beneficially
  owned prior to the offering shown in the table for each selling stockholder
  includes (i) all shares held by the selling stockholder prior to the private
  placement, plus (ii) all shares purchased by the selling stockholder pursuant
  to the private placement and being offered pursuant to the prospectus, as well
  as (iii) all options or other derivative securities held by the selling stockholder
  that are exercisable within 60 days of June 10, 2009, including the warrants
  issued in the private placement. <br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif">Throughout this prospectus,
  when we refer to the &quot;selling stockholders,&quot; we mean the persons listed
  in the table below, as well as the pledgees, donees, assignees, transferees,
  successors and others who later hold any of the selling stockholders' interests,
  and when we refer to the shares of our Common Stock being offered by this prospectus
  on behalf of the selling stockholders, we are referring to the shares of our
  Common Stock sold in and the shares of our Common Stock issuable upon the exercise
  of the warrants issued in the private placement, collectively, unless otherwise
  indicated.<br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif">The selling stockholders
  may have sold or transferred, in transactions exempt from the registration requirements
  of the Securities Act of 1933, some or all of their shares of Common Stock since
  the date as of which the information in the table below is presented. Information
  about the selling stockholders may change over time. </font></P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">17</font></P>
<hr align="LEFT" size=4>
<P ALIGN="center">&nbsp;</P>
<table width="87%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th align="LEFT" height="59"><font face="Times New Roman, Times, serif"></font></th>
    <th align="CENTER" height="59"><font size="3" face="Times New Roman, Times, serif">Shares
      Beneficially<br>
      Owned Prior to </font></th>
    <th align="CENTER" height="59"><font face="Times New Roman, Times, serif"><b><font size="3">Number
      of Shares</font></b></font></th>
    <th align="CENTER" height="59" colspan="2"><font face="Times New Roman, Times, serif">Shares
      Beneficially Owned<br>
      After Offering </font></th>
  </tr>
  <tr valign="bottom">
    <td align="LEFT" height="19">
      <div align="left"><font size="3" face="Times New Roman, Times, serif"><b>Name<br>
        </b></font> </div>
      <hr NOSHADE>
    </td>
    <td align="CENTER" height="19"><font face="Times New Roman, Times, serif"><b><font size="3">Offering
      </font> </b> </font>
      <hr NOSHADE>
    </td>
    <td align="CENTER" height="19"><font face="Times New Roman, Times, serif"><b><font size="3">Being
      Offered</font> </b> </font>
      <hr NOSHADE>
    </td>
    <td align="CENTER" height="19"><font face="Times New Roman, Times, serif"><b><font size="3">Number</font>
      </b> </font>
      <hr NOSHADE>
    </td>
    <td align="CENTER" height="19"><font face="Times New Roman, Times, serif"><b><font size="3">Percent(1)
      </font> </b> </font>
      <hr NOSHADE>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="9"><font size="3" face="Times New Roman, Times, serif">Kevin
      J. Mills (2)</font></td>
    <td align="RIGHT" height="9" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">306,525
        </font></div>
    </td>
    <td align="RIGHT" height="9" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">200,000
        </font></div>
    </td>
    <td align="RIGHT" height="9" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">106,525
        </font></div>
    </td>
    <td align="RIGHT" height="9" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2.8%
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="18"><font face="Times New Roman, Times, serif">The
      Bass Trust (3)</font></td>
    <td height="18" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">267,974
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">50,000
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">217,974
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">5.8%</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="19"><font size="3" face="Times New Roman, Times, serif">Leviticus
      Partners L.P. (4)(16)</font></td>
    <td align="RIGHT" height="19" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">287,172
        </font></div>
    </td>
    <td align="RIGHT" height="19" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">99,999
        </font></div>
    </td>
    <td align="RIGHT" height="19" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">187,173
        </font></div>
    </td>
    <td align="RIGHT" height="19" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">4.9%</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17"><font face="Times New Roman, Times, serif">Cardinal
      Value L.P. (5)</font></td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">78,321
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">33,331
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">44,990
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">1.2%
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="18"><font face="Times New Roman, Times, serif">Howard
      Miller (6)</font></td>
    <td height="18" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">33,360
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">20,160
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">13,200
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="19"><font size="3" face="Times New Roman, Times, serif">Rogers
      Family Trust (7) </font></td>
    <td align="RIGHT" height="19" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">360,288
        </font></div>
    </td>
    <td align="RIGHT" height="19" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">168,000
        </font></div>
    </td>
    <td align="RIGHT" height="19" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">192,288
        </font></div>
    </td>
    <td align="RIGHT" height="19" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">5.1%
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17"><font face="Times New Roman, Times, serif">Brian
      G. Swift (8)(16)</font></td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">58,994
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">58,795
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">199
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="18"><font face="Times New Roman, Times, serif">William
      A. Klages (9)(16)</font></td>
    <td height="18" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2,103
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">1,553
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">550
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="19"><font size="3" face="Times New Roman, Times, serif">Gary
      Hamilton (10)(16) </font></td>
    <td align="RIGHT" height="19" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">1,553</font></div>
    </td>
    <td align="RIGHT" height="19" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">1,553
        </font></div>
    </td>
    <td align="RIGHT" height="19" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">0
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17"><font size="3" face="Times New Roman, Times, serif">David
      N. Olson (11)(16) </font></td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">4,676
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">4,676
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">0
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="18"><font face="Times New Roman, Times, serif">David
      Dohrmann (12)(16)</font></td>
    <td height="18" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">1,057
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">1,057
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">0
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="19"><font size="3" face="Times New Roman, Times, serif">Timothy
      Collins (13)(16) </font></td>
    <td align="RIGHT" height="19" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">1,057
        </font></div>
    </td>
    <td align="RIGHT" height="19" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">1,057
        </font></div>
    </td>
    <td align="RIGHT" height="19" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">0
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17">
      <p><font size="3" face="Times New Roman, Times, serif">Kevin F. Cottrell
        (14)(16) </font></p>
    </td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">1,057
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">1,057
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">0
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="20">
      <p><font size="3" face="Times New Roman, Times, serif">Security Research
        Associates, Inc. (15)(16) </font></p>
    </td>
    <td align="RIGHT" height="20" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">4,743
        </font></div>
    </td>
    <td align="RIGHT" height="20" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">4,743
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">0
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td colspan="6" height="265">
      <hr NOSHADE align="LEFT" width="120">
      <font size="2" face="Times New Roman, Times, serif">* Less than 1%.<br>
      (1) Based upon 3,786,702 shares of Common Stock outstanding as of the close
      of business on June 10, 2009 in accordance with Rule 13d-3 under the Securities
      Exchange Act of 1934. <br>
      (2) Includes (i) 89,557 shares of Common Stock subject to options exercisable
      by Kevin J. Mills within 60 days of June 10, 2009, (ii) 180,000 shares of
      Common Stock held by the Kevin and Frances Mills Trust dtd 04/10/2003, (iii)
      11,979 shares of Common Stock held by the Irrevocable Trust for Benefit
      of Nadia Dominique Mills dtd 12/26/2000, and (iv) 11,979 shares of Common
      Stock held by the Irrevocable Trust for Benefit of Enrico Kevin Mills dtd
      12/26/2000. As trustee, Mr. Mills has beneficial ownership of the trusts
      and he and his wife share voting and investment control in respect of the
      securities of the trusts. Mr. Mills is President and Chief Executive Officer
      of Socket Mobile. <br>
      (3) Includes 43,750 shares of Common Stock subject to options exercisable
      by Charlie Bass, within 60 days of June 10, 2009. The Bass Trust is a family
      trust for Charlie Bass, Chairman of the Board of Socket Mobile. Mr. Bass
      is the custodian of The Bass Trust and has voting control and beneficial
      ownership of the trust.<br>
      (4) Includes 16,666 shares of Common Stock subject to a warrant issued in
      the private placement. AMH Equity LLC is the general partner of Leviticus
      Partners, LP Adam Hutt, the President of AMH Equity LLC, has voting and
      investment control in respect of the securities held by Leviticus Partners,
      LP<br>
      (5) Includes 5,555 shares of Common Stock subject to a warrant issued in
      the private placement. James Smart and William Smart are managing members
      of Cardinal Value LP and have voting and investment control in respect of
      the securities held by Cardinal Value LP <br>
      (6) Includes 3,360 shares of Common Stock subject to a warrant issued in
      the private placement. The securities are held by the Howard Miller IRA.
      Howard Miller, an individual, has voting and investment control in respect
      of the securities held by the Howard Miller IRA and is the beneficial owner
      of the IRA.<br>
      (7) Includes (i) 28,000 shares of Common Stock subject to a warrant issued
      to the Rogers Family Trust UTD 01-21-81 in the private placement, (ii) 243,887
      shares of Common Stock held by the Rogers Family Trust UTD 01-21-81, and
      (iii) 88,401 shares of Common Stock held by the Roy and Ruth Rogers Unitrust,
      UTD 09-28-89. Roy L. Rogers, an individual, is the beneficial owner of the
      trusts and has voting control in respect of the securities held by the trusts.
      <br>
      (8) Includes (i) 12,143 shares of Common Stock subject to a warrant issued
      to the Brian G. Swift and Suzanne B. Swift TTEES UTD 3/13/91 FBO Brian and
      Suzanne Swift 1991 Liv Trust in the private placement, (ii) 7,775 shares
      of Common Stock subject to a warrant issued to the Brian G. Swift IRA in
      the private placement, and (iii) 38,877 shares of Common Stock held by the
      Brian G. Swift IRA. Brian G. Swift, an individual, has voting and investment
      control in respect of the securities held by the Brian G. Swift IRA and
      is a beneficial owner of the IRA. As trustee, Mr. Swift has beneficial ownership
      of the trust and he and his wife share voting and investment control in
      respect of the securities of the trust.</font></td>
  </tr>
</table>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">18</font></P>
<hr align="LEFT" size=4>
<P ALIGN="center">&nbsp;</P>
<table width="87%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr bgcolor="#FFFFFF" valign="top">
    <td colspan="6" height="70"> <font size="2"> <font face="Times New Roman, Times, serif">(9)
      Includes 1,553 shares of Common Stock subject to a warrant issued in the
      private placement.<br>
      (10) Consists of 1,553 shares of Common Stock subject to a warrant issued
      in the private placement.<br>
      (11) Consists of 4,676 shares of Common Stock subject to a warrant issued
      in the private placement.<br>
      (12) Consists of 1,057 shares of Common Stock subject to a warrant issued
      in the private placement.<br>
      (13) Consists of 1,057 shares of Common Stock subject to a warrant issued
      in the private placement.<br>
      (14) Consists of 1,057 shares of Common Stock subject to a warrant issued
      in the private placement. <br>
      (15) Consists of 4,743 shares of Common Stock subject to a warrant issued
      in the private placement. Each of Brian G. Swift, William A. Klages, Gary
      Hamilton, David N. Olson, David Dohrmann, Timothy Collins and Kevin F. Cottrell,
      who are shareholders of Security Research Associates, Inc., may be deemed
      to be the beneficial owner of the securities held by Security Research Associates,
      Inc. and have voting and investment control in respect of these securities.<br>
      (16) The selling stockholders identified have indicated that they are, or
      are affiliates of, registered broker-dealers. These selling stockholders
      have represented that at the time of the acquisition of the securities,
      they had no agreements or understandings, directly or indirectly, with any
      person to distribute the securities. To the extent that we become aware
      that any such selling stockholders did have such an agreement or understanding,
      we will file a post-effective amendment to registration statement of which
      this prospectus is a part to designate such person as an "underwriter" within
      the meaning of the Securities Act of 1933. </font></font></td>
  </tr>
</table>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">19</font></P>
<hr align="LEFT" size=4>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><b>PLAN OF DISTRIBUTION</b></font></P>
<p><font face="Times New Roman, Times, serif">We are registering the shares of
  Common Stock issued in the May 26, 2009 private placement and the shares of
  Common Stock issuable upon exercise or conversion of warrants also issued in
  the private placement, for sale on behalf of the selling stockholders. These
  shares may be sold in one or more transactions at fixed prices, at prevailing
  market prices at the time of sale, at prices related to the prevailing market
  prices, at varying prices determined at the time of sale, or at negotiated prices.
  These sales may be effected at various times in one or more of the following
  transactions, or in other kinds of transactions: </font></p>
<ul>
  <li><font face="Times New Roman, Times, serif">transactions on the NASDAQ Stock
    Market or on any national securities exchange or U.S. inter-dealer system
    of a registered national securities association on which the Common Stock
    may be listed or quoted at the time of sale;<br>
    <br>
    </font></li>
  <li><font face="Times New Roman, Times, serif">in the over-the-counter market;<br>
    <br>
    </font></li>
  <li><font face="Times New Roman, Times, serif">in private transactions and transactions
    otherwise than on these exchanges or systems or in the over-the-counter market;<br>
    <br>
    </font></li>
  <li><font face="Times New Roman, Times, serif">in connection with short sales
    of shares of our Common Stock;<br>
    <br>
    </font></li>
  <li><font face="Times New Roman, Times, serif">by pledge to secure or in payment
    of debt and other obligations;<br>
    <br>
    </font></li>
  <li><font face="Times New Roman, Times, serif">through the writing of options,
    whether the options are listed on an options exchange or otherwise;<br>
    <br>
    </font></li>
  <li><font face="Times New Roman, Times, serif">in connection with the writing
    of non-traded and exchange-traded call options, in hedge transactions and
    in settlement of other transactions in standardized or over-the-counter options;
    or<br>
    <br>
    </font></li>
  <li><font face="Times New Roman, Times, serif"> through a combination of any
    of the above transactions. <br>
    </font></li>
</ul>
<P ALIGN="left"><font face="Times New Roman, Times, serif">The selling stockholders
  and their successors, including their transferees, pledgees or donees or their
  successors, may sell the shares directly to purchasers or through underwriters,
  broker-dealers or agents, who may receive compensation in the form of discounts,
  concessions or commissions from the selling stockholders or the purchasers.
  Discounts, concessions or commissions as to any particular underwriter, broker-dealer
  or agent may be in excess of those customary in the types of transactions involved.
  <br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif">In addition, any securities
  covered by this prospectus that qualify for sale pursuant to Rule 144 of the
  Securities Act may be sold under Rule 144 rather than pursuant to this prospectus.
  <br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif">We entered into a registration
  rights agreement for the benefit of the selling stockholders to register the
  Common Stock issued in the May 26, 2009 private placement and the Common Stock
  issuable upon exercise or conversion of warrants under applicable federal and
  state securities laws. The registration rights agreement provides for cross-indemnification
  among the selling stockholders and us and our respective directors, officers
  and controlling persons against specific liabilities in connection with the
  offer and sale of the securities covered by this prospectus, including liabilities
  under the Securities Act. We will pay substantially all of the expenses incurred
  by the selling stockholders incident to the registration of the offering and
  sale of the securities covered by this prospectus.</font></P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">20</font></P>
<hr align="LEFT" size=4>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><b>LEGAL MATTERS</b><br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif">Wilson Sonsini Goodrich
  &amp; Rosati, Professional Corporation, Palo Alto, California will pass upon
  certain legal matters relating to the validity of the securities offered hereby.<br>
  </font></P>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><b>EXPERTS</b><br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif">Moss Adams LLP, independent
  registered public accounting firm, have audited our financial statements included
  in our Annual Report on Form 10 K for the year ended December 31, 2008, as set
  forth in their report, which is incorporated by reference in this prospectus
  and registration statement. Our financial statements are incorporated by reference
  in reliance on Moss Adams LLP's report and upon the authority of such firm as
  experts in accounting and auditing.<br>
  </font></P>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><b>WHERE YOU CAN
  FIND MORE INFORMATION</b><br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif">We have filed with
  the Securities and Exchange Commission a registration statement on Form S 3,
  of which this prospectus is a part, under the Securities Act with respect to
  the shares of Common Stock offered hereby. This prospectus does not contain
  all of the information included in the registration statement. Statements in
  this prospectus concerning the provisions of any document filed as an exhibit
  to the registration statement or otherwise filed by us with the SEC are not
  necessarily complete. You should refer to the copies of these documents for
  a more complete understanding of the matters involved. Each statement concerning
  these documents is qualified in its entirety by such reference.<br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif">We are subject to the
  informational requirements of the Securities Exchange Act of 1934 and, accordingly,
  file reports, proxy statements and other information with the SEC. Copies of
  our reports, proxy statements and other information also may be inspected and
  copied at the SEC's public reference room located at 100 F Street, N.E., Washington,
  D.C. 20549. You can call the SEC at 1-800-SEC-0330 for further information about
  the operation of the public reference room. The SEC maintains a web site at
  http://www.sec.gov that contains reports, proxy and information statements and
  other information regarding registrants that file electronically with the Commission.
  You can also find these documents through our own web site which is located
  at http://www.socketmobile.com. Information included on our web site is not
  a part of this prospectus or any prospectus supplement.</font></P>
<P ALIGN="left">&nbsp;</P>
<p align="center"><font face="Times New Roman, Times, serif">21</font></p>
<hr align="LEFT" size=4>
<P ALIGN="left"><font face="Times New Roman, Times, serif"><br>
  </font></P>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><b>INFORMATION INCORPORATED
  BY REFERENCE</b><br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif">The SEC allows us to
  &quot;incorporate by reference&quot; the information we file with them, which
  means that we can disclose important information to you in this document by
  referring you to other filings we have made with the SEC. The information incorporated
  by reference is considered to be part of this prospectus, and later information
  filed with the SEC will update and supersede this information. In this instance,
  we are incorporating by reference the documents and information listed below
  and any future filings made with the SEC under Section 13(a), 13(c), 14 or 15(d)
  of the Securities and Exchange Act prior to the completion of the offering covered
  by this prospectus:</font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif">(1) Our Annual Report
  on Form 10 K for the year ended December 31, 2008, filed with the SEC on March
  16, 2009.</font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif"> (2) Our Quarterly
  Report on Form 10-Q for the quarter ended March 31, 2009, filed with the SEC
  on May 14, 2009. </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif"> (3) Our current reports
  on Form 8-K filed with the SEC on January 7, 2009, January 27, 2009, February
  18, 2009, February 25, 2009, April 3, 2009, April 22, 2009, May 20, 2009, June
  4, 2009, July 7, 2009 and July 23, 2009.</font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif"> (4) The description
  of our Common Stock contained in our Registration Statement on Form 8 A filed
  with the SEC on April 11, 1995, as amended by our Registration Statement on
  Form 8 A/A filed with the SEC on June 15, 1995.<br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif">We will provide to
  any person, including any beneficial owner, to whom a prospectus is delivered,
  a copy of any of the information which has been incorporated by reference into
  this prospectus at no cost upon an oral or written request to:<br>
  <br>
  </font></P>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><br>
  Socket Mobile, Inc.<br>
  39700 Eureka Drive<br>
  Newark, CA 94560<br>
  Attention: David W. Dunlap<br>
  Phone: (510) 933-3035</font></P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">22</font></P>
<hr align="LEFT" size=4>
<P ALIGN="center">&nbsp;</P>
<hr NOSHADE>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">645,981 Shares</font></P>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><b><font size="5">SOCKET
  MOBILE, INC.</font></b></font></P>
<P ALIGN="center"><font face="Times New Roman, Times, serif" size="3">____________________</font></P>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><b>COMMON STOCK<br>
  </b><font size="3">____________________</font></font></P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif"><b>PROSPECTUS</b></font></P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="center">&nbsp;</P>
<P ALIGN="left"><font face="Times New Roman, Times, serif">No dealer, salesperson
  or other person is authorized to give any information or to represent anything
  not contained in this prospectus. You must not rely on any unauthorized information
  or representations. This prospectus is an offer to sell only the shares offered
  hereby, and only under circumstances and in jurisdictions where it is lawful
  to do so. The information contained in this prospectus is current only as of
  its date.</font></P>
<P ALIGN="left">&nbsp;</P>
<P ALIGN="center"><font face="Times New Roman, Times, serif">August 4, 2009</font></P>
<P ALIGN="center">&nbsp;</P>
<hr NOSHADE>
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